As filed with the Securities and Exchange Commission on October 7, 2002,
Registration No. 333-88272
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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Amendment No. 3
to
FORM SB-2
REGISTRATION STATEMENT
UNDER THE
SECURITIES ACT OF 1933
AutoExotica International, Ltd.
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(Exact name of Registrant as Specified in Its Charter)
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Nevada 23-3429345
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(State or other Jurisdiction (Primary Standard Industrial (I.R.S. Employer
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of Incorporation or Organization) Classification Code) Identification No.)
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AutoExotica International, Ltd.
927 Broadway, Suite 2
Bayonne, New Jersey 07002
(201) 437-6238
(Address, including zip code, and telephone number,
including area code, of registrant's
principal executive offices)
Darryl A. Nowak
President and CEO
AutoExotica International, Ltd.
927 Broadway, Suite 2
Bayonne, New Jersey 07002
(201) 437-6238
(Name, address, including zip code, and telephone number
including area code, of agents for service)
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Copies to:
Victoria A. Baylin, Esq.
Vorys, Sater, Seymour and Pease, LLP
1828 L Street, N.W.
11/th/ Floor
Washington, D.C. 20036
(202) 467-8800
Approximate date of commencement of proposed sale to the public: As
soon as practicable after this Registration Statement becomes effective.
If any of the securities being registered on this form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, check the following box. [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 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. [_]
Continued overleaf
CALCULATION OF REGISTRATION FEE
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Title of Each Class of Proposed Maximum Proposed Maximum
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Securities To Be Amount To Be Offering Price Per Aggregate Amount Of
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Registered Registered Security (1) Offering Price Registration Fee
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Units (2) 400,000 -- $ -- $ --
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Common Stock(3) 400,000 $2.50 $1,000,000.00 $ 92.00
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Warrants to purchase Common Stock(4) 400,000 $3.00 $1,200,000.00 $ 110.40
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Common Stock(5) 200,000 $2.50 $ 500,000.00 $ 46.00
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Total $2,700,000.00 $ 248.40*
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(1) Estimated solely for purposes of calculating registration fee pursuant to
Rule 457(c) under the Securities Act of 1933, as amended.
(2) Includes 400,000 shares of common stock and warrants exercisable to
purchase 400,000 shares of common stock.
(3) Represents 400,000 shares of common stock included in the units being
offered by AutoExotica International, Ltd.
(4) Represents 400,000 shares of common stock underlying the warrants included
in the units being offered by AutoExotica International, Ltd.
(5) Represents 200,000 shares of common stock being offered by a Selling
Shareholder.
* Previously paid.
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Pursuant to Rule 416 of the Act, this registration statement also covers
such indeterminate additional shares of common stock as may become issuable as a
result of stock splits, stock dividends or other similar events.
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The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
EXPLANATORY NOTE
This registration statement contains two prospectuses: (a) one prospectus
relating to the offering for cash by AutoExotica International, Ltd. of 400,000
units, each consisting of one share of common stock, par value $.001 per share
and one warrant exercisable to purchase one share of our common stock, par value
$.001 per share, and (b) another prospectus relating to the offering of 200,000
shares of common stock by a selling shareholder. The prospectus relating to the
selling shareholder is referred to as the "selling shareholder prospectus."
Following this prospectus are substitute pages of the selling shareholder
prospectus, including alternate front outside and back cover pages, an alternate
section entitled "The Offering" under "Prospectus Summary" and an alternate
section entitled "Plan of Distribution." Each of the alternate pages for the
selling shareholder prospectus is labeled "Alternate Page for the Selling
Shareholder Prospectus." All other sections of the prospectus are to be used in
both prospectuses. In addition, cross-references in the prospectus will be
adjusted in the selling shareholder prospectus to refer to the appropriate
sections.
This registration statement has been filed with the Securities and
Exchange Commission and with the regulatory commissions of certain states,
including Connecticut, New York and Pennsylvania. No sales of the securities
described herein may be sold until such time as the registration statement has
been declared effective by the Securities and Exchange Commission and the
respective state authorities.
The information in this prospectus is not complete and may be changed. The
securities described in this prospectus may not be sold until the registration
statement containing this prospectus as filed with the Securities and Exchange
Commission is effective. This prospectus is not an offer to sell these
securities and it is not soliciting an offer to buy these securities in any
state where the offer or sale is not permitted.
PROSPECTUS Subject to Completion dated _________ __, 2002
400,000 Units
of
AutoExotica International, Ltd.
We are offering, on a "best efforts, all-or-none basis," 400,000 units at
a price of $2.50 per unit. Each unit consists of one share of our common stock,
$.001 par value, and one warrant exercisable to purchase one share of our common
stock at an exercise price of $3.00 per share. The aggregate amount of proceeds
of the offering, before expenses and excluding exercise of the warrants, will be
$1,000,000. Pending the sale of the 400,000 units, all of the proceeds of our
offering will be held in an escrow account. If 400,000 units are not sold within
60 days from the date hereof, all funds received by us will be refunded to
subscribers in full without interest thereon. We may extend the offering period
for an additional 30 days in our sole discretion.
Concurrent with this offering, we are registering 200,000 additional
shares of common stock for sale by a selling shareholder who may wish to sell
its shares in the open market or in privately negotiated transactions. The
selling shareholder is identified in this prospectus and in a separate selling
shareholder prospectus. The sale by the selling shareholder will only be made
subsequent to the completion of our offering of the 400,000 units.
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No public trading market currently exists for the units, our common stock
or the warrants. The offering price of the units, the value of our common stock
and the exercise price of the warrants have been arbitrarily determined by us.
There can be no assurance that a market for our securities will develop or that
you will be able to liquidate your investment. See "Risk Factors."
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Our principal executive offices are located at 927 Broadway, Suite 2,
Bayonne, New Jersey 07002. Our telephone number is (201) 437-6238.
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The securities being offered by this prospectus involve a high degree of
risk. You should read the "Risk Factors" section beginning on page 4 before you
decide to purchase any of the securities.
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Neither the Securities and Exchange Commission nor any state commission
has approved or disapproved of these securities or passed upon the adequacy or
accuracy of this prospectus. Nor have they made, nor will they make, any
determination as to whether anyone should buy these securities. Any
representation to the contrary is a criminal offense.
The date of this Prospectus is _________ __, 2002
TABLE OF CONTENTS
You should rely only on the information contained in this document. We
have not authorized anyone to provide you with information that is different.
This document may only be used where it is legal to sell these securities. The
information in this document may only be accurate on the date of this document.
PROSPECTUS SUMMARY ....................................................... 2
AUTOEXOTICA INTERNATIONAL, LTD ........................................... 2
RECAPITALIZATION ......................................................... 2
THE OFFERING ............................................................. 2
CONCURRENT OFFERING ...................................................... 3
SUMMARY FINANCIAL INFORMATION ............................................ 3
RISK FACTORS ............................................................. 4
USE OF PROCEEDS .......................................................... 9
DILUTION ................................................................. 9
CONCURRENT OFFERING ...................................................... 10
PLAN OF DISTRIBUTION ..................................................... 10
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS
AND CONTROL PERSONS .................................................... 11
EXECUTIVE COMPENSATION ................................................... 12
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT .................................................. 13
BUSINESS ................................................................. 13
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS .......................... 17
DESCRIPTION OF SECURITIES ................................................ 21
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS ..................... 24
LEGAL MATTERS ............................................................ 25
EXPERTS .................................................................. 25
AVAILABLE INFORMATION .................................................... 26
FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements that involve risks
and uncertainties. We use words such as "anticipates," "believes," "plans,"
"expects," "future," "intends" and similar expressions to identify these
forward-looking statements. You should not place undue reliance on these
forward-looking statements, which apply only as of the date of this prospectus.
Our actual results could differ materially from those anticipated in these
forward-looking statements for many reasons, including the risks faced by us as
described in "Risk Factors" and elsewhere in this prospectus.
i
PROSPECTUS SUMMARY
This summary highlights certain information contained elsewhere in this
prospectus. You should read the following summary together with the more
detailed information regarding our company and our financial statements and the
related notes appearing elsewhere in this prospectus.
AUTOEXOTICA INTERNATIONAL, LTD.
AutoExotica International, Ltd. is in the business of renting luxury,
exotic and high-performance automobiles and motorcycles to individuals and
businesses throughout the United States. Originally incorporated in the State of
New Jersey on June 16, 1989, AutoExotica was reincorporated in the State of
Nevada on June 13, 1995. We commenced our operations in July 1998, concentrating
our efforts in the New York and Washington, D.C. metropolitan areas. Focused
initially on providing rental services in the Northeastern region of the United
States, we have expanded our service to include parts of the Southeastern and
Western regions of the United States. See "Business-Operations."
Our business was created to respond to what we believe is a strong and
continually increasing public interest in experiencing the pleasure of driving
high performance luxury vehicles. We offer top of the line automobiles from
manufacturers such as Mercedes Benz, Porsche, Ferrari and BMW. We rent our
vehicles to individuals and businesses on a short-term and long-term basis. To
date, we have derived most of our business from referrals from prestigious
hotels and resorts; recently, we expanded our business relationships through
strategic alliances with a private membership club and a luxury properties
registry. See "Business-Strategic Alliances."
Our principal executive offices are located at 927 Broadway, Suite 2,
Bayonne, New Jersey 07002. Our telephone number is (201)437-6238, our website is
www.autoexoticarentals.com and our email address is exotorent@aol.com.
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RECAPITALIZATION
In January 2001, we effected a 4.87774-for-one stock split pursuant to
which all of our 1,000,000 shares of then-issued and outstanding common stock
were converted into 4,877,740 shares of common stock. Unless otherwise noted,
all share and per share data presented in this prospectus is reflected on a
post-split basis as if the stock split had occurred upon inception of our
company. See "Business-Summary" and Note G to the Financial Statements included
elsewhere in this prospectus.
THE OFFERING
Shares of common stock outstanding before offering........... 5,600,000 shares
Shares of common stock in units being offered ............... 400,000 shares
Shares of common stock issuable on exercise of the
warrants in the units being offered.......................... 400,000 shares
Plan of distribution ........................................ We are offering the units for cash at a price of $2.50
per unit. Each unit contains one share of our common
stock and one warrant. Each warrant is exercisable to
purchase one share of our common stock at a price of
$3.00 per share.
Use of proceeds.............................................. The proceeds of this offering will be used by us to
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finance additional vehicles, for marketing, promotion and
advertising and for working capital.
CONCURRENT OFFERING
Shares of common stock being offered by selling
shareholder......................................................... 200,000 shares
Plan of distribution ............................................... Concurrent with our offering, a selling shareholder is
offering for sale shares of our common stock. The selling
shareholder may sell its shares in the open market or in
privately negotiated transactions and at market prices,
fixed prices or negotiated prices.
Use of Proceeds .................................................... We will not receive any of the proceeds from the sale of
shares of our common stock by the selling shareholder.
SUMMARY FINANCIAL INFORMATION
The following selected historical financial data should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the financial statements, related notes and other
financial information included elsewhere in this prospectus. The balance sheet
data as of June 30, 2001 and 2002 and the statements of operations data for the
year ended June 30, 2001 and 2002 are derived from our financial statements. The
financial statements as of June 30, 2001 and 2002 and for the years then ended
have been audited by Asher & Company, Ltd. and are included in this prospectus.
Historical results are not necessarily indicative of future results.
BALANCE SHEET DATA
June 30, 2001 June 30, 2002
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Cash $ 1,480 $ 6,389
Deferred lease costs (net of accumulated
amortization) 33,445 36,228
Total assets 99,304 79,972
Long-term notes payable 22,501 20,285
Total Liabilities 99,305 105,913
Stockholders' (deficit), equity (1) (25,941)
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STATEMENT OF OPERATIONS DATA
June 30,
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2002 2001
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Revenue $ 146,818 $ 83,022
Vehicle Expense 101,766 50,248
Interest Expense (10,092) (4,554)
Net Loss (403,790) (150,096)
Loss per share-
Basic and diluted $ (0.07) $ (0.03)
RISK FACTORS
You should carefully consider the following risk factors and all other
information contained in this prospectus before investing in our securities.
Investing in our securities involves a high degree of risk. Any of the following
risks could adversely affect our business, financial condition and results of
operations and could result in a complete loss of your investment. The risks and
uncertainties described below are not the only ones we may face.
RISKS RELATED TO OUR BUSINESS
We have experienced and may continue to experience operating losses, which could
cause our business to fail.
We have had net losses in each year of our operations. For the fiscal
years ended June 30, 2002 and 2001, our net losses from operations were
$393,698 and $145,542, respectively. There can be no assurance that we will
obtain profitability in the foreseeable future. Even if we do achieve
profitability we may be unable to sustain or increase profitability or a
quarterly or annual basis. This could cause our business to fail.
Our auditors have expressed substantial doubt about our ability to continue as a
going concern; our business could fail if we are unable to generate sufficient
working capital to meet our financial obligations.
