SEC Info  
    Home      Search      My Interests      Help      Sign In      Please Sign In

Ajk Perfect Renaissance Inc – ‘SB-2/A’ on 11/13/00

On:  Monday, 11/13/00, at 5:18pm ET   ·   Accession #:  1094891-0-644   ·   File #:  333-40402

Previous ‘SB-2’:  ‘SB-2’ on 6/29/00   ·   Latest ‘SB-2’:  This Filing

  in    Show  and    Hints

  As Of                Filer                Filing    For·On·As Docs:Size              Issuer               Agent

11/13/00  Ajk Perfect Renaissance Inc       SB-2/A                 9:322K                                   Graubard Miller/FA

Pre-Effective Amendment to Registration of Securities by a Small-Business Issuer   —   Form SB-2
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: SB-2/A      Amendment to Form SB-2                                83    350K 
 2: EX-10.1     Sales Contract                                        10     39K 
 3: EX-10.2     Credit Agreement                                      14     46K 
 4: EX-10.3     Agreement                                              3     11K 
 5: EX-10.4     Agreement                                              1      8K 
 6: EX-10.5     Agreement                                             17     57K 
 7: EX-10.6     Agreement                                             10     34K 
 8: EX-23.1     Consent of Public Accountant                           1      7K 
 9: EX-23.2     Consent of Public Accountant                           1      6K 


SB-2/A   —   Amendment to Form SB-2
Document Table of Contents

Page (sequential) | (alphabetic) Top
 
11st Page   -   Filing Submission
5Prospectus Summary
"The offering
6Summary Financial Data
7Risk Factors
9Dividend Policy
10Use Of Proceeds
16Forward-Looking Statements
18Business
24Selling Stockholders
29Plan Of Distribution
31Management
33Executive Compensation
35Principal Stockholders
36Certain Transactions
"Description Of Securities
39Legal Matters
40Experts
"Where You Can Find More Information
41Index To Financial Statements
79Item 24. Indemnification of Directors and Officers
"Item 25. Other Expenses of Issuance and Distribution
"Item 26. Recent Sales of Unregistered Securities
80Item 27. Exhibits and Financial Statement Schedules
"Item 28. Undertakings
SB-2/A1st Page of 83TOCTopPreviousNextBottomJust 1st
 

As filed with the Securities and Exchange Commission on November 13, 2000 Registration No. 333-40402 ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 -------------- AMENDMENT NO. 1 TO FORM SB-2 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 -------------- AJK PERFECT RENAISSANCE, INC. -------------- (Name of Small Business Issuer in Its Charter) Delaware 5180 52-2210600 ----------------- ---------------------------- ----------------- (State or other (Primary Standard Industrial (I.R.S. Employer jurisdiction of Classification Code Number Identification incorporation or Number) organization) -------------- 6800 Satinleaf Road, Suite 104 Naples, Florida 34109 Telephone 941-566-3822 (Address and Telephone Number of Principal Executive Offices) Curtis Sittenfeld 6800 Satinleaf Road, Suite 104 Naples, Florida 34109 Telephone 941-566-3822 (Name, Address and Telephone Number of Agent For Service) -------------- Copies to: David Alan Miller, Esq. Graubard Mollen & Miller 600 Third Avenue New York, New York 10016 (212) 818-8800 (212) 818-8881 Facsimile Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this Registration Statement. If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. |_| If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. |_| If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier registration statement for the same offering. |_| If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. |_| If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. |_|
SB-2/A2nd Page of 83TOC1stPreviousNextBottomJust 2nd
=============================================================================== CALCULATION OF REGISTRATION FEE ------------------------------------------------------------------------------- Title of Each Class of Amount Proposed Maximum Proposed Maximum Amount of Securities to be to be Offering Price Aggregate Registra- Registered Registered Per Share Offering Price tion Fee ------------------------------------------------------------------------------- Shares of Common Stock being offered by AJK 600,000 $5.50(1) $3,300,000.00 $ 871.20 (maximum offering) Shares of Common Stock 1,604,095 $5.50(1) $8,822,522.50 $2,329.15 held by Selling Securityholders Registration Fee $3,200.35 Registration Fee Previously Paid $ 929.00 Registration Fee $2,271.35 Payable with this Amendment No. 1 =============================================================================== (1) There is no current market for the securities and the per share book value of the Common Stock is $2.60. The proposed per share offering price for the Common Stock, being registered here, for sale by us and, for resale by the selling securityholders, is estimated for purposes of calculating the amount of the registration fee based on a bona fide estimate of the maximum offering price by AJK and, with respect to the selling stockholders, the proposed reoffering price to the general public. The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, or until the registration statement shall become effective on such date as the Securities and Exchange Commission may determine.
SB-2/A3rd Page of 83TOC1stPreviousNextBottomJust 3rd
PROSPECTUS Subject to completion, dated November 13, 2000 The information in this prospectus is not complete and may be changed. These securities may not be sold 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. AJK PERFECT RENAISSANCE, INC. Minimum of 300,000 shares and maximum of 600,000 shares of Common Stock offered by AJK Perfect Renaissance, Inc. and 1,604,095 shares of Common Stock to be sold by the holders thereof. This is the initial public offering of our common stock and the offer by certain of our stockholders of our common stock for resale. In considering the offering you should know that: o No public market exists for our stock; and o The offering price has been arbitrarily determined. We are offering on a best efforts basis a minimum of 300,000 and a maximum of 600,000 shares of our common stock, at a price per share of $5.50, for minimum gross proceeds of $1,650,000 and maximum gross proceeds of $3,300,000. All proceeds raised in the offering will be held by Continental Stock Transfer & Trust Company, as escrow agent, in a non-interest bearing account until the minimum is reached. If the minimum offering is not reached within six months from the date of this prospectus all funds will be returned without interest and the offering will be terminated. If the minimum offering is achieved by six months from the date of this prospectus, the proceeds will be released to us. Thereafter, sales will continue at our sole discretion until the earlier of the date the maximum offering is achieved, or six months from the date of this prospectus, unless we decide to further extend the offering for an additional three months, at our sole discretion without notice to investors and potential subscribers. In addition, current stockholders, including officers, directors, employees and other affiliates and persons are registering for resale 1,604,095 shares of our common stock at a price per share of $5.50 concurrent with our offering. These securities involve a high degree of risk. See "RISK FACTORS" beginning on page 7. Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense. --------------------------------------------- The date of this Prospectus is ________ ____, 2000
SB-2/A4th Page of 83TOC1stPreviousNextBottomJust 4th
Table of Contents Page Prospectus Summary........................................................3 Summary Financial Data....................................................4 Risk Factors..............................................................5 Dividend Policy...........................................................7 Use Of Proceeds...........................................................8 Management's Discussion And Analysis Of Financial Condition And Results Of Operations...................................9 Business.................................................................16 Selling Stockholders.....................................................22 Plan Of Distribution.....................................................27 Management...............................................................29 Executive Compensation...................................................31 Principal Stockholders...................................................33 Certain Transactions.....................................................34 Description Of Securities................................................34 Legal Matters............................................................37 Experts..................................................................38 Where You Can Find More Information......................................38 Index To Financial Statements............................................39 2
SB-2/A5th Page of 83TOC1stPreviousNextBottomJust 5th
PROSPECTUS SUMMARY This summary highlights information contained elsewhere in this prospectus. This summary is not complete and does not contain all of the information you should consider before investing in our common stock. You should read the entire prospectus carefully, including the "Risk Factors" section. Our Business We are a development stage company. Through our subsidiaries, S.C. Perfect Renaissance, S.R.L.; S.C. Renaissance, S.R.L.; and S.C. Renaissance 2000, S.R.L., we: o produce and market Roumanian vodka, flavored vodka and other distilled spirits and liqueurs in Roumania, Central Europe and Eastern Europe; and o distribute and market watches and other jewelry in Roumania and Central and Eastern Europe. We plan to expand our distribution into Western Europe, Central Europe and the United States. We are a Delaware corporation originally incorporated on March 24, 1999 under the name Allegiance Acquisition Corporation. On July 21, 1999 we changed our name to AJK Perfect Renaissance, Inc. On May 5, 2000, we acquired substantially all of the shares of three Roumanian subsidiaries from Ferrand Investment Limited, a British Virgin Islands limited liability company: o S.C. Perfect Renaissance, S.R.L. (primarily involved in the vodka business); o S.C. Renaissance, S.RL. (primarily involved in the importing and distribution of watches); and o S.C. Renaissance 2000, S.R.L. (primarily involved in the sale of glassware and ornaments). These three operating subsidiaries are limited liability companies registered under the laws of Roumania. We maintain our principal executive United States offices at 6800 Satinleaf Road, Suite 104, Naples, Florida 34109. Our telephone number is 941-566-3822 and our fax number is 941-566-1329. In this prospectus, we refer to our company, AJK Perfect Renaissance, Inc., as we, us or AJK. The Offering o Total common stock outstanding prior to the offering ........ 5,604,095 o Maximum number of common stock being offered by us........... 600,000 o Total common stock outstanding after our offering (minimum).. 5,904,095 o Total common stock outstanding after our offering (maximum).. 6,204,095 o Common stock being offered for resale by the selling stockholders................................................. 1,604,095 Use of Proceeds........... We plan to use the proceeds to establish a sales and marketing organization in the United States, for advertising and marketing activity, for the repayment of debt and for working capital and general corporate purposes. 3
SB-2/A6th Page of 83TOC1stPreviousNextBottomJust 6th
Summary Financial Data As of December 31, 1999, we were nominally capitalized with no income or revenues. As of December 31, 1999, we had 500,000 shares of common stock outstanding for an aggregate price of $50 and had incurred $535 in organization expense. At December 31, 1999, our total assets were $50. Subsequent to December 31, 1999, we acquired our three operating subsidiaries for an aggregate of 5,000,000 shares of common stock. The following information is based on the audited combined financial statements for our three subsidiaries for the years ended December 31, 1999 and 1998 and on the unaudited combined financial statements for our three subsidiaries for the six months ended June 30, 2000. Year Ended December 31, Six months ended ------------------------- ---------------- 1999 1998 June 30, 2000 ------------ ------------ -------------- (audited) (audited) (unaudited) Income Statement Items: Sales $ 4,689,593 $ 5,544,717 $ 2,221,586 Costs of Sales (2,734,291) (3,218,066) (1,376,325) Gross Profit 1,955,302 2,326,651 845,261 Selling, General and Administrative (802,417) (577,826) (311,462) Other expenses (582,262) (852,940) (66,930) Net Income 570,623 895,885 466,869 Balance Sheet Items: Cash 46,680 203,456 79,388 Total Current Assets 1,103,297 1,670,511 942,218 Total Assets 8,703,061 7,657,691 8,711,839 Total Current Liabilities 2,910,906 6,226,415 3,040,532 Long-Term Debt 4,092,684 -- 3,518,062 Total Stockholders' Equity 1,686,326 1,432,276 2,153,245 Total Liabilities and Stockholders' Equity 8,703,061 7,657,691 8,711,839 Please read this prospectus carefully. You should rely only on the information contained or incorporated by reference in this prospectus to make your investment decision. We have not authorized anyone to provide you with different information. We are not and the selling stockholders are not offering these securities in any state where the offer is not permitted. You should not assume that the information in this prospectus is accurate as of any date other than the date on the front page of this prospectus. 4
SB-2/A7th Page of 83TOC1stPreviousNextBottomJust 7th
RISK FACTORS You should carefully consider the following factors, in addition to other information contained in this prospectus, before you decide to invest in our common stock. An investment in our common stock includes a high degree of risk and you could lose all or part of your investment. We are a recently formed company with a limited operating history and our financial condition raises uncertainties as to whether we will be able to continue as a going concern. We were recently formed to expand the international and United States operations of our operating subsidiaries, S.C. Perfect Renaissance, S.R.L., S.C. Renaissance, S.R.L. and S.C. Renaissance Alpha 2000, S.R.L. Our management is unfamiliar with the United States marketplace and the other markets in which we may be operating. Our company and our products have no established reputation and will need to be promoted. There is no assurance that we will be able to market or distribute our products in the markets we enter or that we will sell a sufficient quantity of our products to justify the costs incurred. The unaudited consolidated financial statements for us and our three operating subsidiaries, S.C. Perfect Renaissance, S.R.L., S.C. Renaissance, S.R.L. and S.C. Renaissance Alpha 2000, S.R.L., for the six months ended June 30, 2000, reflect consolidated current liabilities exceeding consolidated current assets by $2,098,314. This condition raises substantial doubt about our ability to continue as a going concern. Risks of doing business in Roumania could adversely affect our business and result in the loss of your investment and you may not be able to enforce your rights against us and our officers and directors. Roumania is a developing country that until the last decade was allied with the former Soviet Union under a communist economic system. The region is still unstable, given the recent history of the former Yugoslavia, the breakup of Czechoslovakia, military uprisings in Chechnya and other former Soviet states, the rise of political and criminal corruption in Russia, and the lack of experience and unpredictability of the civil justice system. Roumania, in particular, continues to suffer from high unemployment, low wages, low literacy rates, and rumors of corruption. Business risks include, among others, internal political or civil unrest, war, corruption or government restrictions. These risks could be harmful to us and are difficult to quantify. We will be subject to the risks normally associated with changes in general national economic conditions or local market conditions, including competition, patronage, changes in market rates, the need to periodically upgrade and replace equipment and to pay the costs thereof. Although many governments of the countries of Central and Eastern Europe have liberalized policies on international trade, foreign ownership and development, investment, and currency repatriation to increase both international trade and investment, such policies might change unexpectedly. We will be affected by the rules and regulations regarding foreign ownership of real and personal property, including manufacturing plants and other property. Such rules may change quickly and dramatically which may have an adverse impact on ownership and may result in a loss without recourse of our property or assets. Domestic and international laws and regulations, whether existing today or in the future, could adversely affect our ability to market and sell our products and could impair our profitability. Although a Delaware corporation whose securities are governed by United States securities laws, all of our operations are in Central and Eastern Europe. Our management resides in Israel and Roumania and may be protected by or subject to foreign rules, which may be adverse to a stockholder of our company. Any foreign company or litigant may encounter difficulty in prevailing in any dispute with or enforcing any judgment against the Roumanian government or any of our officers or directors under the Roumanian legal system. 5
SB-2/A8th Page of 83TOC1stPreviousNextBottomJust 8th
Speculative nature of our business could result in unpredictable results and a loss of your investment. The liquor industry is extremely competitive and the commercial success of any product is often dependent on factors beyond our control, including but not limited to market acceptance and retailers' prominently shelving and selling our products. We may experience substantial cost overruns in manufacturing and marketing our products, and may not have sufficient capital to successfully complete any of our projects. We may also incur uninsured losses for liabilities which arise in the ordinary course of business in the manufacturing industry, or which are unforeseen, including but not limited to trademark infringement, product liability, and employment liability. Our operations will be adversely affected if we are unable to obtain additional financing when needed. This could result in a loss of your investment. Future events, including the problems, delays, expenses and difficulties frequently encountered by development stage companies may lead to cost increases that could make the net proceeds of this offering insufficient to fund our proposed operations. We may seek additional sources of capital, including an additional offering of our equity securities, an offering of debt securities or financing through a bank or other entity. If we raise additional funds through the issuance of equity or debt securities, your investment could be substantially diluted and those securities could have preferences and privileges that your securities do not have. We have not established a limit on the amount of debt we may incur nor have we adopted a ratio of our equity to debt allowance. If we need to obtain additional financing, there is no assurance that financing will be available or that it will be available on terms acceptable to us, or that any future offering of securities will be successful. We could suffer adverse consequences if we are unable to obtain additional capital when needed. Our bank loan for the construction of our Roumanian distillery is collaterized by substantially all of our assets. A default under the loan could result in a cessation of our business and a loss of your investment. If we default, our assets could be seized and we may cease operations, which would result in a loss of your investment. In order to construct our Roumanian Distillery, we entered into a loan agreement which was subsequently assigned to the Roumanian Bank Restructuring Organization. Approximately $1,425,789 is outstanding as of September 30, 2000. This loan is secured by our real property, other fixed assets and inventories. In the event we default on this loan, it is possible that all of our assets could be seized and you could lose your entire investment. Limited state registration of our common stock may limit the gross proceeds raised in the offering for the company. We anticipate that we will primarily sell our shares in a limited number of states. We will not accept subscriptions from investors who reside in other states unless we effect a registration therein or determine that no such registration is required. In order to comply with applicable state securities laws, if any, the shares we offer will be sold in such states through registered or licensed brokers or dealers in those states. In addition, in certain states, the shares may not be offered or sold unless they have been registered or qualified for sale in such states or an exemption from such registration or qualification is available. 6
SB-2/A9th Page of 83TOC1stPreviousNextBottomJust 9th
If only the minimum amount of shares are sold, we may not have sufficient funds to fulfill our business plan and early investors could be adversely affected. This offering is being conducted on a minimum/maximum basis meaning that if the minimum amount of common stock is sold all of the proceeds will be used when accepted by us. If the proceeds from the sale of only the minimum amount of common stock is sold, and no more, it may not be sufficient to meet our proposed objectives, and therefore, early investors will have a greater risk of loss of all of their investment. The distillation process could have environmental risks which could adversely affect us and your investment. The process of distilling and manufacturing vodka involves the burning of fossil fuels. It also utilizes an exothermic distillation process that uses local water in the cooling process, which is then returned to its source warm. Although the Roumanian government has expressed no substantial concern over industrial air, water, or thermal pollution from our plant, an attempt to regulate the effluents from our operations could increase costs of doing business. Also, local water could have contaminants which cannot be remedied by us and which would adversely affect our products and, consequentially, our operations and results. No assurance of trading market may result in illiquidity for your investment. There is currently no trading market for our securities and there is no assurance one will develop. We intend to apply initially for admission to quotation of our common stock on the NASD OTC Bulletin Board. There is no assurance that trading activities or market making activities, if commenced, will be maintained, which could result in the illiquidity of your investment. Cost and Availability of Raw Materials Our operations require substantial amounts of raw materials. The price and availability of these materials are subject to market conditions. Increases in the price of our products, due to the increase in the cost of raw materials, could have a negative effect on our business. We are controlled by an entity affiliated with our President. Iotakappa Capital Corp., a Delaware company wholly-owned by our President, has the ability to vote approximately 70.1% of the votes, if the minimum amount of shares are sold in this offering and approximately 64% of the votes if the maximum amount of shares are sold in this offering. Consequently, we are essentially controlled by our President. As a result, he will be able to exercise substantial interest over matters requiring stockholder approval, including the election of directors and the approval of material corporate matters such as change of control transactions. The effects of such influence could be to delay or prevent a change of control of us unless the terms are approved by our President. DIVIDEND POLICY We have not paid dividends on our common stock and do not currently intend to pay dividends on our common stock in the foreseeable future. We intend to retain future earnings, if any, to finance the expansion and development of our business. Any future decision of our board of directors to pay dividends will be made in light of our earnings, financial position, capital requirements and other relevant factors then existing. 7
SB-2/A10th Page of 83TOC1stPreviousNextBottomJust 10th
USE OF PROCEEDS We are offering for sale a minimum of 300,000 and a maximum of 600,000 shares of our common stock at a price of $5.50 per share. The net proceeds from the minimum offering after deducting expenses will be approximately $1,490,000. The net proceeds from the maximum offering after deducting expenses will be approximately $3,140,000. The selling stockholders are registering for resale 1,604,095 shares of our common stock. We will not receive any net proceeds from their sales. We expect to use the net proceeds from our sale of common stock in the offering as follows: Description Maximum Offering Percentage ------------------------------------------------ ---------------- ---------- Establish a sales and marketing organization in the United States ........................... $ 750,000 24% Advertising and marketing activities .............. 600,000 19% Repayment of a portion of the debt incurred in connection with the construction of our distillery(1) .............. 1,000,000 32% General working capital including salaries, rent utilities, supplies and telecommunications ......................... 690,000 22% Other debt(2) ..................................... 100,000 3% Total .......................................... $3,140,000 100% ------------------------------------------------------------------------------ (1) This debt was incurred as a result of the $3,918,409 loan for the construction of our Roumanian distillery. Approximately $1,425,789 of that loan is outstanding as of September 30, 2000. Total repayment is due by December 2004. (2) In May 2000, Ferrand agreed to transfer its Roumanian assets to us in exchange for 5,000,000 shares of our common stock. As part of this transaction, Ferrand also agreed to retain the debt of $858,934 and convert it into deferred receivables, which is carried on our financial records as long-term debt. In the event only the minimum offering is sold, we expect the net proceeds from the minimum offering, after deducting expenses will be approximately $1,490,000 ($1,650,000 minus $160,000), which we intend to devote primarily to establishing our United States sales and marketing operations and, to a lesser extent, to the repayment of a portion of debt incurred in connection with the construction of our distillery. The allocation of the net proceeds of the offering set forth above represents our best estimate based upon our present plans and certain assumptions regarding general economic and industry conditions and our future revenues and expenditures. If any of these factors change, we may find it necessary to reallocate a portion of the proceeds within the above-described categories or use portions of the proceeds for other purposes. Based on currently proposed plans and assumptions relating to the implementation of our business plans, we believe that the minimum proceeds from this offering, combined with cash flow from operations, will enable us to fund our planned operations for a period of at least 12 months from the date of this prospectus and we believe that the maximum proceeds from this offering, combined with cash flow from operations, will enable us to fund our planned operations for a period of at least 18 months from the sale of this prospectus. However, we cannot assure you we will realize cash flow from operations or that the cash flow will be sufficient. We cannot assure you that any additional financing, if necessary, will be available to us on acceptable terms, or at all. Proceeds not immediately required for the purposes described above will be invested principally in United States government securities, short-term certificates of deposit, money market funds or other short-term interest-bearing investments. 8
