As filed with the Securities and Exchange Commission on December
17, 1996
SEC Registration No. 33-98526-D
_________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
Denver, Colorado 80202-2648
AMENDMENT NO. 2
TO
FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
CALIFORNIA APPLIED RESEARCH, INC.
(Exact name of registrant as specified in charter)
NEVADA 6770 84-1345053
(State or other (Primary Standard Industrial (IRS Employer
jurisdiction of Classification Code Number) Identification
incorporation or Number)
organization)
1275 East Bellview
Cherry Hills Village, Colorado 80121
(303) 333-5305
(Address and telephone number of registrant's principal
executive offices and principal place of business)
____________________________
J. Michael Spinali
1275 East Bellview
Cherry Hills Village, Colorado 80121
(303) 333-5305
(Name, address, and telephone number of agent for service)
________________________
Copy to:
Robert C. Weaver, Jr., Esq.
4475 Mission Blvd., #216
San Diego, California 92109
(619) 270-3466
FAX (619) 270-5575
________________________
Approximate date of commencement of proposed sale to the public:
As soon as practicable after this Registration Statement becomes
effective.
________________________
(Continued on Next Page)
CALCULATION OF REGISTRATION FEE
_________________________________________________________________
Title of Each Amount Proposed Proposed Amount of
Class of Securities to be Maximum Maximum Registration
Being Registered Registered Offering Aggregate Fee
Price Offering
Per Share Price
Common Stock, par
value $.001 per
share 1,000,000 $.25 $ 250,000 $ 86.21
TOTAL (Minimum) $100.00
_________________________________________________________________
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.
CALIFORNIA APPLIED RESEARCH, INC.
Cross Reference Sheet between Items of Form SB-2
and Prospectus Pursuant to Rule 501(b) of Regulation S-B
Item in Form SB-2 Location in Prospectus
1.Front of Registration Statement and
Outside Front Cover Page of the
Prospectus Cover Pages
2.Inside Front and Outside Back Cover Pages
of Prospectus Cover Pages
3.Summary Information and Risk Factors Prospectus Summary,
Risk Factors
4.Use of Proceeds Use of Proceeds
5.Determination of Offering Price Risk Factors,
Offering
6.Dilution Dilution
7.Selling Security Holders Not Applicable
8.Plan of Distribution Offering
9.Legal Proceedings Legal Proceedings
10.Directors, Executives Officers,
Promoters and Control Persons Management
11.Security Ownership of Certain Beneficial
Owners and Management Principal
Shareholders
12.Description of Securities to be
Registered Description of
Securities
13.Interest of Named Experts and Counsel Experts
14.Disclosure of Commission position
on Indemnification for
Securities Act Liabilities Indemnification
15.Organization Within Last 5 years Proposed Business,
Certain Transactions
16.Description of Business Proposed Business
17.Management's Discussion and
Analysis or Plan of Operation Management's
Discussion and
Analysis or
Plan of Operation
18.Description of Property Proposed Business
19.Certain Relationships and Related
Transactions Risk Factors,
Certain Transactions
20.Market for Common Equity and
Related Stockholder Matters Risk Factors,
Description of
Securities
21.Executive Compensation Management
22.Financial Statements Financial Statements
(The next two pages in the Prospectus are, respectively, Cover Page
- - Outside Back and Cover Page - Outside Front.)
TABLE OF CONTENTS
PROSPECTUS SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
The Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
The Offering. . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . .7
Risk Factors. . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
DILUTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
USE OF PROCEEDS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
CAPITALIZATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
PROPOSED BUSINESS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
"Blank Check" Offering
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Payment of Salaries or
Consulting Fees. . . . . . . . . . . . . . . . . . . . . . . . 46
Involvement of Certain
Principals in Prior
"Blank Check"
Companies. . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Uncertainty of
Competitive
Environment of
Acquired Business
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Redemption Rights
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Certain Securities Laws
Considerations . . . . . . . . . . . . . . . . . . . . . . . . 49
Facilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
MANAGEMENT'S DISCUSSION AND
ANALYSIS OR PLAN OF
OPERATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Directors and Officers
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Executive
Compensation . . . . . . . . . . . . . . . . . . . . . . . . . 54
PRINCIPAL SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . 56
CERTAIN TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 57
DESCRIPTION OF SECURITIES. . . . . . . . . . . . . . . . . . . . . . . . 58
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
Common Stock. . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
Shares Eligible For
Future Sale. . . . . . . . . . . . . . . . . . . . . . . . . . 59
THE OFFERING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
LEGAL PROCEEDINGS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
LEGAL MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
EXPERTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
AVAILABLE INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . 62
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . 62
CALIFORNIA APPLIED
RESEARCH, INC.
Minimum 100,000 Shares
Maximum 1,000,000 Shares
Offering Price,
$.25 Per Share
PROSPECTUS
________________, 19__
California Applied
Research, Inc.
1275 East Bellview
Cherry Hills Village,
Colorado 80121
(303) 333-5305
Until 90 days after the
date funds and securities are
released from the escrow or
trust account pursuant to Rule
419, all dealers participating
in this distribution are
required to deliver a
prospectus.
CALIFORNIA APPLIED RESEARCH, INC.
Minimum 100,000 / Maximum 1,000,000
Shares of Common Stock
Offering Price $0.25 Per Share
California Applied Research, Inc. (the "Company") hereby offers
1,000,000 shares of Common Stock, par value $.001 per share ("the
Shares"). See Description of Securities." The Company is a blank
check company and has not engaged in any business and has no specific
plans for any given business or industry.
Prior to this offering there has been no public market for the
Shares. The initial public offering price of the Shares has been
arbitrarily determined by the Company and does not bear any
relationship to such established valuation criteria as assets, book
value or prospective earnings. THE COMPANY HAS NOT MADE APPLICATION
TO REGISTER SHARES IN ANY STATES. AN EXEMPTION FROM REGISTRATION WILL
BE RELIED UPON IN SOME STATES WHERE SHARES ARE SOLD AND THE SHARES
MAY ONLY BE TRADED IN SUCH JURISDICTIONS AFTER COMPLIANCE WITH
APPLICABLE SECURITIES LAWS. THERE CAN BE NO ASSURANCES THAT THE
SHARES WILL BE ELIGIBLE FOR SALE OR RESALE IN SUCH JURISDICTIONS.
THE COMPANY MAY MAKE APPLICATION TO REGISTER THE SHARES FOR OFFER
HEREUNDER OR FOR SECONDARY TRADING, HOWEVER IT IS UNDER NO
REQUIREMENT TO DO SO. There can be no assurance that a regular
trading market will develop for the Shares after this offering or
that, if developed, any such market will be sustained. After a
merger, the Company anticipates that trading of the Shares will be
conducted through what is customarily known as the "pink sheets"
and/or on the National Association of Securities Dealers, Inc.'s
Electronic Bulletin Board (the "Bulletin Board"). Any market for the
Shares which may result will likely be less well developed than if
the Shares were traded on NASDAQ or on an exchange. For information
regarding the factors considered in determining the initial public
offering price of the Shares see "Risk Factors" and "Offering."
The Company is conducting a blank check offering subject to the
Commission's Rule 419 of Regulation C. The net offering proceeds,
after deduction for underwriting commissions and offering expenses,
estimated at ($5,000) and the securities to be issued to investors
must be deposited in an escrow account (The "DEPOSITED FUNDS" and
"DEPOSITED SECURITIES," respectively). While held in the escrow
account, the securities may not be traded or transferred. Except for
an amount up to 10% of the DEPOSITED FUNDS ($1,750 if minimum is
sold, $22,000 if the maximum is sold) otherwise releasable under the
rule, the DEPOSITED FUNDS and the DEPOSITED SECURITIES may not be
released until an acquisition meeting certain specified criteria has
been made and a sufficient number of investors reconfirm their
investment in accordance with the procedures set forth in the Rule
419. Pursuant to these procedures, a new prospectus, which describes
an acquisition candidate and its business and includes audited
financial statements, will be delivered to all investors The Company
must return the pro rata portion of the DEPOSITED FUNDS to any
investor who does not elect to remain an investor. Unless a
sufficient number of investors elect to remain investors, all
investors will be entitled to the return of a pro rata portion of the
DEPOSITED PROCEEDS (and any interest earned thereon) and none of the
DEPOSITED SECURITIES will be issued to investors. In the event an
acquisition is not consummated within 18 months of the effective
date, the DEPOSITED PROCEEDS will be returned on a pro rata basis to
all investors. (see "Summary - Investors Rights and Substantive
Protection Under Rule 419")
Officers, directors affiliates, and principal shareholders of
the Company may purchase a percent of the shares sold in the offering
under the same terms and conditions as the public investors. Such
purchases, if made, will be for investment purposes only and not for
redistribution. Such purchases may be made for the purpose of
closing the minimum offering.
"THE SECURITIES HAVE NOT BEEN REGISTERED IN ANY STATE, AND MAY
ONLY BE OFFERED OR TRADED IN SUCH STATE PURSUANT TO AN EXEMPTION FROM
REGISTRATION. PURCHASERS OF SUCH SECURITIES EITHER IN THIS OFFERING
OR IN ANY SUBSEQUENT TRADING MARKET WHICH MAY DEVELOP MUST BE
RESIDENTS OF STATES IN WHICH THE SECURITIES ARE REGISTERED OR EXEMPT
FROM REGISTRATION." FOR THE OFFERING HEREUNDER, THE COMPANY WILL
AMEND THIS PROSPECTUS FOR THE PURPOSE OF DISCLOSING STATES, IF ANY,
IN WHICH THE COMPANY' SECURITIES WILL HAVE BEEN REGISTERED OR AN
EXEMPTION IS AVAILABLE INTENDS TO RELY ON LIMITED OFFERING EXEMPTIONS
IN THE STATES OF ARIZONA, CALIFORNIA, FLORIDA, GEORGIA, ILLINOIS,
NEVADA, NEW YORK, PENNSYLVANIA, VIRGINIA, AND WASHINGTON.
The Company intends to provide the Company's shareholders with
complete disclosure documentation, including audited financial
statements, concerning a target company and its business prior to any
merger or acquisition.
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK AND
IMMEDIATE SUBSTANTIAL DILUTION. SEE "RISK FACTORS" AND "DILUTION."
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
Offering Proceeds to
Price to Public (1) Discount (2) Company (3)
Per Share $ .25 $ .025 $ .225
Minimum 100,000 $ 25,000 $ 2,500 $ 22,500
Maximum 1,000,000 $ 250,000 $25,000 $225,000
(Notes on following page.)
CALIFORNIA APPLIED RESEARCH, INC.
1275 East Bellview
Cherry Hills Village, Colorado 80121
The date of this Prospectus is , 19
(1) SUBSCRIBERS PURCHASING THE SHARES SHOULD MAKE THEIR CHECK
PAYABLE TO "COLORADO BUSINESS BANK - ESCROW AGENT." The address of
Colorado Business Bank is 101 W. Mineral Ave., Littleton, CO 80120.
All proceeds from subscriptions to purchase the Shares will be
transmitted by the Company and any participating dealer to the escrow
account by noon of the next business day after receipt. The Shares
are offered by the Company on a "best efforts" 100,000 Share minimum,
1,000,000 Share maximum basis. In the event that the minimum of
100,000 Shares are not sold within 360 days from the effective date
of this prospectus all proceeds raised will be returned promptly to
subscriber in full without interest thereon. Subscribers will not be
entitled to a return of funds from the escrow during the offering
period (including the extension thereof). Pending the sale of the
1,000,000 Share minimum, All proceeds will be deposited into the
escrow account.
(2) The Company intends to offer the Shares through its officers and
directors Michael Spinali and Brian French without the use of a
professional underwriter, and by selected broker-dealers who are
members of the National Association of Securities Dealers, Inc.
(N.A.S.D.) On sales made by brokers a maximum commission of 10% will
be allowed. No commissions will be paid for sales effected by
officers and directors, however these figures assume payment of
commissions on the sale of all Shares. The offering is being
conducted directly by the Company without the use of a professional
underwriter.
(3) The proceeds to the Company set forth in the table on the cover
page of the Prospectus have been computed before deduction of costs
that will be incurred in connection with this offering (excluding the
Offering discount), including filing, printing, legal, accounting,
transfer agent and escrow agent fees (collectively, the "Offering
Costs") estimated at $5,400.
THE SHARES ARE BEING OFFERED BY THE COMPANY SUBJECT TO PRIOR SALE
WHEN, AS AND IF DELIVERED TO AND ACCEPTED BY THE COMPANY, AND SUBJECT
TO APPROVAL OF CERTAIN LEGAL MATTERS BY COUNSEL AND CERTAIN OTHER
CONDITIONS. THE COMPANY RESERVE THE RIGHT TO WITHDRAW, CANCEL OR
MODIFY THIS OFFERING AND TO REJECT ANY ORDER IN WHOLE OR IN PART.
ESCROW OF 90% OF THE PROCEEDS DERIVED HEREBY
UPON COMPLETION OF THIS OFFERING, 90% OF THE NET PROCEEDS
THEREFROM WILL BE PLACED IN AN ESCROW ACCOUNT WITH THE COLORADO
BUSINESS BANK AS ESCROW AGENT, SUBJECT TO RELEASE UPON THE EARLIER OF
(i) WRITTEN NOTIFICATION BY THE COMPANY OF ITS NEED FOR ALL, OR
SUBSTANTIALLY ALL OF SUCH NET PROCEEDS FOR THE PURPOSE OF
FACILITATING A BUSINESS COMBINATION; OR (ii) THE EXERCISE BY CERTAIN
SHAREHOLDERS OF THE REDEMPTION OFFER (AS HEREINAFTER DEFINED), OR
(iii) 18 MONTHS AFTER THE EFFECTIVE DATE OF THIS OFFERING
REGISTRATION STATEMENT. IN THE EVENT OF THE EXERCISE OF THE
REDEMPTION OFFER, INVESTORS MAY RECOUP ONLY A PORTION OF THEIR SEE
"RISK FACTORS" AND "PROPOSED BUSINESS."
ESCROW FUNDS NOT TO BE USED FOR SALARIES OR REIMBURSABLE EXPENSES
NO FUNDS (INCLUDING ANY INTEREST EARNED THEREON) WILL BE
DISBURSED FROM THE ESCROW FUND FOR THE PAYMENT OF SALARIES OR
REIMBURSEMENT OF EXPENSES INCURRED ON THE COMPANY'S BEHALF BY THE
COMPANY'S OFFICERS AND DIRECTORS. OTHER THAN THE FOREGOING, THERE IS
NO LIMIT ON THE AMOUNT OF SUCH REIMBURSABLE EXPENSES, AND THERE WILL
BE NO REVIEW OF THE REASONABLENESS OF SUCH EXPENSES BY ANYONE OTHER
THAN THE COMPANY'S BOARD OF DIRECTORS, ALL OF WHOM ARE OFFICERS. IN
NO EVENT WILL THE ESCROW FUND (INCLUDING ANY INTEREST EARNED THEREON)
BE USED FOR ANY PURPOSE OTHER THAN IMPLEMENTATION OF A BUSINESS
COMBINATION OR FOR PURPOSES OF THE REDEMPTION OFFER. SEE "RISK
FACTORS," "USE OF PROCEEDS" AND "CERTAIN TRANSACTIONS."
NO PRIOR CONTACT WITH OTHER FIRMS REGARDING POSSIBLE BUSINESS
COMBINATIONS
NONE OF THE COMPANY'S OFFICERS, DIRECTORS OR GREATER THAN 10%
SHAREHOLDERS OR PERSONS WHO DIRECTLY OR INDIRECTLY CONTROL, ARE
CONTROLLED BY OR ARE UNDER COMMON CONTROL WITH, THE COMPANY OR
PERSONS WHO MAY BE DEEMED PROMOTERS OF THE COMPANY HAVE HAD ANY
PRELIMINARY CONTACT OR DISCUSSIONS WITH ANY REPRESENTATIVE OF ANY
OTHER FIRM REGARDING THE POSSIBILITY OF A BUSINESS COMBINATION
BETWEEN THE COMPANY AND SUCH OTHER FIRM.
MATERIAL PERSONS
THE OFFICERS , DIRECTORS, AND MAJOR SHAREHOLDERS OF THE COMPANY
ARE THE ONLY PERSONS WHO HAVE BEEN INSTRUMENTAL IN ARRANGING THE
CAPITALIZATION OF THE COMPANY TO DATE. NONE OF THE OFFICERS OR
DIRECTORS OF THE COMPANY ARE ACTING AS NOMINEES FOR ANY PERSONS OR
ARE OTHERWISE UNDER THE CONTROL OF ANY PERSON OR PERSONS. OTHER THAN
CERTAIN COMPENSATION TO BE PAID BY THE COMPANY TO EACH OF MESSRS.
SPINALI, FRENCH AND MS. JEAN BOYD, THERE ARE NO AGREEMENTS,
AGREEMENTS IN PRINCIPLE, OR UNDERSTANDINGS WITH REGARD TO
COMPENSATION TO BE PAID BY THE COMPANY TO ANY OFFICER OR DIRECTOR OF
THE COMPANY.
OFFICERS OR DIRECTORS MAY PURCHASE SHARES IN THIS OFFERING
IT IS ANTICIPATED THE COMPANY MAY MAKE SALES OF SHARES TO
OFFICERS, DIRECTORS AND PRESENT SHAREHOLDERS OF THE COMPANY AND
PERSONS ASSOCIATED WITH THEM, AND THAT SUCH PERSONS MAY PURCHASE A
LARGE PROPORTION OF THE SHARES OFFERED HEREBY. SUCH PURCHASES SHALL
BE MADE FOR INVESTMENT PURPOSES ONLY AND IN A MANNER CONSISTENT WITH
A PUBLIC OFFERING OF THE COMPANY'S SHARES. SUCH PURCHASES MAY BE
USED TO REACH THE AMOUNT REQUIRED FOR CLOSING IN THE EVENT SUCH
AMOUNT IS NOT REACHED AS A RESULT OF PURCHASES BY THE GENERAL PUBLIC.
THE PRESENT SHAREHOLDERS OFFICERS AND DIRECTORS COULD PURCHASE THE
ENTIRE 100% OF THE AMOUNT REQUIRED FOR CLOSING IF NO SALES ARE MADE
TO NEW SHAREHOLDERS, THE MAXIMUM OF WHICH COULD BE 100,000 SHARES TO
MEET THE OFFERING MINIMUM. SUCH PURCHASES WILL INCREASE THE
PERCENTAGE OF SECURITIES BEING HELD BY PRESENT SHAREHOLDERS THE
OFFICERS AND DIRECTORS.
INVESTORS SHOULD CAREFULLY REVIEW THE FINANCIAL STATEMENTS WHICH
ARE AN INTEGRAL PART OF THIS PROSPECTUS,
DEALERS PARTICIPATING IN THIS OFFERING ARE REQUIRED TO DELIVER
A COPY OF THE FINAL PROSPECTUS TO ANY PERSON WHO IS EXPECTED TO
RECEIVE A CONFIRMATION OF THE SALE AT LEAST 48 HOURS PRIOR TO THE
MAILING OF THE CONFIRMATION.
