As filed with the Securities and Exchange Commission on July 27, 2001
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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LATIN AMERICAN CASINOS, INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware 65-0159115
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
2000 NE 164th Street
North Miami Beach, FL 33162
(305) 945-9300
(Address, Including Zip Code, and Telephone Number, Including
Area Code, of Registrant's Principal Executive Offices)
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Jeffrey A. Felder, President
2000 NE 164th Street
North Miami Beach, FL 33162
(305) 945-9300
(Address, Including Zip Code, and Telephone Number, Including
Area Code, of Agent for Service)
Copies to:
Jeffrey M. Stein, Esq.
The Goldstein Law Group, P.C.
65 Broadway, 10th Floor
New York, N.Y.
(212) 809-4220
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Approximate date of commencement of proposed sale to the public:
As soon as practicable after the effective date of this Registration Statement.
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If the securities being registered to this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered in this form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, please check the
following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act of 1933, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If the delivery of the prospectus is expected to be made pursuant to
Rule 434, please check the following box. [ ]
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CALCULATION OF REGISTRATION FEE
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Proposed Maximum
Title of Each Class of Amount to be Aggregate Amount of
Securities to be Registered Registered (1)(2) Offering Price (3) Registration Fee
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Common Stock, $0.0067 par value .......... 7,229,608 $2.63 $4,753.47
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(1) Represents (a) 1,809,612 shares of Common Stock, (b)
2,119,996 shares of Common Stock issuable upon conversion of
our Convertible Debentures, and (c) 3,300,000 shares of Common
Stock issuable upon exercise of our private warrants being
registered for resale by the selling stockholders.
(2) Pursuant to Rule 416, the shares of common stock offered
hereby also include such presently indeterminate number of
shares of common stock as shall be issued by us to the selling
stockholders upon adjustment under anti-dilution provisions
covering the additional issuance of shares by us resulting
from stock splits, stock dividends or similar transactions.
(3) Estimated solely for the purpose of calculating the
registration fee, pursuant to Rule 457(c) under the Securities
Act of 1933, as amended; based on the average ($2.625) of the
bid ($2.60) and asked ($2.65) price on the Nasdaq Small Cap
Market on January 24, 2001.
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The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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SUBJECT TO COMPLETION, DATED JULY 27, 2001
PROSPECTUS
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LATIN AMERICAN CASINOS, Inc.
7,229,608 Shares of Common Stock
The persons listed in this prospectus under the caption "Selling
Security Holders" may from time to time offer and sell up to 7,229,608 shares of
our common stock.
The selling security holders may offer their shares from time to time
through public or private transactions, on or off the Nasdaq SmallCap Market, at
prevailing market prices or at privately negotiated prices. We will not receive
any of the proceeds from the sale of common stock by the selling security
holders, however, we will receive an amount equal to the exercise price of any
warrants exercised on a cash basis prior to the sale of the underlying shares by
the selling security holder.
Our common stock is quoted on the Nasdaq SmallCap Market under the
symbol "LACI". On July 20, 2001, the last reported sale price for the common
stock on the Nasdaq SmallCap Market was $2.51 per share.
INVESTING IN THE COMMON STOCK IS SPECULATIVE AND INVOLVES A HIGH DEGREE
OF RISK. YOU SHOULD ONLY PURCHASE THE SHARES OF COMMON STOCK IF YOU CAN AFFORD
TO LOSE YOUR ENTIRE INVESTMENT. SEE "RISK FACTORS" BEGINNING ON PAGE 3 FOR A
DISCUSSION OF CERTAIN FACTORS THAT YOU SHOULD CONSIDER BEFORE YOU INVEST IN THE
COMMON STOCK BEING REGISTERED WITH THIS PROSPECTUS.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The information in this prospectus is not complete and may be changed.
The selling security holders may not sell these securities until the
registration statement filed with the Securities and Exchange Commission is
effective. This prospectus is not an offer to sell these securities and it is
not soliciting an offer to buy these securities in any state where the offer or
sale is not permitted.
THE DATE OF THIS PROSPECTUS IS _____, 2001
TABLE OF CONTENTS
Page
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DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS................................1
PROSPECTUS SUMMARY.............................................................2
RISK FACTORS...................................................................3
DILUTION......................................................................10
USE OF PROCEEDS...............................................................11
SELLING SECURITY HOLDERS......................................................11
DESCRIPTION OF SECURITIES.....................................................18
PLAN OF DISTRIBUTION..........................................................19
TRANSFER AGENT AND WARRANT AGENT..............................................22
LEGAL MATTERS.................................................................22
EXPERTS.......................................................................22
WHERE YOU CAN FIND MORE INFORMATION ABOUT US..................................22
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE...............................23
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES ACT
LIABILITIES...........................................................23
1
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements that involve risks
and uncertainties that include, but are not limited to, the following:
o trends affecting our financial condition or results of
operations;
o the impact competition has on our business;
o our strategies concerning the expansion of our operations;
o the impact of social, political and economic instability on
our operations; and
o volatility of our stock price.
You can identify forward-looking statements generally by the use of
forward-looking terminology such as "believes," "may," "will," "plans,"
"estimates," "continues," "intends," "expects," "should," "could," "seeks,"
"anticipates," or other variations, including their use in the negative, or by
discussions of strategies, opportunities, plans or intentions. You may find
these forward-looking statements under the captions "Prospectus Summary," and
"Risk Factors," as well as captions elsewhere in this prospectus. A number of
factors could cause results to differ materially from those anticipated by these
forward-looking statements, including those discussed under "Risk Factors".
These forward-looking statements necessarily depend on assumptions and
estimates that may prove to be incorrect. Although we believe that the
assumptions and estimates reflected in the forward-looking statements are
reasonable, we cannot guarantee that we will achieve our plans, intentions, or
expectations. The forward-looking statements involve known and unknown risks,
uncertainties and other factors that may cause actual results to differ in
significant ways from any future results expressed or implied by the
forward-looking statements.
The cautionary statements made in this prospectus are intended to apply
to all related forward-looking statements wherever they appear in this
prospectus. We assume no obligation to update these forward-looking statements
or to update the reasons why actual results could differ materially from those
anticipated in these forward-looking statements.
PROSPECTUS SUMMARY
This summary is not complete and does not contain all of the
information that may be important to you. You should read the detailed
information appearing elsewhere in this prospectus, including the more detailed
information and financial statements and the notes to those statements contained
in the documents we have incorporated by reference.
ABOUT THE COMPANY
We operate a slot machine rental and remanufacturing company in South
America and also distribute and sell our own premium brand cigars in the United
States. We were initially organized as Repossession Auction, Inc., a Florida
corporation, in 1989. We merged into a Delaware corporation bearing the same
name in 1991 and changed our name to Latin American Casinos, Inc. to reflect our
entrance into the gaming and casino business in South and Central America. In
September 1997, we directed part of our efforts into establishing a business of
producing, distributing and selling premium cigars throughout the United States
and formed World's Best Rated Cigar Company as a subsidiary to distribute
cigars. In July 2001 we created a Nevada and Canadian subsidiary to explore
possible joint ventures. There are no agreements in place and there is no
guarantee that we will ever enter into any agreements. We are evaluating
possible joint ventures, acquisitions of businesses as part of our ongoing
business strategy, and re-evaluating our current business.
SLOT MACHINE OPERATIONS
To date, we have concentrated our efforts on the rental of used five
reel slot machines in South and Central America. We purchase these machines at a
fraction of the cost of new machines and then refurbish them at facilities in
South and Central America.
We entered the gaming and casino industry in Peru in 1994. Since then,
we have been engaged in the renting of slot machines to licensed gaming
establishments in various major cities through our wholly owned subsidiaries in
South and Central America. In 1994, we formed a Peruvian subsidiary; in late
1995, we formed a Colombian subsidiary; and in 1997, we formed a subsidiary in
Nicaragua. In February 1997, we expanded into gaming route operations in
Colombia and Nicaragua on a participation basis with the owners of various
business establishments. In 1998, Hurricane Mitch adversely affected our
operations in Nicaragua, which were not substantial and we subsequently
discontinued our operations in Nicaragua. We have no personnel employed in
Nicaragua, nor any office, machines, or warehouse. We have initiated a review of
our operations on a country-by country basis.
PREMIUM CIGAR OPERATIONS
Beginning in September 1997, we directed part of our efforts into
establishing a business of distributing and selling premium cigars throughout
the United States and formed World's Best Rated Cigar Company as a subsidiary to
distribute cigars initially manufactured by Claudio Norberto Mercado in Santiago
in the Dominican Republic and, subsequently, under agreements with other
manufacturers in Nicaragua, Honduras and the Dominican Republic. These
agreements allow us to acquire cigars at a fraction over their cost and sell
them at a retail price significantly below the current retail price for brand
name premium cigars. The cigars are transported to our facilities in Miami to be
placed in individual containers and shipped to our customers. We are in the
process of establishing relationships with various distributors in the United
States who supply convenience stores, restaurants, bars and supermarkets with
products. We have had limited success with establishing these relationships, and
are currently reassessing this strategy.
In August 2000, we opened our web site, www.worldsbestrated.com, to
accommodate retail as well as wholesale distribution of our cigars. We believe
that our web site will allow us to create consumer demand for our products,
increase brand recognition and open up new distribution channels for our cigars,
as well as allow us to sell directly to the consumer.
CORPORATE INFORMATION
We have offices in Lima, Peru; and Bogota, Colombia. Our principal
executive offices are located at 2000 NE 164th Street, North Miami Beach, FL
33162, and our telephone number is (305) 945-9300.
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RISK FACTORS
You should carefully consider the following risk factors and all other
information contained in this report and the documents we have incorporated by
reference before purchasing shares of our common stock. Investing in our common
stock involves a high degree of risk. If any of the following events or outcomes
actually occurs, our business, operating results and financial condition would
likely suffer. As a result, the trading price of our common stock could decline,
and you may lose all or part of the money you paid to purchase our common stock.
