SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549-1004
SCHEDULE 14c INFORMATION STATEMENT
Information Statement Pursuant to Section 14(c)
of the Securities Exchange Act of 1934
Check the appropriate box:
[x] Preliminary information statement
[ ] Confidential, for use of the Commission only (as permitted by Rule
14c-5(d)(2))
[ ] Definitive information statement
ALPHA HOLDING, INC.
(Exact name of registrant as specified in its charter)
Payment of Filing Fee
[ ] No fee required
[x] Fee computed on table below per Exchange Act Rule 14c-5(g) and 0-11
[ ] Fee paid previously with preliminary materials
[ ] Check box if any part of the fee is offset by Exchange Act Rule 0-11(a)(2)
and identify the filing for which the offsetting fee was paid previously
Calculation of Filing Fee
-------------------------
Number of Shares outstanding Book Value Per Share 1/50th of 1%
- ---------------------------- -------------------- ------------
3,460,490 ($.01) $692.09
NOTICE AND INFORMATION STATEMENT DATED MARCH 20, 2002
TO THE STOCKHOLDERS OF ALPHA HOLDING, INC.:
In accordance with the provisions of Section 228 of the Delaware General
Corporation Law ("DGCL"), notice is hereby given that four shareholders owning a
total of 3,447,250 shares (approximately 90.7%) of the issued and outstanding
common stock of Alpha Holding, Inc., a Delaware corporation ("Alpha"), having
not less than the minimum number of votes that would be necessary to authorize
or take such action, as described below have, by written consent without a
meeting and without a vote, on January 10, 2002, (the "Written Consent"), in
lieu of any meeting, agreed to the following shareholder actions:
(1) Entering into a Stock Purchase Agreement with the holder of 100% of
the issued and outstanding stock of Todtri Productions, Ltd, and
issuing 17,914,286 shares of Alpha's common stock to the Todtri
shareholders in exchange for 100% of the issued and outstanding shares
of Todtri Productions, Ltd. (the "Todtri Shares");
(2) The amendment of the Articles of Incorporation to change the name of
the Corporation to TODTRI Book Publishers, Inc.;
(3) The amendment of the Articles of Incorporation to increase the
authorized common shares from 10,000,000 shares par value $.001 to
50,000,000 shares, par value $.001 and authorize a new class of
shares, namely 10,000,000 shares of $.01 per share value Preferred
Stock, with the issuance of any such Preferred Stock, in such series
and with such rights, powers, and designations thereof, to be
determined by the Board of Directors as and when any shares of
Preferred Stock are issued;
(4) Election of Robert Tod and Yafit Tod as directors of Alpha;
(5) That the officers and directors are authorized to submit this
Information Statement pursuant to Schedule 14C under the Securities
Exchange Act of 1934 to all Company shareholders which did not sign
the Written Consent.
The actions of (1) changing the name to TODTRI Book Publishers, Inc.; (2)
increasing the authorized common stock to 50,000,000 shares and authorizing
10,000 shares of Preferred Stock, will become effective concurrent with the
filing of the Certificate of Amendment with the Delaware Secretary of State,
which filing will take place immediately prior to the closing..
Only holders of record of the Alpha stock at the close of business on March
15, 2002, are entitled to receive notice of the informal action by the
shareholders in accordance with Section 228 of the DGCL. This Information
Statement is being sent on or about March 20, 2002 to such holders of record. No
response is being requested from you and you are requested not to respond to
this Information Statement. In accordance with Section 228 of the DGCL, this
Notice and Information Statement is notice of the taking of the corporate
actions, without a meeting by less than unanimous written consent to those
shareholders who have not consented in writing.
WE ARE NOT ASKING YOU FOR A PROXY, AND YOU ARE REQUESTED NOT TO SEND US A
PROXY.
Company:
Alpha Holding, Inc.
c/o Steven L. Siskind
645 Fifth Avenue, Suite 403
New York, NY 10022
Tel. 212-750-2002
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ALPHA HOLDING, INC.