PROSPECTUS SUMMARY
The following is qualified in its entirety by reference to the
more detailed information and financial statements, including the
notes thereto appearing elsewhere in this Prospectus. Each
prospective investor is urged to read this Prospectus in its
entirety.
The Company
California Applied Research, Inc. (the "Company") was
incorporated in the State of Nevada on March 25, 1992, to seek and
make one or more Business Combinations to the extent its limited
assets will allow. See "RISK FACTORS" and "PROPOSED BUSINESS." The
Company is in the development stage and has no operating history.
No representation is made nor implied that the Company will be able
to carry on its activities profitably. The subsistence of the
Company is dependent initially upon sufficient proceeds being
realized by the Company from this Blank Check Offering, of which
there is no assurance. Proceeds of this Blank Check Offering
may be insufficient to enable the Company to conduct
potentially profitable operations or otherwise to engage in any
business endeavors. The likelihood of the success of the Company
must be considered in light of the expenses, difficulties and delays
frequently encountered in connection with the formation of any new
business. Further, no assurance can be given that the Company will
have the ability to acquire assets, business or properties with any
value to the Company. The Company's office is located at 1275 East
Bellview, Cherry Hills Village, Colorado 80121 and its' telephone
number is (303) 333-5305.
The Company intends to use the net proceeds of the Blank Check
Offering to effect a merger, acquire the assets or the capital stock
of existing businesses or other similar business combination (a
"Business Combination) and/or to establish businesses which may
become profitable, of which no assurances are given. The Company's
current management may manage any business developed or acquired by
the Company or may employ qualified, but as yet unidentified,
individuals to manage such business. No assurance can be given that
the net proceeds of the maximum offering of this Blank Check Offering
or any lesser net amount will be sufficient to accomplish the
Company's goals or that any business acquired or developed by the
Company will become profitable. In the event that substantially
less than the net proceeds from the maximum of offering are raised,
the Company's plans may be materially and adversely effected in that
the Company may find it even more difficult, if not impossible, to
realize its goals. Further, the Company has not identified any
business to be acquired, has no plan to create any business and has
no alternative plans to utilize the portion of the net proceeds of
the Blank Check Offering intended to be utilized for such purposes.
Investors will be providing their funds to Management who will have
complete discretion as to their expenditure. See "RISK FACTORS",
"USE OF PROCEEDS" and "PROPOSED BUSINESS."
The net proceeds from the maximum offering of this Blank Check
Offering, as well as any lesser net amount may be insufficient for
the Company to realize its goals and allow the Company to engage in
a business venture chosen by the Company's management. In the event
that Substantially less than the net proceeds from the maximum of
offering are raised, the Company's plans may be materially and
adversely effected in that the Company may find it even more
difficult, if not impossible, to realize its goals. (See "Use of
Proceeds.") If such proceeds are insufficient, the Company may be
required to seek additional capital. No assurance can be given that
the Company will be able to obtain such additional capital, or even
if available, that such additional capital will be available on terms
acceptable to the Company. In the event that Management determines
that the Company is unable to conduct any business whatsoever,
Management, subject to the requirements of Rule 419, which provides
that the DEPOSITED FUNDS will be returned on a pro rata basis if an
acquisition meeting certain prescribed criteria is not consummated
within 18 months of the date of this Prospectus, will, in its sole
discretion, seek shareholder approval to liquidate the Company. In
the event such a liquidation were to occur at some point in time
after the Company's compliance with the provisions of Rule 419,, all
shareholders of the Company including those owning shares purchased
privately at less than the public offering price (see "Dilution"),
will receive the liquidated assets on a pro rata basis (as opposed to
being based on the amounts paid for such shares). While Management
has not established any guidelines for determining at what point in
tine it might elect to discontinue its efforts to engage in a
business and seek shareholder approval to liquidate the Company,
Management is subject to the 18 month time frame set forth in Rule
419 in which to effect an acquisition.
The Offering
Minimum Maximum
Securities offered 100,000 1,000,000
Common Shares
par value $0.001 per share
Common Shares to
be outstanding after
the offering 2,570,000 3,470,000
Officers, directors affiliates, and principal shareholders of
the Company may purchase a percent of the shares sold in the offering
under the same terms and conditions as the public investors. Such
purchases, if made, will be for investment purposes only and not for
redistribution. Such purchases may be made for the purpose of
closing the minimum offering.
Use of Proceeds
The Company intends to apply substantially all of the Net
Proceeds of this offering (other than the proceeds to be delivered to
the Escrow Fund) to cover costs and expenses incurred in attempting
to effect a Business Combination, including selecting and evaluating
an Acquired Business, structuring and consummating a Business
Combination. The proceeds placed in the Escrow Fund shall not be
used by the Company for any Company payment of salaries or expenses
to Messrs. Spinali and French and Ms. Boyd. The proceeds placed in
the Escrow Fund shall only be used, of at all, for the implementation
of a Business Combination or for purposes of the Redemption Offer.
See "USE OF PROCEEDS," "PROPOSED BUSINESS" and "CERTAIN
TRANSACTIONS."
Risk Factors
The securities offered hereby involve a high degree of risk and
immediate substantial dilution and should not be purchased by
investors who cannot afford the loss of their entire investment.
Such risk factors include, among others: the Company's recent
formation and limited resources; discretionary use of proceeds; an
intense competition in selecting an Acquired Business and effecting
a Business Combination. See "Risk Factors," "Dilution" and "Use of
Proceeds."
Investors Rights to Reconfirm Investment Under Rule 419
Deposit of Offering Proceeds and Securities
Rule 419 requires that the net offering proceeds, after
deduction for underwriting compensation and offering expenses and all
securities to be issued be deposited into an escrow or trust account
(The "DEPOSITED FUNDS" and "DEPOSITED SECURITIES," respectively)
governed by an agreement which contains certain terms and provisions
specified by the rule. Under Rule 419, the DEPOSITED FUNDS and
DEPOSITED SECURITIES will be released to the Company and to
investors, respectively, only after the Company has met the following
three conditions. First, the Company must execute an agreement for
an acquisition(s) meeting certain prescribed criteria. Second, the
Company must successfully complete a reconfirmation offering which
includes certain prescribed terms and conditions. Third, the
acquisition(s) meeting the prescribed criteria must be consummated
(see "Prescribed Acquisition Criteria" and " Reconfirmation
Offering")
Accordingly, the Company has entered into an escrow agreement
with (name of bank or broker-dealer) (the "Escrow Agent") which
provides that:
(1) The net proceeds are to be deposited into an escrow
account (maintained by the bank) or (established by the broker-
dealer) promptly after the termination of the offering. The
DEPOSITED FUNDS and interest or dividends thereon, if any, are to be
held for the sole benefit of the investors and can be only invested
in bank deposits, in money mutual funds or federal government
securities or securities for which the principal or interest is
guaranteed by the federal government.
(2) All securities issued in connection with the offering
and any other securities issued with respect to such securities,
including securities issued with respect to stock splits, stock
dividends or similar rights are to be deposited directly into the
escrow account promptly upon issuance. The identity of the investors
are to be included on the stock certificates or other documents
evidencing the securities. The securities held in the escrow account
are to remain as issued and deposited and are to be held for the sole
benefit of the investors who retain the voting rights, if any, with
respect to the securities held in their names. The securities held
in the escrow account may not be transferred, disposed of nor any
interest created therein other than by will or The laws of descent
and distribution, or pursuant to a qualified domestic relations order
as defined by The Internal Revenue Code of 1986 or Table 1 of the
Employee Retirement Income Security Act.
(3) Warrants, convertible securities or other derivative
securities relating to securities held in the escrow account may be
exercised or converted in accordance with the terms provided, however
that the securities received upon exercise or conversion together
with any cash or other consideration paid in connection with The
exercise or conversion, are to be promptly deposited into the escrow
account.
Prescribed Acquisition Criteria
Rule 419 requires that before the DEPOSITED FUNDS and the
DEPOSITED SECURITIES can be released the Company must first execute
an agreement(s) to acquire an acquisition candidate(s) meeting
certain specified criteria. The agreement must provide for the
acquisition of a business(es) or assets for which the fair value of
the business(es) represents at least 80% of the maximum offering
proceeds, including funds received or to be received from the
exercise of warrants, but excluding underwriting commissions,
underwriting expenses and dealer allowances payable to non-
affiliates. For purposes of the offering, the fair value of the
business(es) or assets to be acquired must be at least (state
amount). Once the acquisition agreements meeting the above criteria
have been executed, the Company must successfully complete the
mandated reconfirmation offering and consummate the acquisition(s).
Post-Effective Amendment
Once the agreement(s) governing The acquisition(s) of a
business(es) meeting the above criteria has been executed, Rule 419
requires the Company to update the registration statement with a
post-effective amendment. The post-effective amendment must contain
information about: the proposed acquisition candidate(s) and its
business(es), including audited financial statements; the results of
this offering; and the use of the funds disbursed from the escrow
account. The post-effective amendment must also include the terms of
the reconfirmation offer mandated by Rule 419. The offer must
include certain prescribed conditions which must be satisfied before
the DEPOSITED FUNDS and DEPOSITED SECURITIES can be released from
escrow.
Reconfirmation Offering
The reconfirmation offer must commence within five business days
after the effective date of the post-effective amendment. Pursuant
to Rule 419, the terms of The reconfirmation offer must include the
following conditions:
(1) The prospectus contained in The post-effective
amendment will be sent to each investor whose securities are held in
the escrow account within 5 business days after the effective date
of the post-effective amendment;
(2) Each investor will have no fewer than 20, and no more
than 45, business days from the effective date of the post-effective
amendment to notify the Company in writing that the investor elects
to remain an investor;
(3) If the Company does not receive written notification
from any investor within 45 business days following the effective
date, the pro rata portion of the DEPOSITED FUNDS (and any related
interest or dividends) held in the escrow account on such investor's
behalf will be returned to the investor within 5 business days by
first class mail or other equally prompt means;
(4) The acquisition(s) will be consummated only if a
minimum number of investors representing 80% of the maximum offering
proceeds (including funds received or to be received from the
exercise of warrants) (state amount) elect to reconfirm their
investments;
(5) If a consummated acquisition(s) has not occurred by 18
months from The date of this prospectus, the DEPOSITED FUNDS held in
the escrow account shall be returned to all investors on a pro rata
basis within 5 business days by first class mail or other equally
prompt means.
Release of Deposited Securities and Deposited Funds
The DEPOSITED FUNDS and DEPOSITED SECURITIES may be released to
the Company and the investors, respectively, after:
(1) The escrow agent has received a signed representation
from the Company and any other evidence acceptable by the escrow
agent that: (a) The Company has executed an agreement for the
acquisition(s) of a business(es) for which the par value of the
business represents at least 80% of the maximum offering proceeds and
has filed the required post-effective amendment; (b) The
post-effective amendment has been declared effective, that the
mandated reconfirmation offer having the conditions prescribed by
Rule 419 has been completed and that The Company has satisfied all of
the prescribed conditions of the reconfirmation offer.
(2) The acquisition(s) of the business(es) with the fair
value of at least 80% of the maximum proceeds is (are)consummated.
RISK FACTORS
The securities offered hereby are speculative, involve immediate
substantial dilution and a high degree of risk, including, but not
necessarily limited to, the several factors described below. Each
prospective investor should carefully consider the following risk
factors inherent in and affecting the business of the Company and
this offering before making an investment decision.
Rule 419 Generally
Rule 419 generally requires that the securities to be issued and
the funds received in a blank check offering be deposited and held in
an escrow account until an acquisition meeting specified criteria is
completed. Before the acquisition can be completed and before the
funds and securities can be released, the blank check company is
required to update the registration statement with a post-effective
amendment; after the effective date of any such post-effective
amendment. the Company is required to furnish investors with the
prospectus produced thereby containing information, including audited
financial statements, regarding the proposed acquisition candidate
and its business. According to the rule, the investors must have no
fewer than 20 and no more than 45 days from the effective date of the
post-effective amendment to decide to remain an investor or require
the return of their investment funds Any investor not making a
decision within said 45-day period is to automatically receive a
return of his investment funds. Unless investors representing 80%
of the offering proceeds elect to remain investors consummation of an
acquisition of or merger with a target business would be prevented,
all of the deposited funds in the escrow account must be returned to
all investors and none of the securities will be issued. Rule 419
further provides that if the blank check company does not complete an
acquisition meeting the specified criteria within 18 months of the
effectiveness of the initial registration statement of which this
Prospectus comprises a part thereof, all of the DEPOSITED FUNDS in
the escrow account must be returned to investors.
Conflicts of Interest - Possible Negotiation or Otherwise Grant of
Consent by Management to Purchase of Management's Common Stock.
While the Company and its Management intend that no shares of
the Company's Common Stock will be sold by any officers, directors or
greater than 10% shareholders or persons who may be deemed promoters
of the Company without affording all shareholders of the Company a
similar opportunity, Management may, nevertheless, actively
negotiate or otherwise consent to the purchase of all or a portion of
their shares of Common Stock as a condition to or in connection with
a proposed merger or acquisition transaction. It is noted that
Management may be deemed to have paid approximately $______ per
share for Common Stock owned by Management. In connection with any
such stock purchase transaction, it is possible that a premium may be
paid for Management's shares of Common Stock and that public
investors in the Company may not receive any portion thereof in the
event such premium may he paid. Any transaction structured in such
manner may present Management with conflicts of interest and as a
result of such conflicts, may possibly compromise Management's
fiduciary duties to the Company's shareholders, as the potential
would therefore exist for members of Management to consider their own
personal pecuniary benefit rather than the best interests of the
Company's other shareholders. Further, the Company's other
shareholders may not be afforded an opportunity to otherwise
participate in any particular stock buy-out transaction.
Additionally, in any such transaction, it is possible, although not
presently intended, that the Company may borrow funds to be used
directly or indirectly to purchase Management's shares. Proceeds
from this Blank Check Offering will not be utilized directly or
indirectly to purchase Management's shares.
Although investors may request the return of their investment
funds in connection with the reconfirmation offering required by Rule
419, the Company's shareholders will not be afforded an opportunity
specifically to approve or disapprove any particular buy-out
transaction. (See also RISK FACTOR entitled "Actual and Potential
Conflicts of Interest."
Actual and Potential Conflicts of Interest
The Company's officers and directors may engage in other
business activities similar and dissimilar to those engaged in by the
Company. To the extent that such officers and directors engage in
such other activities, they will have possible conflicts of interest
in diverting opportunities to other companies, entities or persons
with which they are or may be associated or have an interest,
rather than direct such opportunities to the Company. Such potential
conflicts of interest include, among other things, the time, effort
and corporate opportunity involved in their participation in other
business transactions or activities as well as the preference,
notwithstanding other possible factors, to utilize Robert C. Weaver,
Jr., Esq., a substantial shareholder, for legal services. Since
only limited policies have been established for the resolution of
such conflicts, the Company may be adversely affected should these
individuals choose to place their other business interests before
those of the Company. (See Risk Factor entitled "Conflict of
Interest.")
In addition, any officer, director, and shareholder of the
Company or their affiliates may receive personal financial gain,
other than from the proceeds of this Blank Check Offering, by means
of a stock exchange transaction or other means. including: (1)
payment of consulting fees: (ii) payments of finder's fees; (iii)
sales of affiliates' stock; (iv) payments of salaries; or (v) other
methods of payment by which affiliates may receive cash, stock or
other assets.
The potential exists that finder's fees or other acquisition
related compensation may be paid to the Company's officers,
directors, promoters or their affiliates or associates from revenues
or other funds of an acquisition or merger candidate, or by the
issuance of debt or equity of such an entity; the possibility,
therefore, exists that such fees may become a factor in negotiations
and present conflicts of interest.
The net proceeds of this Blank Check Offering may be used, in
Management's discretion, to make loans (other than to officers and
other affiliates); no restrictions exist other than as set forth
above, as to whom loans may be made. Further, no criteria have as
yet been established for determining whether or not to make loans,
whether any such loans will be secured or limitations as to amount.
The Company has not and does not presently intend to impose any
limits or other restrictions on the amount or circumstances under
which any of such transactions may occur, except that none of the
Company's officers, directors or their affiliates shall receive any
personal financial gain from the proceeds of this Blank Check
Offering except for reimbursement for out-of-pocket offering
expenses. ( See "USE OF PROCEEDS - Footnote No. 2." No assurance
can be given that any of such potential conflicts of interest will be
resolved in favor of the Company or will otherwise not cause the
Company to lose potential opportunities.
The Company may, subject to disinterested director or
shareholder approval and consistent with statutory procedures,
acquire a business or property from Management of the Company. In
such event, the terms of such acquisitions may not be the result of
arm's-length negotiations. (See Risk Factor entitled "Conflict of
Interest.")
Prohibition Pursuant to Rule 15g-8 Under Exchange Act to Sell or
Offer to Sell Shares in Rule 419 Account
According to Rule 15g-8 under the Exchange Act, it shall be
unlawful for any person to sell or offer to sell the Shares (or any
interest in or related to the Shares) held in the Rule 419 account
other than pursuant to a qualified domestic relations order. As a
result, contracts for sale to be satisfied by delivery of the
deposited shares (e.g., contracts for sale on a when, as, and if
issued basis) are prohibited. such rule prohibits sales of other
interests based on the shares, whether or not physical delivery is
required.
Recently Organized Company; Limited Resources; No Present Source of
Revenues; Report of Independent Auditors
The Company, which was incorporated on March 25, 1992 and is in
the development stage, has not as yet attempted to seek a Business
Combination. Other than Ms. Boyd, who has been an officer and
director in prior "blank check" companies, management has no prior
experience with respect to a transaction involving the proposed
combination of certain corporations, including a blank check company
(the "Contemplated Transaction"). Including Ms. Boyd, none of the
Company's officers have had prior experience relating to the
identification, evaluation and acquisition of an Acquired Business.
See "Management." Thus the Company has no experience in consummating
a business combination and, accordingly, there is only a limited
basis upon which to evaluate the Company's prospects for achieving
its intended business objectives. To date, the Company's efforts
have been limited primarily to organizational activities. The
Company has limited resources and has had no revenues to date. In
addition, the Company will not achieve any revenues (other than
interest income upon the proceeds of this offering) until, the
consummation of a Business Combination, if at all. Moreover, there
can be no assurance that any Acquired Business, at the time of the
Company's consummation of a Business Combination, or at any time
thereafter, will derive any material revenues from its operations or
operate on a profitable basis. The Company's independent auditors'
report on the Company's financial statements includes an explanatory
paragraph stating that the Company's ability to commence operations
is dependent on the sale of the Shares or other fund raising, which
raises substantial doubt about its ability to continue as a going
concern and that the financial statements do not include any
adjustments relating to the recoverability and classification of
asset carrying amounts or the amount and classification of
liabilities that might result should the Company be unable to
continue as a going concern. See "Proposed Business" and the
Financial Statements of the Company included elsewhere in this
Prospectus.