GENERAL RISKS RELATED TO OUR BUSINESS
WE ARE REVIEWING OUR BUSINESS STRATEGY AND THIS STRATEGY MAY INVOLVE RISKS FOR
US.
We are evaluating different strategies to enhance the inherent value of
the Company as part of our business strategy. This strategy may result in
potentially dilutive issuances of equity securities, the use of our cash
resources, the incurrence of additional debt and increased goodwill, intangible
assets and amortization expense, which could negatively impact our
profitability. In addition, if we pursue joint ventures, acquisitions and/or
mergers, they will involve numerous risks, including difficulties in the
assimilation of the operations and products of the other companies, the
diversion of management's attention from other business concerns, risks of
entering markets in which we have no or limited direct prior experience, the
potential loss of key employees of the other company, and the exposure to
unforeseen liabilities of other companies. Our management will have sole and
absolute discretion in identifying and selecting such businesses. You will not
be able to evaluate the merits of an acquisition and/or merger before we proceed
with the transaction.
Even if we were to identify a company for a possible joint venture,
merger or acquisition, we may not be able to complete this transaction (or any
future transactions) for many reasons including: our inability to interest
companies in aligning with us; our inability to agree on the terms; and
incompatibility between us and the management of the company.
In the event we elect to proceed with a joint venture, acquisition or
merger that results in the change of control of the Company Nasdaq requires that
an Initial Listing Application be filed. There can be no assurance that such
surviving entity will satisfy the requirements of the Initial Listing
Application which could hinder our ability to successfully complete any
potential joint venture, acquisition and/or merger
WE CANNOT GUARANTEE THAT OUR FUTURE BUSINESS STRATEGY WILL BE SUCCESSFUL.
There can be no assurance that suitable joint venture, acquisition,
merger and/or investment opportunities will be identified, that any of these
transactions can be consummated, or that, if consummated, these new businesses
can be integrated successfully and profitably into our operations. These joint
ventures, acquisitions, mergers and investments may also require a significant
allocation of resources, which will reduce our ability to focus on the other
portions of our business, including many of the factors listed in the prior risk
factor.
WE FACE COMPETITION AND CANNOT GUARANTEE CONTINUED GOOD RELATIONSHIPS WITH
EXISTING CLIENTS.
We compete for opportunities with all the major gaming companies in
South and Central America, including IGT and Admiral. We also compete for
opportunities with producers, distributors, and sellers of tobacco and cigars,
in the Dominican Republic and the United States. Many of these companies are
more established and have significantly greater financial and management
resources than us, and have more experience in the industry. We rely on our
current relationships with existing clients to limit the impact of competition
from these major competitors. If these relationships became strained or ceased,
it could have a material adverse affect on our continued success or
profitability.
WE MAY HAVE TO LOWER PRICES OR SPEND MORE MONEY TO EFFECTIVELY COMPETE AGAINST
COMPANIES WITH GREATER RESOURCES THAN US THAT COULD RESULT IN LOWER REVENUES
AND/OR PROFITS.
The success of our machines and our cigars in the marketplace depends
on many factors, including product performance, price, support of industry
standards and service. Given these factors we cannot assure you that we will
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be able to compete successfully. For example, if our competitors offer lower
prices, we could be forced to lower prices that could result in reduced or
negative margins and a decrease in revenues. If we do not lower prices we could
lose sales and market share. In either case, if we are unable to compete against
our main competitors which include established companies, we would not be able
to generate sufficient revenues to grow our company.
SOCIAL, ECONOMIC AND POLITICAL INSTABILITY IN SOUTH AND CENTRAL AMERICA COULD
INTERRUPT OUR SLOT MACHINE OPERATIONS AND CIGAR EXPORT BUSINESS AND CAUSE US TO
LOSE SALES AND MARKETING OPPORTUNITIES.
Some countries in South and Central America have experienced
significant social, economic and political unrest in the past and we cannot
assure you that these instabilities will not reoccur or continue in the future.
The effects of social, political or economic instability could include:
o unexpected changes in regulatory requirements and tariffs;
o difficulties in staffing and managing foreign operations, including
foreign manufacturer and licensee relationships;
o interruptions in payment cycles;
o adverse economic or political changes;
o potential trade restrictions, exchange controls and import and export
licensing requirements;
o loss of cash deposits in banks located within the same geographic
region which may not be covered by federal deposit insurance;
o currency devaluation within the countries in South and Central America
and between those countries and the United States;
o problems in collecting accounts receivable; and
o potentially adverse tax consequences.
Any instability could temporarily or permanently interrupt the revenue
from our slot machine operations and cigar business and cause us to lose sales
and marketing opportunities in the future.
FAILURE TO ATTRACT AND RETAIN QUALIFIED PERSONNEL OR LOSS OF KEY MANAGEMENT OR
KEY PERSONNEL COULD HURT OUR BUSINESS.
Recruiting and retaining qualified personnel is critical to our
success. We face significant challenges attracting and retaining this qualified
personnel base. Although we believe we have been and will be able to attract and
retain these personnel, there can be no assurance that we will be able to
continue to successfully attract qualified personnel. In addition, our
anticipated growth and expansion into areas and activities requiring additional
expertise will require the addition of new management personnel and the
development of additional expertise by existing management personnel. The
failure to attract and retain these personnel or, alternatively, to develop this
expertise internally would adversely affect our business.
Our success also will continue to depend to a significant extent on the
members of our management team. Except for certain employment agreements with
our Chief Operating Officer, Chief Executive Officer, President, Secretary and
President of our Latin American operations, we do not have employment agreements
with any of our executive officers or key personnel or maintain any "key man"
insurance policies regarding any of these individuals. We may not be able to
retain the services of our executive officers and key personnel or attract
additional qualified members to management in the future. The loss of services
of any of our key management or employees could have a material adverse effect
upon our business.
4
OUR LIABILITY INSURANCE MAY BE INSUFFICIENT.
We maintain and intend to maintain general liability insurance in
amounts that we believe will be sufficient to cover casualty risks associated
with the operation of our business. These risks include fire, property damage,
personal injury, liquor liability, etc. There is no guarantee that such
insurance will be sufficient to cover the risks associated with our business, or
that we will able to obtain sufficient coverage as we pursue our business
strategy.
RISKS RELATED TO OUR GAMING OPERATIONS
DEVALUATION OF CURRENCY
Since our gaming operations are conducted in Peru and Columbia we are
subject to devaluations of the United States dollar in such countries. The
exchange rate for the local currencies in these countries may fluctuate in
relation to the U.S. dollar. Such fluctuation may have an adverse effect on our
competitive position, as well as our expenses, revenues, earnings, assets or
liabilities when such local currencies are translated into U.S. dollars. This
may force us to reevaluate our business in such country(ies).
COMPLIANCE WITH GOVERNMENT REGULATIONS MAY BE COSTLY OR DISRUPTIVE TO OUR
PROPOSED OPERATIONS.
Our gaming operations are regulated by federal, state and local
governmental authorities in the United States, Peru, and Columbia. We are
subject to the requirements set forth under the Gambling Devices Act of 1962 (15
U.S.C. 1171-1178), and pursuant to such act we are required to register with the
U.S. Department of Justice. We cannot assure you that we will be able to comply
with current or future governmental regulations everywhere we conduct business
operations. We may be required to incur substantial costs or interrupt our
activities to comply with regulations. Present or future federal, state or local
regulations may restrict our present and possible future activities. If we are
unable to comply with these or similar requirements, we could be subject to
sanctions. Any sanctions could have a materially adverse effect upon our
business.
CHANGES IN GOVERNMENT REGULATIONS COULD HAVE AN EFFECT ON OUR OPERATIONS AND
BUSINESS.
The governments of Peru and Colombia regulate gaming activities by
requiring licenses for the operation of slot machines. We anticipate new
regulations governing the age and condition of machines and we are currently
considering upgrading our machines. The costs associated with this upgrade will
be partially financed by the sale of the older equipment. We plan to take
appropriate steps to verify the licenses of our customers, particularly those
involved in joint participation agreements. We believe by upgrading to newer
machines we can avoid any new government mandated age restrictions. However, our
failure to complete this upgrading to newer machines could have a material
adverse effect on our business.
The Peruvian government has made recent significant legislative changes
regarding the regulation of gaming activities. Some of these changes introduced
new requirements governing a slot machine's age, condition and the place of
operation, as well as requiring us to register the slot machines with the
government and have them certified by an accredited laboratory. We have an
injunction that protects us from specific parts of this legislation. However, if
this injunction was no longer in place, it would severely affect our business
and we would have to reevaluate our position in Peru. Any similar moves by other
governments would also cause us to reevaluate our slot machine operations
elsewhere in South and Central America.
We are also subject to United States laws in connection with gambling
devices and in connection with our cigar business. These laws are subject to
change and there is a possibility that such changes will adversely affect our
business.
THE IMPOSITION OF EXCISE TAX BY THE PERUVIAN GOVERNMENT MAY REQUIRE US TO
REEVALUATE OUR OPERATIONS IN PERU.
In October 1996, the Peruvian government introduced new legislation
that included the imposition of an excise tax of 200% on lessees of gaming
equipment, including slot machines. The new legislation caused many of
5
our customers to return their slot machines to us rather than pay the higher
tax. There is currently a temporary injunction against the Peruvian government
in force, prohibiting it from implementing the excise tax. In addition, the
Peruvian government has lowered the tax to a more realistic level. However, the
re-imposition of an excise tax in Peru could adversely affect future earnings.
Accordingly, if we could no longer prevent the imposition of excessively high
excise tax, we would have to reevaluate our position in Peru and any similar
moves by other governments would also cause us to reevaluate our slot machine
operations elsewhere in South and Central America.