INFORMATION STATEMENT FOR SHAREHOLDERS
The Written Consent
Pursuant to Section 228 of the DGCL, shareholders owning a majority of the
outstanding shares of common stock of Alpha have voted by Written Consent in
favor of the following actions:
(1) Entering into a Stock Purchase Agreement with the holder of 100% of
the issued and outstanding stock of Todtri Productions, Ltd, and
issuing 17,914,286 shares of Alpha's common stock to the Todtri
shareholders in exchange for 100% of the issued and outstanding shares
of Todtri Productions, Ltd. (the "Todtri Shares");
(2) To amend the Certificate of Incorporation to change the name of the
Corporation to Todtri Book Publishers, Inc.
(3) To amend the Articles of Incorporation to increase the authorized
common stock to 50,000,000 shares of common stock, par value $.001,
and to authorize a new class of shares, namely 10,000,000 shares of
$.01 per share value Preferred Stock, with the issuance of any such
Preferred Stock, in such series and with such rights, powers, and
designations thereof, to be determined by the Board of Directors as
and when any shares of Preferred Stock are issued;
(4) To elect Robert Tod and Yafit Tod as Directors of Alpha;
(5) That the officers and directors are authorized to submit this
Information Statement pursuant to Schedule 14C under the Securities
Exchange Act of 1934 to all Alpha shareholders who did not sign the
Written Consent.
(1) Acquisition of TODTRI PRODUCTIONS, LTD.
As of January 11, 2002, Alpha entered into a Stock Purchase Agreement (the
"Agreement") to acquire (the "Acquisition") all of the issued and outstanding
shares of Todtri Productions, Ltd., a New York corporation ("Todtri"), in
exchange for a total of 17,914,286 shares of Alpha's Common Stock. The
Acquisition is subject to the approval of the stockholders of Todtri and Alpha.
As a result of the Acquisition, Todtri will become a wholly owned subsidiary of
Alpha and the former shareholders of Todtri will own approximately 82.5% of
Alpha's issued and outstanding common stock. The consummation of the Acquisition
will vest control of Alpha with the former shareholders of Todtri.
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Description of Todtri
Todtri was formed in New York in 1981 as a consulting company to a number
of media related businesses. In 1989, Todtri started producing books for other
publishing and distribution companies, such as Outlet Book Company, Smithmark,
Courage Books, W.H. Smith, and Chapters. Todtri publishes predominantly hard
cover, illustrated books covering a wide range of popular, non-fiction,
subjects, often referred to collectively as "coffee-table books". Today, Todtri
has a customer base of more than 3,000 customers in the United States and
effective distribution of its products around the world. Its customers include
Book Wholesalers, Retailers, Price Clubs, Mass-Market Merchandisers, and
Publishers of Books. Todtri's business address is 254 West 31st Street, New
York, NY 10001- 2813. Telephone: 212 695 6622.
In order to better manage its business, Todtri decided to take control of
the distribution of its product line in 1998 and entered into fulfillment
agreements with two warehouse operations, one in New York, and the other in the
United Kingdom. These warehouse operations maintain Todtri's inventory and
fulfill orders by shipping books to Todtri's customers. The New York fulfillment
company has been in the same location for more than 50 years and has a long term
lease with its landlord for approximately 250,000 square feet of space of which
approximately 50,000 square feet is used to service Todtri's needs. The UK
fulfillment company has a long term lease with its landlord for approximately
100,000 square feet of space of which approximately 20,000 square feet is used
to service the Todtri's needs.
Todtri entered into representation agreements with commissioned sales
representatives, experienced with selling the types of books the company
publishes. In 1999, Todtri entered into a distribution agreement with a company
in Australia handling sales, storage and fulfillment functions. The sales
representatives are independent contractors and not employees of Todtri. The
sales representatives earn commissions generally ranging from 2.5% to 12.5% of
the net invoice value based on, among other things, the location of the
representative and the discount at which such books are sold.
