As filed with the Securities and Exchange Commission on September 9, 1997
Registration No. 333-5188-A
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________
AMENDMENT NO. 6 TO
FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
___________
WIN-GATE EQUITY GROUP, INC.
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(Name of small business issuer in its charter)
FLORIDA 6770 65-0669842
- ----------------------------- ---------------------------- -------------------
(State or jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization Classification Code Number) Identification No.)
8700 N.W. 47th Drive, Coral Springs, Florida 33067 (954) 255-5566
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(Address and telephone number of principal executive offices)
8700 N.W. 47th Drive, Coral Springs, Florida 33067
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(Address of principal place of business or intended principal place of business)
Debra Janssen
WIN-GATE EQUITY GROUP, INC.
8700 N.W. 47th Drive
Coral Springs, FL 33067
(954) 255-5566
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(Name, address and telephone number of agent for service)
With a copy to:
Atlas, Pearlman, Trop & Borkson, P.A.
200 East Las Olas Boulevard
Fort Lauderdale, Florida 33301
Attention: Charles B. Pearlman
Roxanne K. Beilly
(954) 763-1200
_____________________________________________
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Approximate date of proposed offering: As soon as possible after the
Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, check the following box: [ X ]
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.
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering: [ ] ______________
If this Form is a Post-Effective Amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: [ ] ______________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box: [ ]
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CALCULATION OF REGISTRATION FEE
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Proposed Proposed
Title of maximum maximum
each class Amount offering aggregate Amount of
of securities being price per offering registration
being offered registered share(1) price(1) fee
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Units(2) 100,000 $1.00 $100,000 $100.00
Shares of Common Stock 100,000 --- --- ---
included as part of
the Units(2)
Warrants included as part 100,000 --- --- ---
of the Units(2)
Common Stock(3)(4) 1,000,000 $1.20 $1,200,000 $396.00
------
Total $496.00
=======
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(1) Estimated solely for the purpose of calculating the registration fee.
(2) Includes 100,000 Units, and 100,000 shares of Common Stock and 100,000
Warrants underlying such Units.
(3) Represents shares of Common Stock issuable upon exercise of the Warrants.
(4) Pursuant to Rule 416, there is also being registered such additional
securities as may become issuable pursuant to the anti-dilution provisions
of the Warrants.
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, as amended, or until the Registration Statement
shall become effective on such date as the Commission, acting pursuant to
Section 8(a), may determine.
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WIN-GATE EQUITY GROUP, INC.
___________________
Cross Reference Sheet
<TABLE>
<CAPTION>
Registration Statement Item
Number and Caption Prospectus Caption
--------------------------- ------------------
<S> <C> <C>
1. Front of the Registration Statement Facing Page of Registration Statement and
and Outside Front Cover Page of Cover Page to Prospectus
Prospectus
2. Inside Front and Outside Back Inside Front Cover Page to Prospectus and
Cover Pages of Prospectus Outside Back
3. Summary Information and Risk Prospectus Summary and Risk Factors
4. Use of Proceeds Use of Proceeds
5. Determination of Blank Check Cover Page to Prospectus and Risk Factors
Offering Price
6. Dilution Dilution and Risk Factors
7. Selling Security Holders Inapplicable
8. Plan of Distribution Cover Page and Inside Cover Page of
Prospectus and Plan of Distribution
9. Legal Proceedings Company Legal Proceedings
10. Directors, Executive Officers, Management - Directors and Executive
Promoters and Control Persons Officers
11. Security Ownership of Certain Management - Directors and Executive
Beneficial Owners and Management Officers and Principal Shareholders
12. Description of Securities Cover Page and Description of Securities
13. Interest of Named Experts and Counsel Legal Matters and Experts
14. Disclosure of Commission Position on Indemnification of Officers and
Indemnification for Securities Act Directors
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15. Organization Within Last Five Years Prospectus Summary; The Company;
Factors and Management Risk Factors and Management
16. Organization Within Last Five Years Prospectus Summary; The Company; Risk
Factors and Management
17. Description of Business Cover Page; Prospectus; Summary; The
Company; Proposed Business; Management
and Conflicts of Interest
18. Management's Discussion and Prospectus Summary; Use of Proceeds;
Analysis or Plan of Operation Management's Discussion and Analysis or
Plan of Operation; Proposed Business
19. Description of Property Proposed Business - Office Facilities
20. Certain Relationships and Related Certain Transactions
Transactions
21. Market for Common Equity and Related Cover Page; Front Cover Page of Stockholder
Matters Prospectus; Prospectus Summary and
Description of Securities
22. Executive Compensation Management
23. Financial Statements Financial Statements
24. Changes In and Disagreements with Inapplicable
Accountants on Accounting and
Financial Disclosure
</TABLE>
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SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED SEPTEMBER 9, 1997
PROSPECTUS
WIN-GATE EQUITY GROUP, INC.
100,000 Units
Consisting of
100,000 Shares of Common Stock and
1,000,000 Redeemable Common Stock Purchase Warrants
Win-Gate Equity Group, Inc., a Florida corporation (the "Company"), hereby
offers for sale up to a maximum of 100,000 units (the "Units") at a purchase
price of $1.00 per Unit through its sole director and executive officer, Ms.
Debra Janssen (the "Blank Check Offering"). Each Unit consists of one share of
Common Stock, par value $.001 per share (the "Common Stock" or the "Shares"),
and ten Common Stock Purchase Warrants (the "Warrants") of the Company. The
Units, Shares and Warrants are not separately transferable until the Company
acquires a Business Combination (as defined herein). Each Warrant entitles the
holder thereof to purchase one share of Common Stock at an exercise price of
$1.20 per Warrant at any time during the five (5) year period commencing on the
date of this Prospectus. The shares of Common Stock issuable upon exercise of
the Warrants are also being registered under the Company's Registration
Statement of which this Prospectus is a part. The Company reserves the right to
withdraw, cancel or modify the offering and to reject orders in whole or in
part. The Units are being offered on a "best efforts - all or none" basis as to
50,000 Units (the "Minimum Units" or "Minimum Offering") ($50,000) and on a
"best efforts" basis as to the additional 50,000 Units (the "Maximum Units" or
"Maximum Offering") ($100,000) for an aggregate offering of 100,000 Units
($100,000). The Company will offer and sell the Units through its sole officer
and director, Ms. Debra Janssen who will receive no commission for selling any
Units offered hereby. The Company does not intend to retain any broker-dealers
as selling agents. Neither Ms. Janssen, nor any officer, director, nor Principal
Stockholders of the Company (including any affiliates thereof) will purchase any
of the Units in this Blank Check Offering. See "Description of Securities" and
"Plan of Distribution."
The Company is conducting this Blank Check Offering subject to the
Securities and Exchange Commission's Rule 419 of Regulation C under the
Securities Act of 1933, as amended (the "Act"). In the event the Minimum
Offering or Maximum Offering is sold, the net offering proceeds will be
approximately $33,000 or $83,000, after deduction for offering expenses of
$17,000. ^The Units to be issued to investors and the funds delivered to the
Company ^must be deposited in an escrow account (the "Deposited Funds" and
"Deposited Securities," respectively) with United National Bank (the "Escrow
Agent"). While held in the escrow account, the Units may not be traded or
transferred. Except for an amount up to 10% of the Deposited Funds (i.e.,
assuming the Minimum Offering or Maximum Offering is sold, up to $3,300 or
$8,300), the Deposited Funds and the Deposited Securities may not be released
until an acquisition meeting certain specified criteria has been made and a
<PAGE>
sufficient number of investors reconfirm their investment in accordance with the
procedures set forth in Rule 419. Pursuant to these procedures, a revised
Post-Effective Amendment and prospectus, which describes an acquisition
candidate and its business and includes audited financial statements, will be
filed and delivered to all investors at that time. The Units are offered by the
Company for a period of 90 days from the date hereof (which period may be
extended for an additional 90 days by the Company), or until such earlier date
as all, but not less than all, such Units are sold. The Company must return the
pro-rata portion of the Deposited Funds less offering expenses of $17,000
($33,000 or $83,000 assuming the Minimum Offering or Maximum Offering is sold,
which offering expenses shall not exceed 17,000, and any amount up to 10% of the
Deposited Funds $3,300 or $8,300 assuming the Minimum Offering or Maximum
Offering is sold), but in no event greater than 10% of the Deposited Funds (if
any) used as working capital in connection with the Company's acquisition of a
Business Combination, in the event an acquisition is not consummated within 18
months of the effective date of the Registration Statement of which this
Prospectus is a part. See "Prospectus Summary - Investors Rights to Reconfirm
Investments Under Rule 419," "Use of Proceeds," and "Plan of Distribution."
None of Ms. Janssen, the Company or Lake Worth Holding, Inc., a 61%
shareholder of the Company ("LWH"), or any affiliate, promoter or related party
of Ms. Janssen, the Company or LWH has had any preliminary contact or
discussions with any representative of any other company regarding the
possibility of an acquisition or merger between the Company and such other
company. The Company will not acquire or merge with a business or a company in
which Ms. Janssen, the Company or LWH or any affiliates or associates of Ms.
Janssen, the Company or LWH, directly or indirectly, have an ownership interest
or otherwise control.
The Company's potential inability to widely distribute the Units offered
hereby may reduce the "public float" and trading market and thus, potentially,
inhibit the ability of any public shareholder to trade in the secondary market.
There is no public market for the Common Stock and no assurance can be
given that a trading market for the Common Stock will develop subsequent to the
completion of this Blank Check Offering or be sustained if developed. The Shares
of Common Stock will not be eligible for listing on the Automated Quotation
System of the National Association of Securities Dealers ("NASDAQ") upon the
completion of this Blank Check Offering and, therefore, the Company has not and
does not presently intend to make application to have the Shares of Common Stock
qualified for inclusion on NASDAQ. The public offering price of the Units has
been arbitrarily determined by the Company, and bears no specific relationship
to the Company's assets, earnings, book value or other recognized criteria of
value. See "Risk Factor No. 3 Prohibition Pursuant to Rule 15g-8 Under Exchange
Act to Sell or Offer to Sell Shares in Rule 419 Account," Risk Factor No. 22 "No
Likelihood of Active and Liquid Public Market," and "Plan of Distribution."
_____________________
THIS BLANK CHECK OFFERING AND THE SECURITIES OFFERED HEREBY INVOLVE SUBSTANTIAL
RISK AND IMMEDIATE AND SUBSTANTIAL DILUTION. SEE "RISK FACTORS." THE COMPANY HAS
NO PRESENT PLAN FOR THE EXPENDITURE OF THE FUNDS PROPOSED TO BE RAISED
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HEREUNDER. MS. JANSSEN, THE SOLE DIRECTOR AND OFFICER OF THE COMPANY, MAY NOT
HAVE EXPERIENCE IN ANY OF THE AREAS IN WHICH THE COMPANY MAY COMMIT ITS
RESOURCES. MS. JANSSEN WILL NOT DEVOTE FULL TIME TO THE COMPANY'S AFFAIRS, WHICH
MAY ADVERSELY AFFECT THE COMPANY. POTENTIAL PURCHASERS SHOULD NOT INVEST IN
THESE SECURITIES UNLESS THEY CAN AFFORD A LOSS OF THEIR ENTIRE INVESTMENT. 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.