SB-2/A11th Page of 83TOC1stPreviousNextBottomJust 11th
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FNANCIAL CONDITION AND RESULTS OF OPERATIONS The following should be read in connection with our financial statements, including the financial statements of our subsidiaries, related notes and other financial information included elsewhere in this prospectus. Background Following the anti-Communist revolution and the end of the Ceausescu dictatorship early in 1990, our president, chief executive officer and chairman, Mr. Jacob Kieselstein, returned to Roumania and started the Perfect Renaissance companies, selecting the name to signify the family's return to Roumania from which it had fled during World War II. Initially we imported and distributed jewelry and watches. Subsequently we entered the vodka business. We bought grain alcohol from existing distilleries in Roumania and then re-processed the alcohol so as to assure maximum purity and quality. Sales grew from less than $150,000 in 1990 to over $5 million in 1999. As the market expanded and our principal product, "Perfect Vodka," gained market acceptance and popularity throughout Roumania and in nearby countries. We entered into an agreement in late 1997 with Ex-Klar Technologies, Inc. of Pawling, New York for the construction of our distillery. We obtained a letter of credit for the value of the contract, supported by financing from Bancorex, our lead bank. The distillery was completed in December 1999 and we commenced production in January 2000. Ex-Klar will continue to provide technical support and operating personnel until at least December 31, 2000. Now that we control our own in-house supply of key raw materials, we are in a position to expand our market coverage within Roumania, as well to other important markets in Central and Eastern Europe. In addition, we intend to begin marketing our products in the United States. A major portion of the proceeds of this offering will be dedicated to establishing a distribution network, advertising, and shelf space acquisition in the United States. We have registered the trademark "Perfect Vodka" with the United States Patent and Trademark Office. We anticipate that we will be able to compete with other established brands based on our competitive production costs in Roumania and the quality and purity of our products. We also manufacture and bottle Bardinet brandy under an arrangement with Cie. Bardinet of France. Roumania has a population approaching 25 million, and is in line to become a member of the European Union. The economy is slowly growing and improving. It is nevertheless still a poor country and the general population has limited purchasing power. Therefore the volume of sales of liquor products and Bardinet brandy is anticipated to be small in Roumania and may expand only gradually over several years, if at all. The impact of our relationships with other liquor companies and Bardinet on our profits will not be meaningful for some time to come. However, we believe that even a small sales volume of these brands will lend prestige and visibility to our company and will contribute to the marketing programs of our own "Perfect" brands. We employ approximately 200 persons. This makes us one of the largest employers in the Timisoara Roumania area. We believe that such a position contributes to good relations with local and national authorities. Many of our Roumanian employees are long-term employees and we consider our staff to be well educated. In addition, we conduct in-house training and refresher courses for technical and sales staff and from time to time send 9
SB-2/A12th Page of 83TOC1stPreviousNextBottomJust 12th
selected personnel out of the country for specialized training. We believe we have satisfactory relationships with our employees. We have made and intend to continue to make our shares available to employees, as rewards and incentives. Nevertheless, Roumania is in a volatile and unstable part of the world, in the Balkans between Ukraine and Serbia. Therefore, we have decided to purchase political risk insurance, to cover losses for events such as confiscation, expropriation, nationalization, selective discrimination, deprivation, forced abandonment, forced divestiture, strikes, riots, civil commotion, malicious damage, business interruption and non-availability of hard currency to remit interest, dividends and profits and repatriate capital. There is no assurance that we will be able to secure adequate amounts of insurance, if at all, and if any, that such insurance would be sufficient to remedy the adverse effect of political events. We believe that we will grow and diversify. There are several opportunities in Roumania which would be complementary to our liquor production business. There are opportunities in countries adjacent to Roumania, where existing facilities are being offered at a fraction of cost as part of a privatization movement. We will also look at opportunities in the United States, especially in the areas of packaged ethnic foods and wine. Results and Plan of Operations Our subsidiaries are in a period of steady growth and sustained market development. Sales of our own branded products as well as products being marketed under license have increased and are expected to continue to increase, although there can be no assurance. The new distillery gives us our own supply of 96% alcohol, which is known as neutral alcohol and the distillery is also expected to generate revenues of approximately $160,000 per year from the sale of stillage and approximately $120,000 per year from sale of carbon dioxide. However, some additional equipment is required for the production of carbon dioxide and we do not plan to make this additional investment until the year 2002. Over time, our jewelry and watch business has become somewhat overshadowed by the liquor business but remains an important source of revenue and profit. Sales of jewelry and watches are projected to be in the area of $900,000 in the year 2000, with a net profit of $280,000. While the existing business is reaching maturity and is not expected to grow dramatically in the coming years. We have recently been approached by Citizen Watch Company of Japan and are in ongoing discussions about a possible exclusive distributorship. Our growth and market penetration in our primary market in Roumania and elsewhere have met or exceeded our expectations. Roumania experienced a deep recession in 1999 which is reflected in our sales for that year. In addition we incurred large expenses in 1999 in connection with the completion and startup of the distillery. Year to year gains in sales and profits of our subsidiaries have exceeded projections and are expected to continue to do so. Combined sales and net income from our subsidiaries are: Net Income Year Sales From Operations ---- ------------- --------------- 1997 $ 3,128,254 $ 333,787 1998 5,544,717 895,885 1999 4,689,593 570,623 10
SB-2/A13th Page of 83TOC1stPreviousNextBottomJust 13th
Our proposed sale of up to 600,000 shares of common stock to the public is expected to provide additional capital of $3,140,000 after estimated expenses are deducted. The funds will be employed primarily to gain greater market share by improving and expanding our sales and distribution network and establishing an advertising program. In the United States, we will aim for penetration of selected markets, with emphasis on the greater New York metropolitan area, southern California, south Florida and the Washington, DC area. In addition, selected markets in Pennsylvania, Ohio and Illinois, where there is a substantial ethnic Roumanian population, will be addressed. For the time being, our aim is to capture only a tiny share of the U.S. market for superpremium imported vodka. However, we believe even a tiny share will have a major impact on our sales and net income. Similarly, European markets are huge and a relatively modest marketing effort is expected to yield substantial additional income over time, although there can be no assurance of this. Liquidity and Capital Resources Our available cash on hand increased from $63,610 at the beginning of 1998 to $203,456 at the end of 1998. Available cash on hand at the end of 1999 was $46,680 and $79,388 for the six months ended June 30, 2000. The Roumanian economy has been slow to adjust to western free market policies and many sectors, especially the banking sector, have had and continue to have difficulties. As the result, much of our business is conducted on a cash-for-product basis. Purchases and investments were traditionally supported by cash in banks. Only when we decided to build our own distillery, requiring an investment close to $7,000,000, did we seek financing from our principal bank in Timisoara Roumania. However, Bancorex, the bank holding the loan, was declared insolvent by the government of Roumania and we had to negotiate the loan with its successor and the Roumanian government. Six Months Ended June 30, 2000 Compared to Six Months Ended June 30, 1999. The following discussion should be read in conjunction with our consolidated financial statements and notes thereto for the six months ending June 30, 2000 and June 30, 1999. The statements contained in this discussion that are not historical facts are forward looking statements. These forward looking statements are based on current expectations, estimates and projections derived from management's experience of 10 years of operations in its principal markets. Words used in 11
SB-2/A14th Page of 83TOC1stPreviousNextBottomJust 14th
this discussion such as "expects", "believes" and "estimates" are intended to identify such forward looking statements and are not guarantees of future performance. Markets and conditions in our principal area of activity, Romania and adjacent countries, are progressing only slowly as these formerly Communist eastern European nations gradually shift from command to market economies. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in such forward looking statements. Our operating results depend primarily on (a) the availability and cost of our principal raw material, which is corn; and (b) the purchasing power of our customers, which is a function of economic reforms and job creation in Romania and eastern Europe. Eastern Europe, together with many other countries around the world, has just emerged from a period of severe drought, characterized as a historic 50-year drought. We were able to obtain corn from various sources, but at a substantially higher cost. It is expected that farming will return to normal during the second half of 2000 and corn prices will fall back to their traditional level, although there can be no assurance that this will happen. Unlike Poland, Hungary and to a lesser extent the Czech Republic, which have made impressive strides towards market reforms, investments and job creation, Romania has been slower to implement reforms. While it has attracted substantial investments in assembly operations, these assembly operations are of the sewing machine and screwdriver variety, with relatively modest value-added, primarily motivated by low wages. As a result, income and purchasing power have lagged behind other countries in the area. Our new distillery, representing a total investment of over seven million dollars, was completed and began operating early in 2000. Only some minor additions and adjustments are still required. The shift of assets from construction-in-progress to property and plant in operation did not result in a major change in total assets year to year. Short term bank borrowings are about the same in the current six months as opposed to last year's equivalent period. The major change in liabilities at June 30, 1999 to June 30, 2000 is the result of the successful restructuring of the loan incurred in connection with the purchase and installation of the new distillery. The current portion of the loan is now less than half compared with the previous year. Also, the payable to a related party (our principal shareholder), which accumulated over time because of payments made to vendors on our behalf when hard currency was scarce in Romania, has now been converted to a long term obligation. Trade payables were also reduced appreciably. All of these changes in the financial position resulted in a more favorable current asset to liability ratio at June 30, 2000 as compared to June 30, 1999. The additional net income from operations in the first six months of 2000 and a substantial decrease in receivables net of an appreciable reduction of trade payables has resulted in improved cash availability for management at June 30, 2000 as compared to December 31, 1999. A substantial portion of the debt incurred in connection with the construction of the distillery has now been repaid or rescheduled and we expect 12
SB-2/A15th Page of 83TOC1stPreviousNextBottomJust 15th
to continue these efforts. We have enjoyed considerable assistance and good will from AVAB, the Romanian bank restructuring agency which assumed responsibility for our loan portfolio when the commercial bank with which we had been dealing for years failed. We believe that there is recognition that we are a major employer, paying decent salaries and providing good working conditions and benefits to our more than 200 employees. We also have a reputation in Romania for being a serious investor, paying our taxes dutifully and being good corporate citizens. We believe that improved operations, greater market penetration, more efficient cash management, having our own distillery and therefore our own assured supply of high quality raw material for our products and continued, albeit gradual government reform and improvement in the economy as Romania approaches membership in the European Union will all combine to provide enough liquidity for our normal business operations. In addition, having reduced and restructured our loan portfolio and reduced current obligations, we believe that we will have access to additional financing should the need arise. While no assurance can be given that we will continue to receive AVAB's cooperation, our status as a major employer in an area of substantial unemployment and a producer of high quality consumer goods which have a major impact on the state's tax receipts lead us to believe that we will be able to continue making progress in the areas of liquidity and shareholder value. Results of Operations The following discussion relates to our actual operating results for the periods noted. Comparison of Six Months ended June 30, 2000 and June 30, 1999 Net sales. Net sales were $2,060,271 for the six months ended June 30, 1999 and $2,221,586 for the six months ended June 30, 2000, an increase of approximately 8%. This modest increase was primarily the result of lagging purchasing power. Cost of sales. Cost of sales were $1,157,600 for the six months ended June 30, 1999 and $1,376,325 for the six months ended June 30, 2000, an increase of approximately 18%. This increase was primarily the result of the higher cost of corn. Gross Profit. Gross profits were $902,671 for the six months ended June 30, 1999 and $845,261 for the six months ended June 30, 2000, a decrease of approximately 6%. This decrease was primarily the result of increased sales offset by increased cost of sales. Selling, General and Administrative Expenses. Selling, general and administrative expenses were $283,704 for the six months ended June 30, 1999 and $311,462 for the six months ended June 30, 2000, an increase of approximately 10%. This increase was primarily the result of the increased expenses associated with the start-up of the new distillery. Financial Expenses. Financial Expenses were $45,492 for the six months ended June 30, 1999 and $17,664 for the six months ended June 30, 2000, a decrease of approximately 61%. This decrease was primarily the result of our ability to reschedule certain of our debt repayment obligations. 13
SB-2/A16th Page of 83TOC1stPreviousNextBottomJust 16th
Net Income. Net income was $359,475 for the six months ended June 30, 1999 and $466,869 for the six months ended June 30, 2000, an increase of approximately 30%. This increase was primarily the result of more prudent management and a more favorable dollar-to-local currency exchange rate. Comparison of the years ended December 31, 1999 and December 31, 1998 for S.C. Perfect Renaissance S.R.L., S.C Renaissance S.R.L. and S.C Renaissance Alpha 2000 S.R.L. Net sales. Net sales were $5,544,717 in 1998 and $4,689,593 in 1999, a decrease of approximately 15%. This decrease was primarily due to a deep recession in Roumania. Cost of sales. Cost of sales were $3,218,066 in 1998 and $2,734,291 in 1999, a decrease of approximately 15%. This decrease was primarily the result of the reduced amount of inventory purchased. Gross Profit. Gross profits were $2,326,651 in 1998 and $1,955,302 in 1999, a decrease of approximately 16%. This decrease was primarily the result of reduced net sales and increased expenses connected with completion and startup of our distillery. Selling, General and Administrative Expenses. Selling, general and administrative expenses were $577,826 in 1998 and $802,417 in 1999, an increase of approximately 28%. This increase was primarily the result of the increased expenses associated with the start-up of the new distillery. Financial Expenses. Financial expenses were $114,732 in 1998 and $50,958 in 1999, a decrease of approximately 56%. This decrease was primarily the result of our ability to reschedule certain of our debt repayment obligations. Net Income. Net income was $895,885 in 1998 and $570,623 in 1999 a decrease of approximately 36%. This decrease was primarily the result of reduced net sales and increased expenses connected with completition and start-up of our distillery. Total Assets. Total assets increased from $7,657,691 in 1998 to $8,703,061 in 1999, largely attributable to an increase in property, plant and equipment arising from completion of our distillery. Forward-looking Statements When used in this prospectus and in our other filings with the Securities and Exchange Commission, in our press releases and in oral statements made with the approval of one of our authorized executive officers, the words or phrases "will likely result," "plans," "will continue," "is anticipated," "estimated," "expect," "project" or "outlook" or similar expressions (including confirmations by one of our authorized executive officers of any such expressions made by a third party with respect to us) are intended to identify "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. We caution readers not to place undue reliance on any such forward-looking statements, each of which speaks only as of the date made. Such statements are subject to certain risks and uncertainties, including but not limited to our limited operating history, our need for additional financing, our ability to continue as a going concern, risks of doing business in Roumania, intense competition, limited advertising budget, dependence upon suppliers and distributors, environmental risks, dependence upon certain key officers, penny stock regulation and no assurance that a public market will develop for our stock, that could cause actual results to differ materially from historical earnings and those presently anticipated or projected. Factors that may cause 14
SB-2/A17th Page of 83TOC1stPreviousNextBottomJust 17th
actual results to differ materially from those contemplated by such forward-looking statements include, among others, the factors described in the risk factors section of this prospectus. We undertake no obligation to release publicly revisions we make to any forward-looking statements to reflect events or circumstances occurring after the date of such statements. All written and oral forward-looking statements made after the date of this prospectus and attributable to us or persons acting on our behalf are expressly qualified in their entirety by this discussion. 15
SB-2/A18th Page of 83TOC1stPreviousNextBottomJust 18th
BUSINESS Background We are a development stage company that, through our operating subsidiaries, is engaged in the production and marketing of Roumanian vodka, flavored vodka and other distilled spirits and liqueurs in Central and Eastern Europe. In addition, we distribute and market watches and other jewelry in Roumania and Central and Eastern Europe. We plan to expand our liquor distribution into Western Europe and the United States. We were originally incorporated on March 24, 1999 as a Delaware corporation under the name Allegiance Acquisition Corporation. On July 21, 1999, we changed our name to AJK Perfect Renaissance, Inc. Subsequently, we acquired substantially all the shares of three Roumanian subsidiaries of Ferrand, consisting of: o S.C. Perfect Renaissance, S.R.L. o S.C. Renaissance, S.R.L. and o S.C. Renaissance Alpha 2000, S.R.L. Due to a requirement of Roumanian law that Roumanian companies cannot be wholly-owned by foreign nationals, the remaining interest in two of the subsidiaries is owned by Petru Willkovits, our Vice President and a Roumanian national, and the interest in the remaining company is owned by one of the other two companies. For accounting purposes, the subsidiaries will be treated as if wholly owned. Roumanian Subsidiaries Our primary operations are performed by our subsidiary, S.C. Perfect Renaissance, S.R.L. S.C. Perfect Renaissance, S.R.L. purchases the raw materials for our vodka production, oversees the distillation, mixing and bottling operations, ownership of the distillery and bottling plant, lease and purchase of real estate and the marketing and sales of vodka and other products. S.C. Perfect Renaissance, S.R.L. was incorporated on November 11, 1994 as a limited liability company under the laws of Roumania. S.C. Renaissance S.R.L was established in Timisoara, Roumania on April 15, 1991, as a limited liability company under the laws of Roumania. It is principally involved in the import, marketing and distribution of digital and analog watches and other jewelry from Asia and around the world. S.C. Renaissance Alpha 2000, S.R.L. was incorporated on November 22, 1994 as a limited liability company under the laws of Roumania. It is principally involved in the sale of glassware and ornaments. Vodka and Other Liquor Operations The manufacture of vodka consists mainly of blending alcohol with purified water. Until December 1999, we purchased alcohol from outside vendors, mixed and bottled the vodka, and marketed it in Roumania. In December 1999 we began operating our own distillery in Timisoara, Roumania. The Roumania distillery has a capacity of 13,000 liters of grain alcohol per day, using locally grown corn as raw material. We plan to operate the plant approximately 335 days per year, 24 hours a day, with the balance of the time used for maintenance and repair. 16
SB-2/A19th Page of 83TOC1stPreviousNextBottomJust 19th
The corn is dry-milled, batch-cooked and fermented using commercially available enzymes and dry yeast. The alcohol distillation process is continuous. The plant operation is mostly manual, given the local supply of inexpensive labor. Operation of the distillery is currently under the training and supervision of Ex-Klar Technologies, Inc., who constructed our distillery, although our personnel are being trained in all phases of the plant's operations, training is expected to continue until the end of 2000 after which time, we intend to assume full responsibility for training and supervision. The Fermentation Process Corn is stored in four silos, each having a capacity of approximately 585 metric tons, enough for approximately 60 days' operation. A corn receiving area receives the corn from dump trucks at a rate of approximately 7.5 metric tons per hour. Plant consumption is approximately 36 metric tons per day. The corn is cleaned and mechanically milled into meal containing particles not larger than 1/8" in diameter. The meal is weighed for production and inventory control and yield calculations and discharged into cookers, mixed with hot water and enzymes and cooked and agitated into mash. The mash is mixed with yeast and allowed to ferment for approximately 48 hours. Fermentation is exothermic and heat generated during the process must be dissipated. The Distillation Process After fermentation, the mash, now called beer, is pumped into a continuous distillation unit, which reduces the beer to a concentration of 96% alcohol, while removing impurities known as cogeners. A boiler burning No. 2 fuel oil heats the distillation unit. The waste products from the fermentation cycle, known as stillage, is sold to local farmers as animal feed. We expect to earn approximately $160,000 per year from the sale of stillage. Another by-product of the distillation process is carbon dioxide, which can be marketed to the soft drink industry. We expect to earn approximately $120,000 per year from sale of carbon dioxide. However, some additional equipment is required for the production of carbon dioxide and we do not plan to make this additional investment until the year 2002. Additionally, we expect our distillation plant to earn additional revenues from sales of alcohol and by-products to customers in the chemical industry, pharmaceutical industry, cosmetic industry and other producers of alcoholic beverages. However, there can be no assurance that we will be able to establish sales relationships with any other companies, or whether any such relationships will be maintained or be profitable. The 96% alcohol is known as neutral alcohol, which is tested to conform to specific chemical analyses such as acidity levels, levels of cogeners, color and odor. The neutral alcohol is then mixed with purified water to make vodka. Our distillation plant includes a water treatment and purification plant purchased from U.S. Filter Corporation. Absent unforeseen circumstances, our new distillery has an annual production capacity of approximately 4.3 million liters of neutral alcohol per year. Daily production is approximately 13,000 liters. The Finishing and Bottling Process After the neutral alcohol is blended with purified water, it is stored in large securely vented storage tanks. From there, batches are pumped over to blending tanks, where the vodka, now cut to 40% alcohol (80 Proof) is either blended with various flavors or fed directly as plain vodka to the bottling plant. We have our own water purification system for blending purposes. 17