Intellectual Property Rights
Todtri is the copyright holder to approximately 200 books it has
originated, including all the text it commissioned on a work for hire basis. The
artwork appearing in its publications is owned by various copyright holders and
permission secured for reproduction purposes within the context of each book
project.
Markets
Todtri has penetrated a number of markets including trade retail, bargain
retail, wholesale, museum shops, school and library, gift stores, price clubs,
mass-market merchandisers, premium, display marketing and the Internet.
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Products and Competition
Todtri predominantly publishes hard bound, full-color, illustrated books on
a wide range of popular subjects, include fine arts, architecture,
transportation, travel, natural history, crafts, gardening, health, cookery and
children.
In the United States there are thousands of book publishing companies. Most
of these companies are relatively small to medium size, as is Todtri, and are
privately owned, although the industry is dominated by a small number of very
significant publishers with a global presence. Management believes Todtri can
compete in the book publishing industry because the market itself is fragmented
which offers ample opportunity to publishers that are creative and who have
their own internal distribution service.
Todtri publishes approximately 60 new titles each year in order to insure
continued sales growth and provide its customers with exciting new product lines
to complement its ever-popular subjects such as natural history, travel, the
fine arts, and automobiles.
Suppliers and Customers
Todtri has about 15 suppliers that supply it with inventory. We believe
that Todtri would not be adversely affected by the loss of any particular
supplier. Todtri has more than 3,000 customers and is therefore not dependent on
any one account. No customer has accounted for more than 10% of the revenues in
either of the last two years.
Employees
Todtri has seven employees, including its two executive officers.
Management believes its relationship with its employees is satisfactory.
Properties
Todtri's lease for a 3,350 square feet of space in New York City has
expired and Management is in the process of negotiations to renew the lease for
seven years. This facility houses senior management, and administrative support
staff. The space is sufficient for Todtri's current needs and for the
foreseeable future.
Legal Proceedings
Todtri is involved in a number of pending legal actions or threatened
actions from various third parties for non-payments of amounts they claim are
owed. The aggregate amount claimed by such third parties exceeds $700,000. In
addition, certain vendors from Picture Perfect USA, Inc., a former subsidiary of
Todtri, may assert claims against Todtri relating to Picture Perfect photography
sales. These potential claims may approximate two million dollars.
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For a discussion of Todtri's financing arrangements, see "Management's
Discussion and Analysis of Financial Condition and Results of Operations".
RISK FACTORS
Ownership of securities in Alpha following completion of the acquisition of
Todtri involves a high degree of risk. Accordingly, in determining whether to
support this transaction you should carefully consider, along with the other
matters referred to herein, the following risk factors:
The book publishing industry has been weak in the past few years
For the past several years there has been a decline in book sales overall
throughout the publishing industry. In part this is cyclical based on
overproduction by the large publishing houses but is also attributable to the
overall slowdown with the large chain stores that experienced accelerated
growth, like so many other industries, throughout the 1990's. During their
expansion, purchases exceeded rate of sales in turn leading to larger than usual
returns to their suppliers while the chains reassessed the size of the market
place. Disposable income of the average consumer for leisure activities has
tightened and other products, such as CDs (music), videos/DVDs (cinema),
computer games have resulted in increased competition for book products. On a
retail level, competition has become more intense as retailers desired to sell
their goods at still cheaper prices and companies like Amazon.com caused
additional pressure on independent retailers by attracting consumers to shop
online. Other weaknesses include the increase of publishing costs combined with
smaller print runs that in turn forced retail prices on many books to increase
to levels that make the products less desirable to the consumer. This in turn
caused financial hardship to many businesses and a number of those that were
unable to recognize the downturn and adjust accordingly went out of business.
The events of September 11, 2001 and the resulting economic downturn have
further exacerbated market conditions.
Todtri needs cash to continue operations
At September 30, 2001, Todtri had a working capital deficit in excess of
$5.6 million. We require significant funds to satisfy our current obligations
and to continue operations and no assurance can be given that such funds will be
available to us on satisfactory terms or that any financing transaction will not
result in significant dilution to the shareholders. If we do not obtain
financing, we may be required to cease operations.
