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As filed with the Securities and Exchange Commission on February 7, 2001.
Registration No. 333-55088
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 1
TO
FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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HARP & EAGLE, LTD.
(Name of small business issuer in its charter)
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WISCONSIN 7011 39-1980178
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
1234 NORTH ASTOR STREET
MILWAUKEE, WISCONSIN 53202 1234 NORTH ASTOR STREET
(414) 272-5273 - FAX (414) 290-6300 MILWAUKEE, WISCONSIN 53202
(Address and telephone number of (Address of principal place of business)
principal executive offices)
CARY JAMES O'DWANNY
HARP & EAGLE, LTD.
1234 NORTH ASTOR STREET
MILWAUKEE, WISCONSIN 53202
(414) 272-5273 - FAX (414) 290-6300
(Name, address and telephone number of agent for service)
Copies of communications to:
ROBERT J. PHILIPP, ESQ. KEVIN B. DUNN, ESQ.
KRANITZ & PHILIPP KEVIN B. DUNN LAW OFFICE
2230 EAST BRADFORD AVENUE 823 NORTH CASS STREET
MILWAUKEE, WISCONSIN 53211 MILWAUKEE, WISCONSIN 53202
(414) 332-2118 - FAX (414) 332-4480 (414) 276-1818 - FAX (414) 273-0554
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this registration statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. |_| If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, as amended, other than securities offered only in
connection with dividend or interest reinvestment plans, please check the
following box, |X| If this Form is filed to register additional securities for
an offering pursuant to Rule 462(b) under the Securities Act, 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 this Form is a post-effective amendment filed pursuant
to Rule 462(d) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. |_| If delivery of the
prospectus is expected to be made pursuant to Rule 434, please check the
following box. |_|
CALCULATION OF REGISTRATION FEE
=========================================================================================================================
Proposed Proposed
Amount maximum maximum Amount of
Title of each class of securities to be offering price aggregate registration
to be registered registered per unit offering price fee
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Common Stock 1,000,000 shares $6.50 (1) $6,500,000 (1) $1,625.00
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(1) Price of Common Stock estimated solely for the purpose of calculating the
registration fee.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN
OFFER TO SELL THESE SECURITIES AND WE ARE NOT SOLICITING OFFERS TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
PROSPECTUS (SUBJECT TO COMPLETION)
DATED FEBRUARY 7, 2001
1,000,000 SHARES
HARP & EAGLE, LTD.
COMMON STOCK
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Harp & Eagle, Ltd. is offering a minimum of 60,000 shares and a maximum of
1,000,000 shares of its common stock. This is our initial public offering and no
public market currently exists for our shares. We expect that the initial public
offering price will be between $5.00 and $6.50 per share.
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We anticipate that, upon the completion of this offering, our common stock
will be quoted on the NASD's OTC Bulletin Board under the symbol " ."
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INVESTING IN OUR COMMON STOCK INVOLVES SUBSTANTIAL RISKS. SEE "RISK
FACTORS" BEGINNING ON PAGE 5.
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PRICE $ A SHARE
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Underwriting Proceeds to
Price to Discounts and International
Public Commissions Monetary Systems
------ ----------- ----------------
Per Share................................. $ $ $
Minimum (60,000 shares)................... $ $ $
Maximum (1,000,000 shares)................ $ $ $
THE SECURITIES AND EXCHANGE COMMISSION AND STATE SECURITIES REGULATORS HAVE
NOT APPROVED OR DISAPPROVED THESE SECURITIES, OR DETERMINED IF THIS PROSPECTUS
IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
This is a best-efforts, minimum-maximum offering. Our selected placement
agents must sell the minimum offering of 60,000 shares if any are sold. The
selected placement agents are not required to sell any specific number or dollar
amount of securities in excess of the 60,000-share minimum offering, but will
use their best efforts to sell all of the 1,000,000 shares offered. Funds
received from subscribers will be held in escrow by Grafton State Bank. Unless
the minimum offering is fully sold within 120 days from the date of this
prospectus, all purchase payments will be returned in full to subscribers,
without interest or deduction. If the minimum offering is sold within the
foregoing period, the offering may continue until 1,000,000 shares are sold or
December 31, 2001, whichever occurs first. However, we may terminate the
offering at any earlier time if we choose to do so.
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LISS FINANCIAL SERVICES
, 2001
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[Inside front cover]
[Insert graphic, including photographs of Castledaly Manor
superimposed on a map of its location in Ireland]
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TABLE OF CONTENTS
Page
Prospectus Summary...................................................... 3
Risk Factors............................................................ 5
Use of Proceeds......................................................... 8
Dividend Policy......................................................... 8
Dilution................................................................ 9
Selected Financial Data................................................. 10
Plan of Operation....................................................... 10
Business................................................................ 11
Management.............................................................. 14
Certain Relationships and Related Transactions.......................... 16
Principal Stockholders.................................................. 17
Description of Securities............................................... 18
Shares Eligible for Future Sale......................................... 22
Underwriting............................................................ 23
Legal Matters........................................................... 25
Experts................................................................. 25
Where You Can Find Additional Information............................... 25
Index to Financial Statements........................................... 26
Exhibit A (Subscription Agreement)...................................... A-1
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UNTIL , 2001 (90 DAYS AFTER THE COMMENCEMENT OF THIS OFFERING), ALL
DEALERS THAT BUY, SELL OR TRADE OUR COMMON STOCK, WHETHER OR NOT PARTICIPATING
IN THIS OFFERING, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS DELIVERY
REQUIREMENT IS IN ADDITION TO THE DEALERS' OBLIGATION TO DELIVER A PROSPECTUS
WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
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PROSPECTUS SUMMARY
You should carefully read the following summary in conjunction with the
more detailed information appearing elsewhere in this prospectus concerning our
company and the common stock being offered, including our consolidated financial
statements and related notes. In this prospectus, "Harp & Eagle," "we," "us" and
"our" refer to Harp & Eagle, Ltd., a Wisconsin corporation, and its
subsidiaries, and not to the selected placement agents.
OUR COMPANY
Harp & Eagle is engaged in the business of forming, acquiring, operating
and managing Irish-theme inns and restaurants in the United States. We also own
a majority of the outstanding common stock of Castledaly Acquisition
Corporation, a Wisconsin corporation which owns all of the outstanding "ordinary
shares" of Castledaly Manor, Ltd., an Irish limited company which owns and
operates a 24-room inn and related facilities in a refurbished country manor
known as Castledaly Manor, located approximately five miles from Athlone, County
Westmeath, in the center of Ireland. See "Business."
Harp & Eagle was incorporated in 1999 under the laws of the State of
Wisconsin. Castledaly Acquisition Corporation and Castledaly Manor, Ltd. were
incorporated in 1997 under the laws of Wisconsin and Ireland, respectively. Our
executive offices are located at 1234 North Astor Street, Milwaukee, Wisconsin
53202. Our telephone number is (414) 272-5273, and our facsimile number is (414)
290-6300. Our Internet World Wide Web address is www.countyclare-inn.com.
Castledaly Manor is located in Athlone, County Westmeath, Ireland. Its telephone
number, when dialing from the United States, is (011) 353-902-81221, and its
facsimile number is (011) 353-902-81600; its e-mail address is
castledaly@tinet.ie.
THE OFFERING
Common stock offered................................................ 1,000,000 shares
Common stock outstanding before the offering........................ 1,513,000 shares
Common stock to be outstanding after minimum offering............... 1,573,000 shares
Common stock to be outstanding after maximum offering............... 2,513,000 shares
Proposed OTC Bulletin Board trading symbol..........................
This is a best-efforts, minimum-maximum offering. Unless at least 60,000
shares of our common stock are sold within 120 days following the date of this
prospectus, the offering will terminate and no shares will be sold. If the
60,000-share minimum offering is sold within the foregoing period, the offering
may continue until 1,000,000 shares are sold or December 31, 2001, whichever
occurs first. Our selected placement agents are not obligated to (1) sell any
number or dollar amount of our common stock in excess of the 60,000-share
minimum offering or (2) purchase any shares at any time. While these agents have
agreed to use their best efforts to sell on our behalf all of the common stock
offered, we cannot guarantee how much stock in excess of the required minimum,
if any, will actually be sold in the offering. See "Risk Factors" and
"Underwriting" for additional information concerning the terms of this offering.
-------------------------
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. WE
HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION DIFFERENT FROM THAT
CONTAINED IN THIS PROSPECTUS. WE ARE OFFERING TO SELL, AND SEEKING OFFERS TO
BUY, SHARES OF COMMON STOCK ONLY IN JURISDICTIONS WHERE OFFERS AND SALES ARE
PERMITTED. THE INFORMATION CONTAINED IN THIS PROSPECTUS IS ACCURATE ONLY AS OF
THE DATE OF THIS PROSPECTUS, REGARDLESS OF THE TIME OF DELIVERY OF THE
PROSPECTUS OR OF ANY SALE OF OUR COMMON STOCK.
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USE OF PROCEEDS
We intend to use the initial net proceeds of this offering to repay
existing indebtedness incurred principally in connection with the acquisition of
Castledaly Acquisition Corporation and the improvement and operation of our
Castledaly Manor inn and restaurant located in Athlone, Ireland. We anticipate
that approximately $341,000 will be expended for this purpose. If we receive
sufficient net proceeds in excess of the minimum offering, we will pursue our
plans to develop inns in Green Bay, Wisconsin and County Antrim, Ireland. We
expect that the cost of these projects will require approximately $2,000,000 and
$1,000,000 of proceeds, respectively. If net proceeds are not sufficient to fund
one or both of our proposed new inns, we will use such proceeds to increase our
interest in County Clare, an Irish-theme inn and restaurant located in
Milwaukee, Wisconsin. Net proceeds, if any, in excess of amounts required for
the foregoing purposes will be expended to acquire and/or develop other inns in
the United States and Ireland. Please see "Use of Proceeds" for additional
information concerning the manner in which we intend to expend the net proceeds
of this offering.
SUMMARY FINANCIAL DATA
You should read the following summary financial data in conjunction with
"Plan of Operation" and our consolidated financial statements, and the related
notes, which are included elsewhere in this prospectus. The information shown
below as of December 31, 1999, and for the period from September 14, 1999
(inception) to December 31, 1999, has been taken from the financial statements
of Harp & Eagle, which have been audited by Schenck & Associates, S.C.,
independent certified public accountants. Our unaudited financial statements as
of October 31, 2000, and for the ten months then ended, reflect, in the opinion
of our management, all adjustments, which include only normal recurring
adjustments, necessary to present fairly the financial condition and results for
such period.
STATEMENT OF INCOME DATA: September 14, 1999
(inception)
to Ten Months Ended
December 31, October 31,
1999 2000
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(Unaudited)
Sales............................................................. $ -- $ 292,987
Cost of sales..................................................... -- 95,009
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Gross income...................................................... -- 197,978
Operating expense................................................. -- 302,353
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Loss from operations.............................................. -- (104,375)
Other expense, net................................................ (2,700) (54,100)
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Net loss before minority interest in loss of subsidiaries......... (2,700) (158,475)
Minority interest in loss of subsidiaries......................... -- 54,488
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Net loss.......................................................... $ (2,700) $ (103,987)
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Net loss per common share......................................... $ N/A * $ (0.07)
Weighted average common shares outstanding........................ N/A * 1,405,272
BALANCE SHEET DATA: October 31, 2000
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(unaudited)
Cash and cash equivalents...................................................... $ 212,766
Total assets................................................................... $1,812,648
Long-term debt, less current portion........................................... $ 293,524
Stockholders' equity........................................................... $ 756,428
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* As of December 31, 1999, no shares of common stock were outstanding;
1,000,000 shares were subscribed but not yet issued and outstanding.
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RISK FACTORS
This offering and an investment in our common stock involve a high degree
of risk. You should carefully consider the following risk factors and the other
information in this prospectus, including our financial statements and the
related notes, before investing in our common stock. If any of the following
risks actually occurs, our business, operating results, prospects or financial
condition could be seriously harmed. The trading price of our common stock could
decline, and you could lose all or part of your investment.
THIS IS A BEST-EFFORTS, MINIMUM-MAXIMUM OFFERING, AND WE MAY NOT RAISE ENOUGH
CAPITAL FROM THE SALE OF OUR COMMON STOCK TO ADEQUATELY FUND OUR PLANNED METHOD
OF GROWTH AND EXPANSION.
The managing placement agent, Liss Financial Services, and the other
selected placement agents are not obligated (1) to sell on our behalf any number
or dollar amount of our common stock in excess of the 60,000-share minimum
offering or (2) to purchase any number or dollar amount of shares at any time.
These agents have agreed to use their best efforts to sell on our behalf all of
the common stock offered by this prospectus. However, we cannot guarantee how
much of our common stock in excess of the required minimum, if any, will
actually be sold in this offering.
We plan to use up to approximately $341,000 of net offering proceeds to
repay existing indebtedness, whether or not we are also able to acquire or
develop additional hotel properties. Thereafter, if sufficient net proceeds of
this offering are available, we intend to acquire and develop one or more
additional hotel properties. We anticipate that we will be able to acquire or
develop additional hotel properties for prices ranging from approximately
$500,000 to $3.5 million per property. If the proceeds of this offering, after
deduction of selling commissions and other expenses, are not sufficient to meet
our cash requirements for such expansion, we will expend all the proceeds we
receive to grow and expand our existing business, principally by improving our
properties and/or increasing our ownership interest in affiliated properties.
Our inability to obtain adequate financing may impede our growth and thus
negatively affect the return on your investment in our common stock.
WE FACE RISKS ASSOCIATED WITH OUR EXPANSION PLANS, INCLUDING COMPETITION FOR
SUITABLE PROPERTIES.
We expect our growth to continue, in large part, through the acquisition
and development of additional hotel properties. The success of this strategy
depends upon several factors, including:
- the availability of financing;
- our ability to identify and acquire properties on a cost-effective
basis;
- our ability to integrate acquired personnel, operations, products and
technologies into our organization effectively; and
- our ability to retain and motivate key personnel and to retain the
clients of acquired properties.
The competition to find and acquire or develop suitable hotel properties is
intense, and we will compete for these properties with other companies that have
substantially greater financial and other resources than our company.
We cannot assure you that financing for expansion will be available on
terms we find acceptable, or that we will be able to identify or consummate
acquisitions, or manage and integrate any such acquisitions successfully. Our
inability to do so could materially and adversely affect our business, financial
condition and operating results, principally by requiring us to grow at a slower
rate than planned. We also cannot assure you that we will be able to sustain the
rates of growth that we have experienced in the past.
Furthermore, we may issue equity securities to pay for future expansion,
which could be dilutive to our existing stockholders. We may also incur debt or
assume contingent liabilities in connection with acquisitions, which could harm
our operating results.
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WE CANNOT GUARANTEE THAT AN ACTIVE TRADING MARKET FOR OUR COMMON STOCK WILL
DEVELOP OR BE SUSTAINED.
While our common stock will be quoted on the NASD's OTC Bulletin Board upon
completion of this offering, we cannot provide definite assurance that our
shares will be actively traded. The development and continuation of a trading
market will depend principally upon our business, financial condition and
operating results. Further, if the market price for our common stock drops below
$5.00 per share, SEC rules may impose additional requirements upon
broker-dealers who effect transactions in our shares, principally with respect
to (1) additional disclosures concerning the risks of investment in lower-priced
stocks, (2) written investor-suitability determinations and (3) written
authorization of these transactions by the proposed purchasers. Compliance with
these rules could impede trading and adversely impact the price and liquidity of
your shares.
PURCHASERS OF COMMON STOCK IN THIS OFFERING WILL EXPERIENCE IMMEDIATE AND
SUBSTANTIAL DILUTION.
Assuming a price of $6.00 per share, the initial public offering price of
our common stock is substantially higher than its book value immediately after
the offering. As a result, if you invest in this offering, you will incur
immediate dilution of at least $3.73 per share in the book value of the shares
purchased from the price you pay for your stock. You will incur this dilution
largely because our earlier investors paid substantially less than the initial
public offering price when they purchased their common stock. See the discussion
under "Dilution" for a calculation of the dilution you will experience, assuming
various levels of sales in this offering.
PROVISIONS IN OUR CHARTER DOCUMENTS AND WISCONSIN LAW COULD PREVENT OR DELAY A
CHANGE IN CONTROL OF OUR COMPANY AND POSSIBLY REDUCE THE AMOUNT PAID FOR OUR
COMMON STOCK IN THE FUTURE.
Provisions of our articles of incorporation, bylaws and Wisconsin law
could, separately or together:
- discourage potential acquisition proposals;
- delay or prevent a change in control; and
- limit the price that investors might be willing to pay in the future for
shares of our common stock.
The application of these provisions could make it more difficult for a
third party to acquire us, even if doing so would be beneficial to our
stockholders. See "Description of Securities - Anti-Takeover Provisions" for a
further discussion of statutory and other anti-takeover provisions which may
affect us. Also, our board of directors has the authority to issue up to
2,000,000 shares of preferred stock and to determine the price, voting rights,
restrictions, preferences and privileges of those shares without the approval of
our stockholders. The rights of holders of common stock will be subject to, and
may be impaired by, the rights of the holders of any shares of preferred stock
that may be issued in the future. The issuance of preferred stock may delay,
defer or prevent a change in control by making it more difficult for a third
party to acquire a majority of our stock. In addition, the issuance of preferred
stock could have a dilutive effect on our stockholders. We have no present plans
to issue shares of preferred stock. However, even the potential issuance of
preferred stock could reduce the price that investors are willing to pay for our
common stock.
OUR PRESIDENT IS NOT COVERED BY AN EMPLOYMENT CONTRACT OR "KEY PERSON" LIFE
INSURANCE, AND HIS LOSS COULD ADVERSELY AFFECT OUR BUSINESS RESULTS AND THE
VALUE OF YOUR INVESTMENT.
Our future success depends upon the continued services of our president,
Cary James O'Dwanny, and the loss of his services could have a material adverse
effect on our business, financial condition, operating results and, potentially,
the value of your investment in our common stock. In addition, if Mr. O'Dwanny
or any of our key employees joins a competitor firm or forms a competing
company, the resulting loss of existing or potential clients and business
relationships, including merger or acquisition candidates, could have a serious
adverse effect upon our business and the value of your investment in our common
stock. None of our employees, including Cary James O'Dwanny, is bound by an
employment agreement, and these personnel may terminate their employment at any
time. If we were to lose one or more key employees, we may be unable to prevent
the unauthorized disclosure of our strategic planning, procedures, practices or
client lists. In addition, we do not have "key person" life insurance policies
covering any of our employees.
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OUR MANAGEMENT MAY NOT BE SUCCESSFUL IN APPLYING THE PROCEEDS OF THIS OFFERING
IN A MANNER THAT INCREASES THE VALUE OF YOUR INVESTMENT.
The net proceeds of this offering have not been allocated for specific
purposes, and we will have broad discretion in determining how the proceeds will
be used. You will be entrusting your funds to our management, upon whose
judgment you must depend, with limited information concerning acquisitions, if
any, or other purposes to which the funds will ultimately be applied. We may not
be successful in spending the proceeds from this offering, whether in our
existing operations or for external investments, in ways which increase our
profitability or our market value, or otherwise yield favorable returns. See
"Use of Proceeds" for information concerning how we plan to use the proceeds
from this offering.
UNLESS MORE THAN 687,000 SHARES OF COMMON STOCK ARE SOLD IN THIS OFFERING TO
PERSONS WHO ARE NOT DIRECTORS OR EXECUTIVE OFFICERS OF HARP & EAGLE, OR
THEIR AFFILIATES, IT IS LIKELY THAT OUR DIRECTORS, EXECUTIVE OFFICERS AND THEIR
AFFILIATES WILL CONTINUE TO OWN A CONTROLLING PERCENTAGE OF OUR COMMON STOCK,
AND THE VOTING POWER OF OTHER STOCKHOLDERS MAY BE LIMITED.