SB-2/A20th Page of 83TOC1stPreviousNextBottomJust 20th
Flavors include orange, lemon, peach, melon, blackcurrant, strawberry and hot pepper. Test marketing with other flavors is conducted on a regular basis. Flavoring agents are purchased on the world market from suppliers such as International Flavors & Fragrances, Inc., Monsanto and Bayer. The bottling plant has a capacity of 60 bottles per minute and is fully automatic. The empty bottles are first rinsed and then go to a rotary-filling machine, a capping machine and a labeling machine. They are interconnected by chain conveyors so that the product is never touched by operators. After bottling, the product is packed in re-shippers, the same cartons in which the empty bottles are supplied from the glass plant and either conveyed to the plant warehouse, shipped out immediately to satellite warehouses or to distributors. Our warehouse system is fully automated and inventory-controlled. Bank Loan for Construction of Our Roumania Distillery In 1998, S.C. Perfect Renaissance S.R.L., prior to becoming our subsidiary, entered into an agreement with Ex-Klar Technologies, Inc. for the design, construction, start-up and commissioning of a state-of-the-art distillery with a capacity of 13,000 liters of neutral alcohol per day. The new distillery was completed in late 1999 and began operations in December 1999. We entered into a loan agreement with Bancorex which at the time was the principal bank in Timisoara, Roumania, for $3,918,409 to provide funding for the construction of the distillery and ancillary facilities. The loan had a five-year term with an annual interest rate of 14.75%, repayable in semi-annual installments of approximately $435,000 including principal plus accrued interest. The loan was secured by our real property, other fixed assets and inventories. In late 1998 Bancorex was declared insolvent by the government of Roumania, which controlled Bancorex, and was taken over by Banca Comerciala Romana controlled by the Roumanian government. The Roumanian government created the Roumanian Bank Restructuring Organization, AVAB, after its initials in the Roumanian language, to handle bank insolvencies. AVAB is similar in concept and organization to the Resolution Trust Corporation created by the United States government at the time of the savings and loan crisis in this country. Approximately $1,685,788 of our loan from Bancorex was assigned to AVAB with a monthly repayment schedule and total repayment due by August 31, 2001. We anticipate that the entire loan will be assigned to AVAB with a then-established monthly payment schedule. Under the rules of AVAB, loans assigned to it do not accrue additional interest. Vodka Products We currently produce ten types of vodka, bottled in four different-sized bottles. We sell unflavored vodka in strengths of 50%, 40% and 33%, and vodkas with flavors of lemon, orange, peach, blackcurrant, melon, strawberry and hot pepper, all 40% strength. Additionally, we sell an oak-aged vodka as "Baron Vodka" and recently introduced a less expensive brand as "Total Vodka". These two varieties of vodka are sold in .5-liter, .7-liter, one-liter and 1.75-liter bottles. In addition, we produce seven types of liqueurs: Napoleon 444 brandy, raspberry, chocolate, coffee, cherry, pina colada, and vishniak (a sour cherry brandy). Each liqueur is sold in .7-liter bottles. 18
SB-2/A21st Page of 83TOC1stPreviousNextBottomJust 21st
Distribution, Marketing and Sales of Vodka Our vodka and other liquor products are marketed throughout Roumania, Central and Eastern Europe, and are sold in shops, mini-markets, restaurants, hotels and bars. We sell through 16 independent, exclusive sales agents and 16 wholesalers, who deal with 47 nonexclusive distributors, employing in turn over 200 agents. We are conducting studies to determine the feasibility of setting up our own company-owned distribution centers in selected markets. Licenses We have also obtained a license to manufacture, bottle and market Bardinet Brandy in Roumania, a product of Cie Bardinet. Cie. Bardinet, Bordeaux, France is an established and well-known producer of Napoleon, VSOP and XO cognacs. Cie. Bardinet supplies certain ingredients to us and closely supervises the manufacture of Bardinet products on our premises. Major Competitors Major competitors in Central and Eastern Europe include numerous local distillers and bottlers as well as international brands such as Absolut, Finlandia and Smirnoff. If we enter the American market, we will compete with all the major liquor companies doing business in the United States. Inventory Our distillery has 60 days' worth of stored grain and approximately 20 days' worth of finished, bottled and marketable products. We also keep approximately a 30-day supply of glass bottles and labels, and a 60-day supply of flavorings. In addition, we generally keep approximately a 60-day supply of watches and jewelry. Raw Materials We purchase our raw materials including corn, grains, bottles, corks, and caps, on the open market from various dealers. We believe that these materials are readily available from various suppliers. We have recently completed the installation of a mile-long gas pipeline to allow us to switch from fuel oil to natural gas. Seasonality Sales of vodka, flavored vodka, distilled spirits and liqueurs are not seasonal in nature except for a slight increase in sales in the fourth calendar quarter around end-of-year holidays. Operations Relating to the Jewelry and Watch Business Our primary products are our vodka products, but we also operate a jewelry and watch business primarily through our S.C. Renaissance, S.R.L. and S.C. Renaissance Alpha 2000 subsidiaries. In 1990, after the fall of the communist Ceaucescu regime, Jacob Kieselstein, our president, chief executive officer and chairman, organized our predecessor by setting up a watch and jewelry importing and distribution organization. The principal countries of origin are Japan, Hong Kong, Taiwan, Brazil, Denmark and England. We import and distribute watches under our own name, "Xedox". Customers are primarily retail shops throughout Roumania, supplied by a network of sales agents and wholesalers of AJK. 19
SB-2/A22nd Page of 83TOC1stPreviousNextBottomJust 22nd
Inflation We believe that inflation has not had a material impact on our operations to date. Substantial increases in labor, raw materials, transportation and other operating expenses could adversely affect our operations. Europe, particularly Roumania, may experience different economic conditions than the United States. Patents and trademarks Our brand name "Perfect", along with our bottles and labeling, are trademarked in Roumania; the trademark registration is effective for 10 years from issuance of a Certificate of Registration by the State Office of Inventions and Trademarks. The following certificates have been issued in Roumania: Certificate No. 24903 issued March 18, 1994 with respect to our name, .7 liter bottle and label. Certificate No. 28081 issued March 2, 1998 with respect to our name, 1.75 liter bottle and label. Certificate No. 24981 issued May 4, 1995 with respect to our lemon vodka name, bottle and label. Certificate No. 27674 issued July 25, 1995 with respect to our orange vodka name, bottle and label. Certificate No. 27685 issued November 23, 1996 with respect to our peach vodka name, bottle and label. Certificate No. 27852 issued November 20, 1996 with respect to our blackcurrant vodka name, bottle and label. We were granted the exclusive right to use the trademark "Perfect" in connection with alcoholic beverages in bottles with various combinations of labels, colors and designs, for an indefinite period of time commencing July 16, 1997, in the Republic of Moldova, by the Ministry of Justice by Certificate No. 17700391 issued June 12, 1997. We filed U.S. Trademark Application No. 75/910001 to import, market and advertise alcoholic beverages under the trade name "Perfect Vodka." Regulation Our operations are conducted through our wholly-owned operating subsidiaries, which are limited liability companies incorporated under the laws of Roumania, and are subject to extensive regulation by Roumanian governmental authorities and are subject to various laws and judicial and administrative decisions imposing requirements and restrictions on part or all of our operations. We believe that we are in substantial compliance with applicable laws, rules and regulations. There can be no assurance that laws, rules or regulations will not be adopted in the future which could make compliance much more difficult or expensive, restrict our ability to do business or otherwise adversely affect our business. Because our business is highly regulated, the laws, rules and regulations applicable to our business are subject to regular modification and change. There can be no assurance that laws, rules or regulations will not be adopted in the future which could make compliance much more difficult or expensive, restrict our ability to do business, or otherwise adversely affect our business or prospects. Insurance We intend to secure political risk insurance coverage to protect investors from various risks of doing business in Roumania and other former communist countries. The policy will cover confiscation, expropriation, nationalization, 20
SB-2/A23rd Page of 83TOC1stPreviousNextBottomJust 23rd
non-repossession and transfer risks. Coverage attaches in the event the present government, any succeeding government (whether legally in power or otherwise) or any local authority takes any action which may impair our ability to conduct business. The policy will cover unlawful seizure of the plant and facilities, inability to operate due to uprisings, terrorism, revolution, illegal acts and other action by government authorities which may prevent us from enforcing our rights to run our business. There is no assurance that we will be able to secure such insurance, and if so, in amounts necessary, on terms desirable, to offset an adverse effect from political matters. It is intended that the policy also protect investors against government actions which may prevent us from obtaining and remitting dividends, lease payments and interest payments and repatriating capital in U. S. dollars. After analyzing and pricing several insurance providers, we have selected Aon Risk Services Inc., Miami, Florida to provide political risk insurance coverage. Aon is one of the largest providers of insurance services in the world. The policy, as bid and offered, provides reimbursement for covered losses up to $25,000,000 under the policy. The annual premium is expected to be approximately $375,000, or 1.5% of the policy amount. Employees We have 200 full-time employees, including our executive officers. We believe our relationship with our employees is satisfactory. Property Our distillery and bottling plant and main offices in Timisoara, Roumania are located in six buildings aggregating 170,834 square feet. In additional to our distillery and bottling plant, we maintain the following warehouse and office space. All cities are in Roumania unless otherwise noted. All properties listed as owned are owned without indebtedness. Expira- Area Monthly tion Address City (Sq. Feet) Rent ($) Date ------------------------- --------- --------- ------- ------- 20 Sulina Street Timisoara 156,077 Owned N/A 14 V. Lupu Street Timisoara 4,962 Owned N/A 16 V. Lupu Street Timisoara 9,795 Owned N/A 122 Drumul Taberei Bucharest 504 Owned N/A 8 Tudor Vladimirescu Blvd Zalau 445 Owned N/A 6800 Satinleaf Road, Suite 104 Naples, FL 23 $400 None(1) (1) This space is leased on a month-to-month basis. 21
SB-2/A24th Page of 83TOC1stPreviousNextBottomJust 24th
SELLING STOCKHOLDERS We are also registering for offer and sale by the holders thereof, the selling securityholders' 1,604,095 shares of common stock. The following table sets forth the beneficial ownership of our securities held by each person who is a selling securityholder and by all selling securityholders as a group. [Enlarge/Download Table] Shares Beneficially Number of Shares Owned After Offering (1) Beneficially Owned Number of ---------------------------- Name Prior to the Offering Shares Offered Number of Shares Percent ---------------------------------- ---------------------- -------------- ---------------- --------- Iotakappa Capital Corp.(2) 5,000,000 1,000,000 4,000,000 71.4% c/o National Corporate Research 615 South Dupont Highway Dover, Delaware 19901 Jovanda Ltd. 250,000 250,000 0 0% James M. Cassidy(3) 125,000 125,000 0 0% James McKillop 125,000 125,000 0 0% Ioan Adrian 250 250 0 0% Silvica Aghiorghiesei 110 110 0 0% Nicolae Albert 150 150 0 0% Nicolae Albu 250 250 0 0% Petre Argetoianu 150 150 0 0% Constantin Arnautu 250 250 0 0% Costel Atanasescu 395 395 0 0% Daniel Atanassescu 150 150 0 0% Maria Avramica 150 150 0 0% Marinela Baciu 150 150 0 0% Constantin Badiant 190 190 0 0% Emerich Balayti 110 110 0 0% Alexandru Balint 110 110 0 0% Gheorghe Bancescu 250 250 0 0% Marius Banda 250 250 0 0% Jeremiah Bar-Joseph 5,000 5,000 0 0% Iuliana Barlenghea 110 110 0 0% Cornel Cristian Barticel 200 200 0 0% Daniela Becheru 150 150 0 0% Tibor Becze 200 200 0 0% Simon Bela 250 250 0 0% Camella Bengescu 200 200 0 0% Edgar Alexandru Bleier 190 190 0 0% Liviu Bobarsc 150 150 0 0% Ana Boeru 190 190 0 0% Clementina Bonea 250 250 0 0% Ovidiu Botirca 250 250 0 0% Florina Botos 150 150 0 0% Emil Brancsik 190 190 0 0% Marin Breje 285 285 0 0% Dumitru Brisc 110 110 0 0% Gianina Brumar 110 110 0 0% Florin Bunda 110 110 0 0% Rodica Burghelea 150 150 0 0% Mircea Buzetoiu 150 150 0 0% Ivan Cabrera 10,000 10,000 0 0% Ioan Chichere 110 110 0 0% Violeta Chioreanu(4) 515 515 0 0% 22
SB-2/A25th Page of 83TOC1stPreviousNextBottomJust 25th
[Enlarge/Download Table] Shares Beneficially Number of Shares Owned After Offering (1) Beneficially Owned Number of ---------------------------- Name Prior to the Offering Shares Offered Number of Shares Percent ---------------------------------- ---------------------- -------------- ---------------- --------- Elisabeta Chioteanu 250 250 0 0% Liliana Chiu 190 190 0 0% Valentin Cioca 110 110 0 0% Maria Ciogolea 150 150 0 0% Valentin Ciuca 200 200 0 0% Gheorghe Cernescu Coman 110 110 0 0% Minerva Coniac 250 250 0 0% Liviu Contiu 250 250 0 0% Coca Costiug 150 150 0 0% Sara Coon 500 500 0 0% Dumitru Cordeanu 110 110 0 0% Eugenia Cota 150 150 0 0% Mihai Cracana 150 150 0 0% Gheorghe Csavossy 200 200 0 0% Adrian Cucu 110 110 0 0% Ovidiu Curuti 110 110 0 0% Christian Alexandru Dacu 200 200 0 0% Dorina Dambolu 200 200 0 0% Lucille DaSilva 500 500 0 0% Mihaela Delca 250 250 0 0% Mariana Delescu 250 250 0 0% Adrian Alex. Dinca 190 190 0 0% Ana Dobre 110 110 0 0% Veronica Doloiu 150 150 0 0% Gheorghe Dumitru 110 110 0 0% Emilian Ene 250 250 0 0% Yehuda Erlich(4) 1,200 1,200 0 0% Erika Fabian 110 110 0 0% Ionel Farcau 110 110 0 0% Klara Feldman 1,000 1,000 0 0% Oana Felicia 500 500 0 0% Keren Gabay 800 800 0 0% Pavel Galdos 200 200 0 0% Constantin Ganea 150 150 0 0% Doina Ganea 150 150 0 0% Emanuel Gelber 3,500 3,500 0 0% Gheorghe Gemes 190 190 0 0% Razvan Georgescu 150 150 0 0% Niculina Gheata 110 110 0 0% Ionel Ghizdaveanu 110 110 0 0% Eugenia Lucia Grapa 110 110 0 0% Gabriel Grapa 110 110 0 0% Cristian Grigore 150 150 0 0% Mariana Grigore 150 150 0 0% Romica Florea Grigorescu 110 110 0 0% Tiberiu Hecht 1,000 1,000 0 0% Ioan Hadti Pop 110 110 0 0% Miriam Hirschl 250 250 0 0% Cornel Alexandru Hodor 200 200 0 0% Dr. Zev Holender 1,200 1,200 0 0% Robert Holcz 110 110 0 0% Ioan Horvat 110 110 0 0% Marius Ilie 190 190 0 0% Adrian Ilion 110 110 0 0% Marinel Ilion 110 110 0 0% 23
SB-2/A26th Page of 83TOC1stPreviousNextBottomJust 26th
[Enlarge/Download Table] Shares Beneficially Number of Shares Owned After Offering (1) Beneficially Owned Number of ---------------------------- Name Prior to the Offering Shares Offered Number of Shares Percent ---------------------------------- ---------------------- -------------- ---------------- --------- Florica Ilion 110 110 0 0% Victor Ionescu 200 200 0 0% Cristina Jascu 110 110 0 0% Dorel Lucian Julean 200 200 0 0% Nedal Kaluf 250 250 0 0% Eyal Bar-Kayama 1,000 1,000 0 0% Igal Katsif 1,000 1,000 0 0% Zsolt Kerekes 190 190 0 0% Magdalena Kiss 190 190 0 0% Boris Kleynburg 500 500 0 0% Arkady Kofman 500 500 0 0% Eva Lang 150 150 0 0% Constantin Lazar 110 110 0 0% Dorina Lazarescu 150 150 0 0% Nava Leaker 1,000 1,000 0 0% Ioana Lenesiu 150 150 0 0% Dan Lepadat 250 250 0 0% Dalia Levy(4) 395 695 0 0% Florentina Lezeu 150 150 0 0% Shmueli Lior 800 800 0 0% Nicoleta Lucescu 250 250 0 0% Alexandru Lungu 190 190 0 0% Eva Lupas 250 250 0 0% Viorel Lupu 150 150 0 0% Fanica Machedon 110 110 0 0% Ionut Machedon 110 110 0 0% Delia Marganovici 110 110 0 0% Cristian Matis 110 110 0 0% Aurel Mainea 150 150 0 0% Felicia Manase 190 190 0 0% Dana Marcela Lupu 200 200 0 0% Mircea Maries 150 150 0 0% Sinisa Marin 150 150 0 0% Camelia Matei 250 250 0 0% Vicki Maer 30,000 30,000 0 0% Robert Maer 1,000 1,000 0 0% Benjamin Maer 1,000 1,000 0 0% Iulian Mereuta 110 110 0 0% Vasile Miclea 110 110 0 0% Stela Micu 285 285 0 0% Ioan Miculaiciuc 110 110 0 0% Ciprian Mierea 110 110 0 0% Ion Mierea 150 150 0 0% Maria Militaru 110 110 0 0% Maria Milotin 110 110 0 0% Remus Mitrica 150 150 0 0% Eugen Mocan 150 150 0 0% Simona Molnar 150 150 0 0% Stefan Molnar 150 150 0 0% Josefina Morosan 500 500 0 0% Ion Motohon 110 110 0 0% Blanca Munteanu 150 150 0 0% Gheorghe Muresan 150 150 0 0% Laura Muresan 150 150 0 0% Gabriel Muscalu 150 150 0 0% 24
SB-2/A27th Page of 83TOC1stPreviousNextBottomJust 27th
[Enlarge/Download Table] Shares Beneficially Number of Shares Owned After Offering (1) Beneficially Owned Number of ---------------------------- Name Prior to the Offering Shares Offered Number of Shares Percent ---------------------------------- ---------------------- -------------- ---------------- --------- Andrei Nagy 150 150 0 0% Clara Nagy 250 250 0 0% Mirela Nagy 150 150 0 0% Emil Neicu 250 250 0 0% Angela Negru 200 200 0 0% Ionel Nemes 200 200 0 0% Lenuta Nicolaescu 250 250 0 0% Ana Nicula 250 250 0 0% Ovidiu Nicula 150 150 0 0% Dan Nistor 250 250 0 0% Adrian Noiculescu 250 250 0 0% Poliana Oarcea 150 150 0 0% Lilia O'Hara 500 500 0 0% Thomas O'Hara 100 100 0 0% Dennis O'Hara4 100 100 0 0% Razvan Ionut Olari 1,000 1,000 0 0% Pastita Olaru 250 250 0 0% Minel Oncio 250 250 0 0% Cezar Oprea 150 150 0 0% Cosmin Oprea 110 110 0 0% Vasile Paceagiu 110 110 0 0% Gheorghe Panait 250 250 0 0% Vasile Pancec 110 110 0 0% Florian Parvu 150 150 0 0% Flaviu Pasare 110 110 0 0% Ionela Pascaru 110 110 0 0% Claudiu Patru 110 110 0 0% Bianca Patrul 200 200 0 0% Haim Peres 500 500 0 0% Anita Petru 150 150 0 0% Lajos Piroska 200 200 0 0% Marius Poenaru 190 190 0 0% Claudiu Pop 110 110 0 0% Ramona Pop 110 110 0 0% Victor Popean 395 395 0 0% Ion Popescu 110 110 0 0% Valentin Popescu 150 150 0 0% Valeriu Precup 95 95 0 0% Olimpia Racasan 150 150 0 0% Daniel Ranca 110 110 0 0% Daniel Reznick 500 500 0 0% Marius Roman 150 150 0 0% Ion Rosculescu 110 110 0 0% Mioara Rosculescu 110 110 0 0% Alina Rostek 110 110 0 0% Sorin Rujescu 110 110 0 0% Lucian Rusu 150 150 0 0% Ana Sabou 110 110 0 0% Ioan Salman 110 110 0 0% Basel Sakshir 250 250 0 0% Catalin Savin 250 250 0 0% Marieta Schipor 190 190 0 0% Batia Shahar 1,000 1,000 0 0% Daniela Siclovan 110 110 0 0% Mircea Silaghi 250 250 0 0% 25
SB-2/A28th Page of 83TOC1stPreviousNextBottomJust 28th
[Enlarge/Download Table] Shares Beneficially Number of Shares Owned After Offering (1) Beneficially Owned Number of ---------------------------- Name Prior to the Offering Shares Offered Number of Shares Percent ---------------------------------- ---------------------- -------------- ---------------- --------- Emilian Sima 150 150 0 0% Alexandru Simion 110 110 0 0% Marian Simion 110 110 0 0% Gheorghe Sirca 200 200 0 0% Nachshon Sobol 800 800 0 0% Romeo Somogy 150 150 0 0% Corin Soporean 150 150 0 0% Dorina Sotter 250 250 0 0% Elisabeta Spataru 400 400 0 0% Tatiana Stanca 150 150 0 0% Georgian Stanciu-Raileanu 110 110 0 0% Maria Stanclu 200 200 0 0% Mihaela Stepan 190 190 0 0% Casian Steti 150 150 0 0% Victoria Stirbu 200 200 0 0% Scumpina Stoia 150 150 0 0% Florin Stoica 150 150 0 0% Ion Stolojan 110 110 0 0% Raimon Stubner 150 150 0 0% Violeta Sucio 150 150 0 0% Gheorghe Tatar 200 200 0 0% Ana Tiran 110 110 0 0% Adrian Alex Tiron-Emandi 190 190 0 0% Eugen Doru Tiuhan 110 110 0 0% Marin Todor 110 110 0 0% Gheorghe Tulcan 150 150 0 0% Rita Umlauf 190 190 0 0% Virgil Umlauf 190 190 0 0% Lenuta Vancea 150 150 0 0% Daniela Vit 200 200 0 0% Dragomir Vlaicov 110 110 0 0% Yosi Weg 110 110 0 0% Andrei Willkovits 150 150 0 0% Vlad Willkovits 190 190 0 0% Haim Yohai 250 250 0 0% Baluta Wylli 600 600 0 0% Crina Zdravcu 250 250 0 0% David Zublin 1,000 1,000 0% --------- --------- --------- ----- Total 5,604,095 1,604,095 4,000,000 71.4% ------------------------------------------------------------------------------- (1) Assumes all shares registered will be sold (except for Iotakappa Capital Corp., which is only registering for resale 1,000,000 of its 5,000,000 shares) and assumes the maximum sale of 600,000 shares offered by us. (2) Mr. Kieselstein, our president, chief executive officer and chairman, is the sole beneficial owner of Iotakappa Capital Corp., a Delaware corporation, and may be deemed the beneficial owner of the shares being registered for sale by it. Iotakappa owns an aggregate of 5,000,000 shares of our common stock of which 1,000,000 are being registered herein for sale. Iotakappa purchased these shares as of September 22, 2000 from Ferrand, which is also wholly-owned by Mr. Kieselstein. (3) Our former legal counsel. (4) One of our officers or directors. 26
SB-2/A29th Page of 83TOC1stPreviousNextBottomJust 29th
PLAN OF DISTRIBUTION Arbitrary Determination of Offering Price The initial offering price of the shares being offered have been determined arbitrarily by us. Among the factors considered were our potential operations, current financial conditions and financial requirements, estimates of our business potential and prospects, prospects for the Roumanian economic improvement, the general condition of the equities market, and other factors. Limited State Registration We will qualify or register the sale of the shares being offered by us in a limited number of states. We will not accept subscriptions from investors residing in other states. Sale of the Shares By Us The shares are being offered on a direct participation basis through our officers and directors. We anticipate that our executive officers will primarily sell the shares. No sales commission will be paid to any officer or director. Executive officers and directors plan to execute our orders to sell our shares under this prospectus prior to the sale of our shares owned by such executive officers and directors. We will pay all expenses incurred in connection with the offer and sale of our shares by our officers and directors. The officers and directors are relying on Rule 3a4-1 of the Exchange Act as a "safe harbor" from registration as a broker-dealer in connection with the offer and sales of the shares. All proceeds raised in the offering will be held by Continental Stock Transfer & Trust Company, as escrow agent, in a non-interest bearing account until the minimum is reached. If the minimum offering is not reached within six months from the date of this prospectus all funds will be returned without interest and the offering will be terminated. If the minimum offering is achieved by six months from the date of this prospectus, the proceeds will be released to us. Thereafter, sales will continue at our sole discretion until the earlier of the date the maximum offering is achieved, or six months from the date of this prospectus, unless we decide to further extend the offering for an additional three months, at our sole discretion without notice to investors and potential subscribers. Sale of the Selling Stockholder Shares Each selling stockholder is free to offer and sell his or her common shares at such times, in such manner and at such prices as he or she may determine. The types of transactions in which the common shares are sold may include transactions in the over-the-counter market (including block transactions), negotiated transactions, the settlement of short sales of common shares or a combination of such methods of sale. The sales will be at market prices prevailing at the time of sale or at negotiated prices. Such transactions may or may not involve brokers or dealers. The selling stockholders have advised us that they have not entered into agreements, understandings or arrangements with any underwriters or broker-dealers regarding the sale of their shares. The selling stockholders do not have an underwriter or coordinating broker acting in connection with the proposed sale of the common shares. The selling stockholders may sell their shares directly to purchasers or to or through broker-dealers, which may act as agents or principals. These broker-dealers may receive compensation in the form of discounts, concessions or commissions from the selling stockholders. They may also receive compensation from the purchasers of common shares for whom such broker-dealers may act as agents or to whom they sell as principal, or both (which compensation as to a particular broker-dealer might be in excess of customary commissions). Each selling stockholder and any broker-dealer that assists in the sale of the common stock may be deemed to be an underwriter within the meaning of Section 2(a)(11) 27
SB-2/A30th Page of 83TOC1stPreviousNextBottomJust 30th
of the Securities Act. Any commissions received by such broker-dealers and any profit on the resale of the common shares sold by them while acting as principals might be deemed to be underwriting discounts or commissions. The selling stockholders may agree to indemnify broker-dealers for transactions involving sales of the common stock against certain liabilities, including liabilities arising under the Securities Act. Because the selling stockholders may be deemed to be "underwriters" within the meaning of Section 2(a)(11) of the Securities Act, the selling stockholders will be subject to prospectus delivery requirements. We have informed the selling stockholders that the anti-manipulation rules of the SEC, including Regulation M promulgated under the Securities Exchange Act of 1934, may apply to their sales in the market and have provided the selling stockholders with a copy of such rules and regulations. Selling stockholders also may resell all or a portion of the common shares in open market transactions in reliance upon Rule 144 under the Securities Act, provided they meet the criteria and conform to the requirements of such Rule. We are responsible for all costs, expenses and fees incurred in registering the shares offered hereby. The selling stockholders are responsible for brokerage commissions, if any, attributable to the sale of such securities. Rule 701 under the Securities Act of 1933 permits resales of shares of common stock that were acquired by our employees, officers, directors or consultants under a written compensatory benefit plan or contract prior to the consummation of this offering or that were acquired upon the exercise of stock options granted prior to the closing of this offering. Rule 701 provides that non-affiliates may sell rule 701 shares in reliance on Rule 144 without compliance with the holding period, public information, volume limitation or notice provisions of Rule 144. Affiliates may sell rule 701 shares without complying with the one-year holding period requirement. No rule 701 shares may be sold until 90 days after the date of this prospectus. 28