THE SUCCESS OF OUR SLOT MACHINE OPERATIONS DEPENDS ON THE CONTINUED SUPPLY OF
SPARE PARTS.
We purchase used slot machines at a fraction of the cost of new
machines and refurbish them at our facilities in South and Central America. Our
operations depend on our ability to repair the slot machines and on the
availability of replacement parts at current prices. If the price of these spare
parts rises unexpectedly or the spare parts become difficult to find, we may not
be able to perform as competitively in the long run, we may not be able to
respond to our customers' needs as quickly, if at all, and we may not be able to
satisfy and maintain our customers.
REVENUE FROM OUR SLOT MACHINE OPERATIONS DEPENDS ON THE CONTINUED POPULARITY OF
GAMBLING IN SOUTH AND CENTRAL AMERICA.
Our revenues from the rental of slot machines were $148,335 for the
quarter ended March 31, 2001. This revenue depends on the continued popularity
of gambling in South and Central America. The popularity of gambling depends on
a variety of factors which are difficult to predict, such as adverse economic
and political changes and other factors such as government regulation of slot
machines. Any decline in the popularity of gambling in this region could
interrupt the revenue from the rental of our slot machines and cause us to lose
sales and marketing opportunities in the future.
RISKS RELATED TO OUR CIGAR OPERATIONS
OUR SHIFT IN FOCUS TO INCLUDE RETAIL DISTRIBUTION OF CIGARS IS IN ITS INITIAL
STAGES.
We have been involved in the distribution and sale of premium cigars
since 1997. The launching of our web site, however, marks a change in our
operations from one based on mostly wholesale distribution to one which includes
retail sales. Although we believe that our experience in conducting business in
South and Central America and our business relations there lend themselves to
wholesale and retail cigar sales, we may not be able to successfully penetrate
the market in the United States or elsewhere with the result that our cigar
operations may not be profitable.
RECENT EFFORTS TO MARKET OUR CIGARS ON THE INTERNET MAY NOT SUCCEED.
In August 2000, we opened our web site, www.worldsbestrated.com, to
accommodate wholesale and retail sale of our cigars via the Internet. This is a
new venture for us and is a business in which we have not historically operated.
The online commerce market is new, rapidly evolving and intensely competitive
and we cannot guarantee success in using the internet as a means of marketing
our products. The factors which could affect the success of our internet
operations include:
o Governmental restrictions on the sale of cigars via the Internet;
o Changes in usage of the Internet and online services and consumer
acceptance of the Internet and online commerce;
o Timing of upgrades and developments in our systems and infrastructure;
o The level of traffic on our web site;
o Technical difficulties, system downtime or Internet brownouts; and
6
o Disruptions in service by common shipping carriers due to labor
problems or other reasons.
ANY CANCELLATION OF AGREEMENTS WE HAVE WITH CIGAR MANUFACTURERS COULD HAVE A
MATERIAL ADVERSE EFFECT ON OUR PROFITABILITY AND THE CONTINUATION OF OUR CIGAR
OPERATIONS
Agreements which we have with our cigar manufacturers are cancelable
upon 60 days written notice by the manufacturer. If one or more of these
manufacturers were to exercise its right to cancel, we would have difficulty
finding a replacement manufacturer upon short notice who could provide cigars to
our specifications either on time or at all. Any failure to find replacement
cigar manufacturers could have a material adverse effect on our cigar
operations.
OUR SALES OF CIGARS RELY ON THE CONTINUED POPULARITY OF CIGAR SMOKING IN THE
UNITED STATES
The success of our cigar operations depends to a large extent on the
continued popularity of cigar smoking in the United States. An increase in
adverse publicity and public health concerns as well as any adverse economic
changes could all have a negative impact on the popularity of cigar smoking. Any
change in the smoking habits of people in the United States could quickly reduce
the demand for our products and could harm our business and negatively affect
future profitability. We cannot assure you that the current popularity of cigars
in the United States will continue.
REVENUE FROM DISTRIBUTION OF CIGARS TO THE UNITED STATES IS SUBJECT TO
ADDITIONAL RISKS.
Our cigars are manufactured overseas and their distribution in the
United States can be subject to many inherent risks that are difficult or
impossible for us to predict or control, including:
o unexpected changes in regulatory requirements and tariffs;
o difficulties in staffing and managing foreign operations, including
foreign supplier relationships;
o adverse economic or political changes;
o potential trade restrictions, exchange controls and import and export
licensing requirements; and
o potentially adverse tax consequences.
RISKS RELATED TO OUR COMMON STOCK
OUR STOCK PRICE MAY BE SUBJECT TO VOLATILITY.
Our common stock is quoted on the Nasdaq SmallCap Market, and there may
be potential volatility in the market price of our common stock. The trading
price of our common stock may be subject to significant fluctuations due to a
variety of factors, including:
o variations in our quarterly operating results;
o the gain or loss of significant contracts;
o changes in management;
o legislative or regulatory changes;
o general trends in the industry;
o recommendations by securities industry analysts;
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o developments in our relationships with current or future customers,
manufacturers and suppliers; and
o general economic conditions, both in the United States and abroad.
In addition, the stock market in general has experienced extreme price
and volume fluctuations that may affect the market price of our common stock.
Often, price fluctuations are unrelated to operating performance of the specific
companies whose stock is affected.
As a result of this potential stock price volatility, investors may be
unable to resell their shares of our common stock at or above their purchase
prices. In addition, companies that have experienced volatility in the market
price of their stock have been the object of securities class action litigation.
If we were the subject of securities class action litigation, this could result
in substantial costs, a diversion of our management's attention and resources
and harm to our business and financial condition.
NASDAQ COULD DELIST OUR COMMON STOCK, WHICH COULD MAKE IT MORE DIFFICULT FOR YOU
TO SELL OR OBTAIN QUOTATIONS AS TO THE PRICE OF OUR COMMON STOCK.
In order to continue to be listed on Nasdaq Small Cap Market, we must
meet the following requirements:
o net tangible assets of at least $2,000,000, or a market capitalization
of $35,000,000 or $500,000 in net income in our latest fiscal year or
for two of the last three fiscal years;
o a minimum bid price of $1.00;
o two market makers;
o 300 stockholders;
o at least 500,000 shares in the public float;
o a minimum market value for the public float of $1,000,000; and
o compliance with certain corporate governance standards.
If we cannot satisfy Nasdaq's maintenance criteria in the future,
Nasdaq could delist our common stock. In the event of delisting, trading, if
any, would be conducted only in the over-the-counter market in the so-called
"pink sheets" or the NASD's Electronic Bulletin Board. As a result of any
delisting, an investor would likely find it more difficult to sell or obtain
quotations as to the price of our common stock.
TAKEOVER EFFORTS COULD BE DETERRED AS A RESULT OF CERTAIN PROVISIONS IN OUR
CERTIFICATE OF INCORPORATION.
Our Board of Directors has the authority to determine or alter the
voting powers, designations, preferences and relative, participating, optional
or other rights, if any, and to qualify, limit or restrict such rights, if any,
granted to or imposed on any wholly-unissued class and/or capital stock without
any further vote or action by our stockholders. If we issue additional stock
with certain voting and conversion rights, the rights of holders of common stock
without the benefit of such rights could be adversely affected by, among other
things, the loss of their voting control to others. Any additional issuances
could also delay, defer or prevent a change in our control, even if these
actions would benefit our stockholders.
Additionally, provisions of Delaware law and our certificate of
incorporation could make it more difficult for a third party to acquire us, even
if doing so would be beneficial to our stockholders.
8
CERTAIN PRINCIPAL STOCKHOLDERS, INSIDERS OR AFFILIATES WILL BE ABLE TO EXERCISE
SIGNIFICANT CONTROL OVER MATTERS REQUIRING STOCKHOLDER APPROVAL THAT MIGHT NOT
BE IN THE BEST INTERESTS OF OUR STOCKHOLDERS AS A WHOLE.
Our officers, directors and their affiliates, and principal
stockholders, beneficially own over 50% of our outstanding shares of common
stock (assuming such parties were to exercise warrants and/or options that they
own). As a result, these stockholders, if voting together, will be able to
exercise significant control over all matters requiring stockholder approval,
including the election of directors and the approval of significant corporate
transactions, which could delay or prevent someone from acquiring or merging
with us. The interest of our officers and directors, when acting in their
capacity as stockholders, may lead them to:
o vote for the election of directors who agree with the incumbent
officers' or directors' preferred corporate policy; or
o oppose or support significant corporate transactions when these
transactions further their interests as incumbent officers or
directors, even if these interests diverge from their interests as
shareholders per se and thus from the interests of other shareholders.
THE FUTURE BUSINESS MODEL OF CERTAIN PRINCIPAL SHAREHOLDERS MAY HAVE A
SIGNIFICANT IMPACT ON OUR FUTURE BUSINESS STRATEGY.
Certain principal shareholders, namely Todd Sanders and William C.
Bossung, are also members of the board and involved in the management of the
Company. Members of the board and management intend to work together with the
Augustine Fund L.P., another principal shareholder, to formulate an ongoing
business model with respect to our future. Such plans may include the sale of
all or substantially all of our assets, a merger and or joint venture with
another entity or similar transactions. As a result, the board, management and
the Augustine Fund L.P. are currently contemplating various material changes in
our business; however, no specific plans have been finalized for any material
change. Our future business strategy may, nevertheless, change significantly
from our current business. We cannot assure you that any suitable strategy or
opportunities will be identified, that any of those strategies can be
consummated or that if they are consummated, that these strategies can be
integrated successfully and profitably into our existing operations.