We anticipate that our directors, executive officers and their affiliates
will beneficially own, in the aggregate, more than 50% of our outstanding common
stock after this offering unless more than 687,000 shares of common stock are
sold to persons who are not directors or executive officers of our company, or
their affiliates. Accordingly, if these persons act together, they will have the
ability to control all matters submitted to our stockholders for approval and to
exercise controlling influence over our business and affairs. This includes any
determination as to the election and removal of directors and the approval of
any merger or other business combination, the acquisition or disposition of our
assets, whether or not we incur indebtedness, the issuance of any additional
common stock or other equity securities and the payment of dividends on our
common stock. These stockholders may make decisions that are adverse to your
interests. See "Principal Stockholders" for more information about the ownership
of our common stock.
FUTURE SALES OF OUR COMMON STOCK MAY DEPRESS OUR STOCK PRICE.
The executive officers and directors of our company and their affiliates
currently own, in the aggregate, 1,100,000 shares, or 72.7%, of our outstanding
common stock. These persons have agreed to enter into lock-up agreements that
prevent them from selling, pledging or otherwise disposing of their common stock
for a period of 120 days after the commencement of this offering, without the
prior written approval of Liss Financial Services, the managing placement agent.
Upon the expiration of the 120-day lock-up period, or earlier with the written
consent of Liss Financial Services, the 1,100,000 restricted shares held by our
affiliates will become eligible for sale in the public market, subject to the
requirements of Rule 144. 319,000; 58,000; 5,000 and 31,000 restricted shares
held by non-affiliates and not subject to lock-up agreements will become
eligible for sale during the first, second, third and fourth quarters of 2001,
respectively, subject in each case to the same Rule 144 restrictions and
requirements as sales by our affiliates. Sales of substantial amounts of our
common stock in the public market, or conceivably only the perception that such
sales may occur, could create the impression in the public of difficulties or
problems with our business. This might adversely affect the market price of our
common stock and could impair our ability to sell additional common stock or
other equity securities on terms that we consider satisfactory. For a more
detailed discussion of potential future sales by existing stockholders, see
"Shares Eligible for Future Sale."
WE DO NOT INTEND TO DECLARE OR PAY DIVIDENDS IN THE FORESEEABLE FUTURE.
We currently intend to retain earnings, if any, to support our growth
strategy. Consequently, a prospective investor who needs to receive periodic
dividend income should probably not invest in this offering.
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USE OF PROCEEDS
Assuming a public offering price of $6.00 per share, we estimate that our
net proceeds from the sale of the sale of this offering, after deducting
underwriting discounts and commissions and other offering expenses payable by
us, will be approximately $247,000 if the minimum offering of 60,000 shares is
sold and $5,325,000 if the maximum offering of 1,000,000 shares is sold. The
primary purposes of this offering are to obtain additional equity capital,
create a public market for our common stock and facilitate future access to
public markets.
We intend to use the net proceeds we receive from this offering to repay
(1) $168,000 owed to Johnson Bank, bearing interest at the prime rate plus 0.5%
(10% at October 31, 2000), due April 30, 2000; (2) $40,000 owed to County Clare,
Ltd., an affiliate, bearing interest at the rate of 6% per annum, due on demand;
and (3) $33,000 owed to Grafton State Bank, bearing interest at the rate of 6%
per annum, due on demand. The foregoing debt was initially owed to or guaranteed
by certain of our officers, directors, shareholders and affiliates. Loan
proceeds were provided to Castledaly Acquisition Corporation to finance the
improvement and operation of the Castledaly Manor inn and restaurant located in
Athlone, Ireland. We assumed this indebtedness in connection with our
acquisition of Castledaly Acquisition Corporation when, during the fourth
quarter of 2000, we purchased from Castledaly Acquisition an aggregate of 241
shares of its common stock, at the price of $1,000 per share, and paid for such
common stock by assuming the debt described above. We may also assume up to
$100,000 of debt owed by Castledaly Acquisition to Richard Peterson, one of our
shareholders, bearing interest at the rate of 9% per annum, due on demand and
initially incurred for the same purpose as the debts described above, in
exchange for common stock of Castledaly Acquisition, on the same terms as the
purchase-by-assumption transactions described above.
If we receive sufficient net proceeds in excess of the minimum offering, we
intend to pursue our plans to develop inns in Green Bay, Wisconsin and County
Antrim, Ireland. We expect that our equity contributions to these projects will
require approximately $2,000,000 and $1,000,000 of proceeds, respectively. The
balance of project costs will be borrowed. If net proceeds are not sufficient to
fund one or both of our proposed new inns, we will use such proceeds to increase
our interest in County Clare, an Irish-theme inn and restaurant located in
Milwaukee, Wisconsin. Net proceeds, if any, in excess of amounts required for
the foregoing purposes will be expended to acquire and/or develop other inns in
the United States and Ireland. We anticipate that we will be able to acquire or
develop additional hotel properties for prices ranging from approximately
$500,000 to $3.5 million per property. We continually evaluate and discuss
potential acquisitions and strategic investments. However, we have no present
understandings, commitments or agreements with respect to any acquisition or
investment.
While we presently anticipate that working capital will be expended for the
above purposes in approximately the amounts indicated, the actual amount that we
expend for these purposes will depend on a number of factors, including the
amount which is raised in this offering, our future revenue growth, if any, and
the amount of cash we generate from operations. As a result, we will retain
broad discretion in the allocation of the net proceeds of this offering. Pending
their use, net proceeds from this offering will be invested in bank certificates
of deposit, interest-bearing savings accounts, prime commercial paper, United
States Government obligations, money market funds or similar short-term
investments. Any income derived from these short-term investments is expected to
be used for working capital.
Because this is a best-efforts, minimum-maximum offering, we can give you
no definite assurance as to how much of our common stock in excess of the
60,000-share minimum, if any, will actually be sold. See "Risk Factors" and
"Underwriting" for additional information concerning the terms of this offering.
DIVIDEND POLICY
We have never declared or paid any cash dividends on our capital stock. We
currently intend to retain any future earnings to finance the growth and
development of our business and therefore do not anticipate paying any cash
dividends in the foreseeable future. Any future determination to pay cash
dividends will be made at the discretion of our board of directors and will
depend on our financial condition, results of operations, capital requirements,
general business condition and other factors that our board of directors may
deem relevant.
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DILUTION
Our net tangible book value as of October 31, 2000 was approximately
$330,297, or $0.22 per share of common stock. Net tangible book value per share
represents the amount of total tangible assets less total liabilities, divided
by the number of shares of common stock then outstanding. The following table
illustrates the dilution to purchasers of common stock in this offering if the
minimum offering of 60,000 shares is sold, and also at certain arbitrarily
determined sales levels on excess of the minimum (ie., 200,000, 600,000 and
1,000,000), at the assumed public offering price of $6.00 per share, after
deduction of estimated underwriting commissions and other offering expenses
payable by us. At the sales levels indicated, our pro forma net tangible book
value at October 31, 2000 would have been $441,297, $1,335,297, $3,495,297 or
$5,655,297, respectively, or $0.28, $0.79, $1.67 or $2.27, respectively, per
share of common stock, representing an immediate increase in net tangible book
value of $0.06, $0.57, $1.45 or $2.05, respectively, per share to existing
stockholders and immediate dilution of $5.72, $5.21, $4.33 or $3.73,
respectively, per share to new investors.
Number of shares of common stock sold in the offering (1)
-------------------------------------------------------------
60,000 200,000 600,000 1,000,000
Shares Shares Shares Shares
------ ------ ------ ------
Initial public offering
price per share ........................... $ 6.00 $ 6.00 $ 6.00 $ 6.00
Net tangible book value
before the offering ....................... 0.22 0.22 0.22 0.22
Increase in net tangible book value
attributable to new investors ............. 0.06 0.57 1.45 2.05
------- ------- ------- -------
Pro forma net tangible book value
per share after the offering ............... 0.28 0.79 1.67 2.27
------- ------- ------- -------
Dilution per share to new public investors ...... $ 5.72 $ 5.21 $ 4.33 $ 3.73
======= ======= ======= =======
(1) The numbers of shares of common stock shown as sold in the above table, in
excess of the minimum offering of 60,000 shares, have been arbitrarily
selected by us for purposes of illustration only. We can provide no
assurance that all or any part of the common stock offered by this
prospectus in excess of the minimum will be sold. See "Risk Factors" and
"Underwriting" for additional information concerning this "best-efforts,"
"minimum-maximum" offering.
The following table summarizes, on a pro forma basis as of October 31,
2000, after giving effect to the sale of the minimum offering of 60,000 shares,
the difference between the number of shares of common stock purchased from us,
the total consideration paid and the average price per share paid by the
existing stockholders and by new public investors purchasing shares in this
offering at the assumed initial public offering price of $6.00 per share and
before deduction of estimated underwriting discounts and commissions and
offering expenses payable by us:
Shares Total
Purchased Consideration Average
------------------------ -------------------------- Consideration
Amount Percent Amount Percent Paid Per Share
------ ------- ------ ------- --------------
Existing stockholders ....................... 1,493,000 96.1% $ 868,000 70.7% $ 0.58
New public investors (1) .................... 60,000 3.9% 360,000 29.3% $ 6.00
--------- ----- ---------- -----
Total .................................. 1,553,000 100.0% $1,228,000 100.0%
========= ===== ========== =====
- -------------
(1) If sales levels of 200,000 shares, 600,000 shares and 1,000,000 shares are
assumed for purposes of illustration only, at the assumed public offering
price of $6.00 per share, the percent of total shares sold which are
purchased by new investors would be 11.8%, 28.7% and 40.1%, respectively;
and the aggregate consideration paid by new investors would be $1,200,000,
$3,600,000 or $6,000,000, respectively, or 58.0%, 80.6% or 87.4%,
respectively, of the total consideration paid for all of the common stock
to be outstanding after this offering. The average consideration paid per
share, by both existing stockholders and new investors, remains the same at
all levels of sales. There can be no assurance that all or any part of the
common stock offered by this prospectus in excess of the minimum offering
of 60,000 shares will be sold. See "Risk Factors" and "Underwriting" for
additional information concerning this "best-efforts," "minimum-maximum"
offering.
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SELECTED FINANCIAL DATA
You should read the following selected financial data in conjunction with
"Plan of Operation" and our financial statements, and the related notes, which
are included elsewhere in this prospectus. The financial information shown below
as of December 31, 1999, and for the period from September 14, 1999 (inception)
to December 31, 1999, has been taken from our financial statements, which have
been audited by Schenck & Associates, S.C., independent certified public
accountants. The financial data as of October 31, 2000, and for the ten months
then ended, have been derived from our unaudited financial statements which, in
the opinion of our management, reflect all adjustments, consisting only of
normal recurring adjustments, necessary for a fair presentation of the data.
STATEMENT OF INCOME DATA: September 14, 1999
(inception)
to Ten Months Ended
December 31, October 31,
1999 2000
--------- ----------
(Unaudited)
Sales ...................................................................... $ -- $ 292,987
Cost of sales .............................................................. -- 95,009
--------- ----------
Gross income ............................................................... -- 197,978
Operating expense .......................................................... -- 302,353
--------- ----------
Loss from operations ....................................................... -- (104,375)
Other expense, net ......................................................... (2,700) (54,100)
--------- ----------
Net loss before minority interest in loss of subsidiaries .................. (2,700) (158,475)
Minority interest in loss of subsidiaries .................................. -- 54,488
--------- ----------
Net loss ................................................................... $ (2,700) $ (103,987)
========= ==========
Net loss per common share................................................... $ N/A * $ (0.07)
Weighted average common shares outstanding.................................. N/A * 1,405,272
BALANCE SHEET DATA: October 31, 2000
----------------
(unaudited)
Cash and cash equivalents...................................................... $ 212,766
Total assets................................................................... $1,812,648
Long-term debt, less current portion........................................... $ 293,524
Stockholders' equity........................................................... $ 756,428
* As of December 31, 1999, 1,000,000 shares were subscribed but none were
then issued and outstanding.
PLAN OF OPERATION
We intend to fully utilize our facilities at Castledaly Manor. By marketing
our travel package, we will seek to maintain full utilization of the guest
rooms, bar and restaurant. We will also seek to expand our appeal to local
residents of the Athlone area for weddings and meetings. If proceeds of this
offering are sufficient, we will seek to build an Irish-theme hotel in Green
Bay, Wisconsin and a second facility in Ireland. If the entire offering is sold,
we will develop additional Irish-theme hotels in the United States.
Harp & Eagle is currently profitable and expects to remain profitable.
We can satisfy our cash operating requirements indefinitely without receiving
proceeds from this offering. However, because we generally desire to
maintain a 50% ratio of equity to total capital in newly-developed facilities,
our rate of expansion may be limited by our ability to add equity capital from
securities offerings or other means. In selected cases, Harp & Eagle may qualify
for government-funded development grants. If so, such grants may supply an
additional source of equity capital and permit more rapid expansion.
Harp & Eagle will only add plant, equipment and personnel as it expands its
existing facilities or develops or purchases additional facilities. We will seek
to expand or add facilities only when we believe that we can achieve profitable
operations within a year of commencement of operations. However, we face
significant competition in many geographic areas and have no assurance of
profitable operations.
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BUSINESS
BACKGROUND
Harp & Eagle has been organized to acquire, expand, build, own, manage and
operate boutique hotels in the United States and Ireland, each of which will
incorporate an ethnic Irish theme. In addition to providing overnight stays in
our rooms, we expect that our hotels will typically incorporate a bar, gift shop
and restaurant. They may feature musical entertainment periodically.
Our President, Cary James O'Dwanny, has organized and presently operates
three hotels in Wisconsin and one hotel in Ireland. The Wisconsin hotels are 52
Stafford in Plymouth, Wisconsin and County Clare in Milwaukee, Wisconsin, both
of which feature an Irish theme; and Audubon in Mayville, Wisconsin which
features fine dining in an historic renovation. Castledaly Manor, the hotel in
Ireland, is situated in a wooded setting on a 37-acre site near Athlone, in the
center of Ireland.
Prior to the commencement of this offering, we acquired a majority of the
shares of common stock of Castledaly Acquisition Corporation, a Wisconsin
corporation, which owns all of the outstanding ordinary shares of Castledaly
Manor, Ltd. By virtue of this acquisition, we manage and control Castledaly
Manor. At the present time, our business operations include (1) the operation of
Castledaly Manor and (2) the review and evaluation of other potential sites for
development of additional Irish-theme inns and restaurants. We are currently
researching potential sites in Green Bay, Wisconsin and County Antrim, Ireland.
In the future, we may seek to build or develop other Irish-theme hotels in the
United States and Ireland.
CASTLEDALY MANOR
GENERAL. Castledaly Manor is a 37-acre facility with a manor house and
stable blocks, originally built as a working estate by a wealthy Irish family in
the early 18th Century. During 1997, a group of Wisconsin investors organized
Castledaly Acquisition Corporation which entered into an agreement to purchase
one-half of the outstanding "ordinary shares" of Castledaly Manor, Ltd., an
Irish limited company; an Irish entrepreneur owned the balance. Castledaly
Manor, Ltd. owns 100% of the equity in Castledaly Manor. An Irish limited
company, which is comparable to a typical business corporation in the United
States, provides limited liability of its shareholders; its equity shares, which
are comparable to common stock, are referred to as "ordinary shares." In 1997,
Castledaly Manor significantly renovated its buildings and improved its grounds.
During 1999, Castledaly Acquisition Corporation acquired the remaining
outstanding ordinary shares of Castledaly Manor, Ltd. and now owns 100% of its
outstanding shares. During 2000, Harp & Eagle acquired a majority of the
outstanding common stock of Castledaly Acquisition Corporation and now exercises
ownership and exclusive operating and management control over Castledaly Manor.
Castledaly Manor offers a travel package for American tourists which
includes round-trip air travel between Chicago to Dublin and one week's
accommodations at Castledaly Manor, for a package price per couple of less than
$1,300 in the winter to $1,800 in the summer. This program has proven very
successful, resulting in a backlog of reservations for most of 2001.
Originally, Castledaly Manor had 11 rooms available for rent. Early in
2001, it expanded by renovation of the stable blocks behind the manor house,
thereby adding an additional 12 guest rooms; with these additional rooms, the
the inn now has 23 guest rooms available for rent. Commencing in the second half
of 1999 and continuing to date, Castledaly Manor has been a profitable
operation.
DESCRIPTION OF THE CASTLEDALY PROPERTY. For over 250 years, Castledaly
Manor has stood on its own private grounds, midway between Athlone and Moate, in
the center of Ireland. It is a charming country retreat with tastefully
appointed en suite bedrooms, all furnished to comfortable standards. The manor
is surrounded by 37 acres of pasture and woodland, and is traversed by small
streams. Five championship golf courses, horse riding and
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angling are available in the immediate vicinity. The manor's main building
includes a large entrance hall and spacious (23 feet by 12 feet) reception hall;
a dining room, lounge and function room (for corporate and business meetings;
conservatory with panoramic views of the gardens; 11 guest rooms including one
double-family suite; a manager's living suite; a bar with constant turf fire in
evidence; and miscellaneous other rooms. The grounds include walled gardens, a
small pond and stream, and stone stables which have been converted into an
additional 12 guest rooms. We intend to further expand by adding an
old-fashioned pub in a section of the stables.
MARKETING AND PROMOTION. We promote Castledaly Manor primarily by word of
mouth referrals and through advertising at County Clare in Milwaukee, Wisconsin
and 52 Stafford in Plymouth, Wisconsin.
CASTLEDALY PERSONNEL. Castledaly Acquisition Corporation has no employees.
Castledaly Manor, Ltd. has six full-time and six part-time employees. No
employee is subject to a collective bargaining agreement. Castledaly Manor, Ltd.
generally considers its relations with its employees to be excellent.
COMPETITION
With respect to both our domestic and Irish operations, the primary method
of competition in the hotel business involves the effort to attract lodging
guests and related dining and other business, such as meetings. This competition
is intense in both countries, and we compete with numerous hotels and inns which
offer excellent facilities and service, many of which have substantially greater
financial and other resources than our company, particularly with respect to
suitable properties and locations for expansion. Risks associated with our
expansion strategy are discussed under "Risk Factors."
In the United States, we believe that our Irish-theme concept distinguishes
our inns from the vast majority of competing facilities, providing a significant
marketing advantage.
As mentioned above, provided that the net proceeds of this offering are
sufficient to adequately fund one or more new inns, we expect to compete for
additional properties principally with respect to properties and locations. We
intend to provide for the growth of our company largely through the acquisition
or development of additional hotel properties, and our inability to successfully
compete for such properties could impede our efforts to grow and expand as
quickly as planned.
BUSINESS EXPANSION
We intend to concentrate substantial efforts, including the allocation of
management time and other resources, on the expansion our business in the United
States and Ireland. We expect to do so by (1) constructing and developing new
inns in the United States and Ireland, (2) acquiring ownership positions in
firms that own and operate hotels, predominantly, we expect, in the United
States and Ireland, and (3) increasing our interest in properties which we
already partially own.
