Initial Public Offering (IPO): Registration Statement (General Form) — Form S-1
Filing Table of Contents
Document/Exhibit Description Pages Size
1: S-1 Registration Statement (General Form) 92 409K
2: EX-1 Underwriting Agreement 30 158K
3: EX-1.2 Warrants for Purchase 15 78K
4: EX-3 Exhibit 3.1 11 31K
6: EX-3 Exhibit 3.3 24 44K
5: EX-3.2 Articles of Amendment 8 18K
7: EX-10 Exhibit 10.1 10 34K
8: EX-10 Exhibit 10.2 15 63K
11: EX-10 Exhibit 10.6 5 13K
9: EX-10.3 Material Contract 16 62K
10: EX-10.5 Option Agreements 7 26K
12: EX-21 Subsidiaries of the Registrant 2 5K
13: EX-23 Exhibit 23.1 1 7K
As filed with the Securities and Exchange Commission on September 6, 1996
Registration No. 333-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-1
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
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VITECH AMERICA, INC.
(Exact name of Company as specified in its charter)
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65 041 9086 Florida 3571
(I.R.S. Employer (State or other jurisdiction (Primary Standard
Identification No.) of incorporation or organization) Industrial Classification Number)
8807 Northwest 23rd Street
Miami, Florida 33172
(305) 477-1161
(Name, address, including zip code, and telephone
number, including area code, of registrant's principal
executive offices)
William C. St. Laurent, President
Vitech America, Inc.
8807 Northwest 23rd Street
Miami, Florida 33172
(305) 477-1161
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copies to:
Jim Schneider, Esq. Robert Steven Brown, Esq.
Joel D. Mayersohn, Esq. Vincent Joseph Pasquariello, Esq.
Atlas, Pearlman, Trop & Borkson, P.A. Brock, Fensterstock, Silverstein,
200 East Las Olas Blvd., Suite 1900 McAuliffe & Wade, LLC
Fort Lauderdale, Florida 33301 One Citicorp Center, 56th Floor
(954) 766-7823 New York, New York 10022
Telecopier: (954)766-7800 (212) 371-2000
Telecopier: (212) 371-5500
Approximate date of commencement of proposed sale to public: As soon as
practicable after this Registration Statement becomes effective.
If any of the securities 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. [X]
EXPLANATORY NOTE
This Registration Statement covers the registration of (i) up to
2,300,000 shares of Common Stock, no par value ("Common Stock"), including the
shares of Common Stock to cover over allotments of Vitech America, Inc. (the
"Company"), a Florida corporation, for sale by the Company in an underwritten
public offering, and (ii) an additional 40,944 shares of Common Stock (the
"Selling Shareholders' Stock") for the sale by the holders thereof (the "Selling
Shareholders") for resale from time to time by the Selling Shareholders, subject
to the contractual restrictions that the Selling Shareholders may not sell the
Selling Shareholders' Stock for a specified period after the closing of the
underwritten offering.
The complete Prospectus relating to the underwritten offering follows
immediately after this explanatory note. Following the Prospectus for the
underwritten offering are pages of the Prospectus relating solely to the Selling
Shareholders' Stock, including an alternative front and back cover pages and the
section entitled "Concurrent Public Offering," "Plan of Distribution," "Selling
Shareholders" and "Shares Eligible for Future Sale" to be used in lieu of
sections entitled "Concurrent Offering," "Shares Eligible for Future Sale" and
"Underwriting" in the Prospectus relating to the underwritten offering. Certain
sections of the Prospectus for the underwritten offering will not be used in the
Prospectus relating to the Selling Shareholders' Stock such as "Use of Proceeds"
and "Dilution."
i
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering.
[ ]
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering.
[ ]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box.
[ ]
CALCULATION OF REGISTRATION FEE
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Title of each
class of Proposed maximum Proposed maximum
securities to be Amount to be offering price aggregate offer- Amount of
registered registered per unit(1) ing price(1) registration fee
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Common Stock,
no par value 2,340,944
per share Shares(2) $10.00 $23,409,440 $8,072.28
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Representative's 200,000
Warrants Warrants(3) $0.000025 $ 5.00 $0.01
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Common Stock,
no par value 200,000
per share Shares(4) $12.00 $2,400,000 $827.59
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TOTAL --- --- $25,400,005 $8,899.88
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(1) Estimated solely for the purpose of calculating the registration fee.
(2) Includes 300,000 shares of Common Stock which the Underwriters have the
option to purchase to cover over-allotments, if any and 40,944 shares
being registered by certain shareholders of the Company.
(3) To be acquired by the Representative.
(4) Issuable upon exercise of the Representative's Warrants.
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 this Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
ii
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any state in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such state.
PROSPECTUS
SUBJECT TO COMPLETION, DATED SEPTEMBER 6, 1996
2,000,000 Shares
VITECH AMERICA, INC.
Common Stock
VITECH AMERICA, INC. (the "Company") is hereby offering 2,000,000
shares of common stock, no par value per share (the "Common Stock").
Prior to this offering, there has been no public market for the Common
Stock, and there can be no assurance that any such market will develop upon
completion of this offering. The Company has applied for quotation of the Common
Stock on the Nasdaq National Market(R) under the symbol "VTCH." It is currently
estimated that the initial public offering price will be between and
per share and will be determined by negotiation between the Company and
H.J. Meyers & Co., Inc., as the representative (the "Representative") of the
several underwriters (the "Underwriters"). For a description of the factors to
be considered in determining the initial public offering price, see
"Underwriting."
THESE SECURITIES INVOLVE A HIGH DEGREE OF RISK AND SHOULD BE CONSIDERED
ONLY BY PERSONS WHO CAN AFFORD THE LOSS OF THEIR ENTIRE INVESTMENT. SEE "RISK
FACTORS" BEGINNING ON PAGE _____.
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
================================================================================
Underwriting
Price to Discounts and Proceeds to
Public Commissions(1) Company(2)
Per Share $ __________ $_________ $__________
Total (3) $ __________ $_________ $__________
================================================================================
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(1) Does not include additional compensation to be received by the
Representative in the form of: (i) a non-accountable expense allowance
equal to 2% of the gross proceeds of this offering ($_______, or
$_______ if the Underwriters' over-allotment option is exercised in
full); (ii) warrants to purchase up to 200,000 shares of Common Stock
at an exercise price equal to 120% of the initial public offering price
per share of Common Stock exercisable over a period of four years
commencing one year from the date of this Prospectus (the
"Representative's Warrants"); and (iii) a financial advisory agreement
which provides that the Representative shall act as an advisor to the
Company for a period of one year for a fee of $36,000, payable at the
closing of this offering. In addition, the Company has agreed to
indemnify the Underwriters against certain civil liabilities, including
liabilities under the Securities Act of 1933, as amended (the
"Securities Act"). See "Underwriting."
(2) Before deducting expenses of the offering payable by the Company,
estimated to be $350,000, excluding the Representative's
non-accountable expense allowance.
(3) The Company has granted the Underwriters an option, exercisable within
45 days from the date of this Prospectus, to purchase up to 300,000
additional shares of Common Stock solely to cover over-allotments, if
any. If the over-allotment option is exercised in full, the total Price
to Public, Underwriting Discounts and Commissions, and Proceeds to
Company will be $__________, $_________, and $__________, respectively.
See "Underwriting."
The shares of Common Stock are offered on a "firm commitment" basis by
the Underwriters when, as, and if delivered to, and accepted by, the
Underwriters, and subject to prior sale, withdrawal, or cancellation of the
offer without notice and their right to reject orders in whole or in part. It is
expected that delivery of the certificates representing the shares of Common
Stock will be made at the offices of H.J. Meyers & Co., Inc., 180 Maiden Lane,
New York, New York 10038 on or about ______________, 1996.
H.J. MEYERS & CO., INC.
The date of this Prospectus is ___________, 1996
2
The Company will furnish its shareholders with annual reports
containing audited financial statements and such other periodic reports as the
Company may from time to time deem appropriate or as may be required by law.
--------------
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR
EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON
STOCK AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET.
SUCH TRANSACTIONS MAY BE EFFECTED IN THE OVER-THE-COUNTER MARKET OR OTHERWISE.
SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
Description of Pictures
Inside Front Cover:
The Vitech logo with a description of the Company as follows:
"A fully integrated manufacturer providing complete multimedia and
network computing solutions."
Picture #1: Picture of a father and his son playing a computer game on a
multimedia personal computer.
Picture #2: The Vitech Vision(TM) personal multimedia computer.
Picture #3: The Vitech MultiShow(TM) multimedia kit.
Picture #4: The Vitech Easynet(TM) networking kit.
Inside Rear Cover:
Picture #1: A picture from a Vitech advertisement showing two hands touching
with the caption: "Vitech Integrated Solutions."
Picture #2: Various networking components.
Picture #3: The Vitech Easynet(TM) networking kit.
Picture #4: An array of network servers and other high-end personal computers.
Picture #5: The Vitech MultiShow(TM) multimedia kit, speakers, and a computer CD
ROM.
Picture #6: The Vitech Vision(TM) line of personal computers.
Picture #7: The Vitech logo.
3
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and the Consolidated Financial Statements and the notes thereto
appearing elsewhere in this Prospectus. Unless otherwise indicated herein, the
information in this Prospectus does not give effect to (i) the exercise of the
Underwriters' over-allotment option, (ii) the Representative's Warrants, (iii)
options to purchase up to 4,000,000 shares of Common Stock issued to members of
management exercisable at prices ranging from $15.00 per share to $25.00 per
share, or (iv) up to 200,000 shares of Common Stock reserved for issuance upon
the exercise of options which may be granted pursuant to the Company's 1996
Stock Option Plan (the "Plan"), none of which options have been granted prior to
the date of this Prospectus. The information in this Prospectus relating to the
Common Stock has been restated to reflect an 8,000-for-one stock split effected
on July 26, 1996. As used in this Prospectus, the term "Company" refers to
Vitech America, Inc., a Florida corporation, and its wholly-owned subsidiary
Bahia Tecnologia Ltda., a Brazil corporation ("Bahia").
The Company
Vitech America, Inc. (the "Company") is engaged in the manufacture and
distribution of computer equipment and related products, as well as the
financing of the purchase thereof, in the Federal Republic of Brazil. The
Company's products, which include personal computers and multimedia systems and
related peripheral products, networking and system integration equipment, and
cellular telephones and accessories, are marketed under Company-owned and other
brand names for distribution through a variety of channels in the Brazilian
marketplace. In addition, the Company maintains an engineering support service
dedicated to assisting the Company's customers in effecting networking and
system integration solutions.
The Company has experienced substantial growth since inception, with
consolidated revenues and consolidated net income increasing from $1,156,253 and
$44,288, respectively, for the period between June 24, 1993, the inception of
the Company, and December 31, 1993, to $17,407,363 and $149,570, respectively,
for the year ended December 31, 1994, and $48,488,996 and $6,904,834,
respectively, for the year ended December 31, 1995. Consolidated revenues and
consolidated net income were $26,080,299 and $2,704,140, respectively, for the
six months ended June 30, 1996 as compared to $20,457,048 and $397,721,
respectively, for the six months ended June 30, 1995.
As a result of the increasing stability of the economy and the growth
of a middle class in Brazil, demand for computer equipment and related products
in Brazil has increased significantly over the last five years. Based upon news,
trade reports, and the Company's experience, the Company believes that the
market for computer equipment and related products in Brazil is expected to grow
at the rate of approximately 30% annually. The Company believes that it is
particularly well-positioned to capitalize upon such anticipated growth based
upon: (i) the Company's extensive knowledge of prevailing customs, importation
practices, technology and labor bases, marketing dynamics, and economic
conditions in Brazil, together with the Company's existing relationships with
U.S. and Asian suppliers and understanding of technology development; (ii) the
Company's integrated manufacturing, research and development, sales, and
warehousing facilities in Brazil; (iii) the Company's existing distribution
arrangements with retailers and others in Brazil; and (iv) the Company's ability
to provide flexible financing alternatives to potential purchasers of the
Company's products.
4
As part of the Company's operating strategy, the Company intends to
utilize a significant portion of the proceeds of this offering as follows:
* to expand inventory;
* to expand consumer financing operations;
* to expand marketing activities;
* to repay indebtedness; and
* to increase manufacturing capacity.
The Company was incorporated on June 24, 1993 under the laws of the
State of Florida. Its principal executive offices are located at 8807 Northwest
23rd Street, Miami, Florida 33172, and its telephone number is (305) 477-1161.
Bahia was incorporated on May 8, 1995 under the laws of Brazil.
5
The Offering
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Common Stock Offered by the Company......................... 2,000,000 shares
Common Stock Outstanding
Prior to Offering........................................... 8,013,648 shares(1)
Common Stock Outstanding
After the Offering.......................................... 10,013,648 shares(1)
Risk Factors................................................ Investment in the shares of Common Stock offered
hereby involves a high degree of risk and
immediate and substantial dilution from the price
to the public. See "Risk Factors," "Dilution," and
"Certain Transactions."
Use of Proceeds............................................. To expand inventory, to expand consumer financing
operations, to expand marketing activities, to repay
indebtedness, to increase manufacturing capacity,
and for general working capital purposes.
Proposed National Market(R) Symbol............................ "VTCH"
(1) Excludes 27,296 shares of Common Stock issuable upon exercise of
warrants issued in the Company's August 1996 Private Placement.
Summary Financial Data
The following tables set forth certain summary financial data of the
Company. The summary statement of operations data for the years ended December
31, 1995 and 1994 and the period from June 24, 1993 (inception) to December 31,
1993 are derived from the Consolidated Financial Statements of the Company,
which have been audited by Pannell Kerr Forster PC, independent certified public
accountants. The summary statement of operations data for the six months ended
June 30, 1996 and 1995 and the summary balance sheet data as of June 30, 1996
have been derived from the unaudited consolidated statements of the Company. The
Consolidated Financial Statements for the periods indicated above, and the
report thereon, appear elsewhere in this Prospectus. The data in such tables
should be read together with "Selected Financial Data" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the Consolidated Financial Statements and the notes thereto, appearing elsewhere
herein.
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Statement of Operations Data:
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Six Months Ended June 30, Year Ended December 31,
------------------------- -----------------------
(unaudited)
Period June
24, 1993
(Inception)
to December
1996 1995 1995 1994 31, 1993
---- ---- ---- ---- --------
Sales $26,080,299 $20,457,048 $48,488,996 $17,407,363 $1,156,253
Cost of sales 18,688,336 19,067,617 39,156,239 16,483,232 903,544
Gross profit 7,391,963 1,389,431 9,332,757 924,131 252,709
Selling, general and
administrative expenses 2,462,646 819,380 1,234,108 505,448 181,139
Income from operations 4,929,317 570,051 8,098,649 418,683 71,570
Interest and financing
expense 1,688,947 163,978 328,278 171,743 14,282
Net income $2,704,140 $397,721 $6,904,834 $149,570 $44,288
Net income per share
Common and Common
Stock equivalents $.31 $.05 $.82 $.02 ---
Weighted average
number of shares
of Common and
Common Stock
equivalents
outstanding 8,503,853 8,041,988 8,293,914 8,000,000 8,000,000
Balance Sheet Data:
As of June 30, 1996
-------------------
(unaudited)
Actual As Adjusted (1)
------ ---------------
Current Assets $23,640,435 $38,025,292
Working capital $7,598,941 $25,183,798
Total assets $26,150,724 $40,425,120
Long-term debt $0 $0
Total liabilities $16,041,494 $12,841,494
Shareholders' equity $10,109,230 $27,583,626
(1) Adjusted to reflect (i) the sale of 13,648 shares of Common Stock and
$1,364,778 aggregate principal amount of debentures issued in the
Company's August 1996 Private Placement and (ii) the sale of the
2,000,000 shares of Common Stock offered hereby (after deducting
underwriting discounts and commissions and estimated offering expenses)
and the application of the net proceeds therefrom assuming an initial
public offering price of $10.00 per share. See "Use of Proceeds" and
"Capitalization."
7
RISK FACTORS
An investment in the shares of Common Stock offered hereby involves a
high degree of risk. Prospective investors should carefully consider the
following risk factors, in addition to the other information set forth in this
Prospectus, including the Consolidated Financial Statements and the notes
thereto, in evaluating an investment in the shares of Common Stock offered
hereby.
Limited Operating History
The Company was organized in June 1993. While the Company has been
profitable since its inception, investors in this offering will have only a
limited operating history to consider in evaluating the Company. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business."
Management of Growth
The Company has experienced substantial growth since inception with
consolidated revenues and consolidated net income increasing from $ 1,156,253
and $ 44,288, respectively, for the period between June 24, 1993, the inception
of the Company, and December 31, 1993, to $17,407,363 and $149,570,
respectively, for the year ended December 31, 1994 and to $48,488,996 and
$6,904,834, respectively, for the year ended December 31, 1995. Consolidated
revenues and consolidated net income were $26,080,299 and $2,704,140,
respectively, for the six months ended June 30, 1996 compared to $20,457,048 and
$397,721, respectively for the six months ended June 30, 1995. There can be no
assurance that such growth will continue. While management has successfully
managed such growth to date and the Company's infrastructure has been sufficient
to support such growth, there can be no assurance that, if such growth
continues, the Company's infrastructure will continue to be sufficient to
support such larger enterprise. See "Risk Factors -- Dependence on Key
Personnel; Recruitment of Additional Personnel," "Management's Discussion and
Analysis of Financial Condition and Results of Operations," "Business --
Employees," and "Management."
Fluctuation of Quarterly Results
The Company's quarterly net sales and operating results may vary
significantly as a result of, among other things, historical seasonal purchasing
patterns in Brazil, the volume and timing of orders received during a quarter,
variations in sales mix, and delays in production schedules. Accordingly, the
Company's historical financial performance is not necessarily a meaningful
indicator of future results and, in general, management expects that the
Company's financial results may vary materially from period to period. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
Customer Concentration
During the year ended December 31, 1995, the Company was engaged as a
contract manufacturer of video cassette recorders by Casas Bahia, a leading
retailer of consumer electronic products in Brazil. Such sales accounted for
approximately 15% of the Company's sales during such period. Such sales
accounted for approximately 14% of the Company's sales during the six month
period ended June 30, 1996. In addition, the Company has a continuing
contractual relationship with Casas Bahia pursuant to which the Company will
manufacture televisions and video cassette recorders. Accordingly, the loss of
8
Casas Bahia as a customer could have a material adverse effect on the Company.
Other than Casas Bahia and Vitoria Tecnologia S.A., an affiliate through common
ownership, no one customer of the Company accounted for more than 5% of the
Company's sales during such period. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations," and "Business -- Customers," and
"Business."
Dependence on Suppliers; Credit Arrangements
During the year ended December 31, 1995, the Company had only one
supplier which accounted for in excess of 10% of purchases. During the six month
period ended June 30, 1996, the Company had four suppliers which each accounted
for in excess of 10% of purchases. Substantially all of the Company's inventory
has, and will be, purchased from manufacturers and distributors with whom the
Company has entered into non-exclusive agreements, which are typically
cancelable upon 30 days written notice. There can be no assurance that such
agreements will not be canceled. While the Company does not believe that the
loss of any one supplier would have a material adverse effect upon the Company
since the components utilized in most products sold by the Company are available
from multiple sources, the Company's future success will depend in part on its
ability to maintain relationships with existing suppliers and to develop new
relationships with additional suppliers. The loss of, or significant disruptions
in relationships with, suppliers could have a material adverse effect on the
Company's business since there can be no assurance that the Company will be able
to replace lost suppliers on a timely basis. See "Business -- Procurement and
Materials Management."
To date, the Company has materially benefited from extended credit
terms that the Company has received from certain of its suppliers. Such terms
enable the Company to defer payment during a significant portion of the
Company's transport and manufacturing cycle thereby permitting the Company to
increase its volume of purchases for components, parts, and equipment. In the
event that the Company's suppliers were to impose more stringent credit terms
with respect to the Company, in the absence of sufficient alternative financing
on favorable terms, the Company could be materially adversely affected. In such
event, there can be no assurance that the Company will obtain alternative
financing on favorable terms, or at all. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources" and "Business -- Procurement and Materials Management."
Competition
The manufacturing and distribution of computer equipment and related
products is highly competitive and requires substantial capital. The Company
competes with, and will compete with, numerous international, national, and
regional companies, many of which have significantly larger operations and
greater financial, marketing, human, and other resources than the Company, which
may give such competitors competitive advantages, including economies of scale
and scope. No assurance can be given that the Company will successfully compete
in any market in which it conducts or may conduct operations.
9
Political and Economic Uncertainty
Notwithstanding the recent stability of the Brazilian economy and
Brazil's unrestricted foreign exchange market, the Brazilian economy has been
characterized by frequent and occasionally substantial intervention by the
Brazilian Government. The Brazilian Government has, in the past, substantially
influenced monetary, credit, tariff, and other policies, including exchange
rates, and has utilized price and wage controls, the restriction of bank
accounts, capital controls, and restrictions on exports to influence the
economy, including to reduce extremely high levels of inflation. In addition,
the Brazilian political environment has been characterized by high levels of
uncertainty since the country returned to civilian rule in 1985. Furthermore,
there have been periodic strikes among workers in Brazil's public sector, and
any such incidents in the future could have a material adverse effect on the
Company's operations during such periods. Future changes in, or the
implementation of, such policies, and increased Brazilian political uncertainty,
could also have a material adverse effect on the Company and its financial
results. See "Conditions in Brazil."
Foreign Exchange Risk
The relationship of Brazil's currency to the value of the U.S. dollar,
and the relative rate of devaluation of Brazil's currency, may affect the
Company's operating results. In particular, the Company's accounts receivable
are denominated in the Brazilian local currency, the Real, while the Company's
operating results are recorded in U.S. dollars. Accordingly, any significant
devaluation of the Real relative to the U.S. dollar could have a material
adverse effect on the Company's operating results. See "Conditions in Brazil."