SB-2/A31st Page of 83TOC1stPreviousNextBottomJust 31st
MANAGEMENT Officers and Directors The following table sets forth certain information with respect to our directors, executive officers and key consultants: Name Position ---- -------- Jacob Kieselstein President, Chief Executive Officer and Chairman Petru Willkovits Vice President and Manager, Watch and Jewelry Division Violeta Chioreanu Financial Manager Curtis J. Sittenfeld Secretary Kochava Kieselstein Director Yehuda Erlich Director Dalia Levy Director Dr. Zvi Yadin Director Jacob Kieselstein, 53, founded the predecessor to AJK in Roumania in 1991. He has been involved in marketing and foreign trade for almost 30 years in Roumania and in Israel. Since 1990, he was the founder and president of AJK Kieselstein Chain Stores Ltd., an Israel chain of jewelry and watch stores no longer active. Mr. Kieselstein is a 33%-stockholder of Renaissance Perfect, a Moldovan company that distributes our products. Mr. Kieselstein is the sole owner of Iotakappa Capital Corp., our majority stockholder. Mr. Kieselstein studied industrial psychology, economics, finance, accounting and industrial management at Bar-Ilan University in Ramat-Gan, Israel and at the Israeli School for Production and Management. Mr. Kieselstein attained the rank of Captain in the Israeli Defense Forces. Petru Willkovits, 49, has been with AJK and our predecessors since 1992. From 1975 until 1989, Mr. Wilkovits worked primarily in the areas of plant maintenance and transportation. Mr. Willkovits received a Bachelor of Science degree in Mechanical Engineering from the Traian Vula Polytechnic Institute in Timisoara, Roumania and completed graduate work in alcohol distillation technology in Louisville, Kentucky. Mr. Willkovits is a reserve captain in the Roumanian Army. Violeta Chioreanu, 49, has been the financial manager of AJK and our predecessor companies since inception in 1992. Ms. Chioreanu is a graduate of the Economic Academy in Bucharest, Roumania and subsequently completed post-graduate high economic studies at Timisoara University in the area of cost studies. Curtis J. Sittenfeld, 68, was appointed secretary in 2000. Mr. Sittenfeld has been president of TechProjects International, Inc., an international project-development consulting firm in Aventura, Florida since April 1993. Prior to forming TechProjects International, Mr. Sittenfeld was Executive Director of the Bolinvest Export and Investment Promotion Project underwritten by the United States Agency for International Development from 1989 to 1993. From 1970 to 1989 he was President of I.R.A.S. Development Corp. and Techno-Design Ltd., a NASDAQ-listed international engineering and construction company. From 1955 to 1970 he was President and Chief Executive Officer of National Filter Corporation, a manufacturer of machinery for the food and beverage industries. Mr. Sittenfeld has a Bachelor of Science degree in Engineering and Economics from the University of Pennsylvania and has taken graduate courses in Economics and Business Administration at City College of New York and in International Negotiations from the Wharton School of Business, part of the University of Pennsylvania. Mr. Sittenfeld is also a member of the American Chemical Society, the American Society of Agricultural Engineers, the New York Academy of Sciences, the International Wood Products Association, the Korean War Veterans Foundation and was listed in Who's Who in Finance and Industry (22nd ed.). He is the author of four articles published between 1953 and 1991. 29
SB-2/A32nd Page of 83TOC1stPreviousNextBottomJust 32nd
Kochava Kieselstein, 50, has been a director since 2000. Mrs. Kieselstein has been a high school teacher at the Ironi "D" High School in Tel Aviv, Israel. Ms. Kieselstein received a Bachelor of Arts in history and literature from Bar-Ilan University in Ramat-Gan, Israel. Ms. Kieselstein is the wife of Jacob Kieselstein. Yehuda Erlich, 52, has been a director since 2000. Mr. Erlich is a certified public accountant in Ramat-Gan, Israel and is also a principal in Erlich Investments & Counseling Ltd. and in Erlich Real Estate Ltd. In addition, Mr. Erlich is a director of Gazit Inc., a company listed on the Israel Stock Exchange, Atarim Co. and Chalamish Co., companies that are each wholly-owned by the Israeli government. Mr. Erlich earned his bachelor's degree and a Masters in Business Administration from the University of Tel Aviv, Israel, and is a member of the Israel Institute of Certified Public Accountants. Dalia Levy 52, has been a director since 2000. Ms. Levi has been the office manager of Perfect Renaissance and its predecessors since 1985. Ms. Levi attended the Management Center of Bar-Ilan University in Bar-Ilan, Israel. Dr. Zvi Yadin, 50, has been a director since 2000. Dr. Yadin has been the Clinic Director at the FEGS Mental Health Center in Far Rockaway, New York since 1992. Dr. Yadin earned Ph.D degrees from Bar-Ilan University, Bar-Ilan, Israel (in Hebrew literature), and Adelphi University, Garden City, New York (in clinical psychology) and has a post-doctoral diploma (in psychoanalysis) from Adelphi. Dr. Yadin is a member of the American Psychological Association and the American Board of Psychological Specialties and is the author of three articles published in the ASPP newsletter. All directors hold office until the next annual meeting of stockholders and until their successors are elected. Officers are elected to serve, subject to the discretion of the board of directors, until their successors are appointed. 30
SB-2/A33rd Page of 83TOC1stPreviousNextBottomJust 33rd
EXECUTIVE COMPENSATION Name and Other Annual Principal Position Year Salary($) Bonus($) Compensation ------------------ ---- ------ ----- ------------ Jacob Kieselstein 1999 120,000 20,000 60,000(1) Chairman, President and 1998 120,000 12,000 60,000 Chief Executive Officer 1997 120,000 -- 60,000 Petru Willkovits 1999 14,000 3,000 10,000(2) Vice President and Manager, 1998 14,000 3,000 10,000 Watch and Jewelry Division 1997 14,000 2,000 10,000 Violeta Chioreanu 1999 8,000 750 4,000(3) Financial Manager 1998 8,000 650 4,000 1997 8,000 500 4,000 Curtis J. Sittenfeld 1999 0 0 67,500(4) Secretary 1998 0 0 0 1997 0 0 0 ------------------------------------------------ (1) Consisting of benefits, including health insurance, home leave and travel allowance. (2) Consisting of benefits, including health insurance. (3) Consisting of benefits, including health insurance and child care allowance. (4) Mr. Sittenfeld is the president of TechProjects International, Inc. which has received consulting fees totaling $7,500 per month since April 1999. Employment Agreements We have not entered into any employment agreements with our executive officers or other employees to date. We may enter into employment agreements with them in the future. Indemnification of Officers, Directors, Employees and Agents Our certificate of incorporation and by-laws provide that we shall indemnify, to the fullest extent permitted by law, all directors, officers and employees. Section 145 of the Delaware General Corporation Law empowers a corporation to indemnify its directors and officers and to purchase insurance with respect to liability arising out of their capacity or status as directors and officers provided that this provision shall not eliminate or limit the liability of a director for any breach of the director's duty of loyalty to the corporation or its stockholders; for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law; Under Section 174 (relating to liability for unauthorized acquisitions or redemptions of, or dividends on, capital stock) of the General Corporation Law of the State of Delaware; or for any transaction from which the director derived an improper personal benefit. The Delaware General Corporation Law provides further that the indemnification permitted thereunder shall not be deemed exclusive of any other rights to which the directors and officers may be entitled under the corporation's by-laws, any agreement, vote of stockholders or otherwise. 31
SB-2/A34th Page of 83TOC1stPreviousNextBottomJust 34th
The effect of the foregoing is to require us to indemnify the officers and directors for any claim arising against such persons in their official capacities if such person acted in good faith and in a manner that they 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 their conduct was unlawful. INSOFAR AS INDEMNIFICATION FOR LIABILITIES ARISING UNDER THE SECURITIES ACT OF 1933, MAY BE PERMITTED FOR DIRECTORS, OFFICERS OR PERSONS CONTROLLING AJK PURSUANT TO THE FOREGOING PROVISIONS, OR OTHERWISE AJK HAS BEEN ADVISED THAT IN THE OPINION OF THE SECURITIES AND EXCHANGE COMMISSION THAT SUCH INDEMNIFICATION IS AGAINST PUBLIC POLICY AS EXPRESSED IN SUCH ACT AND IS, THEREFORE, UNENFORCEABLE. 32
SB-2/A35th Page of 83TOC1stPreviousNextBottomJust 35th
PRINCIPAL STOCKHOLDERS The following table sets forth certain information as of the effective date of this prospectus regarding the beneficial ownership of our common stock by each officer and director and by each person who owns in excess of five percent of our common stock. [Enlarge/Download Table] Shares of Common Stock Beneficially Owned Shares Beneficially Prior to the Offering (1) Owned After Offering (2) ------------------------------ -------------------------------- Name, Position and Address Number of Shares Percent Number of Shares Percent ------------------------------ ---------------- ------- ---------------- -------- Iotakappa Capital Corp. 5,000,000 89.2% 4,000,000 64.5% c/o National Corporate Research 615 South Dupont Highway Dover, Delaware 19901 Jacob Kieselstein 5,000,000(3) 89.2% 4,000,000(3) 64.5% Chairman, President, and Chief Executive Officer Petru Willkovits 0(4) * 0 * Vice President and Plant Manager Violeta Chioreanu 395 * 0 * Financial Manager Curtis Sittenfeld __ __ __ __ Secretary Kochava Kieselstein 5,000,000(3) 89.2% 4,000,000(3) 64.5% Director Yehuda Erlich 1,200 * 0 * Director Dalia Levy 395 * 0 * Director Dr. Zvi Yadin 0 * 0 * Director All officers and directors 5,001,990 89.3% 4,000,000 64.5% as a group (8 persons) --------------------------------------------------------- * Less than 1 percent (1) Based upon 5,604,095 shares outstanding. (2) Assumes maximum number of shares registered will be sold for an outstanding amount of 6,204,095. (3) Represents 5,000,000 shares owned by Iotakappa Capital Corp., a Delaware corporation of which Jacob Kieselstein is the sole beneficial owner. Kochava Kieselstein is the wife of Mr. Kieselstein. Of the 5,000,000 shares owned by Iotakappa, 1,000,000 are being offered for sale pursuant to this prospectus. (4) Mr. Willkovits is the owner of a small minority of the social capital of two of our Roumanian subsidiaries, but Mr. Willkovits is not the owner of any shares of our common stock. 33
SB-2/A36th Page of 83TOC1stPreviousNextBottomJust 36th
CERTAIN TRANSACTIONS We distribute our products to parties affiliated with AJK and Jacob Kieselstein, our president, chairman and chief executive officer. In 1999, we sold $255,793 in products to Impex Renaissance S.R.L., a company incorporated in Roumania, which is dedicated to the distribution of vodka in the Roumanian county of Moldavia. In 1998, we sold $836 and $255,793, respectively, in products to Impex. Impex is 90% owned by AJ Kieselstein & Company, Ltd., a company controlled by Mr. Kieselstein and 10% owned by Mrs. Eugenia Willkovits, wife of Mr. Petru Willkovits who serves as one of our executive officers. Also in 1999, we sold $76,511 in liquor to Renaissance Perfect Chisinau, a Moldavian company 33% owned by Mr. Kieselstein. In 1998, we sold $141,885 in liquor to Renaissance Perfect. We owe $858,934 to Ferrand which is beneficially owned by Jacob Kieselstein, our president, chief executive officer and chairman. Ferrand was formerly the majority stockholder of our Roumanian subsidiaries until their acquisition by us. Prior to 1999 it was not possible for Roumanian companies to obtain the foreign currency necessary to import raw materials. Ferrand loaned us the foreign currency necessary to do so. As part of the acquisition of the Roumanian subsidiaries from Ferrand it agreed to convert the $858,934 in debt into a deferred receivable which is carried on our books as long-term debt. We also owe $44,150 to AJK Israel, a company also under the control of Jacob Kieselstein. This debt was incurred when AJK Israel loaned us foreign currency to purchase bottle labels. This debt is reflected on our financial statements as a current payable. Ferrand recently transferred all of its shares of our common stock to our current majority stockholder, Iotakappa Capital Corp., a Delaware corporation. Both Ferrand and Iotakappa are wholly-owned companies of Jacob Kieselstein. Curtis Sittenfeld is the president of TechProjects International, Inc. which receives $7,500 per month in consulting fees from us pursuant to an agreement dated as of June 1, 1999. In each of 1999 and for the nine months ended September 30, 2000, Mr. Curtis Sittenfeld received $67,500 in compensation for consulting services rendered to us. Our officers and directors have participated in and may continue to participate in other entities which engage in activities similar to our activities. Conflicts of interest may arise as a result of such officers' or directors' involvement with other ventures which may compete directly or indirectly with us. There is no assurance that such conflicts will always be resolved in our best interest. DESCRIPTION OF SECURITIES Authorized Capital The total number of authorized shares of our common stock is one hundred million shares, par value of $.0001 per share, and twenty million shares of non-designated preferred shares, par value of $.0001 per share. Incorporation We were incorporated under the laws of the state of Delaware in 1999 under the name Allegiance Acquisition Corporation. On July 21, 1999, we changed our name to AJK Perfect Renaissance, Inc. Our certificate of incorporation, by-laws and corporate governance, including matters involving the issuance, redemption and conversion of securities, are subject to the provisions of the Delaware General Corporation Law, as amended and interpreted from time to time. 34
SB-2/A37th Page of 83TOC1stPreviousNextBottomJust 37th
Common Stock Immediately prior to the consummation of this offering, we had 5,604,095 shares of common stock are outstanding. Holders of shares of common stock are entitled to one vote for each share on all matters to be voted on by the stockholders. Holders of common stock do not have cumulative voting rights. Holders of common stock are entitled to share ratably in dividends, if any, as may be declared from time to time by the board of directors in its discretion from funds legally available therefor. In the event of a liquidation, dissolution or winding up the holders of common stock are entitled to share pro rata all assets remaining after payment in full of all liabilities. All of the outstanding shares of common stock are, and the shares of common stock offered pursuant to this offering will be, when issued and delivered, fully paid and non-assessable. Holders of common stock have no preemptive rights to purchase our common stock. There are no conversion or redemption rights or sinking fund provisions with respect to the common stock. All outstanding shares of common stock are validly issued, fully paid and nonassessable, and all shares to be sold and issued as contemplated hereby will be fully paid and nonassessable when sold in accordance with the terms hereof and pursuant to a valid and current prospectus. Our board of directors is authorized to issue additional shares, on such terms and conditions and for such consideration as the board may deem appropriate without further stockholder action. Noncumulative Voting Each holder of common stock is entitled to one vote per share on all matters on which such stockholders are entitled to vote. Shares of common stock do not have cumulative voting rights. The holders of more than 50 percent of the shares voting for the election of directors can elect all the directors if they choose to do so, and, in such event, the holders of the remaining shares will not be able to elect any person to the board of directors. Penny Stock Regulation The offering price of our common stock has been arbitrarily determined by us. If a market for our common stock develops and is maintained, falls below $5.00 per share, then our common stock may be considered "penny stock". Penny stocks generally are equity securities with a price of less than $5.00 per share other than securities registered on certain national securities exchanges or quoted on the Nasdaq Stock Market, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or system. Our securities may be subject to "penny stock" rules that impose additional sales practice requirements on broker-dealers who sell such securities to persons other than established customers and accredited investors (generally those with assets in excess of $1,000,000 or annual income exceeding $ 200,000 or $300,000 together with their spouse). For transactions covered by these rules, the broker-dealer must make a special suitability determination for the purchase of such securities and have received the purchaser's written consent to the transaction prior to the purchase. Additionally, for any transaction involving a penny stock, unless exempt, the rules require the delivery, prior to the transaction, of a disclosure schedule prescribed by the Securities and Exchange Commission related to the penny stock market. The broker-dealer also must disclose the commissions payable to both the broker-dealer and the registered representative and current quotations for the securities. Finally, monthly statements must be sent disclosing recent price information on the limited market in penny stocks. Consequently, the "penny stock" rules may restrict the ability of broker-dealers to sell our securities. 35
SB-2/A38th Page of 83TOC1stPreviousNextBottomJust 38th
Preferred Stock We do not have any shares of preferred stock outstanding. In accordance with our certificate of incorporation, in the case of voluntary or involuntary liquidation, dissolution or winding up, holders of shares of preferred stock are entitled to receive the liquidation preference before any payment or distribution is made to the holders of common stock or any other series or class of our stock hereafter issued that ranks junior as to liquidation rights to the preferred stock, but holders of the shares of the preferred stock will not be entitled to receive the liquidation preference of such shares until the liquidation preference of any other series or class of our stock hereafter issued that ranks senior as to liquidation rights to the preferred stock has been paid in full. The holders of preferred stock and all series or classes of our stock hereafter issued that rank on a parity as to liquidation rights with the preferred stock are entitled to share ratably, in accordance with the respective preferential amounts payable on such stock, in any distribution (after payment of the liquidation preference of the senior liquidation stock) which is not sufficient to pay in full the aggregate of the amounts payable thereon. After payment in full of the liquidation preference of the shares of the preferred stock, the holders of such shares will not be entitled to any further participation in any distribution of our assets. Neither a consolidation or merger with another corporation, nor a sale or transfer of all or part of our assets for cash, securities or other property will be considered a liquidation, dissolution or winding up. The board of directors is authorized to provide for the issuance of additional shares of preferred stock in series and, by filing a certificate pursuant to the applicable law of the State of Delaware, to establish from time to time the number of shares to be included in each such series, and to fix the designation, powers, preferences and rights of the shares of each such series and the qualifications, limitations or restrictions thereof without any further vote or action by the stockholders. Any shares of preferred stock so issued would have priority over the common stock with respect to dividend or liquidation rights. Any future issuance of preferred stock may have the effect of delaying, deferring or preventing a change in control without further action by the stockholders and may adversely affect the voting and other rights of the holders of common stock. At present, we have no plan to issue any further preferred stock or adopt any further series, preferences or other classification of preferred stock. Additional Information Describing Stock The above descriptions concerning our stock do not purport to be complete. Reference is made to our certificate of incorporation and by-laws which are included in the Registration Statement of which this Prospectus is a part and which are available for inspection at our offices. Reference is also made to the applicable statutes of the State of Delaware for a more complete description concerning rights and liabilities of stockholders. Admission to Quotation on the NASD OTC Bulletin Board We intend to apply for quotation of our securities on the NASD OTC Bulletin Board. If a market maker does not sponsor our securities, our securities will be quoted in the daily quotation sheets of the National Quotation Bureau, Inc., commonly known as the "pink sheets". We believe, however, that our common stock will be quoted on the NASD OTC Bulletin Board. If our securities are not quoted on the NASD OTC Bulletin Board, a securityholder may find it more difficult to dispose of, or to obtain accurate quotations as to the market value of, our securities. The over-the-counter market differs from national and regional stock exchanges in that it: o is not cited in a single location but operates through communication of bids, offers and confirmations between broker-dealers; and 36
SB-2/A39th Page of 83TOC1stPreviousNextBottomJust 39th
o securities admitted to quotation are offered by one or more broker-dealers rather than the "specialist" common to stock exchanges. To qualify for quotation on the NASD OTC Bulletin Board, an equity security must have one registered broker-dealer, known as the market maker, willing to list bid or sale quotations and to sponsor such a company listing. If such market maker meets the qualifications for trading securities on the NASD OTC Bulletin Board our securities will trade on the NASD OTC Bulletin Board. Following the completion of this offering, certain broker-dealers may be the principal market makers for the securities offered hereby. Under these circumstances, the market bid and asked prices for the securities may be significantly influenced by decisions of the market makers to buy or sell the securities for their own account. No assurance can be given that any market making activities, if commenced, will be continued. Additionally, certain broker-dealers may engage in passive market making transactions in our common stock in accordance with Rule 103 of Regulation M. Market for Our Shares No public market exists for our shares. There are no outstanding options, options to purchase or securities convertible into shares, which are not being registered hereby. We have not agreed with any stockholders, to register their shares for sale, other than for this registration. We do not have any other public offerings in process or proposed. Transfer Agent We will apply to Continental Stock Transfer & Trust Company, New York, to act as transfer agent for our securities. Reports to Stockholders We will furnish to holders of our common stock annual reports containing audited financial statements examined and reported upon, and with an opinion expressed by, an independent certified public accountant. We may issue other unaudited interim reports to its stockholders as it deems appropriate. LEGAL MATTERS Legal Proceedings We are not a party to any litigation and management has no knowledge of any threatened or pending litigation against us. Our subsidiaries are limited liability companies incorporated under the laws of Roumania. Doing business in Roumania is highly structured and bureaucratic. Each Roumanian company's certificate of incorporation must set out exactly what it can and cannot do, who its stockholders are, what its capitalization is, locations in which it is doing business, and other ordinary activities. Changes in this information must in many instances be reflected in an official filing, approved by judicial decree sometimes reflected as a "judgment." 37
SB-2/A40th Page of 83TOC1stPreviousNextBottomJust 40th
Legal Opinion Graubard Mollen & Miller, New York has given its opinion as attorneys-at-law that the common stock, when issued pursuant to the terms hereof will be fully paid and non-assessable. Graubard Mollen & Miller, New York has passed on the validity of the securities being issued but purchasers of the securities offered by this prospectus should not rely on Graubard Mollen & Miller, New York with respect to any other matters. EXPERTS The financial statements for the year ended December 31, 1999 have been included in reliance upon the report of Weinberg & Company, P.A., certified public accountants, and upon the authority of such firm as expert in accounting. The consolidated financial statements for the three Roumanian subsidiaries for the years ended December 31, 1998 and December 31, 1999 have been included in reliance upon the report of Arthur Anderson & Co., certified public accountants. WHERE YOU CAN FIND MORE INFORMATION We have filed with the SEC a registration statement on Form SB-2 under the Securities Act with respect to the securities offered under this prospectus. This prospectus, which constitutes a part of the registration statement, does not contain all of the information set forth in the registration statement, certain items of which are omitted in accordance with the rules and regulations of the SEC. Statements contained in this prospectus as to the contents of any contract or other documents are not necessarily complete and in each instance reference is made to the copy of such contract or documents filed as an exhibit to the registration statement, each such statement being qualified in all respects by such reference and the exhibits and schedules thereto. For further information regarding us and the securities offered under this prospectus, we refer you to the registration statement and such exhibits and schedules which may be obtained from the SEC at its principal office in Washington, D.C. upon payment of the fees prescribed by the SEC or over the Internet at the SEC's web site at http://www.sec.gov. You may also read and copy any document we file at the SEC's public reference room at 450 Fifth Street, N.W., Washington, D.C. 20549, Seven World Trade Center, 13th Floor, New York, New York 10048 and 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Please call the SEC at 1-800-SEC-0330 for further information about the public reference room.