OWNERSHIP OF EQUITY INTERESTS. We own a majority interest in Castledaly
Acquisition Corporation, which owns and operates Castledaly Manor in Ireland, as
discussed above, and a minority equity interest in County Clare, Ltd., which
operates an Irish-theme inn and restaurant named County Clare in Milwaukee,
Wisconsin. County Clare and Castledaly Manor share marketing materials and
advertising. Personnel are occasionally rotated between Milwaukee and Ireland,
and share common training. In the future, we may increase our ownership in these
firms or acquire ownership in other firms that own and operate Irish-theme
facilities. Our general purpose in acquiring such interests is gain
participation in the management of the firms in which we invest, and to develop
operating synergies that benefit our company, such as achieving economies of
scale in purchasing supplies, training of personnel and sharing of marketing
expenses.
DEVELOPMENT OF NEW FACILITIES. We have explored a second location in
Ireland, in the town of Ballycastle, County Antrim. Our President has conducted
discussions with the Moyle District County officials there, who have expressed
favorable interest.
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In the United States, we may seek in the future to enter new markets by
developing and building and developing additional Irish-theme hotels. In
selecting sites, we intend to locate in or near cities with large populations of
persons of Irish heritage, particularly in areas which exhibit pride in their
ethnic origin. In our experience, the sponsorship of local Irish-heritage
organizations, fairs, parades and similar groups and functions indicates an
interest in Irish heritage and provides an effective means of identifying and
communicating with persons who are likely to appreciate and support our
Irish-theme inns and restaurants.
Our first preference is to develop and build an Irish-theme hotel in the
Green Bay, Wisconsin metropolitan area. A large segment of the Green Bay
population is of Irish descent. We have reviewed various potential locations to
build an Irish-theme hotel in the Green Bay area and have identified one that we
consider desirable for this purpose, located on the Fox River in the downtown
area of the city. However, we have not yet committed to purchase the site and
will not do so until we have secured at least $1,000,000 of investment equity
capital. Please see "Use of Proceeds" for additional information concerning our
contribution of equity capital to this project. While we are not bound by
contract to any financing strategy, our general preference is to provide at
least 50% of the financing required for the development of any newly-constructed
hotel in the form of equity capital, in order to minimize the risks that are
inherent in using leverage in our operations.
Our President has had discussions with the mayor and other officials in
Green Bay and has received favorable indications of interest from them. We have
considered potential locations in other U.S. cities, such as St. Paul, Minnesota
and in Chicago, Illinois. We will seek to expand in a manner consistent with our
format.
THE FORMAT OF OUR HOTELS
As a general rule, we expect to follow a common pattern in our newly
constructed Irish theme hotels. Each will generally be constructed in the
Georgian-style of architecture, which is a pattern common to Irish guest houses.
Each of our inns will be typically be a three-story building with colored stucco
exterior. Each will feature an imposing entrance, consistent with the grand pub
entrances found throughout Ireland, and will be enclosed by a European-style
fence to accentuate the building's design. Typically, we will build smaller
facilities, with approximately 30 to 50 guest rooms, featuring four-poster beds,
remote control televisions housed in cabinets, Irish artwork and bathrooms with
double whirlpools and showers. Each inn will typically offer food service from
11:30 a.m. until 9:00 p.m. Sunday through Thursday each week, and until 10:00
p.m. on Fridays and Saturdays. Each will typically accept all major credit
cards; with a monthly direct billing service provided to selected corporate
clients. Each will make parking available to its guests. Our inns will typically
include a pub with stained and beveled glass, handsome millwork and Irish
artwork; the menu will typically feature soups, salads, sandwiches and daily
Irish lunch and dinner specials. Each inn will feature fine food, with a
moderate price structure, unless the its locale otherwise lacks competing
restaurants and accordingly may support more formal dining. While the foregoing
discussion describes our general intent, particular locations may permit or
encourage variations. Each new inn will feature a unique boutique environment,
featuring fine food, attractive facilities, and good fellowship in a
personalized atmosphere. We believe the personal touch is an essential component
of our Irish hospitality.
HARP & EAGLE PERSONNEL
We currently have no full-time employees. Our officers work part-time on an
as-needed basis until we have a sufficient level of operations to justify a
greater commitment of time and financial resources. No employee is subject to a
collective bargaining agreement.
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MANAGEMENT
DIRECTORS AND OFFICERS
Listed below are the names and ages of our directors and officers and the
positions they hold with our company.
Name Age Position
---- --- --------
Cary James O'Dwanny 60 President, Treasurer and Director
Gerard Dunne 44 Vice President and Director
Dennis J. Radtke 29 Vice President and Director
Sean D. O'Dwanny 34 Vice President
Richard A. Kranitz 56 Secretary
Michael S. Joyce 58 Director
Thomas J. Sheehan 61 Director
CARY JAMES "RIP" O'DWANNY has been the President, Treasurer and a director
of Harp & Eagle since our inception in 1999. From 1993 to the present, he has
also been the President, Treasurer and a director of County Clare, Ltd., which
owns and operates County Clare, an Irish-theme inn and restaurant located in
Milwaukee, Wisconsin. From 1989 to the present, Mr. O'Dwanny has also been the
President and a director of Classic Inns of Wisconsin, Inc., which owns and
operates 52 Stafford, another Irish-theme inn and restaurant located in
Plymouth, Wisconsin. Mr. O'Dwanny has developed a number of award-winning
properties which are listed in the National Register of Historic Places.
GERARD DUNNE has been a Vice President and a director of Harp & Eagle
since our inception in 1999. He has been the manager of Castledaly Manor since
June 1999. From 1998 to 1999, Mr. Dunne was a manager with The Bridge House, a
popular pub in Fidelma Kiernan, Ireland, and from 1997 to 1998, he was a manager
with The Three Jolly Pigeons in Athlone, Ireland. Mr. Dunne was employed by the
accounting firm of Milne & Dwyer & Co., of Tullamore, from 1974 to 1981; from
1981 to 1982, he was employed by the accounting firm of Walsh Kealey & Co., also
of Tullamore; and from 1982 to 1998, he has maintained his own private
accounting practice.
DENNIS J. RADTKE has been a Vice President and director of Harp & Eagle
since our inception in 1999. From 1996 to the present, he has been the general
manager of County Clare, an Irish-theme inn and restaurant located in Milwaukee,
Wisconsin. From 1990 to 1996, he was employed at 52 Stafford, another
Irish-theme inn and restaurant located in Plymouth, Wisconsin.
SEAN D. O'DWANNY has been a Vice President of Harp & Eagle since our
inception in 1999. From 1986 to the present, Mr. O'Dwanny has been the general
manager of 52 Stafford, an Irish-theme inn and restaurant located in Plymouth,
Wisconsin. Since 1994, he has also owned and operated the Rochester Inn, a
historic bed-and-breakfast hotel located in Sheboygan Falls, Wisconsin.
RICHARD A. KRANITZ has been the Secretary of Harp & Eagle since our
inception in 1999. He has been an attorney in private practice since 1970,
specializing in securities, banking and business law. Prior to establishing
Kranitz & Philipp (formerly the Law Offices of Richard A. Kranitz) in 1984, he
was with the Milwaukee law firms of Fretty & Kranitz (1982 to 1983), Habush,
Gillick, Habush, Davis, Murphy, Kraemer & Kranitz (1977 to 1978), McKay, Martin
& Kranitz (1973-1976) and Reinhart, Boerner, Van Deuren, Norris & Reiselbach,
S.C. (1970 to 1973). Mr. Kranitz is a director of the Grafton State Bank.
MICHAEL S. JOYCE has been a director of Harp & Eagle since December 2000.
From 1985 to the present, he has been President and Chief Executive Officer of
The Lynde and Harry Bradley Foundation, Milwaukee, Wisconsin. From 1977 to 1985,
Mr. Joyce was the President of the John M. Olin Foundation, New York, New York;
from 1974 to 1977, he was the President of the Goldseker Foundation, Baltimore,
Maryland. Mr. Joyce is a director of Blue Cross & Blue Shied United of
Wisconsin, the Pinkerton Foundation, the Philanthropy Roundtable and a member of
the Selection Committee of the Clare Booth Luce Fund.
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THOMAS J. SHEEHAN has been a director of Harp & Eagle since December 2000.
From 1990 to the present, he has been the Chairman of the Board, President and
Chief Executive Officer of Grafton State Bank, a $125 million full-service
commercial bank with an active mortgage banking operation. Mr. Sheehan is the
current President of the Independent Community Bankers of America, an
organization which represents over 5,000 community banks throughout the United
States. He is also a Director of TYME Corporation, the primary provider of ATM
and POS interchange services in Wisconsin, and a member of its Executive
Committee. Mr. Sheehan is the current Chairman of the Grafton Community
Development Authority; Treasurer of the Ozaukee County Development Corporation;
a Director of the St. Mary's Hospital Foundation; and a member of the Grafton
Police and Fire Commission.
Cary James O'Dwanny is the father of Sean D. O'Dwanny.
All of our directors hold office until the next annual meeting of
stockholders and the election and qualification of their successors. Our
directors are not compensated for acting as directors, nor are they reimbursed
for expenses related to their service as directors. Officers are elected
annually by our board of directors and serve at the discretion of the board. See
"Principal Stockholders" for information concerning ownership of our common
stock by our directors and officers.
MANAGEMENT COMPENSATION
SUMMARY COMPENSATION TABLE. The following table provides information
concerning the compensation earned by our Chief Executive Officer for services
rendered to us in all capacities during the our fiscal year ended December 31,
2000. We are required to disclose in the table the compensation we paid to our
Chief Executive Officer and to any other executive officer of our company who
was paid in excess of $100,000. These persons are referred to in this prospectus
as "named executive officers." Because no executive officer of our company was
paid more than $100,000 for any fiscal year, only the compensation paid by us to
our Chief Executive Officer is included in the table.
Annual Compensation
--------------------------------- All Other
Name and Principal Positions Year Salary($) Bonus($) Compensation($)
---------------------------- ---- --------- -------- ---------------
Cary James O'Dwanny.................................. 2000 -0- -- --
President, Treasurer and Director
OPTION GRANTS IN THE LAST FISCAL YEAR. No options were granted to our Chief
Executive Officer, our only named executive officer, for our fiscal year ended
December 31, 2000.
OPTION EXERCISES IN 2000 AND AGGREGATE OPTION VALUES AT DECEMBER 31, 2000.
No options were exercised by our Chief Executive Officer, our only named
executive officer, during fiscal 2000, and, as of December 31, 2000, no
unexercised options were held by our Chief Executive Officer.
LIMITATION OF LIABILITY AND INDEMNIFICATION
Our bylaws provide for the elimination, to the fullest extent permissible
under Wisconsin law, of the liability of our directors to us for monetary
damages. This limitation of liability does not affect the availability of
equitable remedies such as injunctive relief. Our bylaws also provide that we
shall indemnify our directors and officers against certain liabilities that may
arise by reason of their status or service as directors or officers, other than
liabilities arising from certain specified misconduct. We are required to
advance their expenses incurred as a result of any proceeding against them for
which they could be indemnified, including in circumstances in which
indemnification is otherwise discretionary under Wisconsin law. At the present
time, there is no pending litigation or proceeding involving a director,
officer, employee or other agent of our company in which indemnification would
be required or permitted. We are not aware of any threatened litigation or
proceeding which may result in a claim for such indemnification.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
CERTAIN TRANSACTIONS
During December, 2000, we granted options to purchase 100,000 shares of our
common stock to four persons, all of whom are officers, directors and/or
employees of Harp & Eagle. These options were granted pursuant to a plan adopted
by our shareholders as of September 15, 1999. Options to purchase 25,000 shares
were granted to each of the following persons: Gerard Dunne, Richard A. Kranitz,
Sean D. O'Dwanny and Dennis J. Radtke. All of such options are exercisable for a
period of five years, commencing six months following the initial effective date
of the registration statement relating to this offering, at the price of $1.00
per share. The exercise price of these options was determined by us to reflect
the fair value of our common stock on December 31, 2000.
During the fourth quarter of 2000, we purchased an aggregate of 241 shares
of common stock of Castledaly Acquisition Corporation from that affiliated
corporation, at the price of $1,000 per share. We paid for this common stock by
assuming certain outstanding indebtedness of Castledaly Acquisition to, or
guaranteed by, our directors, officers, shareholders and affiliates, as follows:
Johnson Bank - $168,000 guaranteed by County Clare, Ltd.; County Clare, Ltd. -
$40,000; and Grafton State Bank - $33,000 guaranteed by Cary James O'Dwanny, F.
Fuller McBride and Richard A. Kranitz.
We have no loans outstanding to any of our directors or officers.
CONFLICTS OF INTEREST
Certain potential conflicts of interest are inherent in the relationships
between our affiliates and us.
From time to time, one or more of our affiliates may form or hold an
ownership interest in and/or manage other businesses both related and unrelated
to the type of business that we own and operate. These persons expect to
continue to form, hold an ownership interest in and/or manage additional other
businesses which may compete with ours with respect to operations, including
financing and marketing, management time and services and potential customers.
These activities may give rise to conflicts between or among the interests of
Harp & Eagle and other businesses with which our affiliates are associated. Our
affiliates are in no way prohibited from undertaking such activities, and
neither we or our shareholders will have any right to require participation in
such other activities.
Further, because we intend to transact business with some of our officers,
directors and affiliates, as well as with firms in which some of our officers,
directors or affiliates have a material interest, potential conflicts may arise
between the respective interests of Harp & Eagle and these related persons or
entities. For example, we may buy additional shares of common stock of County
Clare, Ltd., the corporation which owns and operates County Clare, an
Irish-theme inn and restaurant located in Milwaukee, Wisconsin. As of October
31, 2000, we already held a 6% minority interest in County Clare, Ltd. and
options to purchase an additional 16,500 shares (approximately 11%) at the price
of $1.00 per share. Cary James O'Dwanny, who is the president, treasurer, a
director and significant shareholder of Harp & Eagle, is also an officer,
director and shareholder of County Clare, Ltd.
We believe that such transactions will be effected on terms at least as
favorable to us as those available from unrelated third parties, and, with
respect to transactions involving real or apparent conflicts of interest, we
have adopted policies and procedures which require that (1) the fact of the
relationship or interest giving rise to the potential conflict be disclosed or
known to the directors who authorize or approve the transaction prior to such
authorization or approval, (2) the transaction be approved by a majority of our
disinterested outside directors and (3) the transaction be fair and reasonable
to Harp & Eagle at the time it is authorized or approved by our directors.
Kranitz & Philipp, our securities counsel, are also counsel to Liss
Financial Services, the managing placement agent. We will be represented by
other independent counsel in all instances, including securities law matters,
where our interests are deemed by us to conflict with those of the managing
placement agent.
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PRINCIPAL STOCKHOLDERS
The following table sets forth as of December 31, 2000, and as adjusted to
reflect the sale of the minimum offering of 60,000 shares, certain information
with respect to the beneficial ownership of our common stock by:
- each person known by us to beneficially own more than 5% of our common
stock;
- each of our directors;
- our sole named executive officer; and
- all of our directors and executive officers as a group.
We believe that, subject to applicable community and marital property laws,
the beneficial owners of our common stock listed below have sole voting and
dispositive power with respect to such shares.
Shares beneficially owned Shares beneficially owned
prior to offering after minimum offering (1)
-------------------------- --------------------------
Name and Address of Beneficial Owner Number Percent Number Percent
- ------------------------------------ ------ ------- ------ -------
Cary James O'Dwanny ................................... 1,000,000 66.1% 1,000,000 63.6%
1234 North Astor Street
Milwaukee, WI 53202
Gerard Dunne .......................................... -- -- -- --
Castledaly, Moate
County Westmeath, Ireland
Michael S. Joyce ...................................... 75,000 5.0% 75,000 4.8%
1241 North Franklin Place
Milwaukee, WI 53202
Dennis J. Radtke ...................................... -- -- -- --
1234 North Astor Street
Milwaukee, WI 53202
Thomas J. Sheehan ..................................... 25,000 1.7% 25,000 1.6%
101 Falls Road
Grafton, WI 53024
Jeffrey Cameron, M.D .................................. 80,000 5.3% 80,000 5.1%
8225 North Gray Log Lane
Fox Point, WI 53217
F. Fuller McBride, M.D ................................ 82,000 5.4% 82,000 5.2%
N5326 Highway 45 South
Fond du Lac, WI 54935
All directors and executive officers
as a group (6 persons) ............................. 1,100,000 72.7% 1,100,000 69.9%
- --------------
(1) Because this is a best-efforts, minimum-maximum offering, we cannot
guarantee that all or any part of the common stock offered by this
prospectus in excess of the minimum offering of 60,000 shares will be sold.
See "Risk Factors" and "Underwriting" for information concerning this type
of offering. If the number of shares of common stock sold in the offering,
as arbitrarily selected by us for purposes of illustration only, is assumed
to be 250,000 shares, 500,000 shares, 750,000 shares or 1,000,000,
ownership percentages would be as follows:
Assumed number of shares of common stock sold in the offering
-----------------------------------------------------------------
250,000 500,000 750,000 1,000,000
Shares Shares Shares Shares
------ ------ ------ ------
Cary James O'Dwanny........................... 56.7% 49.7% 44.2% 39.8%
Gerard Dunne.................................. -- -- -- --
Michael S. Joyce.............................. 4.3% 3.7% 3.3% 3.0%
Dennis J. Radtke.............................. -- -- -- --
Thomas J. Sheehan............................. 1.4% 1.2% 1.1% 1.0%
Jeffrey Cameron, M.D.......................... 4.5% 4.0% 3.5% 3.2%
F. Fuller McBride, M.D........................ 4.7% 4.1% 3.6% 3.3%
Directors and executive officers as a group... 62.4% 54.6% 48.6% 43.8%
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DESCRIPTION OF SECURITIES
Our authorized capital stock consists of 10,000,000 shares of common stock,
par value $0.0001 per share, and 2,000,000 shares of preferred stock, par value
$0.0001 per share. As of the date of this prospectus, 1,513,000 shares of common
stock (beneficially owned by approximately 15 persons) and no shares of
preferred stock were outstanding.
COMMON STOCK
Holders of our common stock are entitled to one vote per share of common
stock beneficially owned on each matter submitted to a vote at a meeting of
shareholders, subject to Section 180.1150 of the Wisconsin Business Corporation
Law. Our common stock does not have cumulative voting rights, which means that
the holders of a majority of voting shares voting for the election of directors
can elect all of the members of our board of directors.
Our common stock has no preemptive rights and no redemption or conversion
privileges.
The holders of our common stock are entitled to receive dividends out of
assets legally available at such times and in such amounts as our board of
directors may, from time to time, determine, and upon liquidation and
dissolution are entitled to receive all assets available for distribution to the
shareholders. Under the Wisconsin Business Corporation Law, a majority vote of
shares represented at a meeting at which a quorum is present is generally
sufficient for all actions that require the vote of shareholders, However,
certain actions require approval by either a super-majority of two-thirds of all
the outstanding shares entitled to vote, and certain actions require a majority
of all outstanding shares entitled to vote. See "Description of Securities -
Anti-Takeover Provisions" for additional information concerning some of these
actions. All of the outstanding shares of our common stock are, and the shares
to be sold by us as part of this offering when legally issued and paid for will
be, fully paid and nonassessable, except for certain statutory liabilities which
may be imposed by Section 180.0622(2)(b) of the Wisconsin Business Corporation
Law for unpaid employee wages.
PREFERRED STOCK
Our board of directors has the authority, within the limitations and
restrictions in our articles of incorporation, to issue 2,000,000 shares of
preferred stock in one or more series and to fix the rights, preferences,
privileges and restrictions thereof, including dividend rights, dividend rates,
conversion rights, voting rights, terms of redemption, redemption prices,
liquidation preferences and the number of shares constituting any series or the
designation of any series, without further vote or action by the stockholders.