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Per Share Total Underwriting Proceeds
Total Minimum Price to Discounts and to the
Total Maximum Public Commissions(1) Company(2)(3)
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Per Unit $1.00 $-0- $1.00
Total Minimum
(50,000 Units) $50,000 $-0- $50,000
Total Maximum
(100,000 Units) $100,000 $-0- $100,000
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The Date of this Prospectus is ____________, 1997
(1) The Company intends to sell the Units offered hereby through Ms. Janssen
who will receive no commission for selling any Units offered hereby. The Company
does not intend to retain any broker-dealers as selling agents.
(2) Before deducting expenses in connection with this Blank Check Offering in
the amount of $17,000, which amount of offering expenses will not exceed $17,000
in total, including escrow agent, legal, accounting and filing fees, expenses
and printing costs. See also "Use of Proceeds."
(3) The Company intends to sell a minimum amount of 50,000 shares offered on a
"best efforts-all or none" basis and the remaining 50,000 shares on a "best
efforts" basis. The Units are offered by the Company for a period of 90 days
from the date hereof (which period may be extended for an additional 90 days by
the Company), or until such earlier date as all such Units are sold. Any
subscription received after the Company has sold all of the Units will be
promptly returned to the investor without interest or deductions. Pending the
sale of the Units, all proceeds will be deposited by noon of the first business
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<PAGE>
day following receipt into a non-interest-bearing escrow account with United
National Bank, Escrow Agent for this Blank Check Offering and in accordance with
Rule 419 of the Securities Act. See "Prospectus Summary," "Use of Proceeds," and
"Form and Structure of Acquisition."
NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE A REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE BLANK CHECK OFFERING HEREIN CONTAINED AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF ANY
OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY
PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION IN SUCH
JURISDICTION.
THE PROCEEDS OF THIS BLANK CHECK OFFERING AND CURRENT CAPITAL OF THE COMPANY MAY
NOT BE SUFFICIENT TO ALLOW THE COMPANY TO ENGAGE IN A BUSINESS VENTURE AS
CONTEMPLATED IN THIS PROSPECTUS. THE COMPANY MAY REQUIRE ADDITIONAL CAPITAL
WHICH IT MAY NOT BE ABLE TO OBTAIN. IN THE EVENT THAT MS. JANSSEN DETERMINES
THAT THE COMPANY IS UNABLE TO ACQUIRE A BUSINESS FOLLOWING RETURN OF THE
DEPOSITED FUNDS IN COMPLIANCE WITH RULE 419, MS. JANSSEN WILL THEN SEEK
SHAREHOLDER APPROVAL TO LIQUIDATE THE COMPANY. BECAUSE LWH, AN UNAFFILIATED
THIRD PARTY, WILL RETAIN A CONTROLLING INTEREST IN THE COMPANY SUBSEQUENT TO THE
CLOSING OF THIS BLANK CHECK OFFERING, THE DETERMINATION AS TO WHETHER THE
COMPANY SHALL BE LIQUIDATED AND ITS REMAINING ASSETS DISTRIBUTED PRO RATA TO THE
COMPANY'S SHAREHOLDERS WILL BE DECIDED BY LWH. SEE "PROSPECTUS SUMMARY," "THE
COMPANY," PROPOSED BUSINESS" AND "PLAN OF DISTRIBUTION."
NONE OF MS. JANSSEN, THE COMPANY OR ANY OF THE COMPANY'S SHAREHOLDERS, INCLUDING
LWH, OR ANY OF THEIR RESPECTIVE AFFILIATES, 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 ANY SUCH FIRM. THE COMPANY
SHALL, AS REQUIRED BY LAW, PROVIDE ITS SHAREHOLDERS WITH DISCLOSURE
DOCUMENTATION, INCLUDING AUDITED FINANCIAL STATEMENTS, CONCERNING A PROPOSED
BUSINESS COMBINATION PRIOR TO THE COMPLETION OF SUCH PROPOSED BUSINESS
COMBINATION. SEE "PROPOSED BUSINESS - FORM AND STRUCTURE OF ACQUISITION."
THE COMPANY HAS NO PRESENT PLANS, PROPOSALS, ARRANGEMENTS OR UNDERSTANDINGS WITH
ANY PERSON WITH REGARD TO THE DEVELOPMENT OF A TRADING MARKET FOR THE SHARES OF
COMMON STOCK OFFERED HEREBY.
THE SHARES HAVE NOT BEEN REGISTERED IN THE STATE OF FLORIDA, BUT WILL BE OFFERED
AND SOLD THEREIN PURSUANT TO AN EXEMPTION FROM REGISTRATION SET FORTH IN SECTION
517.061(11) FLORIDA STATUTES. SUCH SECTION PROVIDES, IN PERTINENT PART, FOR
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SALES TO NO MORE THAN 35 PURCHASERS, EXCLUDING ACCREDITED INVESTORS, AS SUCH
TERM IS DEFINED IN RULE 501 UNDER REGULATION D OF THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"). SUCH SECTION FURTHER PROVIDES THAT IN THE EVENT SALES ARE
MADE TO FIVE OR MORE PERSONS PURSUANT TO SUCH SECTION, THAT SUCH SALES ARE
VOIDABLE BY EACH OF SUCH SUBSCRIBERS EITHER WITHIN THREE DAYS AFTER THE FIRST
TENDER OF CONSIDERATION IS MADE BY THE SUBSCRIBER OR WITHIN THREE DAYS AFTER THE
AVAILABILITY OF THAT PRIVILEGE IS COMMUNICATED TO THE SUBSCRIBER, WHICHEVER
OCCURS LATER. THIS PROSPECTUS HAS NOT BEEN REVIEWED BY THE ATTORNEY GENERAL OF
THE STATE OF NEW YORK PRIOR TO ITS ISSUANCE AND USE. THE ATTORNEY GENERAL OF THE
STATE OF NEW YORK HAS NOT PASSED ON OR ENDORSED THE MERITS OF THIS OFFERING. ANY
REPRESENTATION TO THE CONTRARY IS UNLAWFUL. THE SALE OF THE SHARES OFFERED
HEREBY IS BEING UNDERTAKEN PURSUANT TO THE NOTICE PROVISIONS PROVIDED BY SECTION
359-e OF THE MARTIN ACT WITH RESPECT TO ISSUER- DEALERS, AS SUCH ACT DOES NOT
REQUIRE THE REGISTRATION OF SECURITIES.
PURCHASERS OF SECURITIES IN THIS BLANK CHECK OFFERING OR IN ANY SUBSEQUENT
TRADING MARKET WHICH MAY DEVELOP MUST BE RESIDENTS OF THE STATES OF FLORIDA OR
NEW YORK, UNLESS AN APPLICABLE TRANSACTION EXEMPTION FROM SECURITIES
REGISTRATION IS OTHERWISE AVAILABLE. THE COMPANY WILL AMEND THIS PROSPECTUS FOR
THE PURPOSES OF DISCLOSING ADDITIONAL STATES, IF ANY, IN WHICH THE COMPANY'S
SECURITIES WILL HAVE BEEN REGISTERED. THE COMPANY HAS NOT REGISTERED THE SHARES
OR OBTAINED AN EXEMPTION FROM REGISTRATION IN ANY JURISDICTION. AN EXEMPTION
FROM REGISTRATION FOR THE SHARES IS AVAILABLE ONLY IN THE STATES OF FLORIDA AND
NEW YORK AND INITIAL SALES MAY ONLY BE MADE IN SUCH JURISDICTIONS UNLESS THE
COMPANY WERE TO REGISTER THE SHARES, OBTAIN AN EXEMPTION FROM REGISTRATION OR
ASCERTAIN THE AVAILABILITY OF AN EXEMPTION IN ANY OTHER JURISDICTION SUBSEQUENT
TO THE DATE HEREOF.
On the effective date, the Company will become subject to the
informational requirements of the Securities Exchange Act of 1934 (the "Exchange
Act") and in accordance therewith, will file reports and other information with
the Securities and Exchange Commission. The Company intends to furnish to its
shareholders, after the close of each fiscal year, with an annual report which
will contain audited financial statements audited by its independent certified
public accountant. In addition, the Company may furnish to its shareholders
quarterly reports containing unaudited financial information following the
acquisition or establishment of actual operations.
The Company will provide without charge to each person who receives a
Prospectus, upon written or oral request of such person, a copy of any of the
information that was incorporated by reference in the Prospectus (not including
exhibits to the information that was incorporated by reference unless the
exhibits are themselves specifically incorporated by reference). Such requests
may be directed to Ms. Debra Janssen, c/o the Company, 8700 N.W. 47th Drive,
Coral Springs, FL 33067, telephone number (954) 255-5566. The Company's fiscal
year is December 31.
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<PAGE>
PROSPECTUS SUMMARY
This Prospectus, which constitutes part of a Registration Statement filed
by the Company with the Securities and Exchange Commission under the Act, omits
certain of the information contained in the Registration Statement. Reference is
hereby made to the Registration Statement and to its exhibits for further
information with respect to the Company and the Units offered hereby. Statements
contained herein concerning provisions of documents are necessarily summaries of
such documents, and each statement is qualified in its entirety by reference to
the copy of the applicable document filed with the Commission.
The Company will not engage in any substantive commercial business
immediately following this Blank Check Offering and for an indefinite period of
time thereafter. The Company has no plan, proposal, agreement, understanding or
arrangement to acquire or merge with any specific business or company and has
not identified any specific business or company for investigation and
evaluation. The Company will not acquire or merge with a company in which Ms.
Janssen, the Company or LWH, or any affiliate or related party of Ms. Janssen,
the Company or LWH have an ownership interest or otherwise control. Neither Ms.
Janssen nor any affiliates of Ms. Janssen or the Company will purchase any of
the Units in this Blank Check Offering.
RULE 419 BLANK CHECK OFFERING
Deposit of Offering Proceeds and Securities
- -------------------------------------------
Rule 419 requires that the net offering proceeds, after deduction for
offering expenses as permitted hereunder, and all securities to be issued be
deposited into an escrow or trust account governed by an agreement which
contains certain terms and provisions specified by Rule 419. 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
meeting certain prescribed criteria. Second, the Company must successfully
complete a reconfirmation offering which includes certain prescribed terms and
conditions. Third, the acquisition meeting the prescribed criteria must be
consummated (see "Prescribed Acquisition Criteria" and "Reconfirmation Offering"
below). Accordingly, the Company has entered into an escrow agreement with
United National Bank (the "Escrow Agent") which provides that:
-- The net proceeds are to be deposited into an escrow account maintained
by the Escrow Agent promptly after the termination of the offering. The
Deposited Funds are to be held for the sole benefit of the investors.
-- All securities issued in connection with the offering and any other
securities issued with respect to such securities, including securities issued
as a result of 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
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<PAGE>
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 or disposed of 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 the Employee Retirement Income Security
Act.
-- Warrants, convertible securities or other derivative securities, if
any, relating to securities held in the escrow account may be exercised or
converted in accordance with the terms; provided, however, the securities
received upon exercise or conversion, together with any cash or other
consideration paid in connection with such 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 to
acquire an acquisition candidate meeting certain specified criteria. The
agreement must provide for the acquisition of a business or net assets for which
the fair value of the business or net assets to be acquired represents at least
80% of the proceeds to be raised pursuant to this Blank Check Offering (i.e.,
Maximum Offering: $100,000 x 80% = $80,000; and Minimum Offering $50,000 x 80% =
$40,000). Once the acquisition agreement meeting the above criteria has been
executed and stockholders representing 80% of the proceeds received elect to
reconfirm their investment, the Company must successfully complete the mandated
reconfirmation offering, as discussed below, and consummate the acquisition. The
Company will not acquire or merge with a business or a company in which Ms.