Todtri has historically lost money and may continue to lose money in the future
For the year ended December 31, 2000, Todtri's audited statements reflect
net income of approximate $1.7 million which included approximately $1.7 million
representing the gain from the sale of Todtri's former subsidiary, Picture
Perfect USA, Inc., to one of the Todtri's shareholders in 2000.
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Todtri sustained bad debts exceeding $2.5 million during 1997 and 1998 when
some of its principal customers went out of business. During this time period,
Todtri entered into various security agreements with its principal manufacturer
that caused additional pressure on Todtri, in turn contributing towards its drop
in sales and subsequent losses. For years ended December 31, 1998 and December
31, 1999 Todtri had losses of $1,966,983 and $2,209,852 on net sales of
$4,145,426 and $2,722,051 respectively. Although Todtri has been successful in
lowering its operating expenses and increasing its gross profit margins there
can be no assurance that it will be able to continue with its recovery progress
with its liabilities of $9,268,525 as of December 31, 2000. Further details are
available in Todtri's audited financial statements as of December 31, 2000.
Risks Concerning Book Products
The ability for Todtri to market and sell its book products rests with its
ability to procure inventory from its various suppliers. Since obtaining open
credit is not possible from its creditors with its current balance sheet, Todtri
is dependent upon letters of credit provided to it under a credit line extended
by its current finance company. No assurance can be given that Todtri will be
able to continue to secure such credit and its inability to secure such credit
would adversely affect it.
We are dependent on the services of Robert Tod
Todtri is substantially dependent on the services of Robert Tod. Todtri's
business would be materially adversely affected in the event that Robert Tod
ceased providing services to Todtri.
Management's Discussion and Analysis of Financial Condition and Results of
Operations of Todtri
Liquidity and Capital Resources
As of December 31, 2000, Todtri had negative working capital of $5,328,839
and as of September 30, 2001, had negative working capital of $5,653,526.
Working capital decreased from December 31, 2000 to September 30, 2001 by
$324,687. At September 30, 2001, liabilities exceeded assets by $6,904,235.
Todtri entered into a factoring agreement in order to improve its cash
position and to provide proceeds from account receivables to its secured
creditor as well as to its finance company. The factor purchases Todtri's
accounts receivables and provides a 70% advance. Half of the advance is remitted
to Todtri's secured creditor and the other half to Todtri. On new inventory
purchases, the factor provides a 70% advance of which 7% goes to Todtri's
secured creditor and the balance goes to Todtri's finance company. Todtri does
not receive any advance associated with new inventory accounts receivables. The
factor permits the account receivables to age 90-100 days at its sole discretion
before selling them back to Todtri by applying them to Todtri's reserve account.
The reserve account is comprised of the 30% spread between the value of the
purchased receivables and the 70% advance. The factor's charges are based upon a
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purchase price they pay when purchasing Todtri's account receivables and is
calculated from the invoice date and based upon the date on which they actually
receive payment from Todtri's customers. Invoices paid within 30 days are
purchased at 97% of the amount of account receivables and the discount given to
the factor is 3%. The purchase price decreases by 1%, and the discount to the
factor increases by 1%, for every 10 days that payment is not received. For
invoices paid after 90 days but within 100 days, the purchase price shall be 90%
of the amount of account receivables and the discount to the factor shall be
10%. For invoices paid after 100 days, the purchase price shall be 85% of the
amount of account receivables and the discount to the factor shall be 15%. The
factor applies its charges to Todtri's reserve account and any funds left over
are remitted to Todtri or held in reserve against possible returns or bad debts
at the factor's sole discretion. The factor has a senior security interest in
Todtri's accounts receivables and a subordinate, to Todtri's secured creditor,
security interest in Todtri's chattel paper, inventory, equipment, instruments,
investment property, general intangibles, documents, proceeds and products of
the foregoing as its collateral. Todtri's shareholders also entered into a
Performance Guaranty with the factor. The factor agreement was renewed August
15, 2001 for one year based on a minimum volume of $200,000 in quarterly
accounts receivables. Any quarter that generates less than $200,000 is subject
to the factor charging Todtri a shortfall fee which is the average interest
charged, determined historically, over the amount that is less than the
quarterly $200,000. Todtri can terminate the agreement at any time prior to its
expiration date however it is subject to an early termination fee calculated at
the same rate as the shortfall fee.
