PROSPECTUS
675,000 SHARES OF COMMON STOCK
SURREY, INC.
Surrey, Inc. is offering to sell up to a maximum of 675,000 shares
of Common Stock under this prospectus. The shares of Common Stock offered will
be issued upon the exercise of the Surrey Redeemable Common Stock Purchase
Warrants. The Warrants were issued as part of the initial public offering in
December of 1997. At that time, we agreed to use our best efforts to maintain an
effective registration statement relating to the Common Stock to be issued upon
exercise of the Warrants. The Common Stock and Warrants are currently trading on
the Nasdaq SmallCap Market(SM) under the symbol SOAP for the Common Stock and
SOAPW for the Warrants.
The 675,000 shares of Common Stock offered pursuant to this
prospectus are being offered and sold by Surrey. The shares of Common Stock
offered under this prospectus will be issued to any Warrant holder upon exercise
of any of the Warrants and payment of the Warrant exercise price. The shares of
Common Stock will not be issued through an underwriter, dealer or broker.
The maximum of 675,000 shares of Common Stock being offered under
this prospectus is equal to the number of Warrants sold in our initial public
offering. Each Warrant grants the right to purchase one share of Common Stock,
which number may increase or decrease as described in this prospectus. The
number of shares of Common Stock may increase or decrease if we pay a dividend
in Common Stock, undertake a stock split, undertake a reverse stock split, or
undertake a reclassification of our Common Stock. In such case, the holder of a
Warrant will be entitled to receive the number of shares of Common Stock which
that holder would have owned if the Warrant holder would have exercised his or
her Warrant prior to any of the events described above.
THE INVESTORS SHOULD REVIEW THE INFORMATION CONTAINED IN THE SECTION
OF THIS PROSPECTUS ENTITLED "RISK FACTORS" ON PAGE 4.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE
SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED
UPON THE ADEQUACY OR ACCURACY OF THE PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
You should rely only on the information contained in this document
or that we have referred you to. We have not authorized anyone to provide you
with information that is different. There may be changes relating to Surrey or
its business since the date of this prospectus or the date of any document that
we have referred you to that are not reflected in this prospectus or any
document that we have referred you to. This prospectus is not an offer to sell
these securities and it is not soliciting an offer to buy these securities in
any state where the offer or sale is not permitted. This prospectus only relates
to the Common Stock. All the information that is important to you may not be
contained in this prospectus. For further information you should refer to the
registration statement including all exhibits filed with the Securities and
Exchange Commission ("SEC"). You may obtain copies of that information in a
manner described in the section of this prospectus entitled "Available
Information."
Surrey's executive offices are located at 13110 Trails End Road,
Leander, Texas 78641, and its telephone number is (512) 267-7172.
The date of this Prospectus is December 10, 1998.
AVAILABLE INFORMATION
Surrey is a reporting company under the Securities Exchange Act of
1934. Surrey files annual, quarterly and special reports, proxy statements and
other information electronically with the SEC. Such material can be inspected
and copied at the public reference facilities maintained by the Commission at
450 Fifth Street, N.W., Washington, D.C. 20549. You may obtain information
relating to the operation of the Public Reference Room by calling the SEC at
1-800-SEC-0330. You may also inspect and copy such information at the SEC's
regional offices at 7 World Trade Center, 13th Floor, New York, New York 10048
and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661-2511. You may obtain copies of such material by writing to the Public
Reference Section of the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549.
You may also access such material through the Commission's home page on the
Internet at http://www.sec.gov. The Common Stock of Surrey is traded on the
Nasdaq SmallCap Market(SM). Surrey's reports, proxy statements and other
information may be inspected at the National Association of Securities Dealers,
Inc. at 1735 K Street, N.W., Washington, D.C. 10006.