Consequences of Technological Changes
The market for the Company's products is characterized by continuous
and rapid technological advances and evolving industry standards. Compatibility
with industry standards in areas such as operating systems and communications
protocols is material to the Company's marketing strategy and product
development efforts. In order to remain competitive, the Company must respond
effectively to technological changes by continuing to enhance and improve its
existing products to incorporate emerging or evolving standards and by
successfully developing and introducing new products that meet customer
requirements. There can be no assurance that the Company will successfully
develop, market, or support such products or that the Company will respond
effectively to technological changes or new product announcements or
introductions by others. In the event that the Company does not enhance and
improve its products, the Company's sales and financial results could be
materially adversely affected. In addition, there can be no assurance that, as a
result of technological changes, a portion of the inventory of the Company would
not be rendered obsolete. See "Business -- Products."
Possible Need for Additional Financing
Based on the Company's operating plan, the Company believes that the
net proceeds of this offering, together with projected cash flows from
continuing operations and existing and contemplated sources of credit, including
the financing of consumer debt portfolios generated from the sales of the
Company's products to end-users, will be sufficient to satisfy its capital
requirements and finance its plans for expansion for at least the next twelve
months. Such belief is based on certain assumptions, and there can be no
assurance that such assumptions are correct. Accordingly, there can be no
assurance that such
10
resources will be sufficient to satisfy the Company's capital requirements for
such period. After such twelve-month period, the Company may require additional
financing in order to meet its current plans for expansion. There can be no
assurance that the Company will be able to obtain such additional capital on a
timely basis, on favorable terms, or at all. In any of such events, the Company
may be unable to implement its current plans for expansion. See "Use of
Proceeds," "Capitalization," "Management's Discussion and Analysis of Financial
Condition and Results of Operations," and "Business -- Business Strategy."
Dependence on Key Personnel; Recruitment of Additional Personnel
The Company is dependent upon the efforts and abilities of Georges C.
St. Laurent, III, its Chairman of the Board and Chief Executive Officer, and
William C. St. Laurent, its President and Chief Operating Officer. Each of such
individuals is a substantial shareholder of the Company and has entered into an
employment agreement with the Company which terminates on December 31, 1998. The
loss or unavailability of the services of either of these individuals for any
significant period of time could have a material adverse effect on the Company's
business prospects. The Company has obtained, and is the sole beneficiary of,
key-person life insurance in the amount of $ 2 million on the life of each of
Messrs. Laurent and has agreed with the Representative that such insurance shall
be kept in effect until at least three years from the date hereof. There can be
no assurance that such insurance will continue to be available on reasonable
terms, or at all.
The ability of the Company to attract and retain highly skilled
personnel is critical to the operations of the Company. To date, the Company has
been able to attract and retain the personnel necessary for its operations.
However, there can be no assurance that the Company will be able to do so in the
future, particularly in light of the Company's expansion plans. If the Company
is unable to attract and retain personnel with necessary skills when needed, its
business and expansion plans could be materially adversely affected. See
"Management."
Expiration of Tax-Exempt Status
The government of the State of Bahia, Brazil has issued a decree that
exempts the Company, through and including the year 2003, from the payment of
state import duties, state sales tax, and state services tax. The Company is
exempted from the payment of Brazilian federal income tax through and including
the year 2004. The abatement will continue during the exemption period provided
that 20% of the budgeted production goals negotiated from time to time by the
Company and the federal government of Brazil in units are met in each year
during the Company's exemption period. Accordingly, upon the expiration of the
Company's tax-exempt status, or the inability of the Company and the federal
government of Brazil to renegotiate such budgeted production goals, the
Company's after-tax earnings may be expected to decline substantially. While the
Company and the federal government of Brazil have agreed to budgeted production
goals in the past, there can be no assurance that they will successfully do so
in future periods. Without the exemption, the Company would have been subject to
additional Brazilian federal income tax of approximately $2.8 million in 1995.
The Company is not exempted from the payment of a federal social contribution
tax of 9.09% of income. See "Conditions in Brazil."
11
Assets Outside the U.S.; Enforceability of Civil Liabilities Against Foreign
Persons
While the Company is a U.S. corporation with executive offices in
Florida, it is a holding company for Bahia, which is domiciled in Brazil. For
the foreseeable future, a substantial portion of the Company's assets will be
held or used outside the U.S. (in Brazil). Enforcement by investors of civil
liabilities under the Federal securities laws may also be affected by the fact
that while the Company is located in the U.S., its principal subsidiary and
operations are located in Brazil. Although the Company's executive officers and
directors are residents of the U.S., all or a substantial portion of the assets
of the Company are located outside the U.S.
No Dividends
The Company has not paid any cash dividends on the Common Stock since
its inception and does not anticipate paying cash dividends on the Common Stock
in the foreseeable future. For the foreseeable future, the Company intends to
reinvest earnings of the Company, if any, in the development and expansion of
its business. See "Dividend Policy."
Dilution
Upon the closing of this offering, investors in this offering will
incur immediate substantial dilution of approximately $7.25 in the per share net
tangible book value of their Common Stock assuming an initial public offering
price of $10.00 per share. At June 30, 1996, giving effect to the receipt by the
Company of the estimated net proceeds from the sale of the shares of Common
Stock offered hereby at an estimated initial public offering price of $10.00 per
share, and the Company's August 1996 Private Placement, the Company had a net
proforma tangible book value of approximately $2.75 per share. Net tangible book
value is the amount of the Company's total assets minus intangible assets and
liabilities. See "Dilution."
Arbitrary Offering Price
The initial public offering price of the shares of Common Stock offered
hereby will be determined by negotiations between the Company and the
Representative. Among the factors to be considered in determining this price
will be the Company's current financial condition and prospects, market prices
of similar securities of comparable publicly traded companies, and the general
condition of the securities market. However, the initial public offering price
of the shares of Common Stock offered hereby will not necessarily bear any
relationship to the Company's assets, book value, earnings, or other established
indicia of value. See "Underwriting."
Exercise of Warrants and Options
Upon completion of this offering, options and warrants to purchase an
aggregate of 4,227,296 shares of Common Stock will be outstanding, including the
27,296 shares underlying the warrants issued in the August 1996 Private
Placement, the 200,000 shares underlying the Representative's Warrants, and the
4,000,000 options issued to William and Georges St. Laurent. Holders of such
options and warrants have the opportunity to profit from a rise in the market
price of the Company's Common Stock, if any without assuming the risk of
ownership.
The existence of such options and warrants may adversely affect the
terms under which the
12
Company could obtain additional equity capital. The exercise of these warrants
and options may materially adversely affect the market price of the Common
Stock. In addition, the Company has agreed it will register under federal and
state securities laws the Representative's Warrant and the securities issuable
thereunder, under certain circumstances.
Shares Eligible for Future Sale
The sale, or availability for sale, of a substantial number of shares
of Common Stock in the public market subsequent to this offering pursuant to
Rule 144 under the Securities Act ("Rule 144") or otherwise could materially
adversely affect the market price of the Common Stock and could impair the
Company's ability to raise additional capital through the sale of its equity
securities or debt financing. The availability of Rule 144 to the holders of
restricted securities of the Company would be conditioned on, among other
factors, the availability of certain public information concerning the Company.
All of the 8,013,648 shares of Common Stock currently outstanding are
"restricted securities" as that term is defined in Rule 144 and may, under
certain circumstances, be sold without registration under the Securities Act.
Ordinarily, any shares issuable upon exercise of options granted under the Plan,
pursuant to Rule 701 under the Securities Act, could be sold publicly commencing
90 days after the Company becomes a reporting company under the Exchange Act.
All of the Company's executive officers and directors have agreed not to sell
their shares of Common Stock for a period of 24 months from the date of this
Prospectus without the Representative's prior written consent. The 13,648 shares
of Common Stock issued in the Company's August 1996 Private Placement are
eligible for sale pursuant to the Selling Shareholders Prospectus commencing 30
days from the date of this Prospectus.
If the Representative should exercise its registration rights to effect
a distribution of the Representative's Warrants or the shares of Common Stock
issuable upon the exercise of such Warrants (the "Warrant Shares"), the
Representative, prior to and during such distribution, may be unable to make a
market in the Company's securities. If the Representative ceases making a market
in the Common Stock, the market and market prices for the Common Stock may be
materially adversely affected, and holders thereof may be unable to sell or
otherwise dispose of shares of Common Stock. The holders of the Representative's
Warrants will have certain demand and "piggyback" registration rights with
respect to such warrants and the Warrant Shares, commencing one year after the
date hereof. See "Shares Eligible for Future Sale" and "Underwriting --
Representative's Warrants."
No Prior Public Market; Possible Volatility of Securities Prices
Prior to this offering, there has been no public market for the Common
Stock, and there can be no assurance that any trading market therefor will
develop, or, if any such market develops, that it will be sustained.
Accordingly, purchasers of the shares of Common Stock offered hereby may
experience difficulty selling or otherwise disposing of their shares of Common
Stock. The market price of the Common Stock following this offering may be
highly volatile. Factors such as announcements by the Company or its competitors
concerning acquisitions or dispositions, new procedures, proposed governmental
regulations, and general market conditions may have a significant impact on the
market price of the Common Stock. See "Underwriting."
13
Control of the Company by Management
Immediately following this offering, the management of the Company will
own 78.46% of the outstanding shares of Common Stock (76.18% if the
Underwriter's over-allotment option is exercised in full, but exclusive of
options granted to management). Accordingly, the management of the Company will
have the ability to elect the Company's entire Board of Directors and control
the outcome of all matters submitted to a vote of the shareholders of the
Company. Notwithstanding the foregoing, the Company has agreed, for the
three-year period following the closing of this offering, to permit an observer
designated by the Representative and acceptable to the Company to attend all
meetings of the Board of Directors. See "Principal Shareholders," "Description
of Securities," and "Underwriting."
Government Regulation
The manufacture of computer equipment and related products is subject
to various forms of government regulation in the United States and Brazil. The
Company and its operations are affected by technology transfer and licensing
regulations, tariff regulations, regulations governing currency conversion and
transfers of profits between jurisdictions, and labor regulations, among others.
While the Company does not believe that such regulations adversely effect the
Company or its business presently, there can be no assurance that such
regulations will not materially adversely affect the Company in the future. See
"Conditions in Brazil."
In addition, the government of Brazil has exercised, and continues to
exercise, substantial influence over many aspects of the private sector in
Brazil. See "Conditions in Brazil."
Authorization of Preferred Stock; Possible Anti-Takeover Effects
The Board of Directors is authorized to issue shares of preferred stock
and to determine the dividend, liquidation, conversion, redemption, and other
rights, preferences, and limitations of such shares without any further vote or
action of the shareholders. Accordingly, the Board of Directors is empowered,
without shareholder approval, to issue preferred stock with dividend,
liquidation, conversion, voting, or other rights which could adversely affect
the voting power or other rights of the holders of the Common Stock. In the
event of issuance, the preferred stock could be utilized, under certain
circumstances, as a method of discouraging and delaying or preventing a change
in control of the Company. The Company has no present intention to issue any
shares of its preferred stock, although there can be no assurance that the
Company will not do so in the future. See "Description of Securities --
Preferred Stock."
14
THE COMPANY
The Company is engaged in the manufacture and distribution of computer
equipment and related products, as well as the financing of the purchase
thereof, in the Federal Republic of Brazil. The Company's products, which
include personal computers and multimedia systems and related peripheral
products, networking and system integration equipment, and cellular telephones
and accessories, are marketed under Company-owned and other brand names for
distribution through a variety of channels in the Brazilian marketplace. In
addition, the Company maintains an engineering support service dedicated to
assisting the Company's customers in effecting networking and system integration
solutions.
The Company has experienced substantial growth since inception, with
consolidated revenues and consolidated net income increasing from $1,156,253 and
$44,288, respectively, for the period between June 24, 1993, the inception of
the Company, and December 31, 1993, to $17,407,363 and $149,570, respectively,
for the year ended December 31, 1994, and to $48,488,996 and $6,904,834,
respectively, for the year ended December 31, 1995. Consolidated revenue and
consolidated net income for the six months ended June 30, 1996 were $26,080,299
and $2,704,140, respectively, as compared to $20,457,048 and $397,721,
respectively, for the six months ended June 30, 1995.
As a result of the increasing stability of the economy and the growth
of a middle class in Brazil, demand for computer equipment and related products
in Brazil has increased significantly over the last five years. Based upon news,
trade reports, and the Company's experience, the Company believes that the
market for computer equipment and related products in Brazil is expected to grow
at the rate of approximately 30% annually. The Company believes that it is
particularly well-positioned to capitalize upon such anticipated growth based
upon: (i) the Company's extensive knowledge of prevailing customs, importation
practices, technology and labor bases, marketing dynamics, and economic
conditions in Brazil, together with the Company's existing relationships with
U.S. and Asian suppliers and understanding of technology development; (ii) the
Company's integrated manufacturing, research and development, sales, and
warehousing facilities in Brazil; (iii) the Company's existing distribution
arrangements with retailers and others in Brazil; and (iv) the Company's ability
to provide flexible financing alternatives to potential purchasers of the
Company's products.
As part of the Company's operating strategy, the Company intends to
utilize a significant portion of the proceeds of this offering as follows:
* to expand inventory;
* to expand consumer financing operations;
* to expand marketing activities;
* to repay indebtedness; and
* to increase manufacturing capacity.
15
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 2,000,000 shares
of Common Stock offered hereby, after deducting estimated offering expenses and
underwriting discounts payable by the Company, are estimated to be approximately
$17,650,000, assuming an initial public offering price of $10.00 per share. The
Company intends to utilize the net proceeds of this offering as follows:
Amount Percent
------ -------
Expansion of inventory $5,000,000 28.3%
Expansion of consumer financing
operations $5,000,000 28.3%
Expansion of marketing activities $ 500,000 2.8%
Repayment of Indebtedness $4,565,000 25.9%
Increase manufacturing capacity $2,150,000 12.2%
General corporate and working capital purposes $ 435,000 2.5%
The foregoing represents the Company's best estimate of its allocation
of the net proceeds of the sale of the shares of Common Stock offered hereby
based upon the Company's currently contemplated operations and existing and
contemplated sources of credit, the Company's business plan, and current
economic and industry conditions and is subject to reapportionment among the
categories listed above or to new categories in response to, among other things,
changes in its plans, regulations, industry conditions, and future revenues and
expenditures. The amount and timing of expenditures may vary depending on a
number of factors, including changes in the Company's contemplated operation or
business plan and changes in economic and industry conditions.
Based on the Company's business plan, the Company believes that the net
proceeds of this offering, together with revenues from continuing operations and
existing and contemplated sources of credit, including the financing of consumer
debt portfolios generated from the sales of the Company's products to end-users,
will be sufficient to permit the Company to conduct its operations as currently
contemplated for at least the next twelve months. Such belief is based upon
certain assumptions, and there can be no assurance that such resources will be
sufficient for such purpose. The Company may be required to raise substantial
additional capital in the future in order to expand operations. In addition,
contingencies may arise which may require the Company to obtain additional
capital. There can be no assurance that the Company will be able to obtain such
capital from any other sources on favorable terms or at all. See
"Capitalization," "Management's Discussion and Analysis of Financial Conditions
and Results of Operations," and "Business -- Business Strategy."
Pending use of the net proceeds of the sale of the shares of Common
Stock offered hereby, the Company intends to invest such funds in short-term,
interest-bearing, investment-grade obligations. Any additional proceeds received
upon the exercise of the Underwriters' over-allotment option or the
Representative's Warrants, as well as income from investments, if any, will be
added to working capital.
16
DIVIDEND POLICY
The Company has not declared or paid any dividends on the Common Stock
since inception and does not intend to pay any dividends to its shareholders in
the foreseeable future. The Company currently intends to reinvest earnings, if
any, in the development and expansion of its business. The declaration of
dividends in the future will be at the discretion of the Board of Directors and
will depend upon the earnings, capital requirements, and financial position of
the Company, general economic conditions, and other pertinent factors.
DILUTION
At June 30, 1996, the proforma net tangible book value of the Company
was $10,129,702, or approximately $1.26 per share of Common Stock based on
8,013,648 shares of Common Stock outstanding, after giving effect to the
issuance of 13,648 shares of Common Stock in the Company's August 1996 Private
Placement. The net tangible book value per share represents the amount of the
Company's total assets less the amount of its intangible assets and liabilities,
divided by the number of shares of Common Stock outstanding. After giving effect
to the receipt of net proceeds (estimated to be approximately $17,650,000) from
the sale of the shares of Common Stock offered hereby at an assumed initial
public offering price of $10.00 per share, the proforma net tangible book value
of the Company at June 30, 1996, would be $27,583,626, or approximately $2.75
per share of Common Stock. This would result in dilution to the public investors
(i.e., the difference between the estimated initial public offering price per
share of Common Stock and the net tangible book value thereof after giving
effect to this offering) of approximately $7.25 per share. The following table
illustrates the per share dilution:
[Enlarge/Download Table]
Per Share of
Common Stock
------------
Assumed initial public offering price.................................. $10.00
Proforma net tangible book value at June 30, 1996................... $ 1.26
Increase in proforma net tangible book
value attributable to new investors................................. $ 1.49
------
Proforma net tangible book value after this offering ............. $ 2.75
------
Dilution of net tangible book value to new investors.................. $ 7.25
======
The following table sets forth as of the date of this Prospectus, the
number of shares of Common Stock purchased, the percentage of shares of Common
Stock purchased, the total consideration paid, the percentage of total
consideration paid, and the average price per share paid by the existing
shareholders and by the investors purchasing shares of Common Stock in this
offering:
[Enlarge/Download Table]
Shares Purchased Total Consideration Average Price
---------------- ------------------- -------------
Number Percent Number Percent Per Share
------ ------- ------ ------- ---------
Existing shareholders 8,013,648 80.03% $326,870 1.6% $ .04
New investors 2,000,000 19.97% $20,000,000 98.4% $10.00
--------- ------ ----------- -----
Total 10,013,648 100.00% $20,326,870 100.0% $ 2.03
========== ======= =========== ======
17
CAPITALIZATION
The following table sets forth the actual capitalization of the Company
at June 30, 1996, and as adjusted to give effect to (i) the sale of 13,648
shares of Common Stock and the issuance of $1,364,778 aggregate principal amount
of debentures in the Company's August 1996 Private Placement and (ii) the sale
of the 2,000,000 shares of Common Stock offered hereby and to the application of
the net proceeds therefrom, at an assumed initial public offering price of
$10.00 per share.
As of June 30, 1996
--------------------
Actual As Adjusted
------ -----------
Short-term debt $6,156,476 $2,956,476
Long-term debt $0 $0
Shareholders' equity
Preferred Stock, no par value
Authorized, 3,000,000 shares;
issued and outstanding, no
shares actual, no shares
as adjusted $0 $0
Common Stock: no par value
Authorized, 30,000,000 shares;
issued and outstanding,
8,000,000 shares actual,
10,013,648 shares, as adjusted $306,398 $17,780,794
Retained earnings $ 9,802,832 $ 9,802,832
---------- ----------
Total shareholder equity $10,109,230 $27,583,626
---------- ----------
Total Capitalization $16,265,706 $30,540,102
=========== ===========
SELECTED FINANCIAL DATA
The following selected statements of operations data for each of the
years in the two year period ended December 31, 1995 and the period from June
24, 1993 to December 31, 1993 and the balance sheet data at December 31, 1995
and 1994, are derived from, and are qualified by reference to, the consolidated
financial statements and the notes thereto included elsewhere herein audited by
Pannell Kerr Forster PC, independent certified public accountants, as indicated
in their report with respect thereto, also included elsewhere in this
Prospectus. The selected statement of operations data for the six month periods
ended June 30, 1996 and 1995 and the balance sheet data as of June 30, 1996 and
1995 have been derived from the unaudited consolidated statements of the
Company. The unaudited financial statements have been prepared on the same basis
as the audited consolidated financial statements and, in the opinion of
management, include all adjustments, consisting only of normal recurring
adjustments necessary for a fair statement of the information set forth therein.
The results presented are not necessarily indicative of results expected for any
future period.
18
Statement of Operations Data:
[Enlarge/Download Table]
Six Months Ended June 30, Year Ended December 31,
------------------------- -----------------------
(unaudited)
Period June
24, 1993
(Inception)
to December
1996 1995 1995 1994 31, 1993
---- ---- ---- ---- --------
Sales $26,080,299 $20,457,048 $48,488,996 $17,407,363 $1,156,253
Cost of sales 18,688,336 19,067,617 39,156,239 16,483,232 903,544
Gross profit 7,391,963 1,389,431 9,332,757 924,131 252,709
Selling, general and 2,462,646 819,380 1,234,108 505,448 181,139
administrative expenses
Income from operations 4,929,317 570,051 8,098,649 418,683 71,570
Interest and financing
expense 1,688,947 163,978 328,278 171,743 14,282
Net income $2,704,140 $397,721 $6,904,834 $149,570 $44,288
Net income per share of
Common and Common
Stock equivalents $.31 $.05 $.82 $.02 ---
Weighted average
number of shares of
Common and Common
Stock equivalents
outstanding 8,503,853 8,041,988 8,293,914 8,000,000 8,000,000
Balance Sheet Data:
[Enlarge/Download Table]
As of June 30, As of December 31,
-------------- -------------------
(unaudited)
1996 1995 1995 1994 1993
---- ---- ---- ---- ----
Current Assets $23,640,435 $10,146,796 $21,267,881 $7,595,246 $1,320,967
Working capital $7,598,941 $755,080 $6,412,154 $403,181 $298,525
Total assets $26,150,724 $10,289,693 $22,260,817 $7,692,321 $1,373,128
Long-term debt 0 0 0 0 0
Total liabilities $16,041,494 $9,391,716 $14,855,727 $7,192,065 $1,022,442
Shareholders' equity $10,109,230 $897,977 $7,405,090 $500,256 $350,686
19
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the
information contained in the Consolidated Financial Statements and the Notes
thereto appearing elsewhere in this prospectus.
Overview
The Company is a manufacturer and distributor of computer equipment and
related products for markets in Brazil. Based on continuing efforts by
management to maximize long-term profit margins and increase penetration into
the marketplace directly to end-users, the Company has evolved from a
Miami-based distributor dedicated to sales of computer peripheral products for
large original equipment manufacturers ("OEM") in 1993 to a vertically
integrated manufacturer and integrator of complete computer systems and business
network systems selling directly to end-users in 1996. This evolution has left
the Company with a diversified customer base widely distributed throughout
Brazil. For the six month period ended June 30, 1996, the Company had over 2,600
customers as compared to one customer during the period ended December 31, 1993.