The issuance of preferred stock may have the effect of delaying, deferring
or preventing a change in control of Harp & Eagle without further action by the
stockholders. The issuance of preferred stock with voting and conversion rights
may adversely affect the voting power of the holders of common stock, including
voting rights, of the holders of common stock. In some circumstances, this
issuance could have the effect of decreasing the market price of the common
stock. We currently have no plans to issue any shares of preferred stock.
OPTIONS AND UNDERWRITER'S WARRANTS
As of the date of this prospectus, 100,000 shares of our common stock are
subject to outstanding options, all of which are exercisable for a period of
five years, commencing six months following the initial effective date of the
registration statement relating to this offering. See "Shares Eligible for
Future Sale" for additional information concerning outstanding options to
purchase our common stock.
In connection with this offering, we have agreed to sell to the managing
placement agent or its designee, at a purchase price of $.01 each, warrants to
purchase from us shares of common stock in an amount equal to 10% of the number
of shares of common stock sold in this offering. See "Underwriting" for a
complete description of the terms and conditions of these underwriter's
warrants.
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LIMITATION OF DIRECTOR LIABILITY
Section 180.0828 of the Wisconsin Business Corporation Law provides that
our directors can be held personally liable only for intentional breaches of
fiduciary duties, criminal acts, transactions from which the director derived an
improper personal profit and wilful misconduct. This provision may have the
effect of reducing the likelihood of derivative litigation against directors and
may discourage or deter shareholders or management from bringing a lawsuit
against directors for breach of their duty of care, even though such an action,
if successful, might otherwise have benefitted Harp & Eagle and its
shareholders.
INDEMNIFICATION
Under the Wisconsin Business Corporation Law, our directors and officers
are entitled to mandatory indemnification from us against certain liabilities
and expenses (1) if the officer or director is successful in the defense of an
action brought against him or her and (2) if the officer or director is not
successful in the defense of an action brought against him or her, unless, in
the latter case only, it is determined that the director or officer breached or
failed to perform his or her duties to Harp & Eagle and such breach or failure
constituted: (a) a wilful failure to deal fairly with us or our shareholders in
connection with a matter in which the director or officer had a material
conflict of interest; (b) a violation of the criminal law unless the director or
officer had reasonable cause to believe his or her conduct was lawful or had no
reasonable cause to believe his or her conduct was unlawful; (c) a transaction
from which the director or officer derived an improper personal profit; or (d)
wilful misconduct. While the Wisconsin Business Corporation Law allows us to
limit our obligation to indemnify officers and directors by so providing in our
articles of incorporation, to date we have not done so.
Our bylaws provide for the indemnification of our directors and officers by
us to the fullest extent permitted by Wisconsin law.
ANTI-TAKEOVER PROVISIONS
Provisions of our bylaws and the Wisconsin Business Corporation Law
described in this section may delay or make more difficult acquisitions or
changes in control of Harp & Eagle which are not approved by our board of
directors. We believe that these provisions will enhance our ability to develop
our business in a manner which will foster our long-term growth without the
disruption caused by the threat of a takeover that our board of directors does
not consider to be in the best interests of Harp & Eagle and its shareholders,
particularly, but not exclusively, in the initial years of our existence as a
publicly-traded company. These provisions could have the effect of discouraging
third parties from making proposals involving an acquisition or change in
control of Harp & Eagle, although such proposals, if made, might be considered
desirable by a majority of our shareholders. These provisions may also have the
effect of making it more difficult for third parties to cause the replacement of
our current management without the concurrence of our board of directors.
Number of Directors; Removal; Vacancies. Our bylaws currently provide that
we may have up to seven directors. The authorized number of directors may be
changed by amendment of the bylaws. The bylaws also provide that the our board
of directors shall have the exclusive right to fill vacancies on the board,
including vacancies created by expansion of the board or removal of a director,
and that any director elected to fill a vacancy shall serve until the next
annual meeting of our shareholders. The bylaws further provide that directors
may be removed by the shareholders only by the affirmative vote of the holders
of at least a majority of the votes then entitled to be cast in an election of
directors. This provision, in conjunction with the provisions of the bylaws
authorizing the board to fill vacant directorships, could prevent shareholders
from removing incumbent directors and filling the resulting vacancies with their
own nominees.
Amendments to the Articles of Incorporation. The Wisconsin Business
Corporation Law provides authority to Harp & Eagle to amend its articles of
incorporation at any time to add or change a provision that is required or
permitted to be included in the articles or to delete a provision that is not
required to be included in such articles. Our board of directors may propose one
or more amendments to our articles of incorporation for submission to a
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shareholder vote. The board may condition its submission of the proposed
amendment on any basis it chooses if the board notifies each shareholder,
whether or not entitled to vote, of the shareholders' meeting at which the
proposed amendment will be voted upon.
Constituency or Stakeholder Provision. Section 180.0827 of the Wisconsin
Business Corporation Law provides that, in discharging his or her duties to Harp
& Eagle and in determining what he or she believes to be in our best interests,
a director or officer may, in addition to considering the effects of any action
on shareholders, consider the effects of the action on employees, suppliers,
customers, the communities in which we operate, so-called "stakeholders," and
any other factors that the director or officer considers pertinent.
Wisconsin Anti-Takeover Statutes. Sections 180.1140 to 180.1144 of the
Wisconsin Business Corporation Law regulate the broad range of "business
combinations" between a "resident domestic corporation," such as Harp & Eagle,
and an "interested stockholder." The law defines a "business combination" to
include a merger or share exchange, or a sale, lease, exchange, mortgage,
pledge, transfer or other disposition of assets equal to at least 5% of the
market value of our stock or assets, 10% of our earning power, or the issuance
of stock or rights to purchase stock with a market value equal to at least 5% of
our outstanding stock, the adoption of a plan of liquidation or dissolution and
certain other transactions involving an "interested stockholder," defined as a
person who beneficially owns 10% of the voting power of our outstanding voting
stock or who is an affiliate or associate of Harp & Eagle and beneficially owned
10% of the voting power of our then outstanding voting stock within the last
three years.
Section 180.1141 of the Wisconsin Business Corporation Law prohibits us
from engaging in a business combination, other than a business combination of a
type specifically excluded from the coverage of the statute, with an interested
stockholder for a period of three years following the date such person becomes
an interested stockholder, unless our board of directors approved the business
combination or the acquisition of the stock that resulted in a person becoming
an interested stockholder before such acquisition. Accordingly, the statutory
prohibition against business combinations cannot be avoided during the
three-year period by subsequent action of the board of directors or
shareholders. Business combinations after the three-year period following the
stock acquisition date are permitted only if (1) our board of directors approved
the acquisition of the stock by the interested stockholder prior to the
acquisition date, (2) the business combination is approved by a majority of our
outstanding voting stock that is not beneficially owned by the interested
stockholder, or (3) the consideration to be received by our shareholders meets
certain requirements of the statute with respect to form and amount.
In addition, the Wisconsin Business Corporation Law provides in Sections
180.1130 to 180.1133 that business combinations involving a "significant
shareholder," as defined below, and a "resident domestic corporation," such as
Harp & Eagle, are subject to a two-thirds supermajority vote of shareholders.
Compliance with this "fair price" provision is in addition to any approval
otherwise required. A "significant shareholder," with respect to a resident
domestic corporation, is defined as a person who beneficially owns, directly or
indirectly, 10% or more of the voting stock of the corporation, or an affiliate
of the corporation which beneficially owned, directly or indirectly, 10% or more
of the voting stock of the corporation within the last two years. We anticipate
that after this offering we will be an "issuing public corporation" for purposes
of the defensive action restrictions discussed below.
Under the Wisconsin Business Corporation Law, the business combinations
described above must be approved by 80% of the voting power of our stock and at
least two-thirds of the voting power of our stock that is not beneficially held
by the significant shareholder who is a party to the relevant transaction or any
of its affiliates or associates, in each case voting together as a single group,
unless the following fair price standards have been met: (1) the aggregate value
of the per share consideration is equal to the higher of (a) the highest price
paid for any of our common stock by the significant shareholder in the
transaction in which it became a significant shareholder within two years before
the date of the business combination, (b) the market value of our shares on the
date of commencement of any tender offer by the significant shareholder, the
date on which the person became a significant shareholder or the date of the
first public announcement of the proposed business combination, whichever is
highest, or (c) the highest liquidation or dissolution distribution to which
holders of the shares would be entitled, and (2) either cash, or the form of
consideration used by the significant shareholder to acquire the largest number
of shares, is offered.
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Section 180.1134 of the Wisconsin Business Corporation Law contains
defensive action restrictions and provides that, in addition to the vote
otherwise required by law or the articles of incorporation of an issuing public
corporation, the approval of the holders of a majority of the shares entitled to
vote is required before we can take certain action while a takeover offer is
being made or after a takeover offer has been publicly announced and before it
is concluded. Under these defensive action restrictions, shareholder approval is
required for us to (1) acquire more than 5% of our outstanding voting shares at
a price above the market price from any individual who or organization which
owns more than 3% of our outstanding voting shares and has held such shares for
less than two years, unless a similar offer is made to acquire all of our voting
shares, or (2) sell or option assets of Harp & Eagle which amount to at least
10% of our market value, unless we have at least three directors who are not
officers or employees and a majority of these independent directors vote not to
have this provision apply to us.
The restrictions described in clause (1) of the preceding paragraph may
have the effect of deterring a shareholder from acquiring shares of our common
stock with the goal of seeking to have us repurchase such shares at a premium
over the market price.
Under Section 180.1150 of the Wisconsin Business Corporation Law, the
voting power of our common stock, held by any person or persons acting as a
group, which is in excess of 20% of the voting power in the election of
directors is limited to 10% of the full voting power of such common stock. This
statutory voting restriction does not apply to shares acquired directly from us
or in certain specified transactions or shares for which full voting power has
been restored pursuant to a vote of our shareholders.
Anti-Takeover Consequences. Certain provisions of our articles of
incorporation and bylaws may have significant anti-takeover affects, including
the inability of our shareholders to remove directors without cause, and the
ability of the remaining directors to fill vacancies.
The explicit grant of discretion to directors to consider non-shareholder
constituencies could, in the context of an "auction" of the Company, have
antitakeover effects in situations where the interests of "stakeholders" of our
company, including employees, suppliers, customers and communities in which we
do business, conflict with the short-term maximization of shareholder value.
The fair price provision may discourage any attempt by a shareholder to
squeeze out other shareholders without offering an appropriate premium purchase
price. In addition, the defensive action restrictions may have the effect of
deterring a shareholder from acquiring our common stock with the goal of seeking
to have us repurchase the common stock at a premium. The statutory and bylaw
provisions referenced above are intended to encourage persons seeking to acquire
control of Harp & Eagle to initiate such an acquisition through arms-length
negotiations with our board of directors, and to ensure that sufficient time for
consideration of such a proposal, and any alternatives, is available. These
measures are also designed to discourage investors from attempting to accumulate
a significant minority position in our company and then using the threat of a
proxy contest as a means to pressure us to repurchase shares of our common stock
at a premium over the market value. To the extent that such measures lessen the
likelihood of a proxy contest or the assumption of control by a holder of a
substantial block of our common stock, they could increase the likelihood that
incumbent directors will retain their positions, and may also have the effect of
discouraging a tender offer or other attempt to obtain control of Harp & Eagle,
even though such attempt might be beneficial to us and to our shareholders.
TRANSFER AGENT AND REGISTRAR
We are currently the transfer agent and registrar for our common stock.
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SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no public market for our common
stock, and sales of substantial amounts of common stock in the public market
after this offering could adversely affect market prices prevailing from time to
time and could impair our ability to raise capital through the sale of equity
securities.
SALES OF RESTRICTED SHARES
Upon completion of this offering, assuming that the entire offering is
sold, 2,513,000 shares of our common stock will be outstanding. All of the
shares we sell in this offering will be freely tradable without restriction or
further registration under the Securities Act, except that any shares purchased
by our affiliates, as that term is defined in Rule 144 under the Securities Act,
may generally only be sold in compliance with Rule 144. In general, our
affiliates are any persons that directly, or indirectly through one or more
intermediaries, control, or are controlled by, or are under common control with,
Harp & Eagle.
The remaining 1,513,000 shares of common stock outstanding following this
offering will be restricted securities under the terms of the Securities Act.
Sales of these restricted shares will be limited by Rule 144 and, in some cases,
by lock-up agreements. Under these agreements, we, our officers, directors and
respective affiliates have agreed, subject to limited exceptions, not to sell,
transfer or otherwise dispose of, directly or indirectly, any shares of common
stock, or any securities convertible or exchangeable for shares of common stock,
for a period of 120 days after the date of this prospectus without the prior
written consent of Liss Financial Services, the managing placement agent. Liss
Financial Services, however, may in its sole discretion, at any time and without
notice, release all or any portion of the shares of common stock subject to
lock-up agreements.
Upon the expiration of the 120-day lock-up period, or earlier with the
written consent of Liss Financial Services, the 1,100,000 restricted shares held
by our affiliates will become eligible for sale in the public market, subject to
the volume, availability of public information, manner of sale and notice
requirements of Rule 144. 319,000; 58,000; 5,000 and 31,000 restricted shares
held by non-affiliates and not subject to lock-up agreements will become
eligible for sale during the first, second, third and fourth quarters of 2001,
respectively, subject in each case to the same Rule 144 restrictions and
requirements as sales by our affiliates.
RULE 144
In general, under Securities Act Rule 144, a stockholder who owns
restricted shares that have been outstanding for at least one year is entitled
to sell, within any three-month period, a number of these restricted shares that
does not exceed the greater of:
- 1% of the then outstanding shares of common stock, or approximately
24,930 shares immediately after this offering, assuming the entire
offering is sold, or
- the average weekly reported trading volume in the common stock during
the four calendar weeks preceding filing of a notice on Form 144 with
respect to the sale.
In addition, our affiliates must comply with the restrictions and
requirements of Rule 144, other than the one-year holding period requirement, to
sell shares of common stock that are not restricted securities. Sales under Rule
144 are also governed by manner of sale provisions and notice requirements, and
current public information about us must be available. Under Rule 144(k), a
stockholder who is not currently, and who has not been for at least three months
before the sale, an affiliate of ours and who owns restricted shares that have
been outstanding for at least two years may resell these restricted shares
without compliance with the above requirements. The one- and two-year holding
periods described above do not begin to run until the full purchase price is
paid by the person acquiring the restricted shares from us or an affiliate of
ours.
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UNDERWRITING
We have entered into a managing placement agent agreement with Liss
Financial Services, providing for the sale of this offering. The principal
offices of the managing placement agent are located at 424 East Wisconsin
Avenue, Milwaukee, Wisconsin 53202, and its telephone number is (414) 225-3555.
Liss Financial Services, as managing placement agent, may engage other
broker-dealer members of the NASD to participate as selected placement agents in
this offering of our common stock.
This is a "best-efforts," "minimum-maximum" offering. Our selected
placement agents, including the managing placement agent, are not obligated (1)
to sell on our behalf any number or dollar amount of our common stock in excess
of the 60,000-share minimum offering or (2) to purchase any number or dollar
amount of shares at any time. These agents have agreed to use their best efforts
to sell on our behalf all of the common stock offered by this prospectus.
However, we cannot guarantee how much stock in excess of the required minimum,
if any, will actually be sold in this offering. See "Risk Factors" for
additional information concerning this type of offering.
All funds received from subscribers for our common stock will be held in
escrow by Grafton State Bank, Grafton, Wisconsin, as escrow agent, pursuant to
an agreement among us, the managing placement agent and the escrow agent.
Pending disbursement, subscription proceeds will be deposited in a segregated
account and invested in short-term United States government securities,
securities guaranteed by the United States government, certificates of deposit
or time or demand deposits in commercial banks located in the United States.
In the event that at least 60,000 shares of Common Stock have not been sold
within 120 days from the date of this prospectus, the offering will terminate
and all funds received from subscribers will be promptly returned in full by the
escrow agent directly to subscribers, without interest or deduction, as provided
in the escrow agreement. Provided that at least 60,000 shares of Common Stock
are sold within the foregoing period, we may continue to offer our common stock
for sale until (1) 1,000,000 shares are sold or (2) December 31, 2001, whichever
occurs first. However, we may terminate the offering at any earlier time if we
choose to do so.
For services performed by it pursuant to the escrow agreement, we will pay
to the escrow agent fees in the amounts of $2,500, plus $250 per closing and $10
per subscriber (whether accepted or rejected); provided, however, that the
escrow agent shall receive, in the aggregate, not less than $3,000 in
consideration of its services rendered pursuant to the terms of the escrow
agreement.
We propose to offer our common stock to the public at the public offering
price set forth on cover page of this prospectus, and will pay to Liss Financial
Services, the managing placement agent, commissions in an amount equal to 8% of
the aggregate purchase price of the common stock sold. The managing placement
agent may reallow all or any part of such commissions to any other selected
placement agent, up to an amount equal to 8% of the aggregate purchase price of
the common stock sold in this offering by that selected placement agent. We have
also agreed to pay to the managing placement agent a non-accountable expense
allowance equal to 2% of the aggregate purchase price of the common stock sold
in this offering. The managing placement agent may reallow all or any part of
such expense allowance to any other selected placement agent, up to an amount
equal to 2% of the aggregate purchase price of the common stock sold in this
offering by that selected placement agent.
Liss Financial Services has informed us that the selected placement agents,
including the managing placement agent, will not confirm sales of common stock
offered by this prospectus to accounts over which they exercise discretionary
authority.
To purchase common stock in this offering, a prospective investor must (1)
complete and sign a subscription agreement, in the form attached to this
prospectus as Exhibit A, and any other documents that we or the managing
placement agent may require and (2) deliver such documents, together with
payment in an amount equal to the full purchase price the shares of common stock
being purchased, to the selling selected placement agent. Checks should be made
payable to "Grafton State Bank, Escrow Agent." Each subscription payment must be
transmitted to the escrow agent by 12:00 noon on the business day next following
its receipt by a selected placement agent.
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We will determine, in our sole discretion, to accept or reject
subscriptions within five days following their receipt. Funds of an investor
whose subscription is rejected will be promptly returned directly to such person
by the escrow agent, without interest or deduction. No subscription may be
withdrawn, revoked or terminated by the purchaser. We reserve the right to
refuse to sell our common stock to any person at any time.
We, our officers, directors and respective affiliates have agreed, subject
to limited exceptions, not to sell, transfer or otherwise dispose of, directly
or indirectly, any shares of common stock or any securities convertible or
exchangeable for shares of common stock for a period of 120 days after the date
of this prospectus without the prior written consent of the managing placement
agent, Liss Financial Services, which may, in its sole discretion, at any time
and without notice, release all or any portion of the common stock subject to
lock-up agreements.
In connection with this offering, we have agreed to sell to the managing
placement agent or its designee, which designee must be another selected
placement agent or a bona fide officer or partner of a selected placement agent,
at a purchase price of $.01 each, warrants to purchase from us shares of common
stock in an amount equal to 10% of the number of shares of common stock sold in
this offering. These underwriter's warrants are exercisable for a period of four
years, commencing one year after the date of this prospectus, at an exercise
price equal to 135% of the price per share set forth on the cover page of this
prospectus. The underwriter's warrants will not be transferable, except to
officers of Liss Financial Services. The underwriter's warrants contain
provisions for adjustment of the exercise price upon the occurrence of certain
events, including stock dividends, stock splits, recapitalizations and the
issuance of our common stock for consideration less than the exercise price. The
holders of underwriter's warrants have no voting, dividend or other rights as
stockholders of Harp & Eagle with respect to shares underlying their warrants,
unless and until the underwriter's warrants have been exercised.