Janssen or any affiliates or associates of Ms. Janssen, directly or indirectly,
have an ownership interest.
Post-Effective Amendment
- ------------------------
Once the agreement governing the acquisition of a business meeting the
above criteria has been executed, Rule 419 requires the Company to update the
Registration Statement of which this Prospectus is a part with a Post-Effective
Amendment. The Post-Effective Amendment must contain information about: the
proposed acquisition candidate and its business, 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 reconfirmation 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 the Rule 419, the
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terms of the reconfirmation offer must include the following conditions: (i) the
prospectus contained in the Post-Effective Amendment will be sent to each
investor whose securities are held in the escrow account within five business
days after the effective date of the Post-Effective Amendment; (ii) 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; (iii) 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 held in the
escrow account on such investor's behalf will be returned to the investor within
five business days by first class mail or other equally prompt means; (iv) the
acquisition will be consummated only if investors representing 80% of the
offering proceeds in this Blank Check Offering elect to reconfirm their
investments; (v) if a consummated acquisition has not occurred within 18 months
from the date of this Prospectus, the Deposited Funds held in the escrow account
will be returned to all investors on a pro-rata basis within five business days
by first class mail or other equally prompt means. In the event Ms. Janssen
determines that the Company is unable to acquire any business or assets
whatsoever, Ms. Janssen, following return of the Deposited Funds in compliance
with Rule 419, will then seek shareholder approval to liquidate the Company.
Because LWH will retain a controlling interest in the Company subsequent to the
closing of this Blank Check Offering, the determination as to whether the
Company will be liquidated and its remaining assets distributed pro rata to the
Company's shareholders will, subject to Rule 419, be decided by LWH.
Release of Deposited Securities and Deposited Funds
- ---------------------------------------------------
The Deposited Funds and Deposited Securities may be released to the
Company and the investors, respectively, after the Escrow Agent has received a
signed representation from the Company and any other evidence acceptable to the
Escrow Agent that: (i) the Company has executed an agreement for the acquisition
of a business for which the value of the business or net assets to be acquired
represents at least 80% of the gross offering proceeds; (ii) the Company has
filed the required Post-Effective Amendment and the Post-Effective Amendment has
been declared effective; and (iii) the mandated reconfirmation offer conducted
in accordance with the conditions prescribed by Rule 419 has been completed and
that the Company has satisfied all of the prescribed conditions of the
reconfirmation offer.
THE COMPANY
Win-Gate Equity Group, Inc. was incorporated under the laws of the State
of Florida, on May 17, 1996 and has no operating history. See "Risk Factors."
The Company is a development stage company, has not begun to operate. The
Company is completely dependent upon proceeds of the Blank Check Offering and
existing funds to commence operations. The Company intends to effect a merger,
acquire the assets or the capital stock of existing businesses or other similar
business combination (a "Business Combination") as to which no assurance can be
given with the proceeds from this Blank Check Offering. The Company will not
acquire or merge with a development stage company, and will consummate an
acquisition solely with a company with existing operations and revenues. The
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Company will not acquire or merge with a company in which Ms. Janssen, the
Company or LWH, or any affiliate or related party of Ms. Janssen, the Company or
LWH have an ownership interest or otherwise control. Ms. Janssen may manage any
business developed or acquired by the Company, may employ qualified, but as yet
unidentified, individuals to manage such business or may not have any active
involvement with such business.
No assurance can be given that the minimum net proceeds or any greater
amount up to the maximum net proceeds of this Blank Check Offering 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 proceeds from
less than the Maximum Offering are raised or if only the Minimum Units are sold,
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. More
particularly, were the Company to raise less than the maximum amount of this
Blank Check Offering, or if only the Minimum Units of this Blank Check Offering
are sold, the Company would have less working capital or only a limited amount
of working capital available for use either to complete an acquisition or to
provide, if necessary, working capital following any such acquisition.
Concomitantly, the potential number of shares of Common Stock subsequently able
to be traded in the over-the-counter market would also be reduced which could
also limit the attractiveness of the Company as an acquisition partner. While
the Company believes that receiving proceeds from only the Minimum Offering and
reduced future trading market for the Company's Common Stock would limit the
attractiveness of the Company as a merger or acquisition partner and reduce the
opportunities for such acquisitions, Ms. Janssen believes, although there can be
no assurances, that there will still be available acquisition opportunities.
Further, there is no assurance that receipt of proceeds from the Maximum
Offering will be sufficient to complete an acquisition or to provide working
capital following such acquisition. 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 limited net proceeds of the
Blank Check Offering intended to be utilized for such purposes. Investors will
be providing their funds to Ms. Janssen, who will have virtually complete
discretion as to their expenditure. In the event that additional capital is
needed by the Company to sustain operations until completion of a merger or
acquisition, LWH has agreed to lend the Company up to $10,000 at such time as
the Minimum Offering is completed on an as needed basis for working capital to
sustain operations. In the event funds are loaned to the Company, the agreement
between the Company and LWH provides for the repayment of principal and interest
thereon, at a rate of six (6%) percent per annum, on January 1, 2000. In the
event that the Company shall not have the ability to pay the note together with
accrued interest at that time, the obligation shall be forgiven by the LWH. In
the event that the Company finds and acquires a "Business Combination" within
the 18 month period, the "Business Combination" will assume the $10,000 debt
payable to LWH. The Company does not intend to obtain any additional loan to
provide funds to sustain operations until completion of a merger or acquisition
nor does it intend to obtain a loan to acquire a Business Combination. The
Company may, however, obtain a loan to provide working capital following any
such acquisition. See "Risk Factors," "Use of Proceeds" and "Proposed Business."
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The Company maintains its business address at 8700 N.W. 47th Drive, Coral
Springs, FL 33067. Its telephone number is (954) 255-5566. See "Proposed
Business - Office Facilities."
THE BLANK CHECK OFFERING
Securities Offered
Maximum Units............................. 100,000 Units
Minimum Units............................. 50,000 Units
Number of shares of Common Stock
authorized.................................... 20,000,000
Number of shares of Common Stock
outstanding prior to this Blank
Check Offering................................ 4,900,000
Number of shares of Common Stock
outstanding after Offering
Maximum Offering.......................... 5,000,000
Minimum Offering.......................... 4,950,000
Preferred Stock................................. 5,000,000 shares of Preferred
Stock ($.001 par value)
authorized; none outstanding
Gross Proceeds to the Company
Maximum Units............................. $100,000
Minimum Units............................. $ 50,000
____________________________
SELECTED FINANCIAL DATA
June 30, 1997
-------------
Current assets .................. $16,292
Total assets .................. $16,292
Liabilities .................. $9,600
Shareholders' equity .................. $6,692
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The Company is presently in the development stage and consequently has not
generated any income nor incurred any expenses, except those incurred in
connection with its organization and this Blank Check Offering. The Company does
not expect to receive any revenues from operations until it locates and acquires
a business. See "Proposed Business."
RISK FACTORS
The Units being offered by this Prospectus represent a speculative
investment and involve a high degree of risk. Therefore, prospective investors
should carefully consider the following risk factors affecting the proposed
activities of the Company, prior to making any investment therein, as well as
all other matters set forth elsewhere in this Prospectus.
1. 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 as investors or require the return of their
investment funds. Any investors not making any decision within such 45-day
period are to automatically receive a return of their investment funds.
2. FAILURE OF SUFFICIENT NUMBER OF INVESTORS TO RECONFIRM INVESTMENT.
Unless investors representing 80% of the offering proceeds received in this
Blank Check Offering elect to remain investors, the consummation of an
acquisition of or merger with a target business would be precluded. In that
event, none of the Units will be issued and all of the Deposited Funds in the
escrow account must be returned to investors (i.e., the Deposited Funds
representing the gross offering proceeds received less offering expenses of
$17,000, which offering expenses shall not exceed $17,000 and any amount, up to
10% of the Deposited Funds but in no event greater than $3,300 or $8,300
assuming the Minimum Offering or the Maximum Offering is sold (if any) used as
working capital in connection with the Company's acquisition of a Business
Combination. As a consequence, investors would be returned less than 100% of
their invested funds.
Additionally, a sufficient number of investors--representing 80% of the
offering proceeds received may not reconfirm their investment, thereby
preventing the consummation of the acquisition of (or merger with) the target
business. A Business Combination with a target business cannot be consummated
unless, in connection with the reconfirmation offering required by Rule 419, the
Company can successfully convince a sufficient number of investors representing
80% of the offering proceeds received in this Blank Check Offering to elect to
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reconfirm their investments. If, after completion of the reconfirmation
offering, a sufficient number of investors do not reconfirm their investment,
the Business Combination will not be consummated. In such event, none of the
Deposited Securities held in escrow will be issued and the Deposited Funds will
be returned to investors on a pro rata basis as described above.
3. 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
securities (or any interest in or related to the securities) 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
Securities (E.G., contracts for sale on a when, as, and if issued basis) and
sales of derivative securities to be settled by delivery of the Deposited
Securities (E.G. physically-settled option on the securities) are prohibited.
Such rule prohibits sales of other interests based on the Deposited Securities,
whether or not physical delivery is required.
4. NO ACCESS TO INVESTORS' FUNDS WHILE HELD IN ESCROW. There is no
commitment by any person to purchase all or any part of the Units offered hereby
and consequently there is no assurance that the Minimum Offering of 50,000 Units
or any additional Units up to the Maximum Offering of 100,000 Units will be sold
during the offering period. Investors in this offering have no right to the
return or the use of their funds until conclusion of the offering, which may
continue for a period of up to six months after the effective date. Even upon
the sale of the Maximum Offering amount (100,000 Units), the investors' funds
(reduced to reflect payments for expense amounts, if any, otherwise released as
permitted by Rule 419 (as discussed below)) may remain in the escrow account,
which is non-interest bearing, and the investors will have no right to the
return or the use of their funds for a period of up to 18 months from the
effective date. Investors in this offering will be offered return of their pro
rata portion of the funds held in escrow only in connection with the
reconfirmation offering required to be conducted upon execution of an agreement
to acquire a target business which represents 80% of the offering proceeds
received in this Blank Check Offering. If the Company is unable to locate a
target business meeting the above acquisition criteria, investors will have to
wait 18 months from the effective date of this offering before a pro rata
portion of their funds is returned without interest thereon. See "Prospectus
Summary - Investor Rights to Reconfirm Investment Under Rule 419 - Prescribed
Acquisition Criteria." and "Rule 419 Prescribed Acquisition Criteria and
Reconfirmation."
5. POSSIBLE GREATER PREMIUM TO BE REALIZED BY MS. JANSSEN THAN BY
INVESTORS ON SUBSEQUENT SALE OF SHARES. While the Company and Ms. Debra Janssen,
the Company's sole officer and director, confirm that no shares of the Company's
Common Stock will be sold by any officers, directors or persons who may be
deemed promoters of the Company without affording all shareholders of the
Company a similar opportunity, Ms. Janssen may, nevertheless, actively negotiate
or otherwise consent to the purchase of all or a portion of her shares of Common
Stock as a condition to or in connection with a proposed merger or acquisition
transaction. It should be noted that Ms. Janssen has paid approximately $.001
per share of Common Stock owned by her as compared to the $1.00 per share paid
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by investors in this Blank Check Offering. In connection with any such stock
purchase transaction, even though Ms. Janssen and the public investors would
receive the same price per share, a greater premium would be deemed to have been
paid for Ms. Janssen's shares of Common Stock and the public investors in the
Company would not receive any portion thereof. 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 Ms. Janssen's
shares. Proceeds from this Blank Check Offering will not be utilized directly or
indirectly to purchase Ms. Janssen'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 No. 17 entitled "Actual and Potential
Conflicts of Interest."