The report of our independent auditors included in this filing
indicates a substantial doubt as to our ability to continue as a going concern
due to our history of limited working capital and net losses and our current
financial obligations (including our obligations under our current vehicle and
equipment leases). We have historically experienced operating losses. If we
experience continued losses or do not otherwise have enough working capital, we
would need to obtain additional financing to keep our business operating.
Continued losses and/or the lack of such financing could cause our business to
fail.
We have relied on outside financing to implement our revenue and operations; the
unavailability of such financing in the future, if we need it, could cause our
business to fail.
Since our inception, our operations have been financed through advances
from our founder and chief executive officer, Darryl A. Nowak, our line of
credit and from the revenue generated by our automobile rentals. Although we
have historically relied on the financial assistance of our chief executive
officer, we believe that the proceeds from this offering and the revenues we
will be able to generate from our operations will provide sufficient cash to
fund our operations, our projected growth and our obligations for the next
twelve months. Further expansion of our operations beyond our current plans
would require additional funds, possibly in the
4
form of debt or equity financing. There can be no assurance that such financing
would be available on terms favorable or acceptable to us as and when needed.
The inability to obtain such financing could cause our business to fail.
We face significant competition; our business may not succeed if we cannot
compete effectively with other companies in our industry.
The automobile rental industry and some of the markets in which we
operate are highly competitive. Our competition consists of companies that
provide service on national, regional and local levels. These companies range in
size from small and local "boutique" operations (which have few employees, small
fleets of automobiles and limited financial resources) to large publicly-held
companies (which have many employees, numerous locations, large fleets of
automobiles and significant capital resources). We believe that we service a
niche market and that we do not compete directly with the larger national or
local automobile rental companies, such as Hertz Corporation, Avis, National,
Budget or Thrifty, because these companies typically offer standard makes and
models of automobiles (such as Ford Taurus and Chevrolet Lumina). Most of the
larger vehicle rental companies do not focus their efforts on the niche market
of providing luxury automobiles for rent.
Our most significant competition is from local "boutique" providers
whose operations are focused on vacation destinations. We believe that our
competition is not significant in the Northeast because no other companies
provide luxury automobile rental services in this area; however, in the
Southeastern and Western regions of the United States (where we have recently
expanded our operations), we face greater competition because there are more
"boutique" providers of luxury rental automobiles focused on the vacation
destination cities and resorts in these areas. We compete primarily on the basis
of our customer service and price. Our ability to succeed may depend upon our
ability to continue to compete with these companies. If we were not able to
continue to effectively compete with other companies in our industry, our
business could fail.
We depend upon our chief executive officer and his loss or unavailability could
put us at a competitive disadvantage.
Our success depends largely on the skills, experience and reputation of
our founder and chief executive officer, Darryl A. Nowak. Mr. Nowak has been
instrumental in developing our business and in structuring our strategic
alliances. The loss or unavailability of Mr. Nowak for any significant period of
time could have a material adverse effect on the business, operations, prospects
and financial condition of our company. We have entered into an employment
agreement with Mr. Nowak for a term of three (3) years. See "Executive
Compensation-Employment Agreements" and "Directors, Executive Officers,
Promoters and Control Persons."
Our founder and chief executive officer is our largest shareholder which enables
him to determine the outcome of matters submitted to a vote of shareholders.
Prior to this offering, Darryl A. Nowak, our company's founder and chief
executive officer, owned 87.1% of our outstanding common stock. Following this
offering, Mr. Nowak will own 81.2% of our outstanding common stock (assuming no
exercise of the warrants included in the units being offered by us). Therefore,
Mr. Nowak will continue to be able to elect a majority of the board of directors
and will continue to control our business, operations and policies upon
completion of this offering. Although investors in the offering will acquire
shares of common stock entitled to vote on certain matters relating to our
company, the outcome of any such vote may be determined ultimately by Mr. Nowak
and not by such investor. See "Dilution" and "Security Ownership of Certain
Beneficial Owners and Management."
Management has broad discretion in using the proceeds of the offering;
investors in the offering will not control the actual use or the allocation of
the money they invest.
We expect to use the net proceeds of this offering to finance the
acquisition of additional automobiles to increase our fleet of rental vehicles,
for marketing, promotion and advertising and for working capital. Our
management, however, has broad discretion over the actual use of the proceeds of
this offering and may therefore determine to reallocate the use of proceeds.
Investors in the offering will not control the actual use or the allocation of
the proceeds and there may be limited information about the specific use of
these funds available to such investors in the future.
Economic conditions and changes in interest rates could impact the profitability
of our business.
Our business may be significantly impacted by down-turns in the economy
and changes in interest rates. If general economic conditions weaken, our
ability to generate new rental business may decrease due to the perception that
rental of exotic vehicles is a luxury (rather than a necessity) in a market in
which consumer confidence and consumer spending is decreasing. Additionally, the
rate of defaults on existing rentals may increase. If we were to experience a
significant decrease in rentals or in the rate of defaults on current rentals,
our cash flow would be more restrained and our revenue would decrease. Either of
these events could cause our business to fail.
5
Since we have borrowed money to finance the leases on the automobiles
that we rent to our customers, increases in interest rates could significantly
increase our expenses and reduce our profitability. To the extent that our
financing facilities are subject to variations in interest rates and to the
extent that we continue in the future to finance the leasing of new automobiles,
increases in the applicable interest rates will increase the amount of interest
we pay on the automobiles we lease and the money we borrow, and our profit
margins will decrease, which could adversely affect our business.
Maintaining a luxury auto fleet is a capital intensive business and we may
require additional capital in order to support and grow our fleet, which capital
may not be available.
Our revenue to date has been related directly to the volume of luxury
automobiles in our fleet. We currently have only twelve vehicles and one
motorcycle in our fleet. Our growth depends on our ability to add more vehicles
to our fleet for rent. Although we intend to use a portion of the proceeds of
this offering to finance our acquisition of additional vehicles for our
fleet (in order to continue to increase our rental business and to enter into
new regions), we may require access to additional short and long term credit in
the future in order to continue to lease vehicles from vehicle manufacturers and
commercial leasing companies. In such event, we may require additional financing
from banks, manufacturer-related financial institutions and commercial leasing
companies. There can be no assurance that we will be able to obtain additional
financing when needed or, to the extent such financing is available, to obtain
financing on acceptable terms. In the event that we require such financing, we
would be adversely effected if we were unable to continue to secure sufficient
and timely financing on acceptable terms; in such event, our business could
fail.
We may be deemed to be in violation of our vehicle leases which could trigger
termination and adversely affect our business.
Rental of the vehicles that we lease for use in our business requires
the written consent of the leasing companies from whom we lease these vehicles.
Although we have obtained the verbal consent of these leasing companies, we have
not secured their written consent. We have, however, entered into discussions
with the leasing companies to obtain written consent; these companies have
indicated that their consent is predicated on our ability to raise capital.
Based on our discussions with the leasing companies to date, we expect to obtain
their written consent upon completion of our offering. Although none of the
leasing companies has determined to terminate its agreement with us, as of the
date hereof, we may be deemed to be in technical violation of these leases,
which entitles the leasing companies to terminate our vehicle leases. If we do
not obtain the requisite consent and the leasing companies determine to
terminate our leases, the leasing companies could require the return of our
leased vehicles. In the event of such termination, we would be required to
identify and obtain vehicles through other leasing companies. Our inability to
secure other leases could cause our business to fail.
RISKS ASSOCIATED WITH OUR SECURITIES
Since our securities have never been traded, prices for our common stock may
vary or decline after the offering.
There is no public market for any of our securities and no assurance
can be given that a market will develop or that any shareholder will be able to
liquidate his investment without considerable delay, if at all. If a market for
any of our securities should develop, the prices for these securities may be
highly volatile. Our sale of the units and sales of common stock owned by
shareholders of our company (including the selling shareholder) into the market
may cause the market price of our common stock to fall. Factors such as those
discussed in this "Risk Factors" section may have a significant impact on the
market price of our securities. The following factors will add volatility to the
price of our common stock:
. actual or anticipated variations in our quarterly operating
results
. conditions or trends in the auto finance industry in general
. announcements by us or our competitors of significant
acquisitions, strategic partnerships or joint ventures
. our capital commitments
. additions or departures of our key personnel
. sales of our common stock
The lack of an underwriter in this offering and the absence of a market-maker
make it extremely unlikely that an orderly market for our securities will
develop.
There is no underwriter engaged in connection with this offering and
there can be no assurance that any brokerage firm will act as a market maker of
our securities. Due to the anticipated volatility of our
6
common stock, brokerage firms may not be willing to effect transactions in our
common stock. Even if a purchaser finds a broker willing to effect transactions
in our common stock, the combination of brokerage commissions, state transfer
taxes, if any, and other selling costs may exceed the selling price.
Investors will be subject to immediate and substantial dilution in the net
tangible value per share of their shares after completion of the offering.
We had a pro forma net tangible book value of zero per share prior to
our offering. After the offering, we expect our net tangible book value per
share to be approximately $.15. There will be an increase in the net tangible
book value per share for our existing stockholders of approximately $.15. There
will be dilution to investors in the net tangible book value per share of
approximately $2.35. In addition, our founder has paid approximately $.03 per
share for the 4,877,740 shares of our common stock that he owns, whereas the
investors will have paid $2.50 per share for their shares. See "Dilution."
We may issue additional shares of our common stock without shareholder consent,
which will further dilute investors' percentage interest in our company.
Our articles of incorporation permit the issuance of additional shares
of common and preferred stock as determined from time to time by management of
our company. Accordingly, we may issue additional shares of common stock or
other securities in the future in connection with acquisitions and other
financing transactions. Our management will have the right to determine the
number of shares that we issue and the consideration or purchase price per share
for such issuances without the consent or approval of shareholders or the
investors in this offering. As an investor in this offering, you would not have
anti-dilution rights (to purchase shares of our common stock in connection with
any subsequent issuance or offering in order for you to maintain their
percentage of ownership of our company). The issuance of additional shares of
our common stock will have the effect of diluting a shareholder's interest in
our company, thereby reducing the percentage of our company that such
shareholder owns.
7
Penny stock regulations impose certain restrictions on the marketability of our
securities.
The Securities and Exchange Commission has adopted regulations which
generally define a "penny stock" to be any equity security that has a market
price (as defined) or exercise price of less than $5.00 per share, subject to
certain exceptions. As a result, our common stock is subject to rules that
impose additional sales practice requirements on broker-dealers who sell such
securities to persons other than established customers and accredited investors
(generally those with assets in excess of $1,000,000 or annual income exceeding
$200,000, or $300,000 together with their spouse). For transactions covered by
these rules, the broker-dealer must make a special suitability determination for
the purchase of such securities and have received the purchaser's written
consent to the transaction prior to the purchase. Additionally, for any
transaction involving a penny stock, unless exempt, the rules require the
delivery, prior to the transaction, of a risk disclosure document mandated by
the Securities and Exchange Commission relating to the penny stock market. The
broker-dealer must also disclose the commission payable to both the
broker-dealer and the registered representative, current quotations for the
securities and, if the broker-dealer is the sole market maker, the broker-dealer
must disclose this fact and the broker-dealer's presumed control over the
market. Finally, monthly statements must be sent disclosing recent price
information for the penny stock held in the account and information on the
limited market in penny stocks. Consequently, the "penny stock" rules may
restrict the ability of broker-dealers to sell our securities and may affect the
ability of investors to sell our securities in the secondary market and the
price at which such investors can sell any such securities.
Shareholders should be aware that, according to the Securities and
Exchange Commission, the market for penny stocks has suffered in recent years
from patterns of fraud and abuse. Such patterns include:
. control of the market for the security by one or a few
broker-dealers that are often related to the promoter or
issuer;
. manipulation of prices through prearranged matching of
purchases and sales and false and misleading press releases;
. "boiler room" practices involving high pressure sales tactics
and unrealistic price projections by inexperienced sales
persons;
. excessive and undisclosed bid-ask differentials and markups by
selling broker-dealers; and the wholesale dumping of the same
securities by promoters and broker-dealers after prices have
been manipulated to a desired level, along with the inevitable
collapse of those prices with consequent investor losses.
State blue sky laws impose significant restrictions on the resale of our stock
which could significantly impair the ability of investors to resell the
securities purchased in this offering.
Each state has its own securities laws, known as "blue sky laws,"
which: (a) limit the sale of securities to a state's residents unless such sale
is registered in that state or qualifies for an exemption from registration; and
(b) govern the reporting requirements for broker-dealers and stock brokers doing
business directly or indirectly in the state. Before a security is sold in a
state, the sale and the broker executing the sale must have been registered in
that state or there otherwise must have been an exemption applicable to the
sale, thereby exempting the transaction from the state's registration
requirements. We have filed a registration statement relating to the sale of our
common stock in Connecticut, New York and Pennsylvania, however, we do not
currently intend to register the sale of our common stock in additional states.