FUTURE SALES OF SHARES COULD ADVERSELY AFFECT OUR STOCK PRICE AND REPRESENT A
RISK OF SERIOUS DILUTION OF OUR STOCKHOLDERS' INTERESTS
If our stockholders sell substantial amounts of our common stock in the
public market or we issue new shares (including shares issued upon exercise of
outstanding options and warrants and the conversion of our convertible
debentures), or if there is the perception that these sales could occur, the
market price of our common stock could fall. In addition these sales might make
it more difficult for us to sell equity or equity-related securities in the
future at a time and price that we deem appropriate. Future sales of substantial
amounts of our common stock in the public market or the issuance of new shares
will also seriously dilute our shareholders' interests.
THE ISSUANCE OF SECURITIES IN CONNECTION WITH THE EXERCISE OF OUR OUTSTANDING
WARRANTS AND OPTIONS, AND THE CONVERSION OF OUR CONVERTIBLE DEBENTURES WILL
SUBSTANTIALLY DILUTE OUR SHAREHOLDERS' INTERESTS.
As of July 23, 2001, we have outstanding 1,725,000 publicly tradable
warrants to purchase one share of our common stock at an exercise price of $3.00
per share that expire on December 11, 2001. In addition, we have outstanding
private warrants to purchase 3,300,000 shares of our common stock at an exercise
price of $1.75 per share that expire on December 11, 2005, and $3,500,000
principal amount of convertible debentures which provide for the issuance of up
to 2,119,996 shares (which includes 119,996 shares of common stock as payment of
interest thereunder) of our common stock at a price of $1.75 per share that
mature on December 13, 2001. We also have outstanding investment banking
warrants to purchase 225,000 shares of our common stock at a price equal to
$1.875 per share, and options to purchase 237,500 shares of our common stock
that are held by certain employees and directors (122,500 exercisable at $1.00,
35,000 exercisable at $1.06 per share, and 80,000 exercisable at $1.75 per
share). To date, none of the private or the public warrants, nor the
aforementioned options, have been exercised and none of the convertible
debentures have been converted. These options, convertible debentures, and
warrants are
9
convertible into or exercisable for shares of common stock at prices that may
represent discounts from future market prices of the common stock. The exercise
of the public or private warrants, and the options, to purchase shares of our
common stock or the conversion of the convertible debentures into shares of our
common stock will seriously dilute our stockholders' interests. The sale of the
common stock by the holders thereof, which may, depending on then market
conditions, have been acquired by such holders at a price which is below the
then trading price of the common stock could have a negative impact on the
trading price of the common stock and could increase the volatility in the
trading price of our common stock.
In connection with any joint venture, acquisition, merger or business
combination which management may pursue, we may issue shares of common stock or
securities convertible into common stock which may seriously dilute our
stockholders interests. In the event we enter into a definitive agreement, the
result of which is a consolidation or merger with or into another corporation or
other entity, or the sale of all or substantially all of our assets to another
corporation or other entity, then the debenture automatically converts into
shares of our common stock at a price of $1.75 per share, which would cause
existing shareholders to suffer significant dilution.
THE REDEMPTION OF THE PUBLIC WARRANTS WOULD TAKE AWAY AVAILABLE CASH.
The Company may redeem the public warrants under certain circumstances
(See "Description of Securities"). If the Company elects to redeem the warrants,
it will use available cash to do so. This would remove cash that would otherwise
be available for the payment of dividends or reinvestment in the Company.
OUR ABILITY TO RAISE THE CAPITAL NECESSARY TO EXPAND OUR BUSINESS IS UNCERTAIN.
In the event we do not have sufficient cash in order to maintain our
operations, and/or in order to expand our business through internal development
or acquisitions in the future, we may need to raise substantial additional funds
through equity or debt financings, research and development financings or
collaborative relationships. However, this additional funding may not be
available or, if available, it may not be available on economically reasonable
terms. In addition, any additional funding may result in significant dilution to
existing stockholders. If adequate funds are not available, we may be required
to curtail our operations or obtain funds through collaborative partners that
may require us to release material rights to our products.
WE DO NOT INTEND TO PAY DIVIDENDS AND THEREFORE YOU WILL ONLY BE ABLE TO RECOVER
YOUR INVESTMENT IN OUR COMMON STOCK, IF AT ALL, BY SELLING THE SHARES OF OUR
STOCK THAT YOU HOLD.
Some investors favor companies that pay dividends. We declared a
dividend of $0.05 to shareholders in May 1997. Certain principal shareholders at
that time, including Lloyd Lyons, Geraldine Lyons and their immediate family,
waived their right to receive these dividends. Since then, we have not declared
or paid any cash dividends on our common stock. We currently intend to retain
any future earnings for funding growth and we do not anticipate paying cash
dividends on our common stock in the foreseeable future. Because we may not pay
dividends, your return on an investment in our shares likely depends on your
ability to sell our stock at a profit.
DILUTION
As of July 23, 2001, we had issued and outstanding 4,225,000 shares of
common stock. As of that date, there were an additional 7,304,500 shares of
common stock reserved for possible future issuances as follows:
o options to purchase 237,500 shares. Consisting of
122,500 options at an exercise price of $1.00 per
share, 35,000 options at an exercise price of $1.06
per share, 80,000 options at an exercise price of $
1.75 per share;
o publicly traded warrants to purchase 1,725,000 shares
of common stock exercisable at a price of $3.00 per
share;
o private warrants to purchase 3,300,000 shares of
common stock exercisable at a price of $1.75 per
share;
o up to 2,119,996 shares of common stock issuable upon
conversion of our convertible debentures; and
10
o Investment banking warrants to purchase 225,000
shares of common stock exercisable at a price of
$1.875 per share.
USE OF PROCEEDS
We will not receive any proceeds from the sale of the selling security
holders' shares in this offering. All proceeds from the sale of these shares
will be for the accounts of the selling security holders described below.
However, we could receive proceeds from the exercise of the private warrants if
the selling security holder elects to utilize the cashless exercise feature
contained in the private warrants. We would not receive any proceeds from the
subsequent sale of shares of common stock received by such selling security
holders upon exercise of such warrants. See "Selling Security Holders" below.
SELLING SECURITY HOLDERS
This prospectus covers the resale by the selling stockholders of up to
7,229,608 shares of our common stock. The following table sets forth the names
of the selling security holders, and certain information regarding the ownership
by such selling stockholder of shares of our common stock as of July 20, 2001,
and as adjusted to reflect the sale of the shares. Information concerning the
selling stockholder, its pledgees, donees and other non-sale transferees who may
become selling stockholders, may change from time to time. To the extent the
selling stockholder or any of its representatives advise us of such changes, we
will report those changes in a prospectus supplement to the extent required. See
"Plan of Distribution." We do not know if, or when, or in what amounts the
selling security holders will sell shares of the common stock. The registration
of the following shares through this registration statement allows the following
entities to sell its share holdings in the future on the open market and is not
necessarily an indication of intent to sell the shares.
The table below assumes that all of the securities offered hereby will
be sold by each selling security holder.
Common Stock
Owned or
Shares of Subject to
Shares of Shares of Common Stock Underlying
Common Common Stock Underlying Debentures or Percentage of
Stock Underlying Private Warrants Outstanding
Owned Prior Debentures Warrants Offered by Common
to the Prior to the Prior to the this Stock Prior to
Name of Selling Security Holders Offering Offering (1) Offering (2) Prospectus (3) the Offering (4)
-------------------------------- ----------- ----------- ------------ -------------- ----------------
Augustine Fund L.P. 804,806 484,571 1,189,377(5) 13.4%
141 West Jackson Boulevard, Suite
2182
Chicago, Illinois
Alliance Financial Network, Inc. (6) 100,000 750,000 850,000 8.8%
9800 Camden Hills Ave
Las Vegas, Nevada 89145
William C. Bossung (7) 539,403 212,000 6.4%
9800 Camden Hills Ave 614,403
Las Vegas, Nevada 89145
H. Glenn Bagwell, Jr 60,571 60,571 *
3005 Anderson Drive
Suite 204
Raleigh, North Carolina 26709
11
Common Stock
Owned or
Shares of Subject to
Shares of Shares of Common Stock Underlying
Common Common Stock Underlying Debentures or Percentage of
Stock Underlying Private Warrants Outstanding
Owned Prior Debentures Warrants Offered by Common
to the Prior to the Prior to the this Stock Prior to
Name of Selling Security Holders Offering Offering (1) Offering (2) Prospectus (3) the Offering (4)
-------------------------------- ----------- ----------- ------------ -------------- ----------------
Anthony Bell & Sandra G. Bell, 60,571 60,571 *
Trustees of the Anthony G. Bell &
Sandra G. Bell 1998 Intervivos
Trust dated February 11, 1998
126 Smith Creek Drive
Los Gatos, California 95030
Carsten Beith 15,143 15,143 *
20 N. Wacker Drive, Ste 1240, Chicago,
Illinois 60606
BiCoastal Associates, LLC 50,000 50,000(8) *
615 Haverstraw Road
Suffern, New York 10901
Robert J. Bobb 60,571 60,571 *
311 South Wacker Drive, Suite 5500
Chicago, Illinois 60606
Phyllis Janet Clemants Trustee of the 15,143 15,143 *
Phyllis Janet Clemants Revocable
Trust, dated October 18, 1995
Edina, Minnesota 55435
David S. Connelly, 60,571 60,571 *
333 Cumnor Road
Kenilworth, Illinois 6043
David Asplund (9) 375,000
703 Sheridan Road
Winnetka, Illinois 60093
John Porter (10) 375,000
33 Locust Road
Winnetka, Illinois 60093
Thomas Duszynski (11) 315,000
22818 Pilcher Road
Plainfield, Illinois 60544