A new registration statement or post-effective amendment to the
registration statement of which this prospectus is a part will be required to be
filed and declared effective before distribution to the public of shares of our
common stock issuable upon exercise of the underwriter's warrants. We have
agreed, on one occasion when requested, to make necessary filings, at our
expense, in order to permit a public offering of the shares underlying the
underwriter's warrants during the period beginning one year and ending five
years after the date of this prospectus, and to use our best efforts to cause
that registration statement or post-effective amendment to become effective and
remain effective for a period of at least one year. In addition, we have agreed
that, during the same four-year period, we will (1) give advance notice to
holders of underwriter's warrants and shares issued upon the exercise of
underwriter's warrants, if any, of our intention to file a registration
statement and (2) include, at the option of the holder, any common stock issued
upon the exercise of underwriter's warrants in that registration statement, at
our expense, and to maintain the effectiveness of such registration statement
for a period of at least one year.
For the period during which the underwriter's warrants are exercisable, the
managing placement agent and any transferee will have the opportunity to profit
from a rise in the market price of our common stock, with a resulting dilution
in the interest of our other stockholders. In addition, the terms on which we
will be able to obtain additional capital during the exercise period may be
adversely affected in that the managing placement agent or its transferee is
likely to exercise the underwriter's warrants at a time when we would, in all
likelihood, be able to obtain capital by a new offering of securities on terms
more favorable than those provided by the terms of the underwriter's warrants.
We and the selected placement agents have agreed to indemnify each other
against certain liabilities, including liabilities under the Securities Act of
1933.
Prior to this offering, there has been no public market for our common
stock. The initial public offering price has been determined by negotiations
between us and the managing placement agent and is not necessarily related to
our asset value, net worth, results of operations or other established criteria
of value. The factors considered in determining the initial offering price
include the history of and the prospects for Harp & Eagle and the industry in
which we operate, our past and present operating results and the trends of such
results, our financial condition, the experience of our management, the market
price of publicly traded stock of comparable companies in recent periods and the
general condition of the securities markets at the time of this offering.
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LEGAL MATTERS
The validity of the shares of our common stock offered through this
prospectus will be passed upon for us by Kevin B. Dunn Esq., Milwaukee,
Wisconsin. Legal matters relating to this offering will be passed upon for the
managing placement agent by Kranitz & Philipp, Milwaukee, Wisconsin. Richard A.
Kranitz, a partner in the law firm of Kranitz & Philipp, is our Secretary.
EXPERTS
Schenck & Associates, S.C., independent accountants, have audited the
financial statements of Harp & Eagle and Castledaly Acquisition Corporation,
respectively, as of December 31, 1999, and for the year then ended, as set forth
in their reports. We have included the financial statements of these two
corporations in this prospectus and elsewhere in the registration statement in
reliance upon the report of Schenck & Associates, S.C., given on their authority
as experts in auditing and accounting.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
We have filed with the SEC a registration statement on Form SB-2 under the
Securities Act of 1933 with respect to the common stock to be sold in this
offering. This prospectus does not contain all of the information set forth in
the registration statement and the exhibits and schedules to the registration
statement. For further information with respect to us and the common stock to be
sold in this offering, we refer you to the registration statement and the
exhibits and schedules filed as part of the registration statement. Statements
contained in this prospectus concerning the contents of any contract or any
other document are not necessarily complete. If a contract or document has been
filed as an exhibit to the registration statement, we refer you to the copy of
the contract or document that has been filed. Each statement in this prospectus
relating to a contract or document filed as an exhibit is qualified in all
respects by the filed exhibit. The registration statement, including exhibits
and schedules filed with it, may be inspected without charge at the SEC's public
reference rooms at:
- Judiciary Plaza, 450 Fifth Street, N.W., Room 1024, Washington, D.C.
20549;
- Seven World Trade Center, 13th Floor, New York, New York 10048; or
- Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661.
Copies of all or any part of the registration statement may be obtained
from such office after payment of fees prescribed by the SEC. Please call the
SEC at 1-800-SEC-0330 for further information on the operation of the public
reference rooms. The SEC also maintains a Web site that contains registration
statements, reports, proxy and information statements and other information
regarding registrants, including us, that file electronically with the SEC at
http://www.sec.gov.
Upon the effectiveness of this offering, we expect to become subject to the
information and periodic reporting requirements of the Securities Exchange Act
of 1934 and, accordingly, will file annual reports containing consolidated
financial statements audited by an independent public accounting firm, quarterly
reports containing unaudited consolidated financial data, current reports, proxy
statements and other information with the SEC. You will be able to inspect and
copy such periodic reports, proxy statements and other information at the SEC's
public reference room, and the Web site of the SEC referred to above.
25
28
INDEX TO FINANCIAL STATEMENTS
Page
HARP & EAGLE, LTD. AND SUBSIDIARIES
Accountants' Compilation Report.............................................................................. F-1
Financial Statements:
Consolidated Balance Sheet at December 31, 1999 (unaudited)............................................. F-2
Consolidated Statement of Operations for the year ended
December 31, 1999 (unaudited)....................................................................... F-4
Consolidated Statement of Changes in Stockholders' Equity
for the year ended December 31, 1999 (unaudited).................................................... F-5
Consolidated Statement of Cash Flows for the year ended
December 31, 1999 (unaudited)....................................................................... F-6
Notes to Consolidated Financial Statements.............................................................. F-8
Accountants' Report on Supplemental Information.............................................................. F-12
Supplemental Information:
Consolidating Schedule, Balance Sheet Information, as of October 31, 2000 (unaudited)................... F-13
Consolidating Schedule, Statement of Operations Information,
for the ten-month period ended October 31, 2000 (unaudited)......................................... F-17
Consolidating Schedule, Statement of Cash Flows Information,
for the ten-month period ended October 31, 2000 (unaudited)......................................... F-19
Consolidating Schedule, Operating Expenses Information,
for the ten-month period ended October 31, 2000 (unaudited)......................................... F-23
HARP & EAGLE, LTD.
Independent Auditors' Report................................................................................. F-25
Financial Statements:
Balance Sheet, as of December 31, 1999.................................................................. F-26
Statement of Operations and Accumulated Deficit, for the period
from Inception (September 14, 1999) to December 31, 1999............................................ F-27
Statement of Cash Flows, for the period from Inception (September 14, 1999)
to December 31, 1999................................................................................ F-28
Notes to Financial Statements........................................................................... F-29
CASTLEDALY ACQUISITION CORPORATION AND SUBSIDIARY
Independent Auditors' Report................................................................................. F-30
Financial Statements:
Consolidated Balance Sheet, as of December 31, 1999..................................................... F-31
Consolidated Statement of Operations, for the year
ended December 31, 1999............................................................................. F-33
Consolidated Statement of Changes in Stockholders' Equity
for the year ended December 31, 1999................................................................ F-34
Consolidated Statement of Cash Flows
for the year ended December 31, 1999................................................................ F-35
Notes to Consolidated Financial Statements.............................................................. F-36
Independent Auditors' Report on Supplemental Information..................................................... F-40
Supplemental Information:
Consolidating Schedule, Balance Sheet Information, as of December 31, 2000 (unaudited).................. F-41
Consolidating Schedule, Statement of Operations Information,
for the year ended December 31, 2000 (unaudited).................................................... F-43
Consolidating Schedule, Statement of Cash Flows Information,
for the year ended December 31, 2000 (unaudited).................................................... F-44
Consolidating Schedule, Operating Expenses Information,
for the year ended December 31, 2000 (unaudited).................................................... F-45
26
29
Accountants' Compilation Report
Board of Directors
HARP & EAGLE, LTD.
Plymouth, Wisconsin
We have compiled the accompanying consolidated balance sheet of HARP & EAGLE,
LTD. AND SUBSIDIARIES as of October 31, 2000 and the related consolidated
statements of operations, changes in stockholders' equity, and cash flows for
the ten-month period then ended, in accordance with Statements on Standards for
Accounting and Review Services issued by the American Institute of Certified
Public Accountants.
A compilation is limited to presenting in the form of consolidated financial
statements information that is the representation of management. We have not
audited or reviewed the accompanying consolidated financial statements, and,
accordingly, do not express an opinion or any other form of assurance on them.
/s/ Schenck & Associates, S.C.
Sheboygan, Wisconsin
December 8, 2000
F-1
30
HARP & EAGLE, LTD. AND SUBSIDIARIES
Consolidated Balance Sheet
October 31, 2000
(See Accountants' Compilation Report)
ASSETS
------
Current assets
- --------------
Cash 212,766
Accounts receivable 14,477
Inventory 5,339
-----------
Total current assets $ 232,582
Property and equipment
- ----------------------
Land and buildings 370,360
Building improvements 613,374
Furniture, fixtures and equipment 22,950
-----------
1,006,684
Less accumulated depreciation 189,614
-----------
Net property and equipment 817,070
Other assets
- ------------
Goodwill, net of amortization 426,696
Note receivable 10,000
Investment in unconsolidated subsidiary 326,300
-----------
Total other assets 762,996
------------
$ 1,812,648
============
See notes to consolidated financial statements.
F-2
31
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities
Notes payable $ 361,289
Current maturities of long-term debt 12,000
Accounts payable 69,074
Accrued liabilities:
Interest 58,747
Payroll taxes 24,657
Other 10,050
Customer deposits 226,879
------------
Total current liabilities $ 762,696
Long-term debt, less current maturities 293,524
------------
Total liabilities 1,056,220
Stockholders' equity
- --------------------
Controlling interest:
Common stock, $0.0001 par value:
Authorized, 10,000,000 shares
Issued and outstanding, 1,493,000 shares 149
Preferred stock, $0.0001 par value:
Authorized, 2,000,000 shares
Issued and outstanding, 0 shares -
Additional paid-in capital 867,851
Accumulated deficit (106,687)
Foreign currency translation adjustment (89,548)
------------
671,765
Minority interest 84,663
------------
Total stockholders' equity 756,428
------------
$ 1,812,648
============
F-3
32
HARP & EAGLE, LTD. AND SUBSIDIARIES
Consolidated Statement of Operations
Ten-Month Period ended October 31, 2000
(See Accountants' Compilation Report)
Sales $ 292,987
Cost of sales 95,009
------------
Gross income 197,978
Operating expenses 302,353
------------
Loss from operations (104,375)
Other income (expense)
- ----------------------
Interest income $ 4,702
Interest expense (58,802)
------------
Other expense, net (54,100)
------------
Net loss before minority interest in loss of subsidiaries (158,475)
Minority interest in loss of subsidiaries 54,488
------------
Net loss $ (103,987)
============
See notes to consolidated financial statements.
F-4
33
HARP & EAGLE, LTD. AND SUBSIDIARIES
Consolidated Statement of Changes in Stockholders' Equity
Ten-Month Period ended October 31, 2000
(See Accountants' Compilation Report)
Common Additional Stock
Common Stock Paid-In Subscriptions Accumulated
Stock Subscribed Capital Receivable Deficit
------ ---------- -------- ---------- -------
Balance, beginning of period $ - $ 100 $ 399,900 $(400,000) $ (2,700)
Acquisition of controlling
interest in Castledaly
Acquisition Corporation - - - - -
Comprehensive loss:
Net loss - - - - (103,987)
Foreign currency
translation adjustment - - - - -
Total comprehensive loss
Issuance of common stock 149 (100) 467,951 400,000 -
--------- --------- --------- --------- ---------
Balance, end of period $ 149 $ - $ 867,851 $ - $(106,687)
========= ========= ========= ========= =========
Accumulated
Other
Comprehensive Minority
Income Interest Total
------ -------- -----
Balance, beginning of period $ - $ - $ (2,700)
---------
Acquisition of controlling
interest in Castledaly
Acquisition Corporation - 192,423 192,423
---------
Comprehensive loss:
Net loss - (54,488) (158,475)
Foreign currency
translation adjustment (89,548) (53,272) (142,820)
---------
Total comprehensive loss - (301,295)
Issuance of common stock - - 868,000
--------- --------- ---------
Balance, end of period $ (89,548) $ 84,663 $ 756,428
========= ========= =========
See notes to consolidated financial statements.
F-5
34
HARP & EAGLE, LTD. AND SUBSIDIARIES
Consolidated Statement of Cash Flows
Ten-Month Period ended October 31, 2000
(See Accountants' Compilation Report)
Operating activities
- --------------------
Net loss $ (103,987)
Adjustments to reconcile net loss to net cash
used for operating activities:
Minority interest in net loss of subsidiaries (54,488)
Amortization of goodwill 12,712
Depreciation 85,373
Increase in:
Accounts receivable (9,058)
Inventories (2,216)
Increase (decrease) in:
Bank overdraft (117,880)
Accounts payable 36,324
Accrued liabilities (6,964)
Customer deposits 117,366
-----------
Net cash used for operating activities $ (42,818)
Investing activities
- --------------------
Purchases of property and equipment (160,070)
Increase in note receivable (10,000)
Investment in subsidiaries, net of cash acquired 45,156
-----------
Net cash used for investing activities (124,914)
Financing activities
- --------------------
Proceeds from:
Note payable 53,000
Long-term debt 74,141
Retirement of note payable (20,000)
Issuance of common stock 284,000
-----------
Net cash provided by financing activities 391,141
Effect of exchange rate changes on cash (10,643)
----------
Cash
- ----
Net increase 212,766
Beginning of period -
-
End of period $ 212,766
==========
Supplemental cash flow information
- ----------------------------------
Cash paid for interest $ 39,162
F-6
35
HARP & EAGLE, LTD. AND SUBSIDIARIES
Consolidated Statement of Cash Flows, Continued
Ten-Month Period ended October 31, 2000
(See Accountants' Compilation Report)
Non-cash investing and financing activities
Summary of investment in subsidiaries, net of cash acquired:
Castledaly
Acquisition County
Corporation Clare, Ltd.
(Consolidated) (Unconsolidated) Total
-------------- ---------------- -----
Total investment in subsidiaries $ (746,200) $ (326,300) $ (1,072,500)
Non-cash activities and elimination transactions:
Acquisition of 241 shares of Castledaly
Acquisition Corporation common stock
through assumption of $241,000 of
short-term debt 241,000 - 241,000
Acquisition of 25,250 shares and options of
County Clare, Ltd. and 330 shares of
Castledaly Acquisition Corporation common
stock in exchange for issuance of 1,257,000
shares of Harp & Eagle, Ltd. common stock
valued at $400,000 73,700 326,300 400,000
Exchange of 257 shares of Castledaly
Acquisition Corporation common stock for
257,000 shares of Harp & Eagle, Ltd.
common stock valued at $257,000 257,000 - 257,000
Elimination on consolidation of Harp & Eagle,
Ltd. Investment in subsidiary, including
$85,656 cash acquired 219,656 - 219,656
------------ ------------ ------------
Net investment in subsidiaries $ 45,156 $ - $ 45,156
============ ============ ============
See notes to consolidated financial statements.
F-7
36
HARP & EAGLE, LTD. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
October 31, 2000
(See Accountants' Compilation Report)
Note 1 - Nature of business and significant accounting policies
A. Nature of business
Harp & Eagle, Ltd. (Company) was formed in September 1999 under the
laws of the state of Wisconsin for the purpose of acquiring all of the
issued and outstanding common stock of Castledaly Acquisition
Corporation (Castledaly). As of October 31, 2000, the Company owns
approximately 63% of the outstanding common stock of Castledaly.
Castledaly owns 100% of its subsidiary, Castledaly Manor Limited, an
Irish manor house inn located in the village of Castledaly, Ireland.
The ten-room inn opened in May 1998 and serves food and beverages on
the premises.
B. Principles of consolidation
During the ten-month period ended October 31, 2000, Harp & Eagle, Ltd.
acquired approximately 63% of the outstanding common stock of
Castledaly. The transaction was accounted for under the purchase method
of accounting. Operations of the entity since the date of acquisition
have been included in these consolidated financial statements. All
significant inter-company transactions and accounts have been
eliminated. The minority interest shown in the financial statements
represent the remaining ownership of Castledaly.
As noted above, Castledaly, owns 100% of Castledaly Manor, Ltd. which
has been consolidated into Castledaly. All intercompany transactions
and accounts have been eliminated.
C. Use of estimates
The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect certain reported amounts and
disclosures. Accordingly, actual results could differ from those
estimates.
D. Foreign currency translation
The assets and liabilities of Castledaly Manor Limited, which are
denominated in a foreign currency, are translated using rates of
exchange as of October 31, 2000. Revenues and expenses and cash flows
are translated at weighted average rates of exchange in effect during
the year. The cumulative effect resulting from such translation is
included in accumulated other comprehensive income in the consolidated
financial statements.
E. Inventories
Inventories are stated at the lower of cost, determined on the
first-in, first-out (FIFO) method, or market.
F-8
37
HARP & EAGLE, LTD. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, continued
October 31, 2000
(See Accountants' Compilation Report)
Note 1 - Nature of business and significant accounting policies, continued
F. Property, equipment, and depreciation
Property and equipment are stated at cost. Expenditures for additions
and improvements are capitalized while replacements, maintenance and
repairs which do not improve or extend the lives of the respective
assets are expensed currently as incurred. Properties sold, or
otherwise disposed of, are removed from the property accounts, with
gains or losses on disposal credited or charged to the results of
operations.
Depreciation is provided over the estimated useful lives of the
respective assets, using the straight-line method for financial
reporting purposes, and, in general, accelerated methods for income tax
purposes.
G. Other assets and amortization
Goodwill represents the excess of the purchase price paid at the date
of acquisition over the fair market value of the net assets acquired.
Goodwill is being amortized using the straight-line method over 15
years.
H. Customer deposits
Customer deposits consist of monies received from customers in advance
for trips to Castledaly Manor Limited.
I. Income taxes
Income taxes are provided for the tax effects of transactions reported
in the financial statements and consist of taxes currently due plus
deferred taxes related primarily to differences between the financial
and tax bases of property and equipment, accrued liabilities and net
operating loss carryforwards. The deferred tax assets and liabilities
represent the future tax return consequences of those differences,
which will either be taxable or deductible when the assets and
liabilities are recovered or settled. Deferred taxes are also
recognized for tax credits that are available to offset future income
taxes. Valuation allowances are established, if necessary, to reduce
any deferred tax assets to the amount that will more likely than not be
realized.
J. Advertising costs
Advertising costs are expensed as incurred. Advertising costs amounted
to $5,261 for the period ended October 31, 2000.
F-9
38
HARP & EAGLE, LTD. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, continued
October 31, 2000
(See Accountants' Compilation Report)
Note 1 - Nature of business and significant accounting policies, continued
K. Comprehensive income
Statement of Financial Accounting Standards No. 130 (SFAS 130),
Reporting Comprehensive Income, requires that total comprehensive
income be reported in the financial statements. Total comprehensive
income is presented on the statement of stockholders' equity.
Note 2 - Investment in unconsolidated subsidiary
As of October 31, 2000, the Company owns approximately 6% of the outstanding
common stock of County Clare, Ltd. The investment has been accounted for at
cost.