As the Company establishes and maintains relationships with end-users of its
products, the Company has developed a clearly defined channel for marketing
additional hardware products, such as updated peripheral products, new
computers, new network products, as well as services, such as internet access
services. The Company markets its products throughout Brazil under the
trademarks Easynet(TM), MultiShow(TM), and Vitech Vision(TM).
In June 1993, Vitech America, Inc. was incorporated for the purpose of
sourcing, purchasing, seeking supplier credit in order to distribute products to
its sole customer, Vitoria Tecnologia S.A., an affiliate of the Company through
common ownership. A 16,000 square foot warehouse with adjoining offices was
leased to receive, inspect, process incoming quality control, consolidate, ship,
and administer purchases and accounts payable. In 1993 and 1994, the Company
distributed electronic parts and finished peripheral products, such as small
capacity hard disk drives of 40 megabyte to 120 megabyte capacity, floppy disk
drives, and dot matrix printers, multimedia products, networking products, and
other related products. The products were ultimately destined to a few large-and
medium-sized Brazilian OEM computer manufacturers and distributors.
In order to take advantage of the large margins available with
in-country distribution of computer products in Brazil, on March 7, 1995, Bahia
was organized as a wholly-owned subsidiary of the Company to act as the
Company's manufacturing and distribution entity in Brazil. The creation of Bahia
marked the transformation of the Company from a low-margin U.S.-based
distributor to a high-margin vertically integrated manufacturer using the model
of other direct distribution computer companies. Management negotiated directly
with the Governor of the State of Bahia to create a High Technology Park in
Ilheus, Bahia, approximately 1,200 kilometers north of Rio de Janeiro on the
Brazilian coast. To create incentives to attract high technology companies, the
state government declared a total exemption from ICMS, the State of Bahia value
added tax, for those companies residing in the technology park. Bahia was the
pilot project and first company to receive this incentive. Additionally, since
the State of Bahia lies within the Northeast Regional Development Area (SUDENE),
the new facilities were eligible for, and received, an exemption from corporate
income tax. Ilheus has its own deep water port and is close to the major markets
in Brazil. In September 1995, the Company commenced leasing a 160,000 square
foot factory at such location.
20
In 1995, with the creation of Bahia and its manufacturing facilities,
the Company introduced its own brand of computers and also began to sell
integrated business network solutions through its own reseller network. In
1996, the Company launched its "10X Promotion" of the Vitech Vision(TM) brand
PCs direct to end-users, paying a commission to the reseller, but ultimately
retaining the client for itself. The strategy of attaining the end-user adds to
the long-term viability of the distribution network created by the Company to
bring new technology products to market in the future. Those potential products
include hardware upgrades, software, internet access services, data network
services, and integrated business systems. In addition to its branded computer,
Vitech also sells the MultiShow(TM) brand of Brazilian Portuguese multimedia
kits and the Easynet(TM) brand of networking kits.
Results of Operations
The following table sets forth for the periods indicated certain line
items from the Company's statement of operations as a percentage of the
Company's consolidated revenues:
[Download Table]
Period June
24, 1993
Six Months Ended Year Ended (Inception)
June 30 December 31 to December
1996 1995 1995 1994 31, 1993
----- ---- ---- ---- --------
Sales 100% 100% 100% 100% 100%
Cost of sales 71.7 93.2 80.8 94.7 78.1
Gross profit 28.3 6.8 19.2 5.3 21.9
Selling, general and
administrative expenses 9.4 4.0 2.5 2.9 15.7
Income from operations 18.9 2.8 16.7 2.4 6.2
Interest and financing
expense 6.5 .8 .7 1.0 1.2
Net income 10.4 1.9 14.2 .9 3.8
Six Months Ended June 30, 1996 Compared to Six Months Ended June 30, 1995
Sales increased by $5,623,251, or approximately 27.5% to $26,080,299
for the six months ended June 30, 1996 as compared to $20,457,048 for the six
months ended June 30, 1995. Such increase in sales was primarily attributable to
increased demand by the Company's customers, the broadening of the Company's
customer base, and the further establishment of the Company's brands in the
Brazilian marketplace. During the six months ended June 30, 1996, the Company
had sales to approximately 2,650 different customers as compared to less than 20
different customers during the six months ended June 30, 1995.
Cost of sales during the six months ended June 30, 1996 were
$18,688,336, representing 71.7% of the sales during the period, as compared to
$19,067,617 for the six months ended June 30, 1995, representing 93.2% of sales
for the period. The decrease in cost of sales as a percentage of sales during
the six months ended June 30, 1996, when compared to the six months ended June
30, 1995, was attributable
21
to the Company's continuing business strategy of the transformation from being
solely a Miami-based distributor to being a vertically integrated manufacturing
and distribution company attaining a broad spectrum of clients throughout
Brazil. As a result of this transformation, the Company has been able to achieve
higher margins through vertical integration. The decrease was also attributable
to the Company's migration from peripheral products and related products to a
full line of branded computer systems and network solutions with greater
aggregated value and greater control over pricing to the customer.
Selling, general, and administrative expenses increased by $1,643,266,
or approximately 200% to $2,462,646 for the six months ended June 30, 1996 as
compared to $819,380 for the six months ended June 30, 1995. Such increase was
primarily related to the increased costs associated with the creation of Bahia
and its manufacturing facility being brought on line as well as the increased
selling activity in Brazil associated with marketing directly to end-users.
Selling, general, and administrative expense as a percentage of sales was 9.4%
for the six months ended June 30, 1996, compared to 4% for the six months ended
June 30, 1995. This increase in the selling, general, and administrative expense
as a percentage of sales was primarily attributable to the creation of Bahia as
well as the broadening of the Company's customer base.
Income from operations increased by $4,359,266 to $4,929,317 for the
six months ended June 30, 1996 as compared to $570,051 for the six months ended
June 30, 1995. Such increase was primarily attributable to the aforementioned
increase in sales, the decrease in cost of sales, and the decrease in cost of
sales as a percentage of sales which more than offset the increase in selling,
general, and administrative expenses. Income from operations as a percentage of
sales increased to 18.9% for the six months ended June 30, 1996 from 2.8% for
the six months ended June 30, 1995. This increase was primarily attributable to
the aforementioned decrease in cost of sales as a percentage of sales which more
than offset the increase in selling, general, and administrative expenses as a
percentage of sales.
Interest and financing expense increased by $1,524,969, or 930%, to
$1,688,947 for the six months ended June 30, 1996 as compared to $163,978 for
the six months ended June 30, 1995. This increase was primarily attributable to
the Company's increased use of debt financing to support its working capital
needs and to support its sales to end-users.
Net income increased by $2,306,419, or approximately 580%, to
$2,704,140 for the six months ended June 30, 1996 as compared to $397,721 for
the six months ended June 30, 1995. The increase in net income was primarily
attributable to the aforementioned increase in income from operations more than
offsetting the increase in interest and financing expense. Net income as a
percentage of sales increased to 10.4% for the six months ended June 30, 1996
from 1.9% for the six months ended June 30, 1995. This increase was primarily
attributable to the aforementioned decrease in the cost of sales as a percentage
of sales more than offsetting the increases in selling, general, and
administrative expenses as a percentage of sales.
Year Ended December 31, 1995 Compared to Year Ended December 31, 1994
Sales increased by $31,081,633, or approximately 178.6% to $48,488,996
for the year ended December 31, 1995 as compared to $17,407,363 for the year
ended December 31, 1994. Such increase in sales was primarily attributable to
increased demand by the Company's affiliated customer Vitoria Tecnologia S.A., a
greater variety of products, and acceptance of the Company as a supplier of
quality value-oriented products with post-sale support.
22
Cost of sales during the year ended December 31, 1995 were $39,156,239,
representing 80.8% of sales during the year, as compared to $16,483,232 for the
year ended December 31, 1994, representing 94.7% of sales for the year. The
increase was attributable to increases in sales during the year ended December
31, 1995 compared to the year ended December 31, 1994. The decrease in cost of
sales as a percentage of sales during the year ended December 31, 1995, when
compared to the year ended December 31, 1994, was primarily attributable to the
Company's changing business strategy from being solely a Miami-based distributor
to being a vertically integrated manufacturing and distribution company to take
advantage of the higher margins available by selling to Brazilian customers and
the Company's migration from peripherals and related products to finished
computers and network solutions.
Selling, general, and administrative expenses increased by $728,660, or
approximately 144.2% to $1,234,108 for the year ended December 31, 1995 as
compared to $505,448 for the year ended December 31, 1994. Such increase was
primarily attributable to an increase in sales associated activities related to
an increase in sales, as well as the increased costs associated with the
creation and operation of Bahia. Selling, general, and administrative expense as
a percentage of sales was reduced to 2.5% of sales for the year ended December
31, 1995 from 2.9% of sales for the year ended December 31, 1994, reflecting
greater sales efficiency in relation to overhead.
Income from operations increased by $7,679,966, or 1,834.3% to
$8,098,649 for the year ended December 31, 1995 as compared to $418,683 for the
year ended December 31, 1994. Such increase was attributable to the
aforementioned increases in sales, which more than offset the increases in cost
of sales and selling, general, and administrative expenses. Income from
operations as a percentage of sales increased to 16.7% for the year ended
December 31, 1995, from 2.4% for the year ended December 31, 1994. This increase
was primarily attributable to the aforementioned increase in sales, reduction in
cost of sales as a percentage of sales, and reduction in selling, general, and
administrative costs as a percentage of sales.
Interest expense increased by $156,535, or by 91.1%, to $328,278 for
the year ended December 31, 1995 as compared to $171,743 for the year ended
December 31, 1994. This increase was primarily attributable to the Company's
increased use of debt financing to support its working capital requirements
during the year ended December 31, 1995.
Net income increased by $6,755,264, or 4,516.5%, to $6,904,834 for the
year ended December 31, 1995 as compared to $149,570 for the year ended December
31, 1994. The increase in net income was attributable to the aforementioned
increases in income from operations, which more than offset the increase in
interest expense. Net income as a percentage of sales increased to 14.2% for the
year ended December 31, 1995 from 0.9% for the year ended December 31, 1994.
This increase was attributable to the aforementioned increase in income from
operations as a percentage of sales and the reduction of interest expense as a
percentage of sales for the year ended December 31, 1995 as compared to the year
ended December 31, 1994.
23
Year Ended December 31, 1994 Compared to Period Ended December 31, 1993
Sales increased by $16,251,110, or approximately 1,405.5% to
$17,407,363 for the year ended December 31, 1994 as compared to $1,156,253 for
the period June 24, 1993, the inception of the Company, to December 31, 1993.
Such increase in sales was primarily attributable to increased demand by the
Company's customer, Vitoria Tecnologia S.A., an affiliate of the Company.
Cost of sales during the year ended December 31, 1994 were $16,483,232,
representing 94.7% of sales during the year, as compared to $903,544 for the
period ended December 31, 1993, representing 78.1% of sales for the year. The
increase was attributable to increases in sales during the year ended December
31, 1994 over the period ended December 31, 1993, while the increase in cost of
sales as a percentage of sales during the period ended December 31, 1994, when
compared to the year ended December 31, 1993 was primarily attributable to
increased competition and lower margins in the distributive environment.
Selling, general, and administrative expenses increased by $324,309, or
approximately 179% to $505,448 for the year ended December 31, 1994, as compared
to $181,139 for the period ended December 31, 1993. Such increase was primarily
attributable to the fact that 1994 was the first full calendar year of
operations compared to 1993 the organizational period of the Company, as well as
increases in marketing activities and the increase in management personnel and
related expenses to support the Company's increased sales activities. Selling,
general and administrative expense as a percentage of sales decreased to 2.9% of
sales for the year ended December 31, 1994 from 15.7% of sales for the period
ended December 31, 1993, reflecting increased efficiency of the organization per
sales dollar.
Income from operations increased by $347,113, or 485% to $418,683 for
the year ended December 31, 1994 as compared to $71,570 for the period ended
December 31, 1993. Such increase was primarily attributable to the
aforementioned increases in sales offset by increases in cost of sales and
selling, general, and administrative expenses. Income from operations as a
percentage of sales decreased to 2.4% for the year ended December 31, 1994 from
6.2% for the period ended December 31, 1993. This decrease was primarily
attributable to the aforementioned increase in cost of sales as a percentage of
sales, resulting in a smaller gross profit and smaller resulting operating
profit.
Interest expense increased by $157,461, or 1,102.5%, to $171,743 for
the year ended December 31, 1994 as compared to $14,282 for the period ended
December 31, 1993. This increase was attributable to the Company's increased use
of debt financing to support its working capital requirements during the year
ended December 31, 1994.
Net income increased by $105,282, or 237.7%, to $149,570 for the year
ended December 31, 1994 as compared to $44,288 for the period ended December 31,
1993. The increase in net income was attributable to the aforementioned
increases in sales offset by increases in cost of sales, selling, general, and
administrative expense, and interest expense. Net income as a percentage of
sales decreased to 0.9% for the year ended December 31, 1994 from 3.8% for the
period ended December 31, 1993. This decrease was attributable to the
aforementioned decrease in income from operations as a percentage of sales as
well as increases in both interest expense and provision for income tax as
percentages of sales for the year ended December 31, 1994, as compared to the
period ended December 31, 1993.
24
Liquidity and Capital Resources
The Company used $2,455,581 of cash in operations during the period
ended December 31, 1995 and had a working capital surplus of $6,412,154 at
December 31, 1995. During the six month period ended June 30, 1996, the Company
provided $1,999,856 of cash from operations and had a working capital surplus of
$7,598,941 at June 30, 1996.
The Company has an overdraft facility of $200,000 with Eastern National
Bank in Miami, Florida, with which the Company maintains its primary banking
relationship. As of June 30, 1996, there was $100,000 drawn on the overdraft
facility.
On June 28, 1996, the Company secured a line of credit in the amount of
$1 million with Deutsch-Sudamerikanische Bank expiring June 30, 1997 to support
letter of credits which the Company may issue to secure purchase obligations. As
of June 30, 1996 there were no funds drawn on such line of credit. Such lines
require the Company to provide a cash deposit equal to 30% of each letter of
credit. The credit agreement is secured by a lien of all personal property owned
by the Company.
The Company had borrowings under lines of credit for placing product at
its distributors and resellers in the amount of $792,210 as of June 30, 1996.
The rates of interest on these lines varies by contract and client and averages
from 3% to 4% per month.
The Company had open invoices receivable from its clients factored at
various banks in the amount of $602,349 at June 30, 1996. The Company bears full
recourse of these receivables. The rates of interest on these receivables varies
by contract and client and averages 3% per month.
The Company borrowed $2,000,000 at 9% interest per year from Georges C.
St. Laurent, Jr., a related party, on May 26, 1995. This note is convertible
into 5.925% of the Common Stock. At December 31, 1995 the Company also had a
note in the amount of $1,911,917 bearing 6% interest per year. As of June 30,
1996, the balance on such note was $661,917. See "Certain Transactions."
The Company borrowed $2,000,000 at 12% per year interest from Meris
Financial Corporation on October 28, 1995. The Company currently intends to
repay this loan in full by November 1, 1996. This loan is secured by the assets
of the Company, exclusive of inventory and receivables.
The Company has had success in creating good relations with suppliers
which are interested in entering into the Brazilian market. The Company has
provided an opportunity to enter the Brazilian technology sales channel to these
suppliers who have willingly offered favorable terms to the Company. The
increase in supplier credit has allowed the Company to diversify its product
line as well as increase sales. Average days outstanding on accounts payable
balances to suppliers was in excess of 50 days when compared to industry
averages of 30 days or less. The Company has continued to develop these key
strategic relationships as a means to fortify its product offering and support
growth without incurring additional interest-bearing debt.
25
Impact of Inflation on Results of Operations, Liabilities and Assets
For many years prior to July 1994, the Brazilian economy was
characterized by high rates of inflation and devaluation of the Brazilian
currency against the U.S. Dollar and other currencies. However, since the
implementation in July of 1994 of the Brazilian government's latest
stabilization plan, the "Real Plan," (See "Conditions in Brazil") inflation,
while continuing, has been significantly reduced and the rate of devaluation has
substantially diminished. The Company has assessed the movement of the Brazilian
currency based upon the trading ranges stated by the policy of the Central Bank
of Brazil and has been able to offset any material effects of inflation. The
Company uses Brazilian Real futures and options contracts from the Chicago
Mercantile Exchange in order partially to offset Brazilian currency exposure.
There can be no assurance that the Real Plan will continue to be effective in
combating inflation and devaluation of Brazil's currency or that the Company's
assessment of the movement of Brazilian currency will be correct in the future.
See "Conditions in Brazil."
26
BUSINESS
Introduction
The Company is engaged in the manufacture and distribution of computer
equipment and related products, as well as the financing of the purchase
thereof, in the Federal Republic of Brazil. The Company's products, which
include personal computers and multimedia systems and related peripheral
products, networking and system integration equipment, and cellular telephones
and accessories, are marketed under Company-owned and other brand names for
distribution through a variety of channels in the Brazilian marketplace. In
addition, the Company maintains an engineering support service dedicated to
assisting the Company's customers in effective networking and systems
integration solutions.
The Company has experienced substantial growth since inception, with
consolidated revenues and consolidated net income increasing from $1,156,253 and
$44,288, respectively, for the period between June 24, 1993, the inception of
the company, and December 31, 1993 to $17,407,363 and $149,570, respectively,
for the year ended December 31, 1994 and to $48,488,996 and $6,904,834,
respectively, for the year ended December 31, 1995. Consolidated revenues and
net income for the six months ended June 30, 1996 were $26,080,299 and
$2,704,140, respectively, as compared to $20,457,048 and $397,721, respectively,
for the six months ended June 30, 1995.
As a result of the increasing stability of the economy and the growth
of a middle class in Brazil, demand for computer equipment and related products
in Brazil has increased significantly over the last five years. Based upon news,
trade reports and the Company's experience, the Company believes that the market
for computer equipment and related products in Brazil is expected to grow at the
rate of approximately 30% annually. The Company believes that it is particularly
well-positioned to capitalize upon such anticipated growth based upon: (i) the
Company's extensive knowledge of prevailing customs, importation practices,
technology and labor bases, marketing dynamics, and economic conditions in
Brazil, together with the Company's existing relationships with U.S. and Asian
suppliers and understanding of technology development; (ii) the Company's
integrated manufacturing, research and development, sales, and warehousing
facilities in Brazil; (iii) the Company's existing distribution arrangements
with retailers and others in Brazil; and (iv) the Company's ability to provide
flexible financing alternatives to potential purchasers of the Company's
products.
As part of the Company's operating strategy, the Company intends to
utilize a significant portion of the proceeds of this offering as follows:
* to expand inventory;
* to expand consumer financing operations;
* to expand marketing activities;
* to repay indebtedness; and
* to increase manufacturing capacity.
27
Business Strategy
The Company's strategy has been to utilize: (i) the Company's extensive
knowledge of prevailing customs, importation practices, technology and labor
bases, marketing dynamics, and economic conditions in Brazil, together with the
Company's existing relationships with U.S. and Asian suppliers and understanding
of technology development; (ii) the Company's integrated manufacturing, research
and development, sales, and warehousing facilities in Brazil; (iii) the
Company's existing distribution arrangements with retailers and others in
Brazil; and (iv) the Company's ability to provide flexible financing
alternatives to potential purchasers of the Company's products to gain market
share and satisfy the increasing demand for consumer electronic products in
Brazil.
As part of the Company's operating strategy, the Company will endeavor
the following:
Expansion of Inventory. The Company intends to expand its inventory in an amount
sufficient to keep pace with its expected sales volume. The Company
believes that increased purchases of certain products will permit it to
realize economies of scale as a result of more favorable pricing.
Expansion of Direct Marketing Program and Consumer Financing for Retail Consumer
Market. The Company has historically focused its marketing for computer
equipment and related products on value added resellers ("VARs"),
system integrators, and distributors. With the expansion of
manufacturing and credit facilities, and the further development of its
distribution system, the Company has targeted the retail consumer
market by offering computer equipment and related equipment products
with innovative and flexible credit arrangements in order to satisfy
consumer demand in Brazil for such products. The Company intends to
utilize the consumer relationships formed in connection with such
financing activities to create ongoing sales of technology products and
services directly to end users, such as internet access services.
Expansion of Distribution Channels. The Company will continue to develop its
distribution channels by providing enhanced customer services and
post-sale support and expanding credit arrangements. The Company has
developed its internal sales force to assist VARs, system integrators,
distributors, and resellers relative to the Company's existing and new
product lines.
Identification of Products. The Company will continue to identify high
technology products for which substantial demand exists or can be
created, with particular emphasis on products which the Company can
manufacture, import, or assemble in Brazil.
Training.The Company will continue to provide training and skill enhancement of
the indigenous work force in Brazil to manufacture and assemble the
Company's products. The Company believes that its deployment of a
trained work force in facilities geographically separated from major
urban areas enables the Company to obtain favorable profit margins by
sustaining low cost manufacturing.
Fortification of the Company's Brands and Trade Names. The Company intends to
further establish its Vitech Vision(TM) and other brand and trade names
as recognized and reliable brands in Brazil for computer equipment
products. The Company continuously evaluates new products, the demand
for its current products, and its overall product mix, and seeks to
develop distribution relationships with vendors of products that
enhance the Company's product offerings.
28
Products
Computer Systems
The computer products distribution industry is significant and growing
in Brazil, reflecting increasing demand in the country for computer products and
systems. The Company believes that Brazilians are highly nationalistic in their
attitudes and exhibit a strong preference for indigenous products. "Vitech" is
perceived as a Brazil-based manufacturer and distributor, and has established a
national identity through the marketing of its Vitech Vision(TM),
MultiShow(TM),and EasyNet(TM) product lines.
The Company offers a complete line of multimedia computer systems under
the Company's Vitech Vision(TM) brand name, including Pentium(TM) and Pentium
Pro(TM) based systems.
The Company also designs, develops, manufactures, and markets under its
MultiShow(TM) brand name a family of multimedia computer products. The Company
offers sound cards, speakers, multimedia titles, microphones, and multimedia
kits complete with user-friendly manuals written in Portuguese. The demand for
multimedia personal computers is increasing as personal computers evolve from a
task-oriented device primarily utilized for word processing and spreadsheets to
a more user-friendly multipurpose device for increasingly diverse multimedia
applications.