John M. Duszynski Trust (11) 20,000
22818 Pilcher Road
Plainfield, Illinois 60544
12
Common Stock
Owned or
Shares of Subject to
Shares of Shares of Common Stock Underlying
Common Common Stock Underlying Debentures or Percentage of
Stock Underlying Private Warrants Outstanding
Owned Prior Debentures Warrants Offered by Common
to the Prior to the Prior to the this Stock Prior to
Name of Selling Security Holders Offering Offering (1) Offering (2) Prospectus (3) the Offering (4)
-------------------------------- ----------- ----------- ------------ -------------- ----------------
James T. Duszynski Trust (11) 20,000
22818 Pilcher Road
Plainfield, Illinois 60544
Daniel P. Duszynski Trust (11) 20,000
22818 Pilcher Road
Plainfield, Illinois 60544
Bartholomew Delsing 60,571 60,571 *
21692 Fall River Drive
Boca Raton, Florida 33428
Jamie Delsing 15,143 15,143 *
345 E. 54th Street, Apt. 6G
New York, New York 10022
Jay Delsing 60,571 60,571 *
1833 Aston Way
Chesterfield, Montana 63005
Kimberly A. Delsing 60,571 60,571 *
132 E. Delaware Place
Chicago, Illinois 60611
Devenshire Management Corporation (12) 639,403 90,857 730,000 1,323,260 13.7%(13)
19100 Von Karman Avenue, Ste 450
Irvine, California 92612
J. Thomas Hurvis . 60,571 60,571 *
939 Central Road
Glenview, Illinois 60025
John and Terry Iannetta 30,286 30,286 *
8701 East Columbus Ave
Scottsdale, Arizona 85251
Michael Iscove (14) 50,000 50,000 *
19 Ridgewood Road
Toronto, Canada M5P 1T4
Michael Klein 60,571 60,571 *
Donna Klein a/k/a Jennifer Klein
105 Buckskin Road
Bell Canyon, California 91307
13
Common Stock
Owned or
Shares of Subject to
Shares of Shares of Common Stock Underlying
Common Common Stock Underlying Debentures or Percentage of
Stock Underlying Private Warrants Outstanding
Owned Prior Debentures Warrants Offered by Common
to the Prior to the Prior to the this Stock Prior to
Name of Selling Security Holders Offering Offering (1) Offering (2) Prospectus (3) the Offering (4)
-------------------------------- ----------- ----------- ------------ -------------- ----------------
David M. Matteson (15) 30,286 45,000 75,286 *
449 W. Aldine
Chicago, Illinois 60657
William J. McCluskey 60,571 60,571 *
340 E. 63rd Street, #6-A
New York, New York 10021
Jennifer McGehee 10,000 10,000(16) *
2030 Loggia
Newport Beach, California 12660
Gregory W. Orlandella 30,286 30,286 *
24422 Santa Clara
Dana Point, California
Point Guard Partners 15,143 15,143 *
c/o Richard Kaplan
1345 N. Wells Street
Chicago, Illinois 60610
Brian Porter (17) 302,857 295,000 597,857 6.2%
17 Indian Hill Road
Winnetka, Illinois 60604
Brian David Porter, Jr. Trust (17) 20,000
17 Indian Hill Road
Winnetka, Illinois 60093
Davis Michael Porter Trust (17) 20,000
17 Indian Hill Road
Winnetka, Illinois 60093
Grace Elizabeth Porter Trust (17) 20,000
17 Indian Hill Road
Winnetka, Illinois 60093
Robert John Porter Trust (17) 20,000
17 Indian Hill Road
Winnetka, Illinois 60093
Richard J. Schaller, Sr 30,286 30,286 *
1170 Hillview Road
Allentown, Pennsylvania 18103
14
Common Stock
Owned or
Shares of Subject to
Shares of Shares of Common Stock Underlying
Common Common Stock Underlying Debentures or Percentage of
Stock Underlying Private Warrants Outstanding
Owned Prior Debentures Warrants Offered by Common
to the Prior to the Prior to the this Stock Prior to
Name of Selling Security Holders Offering Offering (1) Offering (2) Prospectus (3) the Offering (4)
-------------------------------- ----------- ----------- ------------ -------------- ----------------
Robert Schmidt 60,571 60,571 *
100 S. Milwaukee
Vernon Hills, Illinois 60061
Frederic M. Schweiger (18) 30,286 45,000 75,286 *
1753 Park Ridge Pointe
Park Ridge, Illinois 60068
Paul and Victoria Soll, trustees 90,857 90,857 *
of the Soll Family Trust,
dated April 2, 1995
17624 Corinthian Drive
Encino, California 91316
Technology Partners, Ltd. 100,000 100,000(19) *
340 E. 63rd St., Apt. 6A
New York, New York 10021
Theodore Tannenbaum Trust 60,571 60,571 *
875 N. Michigan Avenue
Chicago, Illinois 60611
The Zachary Todd Sanders Trust (20) 20,000 20,000 *
19100 Von Karman Avenue, Ste 450
Irvine, California 92612
(*) Less than one percent.
(1) On December 14, 2000, we issued and sold convertible debentures in the
principal amount of $3,500,000 to those selling security holders with
holdings listed under the column entitled "Shares of Common Stock
Underlying Debentures Prior to the Offering" in the above table. This
registration statement includes 2,119,996 shares of common stock which
are issuable upon conversion of these debentures. The number of shares of
common stock underlying the debentures assumes conversion into common
stock at a conversion rate of $1.75. Therefore, a selling security holder
may convert $25,000 principal amount of these debentures into 15,143
shares of common stock, $50,000 principal amount into 30,286 shares of
common stock, and $100,000 principal amount into 60,571 shares of common
stock. The debentures allow us, at our option, to pay interest on the
debentures in shares of our common stock at the rate of $1.75 per share.
The number of shares of common stock issuable upon conversion includes
accrued interest through the maturity date of the debentures. The
conversion rate and the number of shares of common stock issuable upon
conversion of the debentures are subject to further adjustment under
certain circumstances. Accordingly, the number of shares of common stock
issuable upon conversion of the debentures may increase or decrease from
time to time. See "Plan of Distribution."
(2) On or about December 12, 2000, we issued private warrants to acquire an
aggregate of 3,300,000 shares of common stock to the selling security
holders indicated in the above table. This registration statement
includes 3,300,000 shares of common stock which are issuable upon the
exercise of these warrants. These
15
warrants were issued privately and are not part of the Company's publicly
traded warrants. The exercise price is $1.75, these warrants expire on
December 11, 2005, and are subject to adjustment under certain
circumstances. We also have the discretion to reduce but not raise the
exercise price at any time.
(3) Assumes that the selling security holder will exercise all of its
warrants, if any, and convert all of its convertible debentures, if any,
into shares of common stock.
(4) Based on 4,225,000 shares outstanding as of July 23, 2001, and the
assumption that all of the holders of the privately held warrants set
forth in the table have exercised them into shares of common stock
(3,300,000) and all of the holders of the debentures set forth in the
table have converted them into shares of common stock (2,119,996).
(5) According to filings with the Securities and Exchange Commission,
Augustine Fund L.P. acquired beneficial ownership of 804,806 shares of
our common stock from the Estate of Lloyd Lyons, our former Chief
Executive Officer, in a private transaction. This registration statement
includes these 804,806 shares of our common stock, and also includes
460,571 shares of our common stock issuable upon conversion of our
convertible debentures owned by Augustine Fund L.P.
(6) Alliance Financial Network, Inc. is an entity in which William C.
Bossung, our Chief Operating Officer and a member of our Board of
Directors (See Note 7 below), is president. Mr. Bossung claims beneficial
ownership of these shares. On or about December 12, 2000, we issued
100,000 shares of common stock and private warrants to purchase 750,000
shares of common stock at a price per share of $1.75, to Alliance
Financial Network, Inc., as part of our employment arrangement with
William C. Bossung. This registration statement includes these shares.
(7) William C. Bossung is our Chief Operating Officer and a member of our
Board of Directors. The number set forth under the column entitled
"Shares of Common Stock Owned Prior to the Offering" includes (a) 125,000
of our publicly traded warrants which are exercisable into 125,000 shares
of common stock, (b) 12,000 shares of our common stock, (both (a) and (b)
are not included in this registration statement), (c) 402,403 shares of
our common stock acquired by Mr. Bossung from the Estate of Lloyd Lyons,
our former Chief Executive Officer, in a private transaction, and (d)
212,000 shares of common stock issuable upon conversion of our
convertible debentures (the shares referenced in (c) and (d) are included
in this registration statement). After this, assuming the sale of all of
the securities registered in this offering, Mr. Bossung will beneficially
own 125,000 of our publicly traded warrants and 12,000 shares of common
stock which equals 1.4% of the then diluted number of outstanding shares
of common stock as per Note 4 above.
(8) BiCoastal Associates, LLC is owned by certain partners of The Goldstein
Law Group, P.C., counsel for the Company. On or about December 12, 2000,
we issued private warrants to acquire 50,000 shares of common stock to
BiCoastal Associates, LLC in consideration for services rendered. This
registration statement includes 50,000 shares of common stock to be
issued upon exercise of these warrants.
(9) According to filings with the Securities and Exchange Commission David
Asplund is a controlling member, director, and /or officer of Augustine
Fund L.P. (see Note (5) above).
(10) According to filings with the Securities and Exchange Commission John
Porter is a controlling member, director, and /or officer of Augustine
Fund L.P. (see Note (5) above).
(11) According to filings with the Securities and Exchange Commission, Thomas
Duszynski is a controlling member, director, and /or officer of Augustine
Fund L.P. (see Note (5) above). Thomas Duszynski has voting control over
the shares of common stock underlying the private warrants held by the
following trusts: John M. Duszynski Trust, James T. Duszynski Trust, and
Daniel P. Duszynski Trust.
(12) Devenshire Management Corporation is an entity in which Todd Sanders, our
Chief Executive Officer and a member of our Board of Directors, is
president. The number set forth under the column entitled "Shares of
Common Stock Owned Prior to the Offering" includes (a) 125,000 of our
publicly traded warrants which are
16
exercisable into 125,000 shares of common stock, (b) 12,000 shares of our
common stock (both (a) and (b) are not included in this registration
statement), (c) 100,000 shares of common stock, (d) 402,403 shares of our
common stock acquired from the Estate of Lloyd Lyons, our former Chief
Executive Officer, in a private transaction, (d) 85,714 shares of common
stock which are issuable upon conversion of debentures, and (e) 730,000
shares of our common stock issuable pursuant to our private warrants.