SB-2/A41st Page of 83TOC1stPreviousNextBottomJust 41st
AJK PERFECT RENAISSANCE, INC. (A DEVELOPMENT STAGE COMPANY) INDEX TO FINANCIAL STATEMENTS Page ---- Independent Auditors' Report, Boca Raton Florida...................... 40 Balance Sheet As Of December 31, 1999................................. 41 Statement of Operations for the Period from March 24, 1999 (Inception) to December 31, 1999.................................... 42 Statement of Changes In Stockholders' Equity for the Period from March 24, 1999 (Inception) to December 31, 1999................ 43 Statement of Cash Flows for the Period from March 24, 1999 (Inception) to December 31, 1999.................................... 44 Notes to Financial Statements as of December 31, 1999................ 45 Independent Auditors' Report of S.C. Perfect Renaissance S.R.L.; S.C. Renaissance S.R.L.; and S.C. Renaissance Alpha 2000 S.R.L., Bucharest, Roumania (collectively, the "Subsidiaries").......... 48 Combined Balance Sheets as of December 31, 1999 and 1998............. 49 Combined Statement of Income for the Subsidiaries for the Years Ended December 31, 1999 and 1998.......................... 50 Combined Statement of Changes in Stockholders' Equity of the Subsidiaries for the Years Ended December 31, 1999 and 1998..... 51 Combined Statement of Cash Flows of the Subsidiaries for the Years Ended December 31, 1999 and 1998.................. 52 Notes to Combined Financial Statements of Subsidiaries as of and for the Years Ended December 31, 1999 and 1998.................. 53 Consolidated and Combined Balance Sheets (Unaudited) as of June 30, 2000 and June 30, 1999........................... 72 Consolidated and Combined Statement of Income (Unaudited) for the Six and Three Months Ended June 30, 2000 and June 30, 1999. 73 Consolidated and Combined Statement of Cash Flows (Unaudited) for the Six Months Ended June 30, 2000 and June 30, 1999....... 74 Notes to Consolidated Financial Statements as of June 30, 2000...... 75 39
SB-2/A42nd Page of 83TOC1stPreviousNextBottomJust 42nd
INDEPENDENT AUDITORS' REPORT To the Board of Directors of: AJK Perfect Renaissance (A Development Stage Company) We have audited the accompanying balance sheet of AJK Perfect Renaissance, Inc. (a development stage company) as of December 31, 1999 and the related statements of operations, changes in stockholders' equity and cash flows for the period from March 24, 1999 (inception) to December 31, 1999. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly in all material respects, the financial position of AJK Perfect Renaissance, Inc.(a development stage company) as of December 31, 1999, and the results of its operations and its cash flows for the period from March 24, 1999 (inception) to December 31, 1999 in conformity with generally accepted accounting principles. WEINBERG & COMPANY, P.A. Boca Raton, Florida April 5, 2000 (Except for Note 3 as to which the date is May 5, 2000 and September 29, 2000) 40
SB-2/A43rd Page of 83TOC1stPreviousNextBottomJust 43rd
AJK Perfect Renaissance, Inc. (A DEVELOPMENT STAGE COMPANY) BALANCE SHEET AS OF DECEMBER 31, 1999 ------------------------------ The following are the audited financial statements of AJK as of and at December 31, 1999. ASSETS Cash $ 50 ----------------- TOTAL ASSETS $ 50 ------------ ================= LIABILITIES AND STOCKHOLDERS' EQUITY LIABILITIES $ - STOCKHOLDERS' EQUITY Preferred Stock, $.0001 par value, 20 million shares authorized, none issued and outstanding - Common Stock, $.0001 par value, 100 million shares authorized, 500,000 issued and outstanding 50 Additional paid-in capital 535 Deficit accumulated during development state (535) --------------- Total Stockholders' Equity 50 --------------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 50 ------------------------------------------ ================ See accompanying notes to financial statements. 41
SB-2/A44th Page of 83TOC1stPreviousNextBottomJust 44th
AJK PERFECT RENAISSANCE, INC. (A DEVELOPMENT STAGE COMPANY) STATEMENT OF OPERATIONS FOR THE PERIOD FROM MARCH 24, 1999 (INCEPTION) TO DECEMBER 31, 1999 ----------------------------------- Income $ - Expenses Organization expense $ 535 ------------------ Total expenses 535 ------------------ NET LOSS $ (535) -------- ================== Net loss per share $ (.001) ================== Weighted average shares outstanding during the period 500,000 ================== See accompanying notes to financial statements. 42
SB-2/A45th Page of 83TOC1stPreviousNextBottomJust 45th
AJK PERFECT RENAISSANCE INC. (A DEVELOPMENT STAGE COMPANY) STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY FOR THE PERIOD FROM MARCH 24, 1999 (INCEPTION) TO DECEMBER 31, 1999 ---------------------------------- [Enlarge/Download Table] Deficit Common Stock Additional Accumulated -------------------- Paid-In During Develop- Shares Amount Capital ment Stage Total --------- --------- --------- --------------- -------- Common stock issuance 5,000,000 $ 500 $ - $ - $ 500 Redemption of common stock (4,500,000) (450) - - (450) Expenses contributed by stockholder - - 535 - 535 Net loss for the period ended - - - (535) (535) December 31, 1999 ---------- --------- ------- --------- ------- BALANCE AT DECEMBER 31, 1999 500,000 $ 50 $ 535 $ (535) $ 50 ========== ========= ======= ========= ======= See accompanying notes to financial statements. 43
SB-2/A46th Page of 83TOC1stPreviousNextBottomJust 46th
AJK PERFECT RENAISSANCE, INC. (A DEVELOPMENT STAGE COMPANY) STATEMENT OF CASH FLOWS FOR THE PERIOD FROM MARCH 24, 1999 (INCEPTION) TO DECEMBER 31, 1999 ---------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ (535) Adjustment to reconcile net loss to net cash used by operating activities: Capitalized expenses 535 ---------- Net cash used in operating activities CASH FLOWS FROM INVESTING ACTIVITIES CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from issuance of common stock - net 50 ---------- Net cash provided by financing activities 50 ---------- INCREASE IN CASH AND CASH EQUIVALENTS 50 CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD - --------- CASH AND CASH EQUIVALENTS - END OF PERIOD $ 50 ========== See accompanying notes to financial statements. 44
SB-2/A47th Page of 83TOC1stPreviousNextBottomJust 47th
AJK PERFECT RENAISSANCE, INC. (A DEVELOPMENT STAGE COMPANY) NOTES TO FINANCIAL STATEMENTS AS OF DECEMBER 31, 1999 NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A. Organization and Business Operations Allegiance Acquisition Corporation (a development stage company) was incorporated in Delaware on March 24, 1999 to serve as a vehicle to effect a merger, exchange of capital stock, asset acquisition or other business combination with a domestic or foreign private business. Effective July 1, 1999 the board of directors and Stockholder changed the Company's name to AJK Perfect Renaissance, Inc. ("The Company"). At December 31, 1999, the Company had not yet commenced any formal business operations, and all activity to date relates to the Company's formation and proposed fund raising. The Company's fiscal year end is December 31. The Company's ability to commence operations is contingent upon its ability to identify a prospective target business and raise the capital it will require through the issuance of equity securities, debt securities, bank borrowings or a combination thereof. (See Note 5) B. Use of Estimates The preparation of the financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. C. Cash and Cash Equivalents For purposes of the statement of cash flows, the Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. D. Income Taxes The Company accounts for income taxes under the Financial Accounting Standards Board of Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("Statement 109"). Under Statement 109, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under Statement 109, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. There were no current or deferred income tax expense or benefits due to the Company not having any material operations for the period ended December 31, 1999. 45
SB-2/A48th Page of 83TOC1stPreviousNextBottomJust 48th
E. Earnings Per Shares Net loss per common share for the period ended December 31, 1999 is computed based upon the weighted average common shares outstanding as defined by Financial Accounting Standards No. 128, "Earnings Per Share". In computing weighted average shares the redemption of shares discussed in Note 2(B) has been treated as a retroactive recapitalization at inception. NOTE 2 -- STOCKHOLDERS' EQUITY A. Preferred Stock The Company is authorized to issue 20,000,000 shares of preferred stock at $.0001 par value, with such designations, voting and other rights and preferences as may be determined from time to time by the board of directors. B. Common Stock The Company is authorized to issue 300,000,000 shares of common stock at $.0001 par value. The Company originally issued 4,750,000 shares of its common stock to Pierce Mill Associates, Inc. and 125,000 shares each to James McKillop and James Cassidy pursuant to Rule 506 for an aggregate consideration of $500. On May 20, 1999, Pierce Mill Associates, Inc. transferred 250,000 of its shares in the Company to Jovanda Ltd. for $25. On August 1, 1999, the Company redeemed 4,500,000 shares of its common stock from Pierce Mill Associates, Inc. for $450. C. Additional Paid-In Capital Additional paid-in capital at December 31, 1999 represents the fair value of the amount of organization costs incurred by a stockholder on behalf of the Company. NOTE 3 -- AGREEMENT On May 20, 1999, Perfect Renaissance, Ltd. entered into an agreement with TPG Capital Corporation ("TPG") (see Note 4) to effect transactions intended to merge or otherwise combine Perfect Renaissance with the Company and for other related matters. Perfect Renaissance was the name used by the parties to the agreement to refer to the three operating subsidiaries of the Company before they were acquired by the Company. The agreement calls for TPG to provide services for the Company. Upon execution of the agreement $25,000 was paid to TPG. The Company maintains TPG never provided services under the agreement. Accordingly, the Company believes that the agreement has been terminated with no obligation remaining to any party. NOTE 4 -- RELATED PARTIES Legal counsel to the Company is a firm owned by a stockholder/director of the Company who also owns a controlling interest in the outstanding stock of Pierce Mill Associates and TPG. 46
SB-2/A49th Page of 83TOC1stPreviousNextBottomJust 49th
NOTE 5 -- SUBSEQUENT EVENTS On May 5, 2000, the Company has completed an Asset Purchase Agreement with Ferrand Investment Limited ("Ferrand"), a British Virgin Islands holding corporation that owned the Perfect Renaissance Roumanian companies. Under the terms of the Agreement, Ferrand transferred assets consisting of all of its rights, title and interests in the Roumanian companies to the Company in exchange for 5,000,000 shares of the Company's voting common stock in a transaction intended to qualify as a reorganization under Internal Revenue Code Sec. 368(a)(1)(c), and a recapitalization of the Perfect Renaissance Roumanian companies for financial accounting purposes. On September 22, 2000 Iotakappa Capital Corporation, a Delaware corporation, purchased from Ferrand Investment Limited the 5,000,000 voting common shares of the Company's stock that Ferrand had received under the terms of the aforementioned asset purchase agreement. As of September 25, 2000, the Company issued 58,405 shares of common stock for services having a fair market value of approximately $321,227. As of September 29, 2000, the Company issued 45,690 shares of common stock for services having a fair market value of approximately $251,295. The Company has also filed a Form SB-2 Registration Statement under the Securities Act of 1933 to register and sell up to 600,000 shares of new common stock plus 1,604,095 shares already held by stockholders, which includes 1,000,000 shares of the 5,000,000 shares owned by Iotakappa Capital Corporation originally issued under the asset purchase agreement, 500,000 shares held by the stockholders at December 31, 1999, 58,405 shares held by vendors and suppliers, issued to them as of September 25, 2000, and 45,690 shares held by employees and/or consultants, issued to them as of September 29, 2000. 47
SB-2/A50th Page of 83TOC1stPreviousNextBottomJust 50th
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Board of Directors' and Stockholders' of S. C. Perfect Renaissance, S.R.L. S. C. Renaissance, S.R.L. and S. C. Renaissance Alpha 2000, S.R.L. 1. We have audited the accompanying combined balance sheets of S. C. Perfect Renaissance, S.R.L., S. C. Renaissance, S.R.L. and S. C. Renaissance Alpha 2000, S.R.L. (altogether, the "Companies"), as of December 31, 1999 and 1998 and the related combined statements of income, stockholders' equity and cash flows for the years then ended. These combined financial statements are the responsibility of the Companies' management. Our responsibility is to express an opinion on these combined financial statements based on our audits. 2. We conducted our audits in accordance with generally accepted auditing standards in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. 3. In our opinion, the combined financial statements referred to in the first paragraph above, present fairly, in all material respects, the combined financial position of the Companies as of December 31, 1999 and 1998 and the results of their operations for the years then ended and their cash flows for the years then ended in conformity with accounting principles generally accepted in the United States. 4. The accompanying combined financial statements have been prepared assuming that the Companies will continue as a going concern. As discussed in Note 23 to the accompanying combined financial statements, as of December 31, 1999, the Companies combined current liabilities exceeded their combined current assets by United States Dollars ("USD") 1,807,609 that raises substantial doubt about their ability to continue as a going concern. Management's plan in regard to this matter is also described in Note 23. The combined financial statements do not include any adjustments that might result from the outcome of this uncertainty. Bucharest, Roumania, April 14, 2000 (except with respect to the matters discussed in Notes 1 and 24 (iii) and (iv), as to which the dates are May 5, 2000 and May 24, 2000) Arthur Andersen S.R.L. Paolo Biondi 48
SB-2/A51st Page of 83TOC1stPreviousNextBottomJust 51st
S.C. PERFECT RENAISSANCE S.R.L. S.C. RENAISSANCE S.R.L. AND S.C. RENAISSANCE ALPHA 2000 S.R.L. Combined balance sheets as of December 31, 1999 and 1998 (Currency - United States dollars ("USD")) Note 1999 1998 ---- -------- -------- ASSETS CURRENT ASSETS Cash 4 46,680 203,456 Trade receivables, net of allowance for doubtful accounts of USD 133,942 and USD 54,177, respectively 5 623,514 625,671 Due from related parties 6 58,139 19,724 Inventories, net 7 372,585 480,757 Other current assets 8 2,379 333,094 Deferred tax assets, net 17 - 7,809 --------- ---------- Total current assets 1,103,297 1,670,511 PROPERTY, PLANT AND EQUIPMENT, net 9 7,301,372 778,445 CONSTRUCTION-IN-PROGRESS 10 293,517 5,203,597 OTHER NON-CURRENT ASSETS 4,875 5,138 --------- --------- Total assets 8,703,061 7,657,691 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY: CURRENT LIABILITIES: Short-term bank borrowings 11 27,830 331,462 Current portion of long-term debt 12 1,560,799 3,918,409 Trade payables 13 713,521 417,276 Due to related parties 14 114,651 841,427 Other current liabilities and accrued expenses 15 494,105 717,841 --------- --------- Total current liabilities 2,910,906 6,226,415 LONG-TERM LIABILITIES: Long-term debt, net of current portion 12 3,272,684 - Long-term debt to a related party 14 820,000 - Taxes payable 15 13,145 - COMMITMENTS AND CONTINGENCIES 23 STOCKHOLDERS' EQUITY: Paid-in Capital 16 490,265 458,295 Retained earnings 1,196,061 972,981 --------- --------- Total stockholders' equity 1,686,326 1,431,276 --------- --------- Total liabilities and stockholders' equity 8,703,061 7,657,691 ========= ========= The accompanying notes are integral part of these combined statements. 49
SB-2/A52nd Page of 83TOC1stPreviousNextBottomJust 52nd
S.C. PERFECT RENAISSANCE S.R.L. S.C. RENAISSANCE S.R.L. AND S.C. RENAISSANCE ALPHA 2000 S.R.L. Combined Statement of Income for the Years Ended December 31, 1999 and 1998 (Currency - United States dollars ("USD")) Note 1999 1998 NET SALES 18 4,689,593 5,544,717 COST OF SALES 18 (2,734,291) (3,218,066) ---------- --------- Gross profit 18 1,955,302 2,326,651 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 19 (802,417) (577,826) FINANCIAL EXPENSES, net 20 (50,958) (114,732) OTHER EXPENSE, net (169,245) (314,942) TRANSLATION LOSS, net (353,330) (101,947) ---------- --------- Income before provision for taxes 579,352 1,217,204 PROVISION FOR TAXES 17 - Current (920) (130,335) - Deferred (7,809) (190,l984) ---------- --------- Net income 570,623 895,885 ========== ========= The accompanying notes are integral part of these combined statements. 50
SB-2/A53rd Page of 83TOC1stPreviousNextBottomJust 53rd
S.C. PERFECT RENAISSANCE S.R.L. S.C. RENAISSANCE S.R.L. AND S.C. RENAISSANCE ALPHA 2000 S.R.L. Combined Statement of Changes In Stockholders' Equity for the Years Ended December 31, 1999 and 1998 (Currency - United States dollars ("USD")) Paid-In Retained Stockholders' Capital Earnings Equity ------- -------- ------------ Balances at December 31, 1997 370,895 661,883 1,032,778 ------- -------- ------------ Issuance of capital 87,400 -- 87,400 Payment of dividends -- (584,787) (584,787) Net income for the year -- 895,885 895,885 ------- -------- ------------ Balances at December 31, 1998 458,295 972,981 1,431,276 Transfer of capital (Note 1) 18,769 -- 18,769 Issuance of capital 13,201 -- 13,201 Payment of dividends -- (297,973) (297,973) Profit of 1998 declared but not paid -- (49,570) (49,570) Net income for the year -- 570,623 570,623 ------- --------- ------------ Balances at December 31, 1999 490,265 1,196,061 1,686,326 ======= ========= =========== The accompanying notes are integral part of these combined statements. 51
SB-2/A54th Page of 83TOC1stPreviousNextBottomJust 54th
S.C. PERFECT RENAISSANCE S.R.L. S.C. RENAISSANCE S.R.L. AND S.C. RENAISSANCE ALPHA 2000 S.R.L. Combined Statement of Cash Flows for the Years Ended December 31, 1999 and 1998 (Currency - United States dollars ("USD")) 1999 1998 ---------- ------- CASH FLOWS OPERATING ACTIVITIES: Net income for the year 570,623 895,885 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 161,170 91,371 Decrease in deferred tax asset 7,809 190,984 Changes in operating assets and liabilities: Trade receivables, net 2,157 (154,464) Inventories, net 108,172 284,337 Other current assets 330,715 (93,958) Due from related parties (38,415) 55,469 Trade payables 296,245 158,849 Due to related parties (776,346) 519,469 Other current liabilities and accrued expenses (223,736) 436,108 Other non-current assets 263 444 Long-term taxes payable 13,145 -- ---------- --------- Net cash provided by operating activities 451,802 2,384,494 CASH FLOW FROM INVESTING ACTIVITIES: Additions to property, plant and equipment (31,434) (280,789) Additions to construction in progress (1,742,583) (5,056,271) ---------- --------- Net cash used in investing activities (1,774,017) (5,337,060) CASH FLOW FROM FINANCING ACTIVITIES: Cash proceeds from bank borrowings 27,830 3,589,799 Cash proceeds from long-term debt 583,612 -- Increase in long-term debt to a related party 820,000 -- Transfer of capital 18,769 -- Proceeds from issuance of capital 13,201 87,400 Payment of dividends (297,973) (584,787) ---------- --------- Net cash provided by financing activities 1,165,439 3,092,412 (DECREASE)/INCREASE IN CASH (156,776) 139,846 CASH AT THE BEGINNING OF THE YEAR 203,456 63,610 ---------- --------- CASH AT THE END OF THE YEAR 46,680 203,456 ========== ========= The accompanying notes are integral part of these combined statements. 52
SB-2/A55th Page of 83TOC1stPreviousNextBottomJust 55th
S.C. PERFECT RENAISSANCE S.R.L. S.C. RENAISSANCE S.R.L. AND S.C. RENAISSANCE ALPHA 2000 S.R.L. NOTES TO THE COMBINED FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998 (Currency - United States dollars ("USD"), unless otherwise indicated) 1. INCORPORATION AND PRINCIPAL ACTIVITIES OF THE COMPANIES: S. C. Perfect Renaissance, S.R.L. ("Perfect"), with head office in Str. Vasile Lupu, nr. 16, Timisoara, registered in the Official Commercial Register of Timis under the number J35/2863/1994, is a limited liability company. During 1998 Perfect was dedicated mainly to the production and sale of vodka and liquors (alcoholic beverages) and in 1999 to the production and sale of vodka and liquors (alcoholic beverages) and to the sale of glassware and ornaments. S. C. Renaissance, S.R.L. ("Renaissance"), with head office in Str. Stefan cel Mare, nr. 4, et. 1 Apt 5, Timisoara, registered in the Official Commercial Register of Timis under the number J35/321/1991 is a limited liability company, During 1998 Renaissance was dedicated mainly to the sale of vodka and liquors and in 1999 has no significant operations. S. C. Renaissance Alpha 2000, S.R.L. ("Alpha"), with head office in Str. Vasile Lupu, nr. 16, Timisoara, registered in the Official Commercial Register of Timis under the number J35/3065/1994, is a limited liability company. During 1998 Alpha was dedicated mainly to the sale of glassware and ornaments and in 1999 to sale of vodka and liquors. As of December 31, 1999 and 1998, Perfect, Renaissance and Alpha (altogether, the "Companies") have the same management. As of December 31, 1999 and 1998, the breakdown of stockholders and their respective shareholding percentages in the Companies is as follows: [Enlarge/Download Table] As of December 31, 1999 (%) As of December 31, 1998 (%) -------------------------------- --------------------------------- Perfect Renaissance Alpha Perfect Renaissance Alpha ------- ----------- ------ ------- ----------- ------ Ferrand Investment Limited ("Ferrand") 99.995 - 90.9 97 - 90.9 A.J.K. Kieselstein Chain Stores, Ltd. ("AJK") - 90 - - 90 - Renaissance 0.005 - - 3 - - Petru Willkovits - 10 9.1 - 10 9.1 ------- ----------- ------ ------- ----------- ------ Total 100 100 100 100 100 100 ======= =========== ====== ======= =========== ===== During 1999 Renaissance transferred, free of charge, share capital owned in Perfect, representing 2.995% of Perfect's share capital, to Ferrand. 53