The Company's engineering staff is constantly evaluating components and
product sources from many manufacturers for purposes of incorporating quality
components into its computer products lines. Most of the components purchased by
the Company for computer manufacture are readily available from a large number
of vendors worldwide. However, the loss by the Company of its relationship with
a significant vendor may have a material adverse effect in the short term on the
Company's operations until a new source of reliable components can be
identified.
Business Systems Integration; Client-Server Applications
The Company has created a family of products and services in response
to the need for client-server distributed computing solutions in Brazil. The
Company manufactures a range of powerful symmetrical multi-processor
super-servers. The Company markets a full line of local area network and wide
area network parts, including bridges, multiplexors, DSU/CSU, buffers, modems,
bridges, and routers.
The Company maintains engineering support services for the design of
local and wide area networks for system integrators and their customers. As a
developing country, Brazil has a large demand for distributed computing
solutions through the establishment of client-server networks. Many of the
Company's system integrator customers do not yet have the expertise to design
complex systems. In response, the Company established its own support team that
supplies technical expertise to design complex local area network or wide area
network systems for the system integrators as well as to the end user. The
Company holds several seminars each year in order to educate the marketplace on
the advantages of distributed computing and to train VARs and system integrators
in the latest techniques in this discipline.
29
Cellular Phones
The Company offers a variety of mobile cellular telephones and
accessories as well as rural cellular base stations (a single line which can
accommodate multiple telephone users) and related accessories. For the year
ended December 31, 1995, virtually all of the Company's cellular telephones were
Motorola products, and all of the base station equipment was acquired from
Tellular Corporation, although the Company believes that alternative equipment
is readily available in the market.
In an interview with the Estado de Sao Newspaper on July 19, 1996,
Cesar Michels, director of Planning for Cellcenter, a large Brazilian cellular
retailer, said that the total number of cellular subscribers in Brazil has the
potential to be as great as 20.0 million. With the number of today's total
subscribers at less than 1.0 million, the Company expects that the growth will
occur over the next four years. In Brazil, demand has been driven by high
population density, economic growth, and lack of adequate landline service. Due
to the limited availability and quality of landline service, the Company
believes that telephone users in Brazil will increasingly utilize cellular
systems, despite the fact that cellular phone service may be more expensive to
the consumer than conventional landline communications.
Contract Manufacturing
In order to utilize reserve manufacturing and purchasing capacity, the
Company manufactures two and four head video cassette recorders and 14-inch and
20-inch color television sets. The video cassette recorders and television sets
are assembled under house brand names for exclusive distribution by Casas Bahia,
which is one of Brazil's largest electronic retailers with over 200 outlets.
Casas Bahia has contracted for 52,500 video cassette recorders and has a
standing order for 72,000 television sets to be delivered during the eight month
period which commenced in July 1996.
Freight Forwarding and Importation Procedures
Virtually all of the products that the Company purchases are received
and consolidated in containers for sea or air freight to the Company's
facilities in Ilheus or Salvador, Brazil. These destinations contain good
deep-water ports with modern handling and storage facilities. The Company is
highly-sophisticated in Brazilian customs matters and is knowledgeable in
producing appropriate documentation to expedite customs clearance and
importation of components. Upon receipt in Brazil, the goods are expedited
through customs by Company personnel so that goods spend a minimum amount of
time at the port facility.
Engineering and Manufacturing
The Company has an experienced engineering department comprised of
eight engineers and 54 other technically trained personnel at its facilities.
The engineering department is responsible for designing products, producing the
technical specifications for components required for manufacture, training
personnel, line engineering, and quality control/quality assurance programs. The
engineering group constructs the bill of materials of components that are
required for manufacture and designs the manufacturing line so that the tasks
can be undertaken reliably within the capabilities of the Company's specially
trained labor force. The group also supports the sales force and is responsible
for the design of local area network or wide area network systems for the
Company's customers and their end users.
30
The Company's manufacturing facilities consist of a modern, 160,000
square foot leased facility in Ilheus. See "Business -- Facilities." The Company
intends to build a plant and administration center in Ilheus, Brazil with the
cooperation and financial participation of the government of Bahia.
Procurement and Materials Management
The Company, through its Miami, Florida facility, purchases components,
parts, and equipment worldwide for consolidation and shipment to destinations in
Brazil. The Company maintains a warehouse and containerization operation in
Miami, Florida where goods are booked into the Company's materials handling
system at the point of receipt. Certain testing is undertaken at the Miami,
Florida facility prior to shipment to Brazil as part of the Company's quality
assurance program. See "Business -- Quality Assurance and Service." Virtually
all of the products that the Company purchases are received and consolidated in
containers for sea or air freight to the Company's facilities in Ilheus or
Salvador, Brazil.
The Company's ability to source competitively priced computer
components, cellular telephones, and electronic products internationally is
critical to its success. The Company generally purchases components from
manufacturers and distributors pursuant to non-exclusive agreements. Since
inception, the Company has expanded its vendor base significantly. At present,
the Company has purchase contracts and orders with over 60 different vendors.
The Company does not regard any one supplier as essential to its operations
since most of the components the Company purchases are available from other
sources at competitive prices. During the year ended December 31, 1995, the
Company had only one supplier which accounted for in excess of 10% of its
purchases. During the six month period ended June 30, 1996, the Company had four
suppliers which each accounted for in excess of 10% of purchases. The Company
does not believe the loss of any supplier would have a material adverse effect
on its business as components and products required by the Company are readily
available in the marketplace.
The Company procures most of its products on extended credit terms. In
the ordinary course, the Company is not required to post security or provide
special documents in support of its purchases. The Company believes that
favorable credit terms have been obtained as a result of the credibility that
the Company has established with such vendors, as well as the desire of these
vendors to obtain access for their components and products in Brazil.
Work Force and Training Program
The Company has elected to locate its facilities in remote regions of
Brazil in order to capitalize on lower costs. As such regions lack sufficient
technical educational facilities, the Company has created its own technical
training program to create a technically adept labor force by training workers
in various technical phases of assembly line manufacturing. The Company believes
that many of Brazil's cities and states do not have sufficient technical
educational facilities and, where such facilities do exist, they are located in
areas with higher labor costs. The Company believes that this training will
often confront and mitigate cultural differences that may interfere with an
employee's motivation and productivity.
The Company has designed internal training programs that build
technical skills for entry level employees. Entry level employees engage in
assembly work, packing, shipping, and cleaning and require a great deal of
training and supervision. The Brazilian national minimum wage is currently $114
per month. All of the Company's entry level employees are compensated at a level
in excess of the minimum wage. Technical personnel have had training in a
technical school or at a university level. These workers are
31
usually upwardly mobile and are recruited either from other companies or
technical schools. While they must be taught specific work related details, they
are usually well-trained. Engineers are university trained and are paid
generally from between 5 to 10 times the minimum wage. See
"Business--Employees."
Quality Assurance and Service
The Company addresses quality assurance at all stages of the production
process. First, components considered for use in standard systems are tested for
compatibility by the research staff. Second, incoming components receive a
physical damage inspection on receipt and again at the start of the production
process. A statistical sampling of components in every category is
electronically tested prior to assembly. Each complete unit is then functionally
tested at the end of the production process to demonstrate that all components
are engaged and fully operational.
Thereafter, each complete unit is "burned-in" for three hours. This
process involves running a test program which sequentially tests each component
to verify prescribed operation.
In addition, the Company provides support after the production process
by providing engineers and technicians who perform in-house and local on-site
servicing. The Company offers toll-free telephone support service to its
customers.
Distribution and Marketing
The Company's marketing strategy is designed to eliminate as many
levels of distribution as possible in order to offer competitive pricing to the
customer. In the future, the possibility of Company owned retail stores in some
regions will be explored to further add to the control over margins and to
attain access to the end-user. The Company, operating through its sales and
marketing teams, has built an extensive distribution network consisting of VARs,
systems integrators, distributors, and retailers. This distribution network
includes access to large markets in Brazil for computer systems, business
systems integration, cellular telephones, and consumer electronic products.
Customers include small and medium-sized businesses, government agencies, major
retailers, and consumers. The Company's sales teams are in regular contact with
customers at each distribution level as well as with the end-user. In this
manner, the Company's sales, marketing, and engineering personnel react to
changing demands within the Company's customer base in Brazil.
In 1996, the Company introduced the "10X Program", a financing program
which enables the consumer to pay for Company products purchased in equal
monthly installments. During the term of such financing, a first and exclusive
security interest in the product is retained by the Company and the credit
extended is guaranteed by the ultimate consumer as well as the reseller.
Management believes that the 10X Program utilizes the distribution strengths of
the distributor and the reseller, to which the Company pays a commission, and
benefits the Company by providing a database to be utilized in future direct
technology product sales.
The Company presently utilizes four sales teams comprising 13 persons
in its Sao Paulo facility. The teams work to market new product lines, to
receive input on existing product lines, and to make personal sales calls, as
well as accept, process, and administer sales orders, and coordinate advertising
and the logistics of product shipment.
32
In accordance with its policy to diversify its customer base, the
Company has successfully expanded and diversified its customer base from one
customer during 1993 to in excess of 2,650 customers at June 30, 1996. During
the year ended December 31, 1995, Casas Bahia and Vitoria Tecnologia S.A., an
affiliate of the Company, accounted for 15% and 76% respectively of the
Company's sales. For the six months period ending June 30, 1996, Casas Bahia and
Vitoria Tecnologia S.A. accounted for 14% and 30%, respectively, of the Company
sales.
Backlog; Unfulfilled Contract Manufacturing Obligations
The Company's backlog as of June 30, 1996, exclusive of unfulfilled
contract manufacturing backlog, was approximately $18,000,000. Backlog consists
of contracts or purchase orders with delivery dates scheduled within the next 12
months. The Company currently expects to ship its entire current backlog within
the Company's current fiscal year. Variations in the magnitude and duration of
contracts received by the Company and customer delivery requirements may result
in substantial fluctuations in backlog from period to period. Since customers
may cancel or reschedule deliveries, backlog may not be a meaningful indicator
of future financial results. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources."
At December 31, 1995, the Company had no unfulfilled contract
manufacturing obligation. However, as a result of the agreement between the
Company and Casas Bahia, at June 30, 1996, the Company had an unfulfilled
contract manufacturing obligation of approximately $29,000,000.
Regulation and Environmental Matters
The Company believes that its facilities and practices for controlling
and disposing of the limited amount of wastes it produces are in compliance with
applicable environmental laws and regulations in Brazil.
Employees
As of June 30, 1996, the Company employed approximately 240 persons,
including three executive officers, 12 executive personnel, eight engineering
personnel, and 50 administrative personnel. The Company believes its employee
relations both in Brazil and the United States are satisfactory. None of the
Company's employees are subject to collective bargaining or union agreements.
Facilities
The Company leases, from an unaffiliated landlord, approximately 16,000
square feet of office and warehouse space in Miami, Florida. The office space
lease expires in August 1998. The Company pays annual rent of approximately
$102,000 plus its allocable share of real estate taxes, insurance, and other
assessments.
The Company's Brazilian operations are located in Sao Paulo and Bahia.
The Company leases approximately 7,500 square feet of office space in Sao Paulo.
The Company pays an annual rent of $48,000 on a lease which expires in February
1997. In addition, the Company leases an additional 12,000 square feet of
warehouse space in Sao Paulo pursuant to a lease which expires in June 1997 for
an annual rent of $36,000. Such lease has an option to extend the lease through
June 1999.
33
The Company leases approximately 160,000 square feet of manufacturing
and administrative space in Ilheus for approximately $13,500 per month. Such
lease expires in December 1996, with an option for extension through December
1998.
The Company believes that in the event that the lease with respect to
any of such facilities should not be renewed, alternative space will be
available at comparable rates.
Legal Proceedings
The Company knows of no material litigation or claims pending,
threatened, or contemplated to which the Company is or may become a party.
34
MANAGEMENT
Directors and Executive Officers
The directors and executive officers of the Company and their ages are
as follows:
Name Age Position
---- --- --------
Georges C. St. Laurent, III 35 Chairman of the Board of
Directors and Chief
Executive Officer
William C. St. Laurent 31 President, Chief Operating
Officer, and Director
Mitchell Asher 40 Chief Financial Officer, Treasurer,
Secretary, and Director
-------------
Georges C. St. Laurent, III has served as Chairman of the Board and
Chief Executive Officer of the Company since 1993. Between 1986 and January
1993, Mr. St. Laurent operated a proprietary firm, GSL Trading Co., Miami,
Florida, which was engaged in the re-manufacturing of computer hardware for sale
to Latin America. Between 1983 and 1986, Mr. St. Laurent was a member of the
Chicago Mercantile Exchange and was engaged in trading activities for his
proprietary account specializing in currency options and futures market making.
Mr. St. Laurent graduated from Yale University in 1982 and received a B.S. in
Molecular Biology.
William C. St. Laurent has served as President and Chief Operating
Officer of the Company and a Director since 1993. Mr. St. Laurent has also
served as Vice Chairman of the Board of Directors of the Western Bank of Oregon
from January 1989 through January 1996. Mr. St. Laurent previously owned several
private foods processing companies located in Oregon from 1988 to 1992. Mr. St.
Laurent graduated from Cornell University with a B.S. in Hotel Administration.
Mr. St. Laurent also owns 100% of the voting shares of Vitoria Tecnologia S.A.,
the primary customer of Vitech America, Inc. since inception until Vitoria
Tecnologia S.A. ceased manufacturing and selling activities in March of 1996.
Mitchell Asher has been the Company's Chief Financial Officer,
Treasurer, and Secretary since June 1993. Between 1991 and 1992, Mr. Asher was
Controller and Chief Financial Officer for U.S. Computer of North America, Inc.,
Miami, Florida. Between July 1989 and March 1991, Mr. Asher conducted a
proprietary business, Lahaina Licks, Ltd., Lahaina, Maui, Hawaii which was
engaged in the manufacture and distribution of specialty ice cream. Prior
thereto, between 1984 and 1990, Mr. Asher was employed by Seiko Instruments USA,
Inc., Torrence, California, serving at various times as Controller of its
Consumer Products Division and for its Corporate Division as Corporate
Operations Manager and Accounting Manager. Between 1981 and 1984, Mr. Asher was
employed by Code-A-Phone Corporation, Portland, Oregon, a telephone answering
equipment manufacturer, where he served as Accounting Manager and then Assistant
Controller. Between 1978 and 1981, Mr. Asher was Assistant Controller of
California Mini Computer Systems, Inc., Los Angeles, California. Prior thereto,
between 1976 and 1978, Mr. Asher was an auditor with Gulliver's, Inc., Marino
Del Rey, California, which was an investment chain. Mr.
35
Asher graduated from the University of Southern California with a B.S. in
Business Administration and is a graduate of Pepperdine University where he
received an MBA.
Directors are elected at the Company's annual meeting of shareholders
and serve a term of one year or until their successors are elected and
qualified. Officers are appointed by the Board of Directors and serve at the
discretion of the Board of Directors, subject to the By-laws of the Company. The
Company intends to add directors who are unaffiliated with the Company in the
near future.
Upon the closing of this offering, the Company will establish a
Compensation Committee and an Audit Committee.
The Compensation Committee will administer the Company's stock option
plan and make recommendations to the full Board of Directors concerning
compensation, including incentive arrangements, of the Company's officers and
key employees. The Compensation Committee will be comprised of a majority of
independent directors upon establishment.
The Audit Committee will review the engagement of the independent
accountants and review the independence of the accounting firm. The Audit
Committee will also review the audit and non-audit fees of the independent
accountants and the adequacy of the Company's internal accounting controls. The
Audit Committee will consist of a majority of independent directors upon
establishment.
The Company has agreed with the Representative that, for a period of 36
months from the date of closing of this offering, the Company will allow an
observer designated by the Representative and acceptable to the Company to
attend all meetings of the Board of Directors. Such observer will have no voting
rights. He or she will be reimbursed for out-of-pocket expense incurred in
attending such meetings, and will be indemnified against any claims arising out
of participation at Board meetings, including claims based on liabilities
arising under the securities laws.
Indemnification of Directors and Officers
The Florida Business Corporation Act permits the indemnification of
directors, employees, officers and agents of Florida corporations. The Company's
Amended and Restated Articles of Incorporation indemnify its directors and
officers to the fullest extent permitted by law.
At present, there is no pending litigation or proceeding involving a
director, officer, employee, or other agent of the Company as to which
indemnification is being sought, nor is the Company aware of any threatened
litigation that may result in claims for indemnification by any director,
officer, employee, or other agent.
Insofar as indemnification for liability arising under the Securities
Act may be permitted to directors, officers, and controlling persons of the
Company pursuant to the foregoing provisions or otherwise, the Company has been
advised that, in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable.
36
Employment Agreements
Messrs. Georges C. St. Laurent, III and William C. St. Laurent are
parties to separate three-year employment agreements which terminate on December
31, 1998. Under the terms of each employment agreement, Messrs. St. Laurent and
St. Laurent will each receive annual compensation of $240,000. In the event that
either Georges C. St. Laurent, III or William C. St. Laurent were to die or
become disabled of anywhere outside Brazil, that individual, or his estate,
would receive his annual compensation for twelve months. In the event that
either were to become disabled in Brazil, that individual would receive his
annual compensation for twenty-four months. In the event that either were to die
in Brazil, that individual's estate would receive that individual's compensation
for the greater of twenty-four months or the remaining term of the employment
agreement. Both such employment agreements include non-competition agreements
with the Company which preclude engagement in competitive activities in Latin
America or in the South Florida area as well as solicitation of customers and
employees for a period of twelve months following termination of employment.
Both agreements also require Messrs. St. Laurent and St. Laurent to maintain the
confidentiality of information and proprietary data relating to the Company and
its activities.
Executive Compensation
Summary Compensation Table
The following table sets forth information relating to the compensation
paid by the Company for the past three fiscal years to: (i) the Company's
Chairman and Chief Executive Officer; and (ii) each of the Company's executive
officers who earned more than $100,000 during the fiscal year ended December 31,
1995 (collectively, the "Named Executive Officers"):
[Download Table]
Stock All Other
Name and Principal Position Year Salary Bonus Options Compensation
--------------------------- ---- ------ ----- ------- ------------
Georges C. St. Laurent III, 1995 $120,000 $0 0 $0
Chairman of the Board and 1994 $96,000 $0 0 $0
Chief Executive Officer 1993 $0 $0 0 $0
William C. St. Laurent, 1995 $120,000 $0 0 $4,500*
President and 1994 $96,000 $0 0 $0
Chief Operating Officer 1993 $0 $0 0 $0
Mitchell E. Asher, 1995 $71,190 $15,000 0 $9,000*
Chief Financial Officer 1994 $63,432 $10,000 0 $3,750*
1993 $23,000 $0 0 $0
------------------
* Mr. William C. St. Laurent and Mr. Mitchell Asher received a car
allowance of $750.00 each per month for all or a portion of the year.
The Company maintains keyman life insurance on the life of each of
Georges C. St. Laurent, III and William C. St. Laurent in the amount of
$2,000,000 payable to the Company. These policies were acquired by the Company
pursuant to its undertaking to Meris Financial Incorporated in connection with a
loan provided to the Company on October 28, 1995. In addition, the Company
obtained keyman insurance
37
on the life of William C. St. Laurent pursuant to its agreement with Georges C.
St. Laurent, Jr. in connection with his loan to the Company made on May 26,
1995. The premium for this policy is $9,000 per year and Georges C. St. Laurent,
Jr. is the beneficiary of this policy. See "Certain Transactions."
Option Grants in Last Fiscal Year
No options were granted to, or exercised by, any of the Named Executive
Officers during the fiscal year ended December 31, 1995.
Grants of Stock Options
On September 3, 1996, the Company authorized the issuance of options to
purchase up to 4,000,000 shares of Common Stock. Of such options, 2,040,000
options were issued to Georges C. St. Laurent, III, the Company's Chairman of
the Board and Chief Executive Officer and 1,960,000 options were issued to
William C. St. Laurent, the Company's President and Chief Operating Officer. Of
such options, 490,000 options are exercisable at $15.00 per share, another
490,000 options are exercisable at $20.00 per share and 980,000 options are
exercisable at $25.00 per share by William C. St. Laurent and 510,000 options
are exercisable at $15.00 per share, another 510,000 options are exercisable at
$20.00 per share and 1,020,000 options are exercisable at $25.00 per share by
Georges C. St. Laurent III. The options are exercisable for a four year period
beginning on the closing of the Company's initial public offering.
1996 Stock Option Plan
The 1996 Stock Option Plan provides for the grant of options to
purchase up to 200,000 shares of Common Stock to employees, officers, directors,
and consultants of the Company. Options may be either "incentive stock options"
within the meaning of Section 422 of the United States Internal Revenue Code of
1986, as amended (the "Code"), or non-qualified options. Incentive stock options
may be granted only to employees of the Company, while non-qualified options may
be issued to non-employee directors, consultants, and others, as well as to
employees of the Company.
The Plan will be administered by the Board of Directors or a committee
thereof, who determine, among other things, those individuals who shall receive
options, the time period during which the options may be partially or fully
exercised, the number of shares of Common Stock issuable upon the exercise of
each option, and the option exercise price.
The exercise price of an incentive stock option may not be less than
the fair market value per share of Common Stock on the date the option is
granted. The exercise price of a non-qualified option may be established by the
Board of Directors. The aggregate fair market value (determined as of the date
the option is granted) of Common Stock for which any person may be granted
incentive stock options which first become exercisable in any calendar year may
not exceed $100,000. No person who owns, directly or indirectly, at the time of
the granting of an incentive stock option to such person, 10% or more of the
total combined voting power of all classes of stock of the Company (a "10%
Shareholder") shall be eligible to receive any incentive stock options under the
Plan unless the exercise price is at least 110% of the fair market value of the
shares of Common Stock subject to the option, determined on the date of grant.
Non-qualified options are not subject to such limitation.
38
Incentive stock options may not be transferred by an optionee other
than by will or the laws of descent and distribution, and, during the lifetime
of an optionee, the option will be exercisable only by the optionee. In the
event of termination of employment other than by death or disability, the
optionee will have no more than three months after such termination during which
the optionee shall be entitled to exercise the option, unless otherwise
determined by the Board of Directors. Upon termination of employment of an
optionee by reason of death or permanent and total disability, such optionee's
options remain exercisable for one year thereafter to the extent such options
were exercisable on the date of such termination. No similar limitation applies
to non-qualified options.