This registration statement includes shares of common stock referenced in
(c), (d), and (e). After this, assuming the sale of all of the securities
registered in this offering, Devenshire Management Corporation will
beneficially own 125,000 of our publicly traded warrants and 12,000
shares of common stock which equals 1.4% of the then diluted number of
outstanding shares of common stock.
(13) Percentage includes private warrants to purchase 20,000 shares of common
stock registered in the name of The Zachary Todd Sanders Trust (See Note
(18) below).
(14) On December 12, 2000, the Company issued private warrants to acquire up
to 50,000 shares of common stock to Michael Iscove in consideration for
services rendered. This registration statement includes 50,000 shares of
common stock to be issued upon exercise of these warrants. Michael Iscove
is a member of our Board of Directors.
(15) On December 12, 2000, the Company issued private warrants to acquire
45,000 shares of common stock to David M. Matteson in consideration for
services rendered. This registration statement includes 45,000 shares of
common stock issuable upon exercise of these warrants. According to
filings with the Securities and Exchange Commission David M. Matteson is
a controlling member, director, and /or officer of Augustine Fund L.P.
(see Note (5) above).
(16) On December 12, 2000, we issued private warrants to acquire 10,000 shares
of common stock to Jennifer McGehee in consideration for services
rendered. This registration statement includes 10,000 shares of common
stock issuable upon exercise of these warrants.
(17) According to filings with the Securities and Exchange Commission, Brian
Porter is a controlling member, director, and /or officer of Augustine
Fund L.P. (see Note (5) above). Brian Porter has voting control over the
shares of common stock underlying the private warrants held by the
following trusts: Brian David Porter, Jr. Trust, Davis Michael Porter
Trust, Grace Elizabeth Porter Trust, and Robert John Porter Trust.
(18) On December 12, 2000, we issued private warrants to acquire 45,000 shares
of common stock to Frederic M. Schweiger in consideration for services
rendered. This registration statement includes 45,000 shares of common
stock issuable upon exercise of these warrants.
(19) On December 12, 2000, the Company issued private warrants to acquire
75,000 shares of common stock to Technology Partners Ltd in consideration
for services rendered. This registration statement includes 75,000 shares
of common stock issuable upon exercise of these warrants.
(20) These warrants were assigned by Devenshire Management Corporation to The
Zachary Todd Sanders Trust. Zachary Todd Sanders is the son of Todd
Sanders. This registration statement includes 20,000 shares of common
stock issuable upon exercise of these warrants.
The selling security holders may offer all or some portion of the
common stock that they have (i) either the right to acquire upon conversion of
the convertible debentures and/or upon exercise of the warrants or (ii) acquired
pursuant to the terms of private placements. Accordingly, no estimate can be
given as to the amount of the common stock that will be held by the selling
security holders upon termination of any such sales. See "Plan of Distribution."
The term "selling security holders" includes the holders listed in any
supplement to this prospectus and any beneficial owners of the common stock and
their transferees, pledgees, donees or other successors. Any supplement will
contain certain information about the selling security holders and the number of
shares of common stock beneficially owned by the selling security holders that
may be offered pursuant to this prospectus. Such information will be obtained
from the selling security holders.
17
Under the Securities Exchange Act of 1934, as amended and its rules and
regulations, any person distributing the common stock offered by this prospectus
may not simultaneously engage in market making activities with respect to our
common stock during the applicable "cooling off" periods prior to beginning the
distribution. In addition, the selling security holders will need to comply with
applicable provisions of the Securities Exchange Act and its rules and
regulations including, without limitation, Regulation M, which may limit the
timing of purchases and sales of shares of common stock by the selling security
holders. Regulation M contains certain limitations and prohibitions intended to
prevent issuers, selling security holders and other participants in a
distribution of securities from conditioning the market through manipulative or
deceptive devices to facilitate the distribution.
The common stock has the material rights and obligations discussed
below and under the section entitled "Description of Securities." We have filed
the agreements relating to these rights and obligations with the SEC. We urge
you to read them in their entirety.
We will bear all costs, expenses and fees in connection with the
registration of the selling security holders' shares. All brokerage commissions,
if any, attributable to the sale of the selling security holders' shares will be
borne by the selling security holders . See "Plan of Distribution."
DESCRIPTION OF SECURITIES
COMMON STOCK
We are authorized to issue 15,000,000 shares of common stock, $.00067
par value per share. As of July 23, 2001 there were 4,225,000 shares of common
stock outstanding.
Dividends are payable on the shares of common stock when, as and if
declared by the Board of Directors. Voting. The holders of our common stock are
entitled to one vote for each share held of record on all matters submitted to a
vote of stockholders. Most stockholder votes require the affirmative vote of a
majority of the shares present in person or by proxy at a meeting of the
stockholders. Stockholders have no right to cumulative voting for the election
of directors. Each share of common stock participates equally in assets
available for distribution upon liquidation or dissolution. The holders of
common stock have no preemptive or preference rights to purchase shares of
common stock. Shares of common stock are not subject to any redemption
provisions or convertible into any other of our securities. All of the
outstanding shares are fully paid and non-assessable.
The foregoing description concerning our common stock does not purport
to be complete. Please refer to our certificate of incorporation and by laws as
well as the applicable statutes of the State of Delaware for a more complete
description concerning the rights and liabilities of common stockholders.
PUBLIC WARRANTS
As of July 23, 2001 there were 1,725,000 outstanding public warrants to
purchase 1,725,000 shares of our common stock. Each of these warrants entitles
the registered holder to purchase one share of Common Stock at an exercise price
of $3.00 per share (subject to adjustment in certain events) expiring on
December 11, 2001 (pursuant to the "First Amendment to Warrant Agreement" dated
August 5, 1999).
These public warrants were issued pursuant to a Warrant Agreement (the
"Warrant Agreement") among the Company and American Stock Transfer and Trust
Company as Warrant Agent (the "Warrant Agent"). Under the Warrant Agreement, we
have the right upon 30 days' notice to call these warrants for redemption, in
whole only, at a price of $.05 per warrant at any time after the average closing
bid price of the common stock, as reported on the NASDAQ System if it is then so
listed, or if not so listed, as reported in the over-the-counter market, has
been at least $13.00 per share for 15 consecutive business days. Such notice
shall be given by us to each public warrant holder in writing not less than 30
days prior to the date fixed as the redemption date and redemption price, and
shall state that payment of the redemption price will be made at the Warrant
Agent's office and that the right to exercise these warrants will terminate on
the redemption date. The redemption price and minimum bid price are subject to
adjustment in certain events if the exercise price per share of these warrants
is adjusted. If we call these warrants for redemption, they may be exercised at
any time prior to the close of business on the date fixed for redemption. Any
18
rights to purchase common stock subject to these warrants will be forfeited to
the extent such warrants are not exercised prior to such date.
These warrants contain anti-dilution provisions providing for an
adjustment of the exercise price and the number and kind of shares of common
stock underlying these warrants to be obtained upon exercise of the warrants in
the event of a stock dividend on, or a subdivision, combination or
reclassification of the common stock, or the merger or consolidation with or
into another corporation or the sale or conveyance to another corporation of
substantially all of our assets or upon our issuance of common stock or certain
rights or warrants to purchase common stock, at less than the exercise price
(with certain exceptions) or upon other distributions (other than cash
dividends) to all holders of the common stock.
No adjustments to reflect previously declared or paid cash dividends
will be made upon any exercise of warrants. The warrants do not confer upon the
holder any voting or preemptive rights, or other rights of a stockholder of the
Company.
The warrants may be exercised, subject to prior redemption by us as
described above, by the surrender of the warrant on or prior to the expiration
date at the offices of the Warrant Agent with the "Subscription Form" on the
reverse side of the warrant filled out and executed as indicated accompanied by
the payment of the full exercise price in the form of cash, certified check,
bank draft, or postal or express money order payable to the order of the Company
for the number of shares in respect of which the warrant is being exercised.
The Warrant Agreement provides that the Company and the Warrant Agent
may, without the consent of the holders of the Warrants, make certain changes in
the Warrant Agreement which do not materially adversely affect, alter or change
the rights of the registered holders of these warrants.
The foregoing is a summary of the principal terms of the public
warrants including all material provisions, but does not purport to be complete.
Reference is made to our S-1 Registration Statement filed with the SEC in
December 1991.
PLAN OF DISTRIBUTION
THE SECURITIES OFFERED BY THIS PROSPECTUS
The following are the securities which are included in this
registration under this prospectus:
o 1,609,612 shares of common stock acquired by certain selling
security holders in private purchases of the shares;
o 100,000 shares of common stock which we issued to Alliance
Financial Network, Inc. as part of employment arrangements
with William C. Bossung;
o 100,000 shares of common stock which we issued to Devenshire
Management Corporation, as part of employment arrangements
with Todd Sanders;
o those shares of common stock underlying private warrants to
purchase up to 730,000 shares of common stock issued to
Devenshire Management Corporation, as part of employment
arrangements with Todd Sanders;
o those shares of common stock underlying private warrants to
purchase up to 20,000 shares of common stock issued to The
Zachary Todd Sanders Trust, as part of employment arrangements
with Todd Sanders;
o those shares of common stock underlying private warrants to
purchase up to 750,000 shares of common stock issued to
Alliance Financial Network, Inc., as part of employment
arrangements with William C. Bossung;
19
o those shares of common stock underlying private warrants to
purchase an aggregate of 1,800,000 shares of common stock
issued to certain individuals and entities in consideration
for services rendered; and
o those shares of common stock underlying convertible debentures
in the principal amount of $3,500,000 issued to certain
selling security holders indicated in the table set forth
under the caption "Selling Security Holders" above.