For further information with respect to Surrey and the Common Stock
offered hereby, we refer you to the registration statement, including the
exhibits filed or incorporated as a part of the registration statement. You may
inspect or obtain copies of the registration statement at prescribed rates from,
the Public Reference Section of the SEC at the address set forth above.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
This prospectus is part of a registration statement Surrey filed
with the SEC to register the Surrey Common Stock to be issued upon exercise of
the Warrants offered under this prospectus. It does not repeat important
information that you can find in the registration statement or in the reports or
other documents that Surrey files with the SEC. The SEC allows Surrey to
"incorporate by reference" the information it files with them. This means that
Surrey can disclose important information to you by referring to other documents
that are legally considered to be part of this prospectus, and later information
that it files with the SEC will automatically update and supercede the
information in this prospectus and the documents listed below. Surrey
incorporates by reference the documents listed below and any future filings made
with the SEC under Section 13(a), 13(c), 14, or 15(d) of the Securities Exchange
Act of 1934 until all of the Common Stock offered under this prospectus is sold:
1. Surrey's registration statement on Form SB-2, filed with the
SEC on September 16, 1997 and all amendments thereto;
2. Surrey's Annual Report on Form 10-KSB for the fiscal year
ended December 31, 1997;
3. Surrey's Proxy Statement for the Annual Meeting of
Shareholders held April 30, 1998;
4. Surrey's Quarterly Report on Form 10-QSB for the fiscal
quarter ended March 31, 1998;
5. Surrey's Quarterly Report on Form 10-QSB for the fiscal
quarter ended June 30, 1998;
6. Surrey's Quarterly Report on Form 10-QSB for the fiscal
quarter ended September 30, 1998;
7. The description of Surrey's Common Stock and Warrants set
forth in Surrey's registration statement on Form 8-A filed
with the SEC on November 18, 1997; and
8. Surrey's Current Report on Form 8-K filed with the SEC on
November 25, 1998.
You may request a copy of these filings at no cost by writing or
telephoning Surrey at the following address: Surrey, Inc., Investor Relations,
13110 Trails End Road, Leander, Texas 78641, (Telephone: 512-267-7172).
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RISK FACTORS
AN INVESTMENT IN SURREY COMMON STOCK INVOLVES VARIOUS RISKS. THIS
PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF THE FEDERAL
SECURITIES LAWS. YOU ARE CAUTIONED THAT ANY SUCH FORWARD-LOOKING STATEMENTS ARE
NOT GUARANTEES OF FUTURE PERFORMANCE AND INVOLVE RISKS AND UNCERTAINTIES. ACTUAL
EVENTS OR RESULTS MAY DIFFER MATERIALLY FROM THOSE DISCUSSED IN THE
FORWARD-LOOKING STATEMENTS AS THE RESULT OF VARIOUS FACTORS, INCLUDING THE
FACTORS REFERENCED IN SURREY'S DOCUMENTS THAT ARE FILED WITH THE SEC AND WHICH
ARE INCORPORATED BY REFERENCE INTO THIS PROSPECTUS. IN DECIDING WHETHER OR NOT
TO INVEST IN SURREY COMMON STOCK, YOU SHOULD CONSIDER THE FOLLOWING RISKS
FACTORS:
MANAGEMENT OF GROWTH
We are currently in the process of and intend to continue the
significant expansion of our business over the next several years. The Company
currently has a goal to double its production over the next several years
through a combination of expanded manufacturing and production capacity, use of
additional professional full-time sales personnel, the addition of new products
such as a line of high end scented candles and a line of traditional bar soap.
In addition, Surrey intends to focus on the growth and promotion of its higher
margin products.
We recently completed the expansion of our manufacturing,
warehousing and office facilities by adding approximately 39,100 square feet,
bringing the total size of our facilities to 77,100 square feet. We added 18,100
square feet to our production and manufacturing facilities, 14,900 to our
warehousing and storage space and 6,100 to our office space. We also have leased
several new pieces of manufacturing equipment and are in the process of adding
more manufacturing equipment. We currently expect that this expanded facility
will be fully operational in the first quarter of 1999.
While we are in the process of implementing our growth strategy, we
cannot assure you that the growth strategy will be successful in increasing our
net income or share price of Surrey's Common Stock. Success of our growth
strategy will depend on our ability to utilize the expanded capacity efficiently
to justify the higher costs of maintaining a larger facility, more personnel and
manufacturing a broader variety of products. Surrey cannot assure you that it
will be able to achieve its goal in the next several years, if at all.
Further, growth of Surrey's business will result in increased costs
for personnel and systems. We cannot assure you that we will be able to secure
and maintain the additional management, employees and staffing, or other
resources required to support the intended growth of our business.