Options under the Plan must be issued within ten years from the
effective date of the Plan. The effective date of the Plan is August 20, 1996.
Incentive stock options granted under the Plan cannot be exercised more than ten
years from the date of grant. Incentive stock options issued to a 10%
Shareholder are limited to five year terms. Options granted under the Plan
generally provide for the payment of the exercise price in cash and may provide
for the payment of the exercise price by delivery to the Company of shares of
Common Stock already owned by the optionee having a fair market value equal to
the exercise price of the options being exercised, or by a combination of such
methods. Therefore, if so provided in an optionee's options, such optionee may
be able to tender shares of Common Stock to purchase additional shares of Common
Stock and may theoretically exercise all of his stock options with no additional
investment other than the purchase of his original shares.
Any unexercised options that expire or that terminate upon an
employee's ceasing to be employed by the Company become available again for
issuance under the Plan.
The Plan may be terminated or amended at any time by the Board of
Directors, except that the number of shares of Common Stock reserved for
issuance upon the exercise of options granted under the Plan may not be
increased without the consent of the shareholders of the Company.
To date, no options have been granted under the Plan.
39
CERTAIN TRANSACTIONS
During the period from June 24, 1993 to December 31, 1993, the years
1994 and 1995, and the first six months of 1996, Vitech America, Inc. had as its
primary customer in Brazil, Vitoria Tecnologia S. A., an affiliate controlled by
William C. St. Laurent, the President and Chief Operating Officer of the
Company, to whom it sold products during those years on open terms. Also, Bahia,
the Company's wholly owned subsidiary, bought and sold products to and from
Vitoria Tecnologia S.A. during 1995 and 1996 on a purely commercial basis at
market prices no less favorable than if the Company or its subsidiary bought or
sold products to or from others. In 1996, management of Vitoria Tecnologia S.A.
disclosed to the Company that based on lack of competitive tax and fiscal
incentives in the State of Espirito Santo, it had ceased all manufacturing and
selling operations. Since that time, Vitoria Tecnologia S.A. has paid all
outstanding amounts owed to the Company.
In 1993, Georges C. St. Laurent, Jr., the father of Georges C. St.
Laurent, III, the Company's Chairman of the Board and Chief Executive Officer,
and William C. St. Laurent, the President and Chief Operating Officer of the
Company, loaned to Vitoria Tecnologia S.A., an affiliate and primary customer of
the Company, the principal amount of $2,127,440. Such loan was evidenced by a
note bearing interest at 12% per annum. In 1994, as an accommodation for Georges
C. St. Laurent, Jr., for consideration received by the Company in the amount of
the note, the original note was transferred from Vitoria Tecnologia S.A. to the
Company and the rate of interest thereon was reduced to 6% per annum. As of June
30, 1996, the amount of the note was $661,917. In June 1995, Mr. Georges C. St.
Laurent Jr. loaned the Company an additional $2,000,000 pursuant to the terms of
a secured note which bears interest at the rate of 9% per annum. At June 30,
1996, the amount due on such note was $2,000,000. Such note is convertible into
5.925% shares of Common Stock at any time during the term thereof.
In June 1993, Georges C. St. Laurent, III, the Company's Chairman of
the Board of Directors and Chief Executive Officer, contributed in exchange for
his shares of common stock, assets valued at approximately $306,000 (including
$250,000 of inventory). This amount represented the cost of the items
contributed, which approximated fair market value as agreed to by the
shareholders.
In connection with the Company's recently introduced 10-X consumer
finance program designed to encourage consumer purchases in Brazil through
installment sales, Mr. Georges C. St. Laurent, Jr. agreed to purchase consumer
debt portfolios from the Company at discount rates established at periodic
intervals (currently at a discount allowing for annual return of 30%) but at no
less favorable rates than would be charged in ordinary market transactions in
Brazil for comparable financing programs. Such debt portfolios were acquired
with recourse against the Company. At June 30, 1996, consumer debt portfolios in
the face amount of approximately $10,400,000 were acquired by Mr. St. Laurent
from the Company.
For a description of employment agreements between the Company and its
officers, see "Management - Employment Agreements."
On October 28, 1995, Meris Financial Incorporated ("Meris") entered
into a Loan Agreement with the Company pursuant to which Meris made available a
loan to the Company in the principal amount of $2,000,000. The loan was to
mature on October 28, 1997 and bears interest at the rate of 12% per annum
payable monthly. The loan is secured by the assets of the Company exclusive of
inventory and receivables. In connection with the loan, Meris received a
guarantee by Georges C. St. Laurent, III and William C. St. Laurent, the
President and Chief Operating Officer of the Company, and his wife Wendy St.
Laurent, a stock pledge agreement by such parties, a collateral assignment of
various rights of the St. Laurents as well
40
as assignments of life insurance policies on the lives of Messrs. St. Laurent
and St. Laurent. The note was convertible into up to 379,200 shares of Common
Stock. In addition, certain options were provided to Meris which afforded them
the right to purchase up to an aggregate of 5% capital stock interest in the
Company. On July 20, 1996, the Company and Meris entered into an Amendment to
such Loan Agreement pursuant to which the Company is obligated to pay Meris
$445,000 in installments between July 20, 1996 and November 1, 1996. In
connection with the Amendment, the conversion rights provided by the Note and
the options were canceled provided all payments of principal and interest under
the Note are made as set forth above. As of the date of this prospectus, the
Company has made all payments in accordance with such Amendment. The Company
intends to repay such obligation with a portion of the net proceeds of this
offering.
41
CONCURRENT OFFERING
The registration statement of which this Prospectus forms a part also
includes a Prospectus with respect to an offering by the Selling Shareholders of
40,944 shares of the Selling Shareholders' Stock issued in connection with the
August 1996 Private Placement, which may be sold in the open market, in
privately negotiated transactions, or otherwise directly by the holders thereof,
subject to the following contractual restrictions. Each Selling Shareholder has
agreed not to sell, transfer, or otherwise publicly dispose of the Selling
Shareholders' Stock for up to 30 days from the date of this Prospectus without
the prior written consent of the Representative.
The Company will not receive any proceeds from the sale of any of the
Selling Shareholders' Stock. Sales of the Selling Shareholders' Stock or the
potential of such sales may have an adverse effect on the market price of the
shares of Common Stock offered hereby.
42
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information regarding the
beneficial ownership of the Common Stock as of the date of this Prospectus, and
after the sale of shares of Common Stock offered hereby, by (i) each person who
is known by the Company to own beneficially more than 5% of the Common Stock and
(ii) all directors and executive officers of the Company as a group.
Percentage Beneficially
Owned(1)(2)
Name and Address -------------
of Beneficial Owner Number of Shares Before Offering After Offering
------------------- ---------------- --------------- --------------
Georges St. Laurent, III 3,980,550 49.67% 39.75%
c/o Vitech America, Inc.
8807 N.W. 23rd Street
Miami, FL 33172(3) (5)
William C. St. Laurent 3,824,450 47.72% 38.19%
c/o Vitech America, Inc.
8807 N.W. 23rd Street
Miami, FL 33172(4)(5)
Mitchell Asher 52,000 .65% .52%
c/o Vitech America, Inc.
8807 N.W. 23rd Street
Miami, FL 33172(6)
All directors and executive 7,857,000 98.05% 78.46%
officers as a group (3 persons)
--------------------------
(1) All shares are beneficially owned, and sole voting and dispositive
power is held, by the persons named, except as otherwise noted.
(2) Percentage of ownership is based on 8,013,648 shares of Common Stock
outstanding before the offering of shares hereby and 10,013,648 shares
of Common Stock outstanding immediately after the offering.
(3) Does not include options to purchase 2,040,000 shares of Common Stock.
(4) Includes 2,544,430 shares of Common Stock held by Wolf Partners, a
family Limited Partnership whose limited partners include a trust for
the benefit of Nicolas St. Laurent and Alexander St. Laurent, Mr. St.
Laurent's minor children, of which Mr. St. Laurent is the general
partner as well as a limited partner. Does not include options to
purchase 1,960,000 shares of Common Stock.
(5) Excludes options to purchase 26,520 shares and 25,480 granted by
Georges and William St. Laurent, respectively, to Mitchell Asher.
(6) Represents options to purchase 52,000 shares of Common Stock from
Georges and William St. Laurent proportional to their holdings.
43
DESCRIPTION OF SECURITIES
General
The following description of the material terms of the Common Stock is
subject to the Florida Business Corporation Act (the "FBCA") and to the
provisions contained in the Company's Articles of Incorporation, as amended (the
"Articles of Incorporation"), and By-laws, as amended, copies of which have been
filed as exhibits to the Registration Statement of which this Prospectus is a
part. See "Available Information."
The Company's authorized capital stock consists of 30,000,000 shares of
Common Stock, no par value, and 3,000,000 shares of preferred stock, no par
value (the "Preferred Stock"). Immediately prior to this offering, there were
outstanding 8,013,648 shares of Common Stock and no shares of Preferred Stock.
Common Stock
The Company is authorized to issue 30,000,000 shares of Common Stock,
no par value per share, of which as of the date of this Prospectus, 8,013,648
shares of Common Stock are outstanding. All outstanding shares of Common Stock
are, and all shares of Common Stock to be outstanding upon completion of this
offering will be, validly authorized and issued, fully paid, and non-assessable.
The holders of Common Stock are entitled to one vote for each share
held of record on all matters submitted to a vote of shareholders. Holders of
Common Stock are entitled to receive ratably such dividends as may be declared
by the Board of Directors out of funds legally available therefor. In the event
of a liquidation, dissolution, or winding up of the Company, holders of Common
Stock are entitled to share ratably all assets remaining after payment of
liabilities. Holders of Common Stock have no preemptive rights and have no
rights to convert their Common Stock into any other securities.
For a period of 12 months from the date of this Prospectus, without the
prior written consent of the Representative, which consent shall not be
unreasonably withheld, the Company may not issue any securities, except debt
securities and shares issued pursuant to the exercise or conversion of (i)
options, warrants or other convertible securities outstanding as of the date of
this Prospectus or (ii) options granted in the future pursuant to the Plan.
Also, for a period of 24 months from the date of this Prospectus, the Company
may not issue any shares of Common Stock pursuant to Regulation S without the
Representative's prior written consent.
Preferred Stock
The Company is authorized to issue up to 3,000,000 shares of Preferred
Stock, no par value per share, of which no shares are outstanding as of the date
hereof. The preferred stock may be issued in one or more series, the terms of
which may be determined at the time of issuance by the Board of Directors,
without further action by shareholders, and may include voting rights (including
the right to vote as a series on particular matters), preferences as to
dividends and liquidation, conversion rights, redemption rights, and sinking
fund provisions. The issuance of any such preferred stock could adversely affect
the rights of the holders of Common Stock and, therefore, reduce the value of
the Common Stock. The ability of the Board of Directors to issue preferred stock
could discourage, delay, or prevent a takeover of the Company. See "Risk
Factors--Preferred Stock; Possible Anti-Takeover Effects."
44
NASDAQ National Market(R)
The Company has applied for listing of its shares of Common Stock on
the National Market(R) under the symbol "VTCH."
Anti-Takeover Provisions of Florida Law
The Company may be subject to the affiliated transaction ("Affiliated")
and the control-share acquisition provisions of Sections 607.0901 and 607.0902
of the FBCA.
The Affiliated provisions of the FBCA are designed to restrict the
occurrence of highly coercive takeovers. It also limits certain related party
transactions otherwise permissible under the FBCA. The law specifically provides
that certain transactions between a Florida corporation and an interested
shareholder or affiliate or associate of the interested shareholder (the
"Interested Shareholder"), defined as any person who beneficially owns more than
10% of the outstanding voting shares of the corporation, must be approved by the
affirmative vote of at least two-thirds of the holders of the other voting
shares (the "Disinterested Shareholders").
Transactions that require the approval of two-thirds of the voting
shares beneficially owned by Disinterested Shareholders include: (1) mergers or
consolidations with the Interested Shareholder; (2) the sale, lease, exchange,
mortgage, pledge, transfer, or other disposition to the Interested Shareholder
of five percent or more of either the corporation's total assets or total
outstanding shares, or representing five percent or more of the earning power or
net income of the corporation; (3) issuance or transfers of shares to the
Interested Shareholder having a market value of five percent or more of the
total market value of the corporation's outstanding shares (except pursuant to
the exercise of stock warrants or rights, or a dividend or distribution pro rata
to all shareholders); (4) a liquidation or dissolution of the corporation
proposed by or pursuant to a written or unwritten agreement or understanding
with the Interested Shareholder; (5) a reclassification of securities or other
corporate reorganization with the Interested Shareholder that has the effect of
increasing the percentage voting ownership of the Interested Shareholder by more
than five percent; and (6) any receipt by the Interested Shareholder of a
benefit, directly or indirectly, of any loans, advances, guarantees, pledges,
other financial assistance, or tax credits or advantages provided by or through
the corporation.
Transactions that are approved by majority of disinterested directors
are exempted from the above shareholder approval requirement. A "Disinterested
Director" is defined to mean any person who was a member of the corporation's
Board of Directors before the date the Interested Shareholder became the
beneficial owner of more than 10% of the outstanding voting shares of the
corporation, or anyone who subsequently becomes a member of the Board of
Directors with the approval of the majority of the Disinterested Directors.
There are currently no Disinterested Directors on the Company's Board and
therefore an affiliated transaction may be approved only by the majority of the
Company's Disinterested Shareholders, unless at any time during the three years
preceding the transaction, the corporation has had 300 or fewer shareholders of
record.
The control share acquisition provisions generally provide that control
shares of an issuing public corporation acquired in a control share acquisition
have no voting rights until voting rights are granted by a resolution approved
by a majority of shares entitled to vote excluding control shares.
45
Control share acquisition provisions apply to "Issuing Public
Corporations" which are defined to include corporations with: (i) 100 or more
shareholders, excluding all nominees or brokers; (ii) principal offices in
Florida; and (iii) more than 10% of its shares owned by Florida residents.
"Control Shares" are defined as shares that, when acquired and added to
other shares owned by a person, enable that person to exercise voting power with
respect to shares of an Issuing Public Corporation within the ranges of
one-fifth to one-third, one-third to one-half, and one-half or more of the
outstanding voting power. This term does not include all shares owned by the
person but only those shares acquired to put the shareholder "over the top" with
respect to that particular range. The FBCA provides that shares acquired within
any 90-day period either before or after purchase are considered to be one
acquisition.
Approval of voting rights requires: (i) approval by each class entitled
to vote separately, by majority vote and (ii) approval by each class or series
entitled to vote separately, by a majority of all votes entitled to be cast by
that group excluding all Control Shares.
If an acquiring person proposes to make or has made a control share
acquisition, he may deliver to the Issuing Public Corporation an acquiring
person's statement ("APS"). The acquiring person may then request that the
Issuing Public Corporation call a special meeting of the shareholders at the
acquiring person's expense to consider granting rights to the Control Shares.
If no APS has been filed, any Control Shares acquired in a Control
Share acquisition by such person may, after 60 days has passed since the last
acquisition of Control Shares, be redeemed at their fair market value. If an APS
is filed, the shares are not subject to redemption unless the shares are not
accorded full voting rights by shareholders.
The effect and intent of the control share acquisition provision is to
deter corporate takeovers. Therefore, it is more likely than not that control of
the Company will remain in the hands of the existing principal shareholders. See
"Principal Shareholders."
Transfer and Warrant Agent and Registrar
The transfer agent and registrar for the Common Stock is American Stock
Transfer & Trust Company, 40 Wall Street, New York, New York 10005.
46
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this offering, the Company will have 10,013,648
shares of Common Stock outstanding (10,313,648 shares of Common Stock
outstanding if the Underwriters' over-allotment option is exercised in full). Of
these shares, the 2,000,000 shares of Common Stock offered hereby (2,300,000
shares if the Representative's over-allotment option is exercised in full) will
be freely tradable without further registration under the Securities Act. All
officers and directors of the Company have agreed not to sell or otherwise
dispose of 7,857,000 shares for a period of 24 months from the date of this
offering without the Representative's prior written consent. The 13,648 shares
of Common Stock and the 27,296 warrants for shares of Common Stock issued in the
Company's August 1996 Private Placement are eligible for sale pursuant to the
Selling Shareholders Prospectus commencing thirty (30) days from the date of
this Prospectus.
All of the presently outstanding 8,013,648 shares of Common Stock are
"restricted securities" within the meaning of Rule 144 of the Securities Act
and, if held for at least two years, would be eligible for sale in the public
market in reliance upon, and in accordance with, the provisions of Rule 144
following the expiration of such two-year period. In general, under Rule 144 as
currently in effect, a person or persons whose shares are aggregated, including
a person who may be deemed to be an "affiliate" of the Company as that term is
defined under the Securities Act, would be entitled to sell within any three
month period a number of shares beneficially owned for at least two years that
does not exceed the greater of (i) 1% of the then outstanding shares of Common
Stock, or (ii) the average weekly trading volume in the Common Stock during the
four calendar weeks preceding such sale. Sales under Rule 144 are also subject
to certain requirements as to the manner of sale, notice, and the availability
of current public information about the Company. However, a person who is not
deemed to have been an affiliate of the Company during the 90 days preceding a
sale by such person and who has beneficially owned shares of Common Stock for at
least three years may sell such shares without regard to the volume, manner of
sale, or notice requirements of Rule 144.
Prior to this offering, there has been no public market for the
Company's securities. Following this offering, the Company cannot predict the
effect, if any, that sales of shares of Common Stock pursuant to Rule 144 or
otherwise, or the availability of such shares for sale, will have on the market
price prevailing from time to time. Nevertheless, sales by the current
shareholders of a substantial number of shares of Common Stock in the public
market could materially adversely affect prevailing market prices for the Common
Stock. In addition, the availability for sale of a substantial number of shares
of Common Stock acquired through the exercise of the Representative's Warrants
or the currently outstanding options under the Plan could materially adversely
affect prevailing market prices for the Common Stock. See "Risk Factors -Shares
Eligible for Future Sale."
Up to an aggregate of 200,000 additional shares of Common Stock may be
purchased upon the exercise of options which may be granted under the Plan and
up to an additional 4,227,296 shares of Common Stock may be purchased upon the
exercise of certain other options and warrants.
Up to 200,000 additional shares of Common Stock may be purchased by the
Representative during the period commencing on the first anniversary of the date
of this Prospectus and terminating on the fifth anniversary of the date of this
Prospectus through the exercise of the Representative's Warrants. Any and all
shares of Common Stock purchased upon the exercise of the Representative's
Warrants may be freely tradable, provided that the Company satisfies certain
securities registration and qualification requirements
47
in accordance with the terms of the Representative's Warrants. See
"Underwriting."
CONDITIONS IN BRAZIL
Economic Conditions
In 1995, for the third consecutive year, the economy of Brazil
experienced significant expansion. During the years ended December 31, 1993,
1994, and 1995, Brazil's gross domestic product ("GDP") increased by 4.1%, 9.4%,
and 4.0%, respectively, and inflation receded from 1,149% during the year ended
December 31, 1992, 2,244% for the year ended December 31, 1993, and 1,294% for
the year ended December 31, 1994, to 22.0% for the year ended December 31, 1995.
Such growth in GDP and decrease in inflation is attributable to, among other
things, significant reform initiatives which have been implemented in Brazil's
economy, including: (i) monetary stabilization; (ii) public sector reforms
designed to achieve more economic stability and increased efficiency; (iii)
privatization of activities which could be efficiently undertaken by the private
sector; (iv) increased public health and basic education services; (v) trade
reforms designed to provide incentives to export-oriented and import-competitive
industries; and (vi) social security reforms. Together with such initiatives,
Brazil has granted to foreigners increased access to all sectors of the economy,
thereby resulting in significant increases in foreign investment in comparison
to prior periods. There can be no assurance that the Brazilian government will
be successful in its attempts to stabilize prices and the rate of inflation.
Price instability may have a material adverse effect on the Company.
Brazil's economy has been subject to numerous destabilizing factors,
including recent hyper-inflation, low foreign exchange reserves, and
fluctuations in world commodity prices. In response to these problems, among
others, the Brazilian government has frequently intervened in the Brazilian
economy. Such intervention has taken the form of monetary, credit, tariff, and
other policies, wage and price controls, restriction of bank accounts, and
capital and export controls. The Brazilian government has frequently changed its
policies with respect to the foregoing. There can be no assurance that such
changes in policy will not, directly or indirectly, have a material adverse
effect on the Company.
Currency Exchange Fluctuations
Since its introduction in July 1994, the Brazilian currency, the Real,
initially appreciated against the U.S. dollar, although, since such time, the
Real has experienced limited devaluation in relation to the U.S. dollar within
the forecasted range of the Brazilian government. On January 1, 1996, the Real -
U.S. dollar exchange rate (sell side) in the economical exchange market, as
published by the Central Bank of Brazil was R$0.976 per US$1.00 compared to
R$1.0036 as of June 30, 1996. There is free convertibility of the Real into U.S.
dollars. The Central Bank of Brazil, consistent with most central banks,
intervenes in the currencies markets by buying and selling foreign exchange on
the formal exchange market in order to keep the average exchange rate within
prescribed limits. In the course of conducting its operations, the Company has
experienced no difficulties in Brazil in purchasing foreign currencies at market
rates.
48
Political Environment
The Brazilian political environment has been characterized by high
levels of uncertainty since the country returned to civilian rule in 1985 after
20 years of military government. The death of the President-elect in 1985 and
the resignation of another President in 1992, as well as frequent turnovers in
senior government officials, have resulted in the perceived absence of a
coherent and sustained policy to resolve Brazil's economic problems.
In December 1993, the Brazilian government commenced the implementation
of the country's latest stabilization plan, the Real Plan. The Real Plan has
sought to limit inflation by reducing certain public expenditures, collecting
liabilities owed to the Brazilian government, increasing taxes, continuing a
privatization program, and introducing a new currency, the Real, into
circulation. In October 1994, Fernando Henrique Cardoso, the former Minister of
Finance and the principal architect of the Real Plan, was elected President.