Discretionary Use of Proceeds; "Blank Check" Offering
As a result of management's broad discretion with respect to the
specific application of the Net Proceeds of this offering, this
offering can be characterized as a "Blank check" offering. Although
substantially all of the Net Proceeds of this offering are intended
to be generally applied toward effecting a Business Combination, such
proceeds are not otherwise being designated for any more specific
purposes. Accordingly, prospective investors will invest in the
Company without an opportunity to evaluate the specific merits or
risks of any one or more Business Combinations. There can be no
assurance that determinations ultimately made by the Company relating
to the specific allocation of the Net Proceeds of this offering will
permit the Company to achieve its business objectives. See "Proposed
Business -- 'Blank Check' Offering."
<PAGE>
Absence of Substantive Disclosure Relating to Prospective Business
Combinations; Investment in the Company Versus Investment in an
Acquired Business
"Blank check" offerings are inherently characterized by an
absence of substantive disclosure (other than general descriptions
relating to the intended application of the Net Proceeds of the
offering). The Company has not yet identified a prospective Acquired
Business. Accordingly, investors in this offering will have
virtually no substantive information available for advance
consideration of any specific Business Combination. The absence of
disclosure can be contrasted with the disclosure which would be
necessary if the Company had already identified an Acquired Business
as a Business Combination candidate or if the Acquired Business were
to effect an offering of its securities directly to the Public.
There can be no assurance that an investment in the securities
offered hereby will not ultimately prove to be less favorable to
investors in this offering than a direct investment, if such
opportunity were available, in an Acquired Business. See "Proposed
Business -- 'Blank Check' Offering."
Seeking to Achieve Public Trading Market through Business Combination
While a prospective Acquired Business may deem a Business
Combination with the Company desirable for diverse reasons, a
Business Combination may involve the acquisition, reorganization of,
merger, or some other form of business combination with a company
which does not need substantial additional capital but which desires
to establish a public trading market for its shares, while avoiding
what it may deem to be adverse consequences of undertaking a public
offering itself, such as time delays, significant expense, loss of
voting control and compliance with various federal and securities
laws enacted for the protection of investors. See the risks below
entitled "Unspecified Industry and Acquired Business; Unascertainable
Risks" and "No Assurance of Public Market; Arbitrary Determination of
Offering Price."
Possible Reasons for Merger Transaction
In some instances, the potential acquisition or merger candidate
may not need substantial additional capital but rather desires to
establish a public trading market for its shares. A business or
company attempting to consolidate its operations by a merger,
reorganization, asset acquisition or some other form of combination
through the Company may desire to do so avoid what it may deem to be
adverse consequences of undertaking a public offering itself.
Factors considered may include time delays, significant expense, loss
of voting control and the inability or unwillingness to comply with
various federal and state laws enacted for the protection of
investors."
No Present Identification of Industry and/or Acquisition Prospects;
High Risk of Unavailability of Conventional Private or Public
Offerings of Securities or Conventional Bank Financing
Management has not identified any specific business or even any
specific industry which it intends to enter through the purchase or
formation of a business. Neither the Company or any of its
affiliates has any present plan., proposals, arrangements or
understandings with respect to any possible business combination or
opportunity. None of the Company's officers, directors, promoters,
their affiliates or associates have had any preliminary contact or
discussions with any representative of the owner of any business or
company regarding the possibility of an acquisition or merger
transaction contemplated hereby. While Management will have sole
discretion to determine which businesses, if any, are intended to be
formed or acquired, as well as the intended terms of any
acquisition, purchasers in this Blank Check offering will, as further
discussed under "PROSPECTUS SUMMARY - Investors Rights to Reconfirm
Investment Under Rule 419", in all likelihood have the opportunity
to evaluate the merits and risks of an acquisition and be entitled to
make an election as to whether they desire to remain investors in the
Company. An acquisition will only be consummated if the number of
investor purchasers representing 80% of the maximum offering proceeds
reconfirm that investment. Management has no present intention of
(a) considering a business combination with entities owned or
controlled by affiliates or associates of the Company; (b) creating
subsidiary entities with a view to distributing their securities to
the shareholders of the Company; or (c) selling any securities owned
or controlled by affiliates and associates of the Company in
connection with any business combination transaction without
affording all shareholders a similar opportunity. The success or
failure of an investment in the shares will depend entirely upon the
ability of Management to acquire or form successful businesses and to
continue to operate them and obtain additional capital to support the
working capital requirements of these businesses after their
acquisition or formation, of which no assurances are given. (See
:USE OF PROCEEDS" and "PROPOSED BUSINESS.") Purchasers of Shares
should recognize that the investment may prove substantially less
favorable than a similar investment made directly in a company which
has a current business or stated business prospects.
Further, it may be expected that any target business will
present such a level of risk that conventional private or public
offerings of securities or conventional bank financing will not be
available.
Unspecified Industry and Acquired Business; Unascertainable Risks
To date, the Company has not selected any particular industry in
which to concentrate its Business Combination efforts. Accordingly,
there is no current basis for prospective investors in this offering
to evaluate the possible merits or risks of the Acquired Business or
the particular industry in which the Company may ultimately operate.
However, in connection with seeking shareholder approval of a
Business Combination, the Company, (as a result of its intention to
register its Common Stock under the Securities Exchange Act of 1934
(the "Exchange Act") and thereby become subject to the proxy
solicitation rules contained therein) intends to furnish its
shareholders with proxy solicitation materials prepared in accordance
with the Exchange Act, which, among other matters, will include a
description of the operations of the Acquired Business candidate and
audited historical financial statements thereof. To the extent the
Company effects a Business Combination with a financially unstable
company or an entity in its early stage of development or growth
(including entities without established records of sales or
earnings), the Company will become subject to numerous risks inherent
in the business operations of financially unstable and early stage or
potential emerging growth companies. In addition, to the extent that
the Company effects a Business Combination with an entity in an
industry characterized by a high level of risk, the Company will
become subject to the currently unascertainable risk of that
industry. An extremely high level of risk frequently characterizes
certain industries which experience rapid growth. Although
management will endeavor to evaluate the risks inherent in a
particular Acquired Business or industry, there can be no assurance
that the Company will properly ascertain or assess all such
significant risk factors. See "Proposed Business--'Blank Check'
Offering."
Probable Lack of Business Diversification
While the Company may, under certain circumstances, seek to
effect Business Combinations with more than one Acquired Business, it
will not expend less than the Threshold Amount upon its first
Business Combination. Consequently, it is likely that the Company
will have the ability to effect only a single Business Combination.
Accordingly, the prospects for the Company's success will be entirely
dependent upon the future performance of a single Business. Unlike
certain entities which have the resources to consummate several
Business Combinations of entities operating in multiple industries or
multiple areas of a single industry, it is highly likely that the
Company will not have the resources to diversify its operations or
benefit from the possible spreading of risks or offsetting of losses.
In addition, by consummating a Business Combination with only a
single entity, the prospects for the Company's success may become
dependent upon the development or market acceptance of a single or
limited number of products, processes or services. Consequently,
there can be no assurance than the Acquired Business will prove to be
commercially viable. See "Proposed Business--'Blank Check'
Offering."
Dependence Upon Key Personnel
The ability of the Company to successfully effect a Business
Combination will be largely dependent upon the efforts of J. Michael
Spinali, Brian French and Jean Boyd, the Company's President and
Director, Secretary/Treasurer and Director; and Vice President and
Director, respectively. It is anticipated that Messrs. Spinali and
French and Ms. Boyd are the only persons whose activities will be
material to the operations of the Company pending the Company's
identification and/or consummation of a Business Combination. The
Company has not entered into employment agreements with any officer
or director.. It is anticipated that each of Messrs. Spinali and
French and Ms. Boyd will devote approximately 5% of their time to the
affairs of the Company. The Company has not obtained "key man" life
insurance on the lives of any of the officers or directors. The loss
of the services of such key personnel before suitable replacements
are obtained could have a material adverse effect on the Company's
capacity to successfully achieve its business objectives. None of
the Company's key personnel are required to commit their full time to
the affairs of the Company and, accordingly, such personnel may have
conflicts of interest in allocating management time among various
business activities. In addition, the success of the Company may be
dependent upon its ability to retain additional personnel with
specific knowledge or skills who may be necessary to assist the
Company in evaluating a potential Business Combination. There can be
no assurance than the Company will be able to retain such necessary
additional personnel. See "Proposed Business -- Employees" and
"Management."
Lack of Experience of Management
Messrs. Spinali and French and Ms. Boyd, have no prior
experience with respect to the successful completion of a Business
Combination. ("the Contemplated Transaction"). See "Management."
Possible Change in Control and Management
Although the Company has no present plans, understandings or
arrangements respecting any Business Combination, the successful
completion of such a transaction could result in a change in control
of the Company. This could result from the issuance of a large
percentage of the Company's authorized securities or the sale by the
present shareholders of all or a portion of their stock or a
combination thereof. Any change in control may also result in the
resignation or removal of the Company's present officers and
directors. If there is a change in management, no assurance can be
given as to the experience or qualifications of the persons who
replace present management respecting either the operation of the
Company's activities or the operation of the business, assets or
property being acquired.
<PAGE>
Nature of Transaction, Benefits to Management
The Company's proposed activities may involve the merger of the
Company into or the consolidation of an interest in one or more
companies which will in turn be operated by the Company. In a merger
or acquisition present management may be able to negotiate the sale
of its control portion of Company stock at a premium price. After
the merger the investors in this offering may be left with management
whose background and competence are unknown, stock worth
substantially less than the price paid, and a greatly reduced
percentage of ownership.
Conflicts of Interest - Part-Time Management
None of the Company's key personnel are required to commit their
full time to the affairs of the Company and, accordingly, such
personnel may have conflicts of interest in allocating management
time, among various business activities. Inc.. Messrs. Spinali and
French and Ms. Boyd intend to devote approximately 5% of their time
to the affairs of the Company. Certain of these key personnel may in
the future become affiliated with entities, including other "blank
check" companies, engaged in business activities similar to those
intended to be conducted by the Company. In the course of their
other business activities, including private investment activities,
Messrs. Spinali and French and Ms. Boyd may become aware of
investment and business opportunities which may be appropriate for
presentation to the Company as well as the other entities with which
they are affiliated. Such persons may have conflicts of interest in
determining to which entity a particular business opportunity should
be presented. In general, officers and directors of corporations
incorporated under the laws of the State of Nevada are required to
present certain business opportunities to such corporations.
Accordingly, as a result of multiple business affiliations, Messrs.
Spinali and French and Ms. Boyd may have similar legal obligations
relating to presenting certain business opportunities to multiple
entities. In addition, conflicts of interest may arise in connection
with evaluations of a particular business opportunity by the Board of
Directors with respect to the foregoing criteria. There can be no
assurance that any of the foregoing conflicts will be resolved in
favor of the Company. See "Proposed Business -- 'Blank Check'
Offering -- Selection of an Acquired Business and Structuring of a
Business Combination."
Reimbursement of Expenses to Officers and Directors
No funds will be disbursed from the Escrow Fund for the
reimbursement of expenses incurred by the Company's officers and
directors on behalf of the Company. Notwithstanding the foregoing,
there is no limit on the amount of such reimbursable expenses, and
there will be no review of the reasonableness of such expenses by
anyone other than the Company's Board of Directors, all the members
of which are officers. In no event will the Escrow Fund be used for
any purpose other than implementation of a Business Combination or
for purpose of the Redemption Offer. See "Use of Proceeds";
"Proposed Business -- Payment of Salaries or Consulting Fees"; and,
"'Management. -- Executive Compensation."
Lack of Business Opportunities
Although the Company will use efforts to attempt to locate
potential Business Combinations, there is no assurance that any
Business or assets worthy of even preliminary investigation will come
to the Company's attention, or that any significant amount of Funds
will be expended in actual acquisition of assets.
No Present Acquisition or Merger Transaction Contemplated
None of the Company's officers, directors, promoters, their
affiliates or associates have had any preliminary contact or
discussions with and there are no present plans, proposals,
arrangements or understandings with any representatives of the owners
of any business or company regarding the possibility of an
acquisition or merger transaction contemplated in the prospectus.
Risk of Minimum Offering
The Company will only raise $25,000 in the event only the
minimum offering amount is sold. Under this condition, in view of
the limited funds available, the attractiveness of the Company to
potential acquisition or merger candidates would be materially
diminished. In the event that less than the net proceeds form the
maximum offering are raised, the Company's plans may be materially
and adversely effected in that the Company may find it even more
difficult, if not impossible to realize its goals.
Officers or Directors May Purchase All of the Minimum Shares in this
Offering
It is anticipated the company may make sales of shares to
officers, directors and present shareholders of the company and
persons associated with them, and that such persons may purchase a
large proportion of the shares offered hereby. Such purchases shall
be made for investment purposes only and in a manner consistent with
a public offering of the company's shares. Such purchases may be
used to reach the amount required for closing in the event such
amount is not reached as a result of purchases by the general public.
The officers and directors could purchase 100% of the amount required
for closing if no sales are made to new shareholders, the maximum of
which could be 100,000 shares to meet the offering minimum. Such
purchases will increase the percentage of securities being held by
the officers and directors.
Loss From Analysis and Investigation of Business Prospects
The Company will be required, in all probability, to expend
Funds in the preliminary investigation or examination of assets,
business or properties, whether or not an investment occurs. To the
extent management determines that the potential investment has little
of no value, the monies spent on investigation will be a total loss.
In no event will the funds placed in the Escrow Fund, including any
interest earned thereon, be used for expenses associated with the
evaluation and structuring of a contemplated Business Combination.
Limited Ability to Evaluate Acquired Business' Management
While the Company's ability to successfully effect a Business
Combination will be dependent upon certain of its key personnel, the
future role of such personnel in the Acquired Business cannot
presently be stated with any certainty. While it is possible that
certain of the Company's key personnel will remain associated in some
capacities with the Company following a Business Combination, it is
unlikely that such key personnel will devote their full efforts to
the affairs of the Company subsequent thereto. Moreover, there can
be no assurance that such personnel will have significant experience
or knowledge relating to the operations of the particular Acquired
Business. Furthermore, although the Company intends to closely
scrutinize the management of a prospective Acquired Business in
connection with evaluating the desirability of effecting a Business
Combination, there can be no assurance that the Company's assessment
of such management will prove to be correct, especially in light of
the possible inexperience current key personnel of the Company in
evaluating certain types of businesses. In addition, there can be no
assurance that such future management will have the necessary skills,
qualifications or abilities to manage a public company. The Company
may also seek to recruit additional managers to supplement the
incumbent management of the Acquired Business. There can be no
assurance that the Company will have the ability to recruit such
additional managers, or that such additional managers will have the
requisite skills, knowledge or experience necessary to enhance the
incumbent management. See "Proposed Business--'Blank Check'
Offering."
Competition
The Company expects to encounter intense competition from other
entities having a business objective similar to that of the Company.
Many of these entities are well established and have extensive
experience in connection with identifying and effecting business
combinations directly or through affiliates. Many of these
competitors possess greater financial, technical, personnel and other
resources than the Company and there can be no assurance that the
Company will have the ability to compete successfully. The Company's
financial resources will be relatively limited when contrasted with
those of many of its competitors. This inherent competitive
limitation may compel the Company to select certain less attractive
Business Combination prospects. Further, the Company's obligation to
redeem shares of Common Stock held by future non-affiliated
shareholders of the Company, discussed under "Proposed Business --
Redemption Rights" and elsewhere herein, may place the Company at a
competitive disadvantage in successfully negotiating a Business
Combination. There can be no assurance that such prospects will
permit the Company to meet its stated business objective. See
"Proposed Business -- Competition."
Uncertainty of Competitive Environment of Acquired Business
In the event that the Company succeeds in effecting a Business
Combination, the Company will, in all likelihood, become subject to
intense competition from competitors of the Acquired Business. In
particular, certain industries which experience rapid growth
frequently attract an increasingly larger number of competitors,
including competitors with increasingly greater financial, marketing,
technical and other resources than the initial competitors in the
industry. The degree of competition characterizing the industry of
any prospective Acquired Business cannot presently be ascertained.
There can be no assurance that, subsequent to a Business Combination,
the Company will have the resources to compete effectively,
especially to the extent that the Acquired Business is in a high
growth industry. See "Proposed Business -- Competition."
Possible Need for Additional Financing
The Company has had no revenues to date (except for interest
income) and is entirely dependent upon the proceeds of this offering
to commence operations relating to selection of a prospective
Acquired Business. The Company will not receive any revenues (other
than interest income) until, at the earliest, the consummation of a
Business Combination. Although the Company believes that the
proceeds of this offering will be sufficient to effect a Business
Combination, inasmuch as the Company has not yet identified any
prospective Acquired Business candidates, the Company cannot
ascertain with any degree of certainly the capital requirements for
any particular transaction. In the event that the Net Proceeds of
this offering prove to be insufficient for purposes of effecting a
Business Combination (because of the size of the Business Combination
or the depletion of 10% of the portion of the Net Proceeds available
to the Company for the search of an Acquired Business), the Company
will be required to seek additional financing. In the event no
Business Combination is identified, negotiations are incomplete or no
Business Combination has been consummated, and all of the Net
Proceeds other than the Escrowed Funds have been expended, the
Company currently has no plans or arrangements with respect to the
possible acquisition of additional financing which may be required to
continue the operations of the Company. In such event, Messrs.
Spinali and French and Ms. Jean Boyd may consider loaning to the
Company Funds for operations other than the payment of salaries to
Messrs. Spinali and French and Ms. Jean Boyd. Although there are no
plans or arrangements with respect to such loans, Messrs. Spinali and
French and Ms. Jean Boyd do not currently anticipate such loans, if
any, to be made on terms other than for market interest rates. There
can be no assurance that Messrs. Spinali and French and Ms. Jean Boyd
will make such loans to the Company, or if made that such will be
made on terms favorable to the Company. The Funds placed in the
Escrow Fund, including any interest earned thereon, however, will not
be used for expenses associated with the evaluation and structuring
of a contemplated Business Combination. There can be no assurance
that such financing would be available on acceptable terms, if at
all. To the extent that such additional financing proves to be
unavailable when needed to consummate a particular Business
Combination, the Company would, in all likelihood, be compelled to
restructure the transaction or abandon that particular Business
Combination and seek an alternative Acquired Business candidate. In
addition, in the event of the consummation of a Business Combination
the Company may require additional financing to Fund the operations
or growth of the Acquired Business. It is presently not contemplated
that any of the Company's executive officers or directors or their
respective affiliates will provide any financing to the Company in
connection with a Business Combination nor, will any such persons
borrow any money from the Company. The failure by the Company to
secure such additional financing could have a material adverse effect
on the continued development or growth of the Acquired Business. See
"Proposed Business 'Blank Check' Offering - Selection of an Acquired
Business and Structuring of a Business Combination."
Possible Need for Additional Financing of Acquired Business
In the event of a consummation of a Business Combination, the
Company cannot ascertain with any degree of certainty the capital
requirements for any particular Acquired Business inasmuch as the
Company has not yet identified any prospective Acquired Business
candidates. To the extent the Business Combination results in the
Acquired Business requiring additional financing, such additional
financing (which, among other forms, could be derived from the public
or private offering of securities or from the acquisition of debt
through conventional bank financing), may not be available, due to,
among other things, the Acquired Business not having sufficient (i)
credit or operating history; (ii) income stream; (iii) profit level;
(iv) asset base eligible to be collateralized; or (v) market for its
securities.