The finance company has provided Todtri with a line of credit in the amount
of $1.5 million and opens letters of credit to Todtri's suppliers for inventory
purchases. The finance company charges Todtri 5% of the face value of the letter
of credit fee at the time each is opened and charges Todtri 5% per month
compounded interest for the outstanding principal. The finance company receives
approximately 65% of the invoice value of Todtri's account receivables from the
factor as is explained above. The finance company has a senior security interest
in Todtri's new inventory and a subordinate, to Todtri's secured creditor,
security interest in Todtri's chattel paper, equipment, instruments, investment
property, general intangibles, documents, proceeds and products of the foregoing
as its collateral. Todtri also entered into a supply agreement, and a promissory
note with the finance company. There is no early prepayment penalty.
Results of Operations
Nine Months Ended September 30, 2001 Compared with Nine Months Ended
September 30, 2000:
Sales
For the nine months ended September 30, 2001, Todtri had a net income of
approximately $80,063 compared to a gain of $44,680 for the corresponding period
in the prior year. We believe that for the year ended December 31, 2001, we will
have a loss. Sales for the nine months ended September 30, 2001 decreased 23.5%
in comparison to the corresponding period in 2000. The decrease is primarily
attributable to a reduction of Todtri's trade discount to customers that
eliminated a number of customers who purchase inventory only at steep discounts,
and lack of new titles that arrived in the 4th quarter.
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Gross Margin
The gross profit margin for the first nine months ended September 30, 2001
increased 21.5% in comparison to the corresponding period in 2000. The increase
is primarily attributable to lower costs of inventory, in comparison to the
previous year, as well as an increase in the net invoice value of each book
sold. Most books were sold at 55% trade discount off the suggested retail price
during 2001 as opposed to 65% trade discount during 2000.
Selling, Distribution, General and Administrative Expenses
Todtri's general and administrative expenses decreased 13% in 2001(12 month
period) in comparison to 2000 (12 month period) which makes Todtri's breakeven
position at $875,000, excluding selling, distribution, and interest charges. The
general and administrative expenses include rent, payroll (excluding that of
Robert Tod) , equipment leases, supplies and maintenance, electricity,
telephone, travel and entertainment, promotions and catalog, advertising, shows
and conventions, internet, auto, shipping and postage, office supplies,
insurance, professional fees, bank charges, taxes, pension plan administration.
Selling and Distribution expenses increased in 2001 by 19% in comparison to 2000
due to higher sales commission earned as Todtri's trade discounts decreased, and
an increase in storage charges attributable to a larger number of units in
Todtri's warehouse locations caused by deliveries of new inventory. Todtri's
former subsidiary, Picture Perfect USA, Inc., shares office space with Todtri
and is invoiced its proportionate share of overhead expenses and this is
additional income to Todtri.
Since selling and distribution costs are variable expenses, these will
increase in proportion to Todtri's increase in sales and Management is confident
of its ability to service these expenses from its cash flow going forward. It is
necessary to reduce the high interest costs related to Todtri's current
financing structure, which together with interest charged by Todtri's secured
creditor amounts to 10% per month.
Pro Forma Summary Unaudited Financial Data of Todtri
The following summary financial information is taken from the audited
financial statements of Todtri for the year ended December 31, 2000 and from the
unaudited financial statements of Todtri as of September 30, 2001.