RECENT LOSSES
In our report on Form 10-QSB for the quarter ended September 30,
1998, we reported a net loss of $67,000. For the nine months ended September 30,
1998, we reported a net loss of $220,000. Our net loss for the quarter and for
the first nine months of 1998 was due to a variety of factors including
increased sales and marketing expenses, increased labor costs and the increased
costs of being a publicly traded company. Our sales and marketing expenses
increased as a result of additional personnel that we hired in anticipation of
our expanded production capabilities. We believe that the labor cost increases
are due to training costs associated with our expansion as well as operating
inefficiencies of our existing smaller facilities. We believe that the costs
associated with being a publicly traded company will decline as a percentage of
net sales. Increasing our net profit will require
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that we operate our expanded facilities efficiently and we utilize the expanded
capacity. We cannot assure you that we will be able to operate our expanded
facility efficiently or utilize the expanded capacity.
DEPENDENCE ON CUSTOMERS
During 1997, Wal-Mart, Surrey's single largest customer, accounted
for approximately 34% of net sales, and in 1996, it accounted for 21% of net
sales. Based on net sales from the first nine months of 1998 and anticipated
sales for the entire year, we anticipate that Wal-Mart will be our single
largest customer for 1998 and will account for approximately 25% of net sales.
Avon was our second largest customer in 1997, accounting for approximately 7% of
net sales, and in 1996, it accounted for approximately 6% of net sales. We
believe that Avon and Walgreen's will be the second and third largest customers
in 1998. They each will account for less than 10% of net sales. The loss of any
major account, especially Wal-Mart, or a decrease in orders from any such
customer, could have a material adverse effect on Surrey and its business. We
cannot assure you that our largest customers will continue to purchase Surrey's
products at the same levels.
We recently announced a letter of commitment from Bath & Body Works
to purchase approximately 10 million bars of our high quality, transparent
glycerin and specialty soap. If the purchase order commitment is fulfilled at
expected levels, we anticipate that Bath & Body Works could account for
approximately 33% to 50% of net sales in 1999. We cannot assure you that Bath &
Body Works will continue to purchase our products at such levels in future
years. We have described the purchase order letter of commitment in the section
of the prospectus entitled "Recent Developments."
CUSTOMER CONTRACTS
Surrey's large retail customers, such as Wal-Mart and Walgreen's,
usually establish their product order "plan-a-grams" on a 12-month cycle. Once
such a plan is in place, it is often not reviewed for such 12 month cycle;
however, only the first order under any such plan is guaranteed. We have no
standing orders or long-term contracts with any of our retail customers. Any
customer can re-order at any time or cancel or replace our product in its
12-month plan without notice to us.
Most of Surrey's contract manufacturing customers, such as Elizabeth
Arden, Avon and Walt Disney, order on a job-by-job basis only. Such orders are
usually cancelable by the customer if not shipped within two weeks of the
scheduled shipping date. Unless Surrey is developing a new product for a
contract manufacturing customer (a development period may take months or years
depending on the product and the customer), Surrey typically ships products
within 60 to 90 days after receiving a purchase order. This period may be longer
if special packaging or labeling is required by a customer. Individual contract
manufacturing clients generally supply their own soap boxes and labeling;
therefore, we are not required to carry that inventory on our balance sheet. In
addition, many of Surrey's contract manufacturing customers pay for the
development and production of the dye stock and molds and, therefore, they, and
not Surrey, own such molds and the formulas for their individual products.
COMPETITION
There is extensive competition in the bar soap manufacturing
industry. However, we believe that we currently compete directly with only a
small number of manufacturers in the specialty soap market, including
Neutrogena, Beiersdorf (Basis), and Johnson and Johnson (Purpose). In addition,
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many other companies manufacture and/or market a range of personal care products
which compete with Surrey's soap and other products. These companies include
Bath & Body Works, Twin Craft Soap Company, Original Bradford Soapworks and
Stahl Soap.
As part of our expansion, we intend to begin manufacturing
traditional bar soap. Within the traditional soap market, we will compete
directly with many larger manufacturers, such as Proctor & Gamble,
Colgate-Palmolive, Unilever and Dial, which are much larger and have greater
financial resources than we have. We do not expect to make significant inroads
into the traditional bar soap market; rather, we intend to meet the existing
demand of our customers for traditional soap.