As no specific Business Combination or industry has been
targeted, it is not possible to predict the specific reasons why
conventional private or public financing or conventional bank
financing might not become available. There can be no assurances
that, in the event of a consummation of a Business Combination,
sufficient financing to Fund the operations or growth of the Acquired
Business will be available upon terms satisfactory to the Company,
nor can there be any assurance that financing would be available at
all.
Risk that Additional Financing will be Unavailable
Although there are no specific business combinations or other
transactions contemplated by management, it may be expected that any
such target business will present such a level of risk that
conventional private or public offerings of securities or
conventional bank financing would not be available.
Possible Default on Loans
The Company may make short-term loans to a prospective Acquired
Business under certain conditions. Should one or more of these
prospective Acquired Businesses default on such loans, the Company's
capital would be adversely affected and its ability to conduct its
business may be adversely affected. There is no prohibition against
the Company engaging in this type of loan transaction with affiliates
of the Company or entities controlled by affiliates, however, the
Company does not anticipate such transactions will occur. In the
event such affiliate transactions were to be proposed significant
conflicts of interest are associated therewith and they would be
subject to approval by the board of directors. (See "Proposed
Business")
Possible Depletion of Operating Funds
In the event no Business Combination is identified, negotiations
are incomplete or no Business Combination has been consummated, and
all of the Net Proceeds other than the Escrowed Funds have been
expended, the Company currently has no plans or arrangements with
respect to the possible acquisition of additional financing which may
be required to continue the operations of the Company. In such
event, Messrs. Spinali and French and Ms. Jean Boyd may consider
loaning to the Company funds for operations Although there are no
plans or arrangements with respect to such loans, Messrs. Spinali and
French and Ms. Boyd do not currently anticipate such loans, if any,
to be made on terms other than for market interest rates. There can
be no assurance that Messrs. Spinali and French and Ms. Boyd will
make such loans to the Company, or if made that such will be made on
terms favorable to the Company.
Possible Use of Debt Financing; Debt of an Acquired Business
There are currently no limitations relating to the Company's
ability to borrow funds to increase the amount of capital available
to the Company to effect a Business Combination or otherwise finance
the operations of the Acquired Business. The amount and nature of
any borrowing by the Company will depend on numerous considerations,
including the Company's capital requirements, the Company's perceived
ability to meet debt service on any such borrowing and then
prevailing conditions in the financial markets, as well as general
economic conditions. There can be no assurance that debt financing,
if required or otherwise sought, would be available on terms deemed
to be commercially acceptable and in the best interests of the
Company. The inability of the Company to borrow funds required to
effect or facilitate a Business Combination, or to provide Funds for
an additional infusion of capital into an Acquired Business, may have
a material adverse effect on the Company's financial condition and
future prospects. Additionally, to the extent that debt funding
ultimately proves to be available, any borrowing may subject the
Company to various risks traditionally associated with incurring of
indebtedness, including the risks of interest rate fluctuations and
insufficiency of cash flow to pay principal and interest.
Furthermore, an Acquired Business may have already incurred debt
financing and, therefore, all the risks inherent thereto. See "Use
of Proceeds and of Proposed Business -- 'Blank Check' Offering --
Selection of an Acquired Business and Structuring of a Business
Combination."
Authorization of Additional Securities; No Creation of Subsidiary for
the Purpose of Distributing Securities
The Company's Articles of Incorporation authorizes the issuance
of 100,000,000 shares of Common Stock, par value $.0001 per share.
Upon completion of this offering, assuming all of the Shares offered
hereby are sold, there will be 96,530,000 authorized but unissued
shares of Common Stock available for issuance. Although the Company
has no commitments as of the date of this Prospectus to issue any
shares of Common Stock other than as described in this Prospectus,
the Company will, in all likelihood, issue a substantial number of
additional shares in connection with a Business Combination. To the
extent that additional shares of Common Stock are issued, dilution to
the interests of the Company's shareholders will occur.
Additionally, if a substantial number of shares of Common Stock are
issued in connection with a Business Combination, a change in control
of the Company may occur which may impact, among other things, the
utilization of net operating losses, if any. Furthermore, the
issuance of a substantial number of shares of Common Stock may cause
dilution and adversely affect prevailing market prices, if any, for
the Common Stock, and could impair the Company's ability to raise
additional capital through the sale of its equity securities. The
Company has no plans, proposals, arrangements or understandings with
respect to the creation of a subsidiary entity with a view to
distributing to the Company's shareholders the securities of the
subsidiary entity. See "Proposed Business -- 'Blank Check' Offering
- -- Selection of an Acquired Business and Structuring of a Business
Combination" and "Description of Securities."
Acquisition Dilution and Control
The Company plans to acquire another company or companies
through the issuance of its stock. (See "Proposed Business") Any
such acquisition effected by the Company may result in the issuance
of additional Common Stock which may result in substantial dilution
in the percentage of the Company's Common Stock held by the Company's
existing shareholders. Moreover, the Common Stock issued in any such
acquisition or merger transaction may be valued on an arbitrary or
non arms-length basis by management of the Company. In addition, a
future merger may involve the appointment of additional members to
the Company's Board of Directors. Any such acquisition or merger may
not legally require shareholder approval, however, the Company plans
to hold a shareholders' meeting to vote on any acquisition or merger
and provide a proxy statement to shareholders at least 10 days prior
thereto. Such transaction will likely be structured so that the
shareholders of a private company being acquired will be issued an
amount of the Company's shares sufficient to provide them an 80%
equity ownership interest in the Company.
Investment Company Act Considerations
The regulatory scope of the Investment Company Act of 1940, as
amended (the "Investment Company Act"), which was enacted principally
for the purpose of regulating vehicles for pooled investments in
securities, extends generally to companies engaged primarily in the
business of investing, reinvesting, owning, holding or trading in
securities. The Investment Company Act may, however, also be deemed
to be applicable to a company which does not intend to be
characterized as an investment company but which, nevertheless,
engages in activities which may be deemed to be within the
definitional scope of certain provisions of the Investment Company
Act. The Company believes that its anticipated activities, which
will involve acquiring control of an operating company, will not
subject the Company to regulation under the Investment Company Act.
Nevertheless, there can be no assurance that the Company will not be
deemed to be an investment company, especially during the period
prior to a Business Combination. In the event the Company is deemed
to be an investment company, the Company may become subject to
certain restrictions relating to the Company's activities, including
restrictions on the nature of its investments and the issuance of
securities. In addition, the Investment Company Act imposes certain
requirements on companies deemed to be within its regulatory scope,
including registration as an investment company, adoption of a
specific form of corporate structure and compliance with certain
burdensome reporting, recordkeeping, voting, proxy, disclosure and
other rules and regulations. In the event of characterization of the
Company as an investment company, the failure by the Company to
satisfy regulatory requirements, whether on a timely basis or at all,
would, under certain circumstances, have a material adverse effect on
the Company. See "Proposed Business."
Tax Considerations
As a general rule, Federal and state tax laws and regulations
have a significant impact upon the structuring of business
combinations. The Company will evaluate the possible tax
consequences of any prospective Business Combination and will
endeavor to structure the Business Combination so as to achieve the
most favorable tax treatment to the Company, the Acquired Business
and their respective shareholders. There can be no assurance,
however, that the Internal Revenue Service (the "IRS") or appropriate
state tax authorities will ultimately assent to the Company's tax
treatment of a consummated Business Combination. To the extent the
IRS or state tax authorities ultimately prevail in recharacterizing
the tax treatment of a Business Combination, there may be adverse tax
consequences to the Company, the Acquired Business and their
respective shareholders. See "Proposed Business -- 'Blank Check'
Offering -- Selection of an Acquired Business and Structuring of a
Business Combination."
Possible Payment of Finder's Fees to Management or Affiliates
In the event that a person or entity assists the Company in
connection with the introduction to a prospective Acquired Business
with which a Business Combination is ultimately consummated, such
person or entity may be entitled to receive a finder's fee in
consideration for such introduction. Such person may be required to
be registered as, among other things, an agent or broker-dealer under
the laws of certain jurisdictions. The Company is not presently
obligated to pay any finder's fees. The executive officers and
directors of the Company may be entitled to receive a finder's fee in
the event they originate a Business Combination. See "Proposed
Business - 'Blank Check' Offering -- Selection of an Acquired
Business and Structuring of a Business Combination" and "Management"
The Company, rather than pay normal salaries, intends to
primarily compensate officers and directors through finders fees.
Since the business of the Company is to acquire business
opportunities and finders fees are often paid to intermediaries in
acquisition transactions, the Company has reasoned that, rather than
potentially pay both regular salaries and/or directors fees to
officers and directors, and, also pay finders fees to third parties,
the proceeds for acquisition of business opportunities will be
greater if officers and directors are allowed to share in any finders
fee, with other types of compensation for officers and directors
being limited in amount. (See "Certain Transactions")
Control by Present Shareholders
Upon consummation of the offering, if the maximum is sold, the
present shareholders (including management) of the Company, will
collective own approximately 28.8% of the then issued and outstanding
shares of Common Stock approximately 14.6% of which will be owned by
the current officers and directors (These figures could be higher if
officers, directors and current shareholders acquire Shares through
this offering). In the election of directors, shareholders are not
entitled to cumulate their votes for nominees. Accordingly, it is
likely that the current shareholders will be able to substantially
impact the election of all of the Company's directors and the other
affairs of the Company. See "Principal Stockholders," "Certain
Transactions" and "Description Securities."
No Dividends
The Company has not paid any dividends on its Common Stock to
date and does not presently intend to pay cash dividends prior to the
consummation of a Business Combination. The payment of dividends
after any such Business Combination, if any, will be contingent upon
the Company's revenues and earnings, if any, capital requirements and
general financial condition subsequent to consummation of a Business
Combination. The payment of any dividends subsequent to a Business
Combination will be within the discretion of the Company's then Board
of Directors. It is the present intention of the Board of Directors
to retain all earnings, if any, for use in the Company's business
operations and, accordingly, the Board does not anticipate paying any
cash dividends in the foreseeable future. See "Description of
Securities -- Dividends."
No Commitment to Purchase Shares
No commitment exists by anyone to purchase any of the Shares
offered. Consequently, no assurance can be given that any Shares
will be sold. This Offering is being made on a "best efforts"
100,000 Share minimum, 1,000,000 Share maximum basis. In the event
that the minimum of 100,000 Shares are not sold within 180 days from
the effective date of this prospectus (unless extended for an
additional 180 days by the Company), all proceeds raised will be
returned promptly to subscriber in full without interest thereon.
Subscribers will not be entitled to a return of funds from the escrow
during the offering period (including the extension thereof). (See
"Offering")
No Assurance of Public Market; Arbitrary Determination of Offering
Price
Prior to this offering, there has been no public trading market
for the Shares. The initial public offering price of the Shares have
been arbitrarily determined by negotiation between the Company and
the Representative and does not bear any relationship to such
established valuation criteria as assets, book value or prospective
earnings. There is no assurance that a regular trading market will
develop for any of the Company's securities after this offering or
that, if developed, that any such market will be sustained. The
Shares will likely appear in what is customarily known as the "pink
sheets" or on the NASD Bulletin Board, thus limiting the
marketability of the Shares. If the Company, at any time, has net
tangible assets of $2,000,000 or less, transactions in the Shares
would be subject to Rule 15c2-6 promulgated under the Securities
Exchange Act of 1934. Under such rule, broker-dealers who recommend
such securities to persons other than established customers and
accredited investors (generally institutions with assets in excess of
$5,000,000 or individuals with net worth in excess of $1,000,000 or
annual income exceeding $200,000 or $300,000 jointly with their
spouse) must make a special written suitability determination for the
purchaser and receive the purchaser's written agreement to a
transaction prior to sale. Transactions are exempt from this rule if
the market price of the Shares is at least $5.00 per share. If the
Shares become subject to Rule 15c2-6, broker-dealers may find it
difficult to effectuate customer transactions and/or trading activity
in the Shares, thus, the market price, if any, may be depressed, and
an investor may find it more difficult to dispose of the Shares. As
of the date hereof, the Company has had no discussions and there are
no understandings with any firm regarding the participation of such
firm as a market maker in the shares of the Company's Common Stock.
See "Offering."
No Present Plans for the Development of a Trading Market
There are currently no plans, proposals, arrangements or
understandings with any person with regard to the development of a
trading market in any of the Company's securities.
Effect of Purchases of Stock in this Offering by Officers, Directors
and Affiliates
Officers, directors affiliates, and principal shareholders of
the Company may purchase a percent of the shares sold in the offering
under the same terms and conditions as the public investors. Such
purchases, if made, will be in compliance with Rule 10b-6 and be for
investment purposes only and not for redistribution (i.e., no present
intention to distribute or resell the shares). Such purchases may be
made for the purpose of closing the minimum offering.
To the extent of any such share purchases for investment
purposes only, a portion of the shares from this Offering will not
enter the "public float." The public float is the amount of free-
trading shares which are immediately resalable in the trading
market.. Such reduction means that there are less shares for the
public investors to purchase and resell and may cause a lack of
liquidity in the trading of the Company's shares. Also, such a
reduction in the public float may make possible the commitment of
public investors in the absence of public demand for the offering.
Immediate Substantial Dilution; Disparity of Consideration
New investors will incur of an immediate and substantial
dilution of approximately $.2426 per share between the pro forma net
tangible book value per share after the offering of $.0074 and the
public offering price of $.25 per share allocable to each Share. The
existing shareholders of the Company acquired their shares of Common
Stock at a nominal price and accordingly, new investors will bear
virtually all of the risks inherent in an investment in the Company.
See "Dilution."
Shares Eligible for Future Sale
Shares Eligible for Future Sale. All 2,470,000 shares of the
Company's Common Stock outstanding are "restricted securities" and
under certain circumstances may in the future be sold in compliance
with Rule 144 adopted under the Securities Act of 1933, as amended.
Future sales of those shares under Rule 144 could depress the market
price of the Common Stock in any market which may develop. The
current outstanding shares 2,000,000 became eligible for sale
pursuant to Rule 144 beginning in March 1994.
In general, under Rule 144 as currently in effect, subject to
the satisfaction of certain other conditions, a person, including an
affiliate of the Company (or persons whose shares are aggregated) who
has owned restricted shares of Common Stock beneficially for at least
two years is entitled to sell, within any three-month period, a
number of shares that does not exceed the greater of 1% of the total
number of outstanding shares of the same class or, if the Common
Stock as quoted on NASDAQ, the average weekly trading volume during
the four calendar weeks preceding the sale. The person who has not
been an affiliate of the Company for at least three months
immediately preceding the sale and who has beneficially owned shares
of Common Stock for at least three years is entitled to sell such
shares under Rule 144 without regard to any of the limitations
described above. No prediction can be made as to the effect, if any,
that sales of "restricted" shares of Common Stock or the availability
of such shares for sale will have on the market prices prevailing
from time to time. Nevertheless, the possibility than substantial
amounts of Common Stock may be sold in the public market may
adversely affect prevailing market prices for the Common Stock and
could impair the Company's ability to raise capital through the sale
of its equity securities. See "Principal Stockholders" and "Shares
Eligible for Future Sale."
Regulations Concerning "Blank Check" Issuers
The ability to register or qualify for sale the Shares for both
initial sale and secondary trading is limited because a number of
states have enacted regulations pursuant to their securities or "blue
sky" laws restricting or, in some instances, prohibiting, the sale of
securities of "blank check" issuers, such as the Company, within that
state. In addition, many states, while not specifically prohibiting
or restricting "blank check" companies, would not register the Shares
for sale in their states. Because of such regulations and other
restrictions, the Company's selling efforts, and any secondary market
which may develop, may only be conducted in the Primary Distribution
States (as hereinafter defined) or in those jurisdictions where an
applicable exemption is available or a blue sky application has been
filed and accepted. See "State Blue Sky Registration; Restricted
Resales of the Shares," below. In addition, the Commission enacted
rules under the Securities Act which, among other things, afford
shareholders of "blank check" companies a right to rescind their
purchases of such securities for a limited period subsequent to the
consummation of a Business Combination.
State Blue Sky Registration; Restricted Resales of the Shares
The Company has not made application to register the Shares in
any specific states. The Company will seek to obtain an exemption
from registration to offer the Shares in various state jurisdictions
and may also make application to register the Shares in some states.
Purchasers of the Shares in this offering must be residents of such
jurisdictions which either provide an applicable exemption or in
which the Shares are registered. In order to prevent resale
transactions in violation of states' securities laws, Public
Stockholders may only engage in resale transactions in the Shares in
such jurisdictions in which an applicable exemption is available or
a blue sky application has been filed and accepted. As a matter of
notice to the holders thereof, the Common Stock certificates shall
contain information with respect to resale of the Shares. Further,
the Company will advise its market makers in the Shares, if any, of
such restriction on resale. Such restriction on resales may limit
the ability of investors to resell the Shares purchased in this
offering.
Several additional states may permit secondary market sales of
the Shares (i) once or after certain financial and other information
with respect to the Company is published in a recognized securities
manual such as Standard & Poor's Corporation Records (ii) after a
certain period has elapsed from the date hereof; or (iii) pursuant to
exemptions applicable to certain investors. However, since the
Company is a "blank check" company, it may not be able to be listed
in a recognized securities manual until after the consummation of the
first Business Combination.
Certain Securities Law Considerations
There is no current trading market for the Shares and there can
be no assurance that a trading market will develop, or, if such a
trading market does develop, that it will be sustained. The Shares,
to the extent that a market develops for the Shares at all, of which
there can be no assurance, will likely appear in what is customarily
known as the "pink sheets" or on the NASD Bulletin Board, which may
limit the marketability and liquidity of the Shares.
The Company is currently not seeking listing of the Shares on
NASDAQ. If the Shares are not listed on NASDAQ and if the Company,
at any time, has net tangible assets of $2,900,000 or less,
transactions in the Shares would be subject to Rule of 15c2-6
promulgated under the Securities Exchange Act of 1934. Under such
rule, broker-dealers who recommend such securities to persons other
than established customers and accredited investors (generally
institutions with assets in excess of $5,000,000 or individuals with
net worth in excess of $1,000.000 or annual income exceeding $200,000
or $300,000 jointly with their spouse) must make a special written
suitability determination for the purchaser and receive the
purchaser's written agreement to a transaction prior to sale.
Transactions are exempt from this rule if the market price of the
Shares is at least $5.00 per share. If the Shares become subject to
Rule 15c2-6, broker-dealers may find it difficult to effectuate
customer transactions and/or trading activity in the Shares, thus,
the market price, if any, may be depressed, and an investor may find
it more difficult to dispose of the Shares.
The U.S. Securities and Exchange Commission Rule 3a51-1
generally define a penny stock to be any equity security that has a
market price of less than $5.00 per share, subject to certain
exemptions. Such exemptions include an equity security issued by an
issuer that has (i) net tangible assets of at least $2,000,000, if
such issuer has been in continuous operation for at least three
years; (ii) net tangible assets of at least $5,000,000, if such
issuer has been in continuous operation for less than three years; or
(iii) average revenue of at least $6,000,000 for the preceding three
years. Unless an exemption is available, the regulations require the
delivery, prior to any transaction involving a penny stock, of a
disclosure statement explaining the penny stock market and the risks
associated therewith.