Determinations regarding
8
registration in other states may be made by the broker-dealers, if any, who
agree to serve as the market-makers for our stock. There may be significant
state blue sky law restrictions on the ability of investors to sell, and on
purchasers to buy, our securities. Investors in this offering should consider
the secondary market for our securities to be limited given that investors may
be unable to resell their stock or may be unable to resell without the
significant expense of state registration or qualification.
The offering price of the units was not determined on the basis of our earnings,
book value or any other financial criterion of value; investors could
experience a loss in the value of the securities they purchase following the
offering.
The offering price of the units, the value of the underlying shares of
common stock and the exercise price of the warrants have been arbitrarily
determined by us and are not based on our earnings, book value, net worth or
other financial statement criteria of value. Additionally, the offering price of
the shares of common stock being offered by the selling shareholder will be
determined by such shareholder in its sole discretion. The factors considered by
us in determining the offering price of the units and the exercise price of the
warrants included an evaluation of the history of and prospects for the industry
in which we compete and the prospects for our future earnings. Such factors are
entirely subjective, and no representations are made herein as to any
objectively determinable value of the securities offered in this offering.
Accordingly, there can be no assurance that the prices of our securities will
be sustained (such prices may decrease in the future) or that the market will
similarly value these securities. This may result in a decline in the value of
the securities an investor purchases in this offering.
USE OF PROCEEDS
We estimate that the net proceeds from our offering will be
approximately $900,000. We expect to use such proceeds as follows:
- ------------------------------------------------------------------------------------------------------------------
Approximate Amount of Approximate Percentage of
Proceeds Proceeds
- ------------------------------------------------------------------------------------------------------------------
Lease of Additional Vehicles $600,000 67%
- ------------------------------------------------------------------------------------------------------------------
Marketing, Promotion and Advertising $100,000 11%
- ------------------------------------------------------------------------------------------------------------------
Working Capital $200,000 22%
- ------------------------------------------------------------------------------------------------------------------
The amounts set forth above are estimates and management of our company
has broad discretion with respect to application of the proceeds of this
offering. See "Risk Factors." Should a reapportionment or reallocation of funds
be determined by the board of directors to be in the best interests of our
company, the actual amount expended to finance any category of expenses may be
increased or decreased. The proceeds of this offering that are not expended
immediately may be deposited in interest bearing accounts, or invested in
government obligations, certificates of deposit or similar short term, low risk
investments.
We will not receive any of the proceeds from the sale of shares of our
common stock by the selling shareholder. See "Concurrent Offering."
DILUTION
Net tangible book value consists of total assets minus intangible
assets and liabilities divided by the total number of common shares outstanding.
Our company has no shares of preferred stock outstanding and no options issued
and outstanding.
a) At June 30, 2002, we had a net tangible book value of zero per
share;
b) Assuming consummation of this offering, we will have a net tangible
book value of $874,059 or $.15 per share. This represents an immediatem
increase to existing shareholders in net tangible book value of
9
approximately $.15 per share and an immediate dilution to new investors of $2.35
per share. See "Risk Factors." "Dilution" represents the difference between the
offering price per share and the net tangible book value per share of common
stock at June 30, 2002, after giving effect to the sale of the shares of common
stock offered hereby. The following table illustrates the dilution in net
tangible book value per share to new investors as of June 30, 2002, assuming
that all of the units being offered by us are sold and none of the warrants
included in the units are exercised (because the $3.00 exercise price of the
warrants exceeds the offering price of the units rendering exercise to be
anti-dilutive).
- --------------------------------------------------------------------------------
Offering price .................................................... $ 2.50
- --------------------------------------------------------------------------------
Net tangible book value before offering ........................... $ (25,941)
- --------------------------------------------------------------------------------
Increase in net tangible book attributable to new investors ....... $ 900,000
- --------------------------------------------------------------------------------
Pro forma net tangible book value after the offering .............. $ 874,059
- --------------------------------------------------------------------------------
Dilution in net tangible book value to new investors .............. $ 2.35
- --------------------------------------------------------------------------------
The following table summarizes the differences between existing
shareholders and new investors with respect to the number of shares of common
stock purchased from our company, the total cash consideration paid, and the
average cash consideration per share of common stock paid, assuming all of the
units being offered by us are sold and none of the warrants included in the
units are exercised (because the $3.00 exercise price of the warrants exceeds
the offering price of the units rendering exercise to be anti-dilutive).
- ---------------------------------------------------------------------------------------------
Number of Average
Shares Total Consideration Price Per
Purchased Percent Amount Percent Share
- ---------------------------------------------------------------------------------------------
Existing Shareholders 5,600,000 93% 1,207,179 51% $ .22
- ---------------------------------------------------------------------------------------------
New Investors 400,000 7% 1,000,000 49% $2.50
- ---------------------------------------------------------------------------------------------
CONCURRENT OFFERING
The registration statement of which this prospectus is a part also includes
an alternate prospectus relating to the offering of 200,000 shares of common
stock by the selling shareholder. All of the 200,000 shares of common stock may
be sold, after the closing of the offering, in the open market, in privately
negotiated transactions or otherwise.
We will not receive any of the proceeds from the sale of the 200,000 shares
of common stock by the selling shareholder. Although the selling shareholder
will not sell its shares prior to the completion of our offering, sales of
shares of common stock by the selling shareholder or the potential of such sales
may have a material adverse effect on the market price of our common stock. See
"Risk Factors."
PLAN OF DISTRIBUTION
Escrow of Offering Funds
We are offering 400,000 units on a "best efforts, all-or-none" basis. The
units are being offered directly by us to the public. No underwriter is
participating in our offering. Pending completion of our offering, the funds we
receive will be deposited in an escrow account at Continental Stock Transfer and
Trust Company. If all of the units are not sold within 60 days of the date
hereof, all funds received by us will be refunded to subscribers in full without
interest thereon (unless the offering is extended by us for an additional 30
days, in which case, the funds received by us will be refunded upon expiration
of the
10
additional 30 day period). Each subscriber will receive from us confirmation of
its subscription to purchase the units with instructions to forward funds to
Continental Stock Transfer and Trust Company, Two Broadway, New York, New York
10004. All of the proceeds of this offering will be deposited in the escrow
account by noon of the business day immediately following the day of receipt.
All subscriber checks must be made payable to "Continental Stock Transfer and
Trust Company, as escrow agent for AutoExotica International, Ltd." During the
period of escrow, subscribers will not be entitled to a refund of their
subscriptions. If at the end of the offering period, all of the units have been
sold, all funds in the escrow account will be released to our company.
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
Officers and directors
The names and ages of our directors and executive officers are set forth
below. All directors are elected annually by our shareholders to serve until the
next annual meeting of the shareholders and until their successors are duly
elected and qualified. Officers are elected annually by the board of directors
to serve at the pleasure of the board.
- ----------------------------------------------------------------------------------------------
Name Age Position(s) with AutoExotica
- ----------------------------------------------------------------------------------------------
Darryl A. Nowak 38 Chief Executive Officer, Chief Accounting and Principal Financial
Officer and President
- ----------------------------------------------------------------------------------------------
Elaine Nowak 39 Executive Vice President and Secretary
- ----------------------------------------------------------------------------------------------
Background of Executive Officers, Directors and Significant Employees
Darryl A. Nowak: Darryl A. Nowak, has served as our Chief Executive Officer,
Chief Accounting and Principal Financial Officer and President and as a director
since our inception in 1989. Mr. Nowak has been responsible for the day-to-day
operations of our company and for our company's execution of its business plan,
including development and cultivation of client and strategic alliance
relationships. From 1982 to 1992, Mr. Nowak was employed by Comex et Cie, a
Marseilles, France based oil and gas conglomerate, where he was engaged as an
offshore diving supervisor in the company's underwater marine operations in
Australia, Southeast Asia and Mexico. Pursuant to Mr. Nowak's employment
agreement, Mr. Nowak intends to continue to devote his full time to the business
of our company. See "Executive Compensation-Employment Agreements." Mr. Nowak is
the husband of Elaine Nowak, another officer and director of our company.
Elaine Nowak: Elaine Nowak, has served as our Executive Vice President,
Secretary and as a director since our inception in 1989. Ms. Nowak has been
responsible for assisting Mr. Nowak in overseeing the day-to-day operations of
our company. Ms. Nowak is also responsible for administrative operations,
including invoicing, accounts payable and receivable and office management.
From 1980 to 1988, Ms. Nowak held various positions with local and national
banks. Ms. Nowak has and intends to continue to devote her full time to the
business of the company. Ms. Nowak is the wife of Darryl Nowak, another officer
and director of our company.
Neither Mr. Nowak nor Ms. Nowak has been an officer or director of a
publically-held reporting company previously.
11
EXECUTIVE COMPENSATION
Compensation of Directors and Executive Officers
Our directors are entitled to receive reasonable out-of-pocket expenses
incurred in attending meetings of the board of directors but are not compensated
for their service as directors. We intend to pay non-cash consideration in the
form of options to directors. In the future, we may determine to pay directors
cash as well as non-cash consideration. The board held four (4) meetings during
the last fiscal year and each director attended all of these meetings.
Committees
Given the limited size of the board of directors to date, we have not
established subcommittees. The board of directors performs the role of the
audit, compensation and nominating committees and is entrusted with the overall
management decisions of the company.
Employment Agreements
We recently entered into an employment agreement with Darryl A. Nowak. Mr.
Nowak has agreed to serve as our Chief Executive Officer, Chief Accounting and
Principal Financial Officer and President. The employment agreement provides for
Mr. Nowak to receive an annual salary of $85,000, subject to a ten (10) percent
annual increase and bonuses at the discretion of the board of directors. Mr.
Nowak's agreement expires on April 30, 2005 (subject to earlier termination for
cause). To date, Mr. Nowak has not drawn any salary. See Note M to the Financial
Statements. As an executive officer of our company, Mr. Nowak is entitled to
receive stock options under our stock option plan. In addition, under the terms
of his employment agreement, Mr. Nowak is entitled to participate in all
medical, pension and other benefit plans that we may establish from time to time
for our senior executives. Mr. Nowak's employment agreement is terminable by us
for cause (i.e., conviction of a felony, willful misconduct, dishonesty or
material breach of the agreement) at any time or in the event that Mr. Nowak
becomes disabled and is unable to perform his duties under his employment
agreement for more than 90 consecutive days or for more than 120 days during any
twelve (12) month period.
Elaine Nowak is employed by the company on an "at-will" basis. Ms. Nowak's
current salary is $45,000 per year.
Stock Option Plans and Agreements
We recently adopted the AutoExotica Incentive Stock Option Plan pursuant to
which we may grant options to purchase up to 1,000,000 shares of our common
stock. The stock option plan provides for the grant of options which qualify as
incentive stock options under Section 422 of the Internal Revenue Code of 1986,
as amended, to officers and employees of our company and non-qualified options
to officers, directors, employees and consultants of our company. An aggregate
of 1,000,000 shares of our common stock is reserved for issuance under the stock
option plan (subject to adjustment in the event of our declaration of stock
dividends, stock splits, reclassifications and the occurrence of other similar
events). No options have been granted to date.
The stock option plan is to be administered by our board of directors or a
committee established by the board of directors. The board of directors (or the
committee) determines the persons to whom options are granted, the number of
shares of our common stock subject to an option, the period during which options
may be exercised and the exercise price thereof.
12
The exercise price of each option is to be determined by our board of
directors (or the committee), provided that the exercise price for any incentive
option may not be less than the "fair market value" of our common stock at the
time of grant, and provided that if an incentive option is granted to an
optionee who owns more than ten percent (10%) of the voting power of the capital
stock of our company, the minimum exercise price of such option may not be less
than one hundred ten percent (110%) of the "fair market value" of our common
stock on the date of grant, determined in accordance with the stock option plan.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information, as of September 30, 2002, with
respect to the beneficial ownership of the outstanding shares of our common
stock, $.001 par value, plus, where relevant for particular beneficial owners,
shares which such beneficial owner has the right to acquire by (i) any holder
known to us owning more than five percent (5%) of the outstanding shares; (ii)
our officers and directors; and (iii) the directors and officers of our company
as a group.
- -----------------------------------------------------------------------------------------------------------
Percentage (%) of
Number of Shares of Ownership before Percentage (%) Of
Name of Beneficial Owner Common Stock Offering Ownership After Offering/(1)/
- -------------------------------------------------------------------------------------------------------------
Darryl Nowak (2) 4,877,774 87.1% 81.2%
C/o AutoExotica International, Ltd
927 Broadway, Suite 2
Bayonne, N.J. 07002
- -------------------------------------------------------------------------------------------------------------
Abingdon Associates (3) 600,000 10.7% 10%
P.O. Box 89
RR1, Route 216
Poughquag, N.Y. 12570
- -------------------------------------------------------------------------------------------------------------
All officers and directors as
a group (2) 4,877,774 87.1% 81.2%
- -------------------------------------------------------------------------------------------------------------
(1) Assumes issuance of shares of common stock included in the units but no
exercise of warrants included in the units.