We currently believe that we will experience little competition from
the large manufacturers of traditional bar soap in our specialty soap niche
market due to the small size of the market. In addition, we believe that it is
more expensive to mass produce a high quality glycerin bar soap product.
However, we cannot assure you that these larger manufacturers will not compete
with Surrey in the future for its products, particularly its liquid soap
products.
We have recently added a line of high-end scented candles to
compliment our potpourri and craft products. The candle industry is highly
competitive and dominated by larger manufactures. Most of these larger
manufacturers have greater financial resources than Surrey.
We believe that we experience most of our competition from companies
having a broader variety of product line. We believe we experience a lesser
degree of competition based on the price of our products. By adding products
such as traditional bar soaps and liquid soaps, potpourris, high end scented
candles and crafts, we believe that we will better compete in the marketplace.
SEASONALITY
We experience seasonal fluctuations in operating results, with sales
and revenues generally higher during the third and fourth calendar quarters.
Orders shipped in the third and fourth quarters generally account for
approximately 60% of the Company's total net sales for the year, due primarily
to the holiday retail season.
CONTROL BY MANAGEMENT
As of the date of this prospectus, John B. van der Hagen, CEO and
Chairman of the Board, Mary van der Hagen, Secretary and Director, Martin J. van
der Hagen, President, and Mark J. van der Hagen, Vice President - Finance,
currently own a total of approximately 46% of the Common Stock. Assuming all the
Warrants are exercised, management will own approximately 36% of the Common
Stock. These percentages are calculated excluding the exercise of any warrants
or options held by management. As a result, management may have the ability to
elect the Company's entire Board of Directors and control Surrey, including
transactions such as mergers, consolidations and the sale of substantially all
of Surrey's assets.
DEPENDENCE ON KEY PERSONNEL
Surrey's success is dependent on the efforts of its key management
personnel. The loss of the services of any such personnel could have a material
adverse effect. We currently have employment agreements with our CEO and our
President. We do not have life insurance policies payable to us on
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any key management personnel. We will continue to be dependent on our ability to
attract and retain qualified personnel.
PROPRIETARY PROCESSES AND TRADEMARKS
Surrey holds no patents on any of its equipment or processes and
relies substantially on certain formulas and processes that are not patentable.
In addition, much of our proprietary information is the experience and knowledge
of our employees, contractors and business partners. We protect such processes
through confidentiality agreements with certain contractors, business partners,
and distributors; however, Surrey cannot assure you that these agreements will
adequately protect our proprietary processes and formulas. Any unauthorized
disclosure or use of Surrey's proprietary information could have a material
adverse effect on our business operations. We are aware that a company which
signed such a confidentiality agreement appears to be using certain trade
secrets in violation of their agreement. We do not own any patents on any of our
technology. We believe that the trademarks we own on certain product names have
significant value and are important to the marketing of our products, but do not
consider any individual mark to be material to our operation. Surrey's marks may
violate the proprietary rights of others, proprietary rights in the marks have
never been challenged and, as a result, Surrey does not know if its rights would
withstand such a challenge. In such case, Surrey may be prevented from using its
marks which could have an adverse affect on Surrey. Surrey has been unable to
register the name Surrey as a trademark due to a prior registration; however,
such prior registrant manufactures plastic combs, not soaps. While we believe
that our current use of the name is not infringing on the rights of others,
Surrey cannot assure you that its use will not ever be challenged.
DETERMINATION OF OFFERING PRICE; POSSIBLE STOCK PRICE VOLATILITY; NO DIVIDENDS
There was no public market for the Common Stock at the time the
exercise price of the Warrants was determined. As a result, the exercise price
of the Warrants, which is the price one must pay to purchase the shares of
Common Stock, was determined by negotiation between the underwriter in the
initial public offering and Surrey based upon the general status of the
securities market at that time and other relevant factors. The market price for
the Common Stock may be highly volatile depending upon various factors,
including the general economy, stock market conditions, announcements by us, our
vendors or competitors and fluctuation in Surrey's operating results. We
currently intend to retain earnings for use in operations and expansion of our
business and therefore do not anticipate paying any cash dividends in the
foreseeable future.