Since the Company's Common Stock is subject to the regulations
on penny stocks, the market liquidity for the Company's Common Stock
could be adversely affected by limiting the ability broker/dealers to
sell the Company's Common Stock and the ability of purchasers in this
offering to sell their securities in the secondary market. There is
no assurance that trading in the Company's securities will not be
subject to these or other regulations that would adversely affect the
market for such securities.
Penny Stock Regulation
Broker-dealer practices in connection with transactions in"penny
stocks" are regulated by certain penny stock rules adopted by the
Securities and Exchange Commission. Penny stock generally are equity
securities with a price of less than $5.00 (other than securities
registered on certain national securities exchanges or quoted on the
NASDAQ system, provided that current price and volume information
with respect to transactions in such securities is provided by the
exchange or system). The penny stock rules require a broker-dealer,
prior to a transaction in a penny stock not otherwise exempt from the
rules, to deliver a standardized risk disclosure document that
provides information about penny stocks and the risks in the penny
stock market. The broker-dealer also must provide the customer with
current bid and offer quotations for the penny stock, the
compensation of the broker-dealer and its salesperson in the
transaction, and monthly account statements showing the market value
of each penny stock held in the customer's account. In addition, the
penny stock rules generally require that prior to a transaction in a
penny stock the broker-dealer must make a special written
determination that the penny stock is a suitable investment for the
purchaser and receive the purchaser's written agreement to the
transaction. These disclosure requirements may have the effect of
reducing the level of trading activity in the secondary market for a
stock that becomes subject to the penny stock rules. If the
Company's common stock becomes subject to the penny stock rules
investors in the offering may find it more difficult to sell their
shares.
DILUTION
The difference between the public offering price per share and
the pro forma net tangible book value per share of Common Stock of
the Company after this offering constitutes the dilution to investors
in this offering. Net tangible book value per share is determined by
dividing the net tangible book value of the Company (total tangible
assets less total liabilities) by the number of outstanding shares of
Common Stock.
At September 21, 1995, the net tangible book value of the
Company was $8047 or $.0033 per share of Common Stock. After giving
effect to the sale of the maximum amount, 1,000,000 shares of Common
Stock offered hereby and the application of the estimated Net
Proceeds therefrom, the pro forma net tangible book value of the
Company at September 21, 1995 would have been $22,259 or $.0658 per
share; representing an immediate increase in net tangible book value
of $220,212 or $.0658 per share to existing shareholders and an
immediate dilution of $.1842 per share to new investors. As of the
date hereof there are currently no plans, proposals, arrangements or
understandings with respect to the sale of additional securities to
any persons for the period commencing with the closing of this
offering and the Company's identification of a Business Combination.
See "Offering."
The following table illustrates the foregoing information with
respect to dilution to new investors on a per-share basis after the
offering.
Maximum
Public offering price per Share $ .25
Net tangible book value per
Share, before this offering $ .0033
Increase per Share attributable
to Payment by new investors $ .0325
Net tangible book value per Share,
after this offering $ .0658
Dilution to new investors per Share $ .1842
The following table sets forth as of the date of this Prospectus,
with respect to existing shareholders and new investors, a comparison
of the number of shares of Common Stock acquired from the Company,
their percentage ownership of such shares, the total consideration
paid, the percentage of total consideration paid and the average
price per share:
Shares Purchased Total Consideration Price Per
Amount Percentage Paid Percentage Share
Existing
Shareholders 2,740,000 73.3 $13,750.00 5.2 $.005
New Investors 1,000,000 26.7% 250,000.00 94.8 $.50
Total 3,740,000 100.0% 263,750.00 100.0
USE OF PROCEEDS
Because Management has no specific business contemplated for the
Company, it is unable to precisely indicate categories for the use of
proceeds from this Blank Check Offering. However, the following
table sets forth Management's estimate as to how the proceeds will
likely be allocated:
Minimum Maximum
Gross Gross
Proceeds Proceeds
Description Raised(l) Raised (l)
Working capital available for
operations and other business
endeavors upon completion of
the Blank Check Offering (2) $17,100 $219,600
Expenses of the Blank Check
Offering (3) $ 5,400 $ 5,400
Underwriting Commissions $ 2,500 $ 25,000
Total $25,000 $250,000
(1) The Company intends' to utilize the proceeds from this Blank
Check Offering in the priority set forth in this column whether or
not such gross proceeds or a lesser amount are raised. No assurances
are given that the Company will sell any of its Shares and raise
gross proceeds in any of such aggregate amounts.
(2) The working capital (i.e., monies to be used in connection with
a potential acquisition, including but not limited to due diligence,
travel and related out-of -pocket expenses, and consulting fees, if
any) that will be available should be considered to be uncommitted
because the Company is not presently planning to invest in any
specific business or property, and the Company has no understanding,
arrangement or contractual commitment to participate in, or acquire,
any business or property. Such funds, however, may be used in
connection with tho Company's acquisition of a business or property,
including the costs of such acquisition. Substantial funds could be
expended in connection with preparing for an acquisition that is not
consummated. (See "PROPOSED BUSINESS - Business Objectives" and
"CONFLICTS Of Interest.") Working capital also will be used for
paying other costs of the Company's operations, including legal and
accounting fees and printing costs incurred in the filing of the
periodic reports under the federal securities laws. A portion of the
gross proceeds raised hereby may be paid to officers, directors and
promoters, and their affiliates or associates for any of their
out~of-pocket expenses relating to this offering.. The Company has
not established any limit on the amount of the gross proceeds that
may be paid to officers, directors and promoters and their affiliates
or associates for expenses of the offering. However, no portion of
the proceeds raised hereby will be paid to those persons, directly or
indirectly, as consultants' fees, advisors' fees, officers: salaries,
directors' fees, warrant solicitation fees, finders' fees for
acquisitions, purchase of shares or other payments, in accordance
with an informal understanding among Management. Management is not
aware of any circumstances under which such policy through its own
initiative may be changed. Working capital also may be used to
obtain the services of independent outside consultants to evaluate
prospective acquisitions for the Company. If the Company uses
outside consultants. it will compensate such consultants at
competitive rates. The Company is not presently under any agreement
or understanding to use the services of any outside consultant for
such purposes. Indeed, the Company may choose to enter into an
acquisition or other business endeavors without seeking such
consulting services.
(3) Includes legal, accounting, printing, stock transfer fees, and
other miscellaneous expanses.
The Company has received a total of $5,000 from its founding
shareholders, all of which was a capital contribution (See "CERTAIN
TRANSACTIONS.") This amount is being used as seed money to finance
part of the expenses of this Blank Check Offering. The Company
estimates that it will have available as working capital for
acquisitions and other business endeavors an aggregate of
approximately $219,000, assuming all of the Shares offered hereby are
sold and underwriting commissions are paid, of which no assurances
are given.
The Company presently anticipates that it will be able to locate
and acquire suitable business interests or properties utilizing the
net proceeds of this Blank Check Offering, assuming all or
substantially all of the net proceeds from the maximum offering are
raised. In the event that substantially less than the net proceeds
from the maximum offering are raised, the Company's plans may be
materially and adversely effected in that the Company may find it
even more difficult, if not impossible, to realize its goals. In any
event, if the Company eventually determines that a business
opportunity requires additional funds, regardless of the level of net
proceeds raised, the Company may seek such additional financing
through loans, additional stock issuances or through other financing
arrangements. No such financing arrangements presently exist, and
no assurances can be given that such additional financing will be
available, or, if available, whether such additional financing will
be on terms acceptable to the Company. Investors buying Shares in
this Blank Check Offering will not, unless otherwise required by law,
participate in the determination of whether to obtain additional
financing or as to the terms of any such financing. (See "PROPOSED
BUSINESS").
The net proceeds of this Blank Check Offering may be used, in
Management's discretion, to make loans (other than to officers and
other affiliates); no restrictions exist other than as set forth
above, as to whom loans may be made. Further, no criteria have as
yet been established for determining whether or not to make loans,
whether any such loans will be secured or limitations as to amount.
The Company has not and does not presently intend to impose any
limits or other restrictions on the amount or circumstances under
which any of such transactions may occur, except that none of the
Company's officers, directors or their affiliates shall receive any
personal financial gain from the proceeds of this Blank Check
Offering except for reimbursement for out-of-pocket offering
expenses. No assurance can be given that any of such potential
conflicts of interest will be resolved in favor of the Company or
will otherwise not cause the Company to lose potential opportunities.
None of the proceeds raised hereby will be used to make any
loans to the Company's promoters. management or their affiliates or
associate of any of the Company' s shareholders. Further, the
Company may not borrow funds and use the proceeds therefrom to make
payments to the Company's promoters, management or their affiliates
or associates.
It is contemplated that the DEPOSITED FUNDS of this Blank Check
Offering will be invested in one of the following, pending the
consummation of any acquisition effected in accordance with Rule 419:
(a) an obligation that constitutes a "deposit," as that
term is defined in Section 3(1) of the Federal Deposit Insurance Act
[12 U.S.C. 1813 (1) (1991)];
(b) securities of an open-end investment company registered
under the Investment Company Act of 1940 [15 U.S.C. 800.1 et seq.]
that holds itself out as a money market fund meeting the conditions
of paragraph (c) (2), (c)(3) and (c) (4) of Rule 2a-7 (17 CFR
270.2a-7) under the Investment Company Act of 1940; or
(c) securities that are direct obligations of, or
obligations guaranteed as to principal or interest by, the United
States.
The Company believes that the proceeds from this Blank Check
Offering will be sufficient to satisfy the Company's cash needs for
at least one year. The Company may be deemed an "investment company"
should the net proceeds of this Blank Check Offering remain invested
in such investments for more than one year. Being deemed an
investment company without registration under the Investment Company
Act of 1940 can result in civil liability ad criminal penalties to
controlling person in certain instances, as well as civil liabilities
and unenforceability of contracts with regard to the Company. In the
event the Company has not completed an acquisition of a business
within one year of the closing of this Blank Check Offering, the
Company will take such actions as it deems necessary to avoid being
classified as an "investment company." Such measures may include a
decision, if deemed necessary, to seek shareholder approval to
liquidate the Company. If there is such a liquidation, all investors
in this Blank Check Offering, will receive the liquidated assets
comprised of the DEPOSITS FUNDS on a pro-rata basis.
CAPITALIZATION
The following table sets forth the capitalization of the Company
as of September 21, 1995, and as adjusted to give effect to the sale
of the minimum and maximum number of 1,000,000 Shares being offered
hereby and the application of the estimated net proceeds therefrom:
Minimum - 100,000 Shares
Outstanding As Adjusted
Shareholder's Equity(1)
Common Stock, $.001 per value
100,000,000 shares authorized;
2,470,000 shares issued:
2,570,000 as adjusted $ 2,140 $ 3,470
Capital in excess of par value $11,280 $229,880
Deficit accumulated during
development stage $( 5,091) $ (5,091)
Total shareholders' equity $ 8,659 $228,259
Maximum - 1,000,000 Shares
Outstanding As Adjusted
Shareholder's Equity(1)
Common Stock, $.001 per value
100,000,000 shares authorized;
2,470,000 shares issued:
3,470,000 as adjusted $ 2,140 $ 3,470
Capital in excess of par value $11,280 $229,880
Deficit accumulated during
development stage $( 5,091) $ (5,091)
Total shareholders' equity $ 8,659 $228,259
PROPOSED BUSINESS
Introduction
The Company was formed in March, 1992 to seek to effect a
merger, exchange of capital stock, asset acquisition or other similar
business combination (a "Business Combination") with an operating
business (an "Acquired Business"). The business objective of the
Company is to seek to effect a Business Combination with an acquired
Business, which the Company believes has significant growth potential
The Company will not engage in any substantive commercial business
immediately following this offering and for an indefinite period of
time following this offering. The Company has no plan, proposal,
agreement, understanding or arrangement to acquire or merge with any
specific business or company and the Company has not identified any
specific Business or company for investigation and evaluation. The
Company intends to utilize cash (to be derived from the proceeds of
this offering), equity, debt or a combination thereof in effecting a
Business Combination. While the Company may, under certain
circumstances, seek to effect Business Combinations with more than
one Acquired Business, it will not expend less than the Threshold
Amount upon its first Business Combination. Consequently, it is
likely that the Company will have the ability to effect only a single
Business Combination. The Company may effect a Business Combination
with an Acquired Business which may be financially unstable or in its
early stage of development or growth.
"Blank Check" Offering
Background. As a result of management's broad discretion with
respect to the specific application of the Net Proceeds of this
offering, this offering can be characterized as a "blank check"
offering. Although substantially all of the Net Proceeds of this
offering are intended to be generally applied toward effecting a
Business Combination, such proceeds are not otherwise being
designated for any more specific purposes. Accordingly, prospective
investors will invest in the Company without an opportunity to
evaluate the specific merits or risks of any one or more Business
Combinations. A Business Combination may involve the acquisition of,
or merger with, a company which does not need substantial additional
capital but which desires to establish a public offering itself,
while avoiding what it may deem to be adverse consequences of
undertaking a public offering itself, such as time delays,
significant expense, loss of voting control and compliance with
various Federal one state securities laws.
No Present Potential of Acquiring Any Business: Related Party
Acquisitions. None of the Company's officers, directors, promoters,
their affiliates or associates have had any preliminary contact or
discussions with any representative of the owner of any business or
company regarding the possibility of an acquisition or merger
transaction contemplated hereby. While Management will have sole
discretion to determine which businesses, if any, are intended to be
formed or acquired, as well as the intended terms of any
acquisition, purchasers in this Blank Check offering will, as further
discussed under "PROSPECTUS SUMMARY - Investors Rights to Reconfirm
Investment Under Rule 419", in all likelihood have the opportunity
to evaluate the merits and risks of an acquisition and be entitled to
make an election as to whether they desire to remain investors in the
Company. An acquisition will only be consummated if the number of
investor purchasers representing 80% of the maximum offering proceeds
reconfirm that investment. Management has no present intention of
(a) considering a business combination with entities owned or
controlled by affiliates or associates of the Company (herein defined
as a "related party transaction"); (b) creating subsidiary entities
with a view to distributing their securities to the shareholders of
the Company; or (c) selling any securities owned or controlled by
affiliates and associates of the Company in connection with any
business combination transaction without affording all shareholders
a similar opportunity. In the event management contemplates a
related party transaction it will obtain an independent appraisal of
the value of the business or assets to be acquired and no transaction
will be structured unless it is at a price which is lesser or equal
to the value determined by the independent appraisal. Such a related
party transaction is not an arms-length transaction because
management would be on both sides of the transaction and may have
financial interests which are adverse to the shareholders of the
Company. Such a situation creates a potential for management's
fiduciary duties to the shareholders of the Company to be compromised
and the interests of the shareholders to be affected adversely. (See
"RISK FACTORS"). If management's fiduciary duties are compromised,
any remedy available to shareholders under state corporate law will
most likely be prohibitively expensive and time consuming.
Unspecified Industry and Acquired Business. To date, the
Company has not selected any particular industry or any Acquired
Business in which to concentrate its Business Combination efforts.
Accordingly, there is no current basis for prospective investors in
this offering to evaluate the possible merits or risks of the
Acquired Business or the particular industry in which the Company may
ultimately operate. However, in connection with seeking shareholder
approval of a Business Combination, the Company, (as a result of its
intention to register its Common Stock under the Exchange Act and
thereby become subject to the proxy solicitation rules contained
therein) intends to furnish its shareholders with proxy solicitation
materials prepared in accordance with the Exchange Act which, among
other matters, will include a description of the operations of the
Acquired Business candidate and audited historical financial
statements thereof. To the extent the Company effects a Business
Combination with a financially unstable company or an entity in its
early stage of development or growth (including entities without
established records of sales or earnings), the Company will become
subject to numerous risks inherent in the business and operations of
financially unstable and early stage or potential emerging growth
companies. In addition, to the extent that the Company effects a
Business Combination with an entity in an industry characterized by
a high level of risk, the Company will become subject to the
currently unascertainable risks of that industry. An extremely high
level of risk frequently characterizes certain industries which
experience rapid growth. Although management will endeavor to
evaluate the risks inherent in a particular industry or Acquired
Business, there can be no assurance that the Company will properly
ascertain or assess all significant risk factors.
Probable Lack of Business Diversification. While the Company
may, under certain circumstances, seek to effect Business
Combinations with more than one Acquired Business, it will not expend
less than the Threshold Amount upon its first Business Combination.
Consequently, it is likely that the Company will have the ability to
effect only a single Business Combination. Accordingly, the
prospects for the Company's success will be entirely dependent upon
the future performance of a single business. Unlike certain entities
which have the resources to consummate several Business Combination
of entities operating in multiple industries or multiple areas of a
single industry, it is highly likely that the Company will not have
the resources to diversify its operations or benefit from the
possible spreading of risks or offsetting of losses. The Company's
probable lack of diversification may subject the Company to numerous
economic, competitive and regulatory developments, any or all of
which may nave a substantial adverse impact upon the particular
industry in which the Company may operate subsequent to a Business
Combination. In addition, by consummating a Business Combination
with only a single entity, the prospects for the Company's success
may become dependent upon the development or market acceptance of a
single or limited number of products, processes or services.
Accordingly, notwithstanding the possibility of capital investment in
and management assistance to the Acquired Business by the Company,
there can be no assurance that the Acquired Business will prove to be
commercially viable. Prior to the consummation of a Business
Combination, the Company has no intention to purchase or acquire a
minority interest in any company.
Opportunity for Shareholder Evaluation or Approval of Business
Combinations. The investors in this offering will, in all
likelihood, neither receive nor otherwise have the opportunity to
evaluate any financial or other information which will be made
available to the Company in connection with selecting a potential
Business Combination until after the Company has entered into an
agreement to effectuate a Business Combination. Such agreement to
effectuate a Business Combination, however, will be subject to
shareholder approval as discussed elsewhere herein. As a result,
investors in this offering will be almost entirely dependent on the
judgment of management in connection with the selection and ultimate
consummation of a Business Combination. In connection with seeking
shareholder approval of a Business Combination, the Company intends
to furnish its shareholders with proxy solicitation materials
prepared in accordance with the Exchange Act which, among other
matters, will include a description of the operations of the Acquired
Business candidate and audited historical financial statements
thereof.
Limited Ability to Evaluate Acquired Business' Management.
While the Company's ability to successfully effect a Business
Combination will be dependent upon certain key personnel, the future
role of such personnel in the Acquired Business cannot presently be
stated with any certainty. While it is possible that certain of the
Company's key personnel will remain associated in some capacities
with the Company following a Business Combination, it is unlikely
that such key personnel will devote their full efforts to the affairs
of the Company subsequent thereto. Moreover, there can be no
assurance that such personnel will have any experience or knowledge
relating to the operations of particular Acquired Business.