(2) Mr. Nowak is the founder, Chief Executive Officer, Chief Accounting and
Principal Financial Officer and President of AutoExotica.
(3) Abingdon Associates, the selling shareholder, owns 600,000 shares of common
stock of AutoExotica. Concurrent with the offering by AutoExotica, Abingdon
Associates is offering for sale 200,000 of the 600,000 shares of common
stock it owns. Abingdon Associates provides on-going consulting services to
AutoExotica pursuant to a consulting agreement. See "Certain Relationships
and Related Party Transactions - Consulting Agreement."
BUSINESS
Summary
AutoExotica is in the business of renting luxury, exotic and
high-performance automobiles and motorcycles to individuals and businesses
throughout the United States. Originally incorporated in the State of New Jersey
on June 16, 1989, AutoExotica was reincorporated in the State of Nevada on June
13, 1995. In January 2001, we effected a 4.87774-for-one stock split pursuant to
which all of our 1,000,000 shares of then-issued and outstanding common stock
were converted into 4,877,740 shares of common stock. See Note G to the
Financial Statements included elsewhere in this prospectus.
We commenced our operations in July 1998, concentrating our efforts in the
New York and Washington, D.C. metropolitan areas. Focused initially on providing
rental services in the Northeastern region of the United States, we have
expanded our service to include parts of the Southeastern and Western regions of
the United States. See "Strategic Alliances" below.
Our business was created to respond to what we believe is a strong and
continually increasing public interest in experiencing the pleasure of driving
high performance luxury vehicles. We offer top of the line automobiles from
manufacturers such as Mercedes Benz, Porsche, Ferrari and BMW. We believe that
the
13
increasing demand to drive luxury vehicles is evidenced by the recent launch by
the Hertz Corporation, a large national competitor, of its Prestige Collection.
See "Risk Factors - Competition" and "Competition" below.
Our principal executive offices are located at 927 Broadway, Suite 2,
Bayonne, New Jersey 07002. Our telephone number is (201) 437-6238, our website
address is www.autoexoticarentals.com and our email address is
--------------------------
exotorent@aol.com.
- -----------------
Operations
We rent our vehicles to individuals and businesses. Customers of the
company include brokerage firms, advertising agencies, hotels, vacation resorts,
airlines and travel agencies. We make our vehicles available to our customers on
a short-term and long-term basis. A short-term rental period is typically one or
two days, while long-term rentals may run for a period of up to four (4) weeks.
Subject to certain arrangements that we have made with our strategic alliance
partners (see "Strategic Alliances" below), our rental rates range from $295 per
day (for a Porsche Boxter) to $1,200 per day (for a Ferrari F355).
Our operations are principally conducted out of our executive offices in
Bayonne, New Jersey. Our operations in the Northeast are supported by the fleet
of automobiles that we maintain in our facilities in New Jersey. It is our
practice to deliver our automobiles directly to the customer following a phone
reservation made by the customer or our referral source. At the time of
reservation, prices and terms are agreed to and payments are made by cash or
credit card. Upon delivery of the reserved vehicles to our customers, our
customers execute rental agreements. We also maintain vehicles in Florida,
Colorado, Nevada and Arizona in connection with our agreements with our
strategic alliance partners. See "Strategic Alliances" below.
We lease the vehicles that we rent to the public from vehicle manufacturers
and commercial leasing companies. Our leases are typically financed by banks,
manufacturer-related financing companies and commercial leasing companies. The
leases range in term from three (3) to four (4) years and in monthly payments
from $493 to $1,573. We maintain liability insurance on all of the vehicles we
lease and we are responsible under the leases for all maintenance and repair.
Our vehicle leases require the consent of the leasing companies for use of
the vehicles in our business; we have obtained the verbal consent of these
leasing companies and are in the process of negotiating written consents. Based
on our discussions to date, we believe that we will receive written consent from
the leasing companies upon completion of our offering. In the event that we do
not obtain the written consent, where required, we could be deemed to be in
violation of our lease agreements and the leasing companies could terminate our
agreements. This would have a material adverse effect on our business and
operations. See "Risk Factors."
Business Strategy
A significant portion of our business is derived from referrals from
prestigious hotels and resorts. We work with the concierge services at several
national hotels (such as the Four Seasons) who refer their clientele to us.
Although we currently have no formal written agreements with these concierge
services, our relationships with these establishments have consistently provided
referral opportunities for us. As a result, we are in the process of negotiating
more formal agreements with several hotels. To the extent that such hotels are
national, it is our intention to implement a referral program with such hotels
that would generate referral business at such hotels' various locations
nationally.
We have recently expanded our business relationships to include strategic
alliances with a private membership club and A&K Registry, a luxury properties
registry. See "Strategic Alliances" below.
It is our business strategy to expand our operations by:
. increasing our fleet of vehicles
. increasing the number of locations in which we operate
. expanding our existing relationships with strategic alliance partners
. entering into new agreements with additional luxury products and
service providers
We intend to use a portion of the proceeds of this offering to finance the
acquisition of additional vehicles, thereby increasing the number of vehicles
that we maintain in our fleet. This will enable us to rent more vehicles from
our existing locations, to provide additional vehicles to our strategic alliance
partners and to provide new locations with rental vehicles. It is also part of
our business plan to expand our
14
operations by increasing our marketing, promotional and advertising activities
and by continuing to enter into agreements with luxury product service
providers. It is our belief that increased marketing and promotion will
implement our current referral business.
Marketing
Implementation of a strategic marketing and advertising program is an
important part of our business and growth strategy. We have not previously had
the financial resources to implement such a program and have focused our efforts
on growing our business by encouraging repeat business and referrals. A portion
of the proceeds of our offering are intended to finance our marketing
initiatives. Following completion of this offering, we intend to implement a
strategic plan that includes:
. placement of print ads in national publications such as the Wall
Street Journal and Town & Country Magazine, local publications such
as Palm Beach Illustrated and industry-specific magazines, such as
airline (in flight) magazines and vacation magazines
. preparation and distribution of brochures and flyers to luxury
hotels, spas, resorts and travel agencies in key metropolitan and
resort destination cities such as Palm Beach, Florida, Aspen,
Colorado and Scottsdale, Arizona
. creation of a website with on-line reservation and confirmation
capabilities, which may be used by resort clients, business clients
and airline clients and will have instantaneous "real-time"
information and assistance on our latest vehicle offerings, pricing
packages, promotions, vehicle availability and alternative vehicle
options
. implementation of print and on-line promotional programs that will
provide commercials about and links to our resort and other
strategic alliance partners
Strategic Alliances
In August 2001, we entered into a series of agreements with Private
Retreats, LLC, a private membership club, providing for our membership in the
club and cooperative marketing efforts between our company and the club. Under
the terms of our membership agreement with the club, Private Retreats, LLC
issued a bond in the amount of $150,000 (evidencing a refundable membership
deposit) plus $2,825 of prepaid membership dues in exchange for our issuance to
the club of 122,260 shares of our common stock.
In the event that we determine in the future to terminate our membership,
the bond is refundable in cash pursuant to the terms of the bond and our
membership agreement with Private Retreats, LLC. Under the terms of our
cooperative agreement with Private Retreats, LLC, we have agreed to rent (for a
period of up to thirty (30) days in the aggregate) at least three (3)
automobiles to the club on a monthly basis for use at its resorts in Vail,
Colorado, Las Vegas, Nevada and Scottsdale, Arizona. In exchange for our
provision of luxury automobiles in Vail, Las Vegas and Scottsdale, Private
Retreats, LLC has agreed to pay a retainer of $1,500 per month for thirty (30)
days of vehicle usage (subject to a fifty dollar ($50) per day increase in the
event that additional rental days are requested). We have also agreed to rent a
luxury automobile to the president of the club at a lease price equal to our
direct costs. The cooperative agreement with Private Retreats, LLC is terminable
upon thirty (30) days' prior written notice.
In October 2001, we entered into an agreement with Global Registry, LLC
to cross-market our luxury automobile rental services to the members of an
elite registry known as the A&K Registry. The A&K Registry was established by
Global Registry in alliance with Abercrombie & Kent, a luxury adventure travel
and tour operator. Members of the A&K Registry are owners at private residence
clubs and other elite properties around the world. The A&K Registry offers its
members a portfolio of luxury properties, travel packages, transportation (jets,
yachts and automobiles - through
15
AutoExotica) packages and sports and entertainment event venues. Under the
agreement, we have agreed to make our automobiles available to members of the
A&K Registry at a discounted rate from our customary retail prices and to pay
the registry a marketing fee based on a percentage of the gross rental sales
revenue we receive on automobiles rented by members of the registry. The term of
our agreement with the A&K Registry is three (3) years, subject to earlier
termination.
Competition
The automobile rental industry and some of the markets in which we
operate are highly competitive. See "Risk Factors." Our competition consists of
companies that provide service on national, regional and local levels. These
companies range in size from small and local "boutique" operations (which have
few employees, small fleets of automobiles and limited financial resources) to
large publicly-held companies (which have many employees, numerous locations,
large fleets of automobiles and significant capital resources). We believe that
we do not compete directly with the larger national or local automobile rental
companies, such as Hertz Corporation, Avis, National, Budget or Thrifty because
these companies typically offer standard makes and models of automobiles (such
as Ford Taurus and Chevrolet Lumina). Most of these larger companies do not
focus their efforts on providing luxury automobiles for rent. However, Hertz
recently launched what it calls its Prestige Collection, which we believe is
indicative of the growing market for luxury rentals.
Our most significant competition is from local "boutique" providers whose
operations are focused on vacation destinations. We believe that our competition
is not significant in the Northeast because no other companies provide luxury
automobile rental services in this area; however, in the Southeastern and
Western regions of the United States (where we have recently expanded our
operations), we face greater competition because there are more "boutique"
providers of luxury rental automobiles focused on the resorts in these areas. We
compete primarily on the basis of customer service and price and believe that we
are able to be competitive by offering high quality luxury automobiles at
comparable or lower prices than our competitors.
Employees
As of September 30, 2002 we had two (2) full-time employees. It is our
intention to hire up to four (4) additional employees over the next twelve (12)
months. None of our employees are represented by a labor union and we have not
experienced any work stoppages. We consider our employee relations to be good.
Regulation
Our operations are subject to some governmental regulations, including
those relating to price regulation, advertising, labor matters, charge card and
credit matters and environmental protection. Our operations could be adversely
effected by any limitation in the fuel supply or by the imposition of mandatory
allocation or rationing regulations. Although we have not experienced any such
constraints or disruptions to date, in the event of severe disruption of fuel
supplies, the operations of companies in the business of renting vehicles could
be adversely effected.
The environmental, legal and regulatory requirements applicable to our
business relate to the operation and maintenance of automobiles generally. The
use of automobiles (and other vehicles) is subject to various governmental
requirements designed to limit damage to the environment, including vehicle
16
emissions and noise. Generally, the requirements of these kinds of regulations
are met by vehicle manufacturers, however, we may be required from time to time
to take measures to comply with such regulations (such as vehicle emissions
testing and minor vehicle repair).
Facilities
We currently rent office and garage/warehouse space in Bayonne, New
Jersey on a month-to-month basis. We believe that our current facilities are
adequate to support our operations and will provide adequate space during the
period of our currently anticipated growth; however, as we continue to grow our
business, additional space may be required. In the event that we require
alternate or additional space, based on the current commercial market, we
believe that there would be adequate space available for us to rent on
competitive terms.
Legal proceedings
There are no material legal proceedings pending to which AutoExotica is a
party, and we are unaware of any contemplated material legal actions against us.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Overview and Background
Our company is a relative newcomer to an intensely competitive business.
Our operations commenced in 1998 in a limited geographical area. As of the date
of this prospectus, we have a total of only twelve (12) vehicles available for
rent by our customers. Our business plan envisions the expansion of our business
by increasing our fleet of rental vehicles and by attracting additional
customers by means of effecting strategic alliances with companies having access
to a substantial customer base. In order for our business plan to be successful,
we must be able to finance the acquisition of additional vehicles, attract
additional customers, compete with other luxury vehicle rental providers
(including the larger and well-established entities to the extent that they
enter into and focus on this niche market), and expand into diverse geographical
areas. This requires the infusion of capital, the ability to attract and retain
competent managerial personnel and the success of a directed campaign to attract
additional strategic alliance partners.
Our sole business and source of revenue is derived from the rental of
high performance automobiles and motorcycles. Our revenue is derived primarily
from rental fees. Our expenses consist of direct operating expenses;
depreciation expenses relating to our revenue earning vehicles; general and
administrative expenses; and interest expenses relating to our need for borrowed
funds. Our ability to earn profits is directly related to the volume and pricing
of rental transactions and the turnover ratio of our vehicle fleet. Any
significant change in the cost of operation of our vehicle fleet will impact
directly upon our ability to generate a profit. Our ability to adjust our
pricing to reflect such cost changes is crucial to our profitability. Our
business requires significant expenditures for our vehicle fleet and we require
liquidity to augment our fleet.
