| Hotel Discovery, Inc. | |||
| Ticker: | HOTD | 7701 France Avenue South, Suite 217 | |
| Exchange: | NASDAQ-Small Cap Market | Edina, MN 55435 | |
| Industry: | Retail (SIC Code 5812) | (612) 841-6363 | |
| # of Employees: | 133 | ||
| Type of Shares: | Common Shares | Filing Date: | 8/22/97 | |
| U.S. Shares: | 2,500,000 | Offer Date: | 11/3/97 | |
| Non-U.S. Shares: | 0 | Filing Price: | $5.00 | |
| Primary Shares: | 2,500,000 | Offer Price: | $5.00 | |
| Secondary Shares: | 0 | Gross Spread: | $0.40 | |
| Offering Amount: | $12,500,000 | Selling: | $0.24 | |
| Expenses: | $220,000 | Reallowance: | $0.05 | |
| Shares Out After: | 7,599,289 |
| Manager | Tier | Phone |
| R.J. Steichen & Co. | Lead Manager | (612) 341-6276 |
| Issuer's Law Firm: | Maslon Edelman Borman & Brand |
| Bank's Law Firm: | Doherty, Rumble & Butler |
| Auditor: | Ernst & Young |
| Registrar/Transfer Agent: | Norwest Bank of Minnesota |
Dollar amounts in U.S. millions except for per share data | |||||
| 6 Month Ending Financials | |||||
| Full Year Audited Income | Latest Unaudited Income | Prior Unaudited Income | Balance Sheet | ||
| 12/29/96 | 6/29/97 | 6/30/96 | 6/29/97 | ||
| Revenue: | $0.10 | $1.86 | $0.00 | Assets: | $6.97 |
| Net Income: | -$2.33 | -$1.68 | -$0.45 | Curr Assets: | $2.34 |
| EPS: | -$0.53 | -$0.33 | -$0.10 | Liabilities: | $5.07 |
| Prior EPS: | -$0.28 | -$2.39 | -$0.24 | Curr Liabilities: | $4.02 |
| Cash Flow/Oper: | -$1.02 | $2.13 | $0.95 | Equity: | $1.91 |
| Cash Flow/Fin: | $6.73 | -$0.45 | -$1.00 | Cash: | $2.00 |
| Cash Flow/Inv: | -$3.44 | -$0.45 | Working Cap: | -$1.68 | |
| Business Description |
| The company is to develop, own and operate theme restaurants with a retail component designed to appeal to the upscale casual dining market. The Company opened its first restaurant in the Kenwood Shopping Center in Cincinnati, Ohio (the "Kenwood Unit") on December 19, 1996, and a second restaurant to be located at the Mall of America in a suburb of Minneapolis, Minnesota (the "Mall of America Unit") is under development. In October 1995, a limited partnership raised $2.5 million to build the Kenwood Unit which, at 17,000 square feet and up to 360 seats, represents the first embodiment of the Hotel Discovery theme concept. In conjunction with a reorganization of the Company, the assets of the limited partnership were directly contributed to the Company in November 1996 in consideration of Common Stock of the Company. See "Reorganization." The Company subsequently raised approximately $7 million in private placements which concluded in June and July 1997, the proceeds of which were used to complete and add special features to the Kenwood Unit, begin development of the Mall of America Unit and for working capital purposes. |
| Competition |
| The food service industry is intensely competitive with respect to food quality, concept, location, service and price. In addition, there are many well-established food service competitors with substantially greater financial and other resources than the Company and with substantially longer operating histories. The Company believes that it competes with other full-service dine-in restaurants, take-out food service companies, fast-food restaurants, delicatessens, cafeteria-style buffets and prepared food stores, as well as with supermarkets and convenience stores. Competitors include national, regional and local restaurants, purveyors of carry-out food and convenience dining establishments. Competition in the food service business is often affected by changes in consumer tastes, national, regional, and local economic and real estate conditions, demographic trends, traffic patterns, the cost and availability of labor, purchasing power, availability of product and local competitive factors. The Company attempts to manage or adapt to these factors, but it should be recognized that some or all of these factors could cause the Company to be adversely affected. Management is of the opinion that quality food pleasingly presented is an absolute requirement within the upscale casual segment of the market. |
| Business Plan |
| The Company's ability to execute its business strategy depends to a significant degree on its ability to obtain substantial equity capital and other financing to fund the development of additional restaurants. The proceeds of this Offering will provide the Company with the financing required to develop and open the Mall of America Unit and for working capital purposes. The total cost of developing the Kenwood Unit was approximately $4.7 million, which included $3.5 million for building design and construction and $1.2 million for equipment, furniture and fixtures. The Company estimates that the total cost of developing the planned Mall of America Unit will be approximately $4.5 million, net of landlord contributions. Although the Company estimates that the proceeds from this Offering will be sufficient to develop and open both the Mall of America Unit and a third Hotel Discovery restaurant, there can be no assurance that both of such restaurants can be developed at such estimated costs. If the proceeds of this Offering are not sufficient to develop a third unit, the Company may be required to seek additional funds through an additional offering of the Company's equity securities or by incurring indebtedness. |
| Use of Proceeds |
| The proceeds from the proposed offering will be used for further concept development and construction of a second Hotel Discovery restaurant at the Mall of America and a third Hotel Discovery restaurant at an unidentified site, and for working capital. |
| Name of Shareholder | % Owned Before | % Owned After |
| Kenwood Restaurant Limited Partnership | 25.00% | 17.80% |
| Stephen D. King | 16.70% | 11.80% |
| Officer Name | Title | Age |
| Stephen D. King | Chairman and Chief Executive Officer | 41 |
| John J. Motschenbacher | Controller | 34 |
| Patricia J. Diamond | Director of Retail | 38 |
| Ronald K. Fuller | President, Chief Operating Officer and Director | 51 |
| Steven B. Carey | Vice President -- Menu Development | 36 |
| Additional Underwriter Compensation |
| Warrant to purchase 220,000 shares/units at $50.00 per share/unit. |
| # of Units: | 2,200,000 | |||
| Unit Ticker: | HOTDU | Unit Price: | $5.00 | |
| Warrant Ticker: | HOTDW | Warrant Price: | ||
| Warrant Exercise Date: | Warrant Exercise Price: | $6.50 | ||
| Warrant Expiration Date: | ||||
| Warrant Detachable: | Yes | Warrant Detach Date: | ||
| Warrant Callable: | Yes | Warrant Call Date: |
| Unit Composition: 1 Common Share + 1 Class A Warrant |
| Warrant Entitlement: 1 Common Share |
| Warrants are callable at $0.01 if the common stock trades at $7.00 for 14 of 14 consecutive trading days. |