YEAR 2000 PREPAREDNESS
Surrey has reviewed its software driven accounting system and
personal computers and has taken action so that its computer and non-information
technology systems will function properly with respect to dates in the Year 2000
and thereafter. The total cost of compliance was approximately $40,000. Surrey
has substantially completed its internal Year 2000 compliance. Surrey has not
begun an assessment of the year 2000 preparedness of third parties with which it
has a material relationship. Surrey cannot assure you that its or its suppliers'
year 2000 conversion will be successfully completed. The failure to complete
such conversion may have a adverse material affect on Surrey.
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FORWARD-LOOKING STATEMENTS
Statements contained in this prospectus regarding Surrey's future
operations, growth strategy, contract with Bath & Body Works, future performance
and results are forward looking and, therefore, are subject to certain risks and
uncertainties, including those discussed herein. In addition, any forward
looking information regarding the operations of the Company will be effected by
Surrey's ability to effectively manage and operate its facilities as expanded,
Surrey's ability to successfully increase its marketing and sales effort in
order to take full advantage of its increased production facilities, to
successfully perform on the Bath & Body Works letter of commitment, to obtain
financing for equipment needed to perform under the Bath & Body Works letter of
commitment and continued receipt of large orders from Surrey's significant
customers. We cannot assure you that we will be able to fully and adequately
perform the Bath & Body Works letter of commitment, that we will continue to get
large orders from significant customers, or that we will be able to maximize the
expanded production capabilities.
BUSINESS
Surrey specializes in the development and manufacture of high
quality transparent glycerin and specialty soap products, as well as the
production of certain personal care and home fragrance products. Surrey has
built four successful retail brands and a strong private label and contract
manufacturing business for high-profile customers. Surrey uses a process for
manufacturing poured bar soaps that allows us to produce unique and affordable
original soap products in large quantities. Surrey also maintains a library of
chemical formulations for producing purer, milder and harder glycerin soap bars
primarily through the use of synthetic moisturizing ingredients rather than the
use of tallow (animal fat). We recently expanded into the crafts market, with
soap-making kits and expanded our home fragrance products with the introduction
of a full line of potpourri products. As part of our expansion plans, we will
manufacture a line of high-end scented candles that will compliment our line of
home fragrance products.
Surrey is the successor to a venture begun in 1972 to market a
brush, mug, and line of shaving soap for men. Management began working to
perfect techniques for producing a milder bar soap for its shaving kits, and in
1979 began manufacturing its own soap products and expanding a new library of
soap formulations.
In the early nineties, Surrey entered the contract manufacturing
business and began producing specialty soap products for a variety of premier
brand consumer product companies and prestige accounts including Elizabeth
Arden, Walt Disney Co., Avon, Ann Taylor, Wal-Mart, and Walgreen's. In 1990,
Surrey acquired the assets of Simmer Scents, a line of potpourri home fragrances
and began moving into the major craft chains.
Surrey markets its products, both directly and through
manufacturers' representatives, to a large variety of retail establishments. We
also manufacture, on a contract basis, for a variety of private-label customers.
The Company's total sales and revenue mix for 1997 were approximately equally
divided among:
* contract manufacturing products,
* potpourri and craft products and
* retail soaps and shaving products.
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In 1998, we anticipate the total sales and revenue mix will be
comparable to that of 1997.
RECENT DEVELOPMENTS
Surrey recently received a major purchase order commitment for its
high quality transparent glycerin and specialty soap products from Bath & Body
Works, a wholly owned subsidiary of The Limited, Inc., a New York Stock Exchange
company. Management believes that revenues from such commitment will approximate
$6 million. The commitment represents the single largest order received by the
Company in its history. The letter of commitment calls for Surrey to deliver to
Bath & Body Works ordered products beginning in January 1999 and continuing
throughout 1999.
The letter of commitment is a letter of intent and Bath & Body Works
and Surrey are working toward a more formal arrangement. The letter of
commitment is for one year; however, individual purchase orders may be cancelled
upon 30 days notice. Bath & Body Works has no commitment to place any order with
Surrey after the end of 1999. We cannot assure you that Bath & Body Works will
order the entire amount expected for 1999 or will order more product from Surrey
after 1999. If Bath & Body Works does not order more products from Surrey after
1999, such loss of revenue will have a material adverse effect on Surrey. We
cannot assure you that Bath & body Works will not cancel such letter of
commitment. Bath & Body Works is a major retailer of bathroom and bedroom
accessories, and operates over 1,100 stores nationwide.