Our basic business strategy revolves around the belief that there exists
a niche market for the business of renting luxury, exotic and high performance
vehicles and motorcycles to individuals and businesses. We believe that there is
a strong and increasing interest in driving high-performance luxury vehicles. We
feel that will be able to compete successfully in this niche market if we are
adequately
17
financed. It is our belief that the successful completion of the offering
described in this prospectus will permit us to realize the next stage of our
anticipated growth. In order to be successful, we believe we must concentrate
our efforts on the development and cultivation of our strategic alliances.
Rather than expending any significant percentage of the anticipated proceeds of
our offering on general advertising, we believe that increasing the number of
our strategic alliances will produce the additional customer base we require to
be successful. We intend to increase our strategic alliances (and, therefore,
our customer base) by increasing our fleet of vehicles, adding to our
geographical locations, and offering personalized services to the customers
represented by our strategic alliance partners.
The success of our business is dependent upon our belief that there
exists a substantial niche market for high-performance vehicles. Unlike our
competitors, we are not constrained to offer high-performance vehicles produced
by any single automobile manufacturer. We believe that our ability to offer the
reservation of a specific luxury vehicle combined with personalized services
will attract a significant customer response. Our personalized services will
include specific model reservation capability, free pick-up and return
availability, and customer accommodation services. We intend to target, in
association with our strategic partners, major tourist and business markets.
Although business travel has remained at diminished levels, reflecting a
decrease in corporate spending, we have not experienced any substantial decline
in revenue in 2002, compared with comparable periods in 2001, due to the effect
of the terrorist activities and reduced corporate travel spending.
Results of Operations for the Years Ended June 30, 2002 and June 30, 2001
Revenues for the year ended June 30, 2002 were $146,818 compared to
$83,022 for the year ended June 30, 2001, an increase of $63,796 or 76%. The
primary reason for the increase in revenues was that we increased the number of
vehicles that we maintain in our fleet thereby increasing the number of lease
transactions that we completed. Increased capacity has enabled us to respond to
an increasing number of requests for our vehicles.
Our operating expenses typically consist of vehicle expense, depreciation
and amortization of computer equipment, warehousing expenses, insurance
premiums, salaries and payroll, and general and administrative expenses.
However, for the fiscal year ended June 30, 2002, we were required to amortize
and record $250,000 in consulting fees payable to a consultant over three years
pursuant to the terms of a consulting agreement that will expire by its terms in
2004. Accordingly, total operating expenses increased significantly to $548,162
for the year ended June 30, 2002 from $228,564 for the year ended June 30, 2001.
The overall increase in total operating expenses was primarily attributable to
the expense related to deferred consulting fees we were required to amortize and
record for accounting purposes during this fiscal period. Other components which
contributed to the increase in operating expenses were: vehicle expense
(additional lease commitments on new vehicles for our rental fleet), insurance
(an increase in premiums for coverage of newly leased vehicles) and general and
administrative expenses (resulting from increases in professional fees relating
to this offering).
Vehicle expense increased by 102% from $50,248 for the year ended June
30, 2001 to $101,766 for the year ended June 30, 2002. The increase in vehicle
expense was directly related to an increase in the number of vehicles we lease
for use in our rental fleet. During the year ended June 30, 2001, we leased nine
(9) new vehicles, increasing our fleet to twelve (12) vehicles available for
rent.
Depreciation and amortization of computer and transportation equipment
increased from $5,907 for the year ended June 30, 2001 to $13,025 for the year
ended June 30, 2002.
Warehousing expense decreased from 2001 to 2002. Our expenses for
warehousing of the vehicles that we rent decreased from $6,408 for the year
ended June 30, 2001 to $4,159 for the year ended June 30, 2002. This decrease
was primarily the result of our having fewer vehicles in our warehouse facility
and more vehicles at the facilities of our strategic alliance partners.
18
Insurance expense increased 81% from $8,037 for the year ended June 30,
2001 to $14,567 for the year ended June 30, 2002. The increase in insurance
expense was primarily due to an increase in the amount of insurance that we
carry on our vehicles based on the increase in the number of vehicles we
maintain in our rental fleet and customary (periodic) increases in premiums on
our existing insurance policies.
Salaries and payroll taxes increased modestly from 2001 to 2002. However,
general and administrative expenses increased significantly during the same
period. General and administrative expenses increased 115% from $42,748 for the
year ended June 30, 2001 to $91,771 for the year ended June 30, 2002. This
increase was primarily the result of an increase in professional fees relating
to this offering.
Interest expense was $10,092 for the year ended June 30, 2002 compared to
$4,554 for the year ended June 30, 2001. The 122% increase in interest expense
from 2001 to 2002 was primarily due to increased use of credit card financing
(and the related interest expense) and interest on borrowings under our line of
credit with American Express. See "Liquidity and Capital Resources" below.
Net loss increased 169% to $403,790 for the year ended June 30, 2002 from
$150,096 for the year ended June 30, 2001. The increase in losses was largely
the result of amorization of deferred consulting fees and increases in operating
expenses we experienced as our business grew. See "Certain Relationships and
Related Party Transactions - Consulting Agreement" and Note H to the Financial
Statements included elsewhere herein. Also contributing to the losses was the
increase in professional fees that we incurred in preparation for this offering.
These expenses were offset in part by an increase in our rental revenue
resulting from the increased number of vehicles we had available for rent.
19
Liquidity and Capital Resources
Our operations have been funded to date by cash generated by our
operating activities, amounts available under our credit facilities, including
our line of credit with American Express (see below) and cash advances from
Darryl A. Nowak, our founder and the principal shareholder of our company.
Recently, all amounts owed by us to Mr. Nowak were cancelled and are reflected
in our financial statements as contributions to paid-in capital. See "Certain
Relationships and Related Party Transactions" and Note G to the Financial
Statements.
Our auditors have expressed substantial doubt as to our ability to
continue as a going concern due to our history of limited working capital and
net losses, and our current obligations (including the obligations under our
current vehicle and equipment leases). The auditors have referenced this in
their report relating to our audited financial statements included elsewhere
herein. See "Risk Factors." Although we have faced significant cash constraints
since inception of our operations, we believe that the proceeds of this
offering, together with the revenue which we anticipate will be generated (based
on application of the proceeds of this offering), will be sufficient to sustain
and expand our operations for the next twelve months. In the event that we do
not complete this offering, we may not be able to expand our operations but
believe that we would be able to continue to operate, as we have in the past,
on the modest but more cash constrained basis. See "Risk Factors."
We use our cash primarily to finance the leases on the vehicles that we
maintain in our rental fleet. A portion of our cash is also used to insure the
vehicles and to support the transport costs associated with the delivery of
vehicles to clients. Typically, we lease our vehicles from vehicle manufacturers
through leasing programs offered by them. Sometimes we lease the vehicles
through leasing programs offered by independent banks. It is our intention to
use the proceeds of this offering to increase the number of vehicles that we
have in our fleet (thereby increasing the number of vehicles available for rent
and the revenue that we are able to generate from our fleet). Although we
believe we have received favorable leasing terms, we
20
believe that as we increase the volume of vehicles we lease from existing
providers, the lease terms will become more favorable.
We have a $10,000 line of credit with American Express. The line of
credit bears interest at a variable rate. The applicable interest rate on the
line of credit was 10.99% at June 30, 2001 and at June 30, 2002. We had
outstanding between 80% and 90% of the amounts available under the line of
credit for the periods ended June 30 2001 and 2002. As of June 30, 2002, there
was outstanding $7,500 under the line of credit. While we believe that the terms
of the line of credit with American Express are relatively favorable based on
the size of our business, we believe that we will be able to secure more
favorable terms, including higher lending limits and lower interest rates, as
our business grows. We may use the proceeds of this offering to repay a portion
of the amounts outstanding under the line of credit. It is our belief that, with
the availability of the proceeds of this offering (and the revenue which we
anticipate will be generated by rentals of the additional vehicles we intend to
lease with a portion of the proceeds of this offering), we will not need to rely
on the line of credit to the same extent that we have relied on it historically.
Business Trends; Seasonality
The automobile rental business as a whole tends to be seasonal.
Typically, demand for rental vehicles in the business and leisure segments of
the industry declines in the winter and increases in the spring and summer.
Operations also tend to vary geographically and based on weather considerations.
This is largely consistent with the seasonality in business that the travel
industry experiences. In an effort to offset these trends, we have chosen to
focus our operations on: (a) key metropolitan cities such as New York City and
Washington, D.C. (where business usage remains more consistent and tourism tends
to increase during periods where business usage may otherwise decline) and (b)
vacation and resort destinations such as Palm Beach, Florida, Vale, Colorado and
Scottsdale, Arizona (where there is less business usage, but travel and leisure
usage tends to increase in one city as it declines in another based on
geographic and weather-related considerations). We are able to accommodate
shifts in demand by relocating and increasing/decreasing our fleet in the
various locations throughout the year, thereby maximizing vehicle usage and
availability. We intend to continue to focus our attention on these areas as we
implement our plans for expansion.
DESCRIPTION OF SECURITIES
General
We are authorized to issue up to twenty five million (25,000,000) shares
of common stock, $.001 par value per share, of which five million six hundred
thousand (5,600,000) shares are issued and outstanding. Our articles of
incorporation authorize five million (5,000,000) shares of preferred stock $.001
par value per share, none of which is outstanding.
Common Stock
Subject to the rights of holders of preferred stock, if any, holders of
shares of our common stock are entitled to share equally on a per share basis in
such dividends as may be declared by our Board of Directors out of funds legally
available therefor. There are presently no plans to pay dividends with respect
to the
21
shares of our common stock. Upon our liquidation, dissolution or winding up,
after payment of creditors and the holders of any of our senior securities,
including preferred stock, if any, our assets will be divided pro rata on a per
share basis among the holders of the shares of our common stock. The common
stock is not subject to any liability for further assessments. There are no
conversion or redemption privileges nor any sinking fund provisions with respect
to the common stock and the common stock is not subject to call. The holders of
common stock do not have any pre-emptive or other subscription rights.
Holders of shares of common stock are entitled to cast one vote for each
share held at all stockholders' meetings for all purposes, including the
election of directors. The common stock does not have cumulative voting rights.
There are 3 holders of record of our common stock. See "Certain
Relationships and Related Party Transactions." All of the issued and outstanding
shares of common stock are fully paid, validly issued and non-assessable.
Preferred Stock
None of the five million (5,000,000) shares of authorized preferred stock
are currently outstanding. Our board of directors has the authority, without
further action by the holders of the outstanding common stock, to issue shares
of preferred stock from time to time in one or more classes or series, to fix
the number of shares constituting any class or series and the stated value
thereof, if different from the par value, and to fix the terms of any such
series or class, including dividend rights, dividend rates, conversion or
exchange rights, voting rights, rights and terms of redemption (including
sinking fund provisions), the redemption price and the liquidation preference of
such class or series.
22
Warrants
Each warrant will entitle you to purchase one share of our common stock
at an exercise price of $3.00 per share at any time for a period of three (3)
years commencing on the date of the closing of our offering. Unless we extend
the terms of the warrants, in our sole discretion, the warrants will expire at
5:00 p.m., New York time, five years from the date of the closing. The warrants
will be issued in registered form under a warrant agreement with Continental
Stock Transfer & Trust Company, as warrant agent. Please refer to the warrant
agreement (which has been filed as an exhibit to the registration statement of
which this prospectus is a part) for a complete description of the terms and
conditions of the warrants. The exercise price and number of shares of our
common stock or other securities issuable on exercise of the warrants are
subject to adjustment to protect against dilution if we issue a stock dividend,
or we undertake a stock split, recapitalization, reorganization, merger,
consolidation or other similar event. The warrants do not give you any dividend,
voting, preemptive or any other rights our stockholders may have. We cannot
assure you that the market price of our common stock will equal or exceed the
exercise price of the warrants at any time during the period in which they are
exercisable. The warrants and the shares of common stock issuable upon exercise
of the warrants have been included in the registration statement of which this
prospectus is a part. Although we have undertaken and intend to have all of
these securities covered by an effective registration statement in the states
where our securities are being offered and we will endeavor to maintain a
current prospectus relating to these securities until the expiration or
redemption of the warrants (subject to the terms of the warrant agreement), we
cannot assure you that we will be able to do so. The warrants cannot be
exercised unless, at the time of exercise, the prospectus covering the warrants
and the shares of common stock issuable upon exercise of the warrants is current
and the registration statement covering the securities is effective (or there is
available an exemption from the federal and applicable state registration
requirements).
Options
As of June 30, 2002, we do not have any options issued and outstanding.