SB-2/A56th Page of 83TOC1stPreviousNextBottomJust 56th
Ferrand, a company incorporated in the British Virgin Islands, and AJK, a company incorporated in Israel, are under the control of the same stockholder, namely, Mr. Jacob Kieselstein ("JK"). As explained in Notes 6 and 14, the Companies have significant transactions with the above-mentioned related parties. In May 5, 2000, Ferrand concluded an asset transfer agreement with AJK Perfect Renaissance, Inc, a company incorporated in Delaware, United States of America. Through this asset transfer, Ferrand obtained 5,000,000 shares of the voting common stock of AJK Perfect Renaissance, Inc and transferred the shares presently owned in the Companies to AJK Perfect Renaissance, Inc. As a result, the attached financial statements present the combined balance sheets and results of operations and cash flows of the Companies. Additionally, Ferrand has intention to exchange the account receivables and other receivables it detains over the Companies with shares in AJK Perfect Renaissance, Inc. (Note 14). In 1999, all the vodka and liquor produced by Perfect was sold in Roumania (1998 - 99.5%). The glassware and ornaments are sold in the Roumanian market. The Roumanian vodka market is very competitive in terms of local producers, imported vodka and both local and foreign substitutes, and is mainly based on the low selling price. Alcohol, which is a significant part of the production cost, and other raw materials are acquired on the local market. In 1998, Perfect started the construction of an alcohol distillery in order to assure the supply of its main raw material on a timely basis. The main raw material to be used in the production of alcohol will be corn, which will be acquired on the local market. In December 1999, the construction of the alcohol distillery was completed and alcohol production was started on a test basis to be done at Perfect's premises. On February 1, 2000, Perfect obtained license to produce alcohol, but as of April 16, 2000 has not obtained the license to sell alcohol. Perfect's management expects to obtain the license to sell alcohol during 2000. The alcohol production capacity of the distillery is estimated in 13,000 liters of alcohol per day. During 1999, Perfect consumed approximately 731,056 liters of alcohol (1998: 649,627 liters). The formula to produce vodka was acquired by AJK at no cost who then provided it to Perfect. There is no license fee paid for its use. The brand name, Perfect, is registered. As of and for the years ended December 31, 1999 and 1998, a summary of the significant account balances of the Companies, before and after combination, was as follows: [Enlarge/Download Table] As of December 31, 1999 --------------------------------------------------------------------------- Perfect Renaissance Alpha Total Elimination Combined --------- ----------- ------- --------- ----------- ---------- Total assets 8,673,731 45,496 43,280 8,672,507 (59,446) 8,703,061 Total stockholders' equity 1,683,527 2,525 274 1,686,326 - 1,686,326 Net sales 4,672,706 - 177,292 4,849,998 (160,405) 4,689,593 Net income/(loss) 668,224 (54,401) (43,200) 570,623 - 570,623 As of December 31, 1998 --------------------------------------------------------------------------- Perfect Renaissance Alpha Total Elimination Combined --------- ----------- ------- --------- ----------- ---------- Total assets 7,501,317 212,035 84,895 7,798,247 (140,556) 7,657,691 Total stockholders' equity 1,207,623 180,250 62,171 1,450,044 (18,768) 1,431,276 Net sales 5,152,334 424,152 81,316 5,657,802 (113,085) 5,544,717 Net income/(loss) 1,033,284 (75,992) (61,407) 895,885 - 895,885 The decrease in net sales and total assets of Renaissance and Alpha from 1998 to 1999 are due to the transfer of certain operations to Perfect. 54
SB-2/A57th Page of 83TOC1stPreviousNextBottomJust 57th
2. BASIS OF PRESENTATION AND COMBINATION: a) Basis of presentation: The Companies maintain their statutory books of account and prepare their statutory financial statements in accordance with Roumanian Law and generally accepted accounting principles in Roumania ("RAS"). The accompanying combined financial statements are based on the statutory records, which are maintained under the historical cost convention (except for the revaluation of tangibles) with adjustments and reclassifications, including the remeasurement of operations and balances in Roumanian Lei ("ROL") into United States dollars ("USD") for the purpose of presentation in accordance with generally accepted accounting principles in the United States of America ("US GAAP"). The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. As of April 14, 2000, the statutory financial statements of the Companies are pending the approval from the stockholders. It is management conviction that they will be approved without material changes. b) Combination: As explained in Note 1, the Companies are under the same control and are managed as if they were one single entity. Management considers that these combined financial statements are more meaningful then the individual financial statements. These combined financial statements are the result of the aggregation, on a line by line basis, of similar items of assets, liabilities, equity and expenses. During this process intercompany receivables and payables, and all significant intercompany transactions and resulting unrealized profits or losses, are eliminated. 3. SIGNIFICANT ACCOUNTING POLICIES: A summary of significant accounting policies applied in preparation of the accompanying combined financial statements, is set out below: a) Reporting currency: The Companies maintains their statutory records in conformity with Roumanian Accounting Law, in Roumanian Lei ("ROL"). As mentioned in Note 2 a), the accompanying combined financial statements have been presented in accordance with US GAAP and are presented in USD, applying the remeasurement principles defined in the Statements on Financial Accounting Standards ("SFAS") 52, issued by the Financial Accounting Standards Board of the United States of America ("FASB"). SFAS 52 requires that the financial statements of an entity that keeps its books in the currency of a hyperinflationary economy be adjusted to take into account the effects of inflation. The standard requires that economies should be regarded as hyperinflationary if the 55
SB-2/A58th Page of 83TOC1stPreviousNextBottomJust 58th
cumulative inflation rate over a period of three years exceeds 100%, among other factors. The general inflation rate in Roumania for the period from January 1 to December 31, 1999, 1998 and 1997 were 54%, 41% and 151%, respectively. Therefore, the provisions of SFAS 52 have been adopted in preparing the accompanying combined financial statements. The accompanying financial statements have been translated into USD using the following exchange rates: [Enlarge/Download Table] Caption 1999 1998 ------- ---- ---- > Monetary assets and liabilities Year end (1 USD = 18,255 ROL) Year end (1 USD = 10,951 ROL) Equity and Treasury Shares Historical rate Historical rate Tangibles Historical rate Historical rate Profit and Loss (except for Average rate for the month of Average rate for the month of depreciation expense) original booking original booking Depreciation Historical rate Historical rate Provisions Year end (1 USD = 18,255 ROL) Year end (1 USD = 10,951 ROL) Foreign currency transactions: ----------------------------- Balance sheet items denominated in a currency other than the USD have been translated into USD at the exchange rate prevailing at the balance sheet dates or at the exchange rate between the other currency, the ROL and the USD. b) Use of estimates The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. c) Trade receivables Trade receivables are shown net of a reserve for doubtful accounts that is recorded for purposes of recording the estimated recoverable amount of these accounts. The reserve is based on specific amounts that are considered uncollectable. d) Related parties: For the purpose of the accompanying combined financial statements, the Companies stockholders' and the parties identified by the Companies to be affiliated with them are regarded as and referred to as "related parties". The Companies have extensive transactions and relationships with related parties. It is possible that the terms of these transactions are not the same as those that would result from transactions among completely unrelated parties. e) Inventories: Raw, subsidiary, purchased merchandised and consumable materials are stated at the lower of cost or net realizable value, computed on an average cost basis. 56
SB-2/A59th Page of 83TOC1stPreviousNextBottomJust 59th
Finished goods are stated at production cost, which is lower than market value. Production cost includes the cost of raw materials, direct labor, packaging and auxiliary materials. Cost is determined primarily on the basis of weighted average cost. f) Property, plant and equipment: Property, plant and equipment are recorded at cost, including related costs of transportation and duties, which has been restated in accordance with SFAS 52 and capitalized interest cost incurred during the fixed assets' construction period. Depreciation is provided on a straight-line basis over the estimated useful lives of the assets set out below, based on the historical cost translated as defined in paragraph a). Years ------ Buildings 25 Machinery and equipment 10 Furniture and fixtures 5 g) Taxation: Current: ------- The tax provisions for income tax, VAT, and other tax related items are calculated in accordance with Roumanian tax law and are accrued for the period to which they relate. Deferred: -------- Certain items of income and expense are subject to taxation in periods different than those in which they are recognized in the financial statements (temporary differences). The tax effect of these temporary differences is computed as deferred taxation in accordance with SFAS 109 by using the liability method. Valuation allowances are provided to reduce deferred tax assets to the amounts that is more likely than not of being realized. h) Revenues and expenses recognition: Income and expenses are recognized on the accrual basis. Revenues are recognized when ownership title is transferred which is upon delivery of the goods. i) New accounting standard: In June 1998, the Financial Accounting Standards Board issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities". The Statement establishes accounting and reporting standards requiring that every derivative instrument (including certain derivative instruments embedded in other contracts) be recorded in the balance sheet as either an asset or liability measured at its fair value. The Statement requires that changes in derivative's fair value be recognized currently in the earnings unless specific hedge accounting criteria are met. Special accounting for qualifying hedges allows a derivative's gains and losses to offset related results on the hedged item in the income statement, and requires that a company must formally document, designate, and assess the effectiveness of transactions that receive hedge accounting. 57
SB-2/A60th Page of 83TOC1stPreviousNextBottomJust 60th
SFAS No. 137 delayed the effective date of SFAS No. 133 to fiscal years beginning after June 15, 2000. The Companies do not expect the impact of this new statement on the Companies' combined balances sheet or results of operations to be material. 4. CASH: The breakdown of cash and banks, as of December 31, 1999 and 1998, is as follows: 1999 1998 ------ ------- Bank accounts in ROL 40,148 134,242 Checks 1,876 66,365 Petty cash 4,028 2,392 Bank accounts in foreign currency 628 457 ------ ------- Total 46,680 203,456 ====== ======= 5. TRADE RECEIVABLES, NET: The breakdown of trade receivables, net, as of December 31, 1999 and 1998, is as follows: 1999 1998 ------- ------- Trade accounts receivable 757,456 699,848 Less: Allowance for doubtful accounts (133,942) (74,177) ------- ------- Total 623,514 625,671 ======= ======= 6. DUE FROM RELATED PARTIES: The balance due from related parties, as of December 31, 1999 and 1998 and the sales made to them in 1999 and 1998, can be summarized as follows: Due from Sales ---------------- --------------------- 1999 1998 1999 1998 ----- ------ ------ ------- Impex Renaissance, S.R.L. ("Impex") 38,035 550 255,793 - Renaissance Perfect Chisinau ("Perfect Moldova") 20,104 19,174 76,511 141,885 ------ ------ -------- ------- Total 58,139 19,724 332,304 141,885 ====== ====== ======== ======= Perfect Moldova is a company incorporated in the Republic of Moldova, dedicated to the production of vodka under the brand "Perfect". No fees are paid to the Companies for using the brand name. This company is a related party as it is 33% owned by AJK. Impex is a company incorporated in Roumania, dedicated to the distribution of vodka in the Roumanian County of Moldavia. This company is 90% owned by AJK and 10% by Mrs. Eugenia Willkovits, wife of Mr. Petru Willkovits. 58
SB-2/A61st Page of 83TOC1stPreviousNextBottomJust 61st
7. INVENTORIES, NET: As of December 31, 1999 and 1998, inventories can be summarized as follows: 1999 1998 -------- -------- Raw materials 91,507 154,724 Finished goods 165,577 107,727 Purchased merchandise 128,935 149,282 Packaging 41,319 125,237 Provision for inventories (54,753) (56,213) -------- ------- Total 372,585 480,757 ======== ======= 8. OTHER CURRENT ASSETS: As of December 31, 1999 and 1998, other current assets can be summarized as follows: 1999 1998 ----- ------- Value Added Tax ("VAT") to be recovered 203 237,362 Other receivables 2,176 95,732 ----- ------- Total 2,379 333,094 ===== ======= Tax receivables as of December 31, 1998 represent mainly VAT to be recovered from equipment imported for the alcohol distillery. Other receivables as of December 31, 1999 and 1998 consist mainly of amounts collected by the Companies commissioner's from clients and cashed by the Companies after the balance sheet dates. 9. PROPERTY, PLANT AND EQUIPMENT, NET: The movements in property, plant and equipment and their related accumulated depreciation for the years ended December 31, 1999 and 1998, are the following: [Enlarge/Download Table] Balances Balances Balances As of As of Transfer As of December 31, December 31, From CIP December 31, Transfer Cost 1997 Additions Disposals 1998 (Note 10) Additions Disposals Transfers 1999 --------------- ----------- --------- ---------- ----------- ---------- ---------- --------- --------- ------------ Land 6,072 - - 6,072 - - - - 6,072 Buildings 139,955 138,271 - 278,226 1,072,030 5,745 - 63,709 1,419,710 Machinery and Equipment 496,025 132,202 (4,219) 624,008 5,580,633 42,815 (27,545) (34,784) 6,185,127 Furniture and Fixtures 51,822 16,017 (2,248) 65,591 - 1,604 - (28,925) 38,270 ----------- --------- ---------- ----------- ---------- ---------- --------- --------- ------------ Total 693,874 286,490 (6,467) 973,897 6,652,663 50,164 (27,545) - 7,649,179 [Enlarge/Download Table] Balances Balances Balances As of As of As of Accumulated December 31, Charge for December 31, Charge for December 31, Depreciation 1997 The Year Disposals 1998 The Year Disposals Transfers 1999 --------------- ----------- ----------- --------- ----------- ---------- --------- --------- ------------ Buildings (854) (10,743) - (11,597) (21,186) - (18,351) (51,134) Machinery and Equipment (95,729) (69,735) 206 (165,258) (138,344) 8,815 3,134 291,653 Furniture and Fixtures (8,264) 10,893) 560 (18,597) (1,640) - 15,217 (5,020) ----------- ----------- --------- ------------ ---------- --------- --------- ------------ Total (104,847) (91,371) 766 (195,452) (161,170) 8,815 - (348,807) ----------- ----------- --------- ------------ ---------- --------- --------- ------------ Net book value 589,027 778,445 7,301,372 ============ ============ =========== 59
SB-2/A62nd Page of 83TOC1stPreviousNextBottomJust 62nd
The pledges and mortgages provided by the Companies in connection with the short-term borrowings and long-term debt are disclosed in Note 23. 10. CONSTRUCTION-IN-PROGRESS: Construction-in-progress ("CIP") consists of equipment, buildings and special constructions not yet put into service. In December 1999, Perfect concluded the construction of the new alcohol plant and installation of related equipment and transferred them to Property, Plant and Equipment (Note 9). In order to finance the acquisition of the equipment, on December 22, 1997 Perfect concluded a contract with Bancorex for a long-term debt, in amount of 3,918,409, representing 85% of the total amount of equipment. Due to the bankruptcy of Bancorex and subsequent merger with Banca Comerciala Romana ("BCR"), in 1999 the loan was transferred to BCR, and is presently held at BCR and Agentia de Valorificare a Activelor Bancar ("AVAB" - organization created by the Roumanian Government for bank restructuring) - see also Notes 11 and 12. The movement of CIP during 1998 and 1999, including the components in it, is as follows: [Enlarge/Download Table] Balance Balance Balance As of As of As of December December Transfers Disposals December 31, 1997 Additions 31, 1998 Additions (Note 9) (Note 19) 31, 1999 -------- ---------- ---------- --------- ----------- --------- ---------- Cost of equipment for alcohol distillery - 3,918,409 3,918,409 514,366 (4,235,070) (16,631) 181,074 Customs duties and commissions - 270,32 270,321 161,511 (431,305) - 527 Capitalized interest (Note 20) - 488,428 488,428 726,616 (1,161,235) - 53,809 Warehousing and transportation costs - 959 959 - (959) - - -------- ---------- ---------- --------- ----------- --------- ---------- Total for Distillery - 4,678,117 4,678,117 1,402,493 (5,828,569) (16,631) 235,410 Other Projects 147,326 378,154 525,480 356,721 (824,094) - 58,107 -------- ---------- ---------- --------- ----------- --------- ---------- Total 147,326 5,056,271 5,203,597 1,759,214 (6,652,663) (16,631) 293,517 ======== ========= ========= ========== ========== ========= ========= 11. SHORT-TERM BANK BORROWINGS: Short-term bank borrowings as of December 31, 1999 and 1998 are as follows: [Enlarge/Download Table] Annual December 31, Interest ------------------- Bank Currency Maturity Rate (%) 1999 1998 ------------------------------------- -------- --------------- -------- ------- ------- Bancorex USD July 1996 12.5-13 - (*) - December 1999 323,043 Bancorex ROL August 1999 70 - 8,419 Banca Comerciala Ion Tiriac ("BCIT") ROL June 2000 66 27,830 - ------- -------- 27,830 331,462 ======= ======= (*) Subsequent to December 31, 1998 this loan was transferred to BCR (see Notes 12 and 24). 12. LONG-TERM DEBT: On December 12, 1997 Perfect signed a long-term loan of 3,918,409 (agreement no. 62508) with Bancorex, used to open a letter of credit for Ex-Klar Technologies Inc., New York related to the acquisition of equipment for investment in the new alcohol distillery (Note 10). The loan, which is denominated in USD, has an annual interest rate of 14.75% and is repayable by semi-annual installments of 435,379, started with February 1999 and having the last installment in February 2003. 60
SB-2/A63rd Page of 83TOC1stPreviousNextBottomJust 63rd
On July 16, 1999, when the first installment was already past due, Perfect submitted a request to Bancorex in order to reschedule this installment and the future payments. Because Bancorex was in a process of restructuring no decision was taken at that time. At the end of 1999, Bancorex merged with BCR and the loan, including interest, transferred to BCR. According to the Roumanian Government Law that rules the merger between BCR and Bancorex, BCR has the right to transfer any outstanding debts to AVAB. Additionally, from the loans transferred from Bancorex, BCR can transfer future outstanding amounts to AVAB. On December 14, 1999, BCR transferred to AVAB 1,785,832, representing principal (870,758), interest (including penalty interest) and commissions. The remaining part of the loan, amounting to 3,047,651 is held at BCR. According to the contract signed with Bancorex, now at BCR, in the case that Perfect does not pay the installments in due time, BCR will open a credit line, with no specified payment term, with an interest rate of 18.5% per year, until the complete payment of the debt. Subsequent to December 31, 1999 the Company reached an agreement with AVAB regarding the set up of a payment rescheduling of the amount transferred from BCR, above mentioned (see Note 24). As stipulated in the agreement, if BCR transfers any amount from the existing loan of 3,047,651 to AVAB, this entity will decide upon the reschedule of the amount transferred, for the period preceding of the existing reschedule, taking into consideration the conditions existing at that time. The Company's management is confident that the loan, now at BCR will be transferred to AVAB and payments will be rescheduled with AVAB to suit the needs of Perfect. According to the loan agreement, the Bank can cancel the contract and ask for the immediate payment of all the amounts due, if Perfect is in payment default. The loan contract contains covenants, including having the fixed assets pledged insured and having BCR as the beneficiary of the insurance (see Note 24). The schedule for repayments is as follows: 1999 --------------------------------------- AVAB BCR Total --------- --------- --------- 2000 690,041 870,758 1,560,799 2001 1,095,791 870,758 1,966,549 2002 - 870,758 870,758 2003 - 435,377 435,377 --------- --------- --------- Total loans 1,785,832 3,047,651 4,833,483 ========= ========= ========= 61