For year ended December 31, 2000
--------------------------------
Total Assets $2,284,227
Total Current Assets $1,876,633
Total Current Liabilities $7,205,472
Stockholders Equity $(6,984,298)
Revenues $2,231,194
Net Income after taxes $1,707,413
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As of September 30, 2001
Pro Forma Unaudited
-------------------
Total Assets $2,197,573
Total Current Assets $1,387,525
Total Current Liabilities $7,060,666
Stockholders Equity $(6,917,130)
Revenues $1,149,705
Net Income after taxes $67,168
Upon consummation of the Acquisition, Alpha's current directors and
officers will resign, and Todtri's management will become the new management of
Alpha, to serve in such capacities until the next meeting of Alpha's
stockholders (See (4), below).
(2) Increase in Authorized Shares
Alpha's Board of Directors has unanimously approved an increase in Alpha's
authorized shares of Common Stock from 10,000,000 shares, par value $.001 to
50,000,000 shares, par value $.001, and approved authorization of 10,000,000
Preferred Shares, par value $.01.
(3) Change of Corporate Name
In connection with the consummation of the Acquisition, Alpha has agreed to
change its corporate name to "TODTRI Book Publishers, Inc." which will more
accurately describe the new business in which Alpha intends to become involved.
Alpha's Board of Directors believes that, assuming that the Acquisition is
consummated, changing Alpha's name is in the best interests of Alpha and its
shareholders. Alpha's Board of Directors has unanimously approved the change of
Alpha's name to TODTRI Book Publishers, Inc.
(4) Election of Directors
In accordance with the Agreement, one of the purposes of the meeting is to
elect two (2) Directors to hold office until the next Annual Meeting of
Stockholders of Alpha, and until their successors are duly elected and
qualified.
Nominees
The nominees listed below are designees of Todtri, in accordance with the
Agreement. In addition, the Agreement provides that Todtri has the right to
select another person as a Director of Alpha. Such person has not yet been
selected. If, at the time of the meeting, any of the nominees named are not
available to serve as Directors, then substitute nominees designated by Todtri
will be elected, or the Board may reduce the number of Directors as authorized
under the By-Laws. The Board does not anticipate that any nominee will be
unavailable to serve, if elected.
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A summary of the business experience of the nominees for director of Alpha
is as follows:
Robert Tod, President. Mr. Tod has more than 20 years of industry
experience in all aspects of book publishing, including editorial, production,
finance, sales & marketing, as well as expertise in all fulfillment and customer
service issues
Yafit Tod, Vice President. Mrs. Tod has worked within Todtri Productions
for the past 6 years in the capacity of Office Manager where she has
responsibility for public relations and customer service functions.
Other Matters
No Solicitation of Votes
Under Section 228 of the DGCL, in lieu of a meeting, shareholder action may
be taken by written consent of a majority of the outstanding shares necessary to
authorize the transaction. Four shareholders owning a total of 3,447,250 shares,
or 90.7% of Alpha's 3,800,000 outstanding shares, have signed the Written
Consent. Therefore, other than those four shareholders, no vote of any other
shareholder of Alpha is required to authorize the corporate actions described in
this Information Statement.
The Board of Directors of Alpha also approved these changes, by unanimous
consent dated January 10, 2002.
Alpha is not required to solicit and is not soliciting votes or consents
from any of its other shareholders.
Payment of Expenses
The payment of expenses related to the preparation and filing of this
Information Statement has been made by Alpha.
More Information
This Information Statement is provided for information purposes only. We
are not soliciting proxies in connection with the items described herein. You
are not required to respond to this Notice.
The accompanying Information Statement is for information purposes only.
Please read the accompanying information statement carefully.
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Alpha files annual, quarterly and special reports and proxy statements and
other information with the Securities and Exchange Commission. You may read and
copy any reports, statements or other information Alpha files at the SEC's
public reference room at 450 Fifth Street N.W., Washington, D.C. 20549, or on
the SEC's web site, http://www.sec.gov.
You may call the SEC at 1-800-SEC-0330 for further information on the
public reference rooms. You may also obtain copies of the filings of Alpha made
with SEC directly from Alpha by requesting them in writing or by telephone at
the address set forth earlier in this Information Statement.
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