6. No Assurance Net Proceeds from Maximum Offering or Lesser Amount
Will be Sufficient to Realize Company's Goals. No assurances can be given that
the net proceeds from the Minimum Offering of approximately $29,700 or any
greater amount up to the Maximum Offering of approximately $74,700 will be
sufficient to allow the Company to realize its goals and engage in a business
venture, merger or acquisition chosen by Ms. Debra Janssen, the Company's sole
officer and director. Further, in the event that 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 the event that additional capital is needed
by the Company to sustain operations until completion of a merger or
acquisition, LWH has agreed to lend the Company up to $10,000 at such time as
the Minimum Offering is completed on an as needed basis for working capital to
sustain operations. In the event funds are loaned to the Company, the agreement
between the Company and LWH provides for the repayment of principal and interest
thereon, at a rate of six (6%) percent per annum, on January 1, 2000. In the
event that the Company shall not have the ability to pay the note together with
accrued interest at that time, the obligation shall be forgiven by the LWH. In
the event that the Company finds and acquires a "Business Combination" within
the 18 month period, the "Business Combination" will assume the $10,000 debt
payable to LWH. In the event additional capital is needed by the Company to
sustain operations following an acquisition, the Company may obtain additional
capital through the sale of its securities through loan financing. No assurance
can be given, however, that any additional capital or financing will be
available, or if available, that it will be on favorable terms to the Company.
See Risk Factors No. 10, 18 and 19. In the event the Company borrows funds, the
Company may not be able to incur additional debt, make other acquisitions or
declare dividends.
7. ATTRACTIVENESS OF COMPANY TO POTENTIAL ACQUISITION OR MERGER
CANDIDATES IN VIEW OF LIMITED FUNDS TO BE RAISED NOT ASSURED. In view of the
limited funds to be raised, either at the Minimum Offering or Maximum Offering
level, or at a lesser level, the attractiveness of the Company to potential
acquisition or merger candidates in view of such limited net proceeds should be
considered. 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 to 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
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and state laws enacted for the protection of investors. Further, any
post-effective amendment filed with the Commission must be declared effective by
the staff prior to the ability of the Company to recommence any offering. In
light of the review of such post-effective amendment, any significant delays may
impact adversely upon the Company's plans.
8. USE OF PROCEEDS NOT SPECIFIC. Because the net proceeds of the Blank
Check Offering will be highly limited and have not been allocated to accomplish
any specific corporate purpose (with the exception of up to $17,000, and not to
exceed $17,000, which has been allocated for offering expenses, in connection
with this offering), investors who participate in this Blank Check Offering will
be providing their funds to Ms. Debra Janssen, the Company's sole officer and
director, on whose judgment they must depend. The business may be deemed to be a
"blank check" over which investors will have no control except for the rights
afforded to investors pursuant to the reconfirmation offering and, consequently,
an investment in the Units represents a high degree of risk. As of the date of
this Prospectus, Ms. Janssen and the Company have not formulated any plans,
except that the Company intends to purchase or form a business using the net
proceeds of the Blank Check Offering and existing capital. There is no assurance
whatsoever that the Company will be able to acquire, or form a business and Ms.
Janssen has no alternative plan to utilize the portion of the net proceeds of
the Blank Check Offering intended to be utilized for such purposes. Further,
even if Ms. Janssen is successful in acquiring or forming a business or
otherwise engaging in a Business Combination, there is no assurance that any
business acquired or formed will prove profitable or even commercially viable.
9. NO PRESENT IDENTIFICATION OF INDUSTRY AND/OR ACQUISITION PROSPECTS.
Ms. Debra Janssen, the Company's sole officer and director, has not identified
any specific business or even any specific industry which the Company intends to
enter through the purchase of formation of a business. Neither Ms. Janssen nor
any affiliates has any present plans, proposals, arrangements or understandings
with respect to any possible business combination or business development
opportunity. None of Ms. Janssen, the Company or LWH, or any affiliate,
associate promoter or related party to Ms. Janssen, the Company or LWH has had
any preliminary contact or discussions with any representative of any business
or company regarding the possibility of an acquisition or merger between the
Company and such other company. While Ms. Janssen 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 "Prospective Summary - Investors Right
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 offering proceeds received in this Blank Check Offering
reconfirm that investment. Ms. Janssen will not consider (i) a Business
Combination with entities owned or controlled by affiliates, associates or
related parties of Ms. Janssen, the Company or LWH; (ii) the creation of
subsidiary entities with a view to distributing their securities to the
shareholders of the Company; or (iii) selling any securities owned or controlled
by affiliates and associates of the Company in connection with any business
combination transaction. The success or failure of an investment in the Units
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<PAGE>
will depend entirely upon the ability of Ms. Janssen to acquire or form a
successful business and to continue operations thereafter and obtain additional
capital or financing, if necessary, to support the working capital requirements
of these businesses after their acquisition or formation, of which no assurances
can be given. See "Use of Proceeds" and "Proposed Business." Purchasers of Units
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.
10. HIGH RISK OF UNAVAILABILITY OF CONVENTIONAL PRIVATE OR PUBLIC
OFFERINGS OF SECURITIES OR CONVENTIONAL BANK FINANCING. It may be expected that
any target business that may be acquired by or merged with the Company will
present such a level of risk that conventional private or public offerings of
securities or conventional bank financing will not be available. To the extent
that additional financing is required, the Company may not be able to obtain
financing on terms acceptable or advantageous to the shareholders of the
Company. There can be no assurances that such financing will be available for
each project when needed or, if available, that it will be on terms acceptable
to the Company or in the best interests of its shareholders.
11. DEPENDENCE ON PART-TIME MANAGEMENT. Management of the Company
presently consists solely of Ms. Debra Janssen, who will not devote her
full-time to the affairs of the Company and who intends, prior to the conclusion
of this Blank Check Offering, whether or not the maximum gross proceeds or the
minimum gross proceed is raised, to devote only a portion of her time thereto.
Subsequent thereto and prior to any possible Business Combination, Ms. Janssen
intends to devote such time to the business of the Company as she believes to be
reasonably necessary which would be expected to involve at least 50% of her
available business time. The Company's success will be largely dependent on the
decisions made by Ms. Janssen and any future members of management. No
additional members of management have been selected or are presently
contemplated, and there can be no assurance that the Company will choose to
employ or be able to attract additional members of management in the future. In
the event additional members of senior management are not retained and should
Ms. Janssen's services for some reason no longer be available to the Company, it
may become necessary to liquidate the Company. No agreement has been entered
into between the Company and Ms. Janssen to retain her services. See "Management
- - Compensation."
12. NEED FOR MANAGEMENT FOR ACQUIRED BUSINESSES. The Company will depend
on its ability to attract and retain qualified personnel to manage any
businesses it is able to acquire or form. The Company has not identified the
additional personnel it may need to employ to operate any business it may
acquire or form. Competition for such personnel is intense and the Company may
have to provide qualified personnel with competitive compensation packages,
equity participation and other benefits.
13. NO OPERATING HISTORY. The Company was recently organized and to date
has not engaged in any business operations. As a new business, it is subject to
all of the substantial risks inherent in the commencement of a new business
enterprise with new management. There can be no assurance that the Company will
be able to generate revenues or acquire an interest in any business that might
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prove to be profitable. Additionally, the Company has no business history that
investors can analyze to aid them in making an informed judgment as to the
merits of an investment in the Company. Any investment in the Company should be
considered a high risk investment because investors will be placing their funds
at risk in an unseasoned start-up company with the attendant unforeseen costs,
expense and problems to which a "blank check" is often subject. As of the date
of the Prospectus, the Company has not entered into any negotiations or
arrangement to acquire or develop any business or for the purchase of any
properties.
14. Limited Assets of the Company. As of the date of this Prospectus,
the Company has no substantial assets. Any business activity that the Company
eventually undertakes may require more substantial capital. The success of the
Company will initially depend upon the success of this Blank Check Offering.
Even if this Blank Check Offering is successful, there is still no assurance
that the proceeds of this Blank Check Offering will be sufficient to meet the
ultimate needs of the Company, because the Company does not know in which type
of business it will eventually engage, nor does it know what its ultimate
capital needs will be. In the event the Company were to sell only the Minimum
Units, the Company would have only a limited amount of incremental working
capital available for use either to complete an acquisition or to provide
working capital following any such acquisition. In the event any additional cash
requirements are needed by the Company to sustain operations following
completion of a merger or acquisition the Company would be required to raise
additional capital or financing. No assurance can be given that the Company will
be able to obtain such additional capital or financing, or even if available,
that it will be acceptable or advantageous to the Company. Notwithstanding the
foregoing, LWH has agreed to lend the Company up to $10,000 at such time as the
Minimum Offering is completed on an as needed basis for working capital to
sustain operations. In the event funds are loaned to the Company, the agreement
between the Company and LWH provides for the repayment of principal and interest
thereon, at a rate of six (6%) percent per annum, on January 1, 2000. In the
event that the Company shall not have the ability to pay the note together with
accrued interest at that time, the obligation shall be forgiven by the LWH. In
the event that the Company finds and acquires a "Business Combination" within
the 18 month period, the "Business Combination" will assume the $10,000 debt
payable to LWH. In addition, the Company may incur substantial costs in
connection with its search and negotiations for a business, which may further
deplete the limited assets of the Company apart from the proceeds maintained in
the escrow account.
15. LIMITED EXPERIENCE OF MANAGEMENT. Although Ms. Debra Janssen, the
Company's sole officer and director, has general business experience, potential
investors should be aware that Ms. Janssen has no experience in business
combinations and may not have any significant experience in acquiring or
operating certain business interests that the Company might choose to acquire.
Ms. Janssen does not anticipate retaining outside independent professionals to
assist her in assessing the merits and risks of any proposed acquisition. See
"Proposed Business" and "Management."
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16. POSSIBLE ISSUANCE OF ADDITIONAL SHARES. The Company's Articles of
Incorporation authorize the issuance of 20,000,000 shares of Common Stock and
5,000,000 shares of Preferred Stock. Upon the completion of this Blank Check
Offering, approximately 75% of the Company's authorized Common Stock and all of
its authorized Preferred Stock will remain unissued. The Company's Board of
Directors has the power to issue substantial additional shares and the right
to determine the voting, dividend, conversion, liquidation, preferences and
other conditions of the shares of Preferred Stock without further shareholder
approval. Management presently anticipates that it may choose to issue such
shares of Preferred Stock without further shareholder approval. Management
presently anticipates that it may choose to issue such shares to acquire
business interests or other types of property in the future, although the
Company presently has no commitments, contracts or intentions to issue any
additional shares. Potential investors should be aware that any such stock
issuances may result in a reduction of the book value or market price, if any,
of the outstanding shares of Common Stock. If the Company issues any additional
shares of Common Stock, such issuance will reduce the proportionate ownership
and voting power of each other shareholder. The issuance of shares of Preferred
Stock would in all likelihood provide the holders thereof with certain
priorities with regard to dividends and liquidations rights, and could further
dilute the voting rights and economic interests of the holders of the Company's
Common Stock. Further, any new issuance of shares may result in a change of
control or the management of the Company. See "Proposed Business - Form and
Structure of Acquisition."