The new letter of commitment from Bath & Body Works will require
Surrey to lease six additional machines: three high speed wrapping machines and
three poured soap lines. We are currently in the process of obtaining such
equipment. We currently estimate that the additional machines needed to fulfill
our requirements under the new letter of commitment will cost approximately
$1,000,000. We have entered into negotiations with Keycorp Leasing, a division
of Key Corporate Capital, Inc. ("KCCI") to finance such additional equipment.
Our current operating lease with KCCI provides for $1,500,000 lease line of
credit to finance equipment. The Company anticipates using approximately
$500,000 of the available balance on this lease line of credit to finance such
additional equipment. We currently estimate that we will need to expand our
lease line of credit by approximately $500,000 to $2,000,000 in total. We cannot
assure you that we will be successful in obtaining such additional financing.
In addition, we currently anticipate that we will need to expand our
warehousing facilities by 14,000 square feet and our soap curing area by 5,000
square feet to fulfill the Bath & Body Works letter of commitment. We have begun
negotiations with Chase Bank of Texas, National Association ("Lender") to
increase our existing construction/term loan by approximately $500,000 to
finance such expansion. The principal amount of such loan is currently
$2,300,000. We have also begun negotiations with our Lender to increase our
revolving line from $1,000,000 to $2,000,000 to finance inventory and other
working capital needs relating to the Bath & Body Works letter of commitment. We
cannot assure you that we will be successful in obtaining such additional
financing from our Lender. If we are unable to obtain additional financing, we
may not be able to adequately perform under the Bath & Body Works letter of
commitment.
We recently completed an expansion of our manufacturing, warehousing
and office facilities by adding approximately 39,100 square feet bringing the
total size of our facilities to 77,100 square feet. The cost of constructing the
facilities was approximately $1,100,000. We can give you no assurance that we
will be able to manage our expanded facility efficiently.
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USE OF PROCEEDS
Assuming all the Warrant holders exercise their Warrants to purchase
an aggregate of 675,000 shares of Common Stock, the estimated proceeds received
by us will be $3,240,000 before any expenses. The Warrant holders have no
obligation to exercise any of the Warrants. We cannot assure you that any of the
Warrants will be exercised. Therefore, we cannot predict when or whether we will
receive any of the proceeds of this offering. We currently intend to use the
proceeds of this offering to repay our current debt, to finance product
development, or for general working capital purposes.
Depending on the timing of receipt of the proceeds and the business
climate, we may use the proceeds from this offering for purposes different than
we stated above. We may not update you regarding any changes in our intentions
regarding the prospective proceeds of this offering.
PLAN OF DISTRIBUTION
Any or all of the Warrants may be exercised at various times by the
Warrant holder signing the exercise form attached to the Warrant Agreement and
paying to us $4.80 per share of Common Stock being purchased. We have no selling
arrangements with any underwriters, brokers, agents or other persons in relation
to the sale of these shares of Common Stock.
Surrey has agreed, under certain circumstances, to use our best
efforts to keep the registration statement of which this prospectus forms a
part, effective until the earlier of (i) December 9, 2002, (ii) the time at
which all shares offered have been sold to the Warrant holders or (iii) the time
we redeem all the Warrants pursuant to the terms of the Warrant Agreement. We
may also redeem the Warrants under certain circumstances. We incorporate by
reference into this prospectus the terms of the Warrant Agreement.
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LEGAL MATTERS
Certain matters with respect to the legality of the issuance and
sale of these shares of Common Stock will be passed upon by Mackall, Crounse &
Moore, PLC, Minneapolis, Minnesota. G. Thomas MacIntosh II, a director of
Surrey, is a member of Mackall, Crounse & Moore, PLC.
EXPERTS
Ernst & Young LLP, independent auditors, have audited our financial
statements included in our Annual Report on Form 10-KSB for the year ended
December 31, 1997, as set for in their report, which is incorporated in this
prospectus by reference. Our financial statements are incorporated by reference
in reliance on their report, given on their authority as experts in accounting
and auditing.
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