SB-2/A64th Page of 83TOC1stPreviousNextBottomJust 64th
13. TRADE PAYABLES: As of December 31, 1999 and 1998, trade payables can be summarized as follows: 1999 1998 ------- ------- Raw materials suppliers 630,655 396,550 Fixed assets suppliers 82,866 20,726 ------- ------- Total 713,521 417,276 ======= ======= As of December 31, 1999, trade payables consist mainly of payables to S. C. Alcorom, S.A., an alcohol supplier, in the amount of ROL 7,973,119 thousand (equivalent to USD 436,764). As of December 31, 1998, trade payables consist mainly of payables to Perfect raw materials supplier, Roaim Product, S.R.L. in the amount of ROL 3,133,080 thousand (equivalent to USD 286,099). 14. DUE TO RELATED PARTIES: Balances due to related parties as of December 31, 1999 and 1998 and the purchases made from them in 1999 and 1998, can be summarized as follows: [Enlarge/Download Table] Other debts December 31, 1999 Payables (****) Total payables Purchases ------------------------------ -------------- --------------- ---------------- --------------- AJK (*) 44,150 - 44,150 - Ferrand (**) 218,987 639,947 (***) 858,934 15,320 K.A.Y. 27,707 - 27,707 2,734 Perfect Moldova 3,860 - 3,860 6,123 -------------- --------------- ---------------- --------------- Total 294,704 639,947 934,651 24,177 ============== =============== ================ =============== December 31, 1998 Payables Loans Total payables Purchases ------------------------------ -------------- --------------- ---------------- --------------- Impex - 720 720 836 Ferrand 800,483 - 800,483 222,485 Associates - 40,224 40,224 - -------------- --------------- ---------------- ------------- Total 800,483 40,944 841,427 223,321 ============== =============== ================ ============= (*) Includes dividends payable amounting to ROL 669,042 thousand (equivalent to USD 36,650). (**) Includes dividends payable amounting to ROL 235,867 thousand (equivalent to USD 12,920). (***) As of December 31, 1999, Ferrand agreed to transfer the balance of 820,000 as long-term debt and it was reflected as a long-term liability in the accompanying balance sheet as of December 31, 1999 (****)Other debts to Ferrand represent 15% of the acquisition price of the alcohol plant, which was paid in advance by Ferrand to Ex-Klar (the supplier), on behalf of Perfect. Generally, the commercial relationships between the Companies and the foreign suppliers are done through Ferrand. Ferrand provides advances to the foreign suppliers, who in return supply the goods to the Companies. As of December 31, 1999 and 1998, the amounts due to Ferrand are related to the mentioned advance payments to the Companies' foreign suppliers, regarding mainly the acquisition of raw and auxiliary materials. The purchases from Ferrand are mainly related with raw materials (essence for vodka) and ornaments. 62
SB-2/A65th Page of 83TOC1stPreviousNextBottomJust 65th
15. OTHER CURRENT LIABILITIES AND ACCRUED EXPENSES: 1999 1998 ------- -------- Provision for tax penalties 230,867 47,393 Taxes and state payables 156,182 414,663 Interest accrual 107,617 245,431 Other current liabilities 12,584 10,354 507.250 717,841 Long-portion of taxes and state payables (13,145) - -------- -------- 494,105 717,841 ======== ======= During 1999 Perfect did not reverse charged VAT and assessed withholding tax for know-how invoiced by Ex-Klar, supplier of the alcohol plant. A provision for tax penalties regarding withholding tax penalties and late interest penalty was booked in order to recognize this liability. Taxes and state payables represent mainly customs duties related to the import of equipment for the alcohol plant. Subsequent to December 31, 1998, Perfect has rescheduled the payment of VAT and customs duties due to the State. 16. PAID-IN CAPITAL: Paid-in capital is made up of cash contributions and contributions in-kind valued at cost. The paid-in capital of the Companies is composed of quotas ranging from ROL 10,000 to ROL 300,000 per unit. As of December 31, 1999 and 1998, the statutory paid-in capital in ROL, the number of quotas and their value are as follows: [Enlarge/Download Table] Perfect Renaissance Alpha ----------------------- ----------------- ------------------ 1999 1998 1999 1998 1999 1998 --------- --------- ------- -------- -------- ------- Share capital 1,782,447 1,648,547 188,000 188,000 18,579 18,579 No. of quotas 17,824 16,485 1,880 1,880 1,858 1,858 Value (ROL in thousand 100 100 100 100 10 10 The restated share capital amounts are: Company 1999 1998 ---------------------------- -------- --------- Share capital Perfect Renaissance 439,368 407,398 Renaissance 40,150 40,150 Renaissance Alpha 10,747 10,747 In 1999, Perfect issued a number of 1,339 capital quotas to Ferrand, which made an in-kind contribution of production equipment. 17. DEFERRED TAXES: Until December 7, 1999 Perfect was corporate tax exempt. Starting from December 8, 1999 Perfect is subject to income taxes at the corporate tax rate applicable in Roumania. Renaissance and Alpha are subject to income taxes at the corporate tax rate applicable in Roumania. The corporate tax rate for profits generated in the years ended December 31, 1999 and 1998 is 38%. Beginning with January 1, 2000 the Roumanian Government changed the corporate tax rate from 38% to 25%, applicable to the profits generated starting with that date. 63
SB-2/A66th Page of 83TOC1stPreviousNextBottomJust 66th
As required by FASB Statement No. 109 - Accounting for Income Taxes, deferred income taxes are recognized for tax consequences of temporary differences, by applying the statutory tax rate to differences between the financial reporting and the tax basis of existing assets and liabilities. Deferred tax asset/(liability) resulting from temporary differences as of December 31, 1999 are as follows: [Enlarge/Download Table] Net Deferred -------------------------------------- Tax Tax Asset/ December 31, 1998 Tax Liability (Liability) ------------------------------------------------------------- -------- ------------ ------------ 1. Tax effect of foreign currency accounting for assets and 601,190 (159,892) 441,298 liabilities denominated in foreign currency 2. Tax effect of inventories costing method 13,754 - 13,754 3. Tax effect of expense accrual for services received 59,306 (73,247) (13,941) 4. Tax effect of reserve for accounts receivable 29,956 (4,297) 25,659 ------- ---------- -------- Total deferred tax 704,206 (237,436) 466,770 ======= ========== ========= Valuation allowance (466,770) --------- Deferred Tax, net of valuation allowance - ========= The future realization of the tax benefit of the existing deductible temporary difference depends, among other things, of sufficient taxable income, of the appropriate character, within the carryforward period available under the Roumanian tax law. As expressed on Note 21, the legislation and fiscal environment in Roumania and their implementation into practice change frequently and are subject to different interpretations by various Ministries of the Government. As of December 31, 1999 since the future realization of the deferred tax assets is uncertain due to expected future statutory losses, the Companies recorded an allowance for the full amount of the deferred tax asset. Deferred tax asset/(liability) resulting from temporary differences as of December 31, 1998 are as follows: [Enlarge/Download Table] Net Deferred ------------------------------------- Tax Tax Asset/ December 31, 1998 Tax Liability (Liability) ----------------------------------------------------------- ------- ------------ ------------ 1. Tax effect of reserve for doubtful accounts receivable 15,508 - 15,508 2. Tax effect of foreign currency accounting for assets and - (11,005) (11,005) liabilities denominated in foreign currency 3. Tax effect of inventories costing method 9,939 (24,171) (14,232) 4. Tax effect of expense accrual for services received 2,236 - 2,236 5. Tax effect of bank commissions - (6,059) (6,059) 6. Tax effect of reserve for obsolete and slow moving inventories 21,361 - 21,361 ------ -------- ------- Total 49,044 (41,235) 7,809 ======= ========= ======= The temporary differences are the differences between the tax base of an asset or liability, in the specific circumstance the differences between the value in the Roumanian statutory financial statements and its carrying amount in the balance sheet. FASB Statement No.109 prohibits the recognition of a deferred tax liability or asset for differences related to assets and liabilities that are 64
SB-2/A67th Page of 83TOC1stPreviousNextBottomJust 67th
remeasured from the local currency into the functional currency using historical exchange rates and that result from (1) changes in exchange rates or (2) indexing for tax purposes, under SFAS 52 - Foreign Currency Translation. Accordingly, no adjustment for deferred taxes was made regarding the above mentioned differences. The total provision for taxes reflected in the accompanying financial statements is different from the amounts computed by applying the statutory income tax rate of 38% to income before taxes. The items causing this difference are explained below: [Enlarge/Download Table] 1998 1998 ---------- --------- Net income before provision for taxes 579,352 1,217,204 Provision for income tax at the statutory income tax rate of 38% (220,154) (462,537) Effect of permanent non-taxable items, including translation gain, net 683,035 (119,199) Tax effect of deferred tax computation at enacted tax rate of 25% (242,720) - Effect of tax holiday 237,880 260,417 ---------- --------- Total 458,041 (321,319) ---------- --------- Deferred tax valuation allowance (466,770) - ---------- --------- Provision for taxes as per accompanying statement of income (8,729) (321,319) ========== ========= Of which: - Current (920) (130,335) - Deferred (7,809) (190,984) ---------- --------- Total (8,729) (321,319) ========= ========= 18. SEGMENT INFORMATION: Sales and cost of sales for the year ended December 31, 1999 are as follows: [Download Table] Intercompany Vodka Ornaments Others Sales Totals ---------- ----------- ---------- ------------- ----------- Sales 4,103,247 645,912 100,839 (48,788) 4,801,210 Excise duties (111,617) - - - (111,617) ---------- ----------- ---------- ------------- ----------- Net sales 3,991,630 645,912 100,839 (48,788) 4,689,593 Cost of sales: Raw materials (1,661,164) - - 48,788 (1,612,376) Depreciation (148,785) - - (148,785) Packaging (389,872) - - (389,872) Others (70,626) - - (70,626) Merchandise (161,289) (278,972) (72,371) (512,632) ---------- ----------- ---------- ------------- ----------- Total (2,431,736) (278,972) (72,371) 48,788 (2,734,291) ---------- ----------- ---------- ------------- ----------- Gross profit 1,559,894 366,940 28,468 - 1,955,302 ========== =========== ========== ============= ========== 65
SB-2/A68th Page of 83TOC1stPreviousNextBottomJust 68th
Sales and cost of sales for the year ended December 31, 1998 are as follows: [Download Table] Intercompany Vodka Ornaments Others Sales Totals ---------- ----------- ---------- ------------- ----------- Sales 4,833,633 731,546 292,558 (113,085) 5,744,652 Excise duties (199,935) - - - (199,935) ---------- ----------- ---------- ------------- ----------- Net sales 4,633,698 731,546 292,558 (113,085) 5,544,717 Cost of sales: Raw materials (1,906,958) - - 113,085 (1,793,873) Depreciation (81,100) - - - (81,100) Packaging (389,552) - - - (389,552) Others (310,256) - - - (310,256) Merchandise - (429,170) (214,115) - (643,285) ---------- ----------- ---------- ------------- ----------- Total (2,687,866) (429,170) (214,115) 113,085 (3,218,066) ---------- ----------- ---------- ------------- ----------- Gross profit 1,945,832 302,376 78,443 - 2,326,651 ========== =========== ========== ============= =========== Sales of vodka and ornaments are done in the Roumanian market. Other revenues are related to the sale of boxes, glassware and other materials mainly to Perfect Moldova (see Note 6.). In 1998, excise duty taxes were paid over the sale of alcoholic drinks by the producer. In the beginning of 1998, the law changed and the taxes, instead of being applied to the producer of alcoholic drinks, are applied to the producer of alcohol. The major vodka clients of the Companies (more than 5% of total Vodka sales) are: Gabis & Pappa Reale (9.47%); Impex Renaissance, a related party - see Note 6 (6.52%); Deovex (6.31%) and Grosbi Impex (5.91%). There are no ornament clients with more then 5% of total ornament sales. Reporting of segment assets is not done to the chief operating decision-maker and consequently, it is not presented in the accompanying Notes. 19. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES: Selling, general and administrative expenses for the years ended December 31, 1999 and 1998, are as follows: 1999 1998 ------- ------- Personnel 180,867 194,290 Provision for bad debts 62,456 40,119 Provision for tax penalties (see Note 15) 183,474 47,393 Telecommunication 57,001 65,843 Advertising and promotion 38,579 54,651 Insurance 22,108 24,068 Rent 15,405 22,484 Energy and water 16,363 19,750 Expenses with other materials 7,025 11,930 Transportation 5,778 9,943 Training related with alcohol distillery (Note 10) - 16,631 Services rendered by third parties 107,427 3,053 Other 89,303 84,302 ------- ------- Total 802,417 577,826 ======= ======= 66
SB-2/A69th Page of 83TOC1stPreviousNextBottomJust 69th
20. FINANCIAL ITEMS: Financial items for the years ended December 31, 1999 and 1998, are as follows: 1999 1998 ---------- --------- Financial income Interest income 10,591 2,727 Other financial revenues 12,587 22,553 ---------- --------- Total financial income 23,178 25,280 Financial expense Gross interest expense (777,796) (576,748) Interest capitalized (Note 10) 726,616 488,428 ---------- -------- Interest expense (51,180) (88,320) Other financial expenses (3,374) (51,692) Other financial losses (19,582) - ---------- -------- Total financial expense (74,136) (140,012) Financial expense, net (50,958) (114,732) ========== ========= 21. TAXES AND BUSINESS IN ROUMANIA: The legislation and fiscal environment in Roumania and their implementation into practice change frequently and are subject to different interpretations by various Ministries of the Government. The Roumanian government has a number of agencies that are authorized to conduct audits ("controls") of Roumanian companies as well as foreign companies doing business in Roumania. These controls are similar in nature to tax audits performed by taxing authorities in many countries, but may extend not only to tax matters but to other legal or regulatory matters in which the applicable agency may be interested. In addition, the agencies conducting these controls appear to be subject to significantly less regulation and the company under review appears to have significantly less practical safeguards than is customary in many countries. Generally, tax declarations remain open and subject to inspection for a period of five years. Substantially, the Companies tax declarations have been reviewed by the Tax Authorities during 1998 and 1999. As a result, the tax authorities imposed fines and penalties, and the Companies signed agreements with the tax authorities, rescheduling the payment of due taxes and penalties (see Note 15). Management believes that the Companies is in substantial compliance with the tax laws affecting their operations; however, the risk remains that those relevant authorities could take different positions with regard to interpretative issues and the effect could be significant. The fact that a year has been reviewed, and that the Companies signed agreements with the tax authorities rescheduling the payment of due taxes and penalties, does not exempt that year, or any tax declaration applicable to that year, from further review during the five year period. The region where Roumania is located is unstable, and characterized many times by the rise of political and criminal corruption, the lack of experience and unpredictability of the civil justice system. Roumania in particular suffers from high unemployment, low wages, low literacy rates, high hyperinflation and rumors of corruption. Business risks include, among others, internal political or civil unrest, war, or government restrictions. These risks are dynamic and difficult to quantify. The Companies will be subject to the risks normally associated with changes in 67
SB-2/A70th Page of 83TOC1stPreviousNextBottomJust 70th
general national economic conditions or local market conditions, competition, patronage, changes in market rates, and the need to periodically upgrade and replace equipment to maintain desirability, and to pay the costs thereof. Although many of the governments of the countries of Central and Eastern Europe have liberalized policies on international trade, foreign ownership and development, investment, and currency repatriation, increasing both international trade and investment accordingly, such policies might change unexpectedly. The Companies will be affected by the rules and regulations regarding foreign ownership of real and personal property, including manufacturing plants and other property. Such rules may change quickly and dramatically which may have an adverse impact on ownership and may result in a loss without recourse of property or assets of the Companies. Additionally, several authorizations, licenses and permissions are still necessary from different Government agencies in order to perform, what in more developed countries, is not restricted and considered normal course of business (for instance, necessary authorizations for repatriation of profits, prohibition to perform payments in ROL to foreign entities, among others). The likelihood of any foreign company successfully prevailing in any dispute with the government or any private litigant under the Roumanian legal system is difficult to quantify or predict. 22. FOREIGN CURRENCY EXPOSURE: The major assets and liabilities denominated in foreign currency as of December 31, 1999 and 1998, can be detailed as follows: [Enlarge/Download Table] December 31, 1999 December 31, 1998 ------------------------ ------------------------ USD USD Assets: Currency Amount Equivalent Amount Equivalent -------------------------------------- -------- ---------- ------------ ---------- ------------ Cash and banks USD 108 108 420 420 Others 520 61 37 -------- ----------- ---------- 628 457 -------- ----------- ---------- Clients USD 1,101 1,101 - - -------- ----------- ---------- Due from related parties USD 20,104 20,104 19,174 19,174 -------- ----------- ---------- Total assets denominated in foreign currencies 21,833 19,631 =========== ========== [Enlarge/Download Table] USD USD Liabilities: Currency Amount Equivalent Amount Equivalent -------------------------------------- -------- ---------- ------------ ---------- ------------ Short-term bank borrowings USD - - (331,462) (331,462) Long-term debt USD (3,272,684) (3,272,684) - - Current portion of long-term debt USD (1,560,799) (1,560,799) (3,918,409) (3,918,409) ------------ ---------- (4,833,483) (4,249,871) Interest accrued USD (107,617) (107,617) (245,431) (245,431) ------------ ---------- Due to related Parties USD (828,053) (828,053) (646,217) (646,217) DKK - - (527,489) (82,560) GBP - - (11,542) (19,124) DEM (110,989) (56,981) (77,589) (46,273) CHF - - (8,617) (6,254) ITL (92,000) (48) (92,000) (55) ------------ ---------- (885,082) (800,483) ------------ ---------- Total liabilities denominated in foreign currencies (5,826,182) (5,295,785) ------------ ----------- Net exposure (5,804,349) (5,276,154) ============ =========== 68
SB-2/A71st Page of 83TOC1stPreviousNextBottomJust 71st
The Companies do not use financial instruments to hedge or protect against foreign exchange or interest rates movements. 23. CONTINGENCIES AND COMMITMENTS: a) Going concern assumption: The accompanying combined financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. As shown in the combined financial statements, at December 31, 1999, the Companies' combined current liabilities exceed their combined current assets by 1,807,609. This factor, among others, indicates that the Companies may be unable to continue as a going concern for a reasonable period of time. These combined financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might be necessary should the Companies be unable to continue as a going concern. The Companies' continuation as a going concern is dependent upon their ability to (a) generate sufficient cash flow to meet their obligations on a timely basis, and (b) obtain additional financing and/or reschedule the existing debt, as may be required. The management of the Companies plans to resolve the net working capital deficit of 1,807,609 as of December 31, 1999 as follows: (i) Management believes that an agreement with BCR and AVAB will be reached for the amount of 435,379 due in February and for an equal amount, which will be due in August, as well as for all other installments to be paid to BCR. Therefore, an amount of 870,758 included in current liabilities will be rescheduled for 2001 and the following years as well as all other installments will be rescheduled to suit the needs of Perfect (see Note 12). (ii) The management of the Companies believes that together with the operation of the new alcohol distillery plant, the Companies will be able to generate sufficient cash flows to sustain and meet their current liabilities. b) Commitments: All of the Company credit conventions with Bancorex (see Notes 10 and 12) require pledges and mortgages. As of December 31, 1999 and 1998 pledges and mortgages, as per the respective contracts were as follows: (i) Pledges: Amount Type of Pledge Currency Pledged -------------- ------------ --------- Inventory ROL thousand 6,853,485 69