Furthermore, although the Company intends to closely scrutinize the
management of a prospective Acquired Business in connection with
evaluating the desirability of effecting a Business Combination,
there can be no assurance that the Company's assessment of such
management will prove to be correct, especially in light of the
inexperience of current key personnel of the Company in evaluating
businesses. Furthermore, there can be no assurance that such future
management will have the necessary skills, qualifications or
abilities to manage a public company intending to embark on a program
of business development. The Company may also seek to recruit
additional managers to supplement the incumbent management of the
Acquired Business. There can be no assurance that the Company will
have the ability to recruit additional managers, or that such
additional managers will have the requisite skill, knowledge or
experience necessary or desirable to enhance the incumbent
management.
Selection of an Acquired Business and Structuring of a Business
Combination. Management anticipates that the selection of an
Acquired Business will be complex and risky because of competition
for such business opportunities among all segments of the financial
community. The nature of the Company's search for the acquisition of
an Acquired Business requires maximum flexibility inasmuch as the
Company will be required to consider various factors and divergent
circumstances which may preclude meaningful direct comparison among
the various business enterprises, products or services investigated.
Investors should recognize that the possible lack of diversification
among the Company's acquisitions may not permit the Company to offset
potential losses from one venture against profits from another. This
should be considered a negative factor affecting any decision to
purchase the Shares. Management of the Company will have virtually
unrestricted flexibility in identifying and selecting a prospective
Acquired Business. In addition, in evaluating a prospective Acquired
Business, management will consider, among other factors, the
following:
- costs associated with effecting the Business Combination;
- equity interest in and possible management
participation in the Acquired Business;
- growth potential of the Acquired Business and
the industry in which it operates;
- experience and skill of management and
availability of additional personnel of the
Acquired Business;
- capital requirements of the Acquired Business;
- competitive position of the Acquired Business;
- stage of development of the product, process or
service of the Acquired Business;
- degree of current or potential market acceptance
of the product, process or service of the
Acquired Business:
- possible proprietary features and possible other
protection of the product, process or service of
the Acquired Business; and
- regulatory environment of the industry in which
the Acquired Business operates.
The foregoing criteria are not intended to be exhaustive; any
evaluation relating to the merits of a particular Business
Combination will be based, to the extent relevant, on the above
factors as well as other considerations deemed relevant by management
in connection with effecting a Business Combination consistent with
the Company's business objective. In connection with its evaluation
of a prospective Acquired Business, management anticipates that it
will conduct an extensive due diligence review which will encompass,
among other things, meetings with incumbent management and inspection
of facilities, as well as review of financial or other information
which will be made available to the Company.
The Company will consider the quality of the management of any
Acquired Business candidate and the operating records of the entity,
the soundness of the service or product to be developed or being
developed, the effect of market and economic conditions and
governmental policies on the business and its products, the nature of
its competition, and the total projected required capital.
The time and costs required to select and evaluate an Acquired
Business candidate (including conducting a due diligence review) and
to structure and consummate the Business Combination (including
negotiating relevant agreements and preparing requisite documents for
filing pursuant to applicable securities laws and state corporation
laws) cannot presently be ascertained with any degree of certainty.
Messrs. Spinali and French and Ms. Jean Boyd, the current executive
officers of the Company, intend to devote approximately 5% of their
respective time to the affairs of the Company and, accordingly,
consummation of a Business Combination may require a greater period
of time than if the Company's executive officers devoted their full
time to the Company's affairs. Any costs incurred in connection with
the identification and evaluation of a prospective Acquired Business
with which a Business Combination is not ultimately consummated will
result in a loss to the Company and reduce the amount of capital
available to otherwise complete a Business Combination.
The Company anticipates that it will make contact with Business
prospects primarily through the efforts of its officers, who will
meet personally with existing management and key personnel, visit and
inspect material facilities, assets, products and services belonging
to such prospects, and undertake such further reasonable
investigation as management deems appropriate, to the extent of its
limited financial resources. The Company anticipates that certain
Acquired Business candidates may be brought to its attention from
various unaffiliated sources, including securities broker-dealers,
investment bankers, venture capitalists, bankers, other members of
the financial community, and affiliated sources. While the Company
does not presently anticipate engaging the services of professional
firms that specialize in business acquisitions on any formal basis,
the Company may engage such firms in the future, in which event the
Company may pay a finder's fee or other compensation. Such finder
may be required to be registered as, among other things, an agent or
broker-dealer under the laws of certain jurisdictions. See
"Management, Certain Transactions."
As part of the Company's investigation of prospective
enterprises, products and services, management intends to request
that current owners of a prospective Acquired Business provide, among
other things, written materials regarding the current owner's
business, product or service, available market studies, as well as
the assumptions upon which they are made, appropriate title
documentation with respect to the assets, products and services of
the potential Acquired Business, detailed written descriptions of any
transactions between the potential Acquired Business and any of its
affiliates, copies of pleadings and material litigation, if any,
copies of material contracts and any and all other information deemed
relevant. Additionally, the Company may verify such information, if
possible, by interviewing competitors, certified public accountants
and other persons in a position to have independent knowledge
regarding the product or service as well as the financial condition
of the potential Acquired Business.
As a general rule, Federal and state tax laws and regulations
have a significant impact upon the structuring of business
combinations. The Company will evaluate the possible tax
consequences of any prospective Business Combination and will
endeavor to structure the Business Combination so as to achieve the
most favorable tax treatment to the Company, the Acquired Business
and their respective shareholders. There can be no assurance that
the IRS or appropriate state tax authorities will ultimately assent
to the Company's tax treatment of a particular consummated Business
Combination. To the extent the IRS or state tax authorities
ultimately prevail in recharacterizing the tax treatment of a
Business Combination, there may be adverse tax consequences to the
Company, the Acquired Business and their respective shareholders.
Tax considerations as well as other relevant factors will be
evaluated in determining the precise structure of a particular
Business Combination, which could be effected through various forms
of a merger, consolidation or stock or asset acquisition.
The Company may utilize cash (derived from the proceeds of this
offering), equity, debt or a combination of these as consideration in
effecting a Business Combination. Although the Company has no
commitments as of the date of this Prospectus to issue any shares of
Common Stock other than as described in this Prospectus, the Company
will, in all likelihood, issue a substantial number of additional
shares in connection with a Business Combination. To the extent that
such additional shares are issued, dilution to the interest of the
Company's shareholders will occur. Additionally, if a substantial
number of shares of Common Stock are issued in connection with a
Business Combination, a change in control of the Company may occur.
If securities of the Company are issued as part of an
acquisition, it cannot be predicted whether such securities will be
issued in reliance upon exemptions from registration under applicable
federal or state securities laws or will be registered for public
distribution. When registration of securities is required,
substantial cost may be incurred and time delays encountered. In
addition, the issuance of additional securities and their potential
sale in any trading market which may develop in the Company's Common
Stock, of which there is no assurance, may depress the price of the
Company's Common Stock in any market which may develop in the
Company's Common Stock. Additionally, such issuance of additional
securities of the Company would result in a decrease in the
percentage ownership of the Company of purchasers of the Common Stock
being offered hereby.
The Company's operations may be limited by the Investment
Company Act of 1940. Unless the Company registers with the
Securities and Exchange Commission as an investment company, it will
not, among other things, be permitted to own or propose to acquire
investment securities, exclusive of government securities and cash
items, which have a value exceeding 40% of the value of the Company's
total assets on an unconsolidated basis. It is not anticipated that
the Company will have a policy restricting the type of investments it
may make. While the Company will attempt to conduct its operations
so as not to require registration under the Investment Company Act of
1940, there can be no assurances that the Company will not be deemed
to be subject to the Investment Company Act of 1940.
There are currently no limitations relating to the Company's
ability to borrow funds to increase the amount of capital available
to the Company to effect a Business Combination or otherwise finance
the operations of the Acquired Business. The amount and nature of
any borrowings by the Company will depend on numerous considerations,
including the Company's capital requirements, the Company's perceived
ability to meet debt service on such borrowings and then prevailing
conditions in the financial markets, as well as general economic
conditions. There can be no assurance that debt financing, if
required or otherwise sought, would be available on terms deemed to
be commercially acceptable and in the best interests of the Company.
The inability of the Company to borrow funds for an additional
infusion of capital into an Acquired Business may have material
adverse effects on the Company's financial condition and future
prospects. To the extent that debt financing ultimately proves to be
available, any borrowings may subject the Company to various risks
traditionally associated with incurring indebtedness, including the
risks of interest rate fluctuations and insufficiency of cash flow to
pay principal and interest. Furthermore, an Acquired Business may
have already incurred debt financing and, therefore, all the risks
inherent thereto.
Because of the Company's small size, investors in the Company
should carefully consider the business constraints on its ability to
raise additional capital when needed. Until such time as any
enterprise, product or service which the Company acquires generates
revenues sufficient to cover operating costs, it is conceivable that
the Company could find itself in a situation where it needs
additional funds in order to continue its operations. This need
could arise at a time when the Company is unable to borrow funds
and/or when market acceptance for the sale of additional shares of
the Company's Common Stock does not exist.
Payment of Salaries or Consulting Fees
In connection with the consummation of a Business Combination,
the Company may become obligated to pay to certain persons consulting
fees and/or salaries. No officers, directors or current
shareholders shall be paid any consulting fees or salaries for
services delivered by such persons in connection with a Business
Combination. The Company shall reimburse officers and directors for
any accountable reasonable expenses incurred in connection with
activities on behalf of the Company. The Escrow Fund (including any
interest earned thereon) will not be used for salaries or benefits
payable to Mr. Spinali, Mr. French or Ms. Boyd to reimburse the
Company's officers and directors for expenses incurred in connection
with activities on behalf of the Company. No funds (including any
interest earned thereon) will be disbursed from the Escrow Fund for
reimbursement of expenses. Other than the foregoing, there is no
limit on the amount of such reimbursable expenses and there will be
no review of the reasonableness of such expenses by anyone other than
the Board of Directors, all of the members of which are officers.
Subsequent to the consummation of a Business Combination, to the
extent current officers, directors and/or shareholders of the Company
provide services to the Company, such persons may receive from the
Company consulting fees and/or salaries. The Company has no present
intention to pay to anyone any consulting fees or salaries. The
Company is not aware of any plans, proposals, understandings or
arrangements with respect to the sale of any shares of Common Stock
of the Company by any current shareholders. Further, there are no
plans, proposals, understandings or arrangements with respect to the
transfer by the Company to any of the Current Shareholders, any funds
securities or other assets of the Company.
Involvement of Certain Principals in Prior "Blank Check" Companies
Ms. Jean Boyd, Vice President, Treasurer and Director, is a
director and officer of several inactive "shell" corporations. of
Active Gold and Eastern Star Mining, two Nevada corporations which
are "blank check" companies and which have the same business
objective is the same as the Company's business objective: to effect
a Business Combination with an Acquired Business which has growth
potential. (See "MANAGEMENT").
Competition
The Company expects to encounter intense competition from other
entities having a business objective similar to that of the Company.
Many of these entities are well established and have extensive
experience in connection with identifying and effecting business
combinations directly or through affiliates. Many of these
competitors possess greater financial, technical, personnel and other
resources than the Company and there can be no assurance that the
Company will have the ability to compete successfully. Inasmuch as
the Company may not have the ability to compete effectively with its
competitors in selecting a prospective Acquired Business, the Company
may be compelled to evaluate certain less attractive prospects.
There can be no assurance that such prospects will permit the Company
to meet its stated business objective.
Uncertainty of Competitive Environment of Acquired Business
In the event that the Company succeeds in effecting a Business
Combination, the Company will, in all likelihood, become subject to
Intense competition from competitors of the Acquired Business. In
particular, certain industries which experience rapid growth
frequently attract an increasingly larger number of competitors,
including competitors with increasingly greater financial, marketing,
technical and other resources than the initial competitors in the
industry. The degree of competition characterizing the industry of
any prospective Acquired Business cannot presently be ascertained.
There can be no assurance that, subsequent to a Business Combination,
the Company will have the resources to compete effectively,
especially to the extent that the Acquired Business is in a high
growth industry.
Redemption Rights
At the time the Company seeks shareholder approval of any
potential Business Combination, the Company will offer (the
"Redemption Offer") each of the Public Stockholders the right, for a
specified period of time of not less than 20 days, to redeem all, but
not a portion of, their shares of Common Stock, at a per share price
equal to the Company's liquidation value on the record date for
determination of shareholders entitled to vote upon the proposal to
approve such Business Combination (the "Record Date") divided by the
number of Shares held by all of the Public Stockholders. The
Redemption Offer will be described in the disclosure documentation
relating to the proposed Business Combination, which such disclosure
documentation may require the Company to file a Registration
Statement with the Commission. See "The Company." The Company's
liquidation value will be equal to the Company's book value, as
determined by the Company and audited by the Company's independent
public accountants (the "Company's Liquidation Value") (which amount
will be less than the initial public offering price per Share in the
offering in view of the expenses of this offering and the anticipated
expenses which will be incurred in seeking a Business Combination),
calculated as of the Record Date. In no event, however, will the
Company's Liquidation Value, be less than the Escrow Fund, inclusive
of any net interest income thereon. If less than 30% of the Shares
held by the Public Stockholders elect to have their Shares redeemed,
the Company may, but will not be required to, proceed with such
Business Combination. If the Company elects to so proceed, it will
redeem Shares, based upon the Company's Liquidation Value, from those
Public Stockholders who affirmatively requested such redemption and
who voted against the Business Combination. If 30% or more of the
Shares held by Public Stockholders vote against approval of any
potential Business Combination, the Company will not proceed with
such Business Combination and will not redeem such shares. The
determination as to whether the Company proceeds with a Business
Combination ultimately rests with the Company. If the Company
determines not to pursue a Business Combination, even if less than
30% of the Shares held by Public Stockholders vote against approval
of the potential Business Combination, no Shares will be redeemed.
If a shareholder votes against a potential Business Combination and
the Company determines not to pursue such Business Combination, such
vote will not constitute the exercise of the Redemption Offer so as
to permit release of the Escrowed Funds. Escrowed Funds will be
released to shareholders voting against a Business Combination only
in connection with the consummation of a Business Combination.
Unless otherwise specified by such shareholder, a vote against the
proposed Business Combination will constitute a request by such
shareholder for redemption of his Shares.
Prescribed Acquisition Criteria
As previously discussed herein on the cover page of this
Prospectus and under "PROSPECTUS SUMMARY", this Blank Check
Offering is subject to Rule 419 under the Act. As such, any
agreement to acquire an acquisition candidate must provide for the
acquisition of a. business or assets for which the fair market value
of the business or assets to be acquired represents at least 80% of
the offering proceeds, less underwriting commissions. if any, and
expenses and dealer allowances payable to non-affiliates. Once an
acquisition agreement meeting the above criteria has been executed,
the Company must successfully complete a reconfirmation offering as
described herein under "PROSPECTUS SUMMARY - Investor Rights to
Reconfirm Investment Under Rule 419 - Prescribed Acquisition
Criteria."
Certain Securities Laws Considerations
The Company has agreed, contemporaneous with the sale of the
Shares, that it will file an application with the Securities and
Exchange Commission to register its Common Stock under the provisions
of Section 12(g) of the Exchange Act, and that it will use it best
efforts to continue to maintain such registration for a minimum of
two years from the date of this Prospectus. Such registration will
require the Company to comply with periodic reporting, proxy
solicitations and certain other requirements of the Exchange Act.
If the Company seeks shareholder approval of a Business
Combination at such time as the Company's securities are registered
pursuant to Section 12 of the Exchange Act, the Company's proxy
solicitation materials required to be transmitted to shareholders may
be subject to prior review by the Securities and Exchange Commission.
Under the Federal securities laws, public companies must furnish
certain information about significant acquisitions, which information
may require audited financial statements of an acquired company with
respect to one or more fiscal years, depending upon the relative size
of the acquisition. Consequently, if a prospective Acquired Business
did not have available and was unable to reasonably obtain the
requisite audited financial statements, the Company could, in the
event of consummation of a Business Combination with such company, be
precluded from (i) any public financing of its own securities for a
period of as long as three years, as such financial statements would
be required to undertake registration of such securities for sale to
the public; and (ii) registration of its securities under the
Securities Exchange Act of 1934. Consequently, it is unlikely that
the Company would seek to consummate a Business Combination with such
an Acquired Business. See "Risk Factors."
The Company is currently not seeking listing of the Shares on
NASDAQ. The Shares are not listed on NASDAQ and if the Company, at
any time, has net tangible assets of $5,000,000 or less, transactions
in the Shares would be subject to Rule 15g promulgated under the
Securities Exchange Act of 1934. Under such rule, broker-dealers who
recommend such securities to persons other than established customers
and accredited investors (generally institutions with assets in
excess of $5,000,000 or individuals with net worth in excess of
$1,000,000 or annual income exceeding $200,000 or $300,000 jointly
with their spouse) must make a special written suitability
determination for the purchaser and receive the purchaser's written
agreement to a transaction prior to sale. Transactions are exempt
from this rule of the market price of the Shares is at least $5.00
per share. The U.S. Securities and Exchange Commission Rule 3a51-1,
that generally defines a penny stock to be any equity security that
has a market price of less than $5.00 per share, subject to certain
exemptions. Such exemptions include an equity security issued by an
issuer that has (i) net tangible assets of at least $2,000,000, of
such issuer has been in continuous operation for at least three
years, (ii) net tangible assets of at least $5,000,000, of such
issuer has been in continuous operation for less than three years, or
(iii) average revenue of at least $6,000,000 for the preceding three
years. Unless an exemption is available, Rule 15g require the
delivery, prior to any transaction involving a penny stock, of a
disclosure schedule explaining the penny stock market and the risks
associated therewith.
Since the Shares are subject to Rule 15g, broker-dealers may
find it difficult to effectuate customer transactions and/or trading
activity in the Shares, thus, the market price, if any, may be
depressed, and an investor may find it more difficult to dispose of
the Shares. Also, the market liquidity for the Company's Common
Stock could be adversely affected by limiting the ability of
broker/dealers to sell the Company's Common Stock and the ability of
purchasers in this offering to sell their securities in the secondary
market.
Facilities
Since December 1994 the Company, pursuant to a an oral agreement
with the President, at no cost to the Company, has maintained its
executive offices in approximately 200 square feet of office space
located at 1275 East Bellview, Cherry Hills Village, Colorado, 80121,
in the home of the President. The Company considers this space,
which is leased by the President to be adequate for its needs and,
other than as stated, has no preliminary agreements or understandings
with respect to the office facility in the future.
Employees
As of the date of this Prospectus, the Company's employees
consist of its executive officers, each of whom devote approximately
5% of their working time to the affairs of the Company.
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The Company, a development stage entity, has neither engaged in
any operations nor generated any revenues to date. Its entire
activity since its inception has been to prepare for its proposed
fund raising through an offering of equity securities as contemplated
herein.
The Company's expenses to date, all of which are attributable to
its formation and proposed fund raising are approximately $5,091.
Substantially all of the Company's working capital needs
subsequent to the offering contemplated hereby will be attributable
to the identification of a suitable Acquired Business, and thereafter
to effectuate a Business Combination with such Acquired Business.