17. POTENTIAL CONFLICTS OF INTEREST. The Company's present executive
officer, Ms. Debra Janssen, will not engage in other business activities similar
to those to be engaged in by the Company prior to the time that a Business
Combination is consummated. Any potential conflicts of interest would only arise
following such a Business Combination, and in that event, unless Ms. Janssen
were to remain as a principal officer of the Company, such conflicts of interest
would likely be beyond the control of Ms. Janssen. In the event of a conflict of
interest, it is possible that management may fail to fulfill their fiduciary
duties in a manner satisfactory to the shareholders of the Company. Furthermore,
to the extent that management's fiduciary duties are compromised, any remedy
available under state corporate law will most likely be prohibitively expensive
and time consuming. Since no formal policies have been established for the
resolution of such conflicts, following a Business Combination, the Company
could be adversely affected should Ms. Janssen or such future officers choose to
place any other business interests before those of the Company. See "Conflict of
Interest."
In addition, although such arrangements are not contemplated, Ms. Janssen
may subsequently receive personal financial gain, from any acquired company or
developed business by means of: (i) 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 she could be deemed to have received cash,
stock or other assets. The Company has not imposed any limits or other
restrictions on the amount or circumstances under which any of such transactions
may occur, except neither Ms. Janssen nor any of her affiliates shall receive
any personal financial gain from the proceeds of this Blank Check Offering
except for possible 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 could not develop in the future, will be
resolved in favor of the Company or will otherwise not cause the Company to lose
potential opportunities.
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18. 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 an acquired business.
However, the Company has no intention of borrowing funds to effectuate the
acquisition of a Business Combination but shall, if necessary, to finance the
operations of a Business Combination once acquired. The amount and nature of any
borrowings by the Company will depend on numerous considerations, including the
Company's capital requirements, the Company perceived ability to meet debt
service on any 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, will be available on terms
deemed to be commercially acceptable and in the best interest 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
financing ultimately proves to be available, any borrowings may subject the
Company and its operations to various risks traditionally associated with
incurring of indebtedness, including following strict financial controls, making
significant interest payments, interest rate fluctuations and insufficiency of
cash flow to pay principle and interest. In the event the Company borrows funds
to consummate a Business Combination, the Company may not be able to incur
additional debt, make other acquisitions or declare dividends. Furthermore, an
acquired business may already have previously-incurred debt financing and,
therefore, the risks inherent thereto, as discussed above. See "Use of Proceeds"
and "Proposed Business -Form and Structure of Acquisitions."
19. POTENTIAL NEED FOR ADDITIONAL FINANCING. The funds with which the
Company will commence business will likely not be substantial in relationship to
the business in which the Company may eventually engage. As such, it may become
necessary for the Company to seek additional financing, either through debt or
equity, in the future. No assurance can be given, however, that the Company will
be able to obtain additional financing or, even if available, that such
additional financing will be available on terms acceptable to the Company.
20. INTENSE COMPETITION. Numerous companies and individuals are engaged
in the business of searching for and acquiring businesses and/or properties, and
this area of activity is intensely competitive. Many of the Company's
competitors will have vastly greater resources, personnel, technical know-how,
and financial capacity than the Company. Accordingly, there can be no assurance
that the Company will be able to effectively compete with its competitors. See
"Proposed Business."
21. NO DIVIDENDS ANTICIPATED. The Company has not paid any cash
dividends on its Common Stock and does not anticipate paying dividends on its
shares in the foreseeable future. The Company presently intends to retain future
earnings, if any, for financing such businesses that it ultimately may acquire.
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22. NO LIKELIHOOD OF ACTIVE AND LIQUID PUBLIC MARKET. Prior to this
Blank Check Offering, there has been no public market for the shares of Common
Stock, and there is no likelihood that an active and liquid public market for
the Shares will develop after this Blank Check Offering. In the unlikely event
that a trading market should in fact develop for any of the Shares offered
hereby, there can be no assurances that it will be sustained. Accordingly, there
can be no assurance that any of the Shares offered hereby can be resold at or
near the Blank Check Offering price. The Company intends to timely file periodic
reports under the Exchange Act for so long as it may be required to do so, but
this is not likely to enhance the liquidity of any future market for the Shares.
Purchasers of the Shares may have difficulty in selling their securities in the
future due to the anticipated limited market. Further, the Company's Common
Stock will not be eligible for inclusion on NASDAQ upon completion of this Blank
Check Offering.
23. ARBITRARY DETERMINATION OF BLANK CHECK OFFERING PRICE. The initial
public offering price of the Units was arbitrarily determined by the Company.
Among the limited factors considered in determining the price of the Units were
the uncertain prospects of the Company, and the current conditions in the
over-the-counter market. There is, however, no relationship whatsoever between
the offering price of the Units and the Company's assets, operating results,
book value or any other objective criteria of value.
24. NO FIRM COMMITMENT TO PURCHASE SHARES; NASD STAFF REVIEW REQUIRED IN
EVENT OF RETENTION OF SERVICES OF ANY NASD MEMBER. No commitment exists
respecting the purchase of the Shares being offered by this Prospectus. The
funds available to the Company from the proceeds of this Blank Check Offering
will be reduced to the extent that less than all Shares offered hereby are sold.
The sale of less than all Shares offered would materially and adversely curtail
the Company's proposed operations. See "Plan of Distribution." Should the
services of any NASD members be retained, the staff of the NASD must review and
clear the terms and arrangements prior to their participation. The NASD's review
may result in a delay in their participation thereby reducing the amount of
sales (and proceeds) that they may be able to generate within the 180-day
offering period. It is not contemplated that any broker-dealers will participate
in this offering.
25. IMMEDIATE DILUTION. There will be an immediate and substantial
dilution of the public's investment in the Company in that the net tangible book
value per share after this Blank Check Offering will be substantially less than
the public offering price per share of Common Stock comprising a portion of the
Shares. See "Dilution."
26. POTENTIAL FUTURE RULE 144 SALES. All shares of Common Stock
presently outstanding are "restricted securities" within the meaning of the
Securities Act of 1933, as amended, and the rules and regulations promulgated
thereunder and, generally, may be sold only in compliance with Rule 144 under
the Act. Rule 144 provides that commencing April 29, 1997, a person who has held
restricted securities for a period of two years commencing the date the
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<PAGE>
securities were acquired, may sell a limited number of such securities into the
public market without registration of such securities under the Act. Rule 144
also permits commencing April 29, 1997, under certain circumstances, persons who
are not affiliates of the Company to sell their restricted securities without
quantity limitations once they have satisfied the Rule's three-year holding
period. Sales made pursuant to Rule 144 by the Company's existing shareholders
may have a depressive effect on the price of the shares of Common Stock in the
public market, should a public market for the shares develop. Such sales could
also adversely affect the Company's ability to raise capital at that time
through the sale of its Common Stock or other securities. All of the restricted
securities were issued in May 1996, and as of April 29, 1997 and based on Rule
144, commencing in May 1997, the persons holding such securities may commence
selling a limited number of their securities into the public market without
registration of their securities under the Act.
27. PRESENT SHAREHOLDERS TO RETAIN SUBSTANTIAL VOTING CONTROL UPON
COMPLETION OF BLANK CHECK OFFERING; SUBSTANTIAL PORTION OF FINANCIAL RISK TO
INVESTORS IN THIS BLANK CHECK OFFERING. Following completion of this Blank Check
Offering, the Company's present shareholders will own 98% of the then-issued and
outstanding voting stock of the Company, assuming the maximum offering is
effected. Present shareholders will, therefore, maintain virtually absolute
voting control over the Company and its affairs, including the election of
directors. Upon completion of this Blank Check Offering, assuming the Minimum
Offering or Maximum Offering is effected, the present shareholders will have
paid $4,900 for 98% or 99%, respectfully, of the Company's then outstanding
shares of Common Stock, while persons purchasing Shares in this Blank Check
Offering will have paid $100,000 or $50,000, respectively, for the other 2% or
1%, respectively, of the Company's shares of Common Stock. Thus, investors
purchasing Shares in this Blank Check Offering will incur a substantial portion
of the financial risks associated with the Company. See "Dilution."
28. PROBABLE LACK OF DIVERSIFICATION. The proceeds received from this
Blank Check Offering will be sufficient to complete only a single property or
business acquisition and, in all likelihood, no more than one. The Company does
not intend to use leverage to consummate a Business Combination, nor does the
Company intend to incur debt in connection with such Business Combination.
Accordingly, the Company may lack the funds necessary to diversify the Company's
business interests so as to minimize risks. As such, a single business or
property failure could result in a substantial, if not complete, loss to the
Company and its shareholders. While not anticipated, in the event the Company
were to employ a debt facility in order to consummate a business combination,
the use of leverage to consummate a business combination may reduce the ability
of the Company to incur additional debt, make other acquisitions or declare
dividends. Additionally, such leverage may subject the Company's operations to
strict financial controls and significant interest expense.
29. 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
20
<PAGE>
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 may 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, potentially costly, reporting, record
keeping, 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 - Investment Company Act Considerations."
30. POTENTIAL HIGH RISK ACQUISITION TARGETS. To the extent the Company
effects a Business Combination with a financially unstable company or entity in
an early stage of growth (including entities without consistent records of sales
or earnings), the Company will become subject to numerous risks inherent in the
business operations of financially unstable, early stage or potential emerging
growth companies, including the possibility that it may be precluded from
obtaining conventional bank financing required for the operation of the
business. 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. Although Ms. Debra Janssen, the Company's sole officer and director,
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 - Business
Objectives."
31. BROKER-DEALER SALES OF COMPANY SECURITIES. The Company's securities
are subject to a Securities and Exchange Commission rule that imposes additional
sales practice requirements on broker-dealers who sell 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. For transactions covered by the rule, the broker-dealer must
make a special suitability determination for the purchaser and have received the
purchaser's written agreement to the transaction prior to the sale. Such
broker-dealers must also, prior to the purchase, provide the customer with risk
disclosure documents which identify certain risks associated with investing in
"penny stocks" and which describes the market therefor as well as a customer's
legal remedies. The broker-dealer must also obtain a signed and dated
acknowledgement from its customers demonstrating that the customers have
21
<PAGE>
actually received the required risk disclosure document before their first
transaction in a penny stock. Consequently, the rule may affect the ability of
broker-dealers to sell the Company's securities and also may affect the ability
of purchasers in this offering to sell their shares in the secondary market, if
and when such a market develops.
32. REQUIREMENTS OF CURRENT PROSPECTUS; STATE BLUE SKY REGISTRATION
REQUIRED TO EXERCISE WARRANTS. The shares of Common Stock issuable upon exercise
of the Warrants are also being registered with the Commission under the
Company's Registration Statement, of which this Prospectus is a part. The
Company will be required, from time to time, to file^ post effective amendments
to its registration statement in order to ^maintain a current prospectus
covering the issuance of such shares upon exercise of the Warrants. The Company
will undertake to make such filings and to use its best effort to cause such
post effective amendments to become effective. If for any reason a required post
effective amendment is not filed or does not become effective or is not
maintained, the Holders of the Warrants may be prevented from exercising their
Warrants. Holders of the Warrants have the right to exercise the Warrants only
if underlying shares of Common Stock are qualified, registered or exempt from
registration ^ under applicable securities laws of the states which the various
holders of the Warrants reside. The Company cannot issue shares of Common Stock
to holders of the Warrants in states where such shares ^ are not qualified,
registered or exempt. The Company has not undertaken to register the shares of
Common Stock underlying the Warrants ^ in any state. See "Description of
Securities- Warrants."