SB-2/A72nd Page of 83TOC1stPreviousNextBottomJust 72nd
(ii) Mortgages: Amount Type of Mortgage Currency Mortgaged ---------------- ------------ --------- Fixed assets ROL thousand 5,072,571 Fixed assets USD 4,486,869 24. SUBSEQUENT EVENTS: (i) Subsequent to December 31, 1999, Perfect reached an agreement with AVAB regarding the rescheduling of the remaining part of the loan transferred from BCR to AVAB. The loan is interest free, during the period of the loan, and is payable in USD. The resulting payment schedule is: 2000 2001 Total Rescheduled ------- --------- ------------------ 690,041 1,095,791 1,785,832 The effect of this agreement was reflected in the accompanying balance sheet as of December 31, 1999. (ii) Subsequent to December 31, 1999 the credit line at Banca Comerciala Ion Tiriac, S.A. was increased from thousand ROL 1,000,000 to thousand ROL 1,500,000 and the interest rate to 70% per year. (iii) Subsequent to the balance sheet date, on May 5, 2000, Ferrand concluded an asset transfer agreement with AJK Perfect Renaissance, Inc, a company incorporated in Delaware, United States of America. Through this asset transfer, Ferrand obtained 5,000,000 shares of the voting common stock of AJK Perfect Renaissance, Inc and transferred the shares presently owned in the Companies to AJK Perfect Renaissance, Inc. (iv) Subsequent to the balance sheet date, on May 24, 2000, Perfect received the authorization to sell refined ethyl alcohol. 25. SUPPLEMENTARY CASH FLOW INFORMATION: For the years ended December 31, 1999 and 1998, the supplementary cash flows information comprised the following: 1999 1998 ---------- -------- Taxes Paid 76,228 83,249 Interest Paid - 88,320 70
SB-2/A73rd Page of 83TOC1stPreviousNextBottomJust 73rd
UNAUDITED CONSOLIDATED and COMBINED FINANCIAL STATEMENTS of AJK PERFECT RENAISSANCE, INC. and SUBSIDIARIES At and For The Six Months Ended June 30, 2000 71
SB-2/A74th Page of 83TOC1stPreviousNextBottomJust 74th
[Enlarge/Download Table] AJK PERFECT RENAISSANCE, INC. AND SUBSIDIARIES CONSOLIDATED AND COMBINED BALANCE SHEET (UNAUDITED) ASSETS ------ June 30, 2000 June 30, 1999 (CONSOLIDATED) (COMBINED) -------------------- -------------------- CURRENT ASSETS Cash $ 79,388 $ 131,007 Trade receivables, net of allowance for doubtful accounts 380,019 289,982 Due from related parties 49,636 13,402 Inventories, net 275,606 405,933 Other current assets 157,569 546,504 Deferred tax assets, net - 5,399 -------------------- ------------------ TOTAL CURRENT ASSETS 942,218 1,392,227 PROPERTY, PLANT AND EQUIPMENT - NET 7,430,926 762,621 CONSTRUCTION IN PROGRESS 333,040 6,210,122 OTHER NON-CURRENT ASSETS 5,655 3,641 -------------------- ------------------ TOTAL ASSETS $ 8,711,839 8,368,611 ------------ ==================== ================== LIABILITIES AND STOCKHOLDERS' EQUITY ------------------------------------ CURRENT LIABILITIES: Short-term bank borrowings $ 244,229 $ 259,977 Current portion of long-term debt 1,870,378 4,183,445 Trade payables 320,826 510,937 Due to related parties 88,017 1,094,836 Other current liabilities and accrued expenses 517,082 527,977 -------------------- ------------------ TOTAL CURRENT LIABILITIES 3,040,532 6,577,172 -------------------- ------------------ LONG-TERM LIABILITIES Long-term debt, net of current portion 2,698,062 - Long-term debt to a related party 820,000 - -------------------- ------------------ TOTAL LONG-TERM LIABILITIES 3,518,062 - -------------------- ------------------ COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY: Preferred stock, $.0001 par value, 20,000,000 shares authorized, none issued and outstanding Common stock, $.0001 par value, 300,000,000 shares authorized, 5,500,000 issued and outstanding 550 - Paid-in capital 489,765 458,295 Retained earnings 1,662,930 1,333,144 -------------------- ------------------ TOTAL STOCKHOLDERS' EQUITY 2,153,245 1,791,439 -------------------- ------------------ TOTAL LIABILITIES AND STOCKHOLDERS 'EQUITY $ 8,711,839 $ 8,368,611 ==================== ================== The accompanying notes are an integral part of the financial statements. 72
SB-2/A75th Page of 83TOC1stPreviousNextBottomJust 75th
AJK PERFECT RENAISSANCE, INC. AND SUBSIDIARIES CONSOLIDATED AND COMBINED STATEMENT OF INCOME (UNAUDITED) [Enlarge/Download Table] Three Months Ended June 30, Six Months Ended June 30, ---------------------------------- --------------------------------- 2000 1999 2000 1999 (Consolidated) (Combined) (Consolidated) (Combined) ---------------- ------------- --------------- -------------- NET SALES $ 1,142,416 $ 904,447 $ 2,221,586 $ 2,060,271 COST OF SALES (672,434) (437,616) (1,376,325) (1,157,600) ---------------- ------------- --------------- -------------- GROSS PROFIT 469,982 466,831 845,261 902,671 SELLING GENERAL AND ADMINISTRATIVE EXPENSES (147,564) (182,011) (311,462) (283,074) FINANCIAL EXPENSES, NET (1,140) (28,017) 17,664 (45,492) OTHER EXPENSE, NET (12,956) (5,104) (39,482) (14,393) TRANSLATION GAIN (LOSS), NET (116,867) (123,551) (45,112) (200,237) ---------------- ------------- --------------- -------------- NET INCOME $ 191,455 $ 128,148 $ 466,869 $ 359,475 ================ ============= =============== ============== BASIC AND DILUTED PER SHARE AMOUNTS: $ 0.04 $ 0.03 $ 0.09 $ 0.07 WEIGHTED AVERAGE SHARES 5,311,111 5,000,000 5,153,846 5,000,000 The accompanying notes are an integral part of the financial statements. 73
SB-2/A76th Page of 83TOC1stPreviousNextBottomJust 76th
AJK PERFECT RENAISSANCE, INC. AND SUBSIDIARIES CONSOLIDATED AND COMBINED STATEMENT OF CASH FLOW (UNAUDITED) [Enlarge/Download Table] Six Months Ended June 30, ------------------------------------- 2000 1999 (Consolidated) (Combined) ----------------- ---------------- CASH FLOWS FROM OPERATING ACTIVITIES Net Income for the year $ 466,869 $ 359,475 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 50,599 46,915 Decrease in deferred tax asset - 2,410 Reserves - 688 Changes in operating assets and liabilities: Trade receivables, net 243,496 335,689 Inventories, net 96,979 74,824 Other current assets (155,190) (213,410) Due from related parties 8,503 6,322 Trade payables (392,695) 93,661 Due to related parties (26,634) 253,409 Other current liabilities and accrued expenses 22,978 (189,864) Other non-current assets (780) 1,497 Long-term taxes payable (13,145) - ----------------- ---------------- Net cash provided by operating activities 300,979 771,616 ----------------- ---------------- CASH FLOWS FROM INVESTING ACTIVITIES Cash acquired in recapitalization 50 - Additions to property, plant and equipment (180,153) (31,091) Additions to construction in progress (39,523) (1,006,525) ----------------- ---------------- Net cash provided by investing activities (219,626) (1,037,616) ----------------- ---------------- CASH FLOWS FROM FINANCING ACTIVITIES Cash proceeds (repayments) of bank borrowings and current portion of long term debt 216,399 (71,485) Cash proceeds (repayments) of long-term debt (265,044) 265,036 ----------------- ---------------- Net cash provided by (used in) financing activities (48,645) 193,551 ----------------- ---------------- INCREASE (DECREASE) IN CASH 32,708 (72,449) CASH - BEGINNING OF PERIOD 46,680 203,456 ----------------- ---------------- CASH - END OF PERIOD $ 79,388 $ 131,007 --------------------- ================= ================ The accompanying notes are an integral part of the financial statements. 74
SB-2/A77th Page of 83TOC1stPreviousNextBottomJust 77th
NOTES TO THE AJK PERFECT RENAISSANCE, INC. AND SUBSIDIARIES CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS AS OF AND AT JUNE 30, 2000 NOTE 1 -- BASIS OF PRESENTATION The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles and the rules and regulations of the Securities and Exchange Commission for interim financial information. Accordingly, they do not include all the information and footnotes necessary for a comprehensive presentation of financial position and results of operations. It is management's opinion that all material adjustments (consisting of normal recurring adjustments) have been made which are necessary for a fair financial statement presentation. The results for the interim period are not necessarily indicative of the results to be expected for the year. For further information, refer to the financial statements and footnotes included in the Company's Form SB-2 for the year ended December 31, 1999. NOTE 2 -- INVENTORY Inventory at June 30, 2000 consisted of the following: Raw materials $ 68,208 Finished goods 169,895 Packaging materials 37,503 --------------- $ 275,606 NOTE 3 -- SHORT-TERM BANK BORROWINGS During the period ended June 30, 2000, the Company borrowed $149,827 under a demand loan agreement. The Company also entered into a line of credit agreement totaling $121,734, of which $94,402 has already been drawn down. The interest rate for these loans range from approximately 10 to 11%. NOTE 4 -- ASSET PURCHASE AND RECAPITALIZATION On May 5, 2000 the Company consummated an Asset Purchase Agreement (the "Agreement") with Ferrand Investment Limited, ("Ferrand") a British Virgin Island holding corporation that owned the Perfect Renaissance Roumanian companies. Under the terms of the Agreement, Ferrand transferred assets consisting of all of its rights, title and interests in the Roumanian companies to the Company in exchange for 5,000,000 shares of the Company's voting common stock in a transaction intended to qualify as a reorganization under Internal Revenue Code Sec. 368(a)(1)(c), and a recapitalization of the Perfect Renaissance Roumanian companies for financial accounting purposes (See Note 5). Under generally accepted accounting principles, in a business combination that is treated as a recapitalization the Perfect 75
SB-2/A78th Page of 83TOC1stPreviousNextBottomJust 78th
NOTES TO THE AJK PERFECT RENAISSANCE, INC. AND SUBSIDIARIES CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS AS OF AND AT JUNE 30, 2000 Renaissance Roumanian companies are considered the acquirer for accounting purposes. Accordingly, the transaction was accounted for as an acquisition of the Company and recapitalization of the Perfect Renaissance Roumanian companies. The financial statements subsequent to the acquisition include the following: (1) the balance sheet consists of the net assets of the Company at historical costs (zero at the acquisition date) and the net assets of Perfect Renaissance Roumanian companies at historical cost. (2) the statement of operations consists of the operations of Perfect Renaissance Roumanian companies for the period presented and the operations of the Company from the recapitalization date. NOTE 5 -- SUBSEQUENT EVENTS On September 22, 2000 Iotakappa Capital Corporation, a Delaware corporation, purchased from Ferrand Investment Limited the 5,000,000 voting common shares of the Company's stock that Ferrand had received under the terms of the asset purchase agreement (See Note 4). As of September 25, 2000, the Company issued 58,405 shares of common stock for services having a fair market value of approximately $321,227. As of September 29, 2000, the Company issued 45,690 shares of common stock for services having a fair market value of approximately $251,295. NOTE 6 -- SEGMENT INFORMATION June 30, 2000 Vodka Ornaments Alcohol Total -------------- ------------ ------------ -------- ----------- Sales $1,857,544 $ 295,720 $ 68,322 $ 2,221,586 Cost of Sales 1,140,451 175,134 60,740 1,376,325 ----------- ---------- -------- ----------- Gross Profit $ 717,093 $ 120,586 $ 7,582 $ 845,261 =========== ========== ======== =========== 76
SB-2/A79th Page of 83TOC1stPreviousNextBottomJust 79th
PART II INFORMATION NOT REQUIRED IN THE PROSPECTUS ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS We are incorporated in Delaware. Under Section 145 of the General Corporation Law of the State of Delaware, a Delaware corporation has the power, under specified circumstances, to indemnify its directors, officers, employees and agents in connection with actions, suits or proceedings brought against them by a third party or in the right of the corporation, by reason of the fact that they were or are such directors, officers, employees or agents, against expenses incurred in any action, suit or proceeding. Our Certificate of Incorporation and the By-Laws provide for indemnification of directors and officers to the fullest extent permitted by the General Corporation Law of the State of Delaware. The General Corporation Law of the State of Delaware provides that a certificate of incorporation may contain a provision eliminating the personal liability of a director to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director provided that such provision shall not eliminate or limit the liability of a director for any breach of the director's duty of loyalty to the corporation or its stockholders; for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law under Section 174 (relating to liability for unauthorized acquisitions or redemptions of, or dividends on, capital stock) of the General Corporation Law of the State of Delaware; or for any transaction from which the director derived an improper personal benefit. Our Certificate of Incorporation contains such a provision. INSOFAR AS INDEMNIFICATION FOR LIABILITIES ARISING UNDER THESECURITIES ACT OF 1933 MAY BE PERMITTED FOR DIRECTORS, OFFICERS OR PERSONS CONTROLLING AJK PURSUANT TO THE FOREGOING PROVISIONS OR OTHERWISE, AJK HAS BEEN ADVISED THAT IN THE OPINION OF THE SECURITIES AND EXCHANGE COMMISSION THAT SUCH INDEMNIFICATION IS AGAINSTPUBLIC POLICY AS EXPRESSED IN SUCH ACT AND IS, THEREFORE, UNENFORCEABLE. ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION The following table sets forth the expenses in connection with this Registration Statement. All such expenses are estimates, other than the filing fees payable to the Securities and Exchange Commission: Filing Fee - Securities and Exchange Commission $ 3,200.35 Fees and Expenses of Accountants 40,000.00 Fees and Expenses of legal counsel 300,000.00 Blue Sky Fees and Expenses 3,500.00 Printing and Filing Expenses 10,000.00 Miscellaneous Expenses 2,500.00 ------------ Total $159,200.35 ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES On March 24, 1999, our initial director accepted a subscription for 5,000,000 shares of our common stock for consideration of $500 pursuant to Section 4(2) of the Securities Act. On August 1, 1999, we redeemed all but 500,000 shares of such subscription for a redemption price of $450. 77
SB-2/A80th Page of 83TOC1stPreviousNextBottomJust 80th
On March 24, 1999 we issued 4,750,000 shares of our common stock to Pierce Mill Associates, Inc. and 125,000 shares of our common stock to each of James Cassidy and James McKillop pursuant to Rule 506 of the Securities Act for aggregate consideration of $500. Mr. Cassidy, our former counsel, owned a controlling interest in Pierce Mill Associates, Inc. On May 20, 1999 Pierce Mill Associates, Inc. transferred 250,000 of its shares of our common stock to Jovanda Ltd. in consideration for $25 and introducing Jacob Kieselstein, our president, chairman and chief executive officer, to Mr. Cassidy. On August 1, 1999 we redeemed 4,500,000 shares of our common stock owned by Pierce Mill Associates, Inc. for $450. Effective September 25, 2000, we issued 58,405 shares of our common stock to vendors and suppliers of goods and services pursuant to Section 4(2) of the Securities Act. Effective September 29, 2000, we issued 45,690 shares of our common stock to employees and consultants pursuant to Rule 701 of the Securities Act. ITEM 27. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES (a) Exhibits 3.1 Certificate of Incorporation of AJK Perfect Renaissance, Inc., as amended (incorporated by reference from the Registrant's Registration Statement on Form SB-2, File No. 333-4042) 3.2 By-Laws of AJK Perfect Renaissance, Inc. (incorporated by reference from the Registrant's Registration Statement on Form SB-2, File No. 333-4042) 4.2 Form of common stock certificate (incorporated by reference from the Registrant's Registration Statement on Form SB-2, File No. 333-4042) 5.1* Opinion of Graubard Mollen & Miller 10.1 Agreement with Ex-Klar Technologies, Inc. 10.2 Loan Agreement with Bancorex, as amended by certain letters and notices 10.3 License Agreement with Cie. Bardinet 10.4 Consulting Agreement with Curtis Sittenfeld 10.5 Asset Agreement with Ferrand Investment Ltd. 10.6 Agreement between TPG Capital Corporation and Perfect Renaissance Ltd. 21.1 Subsidiaries of AJK Perfect Renaissance, Inc. (incorporated by reference from the Registrant's Registration Statement on Form SB-2, File No. 333-4042) 24.1 Consent of Weinberg & Company, certified public accountants 24.2 Consent of Arthur Andersen S.R.L., certified public accountants 24.3* Consent of Graubard Mollen & Miller (included in Exhibit 5.1) ---------------------------------------- * To be filed by Amendment ITEM 28. UNDERTAKINGS. (a) The undersigned registrant hereby undertakes that it will: (1) File, during any period in which offers or sales are being made, a post-effective amendment to this registration statement: (i) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933; (ii) To reflect in the prospectus any facts or events which, individually or together, represent a fundamental change in the information in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered 78
SB-2/A81st Page of 83TOC1stPreviousNextBottomJust 81st
(if the total dollar value of securities offered would not exceed that which was registered) and 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 a 20% change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement; (iii) To include any additional or changed material information on the plan of distribution; (2) For determining liability under the Securities Act of 1933, treat each post-effective amendment as a new registration statement of the securities offered, and the offering of the securities at that time to be the initial bona fide offering. (3) File a post-effective amendment to remove from registration any of the securities that remain unsold at the end of the offering. (b) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to 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 expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. (c) The undersigned registrant hereby undertakes that it will: (1) For determining any liability under the Securities Act, treat the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b) (1) or (4) or 497 (h) under the Securities Act as part of this registration statement as of the time the Commission declared it effective. (2) For determining any liability under the Securities Act, treat each post-effective amendment that contains a form of prospectus as a new registration statement for the securities offered in the registration statement, and that offering of the securities at that time as the initial bona fide offering of those securities. 79
SB-2/A82nd Page of 83TOC1stPreviousNextBottomJust 82nd
SIGNATURES In accordance with the requirements of the Securities Act of 1933, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements of filing on Form SB-2 and authorized this registration statement to be signed on its behalf by the undersigned in the City of Aventura, Florida on November 13, 2000. AJK PERFECT RENAISSANCE, INC. By: /s/ Jacob Kieselstein --------------------------------- Jacob Kieselstein President POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Jacob Kieselstein, their true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for and in their name, place and stead, in any and all capacities, to sign any or all amendments to this registration statement, including post-effective amendments, and to file the same, with all exhibits thereto, and all documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, and hereby ratifies and confirms all that said attorneys-in-fact and agents, or any of them or their substitute or 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 as of the dates indicated. [Download Table] Signature Title Date -------------------------- ------------------------------------ ----------------- /s/ Jacob Kieselstein Chairman, President, Chief Executive November 13, 2000 ---------------------- Officer, Director Jacob Kieselstein /s/ Kochava Kieselstein Director November 13, 2000 ------------------------ Kochaua Kieselstein /s/ Yehuda Erlich Director November 13, 2000 ------------------ Yehuda Erlich /s/ Dalia Levy Director November 13, 2000 --------------- Dalia Levy /s/ Dr. Zvi Yadin Director November 13, 2000 ------------------ Dr. Zvi Yadin 80
SB-2/ALast Page of 83TOC1stPreviousNextBottomJust 83rd
EXHIBIT INDEX 10.1 Agreement with Ex-Klar Technologies, Inc. 10.2 Loan Agreement with Bancorex, as amended by certain letters and notices 10.3 License Agreement with Cie. Bardinet 10.4 Consulting Agreement with Curtis Sittenfeld 10.5 Asset Agreement with Ferrand Investment Ltd. 10.6 Agreement between TPG Capital Corporation and Perfect Renaissance Ltd. 23.1 Consent of Weinberg & Company, Certified Public Accountants 23.2 Consent of Arthur Andersen, S.R.L., Certified Public Accountants

Dates Referenced Herein   and   Documents Incorporated by Reference

Referenced-On Page
This ‘SB-2/A’ Filing    Date First  Last      Other Filings
8/31/0120None on these Dates
12/31/0011
Filed on:11/13/00182
9/30/00836
9/29/004280
9/25/004980
9/22/002878
6/30/00678
6/15/0060
5/24/005072
5/5/00577
4/16/0056
4/14/005057
4/5/0042
2/1/0056
1/1/0065
12/31/99677
12/14/9963
12/8/9965
12/7/9965
8/1/994880
7/21/99536
7/16/9963
7/1/9947
6/30/991374
6/1/9936
5/20/994880
3/24/99580
12/31/98672
3/2/9822
12/31/975862
12/22/9762
12/12/9762
7/16/9722
6/12/9722
11/23/9622
11/20/9622
7/25/9522
5/4/9522
11/22/9418
11/11/9418
3/18/9422
 List all Filings 
Top
Filing Submission 0001094891-00-000644   –   Alternative Formats (Word / Rich Text, HTML, Plain Text, et al.)

Copyright © 2020 Fran Finnegan & Company.  All Rights Reserved.
AboutPrivacyRedactionsHelp — Fri., Feb. 28, 9:41:45.1am ET