Limitation on liability of directors
Our articles of incorporation and bylaws provide that we will indemnify
our directors to the extent permitted by Nevada Revised Statutes, including
circumstances in which indemnification is otherwise discretionary under the
Nevada Revised Statutes. Our articles of incorporation also provide that to the
extent that Nevada Revised Statutes is amended to permit further
indemnification, we will so indemnify our directors.
Dividend policy
We have not paid any dividends on our common stock since our inception
and do not intend to pay dividends on our common stock in the foreseeable
future. We anticipate that any earnings which we may realize in the foreseeable
future will be retained to finance the growth of our company.
23
Restricted Shares Eligible for future resale
All of our outstanding shares of common stock are "restricted securities"
and, in the future, may be sold upon compliance with Rule 144. Adopted under the
Securities Act of 1933, as amended, Rule 144 provides, in essence, that a person
holding "restricted securities" for a period of one year may sell only an amount
every three months equal to the greater of (a) one percent of our issued and
outstanding shares, or (b) the average weekly volume of sales during the four
calendar weeks preceding the sale. However, the amount of "restricted
securities" which a person who is not an affiliate of our company may sell is
not limited if his or her shares have been held by the non-affiliate for two
years, provided there is adequate current public information available
concerning our company. Upon the completion of this offering, and assuming
exercise of the warrants offered hereby, AutoExotica will have 6,400,000 shares
issued and outstanding, of which 5,400,000 shares will be "restricted
securities," 1,000,000 shares are included in the registration statement of
which this prospectus is part, 200,000 shares of which are being offered by the
selling shareholder and 800,000 shares of which are being offered by our company
(assuming exercise of the warrants).
The resale of the securities held by the selling shareholder is subject
to prospectus delivery and other requirements of the Securities Act of 1933, as
amended. Sales of such securities or the potential of such sales at any time may
have an adverse effected on the market prices of the securities offered hereby.
See "Selling Shareholder."
Transfer agent and registrar
The transfer agent and registrar for our common stock is Continental
Stock Transfer and Trust company, Two Broadway, New York, New York 10004.
Securities and Exchange Commission position on indemnification for Securities
Act liabilities
Our articles of incorporation and bylaws provide that we will indemnify
our officers and directors for costs and expenses incurred in connection with
the defense of actions, suits, or proceedings against them on account of their
being or having been directors or officers of AutoExotica, absent a finding of
negligence or misconduct in the performance of their duties.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933, as amended, may be permitted to directors, officers or persons
controlling our company pursuant to the foregoing provisions, we have been
informed that, in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Securities Act of
1933, as amended and is unenforceable.
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
Subsequent to the re-incorporation of our company on June 13, 1995, we
issued an aggregate of 5,600,000 shares of our common stock as follows:
a) 1,000,000 (pre-split) shares were issued to Darryl A. Nowak in
consideration of Mr. Nowak's capital contribution of $1,000;
b) 3,877,740 additional shares were issued to Darryl A. Nowak in
connection with a 4.87774:1 stock split effected by us in January
2001 (See "Recapitalization");
c) 600,000 shares were issued to Abingdon Associates in April 2001 in
exchange for consulting services being rendered to us under the
terms of a consulting agreement with
24
Abingdon Associates (see "Consulting Agreement" below and Note H
to the Financial Statements included elsewhere herein); and
d) 122,260 shares were issued to Private Retreats, LLC in September
2001 in exchange for our receipt of a bond in the principal amount
of $150,000 and $2,825 in pre-paid membership fees in connection
with our corporate membership in the retreat (see "Strategic
Alliances" above).
Consulting Agreement
In April 2001, we entered into an agreement with Abingdon Associates to
provide us with strategic business advice in the areas of corporate finance,
business development and growth strategies. The term of our agreement with
Abingdon Associates is three years, subject to earlier termination by either
party upon delivery of one month's prior written notice. We issued 600,000
shares of our common stock to Abingdon Associates in exchange for its services
under the agreement. A portion (200,000) of the shares of common stock we issued
to Abingdon Associates has been included in the registration statement of which
this prospectus is a part and Abingdon Associates is the selling shareholder
referred to throughout this prospectus. Other than as specifically set forth in
this prospectus, Abingdon Associates has no position, office or other material
relationship with our company. See Note H to the Financial Statements included
elsewhere in this prospectus.
Debts owed to Principal Shareholder; Cancellation of Indebtedness
From time to time, Darryl A. Nowak, our founder, chief executive
officer and the principal shareholder of our company, has advanced funds to our
company for working capital. In December 2001, Mr. Nowak agreed to cancel this
indebtedness which has been reflected in our financial statements as a
contribution to additional paid-in capital. See Note G to the Financial
Statements included elsewhere in this prospectus.
LEGAL MATTERS
The validity of the common stock offered hereby will be passed upon for
our company by Vorys, Sater, Seymour & Pease, LLP, 1828 L Street, N.W., 11th
Floor, Washington, D.C. 20036.
EXPERTS
The financial statements of AutoExotica included in this
prospectus and elsewhere in the registration statement, to the extent and for
the periods indicated in their reports, have been audited by Asher & Company,
Ltd.
25
AVAILABLE INFORMATION
We have filed with the Securities and Exchange Commission, Washington,
D.C., a Registration Statement on Form SB-2 under the Securities Act of 1933, as
amended, with respect to the securities offered hereby. 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,
reference is made to the Registration Statement and the exhibits and schedules
files as a part of the Registration Statement. Statements contained in this
prospectus concerning the contents of any contract or any other document are not
necessarily complete; reference is made in each instance to such contract or any
other document filed as an exhibit to the registration statement. After the
offering, we will be subject to the informational requirements of the Exchange
Act of 1934, as amended and in accordance therewith will be required to file
annual, quarterly and special reports, proxy statements and other information
with the Securities and Exchange Commission. The registration statement,
including exhibits and schedules thereto, may be inspected without charge at the
Securities and Exchange Commission's principal office in Washington D.C., and
copies of all or any part thereof may be obtained from the Public Reference
Section of the Securities and Exchange Commission, 450 Fifth Street, N.W.,
Washington, D.C. 20549 after payment of fees prescribed by the Securities and
Exchange Commission. The Securities and Exchange Commission also maintains a
World Wide Web site which provides online access to reports, proxy and
information statements and other information regarding registrants that file
electronically with the Securities and Exchange Commission at the address
http://www.sec.gov. We intend to furnish holders of our common stock with annual
reports containing financial statements audited by independent accountants
beginning with the year ending June 30, 2002.
You should rely only on the information contained in this prospectus.
We have not authorized any other person to provide you with different
information. If anyone provides you with different or inconsistent information,
you should not rely on it. We are not making an offer to sell these securities
in any jurisdiction where the offer or sale is not permitted. You should assume
that the information appearing in this prospectus is accurate as of the date on
the front cover of this prospectus only. Our business, financial condition,
results of operations and prospects may have changed since that date.
26
AUTOEXOTICA INTERNATIONAL, LTD.
FINANCIAL STATEMENTS
JUNE 30, 2002 AND 2001
TABLE OF CONTENTS
Page
----
Independent Auditors' Report ........................................... F-2
Financial Statements
Balance Sheets .................................................... F-3
Statements of Operations and Accumulated Deficit .................. F-4
Statements of Changes in Shareholder's Equity ..................... F-5
Statements of Cash Flows .......................................... F-6
Notes to Financial Statements ..................................... F-7 - F-13
F-1
Independent Auditors' Report
The Shareholder and Board of Directors
Autoexotica International, Ltd.
Bayonne, New Jersey
We have audited the accompanying balance sheets of Autoexotica
International, Ltd. as of June 30, 2002 and 2001 and the related statements of
operations and accumulated deficit, changes in Shareholder's equity and cash
flows for the years then ended. These financial statements are the
responsibility of Autoexotica International, Ltd.'s management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Autoexotica
International, Ltd. as of June 30, 2002 and 2001 and the results of its
operations and its cash flows for the years then ended in conformity with
accounting principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming
Autoexotica International, Ltd. will continue as a going concern. As shown in
the financial statements, Autoexotica International, Ltd. had a net loss of
$403,790 for the year ended June 30, 2002, and as of that date, had a working
capital deficit of $76,514 and a negative net worth of $25,941. These conditions
raise substantial doubt about the Company's ability to continue as a going
concern. Management's plans regarding those matters are discussed in Note B. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
ASHER & COMPANY, Ltd.
Philadelphia, Pennsylvania
September 26, 2002
F-2
AUTOEXOTICA INTERNATIONAL, LTD.
BALANCE SHEETS
ASSETS
June 30,
-----------------------------------
2002 2001
----------- -----------
CURRENT ASSETS
Cash $ 6,389 $ 1,480
Accounts receivable - 4,000
----------- -----------
Total current assets 6,389 5,480
Property and equipment, net of accumulated depreciation 6,224 11,543
Purchased vehicles leased to customers, net of accumulated depreciation 22,631 30,336
OTHER ASSETS
Deferred lease costs, net of accumulated amortization of $34,863
and $15,931 as of June 30, 2002 and 2001, respectively 36,228 33,445
Security deposits 8,500 18,500
----------- -----------
Total other assets 44,728 51,945
----------- -----------
Total Assets $ 79,972 $ 99,304
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Line of credit $ 7,496 $ 9,238
Notes payable, current portion 2,556 2,186
Amounts due on credit cards 18,565 5,171
Accounts payable 37,800 13,586
Accrued expenses 10,402 2,093
Capital lease obligation, current portion 1,084 704
Deferred revenue 5,000 -
----------- -----------
Total current liabilities 82,903 32,978
LONG-TERM LIABILITIES
Notes payable 20,285 22,501
Note payable, principal Shareholder - 39,450
Capital lease obligation 2,725 4,376
----------- -----------
Total long-term liabilities 23,010 66,327
----------- -----------
Total liabilities 105,913 99,305
----------- -----------
SHAREHOLDERS' EQUITY
Preferred stock, $.001 par value; 5,000,000 shares
authorized, none issued and outstanding - -
Common stock, $.001 par value; 20,000,000 shares
authorized, 5,600,000 and 5,477,740 issued and
outstanding as of June 30, 2002 and 2001, respectively 5,600 5,478
Additional paid-in capital 1,217,422 939,694
Accumulated deficit (651,046) (247,256)
Less: Deferred consulting service fees (447,917) (697,917)
Less: Refundable membership deposit (150,000) -
----------- -----------
Total Shareholders' equity (25,941) (1)
----------- -----------
Total Liabilities and Shareholders' Equity $ 79,972 $ 99,304
=========== ===========
The accompanying notes are an integral part of these
financial statements.
F-3
AUTOEXOTICA INTERNATIONAL, LTD.
STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT
Years Ended June 30,
----------------------------
2000 2001
------------ ------------
Revenue
Rental $ 146,818 $ 83,022
Other 7,646 -
------------ -----------
Total revenue 154,464 83,022
Expenses
Vehicle 101,766 50,248
Depreciation 13,025 5,907
Amortization of deferred consulting fee 250,000 52,083
Warehousing 4,159 6,408
Insurance 14,567 8,037
Salaries and payroll taxes 72,874 63,133
General and administrative 91,771 42,748
------------ ------------
Total operating expenses 548,162 228,564
------------ ------------
Loss from operations (393,698) (145,542)
Other expense
Interest expense (10,092) (4,554)
------------ ------------
NET LOSS (403,790) (150,096)
Accumulated deficit, beginning of year (247,256) (97,160)
------------ ------------
Accumulated deficit, end of year $ (651,046) $ (247,256)
============ ============
Loss per share $ (0.07) $ (0.03)
============ ============
Weighted average number of outstanding shares 5,569,184 5,009,247
============ ============
The accompanying notes are an integral part of these financial statements.
F-4
AUTOEXOTICA INTERNATIONAL, LTD.
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
YEARS ENDED JUNE 30, 2002 AND 2001
Shares Deferred
of Additional Consulting Refundable Total
Common Common Paid-In Accumulated Service Membership Shareholders'
Stock Stock Capital Deficit Fees Deposit Equity
---------- -------- ---------- ------------ ---------- ---------- -------------
Balance, June 30, 2000 1,000,000 $ 1,000 $ 55,000 $ (97,160) $ (41,160)
Contribution of loan amounts
by principal Shareholder - - 84,172 - 84,172
Contribution of services by - - 55,000 - 55,000
principal Shareholder
Stock split 4.87774 for 1 3,877,740 3,878 (3,878) - -
Issuance of common stock
to Abington Associates 600,000 600 749,400 - $ (750,000) -
Amortization of deferred
consulting services - - - - 52,083 52,083
Net loss - - - (150,096) - (150,096)
---------- -------- ---------- ------------ ---------- ---------- -------------
Balance, June 30, 2001 5,477,740 5,478 939,694 (247,256) (697,917) (1)
Amortization of deferred
consulting services - - - - 250,000 250,000
Issuance of shares to
Private Retreats, LLC 122,260 122 152,703 - - 152,825
Contribution of loan amounts
by principal Shareholder - - 59,025 - - 59,025
Contribution of services
by principal Shareholder - - 66,000 - - 66,000
Refundable Membership Deposit - - - - - $ (150,000) (150,000)
Net loss - - - (403,790) - - (403,790)
---------- -------- ---------- ------------ ---------- ---------- -------------
Balance, June 30, 2002 5,600,000 $ 5,600 $1,217,422 $ (651,046) $ (447,917) $ (150,000) $ (25,941)
========== ======== ========== ============ ========== ========== =============
The accompanying notes are an integral part of these
financial statements.