THE CONVERTIBLE DEBENTURES
The following are the terms of the convertible debentures mentioned
above:
o We pay interest on the unpaid principal balance of the
convertible debentures at a rate of six percent (6%) per
annum, payable at the option of the Company in common stock or
in cash upon the conversion of the debenture or at the option
of the debenture holder upon the occurrence of an event of
default.
o An event of default includes a breach of certain
representations, warranties and covenants, the liquidation,
reorganization, insolvency or bankruptcy of the Company and
failure to deliver shares of common stock upon conversion of
the debentures.
o The maturity date is December 13, 2002.
o The conversion price is $1.75 and is subject to adjustment
under certain circumstances.
o Each debenture holder has the option to convert its debenture
into shares of our common stock at the conversion price at any
time up to the maturity date.
o If the principal amount of the debenture has not been repaid
as of the close of business on the maturity date, then at such
time the holder shall have the option of receiving (i)
repayment of the principal amount then outstanding to the
holder in cash or cash equivalent, plus accrued and unpaid
interest for the debenture then outstanding, or (ii)
Conversion Shares (as defined in the debenture) for the then
remaining principal and interest outstanding.
o The debentures shall automatically convert into shares of our
common stock if the Company enters into a definitive agreement
to consolidate or merge with, or sell all or substantially all
of its assets to, another corporation or other entity.
o Our gross proceeds from the offer and sale of the convertible
debentures in the aggregate principal amount of $3,500,000 was
$3,500,000 and our net proceeds were approximately $3,435,000.
THE PRIVATE WARRANTS
The following are the terms of the private warrants mentioned above:
o The maturity date of these warrants is December 11, 2005.
o The exercise price is $1.75 and is subject to adjustment under
certain circumstances.
o The Company has the discretion to reduce but not raise the
exercise price at any time.
o The holders may choose to exercise the warrants pursuant to a
cashless exercise feature in which the number of shares issued
to the holder is determined by reference to the average of the
closing bid prices of the common stock for five trading days
prior to the exercise of the warrants.
20
SALE AND DISTRIBUTION
Each selling stockholder and its pledgees, donees, transferees and
other subsequent owners, may offer its shares of common stock at various times
in one or more of the following transactions:
o on any U.S. securities exchange on which our common stock may
be listed at the time of sale;
o in the over-the-counter market;
o in privately negotiated transactions;
o in connection with short sales; or
o in a combination of any of the above transactions.
Each selling stockholder may offer its shares of common stock at
prevailing market prices at the time of sale, at prices related to those
prevailing market prices, at negotiated prices or at fixed prices.
Each selling stockholder may also sell the shares under Rule 144
instead of under this prospectus, if Rule 144 is available for those sales.
The transactions in the shares covered by this prospectus may be
effected by one or more of the following methods:
o ordinary brokerage transactions and transactions in which the
broker solicits purchasers;
o purchases by a broker or dealer as principal, and the resale
by that broker or dealer for its account under this
prospectus, including resale to another broker or dealer;
o block trades in which the broker or dealer will attempt to
sell the shares as agent but may position and resell a portion
of the block as principal in order to facilitate the
transaction; or
o negotiated transactions between selling stockholders and
purchasers without a broker or dealer.
The selling security holders and any broker-dealers that act in
connection with the sale of shares might be considered "underwriters" within the
meaning of Section 2(11) of the Securities Act. Any commissions received by
broker-dealers and any profit on the resale of the shares sold by them might be
considered to be underwriting discounts or commissions under the Securities Act.
Because the selling security holders may be considered an underwriter within the
meaning of Section 2(11) of the Securities Act, the selling security holders
will be required to deliver a prospectus in connection with the sale of its
shares. We have informed the selling security holders that the anti-manipulative
provisions of Regulation M under the Securities and Exchange Act may apply to
sales in the market.
As of the date of this prospectus, we are not aware of any agreement,
arrangement or understanding between any broker or dealer and any of the selling
stockholders with respect to the offer or sale of the shares under this
prospectus.
We have advised the selling stockholders that during the time it is
engaged in distributing shares covered by this prospectus, it must comply with
the requirements of the Securities Act and Rule 10b-5 and Regulation M under the
Exchange Act. Under those rules and regulations, it:
o may not engage in any stabilization activity in connection
with our securities;
o must furnish each broker which offers common stock covered by
this prospectus with the number of copies of this prospectus
which are required by each broker; and
o may not bid for or purchase any of our securities or attempt
to induce any person to purchase any of our securities other
than as permitted under the Exchange Act.
To comply with the securities laws of certain jurisdictions, if
applicable, the shares of common stock will be offered or sold in such
jurisdictions only through registered or licensed brokers or dealers. In
addition, in certain jurisdictions the shares of common stock may not be offered
or sold unless they have been registered or qualified for sale in such
jurisdictions or an exemption from registration or qualification is available
and is complied with. Upon request of the selling security holders, we will make
all applicable filings under state securities or blue-sky laws.
21
TRANSFER AGENT AND WARRANT AGENT
The transfer agent for our common stock and the warrant agent for our
public warrants is American Stock Transfer & Trust Company, 59 Maiden Lane, New
York, New York 10007.
LEGAL MATTERS
Certain legal matters in connection with the shares of common stock
offered by this prospectus or any supplement will be passed upon for Latin
American Casinos, Inc. by The Goldstein Law Group, P.C., New York, New York.
Certain partners of The Goldstein Law Group, Inc. own private warrants to
purchase 50,000 shares of our common stock.
EXPERTS
The financial statements included in our Annual Report on Form 10-KSB
for the years ended December 31, 2000, 1999 and 1998, incorporated by reference
in this prospectus, have been so incorporated in reliance upon the report of
Shubitz Rosenbloom & Co., P.A., independent certified public accountants, given
on their authority as experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION ABOUT US
We file annual, quarterly and special reports, proxy statements and
other information with the SEC. You may read and copy any document we file at
the SEC's public reference rooms of the SEC at 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the SEC's regional offices at Seven World Trade
Center, Suite 1300, New York, New York 10048 and Northwestern Atrium Center, 500
West Madison Street, Suit 1400, Chicago, Illinois 60661. Please call the SEC at
1-800-SEC-0330 for further information on the public reference rooms. Our SEC
filings are also available to the public over the Internet at the SEC's Website
at "http://www.sec.gov."
We have filed with the SEC a registration statement on Form S-3 to
register the shares being offered. This prospectus is part of that registration
statement and, as permitted by the SEC's rules, does not contain all the
information included in the registration statement. For further information with
respect to our common stock, and us you should refer to the registration
statement and to the exhibits and schedules filed as part of the registration
statement, as well as the documents discussed below.
This prospectus may contain summaries of contracts or other documents.
Because they are summaries, they will not contain all of the information that
may be important to you. If you would like complete information about a contract
or other document, you should read the copy filed as an exhibit to the
registration statement or incorporated in the registration statement by
reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The SEC allows us to "incorporate by reference" information into the
registration statement of which this prospectus forms a part, which means that
we can disclose important information to you by referring you to another
document filed separately with the Commission. The information incorporated by
reference is deemed to be part of the registration statement, except for any
information superceded by information in the registration statement and this
prospectus. This prospectus incorporates by reference the documents set forth
below that we have previously filed with the Commission. These documents contain
important information about our finances and us.
1) Annual Report on Form 10-KSB for the fiscal year ended
December 31, 2000 and filed April 2, 2001;
2) Quarterly Report on Form 10-QSB, for the period ended March
31, 2000 and filed May 21, 2000;
3) Current Report on Form 8-K, dated January 5, 2001 and filed
January 5, 2001; and
4) The description of our capital stock contained in our
registration statement, as amended, filed with
22
the Commission on December 9, 1991, pursuant to Section 12 of
the Exchange Act, together with any amendment or report filed
with the SEC for the purpose of updating that description.
We are also incorporating by reference any additional documents that we
file with the SEC between the date of this prospectus and the termination of the
offering.
You may request a copy of these filings, at no charge, orally or by
writing to us at:
Latin American Casinos, Inc.
2000 N.E. 164th Street
North Miami, Florida 33162
Attention: Jeffrey A. Felder
Telephone Number: (305) 945-9300
You can review and copy the registration statement, its exhibits and
schedules, as well as the documents listed above, at the public reference
facilities maintained by the SEC as mentioned above. The registration statement,
including all exhibits and schedules, is also available on the SEC's Website at
"http://www.sec.gov."
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION
FOR SECURITIES ACT LIABILITIES
Our Certificate of Incorporation provides that we will indemnify our
directors and executive officers and any of our other officers, employees and
agents to the fullest extent permitted by Delaware law. Our directors continue
to be subject to liability for breach of the director's duty of loyalty, for
acts or omissions not in good faith or involving intentional misconduct, for
knowing violations of law, for actions leading to improper personal benefit to
the director, and for payment of dividends or approval of stock repurchases or
redemptions that are unlawful under Delaware law. The provision also does not
affect a director's responsibilities under any other law, such as the federal
securities laws or federal environmental laws.
Our Bylaws provide that, pursuant to Delaware law, our directors shall
not be liable to the corporation or its stockholders for monetary damages for
breach of the director's fiduciary duty of care to us and to our stockholders.
This provision does not eliminate the duty of care and, in appropriate
circumstances, equitable remedies such as injunctive or other forms of
non-monetary relief will remain available under Delaware law. Each director
continues to be subject to liability for breach of the director's duty of
loyalty, for acts or omissions not in good faith or involving intentional
misconduct, for knowing violations of law, for actions leading to improper
personal benefit to the director, and for payment of dividends or approval of
stock repurchases or redemptions that are unlawful under Delaware law. The
provision also does not affect a director's responsibilities under any other
law, such as the federal securities laws or federal environmental laws.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers or persons controlling us pursuant
to the foregoing provisions, we have been informed that in the opinion of the
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable.