DILUTION
As of June 30, 1997, the net tangible book value of the Company's
4,900,000 outstanding shares of Common Stock was $(9,448) or approximately
$(.002) per share. "Net tangible book value per share" is determined by dividing
the tangible net worth of the Company (tangible assets less total liabilities)
by the number of shares of Common Stock actually outstanding. After giving
effect to the sale of 100,000 shares of Common Stock offered hereby at an
offering price of $1.00 per share and the application of the anticipated net
proceeds of this Blank Check Offering after deducting the expenses of the
Offering, the assumed net tangible book value of the Company at June 30, 1997,
would have been $89,292 or approximately $.018 per share, representing an
immediate increase in net tangible book value of approximately $.020 per share
to present holders of Common Stock and an immediate dilution of approximately
$.982 per share to new investors. The following table illustrates this per share
dilution.
Minimum Maximum
Offering Offering
-------- --------
Public Offering price per share $1.00 $1.00
Assumed per share net tangible book
value of Common Stock before Offering ($.002) ($.002)
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<PAGE>
Increase per share attributable to
payments by new investors $.010 $.020
Assumed per share net tangible book
value of Common Stock after
Blank Check Offering $.008 $.018
Dilution of net tangible book value
per share to new investors(1) $.992 $.982
________________________________
(1) "Dilution" is determined by subtracting the net tangible book value per
share after the offering from the amount of cash paid by a new investor
for a share of Common Stock.
The following table provides information concerning shares of Common Stock
purchased and held by the existing shareholders of the Company at June 30, 1997,
and in relationship to the Shares of Common Stock to be sold pursuant to this
Blank Check Offering:
<TABLE>
<CAPTION>
Approximate
Proposed Maximum Offering Aggregate
========================= Consideration
as Percentage
Shares of Total
Purchased % of Total Consideration
from the Shares to be Aggregate Received by
Company Outstanding Consideration the Company
------- ----------- ------------- -----------
<S> <C> <C> <C> <C>
Existing Shareholders............... 4,900,000 98% $ 6,900 6%
New Investors...................... 100,000 2% $ 100,000 94%
------- ---- ------- ---
Total............................... 5,000,000 100% $ 106,900 100%
....................................
Approximate
Aggregate
Proposed Maximum Offering Consideration
========================= as Percentage
Shares of Total
Purchased % of Total Consideration
from the Shares to be Aggregate Received by
Company Outstanding Consideration the Company
------- ----------- ------------- -----------
<S> <C> <C> <C> <C>
Existing Shareholder................ 4,900,000 99% $ 6,900 12%
New Investors....................... 50,000 1% $ 50,000 88%
------ ---- ------ ---
Total............................... 4,950,000 100% $ 56,900 100%
</TABLE>
___________________________
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CAPITALIZATION
The following table sets forth the capitalization of the Company as of
June 30, 1997, and as adjusted to give effect to the issuance and sale of all
the Maximum Shares (100,000 Shares) offered hereby.
As of As Adjusted
June 30, 1997 Minimum Maximum
============= ------- -------
Long Term Debt......................... $ -0- $ -0- $ -0-
Shareholders' Equity:
Preferred Stock, $.001 par value,
authorized 5,000,000 shares, none
issued............................... $ -0- $ -0- $ -0-
Common Stock, $.001 par value,
authorized 20,000,000 shares;
presently issued and outstanding,
4,900,000 shares and 5,000,000
shares to be outstanding
after Blank Check Offering........... $ 4,900 $4,950 $ 5,000
Additional Paid-in Capital............. $ 2,000 $34,950 $84,900
Total Shareholders' Equity........... $ 6,900 $39,900 $89,900
Total Capitalization................. $ 6,900 $39,900 $89,900
USE OF PROCEEDS
Because management (which consists solely of Ms. Debra Janssen) has no
specific business contemplated for the Company, it is unable to precisely
indicate categories for the use of proceeds from the Blank Check Offering.
However, the following sets forth management's estimate as to how the gross
proceeds will likely be allocated:
Assuming Assuming
Maximum Gross Minimum Gross
Proceeds Proceeds
Description Raised (1) Raised
- ----------- ---------- ------
Working capital available for
operations and other business
endeavors upon completion of
the Blank Check Offering and
consummation of acquisition(2)(3) $ 83,000 $33,000
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<PAGE>
Expenses of the Blank
Check Offering(4) $ 17,000 $17,000
-------- -------
$100,000 $50,000
_______________________
(1) No assurances are given that the Company will sell any of the 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) 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 the Company's acquisition of a Business Combination,
including the costs of such acquisition as well as the costs of analyzing
such acquisition (up to 10% of the Deposited Funds: Maximum Offering up to
$8,300 and Minimum Offering up to $3,300). The Company will not use any
portion of the proceeds to hire consultants or advisors in connection with
the acquisition of a business or property (other than to defray legal or
accounting costs and fees incurred in the normal course in connection with
an acquisition). Substantial funds could be expended in connection with
preparing for an acquisition that is not consummated subject to the
limitations provided hereafter. See "Proposed Business - Business
Objectives" and "Conflicts of Interest." Working capital also may 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 Ms. Debra Janssen for any of her
out-of-pocket expenses incurred in connection with the Company locating,
analyzing and/or negotiating to acquire a Business Combination not to
exceed 10% of the Deposited Funds. No portion of the proceeds raised
hereby will be paid to Ms. Janssen, directly or indirectly, as
consultant's fees, advisor's fees, officer's salaries, director's fees,
warrant solicitation fees, finder's fees for acquisitions, purchase of
shares or other payments. In addition, no portion of the proceeds of this
offering in excess of 10% of the Deposited Funds (i.e., up to $8,300 if
the Maximum Offering is sold or up to $3,300 if only the Minimum Offering
is sold) may be used to pay Ms. Janssen for any of her out-of-pocket
expenses relating to this offering or incurred in connection with the
costs of an acquisition or analyzing an acquisition which is not
consummated. See "Certain Transactions." Management is not able to
estimate the length of time that such available proceeds and working
capital will be on hand, but as described in the last paragraph of this
section, Ms. Janssen will make available to the Company any additional
funds required to sustain operations.
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<PAGE>
(3) See also "Prospectus Summary" for discussion concerning Rule 419,
Deposited Funds, Deposited Securities, and Rule 419 provision for release
of up to 10% of Deposited Funds while such funds are held in escrow.
(4) Includes legal, accounting, printing, escrow, stock transfer fees, and
other miscellaneous offering expenses (will not exceed $17,000) which
includes $3,600 at June 30, 1997 advanced by Ms. Janssen to the Company in
the form of a non-interest bearing loan to pay certain offering expenses.
The Company estimates that it will have available as working capital for
acquisitions and other business endeavors an aggregate of approximately $83,000
or $33,000 assuming the Maximum Shares or Minimum Shares, respectively, offered
hereby are sold, of which no assurances can be provided. This Blank Check
Offering is being undertaken on a "best efforts-all or none" basis as to the
first 50,000 Shares and, accordingly, may be completed upon satisfaction of the
sale of the Minimum Offering (i.e., 50,000 Units or $50,000, less $17,000 of
offering expenses equals $33,000).
The Company presently anticipates that it will be able to locate and
acquire a suitable business interest or property utilizing the net Minimum
Offering proceeds (approximately $29,700 after deduction of offering expenses of
$17,000 and working capital expenses not to exceed $3,300) of this Blank Check
Offering. However, in the event that only the Minimum Offering is sold, the
Company's plans may be materially and adversely effected in that the Company may
find it even more difficult, to realize its goals than if it sold the Maximum
Offering, with net Maximum Offering proceeds of approximately $74,700 (after
deduction of offering expense, of $17,000 and working capital expenses of up to
$8,300). In the event the Company were to raise only the Minimum Offering
proceeds from this Blank Check Offering, the Company would have only a limited
amount of incremental working capital available for use either to complete an
acquisition or to provide working capital following any such acquisition. See
"Risk Factors Nos. 6, 10, 18 and 19".
None of the proceeds raised hereby will be used to make any loans to Ms.
Debra Janssen, the Company's sole officer and director, or any affiliates or
associates or any of the Company's shareholders. Furthermore, the Company may
not borrow funds and use the proceeds therefrom to make payments to Ms. Janssen
or any 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));
26
<PAGE>
(b) securities of an open-end investment company registered under the
1940 Act [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 1940 Act; or
(c) securities that are direct obligations of, or obligations guaranteed
as to principal or interest by, the United States.
The Company would 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 can result in civil liability and criminal
penalties to controlling persons 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 18
months from the date of this Prospectus, 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 Deposited Funds on a pro-rata basis.
MANAGEMENT DISCUSSION AND ANALYSIS AND PLAN OF OPERATION
The Company's plan of operation for the next 18 months, including the
period the Company can satisfy its cash requirements and whether it may be
required to raise additional funds in such period, is discussed herein under the
headings "Use of Proceeds" and "Proposed Business." The Company has not
conducted any market studies with respect to any business, property or industry.
Prior to its involvement with any business, the Company does not anticipate
performing any product research or development (see "Proposed Business -
Business Objectives"). As of the date of this Prospectus, Ms. Debra Janssen, the
Company's sole officer and director, does not anticipate, during the ensuing 18
months, any expected purchase of plant and significant equipment.
THE COMPANY
Win-Gate Equity Group, Inc. is a Florida corporation formed on May 17,
1996, 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. The Company
will not acquire or merge with a development stage company, and will consummate
an acquisition solely with a company with existing operations and revenues. The
Company will not acquire or merge with a company in which Ms. Janssen, the
Company or LWH, or any affiliate or related party of Ms. Janssen, the Company or
LWH have an ownership interest or otherwise control. Ms. Janssen may manage any
business developed or acquired by the Company, may employ qualified, but as yet
unidentified, individuals to manage such business or may not have any active
involvement with such business.
27
<PAGE>
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 to acquire one or more Business
Combinations and provide, if necessary, working capital following any such
acquisition. 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, acquisitions or mergers. 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, a business or properties with any value to the
Company.
The minimum net proceeds from this Blank Check Offering as well as the
maximum net proceeds may be insufficient for the Company to realize its goals
and allow the Company to engage in a business venture chosen by Ms. Janssen. In
the event that proceeds from less than the Maximum Offering are raised or if
only the Minimum Units are sold from this Blank Check Offering, the Company's
plans may be materially and adversely effected in that the Company may find it
even more difficult to realize its goals. In the event the Company were to raise
any amount less than the maximum amount of this Blank Check Offering, or if only
the Minimum Units are sold, the Company would have less or only a limited amount
of working capital available for use either to complete an acquisition or to
provide working capital following any such acquisition. Concomitantly, the
potential number of shares of Common Stock subsequently able to be traded in the
over-the-counter market would be reduced which could also limit the
attractiveness of the Company as an acquisition partner. While the Company
believes that proceeds from only the Minimum Offering from this Blank Check
Offering and reduced future trading market for the Company's Common Stock would
limit the attractiveness of the Company as a merger or acquisition partner and
reduce the opportunities for such acquisitions, Ms. Janssen believes, although
there can be no assurances, that there will still be available acquisition
opportunities. See "Use of Proceeds." If such proceeds are insufficient to
provide working capital following any such acquisition, the Company may be
required to seek additional capital through the sale of its securities or
obtaining financing through loans. 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 or favorable to the
Company. The Company does not intend to obtain a loan to acquire a Business
Combination. The Company presently anticipates that it may choose to issue
shares of its Common or Preferred Stock in connection with any acquisition of a
business interest or other type of property although the Company presently has
no commitments, contracts or intentions to issue any additional shares.