Note 3 - Notes payable
Notes payable at October 31, 2000 consist of the following:
County Clare, Ltd. - Related party
----------------------------------
6% note, unsecured, due on demand $ 40,000
Richard Peterson - Stockholder
------------------------------
9% note, unsecured, due on demand 100,000
Cary O'Dwanny - Stockholder
---------------------------
10.5% note, unsecured, due on demand 25,289
Fuller McBride - Stockholder
----------------------------
10.5% note, unsecured, due on demand 14,000
Richard Kranitz - Stockholder
-----------------------------
10.5% note, unsecured, due on demand 14,000
Johnson Bank
------------
Line of credit in the amount of $350,000, interest at prime plus .5%
(10% at October 31, 2000), guaranteed by County Clare, Ltd., a related
party, expiring April 30, 2001 168,000
-----------------
$ 361,289
=================
F-10
39
HARP & EAGLE, LTD. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, continued
October 31, 2000
(See Accountants' Compilation Report)
Note 4 - Long-term debt
Long-term debt at October 31, 2000 consists of the following:
Ulster Bank, Ireland
--------------------
Mortgage note, due in monthly installments of $2,866, due February 1, 2013,
interest at Irish prime less .5% (7.5% at October 31, 2000), secured by real estate $ 305,524
Current maturities 12,000
----------------
Long-term debt, less current maturities $ 293,524
=================
Maturities of long-term debt for the twelve-month periods succeeding October 31,
2000 are as follows:
Twelve-month
period ending
October 31,
-----------
2001 $ 12,000
2002 13,000
2003 14,000
2004 15,000
2005 16,000
Note 5 - Income taxes
No net deferred taxes have been recorded, as deferred tax assets have been
offset by valuation allowances:
Deferred income tax assets:
Total $ 31,000
Valuation allowances 31,000
-----------------
-
Total deferred income tax liabilities -
-----------------
Net deferred income tax liability $ -
=================
There is no income tax provision for the period ended October 31, 2000 since the
increase in the valuation allowance offsets any deferred tax benefit
(approximately $19,000) resulting from the current period net operating loss.
F-11
40
Accountants' Report on Supplemental Information
Board of Directors
HARP & EAGLE, LTD.
Plymouth, Wisconsin
The compiled consolidated financial statements of HARP & EAGLE. LTD. AND
SUBSIDIARIES and our report thereon are presented in the preceding section. The
financial information included in the following section is presented only for
supplementary analysis purposes. This financial information was compiled from
information that is the representation of management, without audit or review,
and we do not express an opinion or any other form of assurance on such data.
/s/ Schenck & Associates, S.C.
Sheboygan, Wisconsin
December 8, 2000
F-12
41
HARP & EAGLE, LTD. AND SUBSIDIARIES
Consolidating Schedule, Balance Sheet Information
October 31, 2000
(See Accountants' Report on Supplemental Information)
Castledaly
Castledaly Castledaly Acquisition
Acquisition Manor Corporation
ASSETS Corporation Limited Eliminations Consolidated
------ ----------- ------- ------------ ------------
Current assets
- --------------
Cash $ 170,645 $ 3,273 $ -- $ 173,918
Accounts receivable 11,882 2,595 -- 14,477
Inventory -- 5,339 -- 5,339
---------- ----------- ----------- ----------
Total current assets 182,527 11,207 -- 193,734
---------- ----------- ----------- ----------
Property and equipment
- ----------------------
Land and buildings -- 370,360 -- 370,360
Building improvements -- 613,374 -- 613,374
Furniture, fixtures and equipment -- 22,950 -- 22,950
---------- ----------- ----------- ----------
-- 1,006,684 -- 1,006,684
Less accumulated depreciation -- 189,614 -- 189,614
---------- ----------- ----------- ----------
Net property and equipment -- 817,070 -- 817,070
---------- ----------- ----------- ----------
Other assets
- ------------
Goodwill, net of amortization -- -- 15,694 15,694
Note receivable -- -- -- --
Investment in unconsolidated
subsidiary -- -- -- --
Investment in subsidiary 1,093,061 -- (1,093,061) --
---------- ----------- ----------- ----------
Total other assets 1,093,061 -- (1,077,367) 15,694
---------- ----------- ----------- ----------
$1,275,588 $ 828,277 $(1,077,367) $1,026,498
========== =========== =========== ==========
F-13
42
Harp & Eagle
LTD. Eliminations Consolidated
---- ------------ ------------
$ 38,848 $ -- $ 212,766
-- -- 14,477
-- -- 5,339
----------- --------- ----------
38,848 -- 232,582
----------- --------- ----------
-- -- 370,360
-- -- 613,374
-- -- 22,950
----------- --------- ----------
-- -- 1,006,684
-- -- 189,614
----------- --------- ----------
-- -- 817,070
----------- --------- ----------
-- 411,002 426,696
10,000 -- 10,000
326,300 -- 326,300
746,200 (746,200) --
----------- --------- ----------
1,082,500 (335,198) 762,996
----------- --------- ----------
$ 1,121,348 $(335,198) $1,812,648
=========== ========= ==========
F-14
43
Castledaly
LIABILITIES AND Castledaly Castledaly Acquisition
STOCKHOLDERS' EQUITY Acquisition Manor Corporation
(DEFICIENCY) Corporation Limited Eliminations Consolidated
------------ ----------- ------- ------------ ------------
Current liabilities
- -------------------
Notes payable $ 104,589 $ -- $ -- $ 104,589
Current maturities of long-term debt -- 12,000 -- 12,000
Accounts payable 63,534 5,540 -- 69,074
Accrued liabilities:
Interest 13,016 45,731 -- 58,747
Payroll taxes -- 24,657 -- 24,657
Other -- 10,050 -- 10,050
Customer deposits 226,879 -- -- 226,879
----------- ----------- ----------- -----------
Total current liabilities 408,018 97,978 -- 505,996
Long term debt, less current maturities -- 991,938 (698,414) 293,524
----------- ----------- ----------- -----------
Total liabilities 408,018 1,089,916 (698,414) 799,520
----------- ----------- ----------- -----------
Stockholders' equity (deficiency)
- ---------------------------------
Controlling interest:
Common stock -- -- -- --
Additional paid-in capital 975,200 183,276 (183,276) 975,200
Accumulated deficit (107,630) (496,028) (1,744) (605,402)
Foreign currency
translation adjustment -- 51,113 (193,933) (142,820)
----------- ----------- ----------- -----------
867,570 (261,639) (378,953) 226,978
Minority interest -- -- -- --
----------- ----------- ----------- -----------
Net stockholders' equity (deficiency) 867,570 (261,639) (378,953) 226,978
----------- ----------- ----------- -----------
$ 1,275,588 $ 828,277 $(1,077,367) $ 1,026,498
=========== =========== =========== ===========
F-15
44
Harp & Eagle
LTD. Eliminations Consolidated
---- ------------ ------------
$ 256,700 $ -- $ 361,289
-- -- 12,000
-- -- 69,074
-- -- 58,747
-- -- 24,657
-- -- 10,050
-- -- 226,879
----------- --------- -----------
256,700 -- 762,696
-- -- 293,524
----------- --------- -----------
256,700 -- 1,056,220
----------- --------- -----------
149 -- 149
867,851 (975,200) 867,851
(3,352) 502,067 (106,687)
-- 53,272 (89,548)
----------- --------- -----------
864,648 (419,861) 671,765
-- 84,663 84,663
----------- --------- -----------
864,648 (335,198) 756,428
----------- --------- -----------
$ 1,121,348 $(335,198) $ 1,812,648
=========== ========= ===========
F-16
45
HARP & EAGLE, LTD. AND SUBSIDIARIES
Consolidating Schedule, Statement of Operations Information
Ten-Month Period ended October 31, 2000
(See Accountants' Report on Supplemental Information)
Castledaly
Castledaly Castledaly Acquisition
Acquisition Manor Corporation
Corporation Limited Eliminations Consolidated
----------- ------- ------------ ------------
Sales $ -- $ 292,987 $ -- $ 292,987
Cost of sales -- 95,009 -- 95,009
-------- --------- ----- ---------
Gross income -- 197,978 -- 197,978
Operating expenses 33,680 253,903 969 288,552
-------- --------- ----- ---------
Loss from operations (33,680) (55,925) (969) (90,574)
-------- --------- ----- ---------
Other income (expense)
Interest income 3,296 -- -- 3,296
Interest expense (27,736) (31,066) -- (58,802)
-------- --------- ----- ---------
Other income (expense), net (24,440) (31,066) -- (55,506)
-------- --------- ----- ---------
Net loss before minority interest
in loss of subsidiary (58,120) (86,991) (969) (146,080)
Minority interest in loss of subsidiary -- -- -- --
-------- --------- ----- ---------
Net loss $(58,120) $ (86,991) $(969) $(146,080)
======== ========= ===== =========
F-17
46
Harp & Eagle
LTD. Eliminations Consolidated
---- ------------ ------------
$ -- $ -- $ 292,987
-- -- 95,009
--------- -------- ---------
-- -- 197,978
2,058 11,743 302,353
--------- -------- ---------
(2,058) (11,743) (104,375)
--------- -------- ---------
1,406 -- 4,702
-- -- (58,802)
--------- -------- ---------
1,406 -- (54,100)
--------- -------- ---------
(652) (11,743) (158,475)
-- 54,488 54,488
--------- -------- ---------
$ (652) $ 42,745 $(103,987)
========= ======== =========
F-18
47
HARP & EAGLE, LTD. AND SUBSIDIARIES
Consolidating Schedule, Statement of Cash Flows Information
Ten-Month Period ended October 31, 2000
(See Accountants' Report on Supplemental Information)
Castledaly
Castledaly Castledaly Acquisition
Acquisition Manor Corporation
Corporation Limited Eliminations Consolidated
----------- ------- ------------ ------------
Operating activities
Net loss $ (58,120) $ (86,991) $ (969) $ (146,080)
Adjustments to reconcile net loss
to net cash provided by (used for)
operating activities:
Minority interest in net loss of
subsidiary - - - -
Amortization of goodwill - - 969 969
Depreciation - 85,373 - 85,373
Decrease (increase) in:
Accounts receivable (11,882) 2,824 - (9,058)
Inventories - (2,216) - (2,216)
Increase (decrease) in:
Bank overdraft - (117,880) - (117,880)
Accounts payable 41,214 (4,890) - 36,324
Accrued liabilities (9,043) 2,079 - (6,964)
Customer deposits 183,317 (65,951) - 117,366
-------- -------- -------- --------
Net cash provided by (used for)
operating activities 145,486 (187,652) - (42,166)
-------- -------- -------- --------
Investing activities
Purchases of property and equipment - (160,070) - (160,070)
Increase in note receivable - - - -
Investment in subsidiaries, net of
cash acquired (240,881) 234,127 6,754 -
-------- -------- -------- --------
Net cash provided by (used for)
investing activities (240,881) 74,057 6,754 (160,070)
-------- -------- -------- --------
Financing activities
Proceeds from:
Note payable 40,000 - - 40,000
Long-term debt - 74,141 - 74,141
Retirement of note payable (20,000) - - (20,000)
Issuance of common stock 207,000 - - 207,000
-------- -------- -------- --------
Net cash provided by financing activities 227,000 74,141 - 301,141
-------- -------- -------- --------
F-19
48
Harp & Eagle
LTD. Eliminations Consolidated
---- ------------ ------------
$ (652) $ 42,745 $(103,987)
- (54,488) (54,488)
- 11,743 12,712
- - 85,373
- - (9,058)
- - (2,216)
- - (117,880)
- - 36,324
- - (6,964)
- - 117,366
--------- --------- ---------
(652) - (42,818)
--------- --------- ---------
- - (160,070)
(10,000) - (10,000)
(174,500) 219,656 45,156
--------- --------- ---------
(184,500) 219,656 (124,914)
--------- --------- ---------
13,000 - 53,000
- - 74,141
- - (20,000)
211,000 (134,000) 284,000
--------- --------- ---------
224,000 (134,000) 391,141
--------- --------- ---------
F-20
49
HARP & EAGLE, LTD. AND SUBSIDIARIES
Consolidating Schedule, Statement of Cash Flows Information
Ten-Month Period ended October 31, 2000
(See Accountants' Report on Supplemental Information)
Effect of exchange rate changes on cash $ - $ (3,889) $ (6,754) $ (10,643)
---------- ---------- ---------- ----------
Cash
Net increase (decrease) 131,605 (43,343) - 88,262
Beginning of period - - - -
---------- ---------- ---------- ----------
End of period $ 131,605 $ (43,343) $ - $ 88,262
========== ========== ========== ==========
Supplemental cash flow information
Cash paid for interest $ 16,710 $ 22,452 $ - $ 39,162
F-21
50
Harp & Eagle
LTD. Eliminations Consolidated
---- ------------ ------------
$ - $ - $ (10,643)
--------- --------- ---------
38,848 85,656 212,766
- - -
--------- --------- ---------
$ 38,848 $ 85,656 $ 212,766
========= ========= =========
$ - $ - $ 39,162
F-22
51
HARP & EAGLE, LTD. AND SUBSIDIARIES
Consolidating Schedule, Operating Expenses Information
Ten-Month Period ended October 31, 2000
(See Accountants' Report on Supplemental Information)
Castledaly
Castledaly Castledaly Acquisition
Acquisition Manor Corporation
Corporation Limited Eliminations Consolidated
----------- ------- ------------ ------------
Advertising $ 1,571 $ 2,909 $ - $ 4,480
Amortization of goodwill - - 969 969
Bank charges 246 4,750 - 4,996
Cleaning and hotel maintenance - 4,580 - 4,580
Depreciation - 85,373 - 85,373
Entertainment - 5,192 - 5,192
Gardening and landscaping - 7,583 - 7,583
Insurance - 5,831 - 5,831
Miscellaneous expense - 11,927 - 11,927
Organizational - - - -
Payroll taxes - 7,697 - 7,697
Printing, postage and stationery - 1,904 - 1,904
Professional fees 18,340 7,562 - 25,902
Rent - 796 - 796
Repairs and maintenance - 2,280 - 2,280
Subscriptions - 1,463 - 1,463
Supplies 9,384 761 - 10,145
Telephone - 3,425 - 3,425
Travel 4,139 1,438 - 5,577
Utilities - 13,777 - 13,777
Vehicle expenses - 2,185 - 2,185
Wages and salaries - 82,470 - 82,470
----------- ----------- ----------- -----------
$ 33,680 $ 253,903 $ 969 $ 288,552
=========== =========== =========== ===========
F-23
52
Harp & Eagle
LTD. Eliminations Consolidated
---- ------------ ------------
$ 781 $ -- $ 5,261
-- 11,743 12,712
37 -- 5,033
-- -- 4,580
-- -- 85,373
-- -- 5,192
-- -- 7,583
-- -- 5,831
-- -- 11,927
-- -- --
-- -- 7,697
-- -- 1,904
1,240 -- 27,142
-- -- 796
-- -- 2,280
-- -- 1,463
-- -- 10,145
-- -- 3,425
-- -- 5,577
-- -- 13,777
-- -- 2,185
-- -- 82,470
-------- -------- --------
$ 2,058 $ 11,743 $302,353
======== ======== ========
F-24
53
Independent Auditors' Report
Board of Directors
Harp & Eagle, Ltd.
Plymouth, Wisconsin
We have audited the accompanying balance sheet of HARP & EAGLE, LTD. as of
December 31, 1999 and the related statements of operations and accumulated
deficit and cash flows for the period from inception (September 20, 1999)
through December 31, 1999. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion and based on our audit, the financial statements referred to
above present fairly, in all material respects, the financial position of HARP &
EAGLE, LTD. as of December 31, 1999 and the results of its operations and its
cash flows for the period from inception (September 20, 1999) through December
31, 1999, in conformity with generally accepted accounting principles.
/s/ Schenck & Associates, S.C.
Sheboygan, Wisconsin
December 7, 2000
F-25
54
HARP & EAGLE, LTD.
Balance Sheet
December 31, 1999
ASSETS $ -
------ ========
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Liabilities $ 2,700
Stockholders' deficiency Common stock, $0.0001 par value:
Authorized, 10,000,000 shares
Issued and outstanding, 0 shares
Common stock subscribed, 1,000,000 shares $ 100
Additional paid-in capital 399,900
Stock subscriptions receivable (400,000)
Accumulated deficit (2,700)
---------
Net stockholders' deficiency (2,700)
-------
Total liabilities and stockholders' deficiency $ -
========
See notes to financial statements.
F-26
55
HARP & EAGLE, LTD.
Statement of Operations and Accumulated Deficit
Period from Inception (September 20, 1999) to December 31, 1999
Revenue $ -
Organizational expenses 2,700
-------
Net loss (2,700)
Accumulated deficit
Beginning of period -
-
End of period $(2,700)
=======
See notes to financial statements.
F-27
56
HARP & EAGLE, LTD.
Statement of Cash Flows Period from
Inception (September 20, 1999) to December 31, 1999
Operating activities
Net loss $ (2,700)
Adjustment to reconcile net loss to net cash provided by
operating activities:
Increase in liabilities 2,700
--------
Net cash provided by operating activities $ -
Cash
Net increase
Beginning of period -
-
--------
End of period $ -
========
See notes to financial statements.
F-28
57
HARP & EAGLE, LTD.
Notes to Financial Statements
December 31, 1999
Note 1 - Organization
Harp & Eagle, Ltd. (Company) was formed in September 1999 under the laws of the
state of Wisconsin for the purpose of acquiring all of the issued and
outstanding common stock of Castledaly Acquisition Corporation. As of December
31, 1999, the Company has not yet acquired an ownership interest in Castledaly
Acquisition Corporation.
Note 2 - Stock subscriptions and public offering
As of December 31, 1999, 1,000,000 shares of common stock have been subscribed
by one individual for $400,000.
The Company has commenced an offering for sale of up to 560,000 shares of its
$0.0001 par value common stock.
F-29
58
Independent Auditors' Report
Board of Directors
Castledaly Acquisition Corporation
Plymouth, Wisconsin
We have audited the accompanying consolidated balance sheet of CASTLEDALY
ACQUISITION CORPORATION (a Wisconsin corporation) AND SUBSIDIARY as of December
31, 1999, and the related consolidated statements of operations, changes in
stockholders' equity, and cash flows for the year then ended. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audit. We did not audit the financial statements of
Castledaly Manor Limited, a wholly-owned subsidiary, which statements reflect
total assets of $952,221 as of December 31, 1999, and total revenues of $208,755
for the year then ended. Those statements were audited by other auditors whose
report has been furnished to us, and our opinion, insofar as it relates to the
amounts included for Castledaly Manor Limited, is based solely on the report of
the other auditors.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the consolidated financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the consolidated financial statements.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit and the report of other
auditors provide a reasonable basis for our opinion.
In our opinion, based on our audit and the report of other auditors, the
consolidated financial statements referred to above present fairly, in all
material respects, the financial position of CASTLEDALY ACQUISITION CORPORATION
AND SUBSIDIARY as of December 31, 1999, and the results of their operations and
cash flows for the year then ended in conformity with generally accepted
accounting principles.
/s/ SCHENCK & ASSOCIATES, S.C.
Sheboygan, Wisconsin
August 18, 2000
F-30
59
CASTLEDALY ACQUISITION CORPORATION AND SUBSIDIARY
Consolidated Balance Sheet
December 31, 1999
ASSETS
Current assets
Cash $ 85,656
Accounts receivable 6,157
Inventory 3,981
-----------
Total current assets $ 95,794
Property and equipment
Land and buildings 442,544
Building improvements 562,860
Furniture, fixtures and equipment 24,225
-----------
1,029,629
Less accumulated depreciation 134,162
-----------
Net property and equipment 895,467
Other asset
Goodwill, net of amortization 16,663
-----------
$ 1,007,924
===========
See notes to consolidated financial statements.