23
================================================================================
WE HAVE NOT AUTHORIZED ANY DEALER,
SALESPERSON OR ANY OTHER PERSON TO GIVE ANY
INFORMATION OR TO REPRESENT ANYTHING OTHER
THAN THOSE CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE OFFER CONTAINED HEREIN,
AND, IF GIVEN OR MADE, YOU SHOULD NOT RELY
UPON SUCH INFORMATION OR REPRESENTATIONS AS
HAVING BEEN AUTHORIZED BY LATIN AMERICAN ---------------------------
CASINOS, INC. THIS PROSPECTUS DOES NOT 7,229,608
CONSTITUTE AN OFFER OF ANY SECURITIES OTHER SHARES OF COMMON STOCK
THAN THOSE TO WHICH IT RELATES OR AN OFFER TO
SELL, OR A SOLICITATION OF AN OFFER TO BUY,
THOSE TO WHICH IT RELATES IN ANY STATE TO ANY
PERSON TO WHOM IT IS NOT LAWFUL TO MAKE SUCH
OFFER IN SUCH STATE. THE DELIVERY OF THIS
PROSPECTUS AT ANY TIME DOES NOT IMPLY THAT
THE INFORMATION HEREIN IS CORRECT AS OF ANY
TIME AFTER THE DATE OF THIS PROSPECTUS.
LATIN AMERICAN CASINOS, INC
TABLE OF CONTENTS
Page
----
Risk Factors..................................3
Dilution.....................................10
Use of Proceeds..............................11
Selling Securityholders .....................11
Description of Securities....................18
Plan of Distribution ........................19
Transfer Agent and Warrant Agent.............22
Legal Matters................................22
Experts .....................................22 --------------------
Where You Can Find More
Information About Us......................22
Incorporation of Certain
Documents by Reference....................22
Disclosure of Commission Position
Indemnification for Securities
Act Liabilities...........................23
PROSPECTUS
------------
, 2001
------------
================================================================================
II-1
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table itemizes the expenses incurred by the Registrant in
connection with the issuance and distribution of the securities being
registered, other than underwriting discounts. All the amounts shown are
estimates except the Securities and Exchange Commission registration fee and the
NASD filing fee.
Registration fee--Securities and Exchange Commission.............. $ 4,753.47
Accounting fees and expenses...................................... 5,000.00
Legal fees and expenses (other than blue sky)..................... 30,000.00
Blue sky fees and expenses, including legal fees.................. 30,000.00
Miscellaneous..................................................... 5,000.00
-------------
Total............................................................. $ 64,753.47
=============
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law provides in
relevant part that a corporation may indemnify any person who was or is a party
to or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation) by
reason of the fact that such person is or was a director, officer, employee or
agent of the corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by such person in connection with
such action, suit or proceeding if such person acted in good faith and in a
manner such person reasonably believed to be in or not opposed to the best
interests of the corporation, and with respect to any criminal action or
proceeding, had no reasonable cause to believe such person's conduct was
unlawful.
In addition, Section 145 provides that a corporation may indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that such
person is or was a director, officer, employee or agent of the corporation, or
is or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise against expenses (including attorneys' fees) actually and
reasonably incurred by such person in connection with the defense or settlement
of such action or suit if such person acted in good faith and in a manner such
person reasonably believed to be in or not opposed to the best interests of the
corporation and except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the corporation unless and only to the extent that the Delaware Court
of Chancery or the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of liability but in
view of all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the Delaware Court of Chancery or
such other court shall deem proper. Delaware law further provides that nothing
in the above-described provisions shall be deemed exclusive of any other rights
to indemnification or advancement of expenses to which any person may be
entitled under any bylaw, agreement, vote of stockholders or disinterested
directors or otherwise.
Article VII of the Registrant's Certificate of Incorporation provides
that we will indemnify our directors and executive officers and any of our other
officers, employees and agents to the fullest extent permitted by Delaware law.
Our directors continue to be subject to liability for breach of the director's
duty of loyalty, for acts or omissions not in good faith or involving
intentional misconduct, for knowing violations of law, for actions leading to
improper personal benefit to the director, and for payment of dividends or
approval of stock repurchases or redemptions that are unlawful under Delaware
law. The provision also does not affect a director's responsibilities under any
other law, such as the federal securities laws or federal environmental laws.
-------------------
II-1
Article IX of the Registrant's Bylaws provides for the indemnification
of officers, directors, employees and agents to the full extent permitted by
Delaware Law, and further provides that a director shall not be personally
liable to the corporation or its stockholders for monetary damages for breach of
fiduciary duty as director except (i) for liability for any breach of the
director's duty of loyalty to the corporation or its stockholders, (ii) for acts
or omissions not in good faith or which involved intentional misconduct or a
knowing violation of the law, (iii) under Section 174 of the Delaware General
Corporation Law, or (iv) for any transaction from which the director derived an
improper personal benefit.
The Registrant has agreed to indemnify certain of its directors and
executive officers pursuant to the terms of their employment agreements, in
addition to indemnification provided for in the Registrant's Bylaws, and intends
to enter into indemnification agreements with any new directors and executive
officers in the future.
In addition, the Registrant has purchased insurance pursuant to which
certain of its directors and officers are insured against liability, which they
may incur in their capacity as such.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable.
ITEM 16. EXHIBITS.
EXHIBIT DESCRIPTION
-------------------
EXHIBIT NUMBER
4.1 Form of Convertible Debenture, dated as of December 14, 2000. (1)
4.2 Form of the private warrant. (1)
5.1 Opinion and Consent of The Goldstein Law Group, P.C.
23.1 Consent of The Goldstein Law Group, P.C. (included in its opinion filed
as Exhibit 5.1 hereto).
23.2 Consent of Shubitz Rosenbloom & Co., P.A., independent public
accountants.
24.1 Power of Attorney (included on signature page).
------------------------------------------------------
(1) Incorporated by reference to our Form 10-KSB filed, filed April 2, 2001.
ITEM 17. UNDERTAKINGS.
(a) The undersigned Registrant hereby undertakes:
1. To file, during any period in which it offers or sells common
stock, a post-effective amendment to this registration statement to:
(i.) include any prospectus required by Section 10(a)(3)
of the Securities Act;
(ii.) reflect in the prospectus any facts or events arising
which, individually or together, represent a fundamental change in the
information set forth in the registration statement. Notwithstanding
the foregoing, any increase or decrease in volume of common stock
offered (if the total dollar value of common stock offered would not
exceed that which was registered) and
-------------------
II-2
any deviation from the low or high end of the estimated maximum
offering range may be reflected in the form of prospectus filed with
the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than 20 percent change in
the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement; and
(iii.) include any additional or changed material
information on the plan of distribution; provided, however, that
paragraphs (a)(1)(i) and (a)(1)(ii) do not apply, if the registration
statement is on Form S-3 or Form S-8, and the information required in a
post-effective amendment is incorporated by reference from periodic
reports filed by the Registrant under the Exchange Act.
2. For determining liability under the Securities Act, to treat each
such post-effective amendment as a new registration statement of the common
stock offered, and to treat the offering of such common stock at that time as
the initial bona fide offering.
3. To file a post-effective amendment to remove from registration any
of the common stock that remain unsold at the end of the offering.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission,
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the common stock
being registered, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
The undersigned Registrant undertakes that: (1) for purposes of
determining any liability under the Securities Act, the information omitted from
the form of prospectus as filed as part of the registration statement in
reliance upon Rule 430A and contained in the form of prospectus filed by the
Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act
shall be deemed to be part of the registration statement as of the time it was
declared effective; and (2) for the purpose of determining any liability under
the Securities Act, each post-effective amendment that contained a form of
prospectus shall be deemed to be a new registration statement relating to the
common stock offered by this registration statement, and the offering of such
common stock at that time shall be deemed to be the initial bona fide offering
that common stock.
Pursuant to the requirements of the Securities Act, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Miami, State of Florida, on July 24, 2001.
LATIN AMERICAN CASINOS, INC.
/s/ JEFFREY A. FELDER
---------------------------------------------
By: Jeffrey A. Felder
President
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints
Jeffrey A. Felder, as his true and lawful attorneys-in-fact and agents with full
power of substitution and resubstitution, for him and his name, place and stead,
in any and all capacities, to sign any or all amendments (including post
effective amendments) to this Registration Statement and a new Registration
Statement filed pursuant to Rule 462(b) of the Securities Act and to file the
same, with all exhibits thereto, and other documents in connection therewith,
with the Securities and
-------------------
II-3
Exchange Commission, granting unto said attorneys-in-fact and agents, and each
of them, full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the foregoing, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or either of them, or
their substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates stated.
Signature Title Date
--------- ----- ----
/s/ JEFFREY A. FELDER
---------------------------
Jeffrey A. Felder President July 24, 2001
/s/ GERALDINE LYONS
---------------------------
Geraldine Lyons Acting Chief Financial Officer July 24, 2001
/s/ TODD SANDERS
---------------------------
Todd Sanders Chief Executive Officer and July 24, 2001
Director
/s/ WILLIAM BOSSUNG
---------------------------
William Bossung Chief Operating Officer and July 24, 2001
Director
/s/ MICHAEL ISCOVE
---------------------------
Michael Iscove Director July 24, 2001
/s/ DENNIS BARRY
---------------------------
Dennis Barry Director July 24, 2001
/s/ JOSE CABALLERO
---------------------------
Jose Caballero Director July 24, 2001
II-4
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------
EXHIBITS TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-------------
LATIN AMERICAN CASINOS, INC.
(EXACT NAME OF ISSUER AS SPECIFIED
IN ITS CHARTER)
July 27, 2001
II-5