Potential investors should be aware that any such stock issuances may result in
a reduction of the book value or market price, if any, of the outstanding shares
of Common Stock. If the Company issues any additional shares of Common Stock,
such issuance will reduce the proportionate ownership and voting power of each
other shareholder. In the event that additional capital is needed by the Company
to sustain operations until completion of a merger or acquisition, LWH has
agreed to lend the Company up to $10,000 at such time as the Minimum Offering is
completed on an as needed basis for working capital to sustain operations. In
28
<PAGE>
the event funds are loaned to the Company, the agreement between the Company and
LWH provides for the repayment of principal and interest thereon, at a rate of
six (6%) percent per annum, on January 1, 2000. In the event that the Company
shall not have the ability to pay the note together with accrued interest at
that time, the obligation shall be forgiven by the LWH. In the event that the
Company finds and acquires a "Business Combination" within the 18 month period,
the "Business Combination" will assume the $10,000 debt payable to LWH. In the
event additional capital is needed by the Company to sustain operations
following an acquisition, the Company may obtain additional capital through the
sale of its securities through loan financing. No assurance can be given,
however, that any additional capital or financing will be available, or if
available, that it will be on favorable terms to the Company. See "Risk Factors
No. 10, 18 and 19". In the event the Company borrows funds, the Company may not
be able to incur additional debt, make other acquisitions or declare dividends.
In the event that Ms. Janssen determines that the Company is unable to
conduct or acquire any business in the ordinary course, Ms. Janssen, following
compliance with 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), in her sole discretion, will then seek shareholder approval to
liquidate the Company. In the event such a liquidation were to occur at some
point in time, all shareholders of the Company will receive the liquidated
assets on a pro rata basis, but not including Ms. Janssen, who has waived her
right to receive such liquidating distribution in such circumstances. While Ms.
Janssen has not established any guidelines for determining at what point in time
she might elect to discontinue her efforts to engage in a business and seek
shareholder approval to liquidate the Company, Ms. Janssen is subject to the 18
month time frame set forth in Rule 419 in which to effect an acquisition.
PROPOSED BUSINESS
Business Objectives
- -------------------
The Company's business plan is to seek one or more potential Business
Combinations that may, in the opinion of Ms. Debra Janssen, the Company's sole
officer and director, merit the Company's involvement. The Company recognizes
that, as a result of its limited financial, managerial and other resources, the
number of suitable potential businesses that may be available to it will be
extremely limited. The Company's principal business objective will be to seek
long-term growth potential in the businesses in which it participates rather
than immediate, short-term earnings. In seeking to attain its business
objectives, the Company will not restrict its search to any particular industry.
Rather, the Company may investigate businesses of a varying range of products or
services, including but not limited to finance, high technology, manufacturing,
service, research and development, communications, insurance and transportation.
Any agreement to acquire an acquisition candidate must provide for the
acquisition of a business or net assets for which the fair market value of the
business and net assets to be acquired represents at least 80% of the maximum
offering proceeds pursuant to this Blank Check Offering. See "Acquisition
29
<PAGE>
Restrictions." Subsequent to Rule 419, Ms. Janssen's discretion is unrestricted,
and the Company may participate in any business whatsoever that may, in the
opinion of Ms. Janssen, meet the business objectives discussed herein. See "Form
and Structure of Acquisition." It should be emphasized that such business
objectives are extremely general and are not intended to restrict the discretion
of Ms. Janssen. At the present time, the Company has not chosen the particular
area of business in which it proposes to engage and has not conducted any market
studies with respect to any business, property or industry. Prior to its
involvement with any business, the Company does not otherwise anticipate
performing any product research or development.
The Company will not restrict its search to any specific industry, but the
Company will not acquire or merge with a development stage company, and will
consummate an acquisition solely with a company with existing operations and
revenues. At this time, it is impossible to determine the needs of the business
in which the Company may seek to participate, and whether such business may
require additional capital or may be seeking other advantages that the Company
may offer. In other instances, possible business ventures may involve the
acquisition of a company that does not need additional equity, but rather seeks
to establish a public trading market for its securities.
Businesses that seek the Company's participation in their operations may
desire to do so to avoid what they consider to be adverse factors related to
undertaking a public offering. Such factors include substantial time
requirements and legal costs, along with other conditions or requirements
imposed by federal and state securities laws. In making an investment in the
Company, investors should recognize that the terms of their purchase of the
Shares may ultimately prove to be less favorable that if such person had
invested in the securities of a specific business that was undertaking its own
public offering.
The analysis of potential business endeavors will be undertaken by or
under the supervision of Ms. Janssen who will rely on her own business judgment
in formulating decisions as to the types of businesses that the Company may
acquire or in which the Company may participate. In the event of any Business
Combination, it is likely that the Company's present shareholders (including
investors in this Blank Check Offering) will retain a minority interest in the
resulting stock ownership of the Company. Although Ms. Janssen has general
business and management experience, potential investors should be aware that Ms.
Janssen has no experience in Business Combinations and may not have any
significant experience in operating certain business interests that the Company
might choose to acquire. Ms. Janssen will not seek to obtain financial advisors
or consultants to assist her in assessing the merits and risks of any proposed
acquisition.
In analyzing a prospective business, Ms. Janssen will consider such
factors as available technical, financial and managerial resources; principal
products or services and their markets; distribution methods of products or
services; sources and availability of raw materials and suppliers; dependence
upon customers; need for government approval of products or services; effect of
existing or probable governmental regulation on the business; costs and effects
or compliance with applicable environmental laws; working capital and other
30
<PAGE>
financial requirements; such business' history of operations, if any, and
prospects for the future; the nature of present and expected competition; the
quality and experience of management that may be available and the depth of that
management; the potential for further research, development or exploration; risk
factors; the potential for growth and expansion; the potential for profit; the
perceived public recognition or acceptance of such business' products, services
and trade or service marks; and its name identification. The fact that Ms.
Janssen will consider these factors, however, should not be understood as
implying that it has or will have any experience or expertise in the business
being considered. The foregoing description of factors to be considered is
merely illustrative of the type of analysis which may be applied to an
evaluation of a potential acquisition. See "Management."
Although these and other factors will be considered, to a large extent a
decision to participate in a specific business will be difficult, if not
impossible, to analyze through the application of objective criteria. In many
instances, the achievements of a specific business to date may not necessarily
be indicative of its potential for the future because of various changing
requirements of the marketplace, including a company's abilities to
substantially shift marketing approaches, expand significantly, change product
emphasis, and change or substantially alter its management. On the other hand, a
company's management may not have proven its abilities or its effectiveness, nor
the viability of the market or the products or services that the company
proposes to market. As such, the profitability of such a business may be
unpredictable and might subject the Company and its assets to substantial risks.
As part of the Company's investigation of a business, Ms. Janssen expects that
she will meet personally with the company's management and personnel, visit and
inspect the company's facilities, obtain independent analysis or verification of
certain information provided, check references of the company's management and
key personnel, and conduct other reasonable due diligence, to the extent that
the Company's limited resources and Ms. Janssen's technical expertise, if any,
permit. Generally, Ms. Janssen will analyze all available information and make a
determination based upon a composite of available facts, without reliance upon a
single factor as controlling.
Prospective businesses may be brought to the attention of the Company from
various sources, including securities broker-dealers, venture capitalists,
members of the financial community, and others who may present unsolicited
proposals. It is possible, but not anticipated, that the Company may publish
notices or advertisements in financial or trade publications seeking potential
business acquisitions. The Company does not anticipate engaging the services of
professional firms that specialize in business acquisitions and reorganizations.
It is also possible, but not anticipated, that the Company may agree, in
connection with an acquisition, to pay a finder's fee or other compensation to
an investment banking firm or other person (who will not be affiliated with the
Company) who submits to the Company a business in which the Company
participates. See "Conflicts of Interest."
The process of locating and investigating specific business proposals will
take a varying degree of time which could range up to several months to
complete. Furthermore, even after a business is located, the negotiation,
drafting and execution of relevant agreements, disclosure documents and other
instruments will require substantial additional time, effort and attention on
31
<PAGE>
the part of Ms. Janssen, as well as costs for attorneys, accountants and others.
The time that these subsequent steps will take and the costs associated
therewith also cannot be assured. If a decision is made not to participate in a
specific business endeavor, the costs incurred in the related investigation
might not be recoverable. Furthermore, even if an agreement were reached for the
participation in a specific business, the failure to consummate that transaction
might result in the loss to the Company of the related costs incurred.
Investors in this Blank Check Offering will be relying totally upon the
business judgment of Ms. Janssen in connection with the proper expenditure of
the funds raised in this Blank Check Offering and in the future operations of
the Company. It is not expected that shareholders of the Company will be
consulted with respect to the expenditure of the proceeds of this Blank Check
Offering, except required by Rule 419 or by law. See "Form and Structure of
Acquisition."
Form and Structure of Acquisitions
- ----------------------------------
Of the various methods and forms by which the Company may structure a
transaction in acquiring another business, Ms. Janssen is likely to use one of
the following forms: (i) a merger or consolidation of the acquired corporation
into or with the Company; (ii) a merger or consolidation of the acquired
corporation into or with a subsidiary of the Company organized to facilitate the
acquisition (a "subsidiary merger"), or a merger or consolidation of such a
subsidiary into or with the acquired corporation (a "reverse subsidiary
merger"); (iii) an acquisition of all or a controlling amount of the stock of
the acquired corporation whether by an exchange of shares of stock of the
Company or payment in whole or in part of cash or other assets on the Company;
or (iv) an acquisition of the assets of a business by the Company or a
subsidiary of the Company organized for such purpose. If a merger or
consolidation transaction involving the Company is used, the Company will be the
surviving corporation; if, however, a subsidiary of the Company is used in such
a transaction, either the subsidiary or the acquired corporation may be the
surviving corporation in the merger of consolidation, with the survivor being a
wholly-owned subsidiary of the Company. Following a stock acquisition or
subsidiary-type merger or consolidation, the Company may choose to effect a
merger or consolidation of the acquired company, or subsidiary acquiring such
company, into or with the Company.
In any of the above transactions, it is likely that the consideration used
by the Company to acquire the business will consist of Common Stock, preferred
stock or a combination of both, although the Company may use cash and/or debt.
In the event that a business is acquired for Common Stock, depending upon the
amount so issued, the owners or shareholders of such business may obtain an
amount of shares sufficient to enable such individuals to control the Company,
even if they obtain less than a majority of the Company's then-issued and
outstanding shares. Such a reorganization could result in additional dilution to
the shareholders of the Company. If the Company were to issue substantial
additional securities in the acquisition, such issuances might have an adverse
effect on any trading markets that might develop in the Company's securities in
the future. If, in the acquisition of any given business, the Company were to
incur indebtedness that substantially changed the capital structure of the
Company, the Company's shareholders would most likely be exposed to a greater
risk of their limited investment in the Company.