Since taking office in January 1995, Mr. Cardoso has continued the
implementation of the Real Plan. Although the rate of inflation has decreased
substantially and the value of the Real has stabilized as a result of the Real
Plan, there can be no assurance that the Real Plan will continue to reduce
inflation or stabilize the value of the Real or that the Brazilian government
will continue to implement the Real Plan in the future. The future success of
the Real Plan is dependent on the ability of the Brazilian government to
maintain fiscal restraint and tight monetary policy and effect long-term
structural reforms, including reform of the tax and social security systems and
continued privatization. Certain of such reforms may require the amendment of
the Brazilian constitution. The Company is not able to predict with any degree
of certainty the long-term effects of the Real Plan.
Demographics
The Federal Republic of Brazil is a country of approximately 160
million people in a land mass of 8.5 million square miles. The official language
of Brazil is Portuguese. More than one-half the population are under 24 years of
age. The country has a federal form of government comprising 23 states, three
territories and one federal district (Brasilia). Total GDP at December 31, 1995
was approximately $522 billion and foreign debt existing at that time was
approximately $169 billion. Primary exports of Brazil are machinery, cars, soy
beans, coffee, and citrus concentrates. Brazil is a full member of Mercosur, an
alliance with Argentina, Paraguay, and Uruguay that seeks to eliminate tariffs
in order to create free trade among its member nations.
49
UNDERWRITING
The Underwriters named below have agreed, subject to the terms and
conditions of the Underwriting Agreement, between the Company and H.J. Meyers &
Co., Inc., as Representative of the Underwriters, to purchase from the Company
on a firm commitment basis the number of shares of Common Stock set forth
opposite their respective names. The Underwriting Agreement provides that the
obligations of the Underwriters are subject to certain conditions precedent and
that the Underwriters shall be obligated to purchase all of the shares of Common
Stock offered hereby if any of such securities are purchased. The 8%
underwriting discount set forth on the cover page of this Prospectus will be
allowed to the Underwriters at the time of delivery to the Underwriters of the
shares of Common Stock so purchased.
Name of Underwriter Number of Shares
------------------- ----------------
H.J. Meyers & Co., Inc. ........................ _________
Total ....................................... 2,000,000
=========
The Underwriters have advised the Company that they propose to offer
the shares of Common Stock to the public at an initial price of $10.00 per share
and that the Underwriters may allow certain dealers who are members of the
National Association of Securities Dealers, Inc. (the "NASD") a concession not
in excess of $.__ per share of Common Stock, no portion of which may be
reallowed to certain dealers. After this offering, the public offering price and
concession may change.
The Company has granted to the Underwriters an option exercisable
during the 45-day period from the date of this Prospectus, to purchase up to a
maximum of 300,000 additional shares of Common Stock on the same terms set forth
above. The Underwriters may exercise such right only to satisfy over-allotments
in the sale of the shares of Common Stock.
The Company has agreed to pay to the Representative a non-accountable
expense allowance equal to two percent (2%) of the total proceeds of the
offering, or $400,000 ($460,000 if the Underwriters' the over-allotment option
is exercised in full), of which $25,000 has already been paid. In addition to
the Underwriters' commissions and Representative's expense allowance, the
Company is required to pay the costs of qualifying the shares of Common Stock
under federal and state securities laws, together with legal and accounting
fees, printing, and other costs in connection with this offering, estimated to
total approximately $350,000.
Upon completion of this offering, the Company will issue to the
Representative for nominal consideration, warrants (collectively, the
"Representative's Warrant") to purchase 200,000 shares of Common Stock. The
shares subject to the Representative's Warrant shall be identical to the shares
of Common Stock sold to the public, except for the purchase price as provided
below. The Representative's Warrant will be exercisable over a period of four
years commencing one year from the date of this Prospectus. The per share
exercise price will be $12.00 (120% of the initial public offering price per
share). During the one-year period commencing on the date of this Prospectus,
the Representative's Warrant and the securities issuable upon the exercise
thereof will not be transferable, except to officers of the Underwriters and
members of the selling group and officers and partners thereof.
The Representative's Warrants will contain anti-dilution provisions
providing adjustment in the
50
event of any recapitalization, reclassification, stock dividend, stock split, or
similar transaction, including certain issuances of securities by the Company at
prices less than the Current Market Price (as defined therein). The
Representative's Warrants do not entitle the Representative to any rights as a
shareholder of the Company until such Warrants are exercised and shares are
purchased thereunder.
The Representative's Warrants and the securities issuable thereunder
may not be offered for sale, except in compliance with the applicable provisions
of the Securities Act. The Company has agreed that, if it shall cause a
Registration Statement to be filed with the Securities and Exchange Commission,
the Representative shall have the right during the five-year period commencing
on the date of this Prospectus to include in such Registration Statement the
securities issuable upon its exercise at no expense to the Representative.
Additionally, the Company has agreed that upon written request by the holder(s)
of 50% or more of the shares issuable upon exercise of the Representative's
Warrant which is made during the exercise period of the Representative's
Warrant, the Company will, on up to two separate occasions, register the
securities issuable upon exercise thereof. The initial registration will be at
the Company's expense and the second registration will be at the expense of the
holder(s) of the Representative's Warrants.
For the period during which the Representative's Warrants are
exercisable, the holder or holders thereof will have the opportunity to profit
from a rise in the market value of the Common Stock, with a resulting dilution
in the interests of the other shareholders of the Company. The holder or holders
of the Representative's Warrants can be expected to exercise it at a time when
the Company would, in all likelihood, be able to obtain any needed capital from
an offering of its unissued Common Stock on terms more favorable to the Company
than those provided for in the Representative's Warrants. Such facts may
adversely affect the terms on which the Company can obtain additional financing.
To the extent that the Representative realizes any gain from the resale of the
Representative's Warrants or the securities issuable thereunder, such gain may
be deemed additional underwriting compensation under the Securities Act.
The Company has also agreed that, for a period of 24 months after the
closing date of this offering, if it participates in any merger, consolidation
or other transaction which the Representative has brought to the Company, or for
which the Company retains the Representative for consultation or other services
in connection therewith (including an acquisition of assets or stock in which it
pays for the acquisition, in whole or in part, with shares of the Common Stock
or other securities), then it will pay for the Representative's services an
amount that is equal to 0.875% of the value of the purchase price of the
transaction.
Each officer and director, and holders of all restricted stock of the
Company, have agreed that they will not sell any other shares of Common Stock
owned by them prior to this offering (or subsequently acquired under any option,
warrant, or convertible security owned prior to this offering) for 24 months
following the closing date of this offering, without the Representative's prior
written consent. See "Shares Eligible for Future Sale."
The Company has agreed that for a period of 12 months from the date of
this Prospectus, it will not sell any securities (with the exception of debt
securities and shares of Common Stock issued upon exercise of currently
outstanding options and warrants, and options granted under the Plan) without
the Representative's prior written consent, which shall not be unreasonably
withheld. The Company has also agreed that for a period of 24 months from the
date of this Prospectus, it will not sell or issue any securities pursuant to
Regulation S under the Securities Act without the Representative's prior written
consent.
51
In connection with this offering, the Company has agreed that, for the
36 month period commencing on the date of the Prospectus, the Representative has
the right to appoint a designee as an observer at all meetings of the Company's
Board of Directors. This designee has the right to attend all meetings of the
Board of Directors and shall be entitled to receive reimbursement for all
out-of-pocket expenses of attendance at such meetings, as well as any fees paid
to outside directors solely for their attendance at such meetings. In addition,
such designee shall be indemnified to the same extent as the Company's
directors.
The Underwriting Agreement provides for reciprocal indemnification
between the Company and the Underwriters against certain liabilities in
connection with the Registration Statement, including liabilities under the
Securities Act.
The foregoing is a brief summary of certain provisions of the
Underwriting Agreement and does not purport to be a complete statement of its
terms and conditions. A copy of the Underwriting Agreement is on file with the
Securities and Exchange Commission as an exhibit to the Registration Statement
of which this Prospectus forms a part. See "Additional Information."
Prior to this offering, there has been no public market for the shares
of Common Stock. Accordingly, the initial public offering price of the shares of
Common Stock offered hereby has been determined by negotiations between the
Company and the Representative. Factors considered in determining such price, in
addition to prevailing market conditions, including the history of, and the
prospects for, the industries in which the Company competes, the prospects of
the Company, and such other factors as were deemed relevant, including an
evaluation of management and the general economic climate.
LEGAL MATTERS
The validity of the issuance of the securities offered hereby will be
passed upon for the Company by Atlas, Pearlman, Trop & Borkson, Fort Lauderdale,
Florida. Atlas, Pearlman, Trop & Borkson own 26,500 shares of Common Stock.
Certain matters will be passed upon for the Underwriters by Brock, Fensterstock,
Silverstein, McAuliffe & Wade, LLC, New York, New York.
EXPERTS
The audited consolidated financial statements of Vitech America, Inc.,
as of December 31, 1995 and for each of the three fiscal years in the period
ended December 31, 1995, included in this Prospectus, have been audited by
Pannell Kerr Forster PC, independent certified public accountants, as indicated
in their reports with respect thereto, and are included herein in reliance upon
the authority of said firm as experts in giving said reports.
52
ADDITIONAL INFORMATION
The Company intends to furnish to its shareholders annual reports, which
will include financial statements audited by independent accountants, and such
other periodic reports as it may determine to furnish or as may be required by
law, including Sections 13(a) and 15(d) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act").
The Company has filed with the Securities and Exchange Commission (the
"Commission"), 450 Fifth Street, N.W., Washington D.C. 20549, a registration
statement on Form S-1 (the "Registration Statement") under the Securities Act
with respect to the securities offered hereby. This Prospectus does not contain
all the information set forth in the Registration Statement and the exhibits
thereto, as permitted by the rules and regulations of the Commission. For
further information, reference is made to the Registration Statement and to the
exhibits filed therewith. Statements contained in this Prospectus as to the
contents of any contract or other document which has been filed as an exhibit to
the Registration Statement are qualified in their entirety by reference to such
exhibits for a complete statement of their terms and conditions. The
Registration Statement and the exhibits thereto may be inspected without charge
at the offices of the Commission and copies of all or any part thereof may be
obtained from the Commission's principal office at 450 Fifth Street, N.W.,
Washington D.C. 20549 or at certain of the regional offices of the Commission
located at 7 World Trade Center, 13th Floor, New York, New York 10048 and 500
West Madison Street, Suite 1400, Chicago, Illinois 60661, upon payment of the
fees prescribed by the Commission. Electronic reports and other information
filed through the Electronic Data Gathering, Analysis, and Retrieval System are
publicly available through the Commission's website (http://www.sec.gov.) In
addition, following approval of the Common Stock for quotation on the NASDAQ
National Market, reports and other information concerning the Company may be
inspected at the offices of the National Association of Securities Dealers,
Inc., 1735 K Street, N.W., Washington D.C. 20006.
53
INDEX TO FINANCIAL STATEMENTS
VITECH AMERICA INC.
[Enlarge/Download Table]
Page
Number
------------
Independent Auditor's Report F-2
Balance Sheet as of December 31, 1995 and 1994 F-3
Statement of Income for the Years Ended December 31, 1995 and 1994,
and for the Period June 24, 1993 (Inception) to December 31, 1993 F-4
Statement of Changes in Shareholders' Equity for the Years Ended December 31,
1995 and 1994, and for the Period June 24, 1993
(Inception) to December 31, 1993 F-5
Statement of Cash Flows for the Years Ended December 31, 1995 and 1994, and
for the Period June 24, 1993 (Inception) to
December 31, 1993 F-6
Notes to Financial Statements F-7
Balance Sheet as of June 30, 1996 (Unaudited) F-17
Statement of Income for the Six Months Ended June 30, 1996
and 1995 (Unaudited) F-18
Statement of Changes in Shareholders' Equity for the Six Months
Ended June 30, 1996 (Unaudited) F-19
Statement of Cash Flows for the Six Months Ended June 30, 1996
and 1995 (Unaudited) F-20
Notes to Financial Statements (Unaudited) F-21
F-1
Independent Auditor's Report
Board of Directors and Shareholders
Vitech America, Inc.
We have audited the accompanying balance sheet of Vitech America, Inc. and
Subsidiary as of December 31, 1995 and December 31, 1994, and the related
statements of income, changes in shareholders' equity, and cash flows for the
two years ended December 31, 1995 and 1994 and for the period June 24, 1993
(Inception) through December 31, 1993. 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 audits.
We conducted our audits 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 audits provide 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 Vitech America, Inc. as of
December 31, 1995 and 1994 and the related statements of income, shareholders'
equity, and cash flows for the two years ended December 31, 1995 and 1994 and
for the period from June 24, 1993 (Inception) to December 31, 1993 in conformity
with generally accepted accounting principles.
PANNELL KERR FORSTER PC
New York, New York
July 19, 1996, except for note 15 as to
which the date is September 3, 1996
F-2
VITECH AMERICA, INC.
Balance Sheet
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Assets
December 31,
-----------------------------------
1995 1994
---------------- ----------------
Current assets
Cash and cash equivalents $ 115,925 $ 45,906
Accounts receivable, net (including $11,031,023 and $4,196,731
in 1995 and 1994, respectively, from an affiliate) 15,346,651 4,196,731
Inventories 5,578,974 3,297,979
Deferred tax assets, net 102,530 54,630
Other current assets 123,801 -
---------- ----------
Total current assets 21,267,881 7,595,246
Property and equipment, net 295,646 85,275
Land held for development 592,000 -
Other assets 105,290 11,800
---------- ----------
Total assets $22,260,817 $7,692,321
---------- ----------
Liabilities and Shareholders' Equity
Current liabilities
Trade accounts payable $ 7,030,201 $3,861,972
Borrowings under lines of credit - 896,919
Accrued expenses 161,948 95,088
Due to shareholder 124,433 45,646
Income taxes payable 1,060,391 165,000
Notes payable - related party 3,911,917 2,127,440
Short-term debt 2,566,837 -
---------- ----------
Total current liabilities 14,855,727 7,192,065
---------- ----------
Commitments and contingencies
Shareholders' equity
Common stock, no par value, 30,000,000 shares
authorized, 8,000,000 shares issued and outstanding 306,398 306,398
Retained earnings 7,098,692 193,858
---------- ----------
Total shareholders' equity 7,405,090 500,256
---------- ----------
Total liabilities and shareholders' equity $22,260,817 $7,692,321
---------- ----------
See notes to financial statements
F-3
VITECH AMERICA, INC.
Statement of Income
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Year Ended Period June
December 31, 24, 1993
----------------------------------- (Inception)
to December
1995 1994 31, 1993
---------------- ---------------- ----------------
Net sales (including $36,677,077 in 1995, $17,407,363
in 1994, and $1,156,253 in 1993 to an affiliate) $48,488,996 $17,407,363 $1,156,253
Cost of sales 39,156,239 16,483,232 903,544
---------- ---------- ---------
Gross profit 9,332,757 924,131 252,709
Selling, general and administrative expenses 1,234,108 505,448 181,139
---------- ---------- ---------
Income from operations 8,098,649 418,683 71,570
Other expenses
Interest expense 328,278 171,743 14,282
Foreign currency exchange losses 16,229 - -
Other 1,817 - -
---------- ---------- ---------
Total other expenses 346,324 171,743 14,282
---------- ---------- ---------
Income before provision for income taxes 7,752,325 246,940 57,288
Provision for income taxes 847,491 97,370 13,000
---------- ---------- ---------
Net income $ 6,904,834 $ 149,570 $ 44,288
---------- ---------- ---------
Net income per common and common share equivalent $ 0.82 $ 0.02 $ -
---------- ---------- ---------
Weighted average common and common share equivalents
outstanding 8,293,914 8,000,000 8,000,000
---------- ---------- ---------
See notes to financial statements
F-4
VITECH AMERICA, INC.
Statement of Changes in Shareholders' Equity
For the Years Ended December 31, 1995 and
1994 and for the Period June 24, 1993 (Inception)
to December 31, 1993
[Enlarge/Download Table]
Common Retained
Stock Earnings Total
-------------- --------------- ---------------
Issuance of 8,000,000 shares of common stock, June 24, 1993
including 4,080,000 shares issued for assets $ 306,398 $ - $ 306,398
Net income for the period from
June 24, 1993 (inception) to
December 31, 1993 - 44,288 44,288
-------- --------- ----------
Balance at December 31, 1993 306,398 44,288 350,686
Net income - 149,570 149,570
-------- --------- ----------
Balance at December 31, 1994 306,398 193,858 500,256
Net income - 6,904,834 6,904,834
-------- --------- ----------
Balance at December 31, 1995 $ 306,398 $7,098,692 $7,405,090
-------- --------- ----------
See notes to financial statements
F-5
VITECH AMERICA, INC.
Statement of Cash Flows
[Enlarge/Download Table]
Year Ended Period June
December 31, 24, 1993
--------------------------------- (Inception)
to December 31,
1995 1994 1993
--------------- --------------- ---------------
Cash flows from operating activities
Net income $ 6,904,834 $ 149,570 $ 44,288
--------------- --------------- ---------------
Adjustments to reconcile net income to net cash used in
operating activities
Depreciation 32,934 12,752 3,891
Loss on disposal of assets - 4,200 -
Reserve for inventory obsolescence - 103,980 -
Changes in assets and liabilities
Increase in accounts receivable (11,149,920) (1,780,116) (288,685)
Increase in inventories (2,280,995) (2,458,416) (693,687)
Increase in deferred tax asset (47,900) (54,630) -
Increase in other assets (123,801) (4,800) -
Increase in trade accounts payable 3,168,229 3,706,536 155,436
Increase in accrued expenses 66,860 85,332 9,756
Increase in due to shareholder 78,787 45,646 -
Increase in income taxes payable 895,391 152,000 13,000
--------------- --------------- ---------------
Total adjustments (9,360,415) (187,516) (800,289)
--------------- --------------- ---------------
Net cash used in operating activities (2,455,581) (37,946) (756,001)
--------------- --------------- ---------------
Cash flows from investing activities
Purchases of property and equipment (249,295) (57,066) -
Investments in land held for development (68,799) - -
--------------- --------------- ---------------
Net cash used in investing activities (318,094) (57,066) -
--------------- --------------- ---------------
Cash flows from financing activities
Deferred offering costs (87,500) - -
Proceeds under lines of credit - 52,669 844,250
Payments under lines of credit (896,919) - -
Proceeds from notes payable - related party 2,006,887 - -
Repayment of notes payable - related party (222,410) - -
Proceeds from note payable 2,000,000 - -
Proceeds from short-term borrowing - bank 217,994 - -
Repayment of short-term borrowing - bank (174,358) - -
--------------- --------------- ---------------
Net cash provided by financing activities 2,843,694 52,669 844,250
--------------- --------------- ---------------
Net increase (decrease) in cash and cash
equivalents 70,019 (42,343) 88,249
Cash and cash equivalents - beginning of period 45,906 88,249 -
--------------- --------------- ---------------
Cash and cash equivalents - end of period $ 115,925 $ 45,906 $ 88,249
--------------- --------------- ---------------
Supplemental disclosure of cash flow information
Cash paid during the period for
Interest $ 373,680 $ 154,506 $ 14,282
--------------- --------------- ---------------
Supplemental schedule of non-cash investing and financing activities
Investment in land held for development
acquired through seller financing agreements $ 523,201 $ - $ -
--------------- --------------- ---------------
Assumption of a note payable to a related party from Vitech
Vitoria Technologia S.A. $ - $ 2,127,440 $ -
--------------- --------------- ---------------
Assets contributed by shareholder in exchange for issuance
of 4,080,000 shares of common stock $ - $ - $ 306,398
--------------- --------------- ---------------
See notes to financial statements
F-6
VITECH AMERICA, INC.
Notes to Financial Statements
December 31, 1995
Note 1 - Organization and principal industry
Vitech America, Inc. (the "Company"), a Florida corporation, was incorporated in
June 1993. The Company is engaged in the manufacture and distribution of
computer equipment and related products. On March 7, 1995, the majority
shareholders of the company formed Bahiatech Tecnologia Ltd. (the "Subsidiary")
and on October 12, 1995, the Company acquired a 99.999% interest in the
Subsidiary. The Subsidiary, located in Ilheus, Bahia, Brazil, is engaged in the
assembly and sale of electric and electronic equipment and their components. The
Company sells its products to Vitech Vitoria Tecnoligia S.A. (Vitoria), an
affiliate located in Brazil, South America, and to its subsidiary.
All of the Company's sales are concentrated in Brazil, with approximately 15% to
one unrelated customer and 76% to Vitech Vitoria Tecnologia S.A. (an
affiliate through common ownership) in 1995.
Note 2 - Summary of significant accounting policies
Change in reporting entity
The financial statements for 1995 include the accounts of the Company and its
subsidiary. The 1994 and 1993 financial statements include the accounts of
Vitech America, Inc., individually, since the subsidiary was not formed until
1995.
Principles of consolidation
The consolidated financial statements for 1995 include the accounts of the
Company and its subsidiary. All significant intercompany transactions and
balances have been eliminated in consolidation.
Use of estimates
The preparation of 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 reporting periods. Actual
results could differ from these estimates.
Cash and cash equivalents
The Company considers all highly liquid investments with an original maturity of
three months or less at the time of acquisition to be a cash equivalent. The
Company maintains its cash in bank deposit accounts which, at times, may exceed
federally insured limits. The Company has not experienced any losses in such
accounts. The Company believes it is not exposed to any significant credit risk
on cash and cash equivalents.
Inventories
Inventories are stated at the lower of cost (first-in, first-out method) or
market.
Deferred offering costs
Costs incurred directly related to the proposed public offering are capitalized.
Such costs will be offset against the proceeds received from the proposed public
offering.
F-7
VITECH AMERICA, INC.
Notes to Financial Statements (continued)
December 31, 1995
Property and equipment
Property and equipment are stated at cost. The cost of maintenance and repairs
is charged against results of operations as incurred. Depreciation is computed
over the estimated service lives of the related assets using the straight-line
method. When assets are retired or otherwise disposed of, the cost and
accumulated depreciation are removed from the respective accounts and any gain
or loss is recognized.
Revenue recognition
The Company's policy is to record revenues upon transfer of title to the
customer. Title transfers to the customer upon receipt of the merchandise by the
customer.
Land held for development
Land held for development is carried at cost and comprises of undeveloped
parcels near Ilheus, Bahia, Brazil.