Such working capital needs are expected to be satisfied from the Net
Proceeds of the proposed offering. Although no assurances can be
made, the Company believes it can satisfy its cash requirements until
a Business Combination is consummated, with 10% of the Net Proceeds
derived hereby. Due to the possible indefinite period of time to
consummate a Business Combination and the nature and cost of the
Company's expenses related to the Company's search and analysis of a
Business Combination, there can be no assurances that the Company's
cash requirements until a Business Combination is consummated will be
satisfied with 10% of the Net Proceeds of this offering (including
interest income earned thereon). Prior to the conclusion of this
offering the Company currently anticipates its expenses to be limited
to accounting fees, legal fees, telephone, mailing, filing fees,
occupational license fees, escrow agent fees, transfer agent fees
See "Risk Factors."<PAGE>
MANAGEMENT
Directors and Officers
Name Age Title
J. Michael Spinali 46 Chief Financial Officer,
Chairman, President, Director
Ms. Jean Boyd 57 Vice President, Treasurer,
Director
Brian S. French 50 Vice President, Secretary, Director
J. Michael Spinali will serve as President and Chief Operations
Officer of the Company and will devote 5% of his full time to the
Company's affairs. His responsibilities will include management of
the Company's operations as well as the Company's administrative and
financial activities. Since 1994 Mr. Spinali has been President of
Jalapeno Mexican Grill a restaurant company. From 1993 to present,
Mr. Spinali has been involved in real estate development in Denver,
Colorado. From 1983 to 1992, Mr. Spinali was A Founder, Chief
Operations Officer, and Chief Financial Officer of Aspen Marine
Group, Inc., a public corporation engaged in boat manufacturing,
houseboat vacation ownership, and marina acquisition, management, and
development. In April of 1991, Aspen Marine Group was listed in the
Denver Post 100, and in June of 1991 was rated number 67 in Colorado
Business Magazines Top 300 Public Companies. Aspen Marine Group's
revenues exceeded $16,000,000 in 1991.
Brian S. French will serve as Secretary, Treasurer and
Controller of the Company and will devote 5% of his full time to the
Company's affairs. Mr. French has over ten years of combined
experience in the areas of restaurant management and corporate
finance. Currently Mr. French holds the position of Controller for
a major highway contractor. From 1986 to 1993, Mr. French was the
Controller for Aspen Marine Group, Inc. Prior experience in the
restaurant industry includes over four years management with direct
involvement in food preparation, scheduling, ordering, and cost
control. Further, Mr. French is an accomplished chef and has
developed a personnel training system specifically designed for the
restaurant industry.
Ms. Jean Boyd has been the Vice President and a member of the
Board of Directors of the Company since its inception and will devote
5% of her time to the Company's affairs. Until January 1995 Ms. Boyd
was Secretary of the Company. Ms. Boyd is the widow of Ross Boyd,
the founder of the Company. Ms. Boyd has been an officer and
director of certain other inactive "shell" companies founded by Ross
Boyd. The following table indicates such involvement for the past
five years:
Company Position Date
Active Gold Corp. Dir 7/88-9/92
VP/Dir 9/92-6/94
Pres/Dir 6/94-9/96
Eastern Star Mining, Inc. Sec/Tre/Dir 4/89-4/94
Pres/Dir 4/94-present
Charter West Corp. Sec/Dir 8/84-8/94
Pres/Dir 8/94-present
Applied Resources, Inc. Sec/Dir 6/92-6/94
Pres/Dir 6/94-present
Active Acquisitions, Inc. Sec/Tre/Dir 6/88-6/94
Pres/Dir 6/94-present
International Health
Resorts, Inc. Sec/Tre/Dir 2/92-10/93
Master Gold Corp. Sec/Tre/Dir 6/88-6/94
Pres/Dir 6/94-present
Plateau West Exploration,
Inc. Sec/Dir 5/91-5/94
Pres/Dir 5/94-7/94
Ram Financial Corp. Sec/Tre/Dir 12/89-12/93
Pres/Dir 12/93-present
Rico Diablo Mining, Inc. Sec/Tre/Dir 11/88-11/93
Pres/Dir 11/93-2/94
Lion Capital Sec/Dir unknown-6/93
Code: Dir=director, Pres=president, VP=vice president, Sec=secretary,
Tre=treasurer.
Each of the companies listed have or had the same business objective
is the same as the Company's business objective: to effect a Business
Combination with an Acquired Business which has growth potential.
None of the companies have any assets.
All Directors of the Company will hold office until the next
annual meeting of the shareholders and until their successors have
been elected and qualified.
All directors hold office until the next annual meeting of
shareholder sand the election and qualification of their successors.
Directors receive no compensation for serving on the Board of
Directors other than reimbursement of reasonable expenses incurred in
attending meetings. Officers are appointed by the Board of Directors
and serve at the discretion of the Board. Messrs. Spinal and French,
the current executive officers of the Company, intend to devote
approximately 5% of their time to the affairs of the Company.
There are no agreements or understandings for any officer or director
to resign at the request of another person and none of the officers
or directors are acting on behalf of or will act at the direction of
any other person.
Executive Compensation
No compensation has been paid to any officers or directors since
inception. Pursuant to an oral understanding with management, the
Company does not expect to pay any direct or indirect compensation to
its officers and directors except for reimbursement for reasonable
out-of-pocket expenses. There are no understandings or arrangements
otherwise relating to compensation. Management anticipates that
shares of the Company's authorized but unissued Common Stock may be
utilized in connection with a business acquisition or combination and
not as compensation to the Company's management, promoters, or their
affiliates or associates. (See "Use of Proceeds", "MANAGEMENT -
Conflicts of Interest" and "CERTAIN TRANSACTIONS").
Conflicts of Interest
The proposed business of the Company raises potential conflicts
of interest between the Company and its officers and directors. The
company has been formed for the purpose of locating suitable business
opportunities in which to participate. Each member of management
will not be devoting full time to the Company and is engaged in
various other business activities. From time to time, in the course
of such activities they may become aware of investment and business
opportunities and may be faced with the issue of whether to involve
the Company in such a transaction.
Management of the Company is required by the Company's By-Laws
to bring business opportunities to the Company insofar as they relate
to business opportunities in which the Company has expressed an
interest. Because the business of the Company is to locate a
suitable business venture, management is required to bring such
business opportunities to the Company. Potential conflicts may arise
if a member of management does not disclose such potential business
opportunities.
It is possible that members of management may organize other
companies as "blank check" or "blind pool" companies in the future
and offer their securities to the public. Management may have
conflicts in the event that another "blank check" or "blind pool"
company associated with management is actively seeking the
acquisition of properties and businesses that are identical or
similar to those that the Company may seek, should the Company
complete this Blank Check Offering. A conflict will not be present
as between the Company and another affiliated "blank check" or "blind
pool" if , before the Company begins seeking acquisitions, such
other blank check" or "blind pool" : (i) enters into any
understanding, arrangement or contractual commitment to participate
in, or acquire, any business or property; and (ii) ceases its search
for additional properties or businesses identical or similar to those
the Company may seek. Conflicts also may not be present to the
extent that potential business opportunities are appropriate for the
Company but not for other affiliated "blank check" or "blind pool"
(or vice versa), because of such factors as the difference in working
capital available to the Company. If, however, at any time the
Company and any other firms affiliated with management are
simultaneously seeking business opportunities, management may fact
the conflict of whether to submit a potential business acquisition to
the Company or to such other firms. In the en=vent that an
opportunity is appropriate to both the Company and another affiliated
"blank check" or "blind pool" management intends to first offer such
opportunity to that entity that first closed sale of its securities.
The Company will not invest the proceeds of this Blank Check
Offering in any entity affiliated with management with approval of
either a majority of the disinterested directors or approval of
disinterested shareholders holding a majority of the Company's voting
stock not owned by the Company's officers and directors, beneficially
and of record. Further, and in any event, the Company must comply
with the reconfirmation offering requirements of Rule 419. (See
PROSPECTUS SUMMARY - Investor Rights to Reconfirm Investment Under
Rule 419" and "RISK FACTORS - Conflicts of Interest"). the Company
has established no other guidelines or procedures for resolving
potential conflicts. Failure by management to resolve conflicts of
interest in favor of the Company may result in liability of
management to the Company. Management has and will continue to have
an affirmative obligation to disclose conflicts of interest to the
Company' Board of Directors or shareholders.
Other potential conflicts of interest include (i) the potential
payment of a finder's fee, other than from the proceeds of this Blank
Check Offering, to members of management, shareholders of the Company
or their affiliates if they bring a proposed business venture to the
Company and the Company entered into such business venture; (ii)
demands on management's time from their other business interests; and
(iii) the preferences, notwithstanding other possible factors, to
utilized the legal services of a major shareholder.
PRINCIPAL SHAREHOLDERS
The following table sets forth information as of the date hereof
and as adjusted to reflect the sale of the Shares offered hereby,
based on information obtained from the persons named below, with
respect to the beneficial ownership of shares of Common Stock by (i)
each person known by the Company to be the owner of more than 5% of
the outstanding shares of Common Stock, (ii) each director, and (iii)
all officers and directors as a group:
Amount and Approximate
Percentage of Outstanding Shares
Beneficial Before After
Shareholder Ownership Offering Offering
Scott Bengfort 1,000,000 40.5% 28.8%
11403 Corta Playa Laguna
San Diego, CA 92124
Robert C. Weaver, Jr.(1) 800,000 32.4% 23.1%
721 Devon Court
San Diego, CA 92109
J. Michael Spinali (2) 120,000 4.9% 3.5%
1275 East Bellview
Cherry Hills Village,
CO 80121
Jean Boyd (2) 200,000 8.1% 5.8%
1275 East Bellview
Cherry Hills Village,
CO 80121
Brian S. French (2) 40,000 1.6% 1.2%
1275 East Bellview
Cherry Hills Village,
CO 80121
All Officers & Directors 360,000 14.6% 10.4
as a Group (3 persons)
(1) Counsel for the Company
(2) Officer or Director
Unless otherwise noted, all persons named in the table have sole
voting and investment power with respect to all shares of Common
Stock beneficially owned by them. No persons named in the table are
acting as nominees for any persons or are otherwise under the control
of any person or group of persons.
Messrs. Bengfort, Weaver, Spinali and French and Ms. Boyd may be
deemed to be "promoters" and "parents" of the Company, as such terms
are defined under the Federal securities laws. Messrs. Bengfort and
Weaver, although not management, are substantial shareholders of the
Company and may be instrumental in assisting management in activities
of the Company.
CERTAIN TRANSACTIONS
On March 20, 1992, the Company issued 500,000 shares of it's
Common Stock each to Ross H. Boyd and Jean P. Boyd, at the time, the
Company's President and a Director and Vice President and a Director,
respectively, for cash and services aggregating $1,000. Ross H. Boyd
subsequently died and his shares transferred from his estate to his
wife Jean P. Boyd leaving her with a total of 1,000,000 shares. On
March 20, 1992, the Company also issued 1,000,000 shares of Common
Stock to Scott Bengfort for cash and services aggregating $1,000.
On November 16, 1994, Ms. Jean Boyd, an officer and director of
the Company, transferred from herself to Robert C. Weaver, Jr.
800,000 shares of the Company's Common Stock. Mr. Weaver is counsel
for the Company.
Since December 1994 the Company, pursuant to a an oral agreement
with the President, at no cost to the Company, has maintained its
executive offices in approximately 200 square feet of office space
located at 1275 East Bellview, Cherry Hills Village, Colorado, 80121.
On September 21, 1995, the Company issued the following Common
Stock for services rendered: 90,000 shares to J. Michael Spinali, the
Company's President and a Director, and 30,000 shares to Brian S.
French, the Company's Secretary, Treasurer and Director, for an
aggregate valuation of $4,000.
On September 21, 1995, the Company issued 350,000 shares of
Common Stock to 15 persons, including Messrs. Spinali and French for
an aggregate purchase price of $8,750.
The Company shall not make any loans to any officers or
directors following this offering. Further, the Company shall not
borrow Funds for the purpose of making payments to the Company's
officers, directors, promoters, management or their affiliates or
associates.
Officers, directors or their affiliates may act as finders of
business opportunities. The finders fees which they may receive in
connection therewith will be established by negotiation with the
Company and the potential merger partner and will be no less
favorable to the Company than could be obtained with unrelated third
parties.
DESCRIPTION OF SECURITIES
General
The Company is authorized to issue 100,000,000 shares of Common
Stock, par value $.001 per share. Prior to this offering, 2,470,000
shares of Common Stock were outstanding, held of record by 18
persons.
Common Stock
The holders of Common Stock are entitled to one vote for each
share held of record on all matters to be voted on by shareholders.
There is no cumulative voting with respect to the election of
directors, with the result that the holders of more than 50% of the
shares voted for the election of directors can elect all of the
directors. The holders of Common Stock are entitled to receive
dividends when, as and if declared by the Board of Directors out of
Funds legally available therefor. In the event of liquidation,
dissolution or winding up of the Company, the holders of Common Stock
are entitled to share ratably in all assets remaining available for
distribution to them after payment of liabilities and after provision
has been made for each class of stock, if any, having preference over
the Common Stock. Holders of shares of Common Stock, as such, have
no conversion, preemptive or other subscription rights, and, except
as noted herein, there are no redemption provisions applicable to the
Common Stock. All of the outstanding shares of Common Stock are, and
the Shares when issued and paid for as set forth in this Prospectus,
will be, fully paid and nonassessable.
Dividends
The Company has not paid any dividends on its Common Stock to
date and does not presently intend to pay cash dividends prior to the
consummation of a Business Combination. The payment of cash
dividends in the future, of any, will be contingent upon the
Company's revenues and earnings, if any, capital requirements and
general financial condition subsequent to consummation of a Business
Combination. The payment of any dividends subsequent to a Business
Combination will be within the discretion of the Company's then Board
of Directors. It is the present intention of the Board of Directors
to retain all earnings, if any, for use in the Company's business
operations and, accordingly, the Board does not anticipate paying any
cash dividends in the foreseeable future.
Transfer Agent
The transfer agent for the Company's Common Stock is Atlas Stock
Transfer, 5899 South State Street, Salt Lake City, UT 84107.
Shares Eligible For Future Sale
Upon the consummation of maximum amount of this offering, the
Company will have 3,470,000 shares of Common Stock outstanding. Of
these shares, the 1,000,000 shares sold in this offering will be
freely tradeable without restriction or further registration under
the Securities Act, except for any shares purchased by an "affiliate"
of the Company (in general, a person who has a control relationship
with the Company) which will be subject to limitations of Rule 144
promulgated by the Commission under the Securities Act. All of the
remaining 2,470,000 shares are deemed to be "restricted securities,"
as that term is defined under Rule 144 promulgated under the
Securities Act, in that such shares were issued in private
transactions not involving a public offering. 1,200,000 of such
shares became eligible for sale under Rule 144 on March 20, 1994.
In general, under Rule 144 as currently in effect, subject to
the satisfaction of certain other conditions, a person, including an
affiliate of the Company (or persons whose shares are aggregated),
who has owned restricted shares of Common Stock beneficially for at
least two years is entitled to sell, within any three-month period,
a number of shares that does not exceed the greater of 1% of the
total number of outstanding shares of the same class or, the average
weekly trading volume during the four calendar weeks preceding the
sale. A person who has not been an affiliate of the Company for at
least the three months immediately preceding the sale and who has
beneficially owned shares of Common Stock for at least three years is
entitled to sell such shares under Rule 144 without regard to any of
the limitations described above.
Prior to this offering, there has been no market for the Common
Stock, and no prediction can be made as to the effect, if any, that
market sales of restricted shares of Common Stock or the availability
of such shares for sale will have on the market prices prevailing
from time to time. Nevertheless, the possibility that substantial
amounts of Common Stock may be sold in the public market may
adversely affect the price for the sale of the Company's equity
securities in any trading market which may develop.
THE OFFERING
The Company propose to offer the Shares through it's officers
and directors and members of the National Association of Securities
Dealers, Inc. ("NASD"), and may allow a concession, in their
discretion, to certain dealers who are members of the NASD, and who
agree to sell the Shares in conformity with the NASD Rules of Fair
Practice. In any event, such concessions will not exceed the amount
of the Offering discount that the Company are to receive.
The offering is being conducted directly by the Company without
the use of a professional underwriter.
Prior to this offering, there has been no public market for the
Shares. Consequently, the initial public offering price for the
Shares has been determined by negotiation between the Company and the
Representative. Among the factors considered in determining the
public offering price were the history of, and the prospects for, the
Company's business, an assessment of the Company's management, its
past and present operations, the prospects for earnings of the
Company, the present state of the Company's development, the general
condition of the securities market at the time of the offering and
the market prices of similar securities of comparable companies at
the time of the offering. Such price is subject to change as a
result of market conditions and other factors, and no assurance can
be given that a public market for the Shares will develop after the
close of the offering, or if a public market in fact develops, that
such public market will be sustained, or that the Shares can be
resold at any time at the offering or any other price. See "Risk
Factors -- No Assurance of Public Market; Arbitrary Determination of
Offering Price."
The foregoing is a summary of the principal terms of the
agreements described above and does not purport to be complete.
Reference is made to copies of each such agreement which are filed as
exhibits to the Registration Statement. See "Additional
Information."
Offering Conducted In Accordance With Rule 419
The Company's offering is being conducted in accordance with the
Commission's Rule 419 which was adopted to strengthen the regulation
of securities offerings by "blank check" companies which Congress has
found to have been common vehicles for fraud and manipulation in the
penny stock market. The Company is a "blank check" company subject
to Rule 419 because the Shares are being offered at a price below
$5.00. Accordingly, investors in the offering will receive the
substantive protection provided by Rule 419. Rule 419 requires that
the securities to be issued and the funds received in a "blank check"
offering be deposited and held in an escrow account until an
acquisition meeting specified criteria is completed. Before the
acquisition can be completed and before the Funds and securities can
be released, the "blank check" company is required to update the
registration statement with a post-effective amendment; and after the
effective date thereof the Company is required to furnish investors
with the Prospectus produced thereby containing information,
including audited financial statements, regarding the proposed
acquisition candidate and its business. According to the rule, the
investors must have no fewer than 20 and no more than 45 days from
the effective date of the post-effective amendment to decide to
remain an investor or require the return of their investment funds.
Any investor not making any decision within said 45 day period is to
automatically receive a return of his investment funds. Unless a
sufficient number of investors elect to remain investors, all of the
deposited funds in the escrow account must be returned to all
investors and none of the securities will be issued. Rule 419
further provides that if the "blank check" company does not complete
an acquisition meeting specified criteria within 18 months, all of
the deposited funds in the escrow account must be returned to
investors.
LEGAL PROCEEDINGS
The Company is not a party to, nor is it aware of, any
threatened litigation of a material nature.
LEGAL MATTERS
Robert C. Weaver, Jr., Esq.,4475 Mission Blvd., Suite 216, San
Diego, CA 92109, has rendered an opinion (which is filed as an
exhibit to the Registration Statement of which this Prospectus is a
part) to the effect that the Shares, when issued and paid for as
described herein, will constitute legally issued securities of the
Company, fully paid and non-assessable. Mr. Weaver is a significant
shareholder of the Company. (See "Principal Shareholders")
EXPERTS
The financial statements included in this Prospectus have been
audited by Davis & Co., independent public accountants, as indicated
in their report with respect thereto, and are included herein in
reliance upon the authority of said firm as experts in accounting and
auditing in giving said report. Reference is made to said report in
which the opinion is modified with respect to the fact that the
Company's ability to commence operations is dependent, among other
factors, upon the success of this offering or other fund raising.