F-31
60
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Bank overdraft $ 127,595
Notes payable - shareholders 157,589
Current maturities of long-term debt 36,188
Accounts payable 34,233
Accrued liabilities:
Interest 59,176
Payroll taxes 16,561
Other 40,185
Customer deposits 114,948
-----------
Total current liabilities $ 586,475
Long-term debt, less current maturities 416,633
-----------
Total liabilities 1,003,108
Stockholders' equity
Common stock, $0.0001 par value
Authorized, 9,000 shares
Issued and outstanding, 725 shares --
Additional paid in capital 527,200
Accumulated deficit (459,322)
Foreign currency translation adjustments (63,062)
-----------
Net stockholders' equity 4,816
-----------
$ 1,007,924
===========
F-32
61
CASTLEDALY ACQUISITION CORPORATION AND SUBSIDIARY
Consolidated Statement of Operations
Year ended December 31, 1999
Sales $ 208,755
Cost of sales 72,657
------------
Gross income 136,098
Operating expenses 294,877
------------
Loss from operations (158,779)
Other income (expense)
Interest income $ 1,857
Interest expense (64,015)
------------
Other expense, net (62,158)
------------
Loss before provision for income taxes (220,937)
Provision for income taxes 64
------------
Net loss $ (221,001)
============
See notes to consolidated financial statements.
F-33
62
CASTLEDALY ACQUISITION CORPORATION AND SUBSIDIARY
Consolidated Statement of Changes in Stockholders' Equity
Year ended December 31, 1999
Accumulated
Additional Other
Common Paid-In Accumulated Comprehensive
Stock Capital Deficit Income Total
---------- ---------- ----------- ------------- ----------
Balance, beginning of year $ -- $ 521,200 $(238,321) $ 51,182 $ 334,061
Comprehensive income (loss):
Net loss -- -- (221,001) -- (221,001)
Foreign currency --
translation adjustment -- -- -- (114,244) (114,244)
---------
Total comprehensive income (loss) (335,245)
Issuance of common stock -- 6,000 -- -- 6,000
--------- --------- --------- --------- ---------
Balance, end of year $ -- $ 527,200 $(459,322) $ (63,062) $ 4,816
========= ========= ========= ========= =========
See notes to consolidated financial statements
F-34
63
CASTLEDALY ACQUISITION CORPORATION AND SUBSIDIARY
Consolidated Statement of Cash Flows
Year ended December 31, 1999
Operating activities
Net loss $ (221,001)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Amortization 775
Depreciation 96,659
Decrease (increase) in:
Accounts receivable (3,291)
Inventories 3,600
Increase (decrease) in:
Bank overdraft 20,391
Accounts payable (16,750)
Accrued liabilities 35,166
Customer deposits 119,469
------------
Net cash provided by operating activities $ 35,018
Investing activities
Purchases of property and equipment (31,957)
Increase in investment in subsidiary (108,000)
------------
Net cash used for investing activities (139,957)
Financing activities
Proceeds from:
Note payable 42,000
Long-term debt 168,000
Retirement of long-term debt (28,133)
Issuance of common stock 6,000
------------
Net cash provided by financing activities 187,867
Effect of exchange rate changes on cash (6,332)
------------
Cash
Net increase 76,596
Beginning of year 9,060
------------
End of year $ 85,656
============
Supplemental cash flow information
Cash paid for interest $ 56,818
See notes to consolidated financial statements.
F-35
64
CASTLEDALY ACQUISITION CORPORATION AND SUBSIDIARY
Notes to Consolidated Financial Statements
December 31, 1999
Note 1 - Nature of business and significant accounting policies
A. Nature of business
Castledaly Acquisition Corporation (the Company) was incorporated in
the state of Wisconsin on April 16, 1997 as a stock holding company. As
of December 31, 1999, the Company owns 100% of its subsidiary,
Castledaly Manor Limited, an Irish manor house inn located in the
village of Castledaly, Ireland. The ten-room inn opened in May 1998 and
serves food and beverages on the premises.
B. Principles of consolidation
The consolidated financial statements include the accounts of
Castledaly Acquisition Corporation and its wholly-owned subsidiary,
Castledaly Manor Limited, an Irish corporation. All significant
inter-company balances and transactions have been eliminated.
C. Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect certain reported amounts and disclosures.
Accordingly, actual results could differ from those estimates.
D. Foreign currency translation
The assets and liabilities of Castledaly Manor Limited, which are
denominated in a foreign currency, are translated using rates of
exchange as of December 31, 1999. Revenues and expenses and cash flows
are translated at weighted average rates of exchange in effect during
the year. The cumulative effect resulting from such translation is
included in accumulated other comprehensive income in the consolidated
financial statements.
E. Inventories
Inventories are stated at the lower of cost, determined on the
first-in, first-out (FIFO) method, or market.
F. Property, equipment, and depreciation
Property and equipment are stated at cost. Expenditures for additions
and improvements are capitalized while replacements, maintenance and
repairs which do not improve or extend the lives of the respective
assets are expensed currently as incurred. Properties sold, or
otherwise disposed of, are removed from the property accounts, with
gains or losses on disposal credited or charged to the results of
operations.
Depreciation is provided over the estimated useful lives of the
respective assets, using the straight-line method for financial
reporting purposes, and, in general, accelerated methods for income tax
purposes.
F-36
65
CASTLEDALY ACQUISITION CORPORATION AND SUBSIDIARY
Notes to Consolidated Financial Statements, Continued
December 31, 1999
Note 1 - Nature of business and significant accounting policies, continued
G. Other assets and amortization
Goodwill represents the excess of the purchase price paid by Castledaly
Acquisition Corporation at the date of acquisition over the fair market
value of the net assets of Castledaly Manor Limited acquired. Goodwill
is being amortized using the straight-line method over fifteen years.
H. Customer deposits
Customer deposits consist of monies received from customers in advance
for trips to Castledaly Manor Limited.
I. Income taxes
Income taxes are provided for the tax effects of transactions reported
in the financial statements and consist of taxes currently due plus
deferred taxes related primarily to differences between the financial
and tax bases of property and equipment, accrued liabilities and net
operating loss carryforwards. The deferred tax assets and liabilities
represent the future tax return consequences of those differences,
which will either be taxable or deductible when the assets and
liabilities are recovered or settled. Deferred taxes are also
recognized for tax credits that are available to offset future income
taxes. Valuation allowances are established, if necessary, to reduce
any deferred tax asset to the amount that will more likely than not be
realized.
J. Advertising costs
Advertising costs are expensed as incurred. Advertising costs amounted
to $5,509 for the year ended December 31, 1999.
K. Comprehensive income
Statement of Financial Accounting Standards No. 130 (SFAS 130),
Reporting Comprehensive Income, requires that total comprehensive
income be reported in the financial statements. Total comprehensive
income is presented on the statement of stockholders' equity.
F-37
66
CASTLEDALY ACQUISITION CORPORATION AND SUBSIDIARY
Notes to Consolidated Financial Statements, Continued
December 31, 1999
Note 2 - Notes payable - shareholders
Notes payable - shareholders at December 31, 1999 consist of the following:
Richard Peterson - Shareholder
9% note, unsecured, due on demand $ 120,000
Cary O'Dwanny - Shareholder
10.5% note, unsecured, due on demand 9,589
Fuller McBride - Shareholder
10.5% note, unsecured, due on demand 14,000
Richard Kranitz - Shareholder
10.5% note, unsecured, due on demand 14,000
-----------
$ 157,589
===========
Note 3 - Long-term debt
Long-term debt at December 31, 1999 consists of the following:
Johnson Bank
Line of credit in the amount of $350,000, interest at prime plus .5% (9% at
December 31, 1999), guaranteed by County Clare, Ltd., a related party
(Harp & Eagle, Ltd., a related party, after August 3, 2000), expiring April 30, 2001 $ 168,000
Ulster Bank, Ireland
Mortgage note, due in monthly installments of $3,425, due February 1, 2013,
interest at Irish prime less .5% (5.25% at December 31, 1999), secured by real estate 284,821
-----------
Total long-term debt 452,821
Current maturities 36,188
-----------
Long-term debt, less current maturities $ 416,633
===========
Maturities of long-term debt for each of the five years succeeding December 31,
1999 are as follows:
Year ending
December 31,
------------
2000 $ 36,188
2001 197,000
2002 30,000
2003 32,000
2004 34,000
F-38
67
CASTLEDALY ACQUISITION CORPORATION AND SUBSIDIARY
Notes to Consolidated Financial Statements, Continued
December 31, 1999
Note 4 - Income taxes
No net deferred taxes have been recorded, as deferred tax assets have been
offset by valuation allowances:
Deferred income tax assets:
Total $ 12,000
Valuation allowances 12,000
----------
--
Total deferred income tax liabilities --
----------
Net deferred income tax liability $ --
==========
The provision for income taxes consists of:
Current provision:
Federal $ --
State --
Foreign 64
----------
64
Deferred provision --
----------
$ 64
==========
F-39
68
Independent Auditors' Report on Supplemental Information
Board of Directors
Castledaly Acquisition Corporation
Plymouth, Wisconsin
Our report on our audit of the basic financial statements of CASTLEDALY
ACQUISITION CORPORATION AND SUBSIDIARY for 1999 appears on page F-30. That audit
was conducted for the purpose of forming an opinion on the basic financial
statements taken as a whole. The consolidating schedules on pages F-41 through
F-45 are presented for purposes of additional analysis and are not a required
part of the basic financial statements. Such information has not been subjected
to the auditing procedures applied in the audit of the basic financial
statements, and accordingly, we express no opinion on it.
/s/ SCHENCK & ASSOCIATES, S.C.
Sheboygan, Wisconsin
August 18, 2000
F-40
69
CASTLEDALY ACQUISITION CORPORATION AND SUBSIDIARY
Consolidating Schedule, Balance Sheet Information
December 31, 1999
Castledaly Castledaly
Acquisition Manor
ASSETS Corporation Limited Eliminations Consolidated
----------- ------- ------------ ------------
Current assets
Cash $ 39,040 $ 46,616 $ -- $ 85,656
Accounts receivable -- 6,157 -- 6,157
Inventory -- 3,981 -- 3,981
----------- ----------- ----------- -----------
Total current assets 39,040 56,754 -- 95,794
----------- ----------- ----------- -----------
Property and equipment
Land and buildings -- 442,544 -- 442,544
Building improvements -- 562,860 -- 562,860
Furniture, fixtures and equipment -- 24,225 -- 24,225
----------- ----------- ----------- -----------
-- 1,029,629 -- 1,029,629
Less accumulated depreciation -- 134,162 -- 134,162
----------- ----------- ----------- -----------
Net property and equipment -- 895,467 -- 895,467
----------- ----------- ----------- -----------
Other assets
Goodwill, net of amortization -- -- 16,663 16,663
Investment in subsidiary 852,180 -- (852,180) --
----------- ----------- ----------- -----------
Total other assets 852,180 -- (835,517) 16,663
----------- ----------- ----------- -----------
$ 891,220 $ 952,221 $ (835,517) $ 1,007,924
=========== =========== =========== ===========
F-41
70
LIABILITIES AND Castledaly Castledaly
STOCKHOLDERS' EQUITY Acquisition Manor
(DEFICIENCY) Corporation Limited Eliminations Consolidated
------------ ----------- ----------- ------------ ------------
Current liabilities
Bank overdraft $ -- $ 127,595 $ -- $ 127,595
Notes payable - shareholders 157,589 -- -- 157,589
Current maturities of long-term debt -- 36,188 -- 36,188
Accounts payable 22,320 11,913 -- 34,233
Customer deposits 43,562 71,386 -- 114,948
Accrued liabilities:
Interest 22,059 37,117 -- 59,176
Payroll taxes -- 16,561 -- 16,561
Other -- 40,185 -- 40,185
----------- ----------- ----------- -----------
Total current liabilities 245,530 340,945 -- 586,475
Long term debt, less current maturities 168,000 829,748 (581,115) 416,633
----------- ----------- ----------- -----------
Total liabilities 413,530 1,170,693 (581,115) 1,003,108
----------- ----------- ----------- -----------
Stockholders' equity (deficiency)
Common stock -- -- -- --
Additional paid in capital 527,200 183,276 (183,276) 527,200
Accumulated deficit (49,510) (409,037) (775) (459,322)
Foreign currency translation
adjustment -- 7,289 (70,351) (63,062)
----------- ----------- ----------- -----------
Net stockholders' equity (deficiency) 477,690 (218,472) (254,402) 4,816
----------- ----------- ----------- -----------
$ 891,220 $ 952,221 $ (835,517) $ 1,007,924
=========== =========== =========== ===========
F-42
71
CASTLEDALY ACQUISITION CORPORATION AND SUBSIDIARY
Consolidating Schedule, Statement of Operations Information
Year ended December 31, 1999
Castledaly Castledaly
Acquisition Manor
Corporation Limited Eliminations Consolidated
----------- ------- ------------ ------------
Sales $ -- $ 208,755 $ -- $ 208,755
Cost of sales -- 72,657 -- 72,657
------------ ------------ ------------ ------------
Gross income -- 136,098 -- 136,098
Operating expenses 27,734 266,368 775 294,877
------------ ------------ ------------ ------------
Loss from operations (27,734) (130,270) (775) (158,779)
------------ ------------ ------------ ------------
Other income (expense)
Interest income 230 1,627 -- 1,857
Interest expense (26,221) (37,794) -- (64,015)
------------ ------------ ------------ ------------
Other expense, net (25,991) (36,167) -- (62,158)
------------ ------------ ------------ ------------
Loss before provision for income taxes (53,725) (166,437) (775) (220,937)
Provision for income taxes -- 64 -- 64
------------ ------------ ------------ ------------
Net loss $ (53,725) $ (166,501) $ (775) $ (221,001)
============ ============ ============ ============
F-43
72
CASTLEDALY ACQUISITION CORPORATION AND SUBSIDIARY
Consolidating Schedule, Statement of Cash Flows Information
Year ended December 31, 1999
Castledaly Castledaly
Acquisition Manor
Corporation Limited Eliminations Consolidated
----------- ------- ------------ ------------
Operating activities
Net loss $ (53,725) $ (166,501) $ (775) $ (221,001)
Adjustments to reconcile net loss to
net cash provided by operating activities:
Amortization -- -- 775 775
Depreciation -- 96,659 -- 96,659
Decrease (increase) in:
Accounts receivable -- (3,291) -- (3,291)
Inventories -- 3,600 -- 3,600
Increase (decrease) in:
Bank overdraft -- 20,391 -- 20,391
Accounts payable 22,320 (39,070) -- (16,750)
Accrued liabilities 16,883 18,283 -- 35,166
Customer deposits 43,562 75,907 -- 119,469
------------ ------------ ------------ ------------
Net cash provided by operating activities 29,040 5,978 -- 35,018
------------ ------------ ------------ ------------
Investing activities
Purchases of property and equipment -- (31,957) -- (31,957)
Increase (decrease) in investment
in subsidiary (207,000) 96,315 2,685 (108,000)
------------ ------------ ------------ ------------
Net cash provided by (used for)
investing activities (207,000) 64,358 2,685 (139,957)
------------ ------------ ------------ ------------
Financing activities
Proceeds from:
Note payable 42,000 -- -- 42,000
Long-term debt 168,000 -- -- 168,000
Retirement of long-term debt -- (28,133) -- (28,133)
Issuance of common stock 6,000 -- -- 6,000
------------ ------------ ------------ ------------
Net cash provided by (used for)
financing activities 216,000 (28,133) -- 187,867
Effect of exchange rate changes on cash -- (3,647) (2,685) (6,332)
Cash
Net increase 38,040 38,556 -- 76,596
Beginning of year 1,000 8,060 -- 9,060
------------ ------------ ------------ ------------
End of year $ 39,040 $ 46,616 $ -- $ 85,656
============ ============ ============ ============
Supplemental cash flow information
Cash paid for interest $ 9,338 $ 47,480 $ -- $ 56,818
F-44
73
CASTLEDALY ACQUISITION CORPORATION AND SUBSIDIARY
Consolidating Schedule, Operating Expenses Information
Year ended December 31, 1999
Castledaly Castledaly
Acquisition Manor
Corporation Limited Eliminations Consolidated
----------- ------- ------------ ------------
Advertising $ 1,272 $ 4,237 $ -- $ 5,509
Amortization -- -- 775 775
Bank charges 207 10,432 -- 10,639
Cleaning and hotel maintenance -- 6,761 -- 6,761
Depreciation -- 96,659 -- 96,659
Directors' fees -- 1,357 -- 1,357
Entertainment -- 339 -- 339
Gardening and landscaping -- 6,736 -- 6,736
Insurance -- 4,336 -- 4,336
Miscellaneous expense -- 2,097 -- 2,097
Payroll taxes -- 6,449 -- 6,449
Printing, postage and stationery -- 1,798 -- 1,798
Professional fees 6,000 15,526 -- 21,526
Rent -- 3,841 -- 3,841
Repairs and maintenance -- 5,893 -- 5,893
Subscriptions -- 4,082 -- 4,082
Supplies 7,350 2,192 -- 9,542
Telephone -- 2,881 -- 2,881
Travel 12,905 -- -- 12,905
Utilities -- 14,870 -- 14,870
Vehicle expenses -- 4,895 -- 4,895
Wages and salaries -- 70,987 -- 70,987
-------- -------- -------- --------
$ 27,734 $266,368 $ 775 $294,877
======== ======== ======== ========
F-45
74
EXHIBIT A
1,000,000 SHARES
HARP & EAGLE LTD.
COMMON STOCK
SUBSCRIPTION AGREEMENT
Harp & Eagle, Ltd.
1234 North Astor Street
Milwaukee, Wisconsin 53202
Gentlemen:
The undersigned irrevocably subscribe(s) for and agree(s) to purchase
shares of common stock, par value $0.0001 per share ("Common Stock"), of Harp &
Eagle, Ltd. ("Company"), to be registered in the name(s) of the undersigned at
the address appearing below. Delivered concurrently herewith is payment in full
for the Common Stock subscribed for, at the price of $ per share (checks
made payable to "Grafton State Bank, Escrow Agent"). The undersigned agree(s)
that the Company has the right to reject this subscription for any reason and
that, in the event of rejection, all funds delivered herewith will be promptly
returned, without interest or deduction.
WITHHOLDING CERTIFICATION
Each of the undersigned certifies under penalty of perjury that:
(1) The Social Security Number or other Federal Tax I.D. Number entered
below is correct.
(2) The undersigned is not subject to backup withholding because:
(a) The IRS has not informed the undersigned that he/she/it is subject
to backup withholding.
(b) The IRS has notified the undersigned that he/she/it is no longer
subject to backup withholding.
NOTE: If this statement is not true and you are subject to backup
withholding, strike out section (2).
REGISTRATION OF SECURITIES
Common Stock is to be registered as indicated below. (Please type or
print.)
- --------------------------------
- --------------------------------
Name(s) ------------------------------------------
Social Security or Federal Tax I.D. Number
- --------------------------------
Street Address
Telephone Number ( )
- -------------------------------- ------------------
City, State, Zip Code
OWNERSHIP: [ ] Individual [ ] Marital Property [ ] Joint Tenants with
Right of Survivorship [ ] Tenants in Common [ ] Corporation [ ] Partnership
[ ] Trust [ ] IRA/Qualified Plan [ ] Other
----------------------------------
If Common Stock is to be registered jointly, all owners must sign. For
IRAs/Qualified Plans, the trustee must sign. Any registration in the names of
two or more co-owners will, unless otherwise specified, be as joint tenants with
rights of survivorship and not as tenants in common. Each subscriber certifies
that he/she/it has full capacity to enter into this Agreement. This subscription
is subject to acceptance by the Company and will not be accepted unless
accompanied by payment in full.
A-1
75
SUBSCRIBER SIGNATURES
INDIVIDUALS (All proposed record holders must sign.)
Dated:
-----------------------
- ---------------------------------- ------------------------------------
(Signature) (Signature)
- ---------------------------------- ------------------------------------
(Print or Type Name) (Print or Type Name)
CORPORATIONS, PARTNERSHIPS, TRUSTS AND IRAS/QUALIFIED PLANS (Certificate of
Signatory must be completed.)