F-5
AUTOEXOTICA INTERNATIONAL, LTD.
STATEMENTS OF CASH FLOWS
Years Ended June 30,
----------------------------------
2002 2001
------------- ------------
OPERATING ACTIVITIES
Net loss $ (403,790) $ (150,096)
Adjustments to reconcile net loss to net cash
utilized by operating activities:
Non-cash compensation 66,000 $ 55,000
Depreciation and amortization 284,781 67,521
Changes in:
Accounts receivable 4,000 (2,350)
Accounts payable and accrued expenses 32,523 19,615
Security deposits 10,000 -
Deferred revenue 5,000 -
------------- ------------
Net cash utilized by operating activities (1,486) (10,310)
INVESTING ACTIVITIES
Acquisition of property and equipment - (31,460)
Deferred lease payments (21,715) (12,131)
------------- ------------
Net cash utilized by investing activities (21,715) (43,591)
FINANCING ACTIVITIES
Payments on line of credit, net (1,742) (531)
Payments on notes payable (1,846) (7,286)
Net borrowing on credit cards 13,394 -
Proceeds from notes payable - 25,019
Payments on capital lease obligations (1,271) (2,297)
Proceeds from principal Shareholder's loan - 39,450
Capital contributions from Shareholder 19,575 -
------------- ------------
Net cash provided by financing activities 28,110 54,355
------------- ------------
INCREASE IN CASH 4,909 454
Cash, beginning of year 1,480 1,026
------------- ------------
Cash, end of year $ 6,389 $ 1,480
============= ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for interest $ 10,092 $ 4,554
============= ============
SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING ACTIVITIES:
Non-cash financing activities consists of a capital lease of $6,349 for the year ended June 30, 2001.
Additional non-cash financing activities included the contribution by the principal Shareholder of notes payable
to equity of $39,450 and $84,172 for the years ended June 30, 2002 and 2001. $152,825 of common stock valued at
$1.25 per share was issued in exchange for a refundable membership deposit in a private club for $150,000 and
membership dues and expenses of $2,825 for the year ended June 30, 2002.
The accompanying notes are an integral part of these
financial statements.
F-6
AUTOEXOTICA INTERNATIONAL, LTD.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2002 AND 2001
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
Autoexotica International, Ltd. (the Company) began operations in July,
1998 and is located in Bayonne, New Jersey. The Company leases various
short and long-term leases of exotic and luxury automobiles and motorcycles
to customers located throughout the United States.
Use of estimates
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of financial statements and the reported amounts of
revenue and expenses during the reporting period. Actual results could
differ from those estimates.
Property and equipment
Property and equipment and purchased vehicles leased to customers are
carried at cost. Depreciation is provided by accelerated methods over
estimated useful lives which range from 5 to 7 years. Minor repairs and
maintenance are charged to operations as incurred.
Accounts receivable
Accounts receivable are recorded at their estimated, net realizable value;
therefore, no provision for doubtful accounts is reflected on the balance
sheet. Management believes all material accounts receivable will be
collected.
Deferred lease costs
The Company has deferred lease origination costs associated with several
automobile leases. The costs are amortized over the lives of the respective
leases on a straight-line basis. Amortization expense included in vehicle
expense amounted to $18,932 and $9,579 for the years ended June 30, 2002
and 2001, respectively.
Concentration of credit risk
The Company's operations are largely concentrated in rentals of luxury
automobiles and motorcycles. A serious economic slowdown could negatively
impact operations. However, it is the opinion of management that rentals
offer an attractive alternative to purchasing during economic slowdowns and
their business tends to increase during these periods.
F-7
AUTOEXOTICA INTERNATIONAL, LTD.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2002 AND 2001
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Revenue recognition
Revenue is recognized ratably over the term of the operating lease starting
with the date the lease was entered.
Advertising costs
The Company charges advertising costs to operations as they are incurred.
Advertising costs charged to operations were $8,398 and $1,070 for the
years ended June 30, 2002 and 2001, respectively.
Loss per share
The Company utilizes SFAS No. 128, "Earnings Per Share" to compute the loss
per share. Loss per share is computed by dividing net loss by the weighted
average number of common shares outstanding for the year. The weighted
average number of common shares outstanding for the years ended June 30,
2002 and 2001 have been adjusted to reflect the recapitalization of the
Company on July 1, 2000.
NOTE B - MANAGEMENT'S PLANS TO IMPROVE OPERATIONS AND FINANCIAL CONDITION
The Company's financial statements have been presented on the basis that it
will continue as a going concern, which contemplates the realization of
assets and the satisfaction of liabilities in the normal course of
business. As of June 30, 2002, the Company had a net loss for the year then
ended of $403,790, and a working capital deficit of $76,514. In addition to
operational cash flow requirements, the Company has capital requirements in
connection with capital leases, a note payable, and lease commitments. The
financial statements do not include any adjustments relating to the
recoverability of or classification of assets or the amount and
classification of liabilities that might be required should the Company be
unable to continue as a going concern.
The Company intends to address these issues in the following manner: the
Company intends to file a Registration Statement on Form SB-2 with the
Securities and Exchange Commission (SEC) seeking the registration for sale
to the public of an aggregate of 400,000 of its authorized, unissued shares
at the price of $2.50 per share (as part of an unit that also includes
400,000 warrants exercisable at $3.00 per share).
F-8
AUTOEXOTICA INTERNATIONAL, LTD.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2002 AND 2001
NOTE C - PROPERTY AND EQUIPMENT AND PURCHASED VEHICLES LEASED
TO CUSTOMERS
The cost and accumulated depreciation of property and equipment and
purchased vehicles leased to customers is as follows:
2002 2001
---- ----
Furniture and fixtures $ 9,284 $ 9,284
Transportation equipment 16,730 16,730
------- -------
26,014 26,014
Accumulated depreciation (19,790) (14,471)
------- -------
Property and equipment net of accumulated depreciation $ 6,224 $ 11,543
======= =======
Purchased vehicles leased to customers $ 31,460 $ 31,460
Accumulated depreciation (8,829) (1,124)
------- -------
Purchased vehicles leased to customers, net of
accumulated depreciation $ 22,631 $ 30,336
======= =======
Depreciation expense on property and equipment was $5,319 and $4,783 for
the years ended June 30, 2002 and 2001, respectively. Depreciation expense
on purchased vehicles leased to customers was $7,705 and $1,124 for the
years ended June 30, 2002 and 2001, respectively.
NOTE D - LINE OF CREDIT
The Company has available a line of credit in the amount of $10,000 with a
financial institution. The line of credit bears interest at a variable rate
which was 10.99% as of June 30, 2002.
NOTE E - CAPITAL LEASE PAYABLE
The Company is obligated under the terms of a capital lease agreement for
computer equipment. The carrying cost of the computer equipment was $6,349
at June 30, 2002. Accumulated depreciation was $3,302 and $1,270 at June
30, 2002 and 2001, respectively. Amortization of computer equipment leased
is included with depreciation expense, which is part of operating expenses.
F-9
AUTOEXOTICA INTERNATIONAL, LTD.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2002 AND 2001
NOTE E - CAPITAL LEASE PAYABLE (Continued)
Minimum lease payments under the capital lease obligation are as follows:
Years Ending June 30, Amount
-------------------- ------
2003 $ 2,531
2004 2,531
2005 1,681
-----
6,743
Less amounts representing interest (2,934)
-----
Present value of future minimum
lease payments 3,809
Current portion 1,084
-----
Long-term portion $ 2,725
=====
NOTE F - NOTE PAYABLE
Certain transportation equipment is financed under the terms of a note
payable. The note payable requires monthly principal and interest payments
of $493 through April, 2008, bears interest at 15.7%, and is secured by
certain transportation equipment. Aggregate maturities of the note payable
for the five years subsequent to June 30, 2002 are as follows:
Years Ending June 30, Amount
--------------------- ------
2003 $2,556
2004 2,989
2005 3,495
2006 4,087
2007 4,778
NOTE G - TRANSACTIONS WITH PRINCIPAL SHAREHOLDER
The principal Shareholder of the Company had various loans to the Company
for working capital purposes. The advances are unsecured, interest free and
are not expected to be repaid in the current year. The Company's principal
Shareholder contributed $39,450 and $84,172 of his loan amounts to the
Company's equity for the years ended June 30, 2002 and 2001, respectively,
giving up all rights and claims under the loan.
F-10
AUTOEXOTICA INTERNATIONAL, LTD.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2002 AND 2001
NOTE G - TRANSACTIONS WITH PRINCIPAL SHAREHOLDER (Continued)
On July 1, 2000, the Company approved a resolution to recapitalize the
Company. The recapitalization resulted in the Company's principal
Shareholder owning an aggregate 4,877,740 of shares of common stock.
During 2002 and 2001, the principal Shareholder provided to the Company
certain services related to the sales, administration and financial aspects
of the Company, for which he received no compensation. These financial
statements reflect an expense for the estimated compensation and related
payroll expenses for these services with the credit reflected as an equity
contribution for services provided by the principal Shareholder.
NOTE H - ABINGDON ASSOCIATES CONSULTING AGREEMENT
On April 12, 2001 the Company entered into a three year consulting
agreement with Abingdon Associates to provide the Company with certain
non-exclusive services relating to corporate finance, acquisitions and
general financial services in exchange for 600,000 shares of the Company's
common stock, which were valued at $1.25 per share which the Company
considers to be fair value at the date of issuance. This deferred
consulting service fee is amortized over the related three-year term.
NOTE I - REFUNDABLE MEMBERSHIP DEPOSIT
The Company issued 122,260 shares of common stock to Private Retreats, LLC.
This common stock is valued at $1.25 per share, which is considered by the
Company to be fair value at the date of issuance. Private Retreats, LLC
customarily issues bonds representing the refundable membership fees paid
by its members. Upon termination of a membership by a member, the bond may
be redeemed for cash pursuant to its terms. Although the Company did not
pay for its membership with cash, the Company is entitled, as is the case
with other members who receive these bonds, to surrender the bond for cash
upon termination of its membership, all in accordance with the terms of the
bond and the membership agreement.
There exists no agreement between Private Retreats, LLC and the Company
providing for the return of the common stock issued to Private Retreats,
LLC.
F-11
AUTOEXOTICA INTERNATIONAL, LTD.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2002 AND 2001
NOTE J - INCOME TAXES
At June 30, 2002, the Company has available net operating loss
carryforwards of approximately $585,000 to offset future federal and state
income tax liabilities. The deferred tax asset of approximately $199,000
which is generated by the net operating loss carryforwards is fully
reserved. The valuation allowance increased by $134,000 in 2002. The net
operating loss carryforwards expire from 2019 through 2022.
NOTE K - LEASE COMMITMENTS
The Company leases six luxury automobiles under operating leases which
expire at various times beginning in May, 2003 and ending in April, 2005.
The Company also leases certain storage facilities on a monthly basis.
Lease costs were $90,877 and $46,500 for the years ended June 30, 2002 and
2001, respectively. Minimum future lease payments under these
noncancellable operating leases having remaining terms in excess of one
year as of June 30, 2002 are as follows:
Years Ending June 30, Amount
--------------------- ------
2003 $ 79,899
2004 54,690
2005 28,004
-------
$162,593
=======
NOTE L - REGISTRATION OF SHARES FOR PUBLIC SALE
The Company is in the process of filing a registration statement for
400,000 units, at a price of $2.50 per unit. Each unit consists of one
share of common stock, $.001 par value, and one warrant exercisable to
purchase one share of the Company's common stock at an exercise price of
$3.00 per share.
NOTE M - EMPLOYMENT AGREEMENT - PRINCIPAL SHAREHOLDER
On April 30, 2002 the Company entered into an employment agreement with its
principal Shareholder to serve as Chief Executive Officer and President.
The employment agreement provides for salary of $85,000 plus benefits and
discretionary bonuses over the term of the agreement. The agreement expires
on April 30, 2005. During 2002, the principal shareholder contributed his
salary to additional paid-in capital.
F-12
AUTOEXOTICA INTERNATIONAL, LTD.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2002 AND 2001
NOTE N - STOCK OPTION PLAN
On April 30, 2002 the Company adopted the AutoExotica Incentive Stock
Option Plan which may result in the Company granting options to purchase up
to 1,000,000 shares of the Company's common stock to officers and employees
of the Company. No options have been granted to date.