Further, the financial statements do not include any adjustment
relating to the recoverability of asset carrying amounts and the
amounts and classification of liabilities should the Company be
unable to continue in existence.
INDEMNIFICATION
The Company's Articles of Incorporation and Nevada law contain
provisions relating to the indemnification of officers and directors.
Generally, the foregoing provide that the corporation may
indemnify any person who was or is a party to any threatened,
pending, or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, except for an action by or
in right of the Corporation, by reason of the fact that he is or was
a director, officer, employee or agent of the Corporation.
It must be shown that he acted in good faith and in a manner
which he reasonably believed to be in or not opposed to the best
interests of the Corporation. Generally, no indemnification may be
made where the person has been determined to be negligent or guilty
of misconduct in the performance of his duty to the Corporation.
Insofar as indemnification for liabilities arising under the
securities act of 1933 may be permitted to directors, officers or
persons controlling the registrant pursuant to the foregoing
provisions, or otherwise, the registrant has been informed 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 registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant 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 registrant will, unless in the opinion of his counsel
the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the
Act and will be governed by the final adjudication of such issue.
AVAILABLE INFORMATION
The Company has filed with the Denver Regional Office of the
Securities and Exchange Commission (the "Commission") a Registration
Statement on Form SB-2 (the "Registration Statement") under the
Securities Act with respect to the Shares. This Prospectus does not
contain all of the information set forth in the Registration
Statement, certain parts of which are omitted in accordance with the
rules and regulations of the Commission. For further information
with respect to the Company and this offering, reference is made to
the Registration Statement, including the exhibits filed therewith,
which may be examined at the Commission's principal office, Room
1024, 450 Fifth Street, N.W., Washington, D.C. 20549, the New York
Regional Office of the Commission at 7 World Trade Center, New York,
New York 10007 and the Chicago Regional Office of the Commission,
Northwest Atrium, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661, where copies may be obtained upon payment of the fees
prescribed By the Commission. Descriptions contained in this
Prospectus as to the contents of any contract or other document filed
as an exhibit to the Registration Statement are not necessarily
complete and each such description is qualified by reference to such
contract or document. References in this Prospectus to various
documents, statutes, regulations and agreements do not purport to be
complete and are qualified in their entirety by reference to such
documents, statutes, regulations and agreements. The Company will
provide without charge to each person who receives a Prospectus, upon
written request of such person, a copy of any of the information that
is incorporated by reference in the Prospectus.
FINANCIAL STATEMENTS
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors
California Applied Research, Inc.
(A Development Stage Company)
We have audited the accompanying balance sheets of California Applied
Research, Inc. at December 31, 1995 and March 31, 1996 and the
related statements of changes in stockholders' equity, operations and
cash flows for the years ended December 31, 1994 and 1995, for the
three months ended March 31, 1996, and for the period from inception
(March 25, 1992) to March 31, 1996. These financial statements are
the responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements based on our
audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform
the audits 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 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
California Applied Research, Inc. at December 31, 1995 and March 31,
1996 and the results of its operations and its cash flows for the
years ended December 31, 1994 and 1995, for the three months ended
March 31, 1996, and for the period from inception (March 25, 1992) to
March 31, 1996, in conformity with generally accepted accounting
principles.
The accompanying financial statements have been prepared assuming
that the Company will continue as a going concern. However, the
Company has minimal capital resources presently available to meet
obligations which normally can be expected to be incurred by similar
companies, and with which to carry out its planned activities. These
factors raise substantial doubt about the Company's ability to
continue as a going concern. Management's plans in regard to this
matter are discussed in Note 2. The financial statements do not
include any adjustments that might result from the outcome of this
uncertainty.
Davis & Co., CPAs, P.C.
Certified Public Accountants
Englewood, Colorado
May 29, 1996
F-1
CALIFORNIA APPLIED RESEARCH, INC.
(A Development Stage Company)
Balance Sheets
December 31, March 31,
1995 1996
ASSETS
Current assets
Cash $ 5,520 $ 5,520
Expense advance to officer 368 --
5,888 5,520
Other asset
Deferred public offering costs 2,311 2,311
$ 8,199 $ 7,831
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liability
Account payable $ -- $ 100
Contingency and commitment (Notes 2 and 4)
Stockholders' equity
Common stock, $.001 par value per share;
100,000,000 shares authorized; 2,470,000
shares issued and outstanding at
December 31, 1995 and March 31,
1996, respectively 2,470 2,470
Additional paid-in capital 11,281 11,281
Deficit accumulated during the
development stage (5,552) (6,020)
8,199 7,731
$ 8,199 $ 7,831
The accompanying notes are an integral part of this statement.
F-2
<TABLE> CALIFORNIA APPLIED RESEARCH, INC.
(A Development Stage Company)
Statement of Changes in Stockholders' Equity
For the Period From Inception (March 25, 1992) to December 31, 1992
For the Years Ended December 31, 1993, 1994 and 1995, and for the Three Months Ended March 31, 1996
<CAPTION>
Additional Deficit accumulated Total
Common stock paid-in during the stockholders'
Shares Amount capital development stage equity
<S> <C> <C> <C> <C> <C>
Shares issued as of March 25, 1992
during the formation of the Company,
for services valued at $.001 per
share to: Officers and directors 2,000,000 $ 2,000 $ $ $2,000
Net loss for the period from
inception (March 25, 1992) to
December 31, 1992 (2,000) (2,000)
Balance at December 31, 1992 2,000,000 2,000 -- --
Net loss for the year ended
December 31, 1993 (--) (--)
Balance at December 31, 1993 2,000,000 2,000 (--) (2,000) --
Shares issued for cash of $.025
per share in November and December
1994 to others 140,000 140 3,360 3,500
Shares contributed to the Company
in November 1994 by former officer
and director (Note 3) 1 1
Net loss for the year ended
December 31, 1994 (--) (--)
Balance at December 31, 1994 2,140,000 2,140 3,361 (2,000) 3,501
Common stock issued in
September 1995 at $.025 per share
in exchange for: Services of
officers and directors 120,000 120 2,880 3,000
Cash from officers and
directors 40,000 40 960 1,000
Cash from others 170,000 170 4,080 4,250
Net loss for the year ended
December 31, 1995 (3,552) (3,552)
Balance at December 31, 1995 2,470,000 2,470 11,281 (5,552) 8,199
Net loss for the three months
ended March 31, 1996 (468) (468)
Balance at March 31, 1996 2,470,000 $ 2,470 $11,281 $(6,020) $7,731
<FN>
The accompanying notes are an integral part of this statement.
</TABLE> F-3
<TABLE>
CALIFORNIA APPLIED RESEARCH, INC.
(A Development Stage Company)
Statements of Operations
<CAPTION>
For the period from
For the year ended Inception
December 31, January 1, 1996 (March 25, 1992)
1994 1995 to March 31, 1996 to March 31, 1996
<S> <C> <C> <C> <C>
Expenses
Stock issued for
services $ -- $ 3,000 $ -- $ 5,000
Travel -- 432 368 800
Other general and
administrative -- 120 100 220
-- 3,552 468 6,020
Net loss $ (--) $(3,552) $ (468) $(6,020)
Weighted average
number of shares 2,470,000 2,470,000 2,470,000 2,470,000
Net loss per
common share $ (--) $ (.001) $ (--) $ (.002)
<FN>
The accompanying notes are an integral part of this statement.
</TABLE>
F-4
<PAGE>
<TABLE> CALIFORNIA APPLIED RESEARCH, INC.
(A Development Stage Company)
Statements of Cash Flows
<CAPTION>
For the period from
For the year ended Inception
December 31, January 1, 1996 (March 25, 1992)
1994 1995 to March 31, 1996 to March 31, 1996
<S> <C> <C> <C> <C>
Cash flow from operating
activities:
Net loss $ (--) $(3,552) $ (468) $(6,020)
Noncash items included
in the net loss stock
issued for services -- 3,000 -- 5,000
Changes in assets
and liabilities
(Increase) decrease in
expense advance to
officer (368) 368
Increase in accounts
payable 100 100
(Increase) decrease in
stock subscription
receivable (3,500) 3,500 -- --
Net cash provided (used)
by operating activities (3,500) 2,580 -- (920)
Cash flow from financing
activities:
Proceeds from sale of
common stock 3,500 5,250 -- 8,750
Costs related to public
offering (2,310) -- (2,310)
Net cash provided by
financing activities -- 2,940 -- 6,440
Increase (decrease)
in cash -- 5,520 -- 5,520
Cash, beginning of
period -- -- 5,520 --
Cash, end of period $ -- $ 5,520 $5,520 $ 5,520
<FN>
The accompanying notes are an integral part of this statement.
</TABLE>
F-5
CALIFORNIA APPLIED RESEARCH, INC.
(A Development Stage Company)
Notes to Financial Statements
Note 1: Significant Accounting Policies
Significant accounting policies are as follows:
a. Organization
California Applied Research, Inc. (the "Company") was
incorporated under the laws of the State of Nevada on
March 25, 1992. The Company is in the development stage
as more fully defined in Statement No. 7 of the
Financial Accounting Standards Board. Planned principal
operations of the Company have not yet commenced, and
activities to date have been limited to its formation
and obtaining its initial capitalization. The Company
intends to seek, investigate and, if such investigation
warrants, acquire an interest in business opportunities
presented to it by persons who or firms which desire to
employ the Company's funds in their business or seek the
perceived advantages of a publicly held corporation.
b. Deferred costs related to proposed public offering
Costs incurred in connection with the proposed public
offering of common stock have been deferred and will be
charged against capital if the offering is successful or
against operations if it is unsuccessful.
c. Shares issued in exchange for services
The fair value of shares issued in exchange for services
rendered to the Company was determined by the Company's
officers and directors.
d. Income taxes
The Company has made no provision for income taxes
because of financial statement and tax losses since its
inception. As of March 31, 1996, the Company has net
operating loss carryforwards of approximately $600,
which will expire in 2010.
e. Net loss per common share
The net loss per common share is computed by dividing
the net loss for the period by the weighted average
number of shares outstanding. For purposes of computing
the weighted average number of shares, all stock issued
prior to the public offering is considered to be "cheap
stock" as defined in SEC Staff Accounting Bulletin 4D
and is therefore counted as outstanding for the entire
period.
f. Estimates
The preparation of financial statements in conformity
with generally accepted accounting principles requires
management to make estimates and assumptions that affect
certain reported amounts and disclosures. Accordingly,
actual results could differ from those estimates.
(Continued)
F-6
CALIFORNIA APPLIED RESEARCH, INC.
(A Development Stage Company)
Notes to Financial Statements
Note 2: Going Concern Contingency
The Company has minimal capital resources presently
available to meet obligations which normally can be
expected to be incurred by similar companies and to carry
out its planned operations. These factors raise
substantial doubt about the Company's ability to continue
as a going concern.
In order to begin any significant operations, the Company
will have to pursue other sources of capital, such as
additional equity financing as discussed in Note 4, herein.
There is no assurance that the Company will be able to
obtain such financing. The financial statements, herein,
do not include any adjustments that might result from the
outcome of this uncertainty.
Note 3: Related Party Transactions
In December 1994 the Company's President began providing to
the Company free of charge a minimal amount of office space
in his home.
In November 1994 one of the Company's founders who was also
an officer and director of the Company, transferred 800,000
shares of her originally issued shares, valued at $1, to
the Company's corporate attorney in consideration for said
attorney's undertaking to provide legal services incurred
in connection with the Company's proposed public offering.
Note 4: Commitment - Proposed Public Offering of Common Stock
The Company intends to undertake a public offering to sell
up to 1,000,000 shares of its $.001 par value common stock
at a price of $.25 per share.
The shares will be offered and sold on a "best efforts"
100,000 share minimum, 1,000,000 share maximum basis,
pursuant to a continuing offer over 360 days after the date
of the Prospectus. The shares will be offered by
authorized officers and directors of the Company who will
receive no underwriting discounts or commission, but only
the reimbursement of their out-of-pocket expenses relating
to the offering. The Company may also offer the shares
through selected broker-dealers, as sales agents, at a
commission of 10%. No expense allowance, warrants to
purchase common stock or other remuneration except the 10%
commission will be paid. Offering expenses to be incurred
by the Company are estimated to be a maximum of $30,400
which assumes a commission will be paid on all shares sold.
(Continued)
F-7
CALIFORNIA APPLIED RESEARCH, INC.
(A Development Stage Company)
Notes to Financial Statements
Note 4: Commitment - Proposed Public Offering of Common Stock
(Continued)
Proceeds from subscriptions for shares are required to be
deposited into an escrow account with an independent third
party, pursuant to an escrow agreement between the Company
and the Escrow Agent. The securities to be issued to
investors must also be deposited into this escrow account.
If the minimum number of shares are not sold, the sale of
shares hereunder will not be completed and the full amount
paid by subscribers will be refunded without interest.
If the public offering is successfully completed, except
for an amount up to 10% of the deposited funds ($1,750 if
minimum is sold, $22,000 if the maximum is sold) otherwise
releasable, the deposited funds and the deposited
securities may not be released until an acquisition,
meeting certain specified criteria, has been made and a
sufficient number of investors reconfirm their investment
in accordance with certain specified procedures. Pursuant
to these procedures, a new prospectus, which describes an
acquisition candidate and its business and includes audited
financial statements, must be delivered to all investors.
The Company must return the pro rata portion of the
deposited funds to any investor who does not elect to
remain an investor. Unless a sufficient number of
investors elect to remain investors, all investors will be
entitled to the return of a pro rata portion of the
deposited proceeds (and any interest earned thereon) and
none of the deposited securities will be issued to
investors. In the event an acquisition is not consummated
within 18 months of the effective date, the deposited
proceeds will be returned on a pro rata basis to all
investors.
Officers, directors, affiliates, and principal shareholders
of the Company may purchase a percent of the shares sold in
the offering under the same terms and conditions as the
public investors. Such purchases, if made, will be for
investment purposes only and not for redistribution. Such
purchases may be made for the purpose of closing the
minimum offering.
F-8
Part II - INFORMATION NOT REQUIRED IN PROSPECTUS
Item 22. Indemnification of Directors and Officers.
The information required by this Item is incorporated by
reference to "Indemnification" in the Prospectus herein.
Item 23. Other Expenses of Issuance and Distribution.
SEC Registration Fee $ 100
NASD Filing Fees 300
Blue Sky Fees and Expenses 500
Legal Fees and Expenses -0-
Printing and Engraving Expenses 1,500
Accountants' Fees and Expenses 2,000
Miscellaneous 1,000
________
Total $5,400
The foregoing expenses, except for the SEC fees, are estimated.
Item 24. Recent Sales of Unregistered Securities.
The following sets forth information relating to all previous
sales of Common Stock by the Registrant which sales were not
registered under the Securities Act of 1933.
- -
Date of
Sale Purchaser Shares Consideration
3-20-92 Scott Bengfort 1,000,000 $ 1,000.00
3-20-92 Ross and Jean. Boyd 1,000,000 $ 1,000.00
9-21-95 Robert L. & Diane C.
Fields Trust 60,000 $ 1,500.00
9-21-95 Brian French 40,000 $ 750.00
9-21-95 Jay A. Geier 20,000 $ 500.00
9-21-95 Kenneth E. Goodwin 20,000 $ 500.00
9-21-95 Frank J. Greene 30,000 $ 750.00
9-21-95 James C. Holly 20,000 $ 500.00
9-21-95 Richard D. Kennedy 10,000 $ 250.00
9-21-95 Richard Kyndberg 20,000 $ 500.00
9-21-95 Cindy J. Mendex 10,000 $ 250.00
9-21-95 James W. Rodgers 40,000 $ 1,000.00
9-21-95 Frank Sheldon 20,000 $ 500.00
9-21-95 Ron Shepton 20,000 $ 500.00
9-21-95 J. Michael Spinali 120,000 $ 2,250.00
9-21-95 George B. Tarver 10,000 $ 250.00
9-21-95 Nathanel Weinberger 30,000 $ 750.00
Total 2,470,000 $ 13,750.00
With respect to the issuance of the aforementioned shares, the
Registrant relied on the exemptions from registration provided by
Section 4(2) of the Securities Act of 1933. No advertising or
general solicitation was employed in offering the stock. The
securities were offered to officers, directors, a corporation which
had access to information by virtue of its' relationship with
officers and directors of the Company, and the Company's legal
counsel. The securities were offered for investment only and not
for the purpose of resale or distribution. All of the shares
issued to the aforementioned persons bear or shall bear restrictive
legends preventing their transfer except in accordance with the Act
and the regulations promulgated thereunder. In addition, stop
transfer instructions pertaining to these shares will be lodged
with the Registrant's transfer agent.
Item 25. Exhibits.
The following exhibits are filed with this Registration
Statement:
Exhibit Number Exhibit Name Page Number
1.1 Participating Dealer Agreement *
1.2.1 Fund Escrow Agreement **
1.2.2 Escrow Agreement in Accordance with
Rule 419 under the Securities
Act of 1933, as amended **
1.3 Subscription Agreement *
3.1 Articles of Incorporation *
3.2 By-Laws *
4.1 Common Stock *
5 Opinion Regarding Legality *
24.1 Consent of Counsel (2) *
24.2 Consent of Expert 75
25 Power of Attorney (3) *
* previously provided in the original filing
** previously provided in amendment no. 1.
All other Exhibits called for by Rule 601 of Regulation S-B are not
applicable to this filing.
__________________
(1) Information pertaining to the Common Stock of the Company is
contained in the Certificate of Incorporation and By-Laws of
the Company.
(2) The Consent of Counsel is contained in the Opinion Regarding
Legality filed previously.
(3) The Power of Attorney herein below is incorporated by
reference to Part II, Item 25 of the Registration Statement.
Item 26. Undertakings.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offer or sales are
being made, a post-effective amendment to this registration
statement:
(i) To include any prospectus required by section
10(a)(3) of the Securities Act of 1933;
(ii) 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;
(iii) 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, each such post-effective amendment
that contains a form of prospectus 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.
Subject to the terms and conditions of Section 15(d) of the
Securities Exchange Act of 1934, the undersigned Registrant hereby
undertakes to file with the Securities and Exchange Commission such
supplementary and periodic information, documents, and reports as
may be prescribed by any rule or regulation of the Commission
heretofore or hereafter duly adopted pursuant to authority
conferred to that section.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers, and
controlling persons of the Registrant pursuant to its Certificate
of Incorporation or provisions of Nevada law, or otherwise, the
Registrant 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 Registrant of expenses
incurred or paid by a director, officer or controlling person of
the registrant 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
Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification
by it is against public policy as expressed in the Act and will be
governed by the final adjudication of such issue.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that
it meets all of the requirements for filing on Form SB-2 and has
duly caused this amendment to the registration statement to be
signed on its behalf by the undersigned, thereunto duly authorized
by power of attorney, in the City of Denver, State of Colorado, on
December 13, 1996.
California Applied Research, Inc. (Registrant)
/s/
J. Michael Spinali, President and Chairman
(Signature)