Income taxes
The Company applies the asset and liability approach to financial accounting and
reporting for income taxes. The difference between the financial statement and
tax bases of assets and liabilities is determined annually. Deferred income tax
assets and liabilities are computed for those differences that have future tax
consequences using the currently enacted tax laws and rates that apply to the
period in which they are expected to affect taxable income. Valuation allowances
are established, if necessary, to reduce the deferred tax asset to the amount
that will more likely than not be realized. Income tax expense is the current
tax payable or refundable for the period plus or minus the net change in the
deferred tax assets and liabilities.
The Subsidiary operates in the North-east region of Brazil and enjoys an
exemption from income taxes through and including the year 2004. The subsidiary
is entitled to an exemption from income taxes on the Brazilian operating profit
("Lucro da Exploracao") once twenty percent of the budgeted production goals in
units are met in each year during the exemption period. This benefit is reported
as a reduction of income tax expense for the period in which earned.
Per share information
Per share information is based on the weighted average number of common shares
outstanding during each period and, the weighted average number of common
equivalent shares resulting from the assumed conversion of the $2,000,000
promissory note (see note 6). Fully diluted earnings per common and common
equivalent shares are not presented as such amounts are the same as primary
earnings per share.
F-8
VITECH AMERICA, INC.
Notes to Financial Statements (continued)
December 31, 1995
Translation to U.S. dollars
The Subsidiary's assets and liabilities are translated into U.S. dollars at
exchange rates in effect at the balance sheet date for monetary items and at
historical rates for nonmonetary items. Revenue and expense accounts are
translated at the average exchange rate in effect during each month, except for
those accounts that relate to nonmonetary assets and liabilities which are
translated at historical rates.
Exemption of value added tax (ICMS)
The Subsidiary is exempt from ICMS (Value Added Tax) on imported materials and
components, and on the sales of the finished products arising from such raw
materials through and including the year 2003. The benefits are reflected in
sales and cost of sales.
Note 3 - Related party transactions
The Company made sales to Vitech Vitoria Tecnologia S.A., an entity related
through common ownership, during 1995, 1994 and 1993 in the amounts of
$36,677,077, $17,407,363 and $1,156,253, respectively. Amounts due from Vitoria,
at December 31, 1995 and 1994, amounted to $11,031,023 and $4,196,731,
respectively. Additionally, during 1995, the Company purchased $2,800,000 of
inventory from Vitoria. In 1996, the Company received payment on all outstanding
amounts due from Vitoria.
As discussed in note 6, the Company has outstanding debt obligations to a
related party.
The Company has an employment agreement with its president dated January 1, 1995
and expiring one year from that date providing for payments of $10,000 per
month. At December 31, 1995, $146,667 was owed to the president which amount
includes compensation under the above agreement and unreimbursed travel
expenses. In addition, the Company has a management agreement with its majority
shareholder dated January 1, 1995, and expiring one year from that date
providing for payments of $10,000 per month. At December 31, 1995, the
shareholder owed the Company $22,234 for advances made on his behalf net of
amounts due under the above agreement. In January 1996, these two individuals
signed three year employment agreements which terminate on December 31, 1998.
Under the terms of the agreements each individual will receive annual
compensation of $240,000 subject to annual increases, as defined.
Note 4 - Inventories
Inventories are summarized as follows:
1995 1994
------------------ ------------------
Finished goods $1,753,970 $3,297,979
Components 3,814,762 -
Packaging 10,242 -
--------- ----------
$5,578,974 $3,297,979
--------- ----------
F-9
VITECH AMERICA, INC.
Notes to Financial Statements (continued)
December 31, 1995
Included in inventories at December 31, 1995 and 1994 are items aggregating
$925,336 and $2,233,987, respectively, which were in transit to Vitoria. The
shipments were made under terms which require title to pass when the in-transit
items are received by Vitoria.
Note 5 - Property and equipment
Property and equipment at December 31, 1995 and 1994, are summarized as follows:
[Download Table]
1995 1994
---------------- ----------------
Furniture and office equipment $ 252,863 $ 44,804
Warehouse equipment 56,186 20,940
Transportation equipment 34,373 34,373
--------- ---------
343,422 100,117
Less accumulated depreciation 47,776 14,842
--------- ---------
$ 295,646 $ 85,275
--------- ---------
Note 6 - Note payable - related party
The Company had the following notes payable to an affiliate of the shareholders'
at December 31, 1995 and 1994:
[Enlarge/Download Table]
1995 1994
---------------- ----------------
6% promissory note payable on demand (assumed from
Vitech Vitoria Tecnologia, S.A.) $ 1,911,917 $2,127,440
Promissory note payable, due on demand, bearing
interest at 9% 2,000,000 -
--------- ----------
$ 3,911,917 $2,127,440
--------- ----------
During 1995 and 1994, the Company incurred interest expense of $233,810 and
$106,680, respectively, in connection with these obligations.
In connection with the 9% note payable, the Company granted the lender the right
to convert the note into 5.925% of the outstanding common stock of the Company.
F-10
VITECH AMERICA, INC.
Notes to Financial Statements (continued)
December 31, 1995
Note 7 - Short-term debt
Short-term debt consists of the following at December 31, 1995:
Short-term debt due banks (resulting from discounted
accounts receivable) bearing interest at 5.5% per
month and maturing on April 12, 1996 $ 217,494
Short-term debt (US dollar denominated) due on the
purchase of land, noninterest-bearing, and payable
in monthly installments through September 1996 349,343
Note payable - Meris Financial Incorporated (a) 2,000,000
----------
$ 2,566,837
----------
(a) On October 28, 1995, the Company entered into a loan agreement with Meris
Financial Incorporated. Pursuant to the agreement, the Company executed a
note payable in the amount of $2,000,000 with interest at 12% payable
monthly. Principal was due on October 28, 1997. The note is guaranteed by
the shareholders and collateralized by certain fixed assets of the Company,
real property of its affiliates, beneficial rights under certain agreements
held by the shareholders for options to purchase interests in certain
affiliates, all of the currently outstanding stock of the Company and the
shareholders' ownership interests in the Company's Brazilian affiliates.
The note was convertible, at any time up to maturity, into approximately
4.7% of the issued or issuable common stock of the Company. The Company
incurred interest expense of $40,000 in connection with this obligation
during 1995.
Concurrent with the execution of the loan agreement, the lender and its
affiliate were granted options to purchase common stock in the Company. The
stock option agreements provide for options to purchase 4% of the
outstanding common stock of the Company, issued or issuable at the exercise
date, at an exercise price of $2,000,000 and an additional 1% at an
exercise price of $2,000,000. The options expire eighteen months from
October 28, 1995. No value has been assigned to the options.
In July 1996, the Company entered into a modification agreement whereby the
Company agreed to make payments of $20,000 during July 1996, $200,000
during August 1996, $125,000 during September 1996, $100,000 during October
1996, each payment applied first to accrued unpaid interest and the balance
to principal outstanding. Remaining unpaid accrued interest and principal
is due November 1, 1996.
In addition, as long as the Company makes payments as set forth above,
Meris Financial Incorporated agreed not to exercise the conversion rights
and stock option agreements.
F-11
VITECH AMERICA, INC.
Notes to Financial Statements (continued)
December 31, 1995
Note 8 - Revolving lines-of-credit
The Company had the following lines-of-credit borrowings with one bank at
December 31, 1994:
$450,000 line-of-credit, due June 30, 1995, bearing
interest at the prime rate (8.5% at December 31, 1994)
plus 1% $ 450,000
$400,000 line-of-credit, due June 30, 1995, bearing
interest at the prime rate (8.5% at December 31,1994)
plus 2% 400,000
$50,000 line-of-credit, due June 30, 1995, bearing
interest at the prime rate (8.5% at December 31, 1994)
plus 1% 46,919
--------
$ 896,919
--------
The above lines-of-credit are collateralized by the Company's certificate of
deposit aggregating $10,094, plus certain personal assets provided by a
shareholder of the Company and a related party.
The Company repaid all borrowing under lines-of-credit during 1995. A new
revolving line-of-credit was established which allows for borrowings of up to
$100,000 at the prime rate plus 2%. The prime rate was 8.5% at December 31,
1995. The line-of-credit is collateralized by various Company assets and is
personally guaranteed by the Company's shareholders. At December 31, 1995, no
amounts were outstanding under this line-of-credit.
Note 9 - Fair value of financial instruments
The Company's significant financial instruments are cash and cash equivalents,
account receivables, trade accounts payable, accrued expenses and short-term
debt, all of which are classified as either current assets or current
liabilities. Their carrying amounts approximate their fair values because of the
short-term maturities of these instruments.
Note 10 - Income taxes
The components of the provision for income taxes are as follows:
1995 1994 1993
--------------- --------------- --------------
Current
Federal $ 172,000 $ 130,000 $ 9,500
State 30,000 22,000 3,500
Foreign 699,991 - -
-------------- -------------- --------------
901,991 152,000 13,000
-------------- -------------- --------------
Deferred
Federal (46,500) (49,000) -
State (8,000) (5,630) -
-------------- -------------- --------------
(54,500) (54,630) -
-------------- -------------- --------------
$ 847,491 $ 97,370 $ 13,000
-------------- -------------- --------------
F-12
VITECH AMERICA, INC.
Notes to Financial Statements (continued)
December 31, 1995
There were no material reconciling items between the U.S. Federal Statutory tax
rate and the effective tax rate on U.S. based income.
Included in the accompanying balance sheet at December 31, 1995 and 1994, are
net deferred tax assets of $102,530 and $54,630, primarily relating to inventory
reserves for obsolescence and certain accrued expenses. No deferred tax asset
valuation allowance is required at December 31, 1995 and 1994. Deferred tax
liabilities primarily relate to depreciation on property and equipment.
The Brazilian federal statutory income tax rate varies according to the level of
income and to the taxes and levies applicable to any one year. The federal
statutory income tax rate applicable to the subsidiary is a composite rate
approximating 48% for 1995. This rate includes a 9% federal levy on net income,
sometimes referred to as Social Contribution. The difference from the effective
tax rate and the composite rate relates to the income tax exemption described in
note 2.
In December 1995, changes were introduced in the Brazilian income tax
regulations effective January 1, 1996 which included a reduction of the
composite rate to 31%.
As of December 31, 1995, the Company has not provided for withholding or U.S.
federal income taxes on accumulated undistributed earnings of its foreign
subsidiary as they are restricted from distribution under Brazilian law (see
note 11) and they are considered by management to be permanently reinvested.
Note 11 - Shareholders' equity and dividends
All references to the number of shares of the Company's common stock and per
share amounts have been retroactively restated in the accompanying financial
statements to give effect to the eight thousand-for-one stock split as discussed
in note 15.
As of December 31, 1995, shareholders' equity consisted of $6,787,374 in
retained earnings generated from subsidiary operations. The retained earnings
generated by subsidiary operations and its capital as of December 31, 1995 is
considered national capital and is not eligible for distribution in U.S. dollars
to its foreign shareholder through the Central Bank of Brazil.
Cash dividends credited or paid to shareholders outside of Brazil are subject to
a withholding tax of 15%. In addition, tax exemption benefits amounting to
$2,832,000 ($0.34 per share) cannot be distributed as dividends and are
segregated for capital reserves and offsetting accumulated losses in accordance
with Brazilian law.
On June 24, 1993, the Company issued 4,080,000 shares of common stock to an
individual whereby the individual became the majority shareholder of the
Company. In exchange for the common stock, the shareholder contributed the
following assets:
Inventories $ 250,346
Property and equipment 49,052
Other assets 7,000
----------
$ 306,398
----------
F-13
VITECH AMERICA, INC.
Notes to Financial Statements (continued)
December 31, 1995
The Company recorded the above assets and a corresponding capital contribution
at their cost which approximated fair market value as agreed to by management
and the shareholders.
Note 12 - Major suppliers
The Company purchased merchandise principally from suppliers located in the
United States. In 1995, purchases from one unrelated supplier accounted for
approximately 12% of total purchases. In 1994, purchases from three unrelated
suppliers accounted for approximately 39% of total purchases. In 1993, purchases
from two related parties through common ownership accounted for approximately
22% of total purchases.
Note 13 - Commitments and contingencies
In August 1995, the Company entered into a three-year noncancelable lease
agreement for an office and warehouse building in Miami, Florida, at an annual
rental of approximately $102,000, increasing annually for changes in the
consumer price index. The lease requires the Company to pay for its
proportionate share of real estate taxes, insurance and other taxes and
assessments.
The Company leases warehouse and office space in Sao Paulo, Brazil at an annual
rental of $36,000 and $48,000 respectively. These leases expire June 30, 1997
and February 28, 1997, respectively.
The Company leases manufacturing and administrative space in Ilheus, Brazil at a
monthly rental of $13,500. This lease expires December 31, 1996.
In addition, the Company has various other operating lease agreements primarily
involving automobiles and office equipment. These leases are noncancelable and
expire at various dates through 1998.
Minimum lease commitments under the above operating leases (inclusive of the
warehouse and office lease) as of December 31, 1995 are as follows:
1996 $ 340,500
1997 148,850
1998 67,300
---------
$ 556,650
---------
Rent expense under all operating leases in 1995, 1994 and 1993, was
approximately $185,300, $113,000 and $11,000, respectively.
Pursuant to an amendment of the articles of incorporation of the Subsidiary, the
Company is obligated to contribute $1,100,000 in exchange for common shares on
or before December 18, 1996.
The Company has executed a subordination agreement with one of its vendors and
the shareholders of the Company, in exchange for lines-of-credit aggregating
$1,500,000 for product purchases. As required by the agreements, the note
payable to a related party aggregating $1,911,917, is subordinate to all
obligations to the vendor by the Company. Additionally, a shareholder of the
Company is a guarantor for the payment of product purchases up to a maximum
amount of $1,500,000. Included in trade accounts payable at December 31, 1995,
are amounts payable to the vendor aggregating $815,000 for product purchases.
F-14
VITECH AMERICA, INC.
Notes to Financial Statements (continued)
December 31, 1995
Vitech is subject to inspections and potential claims arising out of the conduct
of its business, principally in connection with tax, labor and government
regulatory matters. While the ultimate results of inspections, claims,
administrative processes and lawsuits cannot be determined, management does not
expect that the resolution of such matters will have a material effect on the
financial position or future results of operations of the Company.
On June 28, 1996, the Company secured a line-of-credit in the amount of $1
million expiring June 30, 1997 to support letters-of-credit which the Company
may issue to secure purchase obligations. The agreement requires the Company to
provide a cash deposit equivalent to 30% of each letter-of-credit. The credit
agreement is secured by a lien on all personal property (as defined) owned by
the Company.
Note 14 - Public offering
The Company is in negotiations with a certain underwriter relating to a
contemplated public offering.
Note 15 - Subsequent events
Common stock
On July 26, 1996, the Company's Board of Directors approved the following
resolutions: (i) an increase in the number of authorized common shares to
30,000,000 and a split to effect the issuance of 8,000 shares of common stock in
exchange for each share of common stock then outstanding and (ii) the
authorization of 3,000,000 shares of no par value preferred stock. The effect of
the stock split has been presented retroactively to the date of inception in the
accompanying financial statements.
Private placement
On July 26, 1996 the Company issued a private placement memorandum offering a
minimum of twenty and a maximum of sixty units (the "Units") for $50,750 per
unit. Each unit consists of $50,000 principal amount of 9% senior debentures,
1,000 common stock purchase warrants, and 500 shares, no par value per share, of
the company's common stock. The principal amount of, and the accrued and unpaid
interest on, the debentures will be payable on the date which is the earlier of
(i) fifteen months from the date of the initial closing of the offering and (ii)
the date of the closing of a public offering of securities of the Company.
Interest on the Debentures will accrue at the rate of 9% per annum payable
semi-annually on July 31, and January 31, beginning on January 31, 1997. The
debentures are not otherwise redeemable prior to maturity. Each warrant entitles
the registered holder thereof to acquire from the Company one share of common
stock, no par value per share of the Company at an exercise price per share of
$10.00, subject to adjustment as provided therein, for the period commencing on
the date of the initial closing and terminating on the third anniversary of such
date.
On August 30, 1996, the Company completed this offering to eleven accredited
investors providing for the sale of 27.3 units for $50,750 per unit.
F-15
VITECH AMERICA, INC.
Notes to Financial Statements (continued)
December 31, 1995
Stock options
On August 20, 1996 the Board of Directors and the shareholders of the Company
adopted a stock option plan (the Plan). The Plan provides for the grant of
options to purchase up to 200,000 shares of common stock to employees, officers,
directors, and consultants of the Company at a price to be determined by the
board of directors (as defined). Options may be either incentive stock options
or non-qualified options. Incentive stock options may be granted only to
employees of the Company, while non-qualified options may be issued to
non-employee directors, consultants, and others, as well as to employees of the
Company.
On September 3, 1996, the Company authorized the issuance of options to purchase
up to 4,000,000 shares of Common Stock. 2,040,000 options were issued to Georges
C. St. Laurent, III, the Company's Chairman of the Board and Chief Executive
Officer and 1,960,000 options were issued to William C. St. Laurent, the
Company's President and Chief Operating Officer. 1,000,000 options are
exercisable at $15.00 per share, another 1,000,000 options are exercisable at
$20.00 per share and the remaining 2,000,000 options are exercisable at $25.00
per share. The options are exercisable for a four year period beginning on the
closing of the Company's proposed initial public offering.
F-16
VITECH AMERICA, INC.
Balance Sheet
June 30, 1996
(Unaudited)
Assets
Current assets
Cash and cash equivalents $ 204,085
Accounts receivable, net 12,921,998
Inventories 10,247,584
Deferred tax assets, net 92,530
Other current assets 174,238
----------
Total current assets 23,640,435
Property and equipment, net 1,795,399
Land held for development 586,640
Other assets 128,250
----------
$ 26,150,724
----------
Total assets
Liabilities and Shareholders' Equity
Current liabilities
Trade accounts payable $ 7,474,165
Borrowings under lines-of-credit 892,210
Accrued expenses 138,850
Due to shareholder 3,429
Sales tax payable 1,027,439
Income taxes payable 1,241,135
Notes payable - related party 2,661,917
Short-term debt 2,602,349
----------
Total current liabilities 16,041,494
----------
Commitments and contingencies
Shareholders' equity
Common stock, no par value, 30,000,000 shares
authorized, 8,000,000 shares issued and outstanding 306,398
Retained earnings 9,802,832
----------
Total shareholders' equity 10,109,230
----------
Total liabilities and shareholders' equity $ 26,150,724
----------
See notes to financial statements
F-17
VITECH AMERICA, INC.
Statement of Income
(Unaudited)
[Enlarge/Download Table]
Six Months Ended
June 30,
------------------------------------
1995 1996
----------------- ----------------
Net sales (including $19,588,155 and $8,066,878
to an affiliate in 1995 and 1996, respectively) $ 20,457,048 $ 26,080,299
Cost of sales 19,067,617 18,688,336
----------------- ----------------
Gross profit 1,389,431 7,391,963
Selling, general and administrative expenses 819,380 2,462,646
----------------- ----------------
Income from operations 570,051 4,929,317
----------------- ----------------
Other expenses
Discount on sale of receivables - 1,166,342
Interest expense 163,978 522,605
Foreign currency exchange losses - 373,627
----------------- ----------------
Total other expenses 163,978 2,062,574
----------------- ----------------
Income before provision for income taxes 406,073 2,866,743
Provision for income taxes 8,352 162,603
----------------- ----------------
Net income $ 397,721 $ 2,704,140
----------------- ----------------
Net Income per common and common share equivalent $ 0.05 $ 0.31
----------------- ----------------
Weighted average common and common share
equivalents outstanding 8,041,988 8,503,853
----------------- ----------------
See notes to financial statements
F-18
VITECH AMERICA, INC.
Statement of Changes in Shareholders' Equity
For the Six Months Ended June 30, 1996
(Unaudited)
[Enlarge/Download Table]
Common Retained
Stock Earnings Total
-------------- --------------- ---------------
Balance at December 31, 1995 $ 306,398 $ 7,098,692 $ 7,405,090
Net income for the six months ended June 30, 1996 - 2,704,140 2,704,140
-------------- --------------- ---------------
Balance at June 30, 1996 $ 306,398 $ 9,802,832 $ 10,109,230
-------------- --------------- ---------------
See notes to financial statements
F-19
VITECH AMERICA, INC.
Statement of Cash Flows
(Unaudited)
[Enlarge/Download Table]
Six Months Ended
June 30,
--------------------------------------
1995 1996
----------------- ------------------
Cash flows from operating activities
Net income $ 397,721 2,704,140
----------------- ------------------
Adjustments to reconcile net income to net cash provided
(used) by operating activities
Depreciation 9,936 72,065
Changes in assets and liabilities
Accounts receivable (3,834,757) 2,424,653
Inventories 1,589,021 (4,668,610)
Deferred tax asset - 10,000
Other assets (8,472) (50,437)
Trade accounts payable 820,120 443,964
Accrued expenses 18,633 (23,098)
Due to shareholder 71,874 (121,004)
Income and other taxes payable 8,352 1,208,183
----------------- ------------------
Total adjustments (1,325,293) (704,284)
----------------- ------------------
Net cash provided (used) by operating activities (927,572) 1,999,856
----------------- ------------------
Cash flows (used) by investing activities
Purchases of property and equipment (47,286) (1,566,457)
----------------- ------------------
Cash flows from financing activities
Deferred offering costs - (22,961)
Proceeds under lines of credit and other borrowings - 927,722
Repayment of notes payable - related party - (1,250,000)
Repayment of short term debt (496,919) -
Proceeds from notes payables 1,777,591 -
----------------- ------------------
Net cash provided (used) by financing activities 1,280,672 (345,239)
----------------- ------------------
Net increase in cash and cash equivalents 305,814 88,160
Cash and cash equivalents - beginning of period 45,906 115,925
----------------- ------------------
Cash and cash equivalents - end of period $ 351,720 204,085
----------------- ------------------
Supplemental disclosure of cash flow information
Cash paid during the period for
Interest $ 154,226 388,627
----------------- ------------------
Income taxes $ - 189,826
----------------- ------------------
Supplemental disclosure of non-cash investing activity
During the period ended June 30, 1996, the Company's
subsidiary received property valued at $417,258 as
settlement of an outstanding accounts receivable
See notes to financial statements
F-20
VITECH AMERICA, INC.