Dated:
----------------------- -------------------------------------------
(Print or Type Name of Entity)
By:
-------------------------------------------
(Signature of Authorized Representative)
CERTIFICATE OF SIGNATORY
I, , am the
-------------------------------------------------------------
(Print or Type Name of Authorized Representative)
of
- -------------------------------------------------------
(Print or Type Title or Position)
("Entity").
- --------------------------------------------------------------------
(Print or Type Name of Subscribing Entity)
I certify that I am fully authorized and empowered by the Entity to execute
this Subscription Agreement and to purchase Common Stock, and that this
Subscription Agreement has been duly executed by me on behalf of the Entity and
constitutes a valid and binding obligation of the Entity in accordance with its
terms.
----------------------------------------------------------------------------
(Signature of Authorized Representative)
SALES AGENT
Name of Selected Placement Agent:
-----------------------------------------
Name of Registered Representative:
----------------------------------------
ACCEPTANCE
Subscription [ ] accepted [ ] rejected as of , 2000.
--------------------
HARP & EAGLE, LTD.
By:
-----------------------------------
(Signature of Authorized Officer)
A-2
76
[Outside back cover]
HARP & EAGLE, LTD.
77
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Sections 11.01 through 11.03 of the Bylaws of the Registrant authorize such
corporation to indemnify its directors, officers, employees or agents to the
fullest extent permitted by Wisconsin law, as follows:
ARTICLE XI
INDEMNIFICATION
SECTION 11.01. INDEMNIFICATION. The corporation shall, to the
fullest extent authorized by ch. 180, indemnify a director or officer
against liability and reasonable expenses incurred by the director or
officer in a proceeding in which the director or officer was a party
because he or she is or was a director or officer of the corporation.
These indemnification rights shall not be deemed to exclude any other
rights to which the director or officer may otherwise be entitled. The
corporation may, to the fullest extent authorized by ch. 180,
indemnify, reimburse or advance expenses of directors or officers.
A director or officer who seeks indemnification under this Section
shall make a written request to the corporation. Indemnification under
this Section is not required to the extent limited by the articles of
incorporation under Section 11.02. Indemnification under this Section
is not required if the director or officer has previously received
indemnification or allowance of expenses from any person, including the
corporation, in connection with the same proceeding.
SECTION 11.02. LIMITED INDEMNIFICATION. The corporation's articles
of incorporation may limit its obligation to indemnify under Section
11.01. A limitation under this Section applies if the first alleged act
or omission of a director or officer for which indemnification is
sought occurred while the limitation was in effect.
SECTION 11.03. INDEMNIFICATION AND ALLOWANCE OF EXPENSES OF
EMPLOYEES AND AGENT. The corporation shall, to the fullest extent
authorized by ch. 180, indemnify an employee who is not a director or
officer of the corporation, to the extent that he or she has been
successful on the merits or otherwise in defense of a proceeding, for
all reasonable expenses incurred in the proceeding if the employee was
a party because he or she was an employee of the corporation. In
addition to the indemnification required by the preceding sentence, the
corporation may indemnify and allow reasonable expenses of an employee
or agent who is not a director or officer of the corporation to the
extent provided by the articles of incorporation or by-laws, by general
or specific action of the board of directors or by contract.
Sections 180.0850 through 180.0859 of the Wisconsin Business Corporation Law
provide for the indemnification of directors, officers and other employees of
the Registrant, as follows:
180.0850 DEFINITIONS APPLICABLE TO INDEMNIFICATION AND INSURANCE
PROVISIONS. In ss. 180.0850 to 180.0859:
(1) "Corporation" means a domestic corporation and any domestic or
foreign predecessor of a domestic corporation where the predecessor
corporation's existence ceased upon the consummation of a merger or
other transaction.
(2) "Director or officer" of a corporation means any of the
following:
(a) An individual who is or was a director or officer of the
corporation.
(b) An individual who, while a director or officer of the
corporation, is or was serving at the corporation's request as a
director, officer, partner, trustee, member of any governing or
decision-making committee, employee or agent of another
corporation or foreign corporation, partnership, joint venture,
trust or other enterprise.
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78
(c) An individual who, while a director or officer of the
corporation, is or was serving an employee benefit plan because
his or her duties to the corporation also impose duties on, or
otherwise involve services by, the person to the plan or to
participants in or beneficiaries of the plan.
(d) Unless the context requires otherwise, the estate or
personal representative of a director or officer.
(3) "Expenses" include fees. costs, charges. disbursements,
attorney fees and any other expenses incurred in connection with a
proceeding.
(4) "Liability" includes the obligation to pay a judgment,
settlement, penalty, assessment, forfeiture or fine, including an
excise tax assessed with respect to an employee benefit plan, and
reasonable expenses.
(5) "Party" includes an individual who was or is, or who is
threatened to be made, a named defendant or respondent in a proceeding.
(6) "Proceeding" means any threatened, pending or completed civil,
criminal, administrative or investigative action, suit, arbitration or
other proceeding, whether formal or informal, which involves foreign,
federal, state or local law and which is brought by or in the right of
the corporation or by any other person.
180.0851 MANDATORY INDEMNIFICATION. (1) A corporation shall indemnify a
director or officer, to the extent that he or she has been successful
on the merits or otherwise in the defense of a proceeding, for all
reasonable expenses incurred in the proceeding if the director or
officer was a party because he or she is a director or officer of the
corporation.
(2) (a) In cases not included under sub. (1), a corporation shall
indemnify a director or officer against liability incurred by the
director or officer in a proceeding to which the director or officer
was a party because he or she is a director or officer of the
corporation, unless liability was incurred because the director or
officer breached or failed to perform a duty that he or she owes to the
corporation and the breach or failure to perform constitutes any of the
following:
1. A wilful failure to deal fairly with the corporation or its
shareholders in connection with a matter in which the director
or officer has a material conflict of interest.
2. A violation of the criminal law, unless the director or
officer had reasonable cause to believe that his or her
conduct was lawful or no reasonable cause to believe that his
or her conduct was unlawful.
3. A transaction from which the director or officer derived an
improper personal profit.
4. Wilful misconduct.
(b) Determination of whether indemnification is required under
this subsection shall be made under s. 180.0855.
(c) The termination of a proceeding by judgment, order,
settlement or conviction, or upon a plea of no contest or an equivalent
plea, does not, by itself, create a presumption that indemnification of
the director or officer is not required under this subsection.
(3) A director or officer who seeks indemnification under this
section shall make a written request to the corporation.
(4) (a) Indemnification under this section is not required to the
extent limited by the articles of incorporation under s. 180.0852.
(b) Indemnification under this section is not required if the
director or officer has previously received indemnification or
allowance of expenses from any person, including the corporation, in
connection with the same proceeding.
180.0952 CORPORATION MAY LIMIT INDEMNIFICATION. A corporation's
articles of incorporation may limit its obligation to indemnify under
s. 180.0851. Any provision of the articles of incorporation relating to
a corporation's power or obligation to indemnify that was in existence
on June 13, 1987, does not constitute a limitation on the corporation's
obligation to indemnify under s. 180.0851. A limitation under this
section applies if the first alleged act or omission of a director or
officer for which indemnification is sought occurred while the
limitation was in effect.
180.0853 ALLOWANCE OF EXPENSES AS INCURRED. Upon written request by a
director or officer who is a party to a proceeding, a corporation may
pay or reimburse his or her reasonable expenses as incurred if the
director or officer provides the corporation with all of the following:
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79
(1) A written affirmation of his or her good faith belief that he
or she has not breached or failed to perform his or her duties to the
corporation.
(2) A written undertaking, executed personally or on his or her
behalf, to repay the allowance and, if required by the corporation, to
pay reasonable interest on the allowance to the extent that it is
ultimately determined under s. 180.0855 that indemnification under s.
180.0851(2) is not required and that indemnification is not ordered by
a court under s. 180.0854(2)(b). The undertaking under this subsection
shall be an unlimited general obligation of the director or officer and
may be accepted without reference to his or her ability to repay the
allowance. The undertaking may be secured or unsecured.
180.0854 COURT-ORDERED INDEMNIFICATION. (1) Except as provided
otherwise by written agreement between the director or officer and the
corporation, a director or officer who is a party to a proceeding may
apply for indemnification to the court conducting the proceeding or to
another court of competent jurisdiction. Application shall be made for
an initial determination by the court under s. 180.0855(5) or for
review by the court of an adverse determination under s. 180.0855(1),
(2), (3), (4) or (6). After receipt of an application, the court shall
give any notice that it considers necessary.
(2) The court shall order indemnification if it determines any of
the following:
(a) That the director or officer is entitled to indemnification
under s. 180-0851 (1) or (2). If the court also determines that the
corporation unreasonably refused the director's or officer's request
for indemnification, the court shall order the corporation to pay the
director's or officer's reasonable expenses incurred to obtain the
court-ordered indemnification.
(b) That the director or officer is fairly and reasonably entitled
to indemnification in view of all the relevant circumstances,
regardless of whether indemnification is required under s.180.0851(2).
180.0955 DETERMINATION OF RIGHT TO INDEMNIFICATION. Unless otherwise
provided by the articles of incorporation or bylaws or by written
agreement between the director or officer and the corporation, the
director or officer seeking indemnification under s. 180.0851(2) shall
select one of the following means for determining his or her right to
indemnification:
(1) By a majority vote of a quorum of the board of directors
consisting of directors who are not at the time parties to the same or
related proceedings. If a quorum of disinterested directors cannot be
obtained, by majority vote of a committee duly appointed by the board
of directors and consisting solely of 2 or more directors who are not
at the time parties to the same or related proceedings. Directors who
are parties to the same or related proceedings may participate in the
designation of members of the committee.
(2) By independent legal counsel selected by a quorum of the board
of directors or its committee in the manner prescribed in sub. (1) or,
if unable to obtain such a quorum or committee, by a majority vote of
the full board of directors, including directors who are parties to the
same or related proceedings.
(3) By a panel of 3 arbitrators consisting of one arbitrator
selected by those directors entitled under sub. (2) to select
independent legal counsel, one arbitrator selected by the director or
officer seeking indemnification and one arbitrator selected by the 2
arbitrators previously selected.
(4) By an affirmative vote of shares as provided in s.180.0725.
Shares owned by, or voted under the control of, persons who are at the
time parties to the same or related proceedings, whether as plaintiffs
or defendants or in any other capacity, may not be voted in making the
determination.
(5) By a court under s.180.0854.
(6) By any other method provided for in any additional right to
indemnification permitted under s.180.0858.
180.0856 INDEMNIFICATION AND ALLOWANCE OF EXPENSES OF EMPLOYEES AND
AGENTS. (1) A corporation shall indemnify an employee who is not a
director or officer of the corporation, to the extent that he or she
has been successful on the merits or otherwise in defense of a
proceeding, for all expenses incurred in the proceeding if the employee
was a party because he or she was an employee of the corporation.
(2) In addition to the indemnification required by sub. (1), a
corporation may indemnify and allow reasonable expenses of an employee
or agent who is not a director or officer of the corporation to the
extent provided by the articles of incorporation or bylaws, by general
or specific action of the board of directors or by contract.
II - 3
80
180.0857 INSURANCE. A corporation may purchase and maintain insurance
on behalf of an individual who is an employee, agent, director or
officer of the corporation against liability asserted against or
incurred by the individual in his or her capacity as an employee,
agent, director or officer or arising from his or her status as an
employee, agent, director or officer, regardless of whether the
corporation is required or authorized to indemnify or allow expenses to
the individual against the same liability under ss. 180.0851, 180.0853,
180.0856 and 180.0858.
180.0858 ADDITIONAL RIGHTS TO INDEMNIFICATION AND ALLOWANCE OF
EXPENSES. (1) Except as provided in sub. (2), ss. 180.0851 and 180.0853
do not preclude any additional right to indemnification or allowance of
expenses that a director or officer may have under any of the
following:
(a) The articles of incorporation or bylaws.
(b) A written agreement between the director or officer and the
corporation.
(c) A resolution of the board of directors.
(d) A resolution, after notice, by a majority vote of all of the
corporation's voting shares then issued and outstanding.
(2) Regardless of the existence of an additional right under sub.
(1), the corporation may not indemnify a director or officer, or permit
a director or officer to retain any allowance of expenses unless it is
determined by or on behalf of the corporation that the director or
officer did not breach or fail to perform a duty that he or she owes to
the corporation which constitutes conduct under s. 180.0851(2)(a)1, 2,
3 or 4. A director or officer who is a party to the same or related
proceeding for which indemnification or an allowance of expenses is
sought may not participate in a determination under this subsection.
(3) Sections 180.0850 to 180.0859 do not affect a corporation's
power to pay or reimburse expenses incurred by a director or officer in
any of the following circumstances:
(a) As a witness in a proceeding to which he or she is not a party.
(b) As a plaintiff or petitioner in a proceeding because he or she
is or was an employee, agent, director or officer of the corporation.
180.0859 INDEMNIFICATION AND INSURANCE AGAINST SECURITIES LAW CLAIMS.
(1) It is the public policy of this state to require or permit
indemnification, allowance of expenses and insurance for any liability
incurred in connection with a proceeding involving securities
regulation described under sub. (2) to the extent required or permitted
under ss. 180.0850 to 180.0858.
(2) Sections 180.0850 to 180.0858 apply, to the extent applicable
to any other proceeding, to any proceeding involving a federal or state
statute, rule or regulation regulating the offer, sale or purchase of
securities, securities brokers or dealers, or investment companies or
investment advisors.
The Registrant has not purchased insurance against costs which may be
incurred by it pursuant to the foregoing provisions of its Articles of
Incorporation of Incorporation and Bylaws, nor does it insure its officers and
directors against liabilities incurred by them in the discharge of their
functions as such officers and directors.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
All amounts below are based upon the registration of 1,000,000 shares at
$6.50 per share, of which all are assumed to be sold in the offering at $6.00
per share:
SEC registration fee............................. $ 1,625.00
NASD filing fee.................................. 1,150.00
Brokers' expense allowance....................... 120,000.00
Legal fees and expenses.......................... 40,000.00*
Accounting fees and expenses..................... 19,000.00*
Blue Sky fees and expenses....................... 4,000.00*
Printing and engraving........................... 8,500.00*
Other expenses................................... 725.00*
--------------
Total................................... $ 195,000.00*
- -----------------
* Estimate
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81
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.
From September 14, 1999 (inception) through November 30, 2000, the
Registrant sold 1,513,000 shares of its common stock in a private offering to 15
individual investors, 11 of whom were shareholders of affiliated corporations,
for an aggregate purchase price of $893,000, consisting of cash in the aggregate
amount of $236,000 and common stock of affiliated corporations valued by the
Registrant at $657,000. No selling commission or other compensation was paid in
connection with such transactions. All sales were made in reliance upon the
exemption from registration under the Securities Act of 1933 provided by Section
4(2) of such Act.
During December, 2000, the Registrant granted options to purchase 100,000
shares of its common stock to four persons, all of whom were officers, directors
and/or employees of the Registrant, pursuant to a plan adopted by its
shareholders as of September 15, 1999. All of such options are exercisable for a
period of five years, commencing six months following the initial effective date
of this registration statement, at the price of $1.00 per share, determined by
the Registrant to reflect the fair value of its common stock on December 31,
2000. No selling commission or other compensation was paid in connection with
the respective grants of such options, which were made in reliance upon the
exemption from registration under the Securities Act of 1933 provided by Section
4(2) of such Act.
ITEM 27. EXHIBITS.
Exhibit
Number Description
------ -----------
1.1 Managing Placement Agent (Underwriting) Agreement *
1.2 Form of Selected Placement Agent (Dealer) Agreement *
3.1 Articles of Incorporation of the Registrant *
3.2 Articles of Amendment of the Registrant *
3.3 Bylaws of the Registrant *
4.1 Form of Underwriter's Warrant *
5.1 Opinion of Kevin B. Dunn, Esq. **
10.1 Escrow Agreement, among the Registrant, Liss Financial Services and
Grafton State Bank *
23.1 Consent of Kevin B. Dunn, Esq. (included in Exhibit 5.1) **
23.2 Consent of Kranitz & Philipp **
23.3 Consent of Schenck & Associates, S.C. **
24.1 Power of Attorney (included at Page II - 7) *
-----------------
* Previously filed.
** To be filed by amendment.
ITEM 28. UNDERTAKINGS.
The undersigned small business issuer will provide to the Underwriters at
the closing specified in the Underwriting Agreement certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the small business issuer pursuant to the foregoing provisions, or
otherwise, the small business issuer has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the small business issuer of expenses incurred or
paid by a director, officer or controlling person of the small business issuer
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person
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in connection with the securities being registered, the small business issuer
will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
The undersigned small business issuer will:
(1) For determining any liability under the Act, treat the information
omitted from the form of prospectus filed as part of this registration statement
in reliance upon Rule 430A and contained in a form of prospectus filed by the
Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Act as part of
this registration statement as of the time the Commission declared it effective.
(2) For determining any liability under the Act, treat each post-effective
amendment that contains a form of prospectus as a new registration statement for
the securities offered in the registration statement, and the offering of the
securities at that time as the initial bona fide offering of those securities.
(3) File, during any period in which it offers or sells securities, a
post-effective amendment to this registration statement to:
(i) Include any prospectus required by section 10(a)(3) of the Act;
(ii) Reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in the
information in the registration statement; and
(iii) Include any additional or changed material information on the
plan of distribution.
(4) For determining liability under the Act, treat each post-effective
amendment as a new registration statement of the securities offered, and the
offering of the securities at that time to be the initial bona fide offering.
(5) File a post-effective amendment to remove from registration any of the
securities which remain unsold at the end of the offering.
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SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form SB-2 and authorized this Registration
Statement to be signed on its behalf by the undersigned, in the City of
Milwaukee, State of Wisconsin, on February 7, 2001.
HARP & EAGLE, LTD.
By: /s/ CARY JAMES O'DWANNY
------------------------------------
Cary James O'Dwanny, President
In accordance with the requirements of the Securities Act of 1933, this
registration statement was signed by the following persons in the capacities
and on the dates stated.
Signature Title
--------- -----
GERARD DUNN Vice President and Director
DENNIS J. RADTKE Vice President and Director
MICHAEL S. JOYCE Director
THOMAS J. SHEEHAN Director
By: /s/ CARY JAMES O'DWANNY
-------------------------------
Cary James O'Dwanny
Signing personally as President (Principal
Executive Officer), Treasurer (Principal Financial
and Accounting Officer) and Director,
and as Attorney-in-Fact for the
directors and officers whose
names appear above, on
February 7, 2001.
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1,000,000 SHARES
HARP & EAGLE, LTD.
COMMON STOCK
INDEX TO EXHIBITS
Exhibit
Number Description
------ -----------
1.1 Managing Placement Agent (Underwriting) Agreement *
1.2 Form Selected Placement Agent (Dealer) Agreement *
3.1 Articles of Incorporation of the Registrant *
3.2 Articles of Amendment of the Registrant *
3.3 Bylaws of the Registrant *
4.1 Form of Underwriter's Warrant *
5.1 Opinion of Kevin B. Dunn, Esq., as to the legality of the Common
Stock **
10.1 Escrow Agreement, among the Registrant, Liss Financial Services and
Grafton State Bank *
23.1 Consent of Kevin B. Dunn, Esq. (included in Exhibit 5.1) **
23.2 Consent of Kranitz & Philipp **
23.3 Consent of Schenck & Associates, S.C. **
24.1 Power of Attorney (included at Page II - 7) *
--------------------
* Previously filed.
** To be filed by amendment.
Exhibit Index