NOTE O - PRICING COMMITMENTS
In August 2001, the Company entered into a cooperative marketing agreement
with Private Retreats, LLC. Under the terms of the agreement the Company
has agreed to lease at least three automobiles to Private Retreats, LLC for
an aggregate of up to 30 days usage per month. The Company will receive a
monthly rental fee of $1,500 for the contracted usage. Private Retreats,
LLC has the option of contracting for additional days usage at $50 per day.
In addition, the Company has agreed to provide the president of Private
Retreats, LLC a car at no more than the Company's direct cost. The
cooperative agreement with Private Retreats, LLC is cancelable by either
party with 30 days written notice.
In October 2001, the Company entered into a marketing alliance agreement
with Global Registry, LLC. Under the terms of the agreement the Company has
agreed to lease vehicles to Global Registry at a 70% discount from the
Company's 2002 retail prices, lease vehicles to members of Global Registry
at a 45% discount from the Company's 2002 retail prices, and pay Global
Registry a 15% of gross sales marketing fee for rentals made by members of
Global Registry. The marketing alliance agreement may be terminated by
either party upon 90 days written notice.
NOTE P - PREFERRED STOCK
The provision and preferences of the preferred stock may be set by the
Company's Board of Directors without Shareholder approval.
F-13
You should rely only on the information contained in this document. We have not
authorized anyone to provide you with information that is different. This
document may only be used where it is legal to sell these securities. The
information in this document may only be accurate on the date of this document.
Additional risks and uncertainties not presently known or that are currently
deemed immaterial may also impair our business operations. The risks and
uncertainties described in this document and other risks and uncertainties which
we may face in the future will have a greater impact on those who purchase our
common stock. These purchasers will purchase our common stock at the market
price or at a privately negotiated price and will run the risk of losing their
entire investment.
AUTOEXOTICA INTERNATIONAL, LTD.
400,000 Units
PROSPECTUS
____________, 2002
[Alternate page for Selling Shareholder prospectus]
THE OFFERING
Shares of common stock being offered by selling
shareholder.............................................. 200,000 shares
Plan of Distribution .................................... A shareholder of AutoExotica is offering shares of our
common stock. The selling shareholder may sell its shares
of our common stock in the open market or in privately
negotiated transactions and at market prices, fixed prices
or negotiated prices.
Use of Proceeds.......................................... AutoExotica will not receive any of the proceeds from the
sale of shares of our common stock by the selling
shareholder. See "Certain Relationships and Related Party
Transactions."
CONCURRENT OFFERING
Shares of common stock outstanding before offering....... 5,600,000 shares
Shares of common stock in units being offered ........... 400,000 shares
Shares of common stock issuable on exercise of the
warrants in the units being offered...................... 400,000 Shares
Plan of Distribution .................................... AutoExotica is offering the units for cash at a price of $2.50
per unit. Each unit contains one share of our common stock
and one warrant. Each warrant is exercisable to purchase
one share of our common stock at a price of $3.00 per share.
Use of Proceeds.......................................... The proceeds of AutoExotica's offering will be used by us to
finance additional vehicles, for marketing, promotion
and advertising and for working capital.
[Alternate page for Selling Shareholder prospectus]
USE OF PROCEEDS
This prospectus is part of a registration statement that permits a
shareholder of AutoExotica, as identified in this prospectus, to sell its shares
of our common stock in the open market or in privately negotiated transactions.
The selling shareholder is referred to throughout this prospectus as the
"selling shareholder." The selling shareholder and AutoExotica will each
respectively receive the proceeds of its offering.
[Alternate page for Selling Shareholder prospectus]
CONCURRENT OFFERING
This prospectus is part of a registration statement filed by AutoExotica
with the Securities and Exchange Commission. The registration statement also
contains a prospectus with respect to the offering by AutoExotica for cash of
400,000 units, each consisting of one share of common stock and one warrant
exercisable to purchase one share of common stock. This distribution may have a
material adverse effect on the market price of the common stock offered by the
selling shareholder.
PLAN OF DISTRIBUTION
This prospectus is part of a registration statement which was filed by
AutoExotica with the Securities and Exchange Commission. While the registration
statement is effective, the selling shareholder may sell its shares directly to
the public, without the aid of a broker or dealer, or it may sell its shares
through a broker or dealer if the common stock is authorized for inclusion on
the OTC Bulletin Board. The selling shareholder may sell its shares in the open
market or in privately negotiated transactions. Additionally, the selling
shareholder may sell its shares at market prices, fixed prices or negotiated
prices. Any commission, fee or other compensation of a broker or dealer would
depend on the brokers or dealers involved in the transaction and would be paid
by the selling shareholder.
[Alternate page for Selling Shareholder prospectus]
SELLING SHAREHOLDER
200,000 shares of AutoExotica International Ltd. common stock being offered by
this selling shareholder's prospectus are owned by and registered in the name of
Abingdon Associates, a partnership whose address is P.O. Box 89, RR1, Route 216,
Poughquag, N.Y. 12570.
[Alternate page for Selling Shareholder prospectus]
The information in this prospectus is not complete and may be changed. These
securities may not be sold until the registration statement filed with the
securities and exchange commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
We are registering up to 200,000 shares of our common stock for sale by a
shareholder of AutoExotica International Ltd. identified in this prospectus.
This shareholder is referred to throughout this prospectus as the "selling
shareholder."
The selling shareholder may offer and sell its shares on a continuous or delayed
basis in the future. These sales may be conducted in the open market or in
privately negotiated transactions and at market prices, fixed prices or
negotiated prices. We will not receive any of the proceeds from the sales of
shares by the selling shareholder.
No public trading market for our common stock exists and the offering price of
our common stock has been arbitrarily determined by AutoExotica International
Ltd. We anticipate that our common stock will initially be traded on the
over-the-counter market after this offering.
Our principal executive offices are located at 927 Broadway, Suite 2, Bayonne,
New Jersey 07002. Our telephone number is (201) 437-6238.
The securities being offered by this prospectus involves a high degree of risk.
You should read the "Risk Factors" section beginning on page _ before you decide
to purchase any common stock.
Neither the Securities and Exchange Commission nor any state commission has
approved or disapproved of these securities or passed upon the adequacy or
accuracy of this prospectus. Nor have they made, nor will they make, any
determination as to whether anyone should buy these securities. Any
representation to the contrary is a criminal offense.
PROSPECTUS
Subject to Completion; dated ______, 2002
200,000
Shares of Common Stock
of
AutoExotica International Ltd.
The date of this Prospectus is _________ __, 2002
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of Directors and Officers
Our Articles of Incorporation provide that we will indemnify our
directors to the extent permitted by Nevada Revised Statutes, including
circumstances in which indemnification is otherwise discretionary under the
Nevada Revised Statutes. Our Articles of Incorporation also provide that to the
extent that Nevada Revised Statutes is amended to permit further
indemnification, we will so indemnify our directors.
Section 78.7502 of the Nevada Revised Statutes provides that a
corporation shall have the power to indemnify any person who was or is a party
or is threatened to be made a party to or is involved in any pending,
threatened, or completed civil, criminal, administrative, or arbitration action,
suit, or proceeding, or any appeal therein or any inquiry or investigation which
could result in such action, suit, or proceeding, because of his or her being or
having been our director, officer, employee, or agent or of any constituent
corporation absorbed by us in a consolidation or merger or by reason of his or
her being or having been a director, officer, trustee, employee, or agent of any
other corporation or of any partnership, joint venture, sole proprietorship,
trust, employee benefit plan, or such enterprise, serving as such at our request
or of any such constituent corporation, or the legal representative of any such
director, officer, trustee, employee, or agent, from and against any and all
reasonable costs, disbursements, and attorney's fees, and any and all amounts
paid or incurred in satisfaction of settlements, judgments, fines, and
penalties, incurred or suffered in connection with any such proceeding. Article
V of our Bylaws also provides that our officers and directors shall be
indemnified and held harmless by us to the fullest extent permitted by the
provisions of Section 78.7502 of the Nevada Revised Statutes.
We do not currently have any liability insurance coverage for our
officers and directors.
Item 25. Other Expenses of Issuance and Distribution
The following table sets forth the costs and expenses payable by
Abingdon Associates in connection with the sale of the securities being
registered. All amounts are estimates except the SEC registration fee:
- --------------------------------------------------------------------------------
SEC registration fee* $ 1,000
- --------------------------------------------------------------------------------
Printing and engraving expenses* $ 10,000.00
- --------------------------------------------------------------------------------
Accounting fees and expenses* $ 25,000.00
- --------------------------------------------------------------------------------
Legal fees and expenses* $ 50,000.00
- --------------------------------------------------------------------------------
Transfer agent's fees and expenses* $ 5,000.00
- --------------------------------------------------------------------------------
Miscellaneous* $ 9,000.00
- --------------------------------------------------------------------------------
Total $100,000.00
- --------------------------------------------------------------------------------
* Estimated
Item 26. Recent Sales of Unregistered Securities.
Set forth below is information regarding the issuance and sales of
AutoExotica International, Ltd. common stock without registration during the
last three years. Other than as set forth below, no such sales involved the use
of an underwriter and no commissions were paid in connection with the sale of
any securities. Each of the following issuances were made in arms-length
transactions which did not involve a public offering. In each instance, the
purchaser represented to the company that such purchaser was knowledgeable,
sophisticated and able to bear the economic risks associated with its investment
in the company.
II-1
Subsequent to the re-incorporation of our company on June 13, 1995, we
issued an aggregate of 5,600,000 shares of our common stock pursuant to Section
4(2) of the Securities Act of 1933, as amended, to the following investors, each
of whom was an accredited investor under Rule 501 of Regulation D as follows:
a) 1,000,000 (pre-split) shares were issued to Darryl A. Nowak in a
single transaction as the founder of the company in consideration
of Mr. Nowak's capital contribution of $1,000;
b) 3,877,740 additional shares were issued to Darryl A. Nowak in a
single transaction in connection with a 4.87774:1 stock split
effected by us in January 2001 (See "Recapitalization");
c) 600,000 shares were issued to Abingdon Associates in April 2001 in
a single transaction in exchange for consulting services being
rendered to us under the terms of a consulting agreement with
Abingdon Associates (see "Certain Relationships and Related Party
Transactions - Consulting Agreement" and Note H to the Financial
Statements included elsewhere herein); and
d) 122,260 shares were issued to Private Retreats, LLC in September
2001 in a single transaction in exchange for our receipt of a bond
in the principal amount of $150,000 and $2,825 in pre-paid
membership fees in connection with our corporate membership in the
retreat (see "Certain Relationships and Related Party Transactions\
- Strategic Alliances").
Item 27. Exhibits
Exhibit
Number Name
3.1 Amended and Restated Articles of Incorporation*
3.2 Amended and Restated Bylaws*
4.1 Form of Stock Certificate*
4.2 Form of Warrant Agreement and Warrant*
5.1 Opinion of Vorys, Sater, Seymour & Pease LLP**
10.1 Consulting Agreement with Abingdon Associates dated April 12, 2001*
10.2 Cooperative Agreement with Private Retreats LLC dated August 1,
2001*
10.3 Employment Agreement between AutoExotica International, Ltd. and
Darryl A. Nowak, dated April 30, 2001*
10.4 Amendment dated July 24, 2002 to Private Retreats LLC
Cooperative Agreement*
16.0 [Intentionally omitted]
23.1 Consent of Asher & Company, Ltd.
23.2 [Intentionally omitted]
23.3 Consent of Vorys, Sater, Seymour & LLP (see Exhibit 5.1)**
*Previously filed.
**To be filed by amendment.
Item 28. Undertakings.
(A) Insofar as indemnification for liabilities arising under the
Securities Act of 1933, as amended, 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 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 Securities Act of
1933, as amended, and will be governed by the final adjudication of
such issue.
(B) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(a) To include any prospectus required by section 10(a)(3) of
Securities Act of 1933, as amended.
II-2
(b) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the commission pursuant to Rule 424(B) if, in the aggregate, the
changes in volume and price represent no more than 20% change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement; and
(c) To include any material information with respect to the
plan of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, as amended, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
(4) That, for purposes of determining any liability under the
Securities Act of 1933, as amended, each filing of the registrant's annual
report pursuant to section 13(a) or section 15(d) of the Exchange Act that is
incorporated by reference in the registration statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
II-3
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the County of Hudson,
State of New Jersey, on October 7, 2002.
AUTOEXOTICA INTERNATIONAL, LTD.
By: /s/ Darryl A. Nowak
-----------------------------------------
Name: Darryl A. Nowak
Title: President, Chief Accounting and
Principal Financial Officer and Chief
Executive Officer
Pursuant to the requirements of the Securities Act of 1933, as
amended, this registration statement has been signed by the following persons
in the capacities and on the dates indicated.
Name Title Date
/s/ Darryl A. Nowak Chief Executive Officer, President, October 7, 2002
- ------------------------------- Chief Accounting and Principal
Darryl A. Nowak Financial Officer
/s/ Elaine Nowak Executive Vice President and Director October 7, 2002
- -------------------------------
Elaine Nowak