Notes to Financial Statements
(unaudited)
Note 1 - Basis of presentation
The accompanying unaudited financial statements of Vitech America, Inc. (the
Company) have been prepared in accordance with generally accepted accounting
principles for interim financial information. In the opinion of management, all
adjustments necessary for a fair presentation of the interim financial
statements have been included, and all adjustments are of a normal and recurring
nature. The financial statements as of and for the interim period ended June 30,
1996 should be read in conjunction with the Company's financial statements as of
and for the year ended December 31, 1995. Operating results for the six months
ended June 30, 1996 are not necessarily indicative of the results that may be
expected for the year ended December 31, 1996.
The financial statements for 1996 include the accounts of the Company and its
subsidiary, Bahiatech Technologia, Ltd. The 1995 financial statements include
only the accounts of the company individually, since the subsidiary was not
operational until the second half of 1995.
Note 2 - Inventories
Inventories as of June 30, 1996 consisted of the following:
Finished goods $ 3,716,634
Components 4,630,724
Packaging 41,557
Consigned inventories 1,858,669
-----------
$ 10,247,584
-----------
Note 3 - Property and equipment
Property and equipment at June 30, 1996, are summarized as follows:
Property $ 417,258
Furniture and office equipment 872,084
Warehouse equipment 591,524
Transportation equipment 34,373
----------
1,915,239
Less accumulated depreciation 119,840
----------
$ 1,795,399
----------
Note 4 - Note payable - related party
The Company had the following notes payable to an affiliate of the shareholders'
at June 30, 1996:
6% promissory note payable on demand (assumed
from Vitech Vitoria Tecnologia, S.A.) $ 661,917
Promissory note payable, due on demand, bearing
interest at 9% 2,000,000
-----------
$ 2,661,917
-----------
F-21
VITECH AMERICA, INC.
Notes to Financial Statements (continued)
(Unaudited)
During 1996, the Company incurred interest expense of $134,214, in connection
with these obligations.
In connection with the 9% note payable, the Company granted the lender the right
to convert the note into 5.925% of the outstanding common stock of the Company.
Note 5 - Short-term debt
Short-term debt consists of the following at June 30, 1996:
Bank loans payable (resulting from discounted
accounts receivable) due banks bearing an
average interest rate of 3% per month $ 602,349
Note payable - Meris Financial Incorporated 2,000,000
---------
$2,602,349
---------
Note 6 - Revolving lines-of-credit
The Company had the following lines-of-credit borrowings with various banks at
June 30, 1996:
$200,000 line-of-credit, due June 1997, bearing
interest at the prime rate plus 2% $ 100,000
Various bank borrowings expiring through September 792,210
1996 at interest rates ranging from 3% to 4% per month --------
$ 892,210
--------
The prime rate was 8.25% at June 30, 1996. The line-of-credit is collateralized
by various Company assets and is personally guaranteed by the Company's
shareholders.
Note 7 - Shareholders' equity and dividends
All references to the number of shares of the Company's common stock have been
retroactively restated in the accompanying financial statements to give effect
to an eight thousand-for-one stock split.
As of June 30, 1996, shareholders' equity consisted of $9,391,471 in retained
earnings generated from subsidiary operations. The retained earnings generated
by subsidiary operations and its capital as of June 30, 1996 is considered
national capital and is not eligible for distribution in U.S. dollars to its
foreign shareholder through the Central Bank of Brazil.
Through December 31, 1995, cash dividends credited or paid to shareholders
outside of Brazil were subject to a withholding tax of 15%. Effective January 1,
1996 the 15% withholding tax was repealed. In addition, tax exemption benefits
amounting to $3,441,932 cannot be distributed as dividends and are segregated
for capital reserves and offsetting accumulated losses in accordance with
Brazilian law.
F-22
VITECH AMERICA, INC.
Notes to Financial Statements (continued)
(Unaudited)
Note 8 - Sale of receivables
During the period January 1, 1996 through June 30, 1996, the Company's
subsidiary sold to an affiliate $10,410,394 of its trade accounts receivable for
$9,244,052 and, accordingly, recognized a discount on the sale in the amount of
$1,166,342, which is reflected in the accompanying statement of income. At June
30, 1996, the affiliate has collected $2,171,665 of the $10,410,394 of purchased
receivables.
F-23
No dealer, salesman, or any other person has been authorized to give any
information or to make any representation not contained in this Prospectus in
connection with the offer contained herein, and, if given or made, such
information or representation must not be relied upon as having been authorized
by the Company or any Underwriter. This Prospectus does not constitute an offer
of any securities other than those to which it relates or an offer to sell, or a
solicitation, in any jurisdiction to any person to whom it is unlawful to make
such offer or solicitation. The delivery of this Prospectus, under any
circumstances, at any time, does not imply that the information contained herein
is correct as of any time subsequent to its date.
------------
TABLE OF CONTENTS
Page
Prospectus Summary.......................... 4
Risk Factors................................ 8
Use of Proceeds............................. 16
Dividend Policy............................. 17
Dilution.................................... 17
Capitalization.............................. 18
Selected Financial Data..................... 18
Management's Discussion and
Analysis of Financial Condi-
tion and Results of Operation............. 20
Business.................................... 27
Management.................................. 35
Certain Transactions........................ 40
Concurrent Offering......................... 42
Principal Shareholders...................... 43
Description of Securities................... 44
Shares Eligible for Future
Sale....................................... 47
Underwriting................................ 50
Legal Matters............................... 52
Experts..................................... 52
Additional Information...................... 53
Index to Financial Statements............... F-1
Until _________, 1996 (25 days after the commencement of this offering), dealers
effecting transactions in registered securities, whether or not participating in
the distribution, may be required to deliver a Prospectus. This is in addition
to the obligation of dealers to deliver a Prospectus when acting as underwriters
and with respect to their unsold subscriptions.
2,000,000 Shares
VITECH AMERICA, INC.
Common Stock
-----------
PROSPECTUS
H.J. MEYERS & CO., INC.
[ALTERNATE PAGE]
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED September ___, 1996
Prospectus
40,944 Shares of Common Stock
VITECH AMERICA, INC.
This Prospectus relates to 40,944 shares of common stock, no par value
(the "Common Stock") of Vitech America, Inc., a Florida corporation (the
"Company"), held by eleven (11) holders (the "Selling Shareholders"). As to
40,944 shares of Common Stock offered hereby (i) 13,648 shares of Common Stock
held by the Selling Shareholders and (ii) up to an aggregate of 27,296 shares of
Common Stock are issuable upon the exercise of certain warrants ("Warrants")
which entitles the holder to purchase one share of Common Stock at $10.00 per
share. The Selling Shareholders' Common Stock and Warrants were issued to the
Selling Shareholders in a private placement by the Company in August 1996 (the
"Private Placement"). See "Selling Shareholders" and "Plan of Distribution."
The Common Stock offered by the Selling Shareholders pursuant to this
Prospectus may be sold from time to time by the Selling Shareholders or by their
transferees. The distribution of the Common Stock offered hereby by the Selling
Shareholders may be effected in one or more transactions that may take place on
the over-the-counter market, including ordinary brokers' transactions, privately
negotiated transactions or through sales to one or more dealers for resale of
such securities as principals, at market prices prevailing at the time of sale,
at prices related to such prevailing market prices or at negotiated prices.
Usual and customary or specifically negotiated brokerage fees or commissions may
be paid by the Selling Shareholders.
The Selling Shareholders, and intermediaries through whom such
securities are sold, may be deemed underwriters within the meaning of the
Securities Act of 1933, as amended (the "Securities Act"), with respect to the
securities offered, and any profits realized or commissions received may be
deemed underwriting compensation. The Company has agreed to indemnify the
Selling Shareholders against certain liabilities, including liabilities under
the Securities Act.
The Company will not receive any of the proceeds from the sale of
Common Stock by the Selling Shareholders. See "Selling Shareholders" and "Plan
of Distribution."
On the date of this Prospectus, a registration statement under the
Securities Act with respect to an underwritten public offering by the Company of
2,000,000 shares of
1
Common Stock was declared effective by the Securities and Exchange Commission
(the "Commission"). The Company will receive approximately $___________ in net
proceeds from such offering (assuming no exercise of the Underwriter's
over-allotment option) after payment of underwriting discounts and commissions
and estimated expenses of Such offering.
----------------------------------
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK AND
IMMEDIATE SUBSTANTIAL DILUTION. SEE "RISK FACTORS."
----------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
----------------------------------
The date of this Prospectus is, _____________, 1996
2
[ALTERNATE PAGE]
SELLING SHAREHOLDERS
An aggregate of up to 40,944 shares of Selling Shareholders' Common
Stock may be offered for resale by the investors listed below.
The following table sets forth certain information with respect to each
Selling Shareholder for whom the Company has registered Selling Shareholders'
Common Stock for resale to the public. The Company will not receive any of the
proceeds from the sale of such Common Stock. There are no material relationships
between any of the Selling Shareholders and the Company or any of its
predecessors or affiliates, nor have any such material relationships existed
within the past three years except as footnoted below. Except as described
below, no Selling Shareholder will beneficially own any Common Stock of the
Company if the Selling Shareholders' Common Stock is sold.
[Enlarge/Download Table]
Number of Shares of Number of Shares Number of Shares of
Common Stock Owned of Common Stock Common Stock Owned
Selling Shareholder Prior to Offering to be Sold After Offering
------------------- ----------------- ---------- --------------
Dennis and B. Elaine Brubaker 3,000 3,000 -0-
Curry Family Trust 3,000 3,000 -0-
Troy D. Wiseman 1,500 1,500 -0-
Arab International Trust 3,000 3,000 -0-
CNCA SCT Brunoy 1,500 1,500 -0-
BIKUBEN GIROBANK A/S 3,000 3,000 -0-
Tresley, David and Cindy 12,000 12,000 -0-
Robert P. Bain 3,000 3,000 -0-
Geoffrey del Marmol 1,944 1,944 -0-
Swedbank (Luxembourg) S.A. 7,500 7,500 -0-
Daniel Phelan 1,500 1,500 -0-
------ ------
Total 40,944 40,944
3
[ALTERNATE PAGE]
PLAN OF DISTRIBUTION
The sale of the Common Stock by the Selling Shareholders may be
effected from time to time in transactions (which may include block transactions
by or for the account of the Selling Shareholders) in the over-the-counter
market or in negotiated transactions, through the writing of options on the
securities, a combination or such methods of sale or otherwise. Sales may be
made at fixed prices which may be changed, at market prices prevailing at the
time of sale, or at negotiated prices.
The Selling Shareholders may effect such transactions by selling their
Common Stock directly to purchasers, through broker-dealers acting as agents for
the Selling Shareholders or to broker-dealers who may purchase Common Stock as
principals and thereafter sell the Common Stock from time to time in the
over-the-counter market in negotiated transactions or otherwise. Such
broker-dealers, if any, may receive compensation in the form of discounts,
concessions or commissions from the Selling Shareholders or the purchasers for
whom such broker-dealers may act as agents or to whom they may sell as
principals or otherwise (which compensation as to a particular broker-dealer may
exceed customary commissions).
Each Selling Shareholder has agreed not to sell, transfer, or otherwise
dispose publicly the Selling Shareholders' Common Stock for a period of 30 days
after the date of this Prospectus.
Under applicable rules and regulations under the Securities Exchange
Act of 1934 ("Exchange Act"), any person engaged in the distribution of the
Selling Shareholders' Common Stock may not simultaneously engage in market
making activities with respect to any securities of the Company for a period of
at least two (and possibly nine) business days prior to the commencement of such
distribution. Accordingly, in the event that H.J. Meyers & Co., Inc., the
Underwriter of the Company's initial public offering, is engaged in a
distribution of the Selling Shareholders' Common Stock it will not be able to
make a market in the Company's Common Stock during the applicable restrictive
period. However, the Underwriter has not agreed to nor is it obliged to act as
broker-dealer in the sale of the Selling Shareholders' Common Stock. The Selling
Shareholders may be required, and in the event the Underwriter is a market
maker, will likely be required to sell such Common Stock through another
broker-dealer. In addition, each Selling Shareholder desiring to sell Common
Stock will be subject to the applicable provisions of the Exchange Act and the
rules and regulations thereunder, including without limitation, Rules l0b-6 and
l0b-7, which provisions may limit the timing of the purchases and sales of the
Company's Common Stock by such Selling Shareholders.
4
The Selling Shareholders and broker-dealers, if any, acting in
connection with such sale might be deemed to be underwriters within the meaning
of Section 2(11) of the Securities Act and any commission received by them and
any profit on the resale of the securities might be deemed to be underwriting
discounts and commissions under the Securities Act.
[ALTERNATE PAGE]
CONCURRENT PUBLIC OFFERING
On the date of this Prospectus, a Registration Statement was declared
effective under the Securities Act with respect to an underwritten offering by
the Company of 2,000,000 shares of Common Stock by the Company and up to 300,000
additional shares of common stock to cover over-allotments, if any.
5
[ALTERNATE PAGE]
-------------------------------------
No dealer, salesperson or other person has been authorized to give any
information or to make any representations other than those contained in this
Prospectus, and, if given or made, such information or representations must not
be relied upon as having been authorized by the Company or the Underwriter. This
Prospectus does not constitute an offer to sell or a solicitation of an offer to
buy any security other than the securities offered by this Prospectus, or an
offer to sell or a solicitation of an offer to buy any securities by any person
in any jurisdiction in which such offer or solicitation would be unlawful.
Neither the delivery of this Prospectus nor any sale made hereunder shall, under
any circumstances, imply that the information in this Prospectus is correct as
of any time subsequent to the date of this Prospectus.
--------------------------
TABLE OF CONTENTS
Page
Prospectus Summary ..................... __
Risk Factors ........................... __
Use of Proceeds ........................ __
Dividend Policy ........................ __
Dilution................................ __
Capitalization . . . . . . . . . ...... __
Selected Financial Data . . . ......... __
Management's Discussion and Analysis
of Results of Operations and Financial
Condition . . . . . . . . . . ....... __
Business . . . . . . . . . . . . ....... __
Management . . . . . . . . . . . ....... __
Certain Transactions . . . . . . ....... __
Principal Shareholders . . . . . ....... __
Selling Shareholders . . . . . .........
Concurrent Public Offering . . . ....... __
Description of Securities . . . ....... __
Shares of Eligible for Future Sale...... __
Plan of Distribution . . . . . . ....... __
Legal Matters . . . . . . . . . ....... __
Experts. . . . . . . . . . . . . ....... __
Additional Information . . . . . ....... __
Index to Financial Statements . ........ __
------------------------------
Until ___, 1996, (25 days after the date of this Prospectus, dealers effecting
transactions in registered securities, whether or no participating in the
distribution, may be required to deliver a Prospectus when acting as
underwriters and with respect to their unsold subscriptions.
VITECH AMERICA, INC.
40,944 of Common Stock
--------------------------------
PROSPECTUS
---------------------------------
_________________, 1996
6
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution.*
Registration Fees - Securities and
Exchange Commission $8,899.88
Filing Fee - National Association
Securities Dealers $ _______
Transfer Agent Fees $ 3,500
Cost of Printing and Engraving $ 80,000*
Legal Fees and Expenses $ 100,000*
Accounting Fees and Expenses $ 90,000*
Blue Sky Fees and Expenses $ 35,000*
Miscellaneous $ _______
Total $ 350,000*
*Estimated
Item 14. Indemnification of Directors and Officers.
The Articles of Incorporation of the Company provide that every
director and every officer of the corporation, every former director and former
officer of the corporation, and every person who may have served at the request
of the corporation as a director or officer of another corporation in which the
corporation owns shares of capital stock or of which it is a creditor, and the
heirs, executors, administrators, and assignors of all of the above persons
shall be indemnified by the corporation for expenses actually and necessarily
incurred by him in connection with the defense of any action, suit, or
proceeding to which he may be a party by reason of his being or having been a
director or officer of the corporation or of such other corporation regardless
of whether or not he continues to be a director or officer at the time of
incurring such expenses, except with respect to matters as to which he shall be
finally adjudged in such action, suit, or proceeding to be liable for negligence
or misconduct in the performance of his duty. The rights of indemnification set
forth in the Articles of Incorporation shall not be exclusive of any other
rights to which such person may be entitled by law or otherwise.
The provisions of the Florida Business Corporation Act that authorize
indemnification do not eliminate the duty of care of the director and, in
appropriate circumstances, equitable remedies such as injunctive or other forms
of nonmonetary relief will remain available under Florida law. In addition, each
director will continue to be subject to liability for: (a) violations of
criminal laws, unless the director had reasonable cause to believe his conduct
was lawful or had no reasonable cause to believe his conduct was unlawful; (b)
deriving an improper personal benefit from a transaction; (c) voting for, or
assenting to, an unlawful distribution; and (d) willful misconduct or conscious
disregard for the best interests of the Company in a proceeding by, or in the
right of, the Company to procure a judgment in its favor or in a proceeding by,
or in the right of, a shareholder. The statute does not effect the director's
responsibilities under any other law.
II-1
Item 15. Recent Sales of Unregistered Securities.
On June 24, 1993, the Company issued 4,080,000 shares of its Common
Stock to Georges St. Laurent, III in exchange for inventory, property, equipment
and other assets having a value of approximately $306,000. On June 24, 1993, the
Company issued 1,312,000 shares, 1,304,000 shares , and an additional 1,304,000
shares, respectively, to William St. Laurent, and Dr. Jose Roberto Rodrigues,
Attorney for Trustee of Nicolas St. Laurent, Dr. Jose Roberto Rodrigues,
Attorney for Trustee of Alexander St. Laurent, respectively.
In August 1996, the Company completed a Private Placement to 11
accredited investors providing for the sale of 27.3 units for $50,750 per unit.
Each unit consisted of $50,000 principal amount of senior debentures, 1,000
Common Stock purchase warrants and 500 shares of the Company's Common Stock.
Registration under the Securities Act of 1933 as amended (the
"Securities Act") of the securities issued in the above transaction was not
required because such securities were issued in transactions not involving any
"public offering" within the meaning of Section 4(2) of said Act.
Item 16. Exhibits and Financial Statement Schedules.
a. The exhibits constituting part of the Registration Statement are as
follows:
(1.1) Form of Underwriting Agreement.
(1.2) Form of Representative's Warrant Agreement.
(3.1) Articles of Incorporation dated June 24, 1993.
(3.2) Amendments to the Company Articles of Incorporation dated November 13,
1995 and July 26, 1996.
(3.3) By-Laws of the Company.
(4.1) Form of Common Stock Certificate*
(5) Opinion of Atlas, Pearlman, Trop & Borkson, P.A. concerning legality of
shares being registered pursuant to this Registration Statement.*
(10.1) Stock Option Plan.
(10.2) Employment Agreement between the Company and William St. Laurent, dated
as of January 1, 1996.
(10.3) Employment Agreement between the Company and Georges C. St. Laurent,
III, dated as of January 1, 1996.
(10.5) Option Agreements for William and Georges St. Laurent.
II-2
(10.6) Promissory Note as amended from the Company to Georges St. Laurent, Jr.
(21) Subsidiaries of the Company.
(23.1) Consent of Pannell Kerr Forster PC.
(23.2) The consent of Atlas, Pearlman, Trop & Borkson, P.A., counsel for the
Company, is included in an opinion filed in Exhibit 5.1.*
------------------
* To be filed by amendment.
Item 17. Undertakings.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officer, and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that, in the opinion of the Securities and Exchange Commission,
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer, or controlling person in connection with the 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 Securities Act and will be governed by the final
adjudication of such issue.
The undersigned registrant hereby undertakes:
(a) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement which:
(i) includes any prospectus required by section 10(a)(3) of
the Securities Act of 1993;
(ii) reflects in the prospectus any facts or events arising
after the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement.
(iii) includes any material information with respect to the
plan of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement.
(b) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(c) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
II-3
(d) To provide to the underwriter at the closing specified in the
underwriting agreements certificates in such denominations and registered in
such names as required by the underwriter to permit prompt delivery to each
purchaser.
(e) (i) that for purposes of determining any liability under the
Securities Act, 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 shall be
deemed to be part of this registration statement as of the time it was
declared effective.
(ii) that for the purpose of determining any liability under
the Securities Act, each post-effective amendment that contains a form
of prospectus shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide
offering thereof.
II-4
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized in the City of Miami, State
of Florida on the 5th day of September, 1996.
VITECH AMERICA, INC.
By: /s/ William C. St. Laurent
----------------------------------
WILLIAM C. ST. LAURENT, President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
[Download Table]
Signature Title Date
--------- ----- ----
/s/ William C. St. Laurent President and Director September 5, 1996
--------------------------------------- (Principal Executive
WILLIAM C. ST. LAURENT Officer)
/s/ Mitchell Asher Vice President and
--------------------------------------- Director September 5, 1996
MITCHELL ASHER Chief Financial Officer
(Principal Accounting
Officer)
/s/ Georges C. St. Laurent III Chief Executive Officer September 5, 1996
--------------------------------------- and Director
GEORGES C. ST. LAURENT, III
II-5
EXHIBIT INDEX
Exhibit Description
------- -----------
(1.1) Form of Underwriting Agreement.
(1.2) Form of Representative's Warrant Agreement.
(3.1) Articles of Incorporation dated June 24, 1993.
(3.2) Amendments to the Company Articles of Incorporation dated November 13,
1995 and July 26, 1996.
(3.3) By-Laws of the Company.
(4.1) Form of Common Stock Certificate*
(5) Opinion of Atlas, Pearlman, Trop & Borkson, P.A. concerning legality of
shares being registered pursuant to this Registration Statement.*
(10.1) Stock Option Plan.
(10.2) Employment Agreement between the Company and William St. Laurent, dated
as of January 1, 1996.
(10.3) Employment Agreement between the Company and Georges C. St. Laurent,
III, dated as of January 1, 1996.
(10.5) Option Agreements for William and Georges St. Laurent.
(10.6) Promissory Note as amended from the Company to Georges St. Laurent, Jr.
(21) Subsidiaries of the Company.
(23.1) Consent of Pannell Kerr Forster PC.
(23.2) The consent of Atlas, Pearlman, Trop & Borkson, P.A., counsel for the
Company, is included in an opinion filed in Exhibit 5.1.*
------------------
* To be filed by amendment.
Dates Referenced Herein and Documents Incorporated by Reference
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