32
<PAGE>
Florida Corporate Law Considerations Concerning Shareholder Approval of Certain
- --------------------------------------------------------------------------------
Business Combinations
- ---------------------
Whether the Company's shareholders have the right, as a matter of Florida
law, to approve or disapprove any proposed transaction will depend upon the form
of the transaction chosen by Ms. Debra Janssen, the Company's sole officer and
director. Of the forms from which Ms. Janssen may choose only the merger,
consolidation and share exchange give rise to a shareholder vote. Shareholder
approval is not required as a matter of Florida law to approve a merger if the
Company is to be the surviving corporation and: (i) the articles of
incorporation of the surviving corporation will not differ from its articles
before the merger; (ii) each shareholder of the surviving corporation whose
shares were outstanding immediately prior to the effective date of the merger
will hold the same number of shares, with identical designations, preferences,
limitations, and relative rights immediately after the merger; and (iii) the
number of voting shares outstanding immediately after the merger, plus the
number of voting shares issuable as a result of the merger (either by the
conversion of securities issued pursuant to the merger or the exercise of rights
and warrants issued pursuant to the merger), will not exceed by more than (20%)
the total number of voting shares of the surviving corporation outstanding
immediately before the merger. Furthermore, if the Company acquires 80% or more
of the outstanding shares of a subsidiary corporation, the Company may then
merge the acquired corporation, or the subsidiary acquiring such corporation,
into the Company without a shareholder vote. However, shareholders may, under
certain circumstances, nevertheless be entitled to dissenters' rights of
appraisal.
Because a transaction requiring shareholder approval gives Ms. Janssen
less flexibility than one as to which only the approval of the Company's Board
of Directors is required, the Company would be more likely as a matter of
Florida law to choose a form of acquisition under which a shareholder vote would
not be required if Florida corporate Law issues were the only consideration. See
discussion below and earlier discussion herein under "Prospectus Summary"
concerning the application of Rule 419 to shareholder voting requirements in
connection with acquisitions. With or without a shareholder vote, Ms. Janssen,
in approving a transaction, may not violate her fiduciary duties to the Company
or its shareholders.
Shareholders of a Florida corporation have dissenters' appraisal rights if
the transaction is one pursuant to which a vote of its shareholders is required
under Florida law. Dissenters' appraisal rights permit shareholders who dissent
from the approval of a corporate transaction to sell their shares back to the
corporation for such shares' fair value. Even if a shareholder vote is required,
dissenters' appraisal rights will be unavailable under Florida law if, on the
date fixed to determine the shareholders entitled to vote at the meeting of
shareholders at which a plan of merger or consolidation is proposed, the shares
are registered on a national securities change or are held of record by not less
than 2,000 shareholders. Although the Company is unlikely to come within the
aforementioned exception, the Company is also unlikely to use a form of
transaction under which shareholders are entitled to vote under Florida law.
Therefore, it is unlikely that dissenters' appraisal rights will be available to
the Company's shareholders in connection with any acquisition.
33
<PAGE>
If the Company were to seek its shareholders' approval of an acquisition
pursuant to Florida law, the proxy used to solicit shareholder approval will not
be subject to the proxy solicitation rules of the federal securities law. A
corporation registered pursuant to Section 12 of the Exchange Act is subject to
the proxy solicitation provisions of such act and the rules and regulations
thereunder, and such corporation's proxy solicitation materials are subject to
review by the Securities and Exchange Commission ("SEC"). Because it is likely
that the Company will not be registered under Section 12 at the time of any
acquisition, it is likely that its proxy solicitation materials will not be
subject to these rules. SEC review might result in different or more inclusive
disclosure in proxy materials used for such shareholder vote. Furthermore,
Florida law does not provide for the regulation of such proxy solicitations.
Rule 419 Prescribed Acquisition Criteria and Reconfirmation
- -----------------------------------------------------------
As previously discussed herein on the cover page of this Prospectus, this
Blank Check Offering is subject to Rule 419 under the Act. As such, among other
things, notwithstanding the above-described Florida state law considerations,
any agreement to acquire an acquisition candidate must provide for the
acquisition of a business or net assets for which the fair market value of the
business or net assets to be acquired represents at least 80% of the Maximum
Offering proceeds pursuant to this Blank Check Offering (i.e., $100,000 x 80% =
$80,000 assuming the Maximum Offering is sold or $50,000 x 80% = $40,000
assuming the Minimum Offering is sold). 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." The Company will not acquire or merge with a business or a company in
which Ms. Janssen, the Company or LWH or any affiliates or associates of Ms.
Janssen, the Company or LWH, directly or indirectly, have an ownership interest
or otherwise control.
Tax Considerations
- ------------------
Federal income tax considerations may have an impact on the manner in
which the acquisition is structured. For example, if the Company uses Common
Stock or any other voting stock to acquire the stock or assets of the acquired
business, it may have to issue a significant amount of such securities, as
opposed to cash or debt, because of the requirements imposed by provisions of
the Internal Revenue Code of 1986, as amended, for obtaining certain beneficial
tax consequences associated with certain types of reorganizations. Accordingly,
the proportional interests of the present shareholders of the Company prior to
such transaction or reorganization, including persons purchasing Shares in this
Blank Check Offering, may be substantially less than the proportional interests
of such shareholders in the reorganized entity.
If the Company uses its Common Stock or other capital stock as the
consideration in acquiring the stock of a corporation (a "stock-for-stock
34
<PAGE>
acquisition") or in a subsidiary or reverse-subsidiary merger form of
acquisition, and if the shareholders of the acquired corporation obtain more
than 50% of the fair market value of the Common Stock or other capital stock of
the Company outstanding after the acquisition, then the acquisition may be
deemed a "reverse acquisition" for purposes of filing federal income tax returns
on a consolidated basis. Under the "reverse acquisition" rules, which would
apply only if the reorganized Company files such returns on a consolidated
basis, the Company may not offset its losses incurred prior to the acquisition
against any post-acquisition profit of the acquired corporation or its
subsidiaries. Accordingly, the Company may not have sufficient income to offset
and use up non-capital expenses and deductions incurred up to the date of
acquisition.
Acquisition Restrictions
- ------------------------
The Company presently intends to engage in the business of acquiring other
businesses or an interest in one or more business endeavors. It is however, the
stated intention of Ms. Debra Janssen, the Company's sole officer and director,
not to acquire investment securities of another company except in those
circumstances in which such company will become a wholly-owned or majority-owned
subsidiary of the Company, or a subsidiary controlled primarily by the Company,
or the Company is the surviving entity in a merger. Ms. Janssen will make every
effort to keep the Company from being classified as an "investment company"
under the Investment Company Act. Being deemed an "investment company" without
registration as such under the Investment Company Act can result in civil
liability and criminal penalties to controlling persons in certain instances as
well as civil liabilities and unenforceability of contracts with regard to the
Company. Accordingly, the Company has not engaged and does not intend to engage
in the business of: (i) investing, reinvesting or trading in securities as its
primary business; (ii) issuing face-amount certificates of the installment type;
or (iii) investing, reinvesting, owning, holding or trading in securities, if it
shall own or propose to acquire investment securities having a value exceeding
40% of the value of its total assets (exclusive of government securities and
cash items) on a consolidated basis. See "Use of Proceeds."
The Company is not engaged, and does not intend to engage, in the business
of advising others for compensation, either directly or through publications or
writing, as to the value of securities or as to the advisability of investing
in, purchasing or selling securities. In addition, it will not be part of the
Company's regular business to issue or promulgate for compensation analysis or
reports concerning securities. The Company does not intend: (i) to pursue any
course of business that would render it an "investment advisor" under the
Investment Advisors Act of 1940; or (ii) to acquire a company that is a broker
or dealer of investment securities or commodities, or a company affiliated with
such a broker or dealer.
The Company will not participate in any business endeavor wherein it
invests the proceeds of this Blank Check Offering in an entity that is an
affiliate of Ms. Janssen. It is the stated intention and undertaking of Ms.
Janssen that the Company will not acquire or merge with a business or a company
in which Ms. Janssen or any affiliates or associates, directly or indirectly,
have an ownership interest. See "Conflicts of Interest" and "Risk Factors -
Conflicts of Interest."
35
<PAGE>
Further, companies subject to Section 13 or 15(d) of the Exchange Act must
furnish certain information about significant acquisitions, including audited
financial statements for the company or companies acquired covering one or two
years, depending upon the relative size of the acquisitions and other factors.
The Company does not expect that its obligation to file such information will be
suspended, and the Company will not suspend its reporting obligations at any
time while it retains investors' funds as part of this Blank Check Offering. In
the event the Company's obligations to file such information and reports is
suspended, it is the Company's intention to continue voluntarily to file such
information and reports. In addition, if during this Blank Check Offering the
Company determines that a material acquisitions is probable, the Company must
file a Post-Effective Amendment to the Registration Statement of which this
Prospectus is a part. A post-effective amendment would include, pursuant to
Regulation S-B promulgated under the Exchange Act, audited financial statements
for the company or companies proposed to be acquired. Such an amendment would
not be declared effective by the SEC until the requisite financial statements
are filed. Consequently, if targeted acquisition prospects do not have, or are
unable to obtain, the requisite audited financial statements, such acquisitions
by the Company would appear to be inappropriate during this Blank Check Offering
and so long as the reporting requirements of the Exchange Act are applicable.
Ms. Janssen has not previously participated in any Blind Pool or Blank
Check Offerings and has no plans to participate in any such future offerings, if
at all, until this Blank Check Offering is complete and a Business Combination
is consummated.
Legal Proceedings
- -----------------
There are no legal proceedings pending or threatened of any type or
otherwise known to be contemplated to which the Company or any of its property
is subject.
Office Facilities
- -----------------
The Company currently maintains its business address on a rent free basis
at 8700 N.W. 47th Drive, Coral Springs, FL 33067. The facility is owned by Debra
Janssen. The Company at present owns no equipment, and does not intend to own
any upon completion of this Blank Check Offering.
MANAGEMENT
Directors and Executive Officers
- --------------------------------
The following person is the sole director and executive officer of the
Company and has served in this position since May, 1996. All officers and
directors are elected annually to serve for one year or until their successors
are elected and qualified.
36
<PAGE>
Name Age Position
- ---- --- --------
Debra Janssen 38 President, Chief Executive
Officer and Director
For purposes of this offering, Ms. Janssen is also considered to be a
promoter of the Company. Ms. Janssen is the Company's sole promoter. The Company
has not entered into an employment contract with Ms. Janssen and does not intend
at this time to do so in the future.
Since 1993, Ms. Janssen has worked as Treasurer/Director and is the
co-founder of Beacon Equity Group, Inc., a Pompano Beach, Florida financial
services corporation specializing in investment banking, mergers and
acquisitions, and financial public relations. Before relocating to Florida from
Long Island, New York in 1993, Ms. Janssen was the assistant to the Vice
President of a large insurance brokerage firm, Blumencranz, Klepper, Wilkins and
Dubofsky, Ltd., from April, 1985 to August, 1993. In this capacity, she assisted
in the operations of the National Basketball Association (the "NBA") and
National Hockey League's Temporary Total Disability Programs and was
instrumental in coordinating the insurance for the NBA "Dream Team" for the
Olympic games.
Ms. Janssen has not participated in any previous Blind Pool or Blank Check
Offerings. Ms. Janssen expects to devote up to 50% of her available business
time for the search for a suitable acquisition candidate.
Compensation
- ------------
<TABLE>
<CAPTION>
Summary Compensation Table(1)
Annual Compensation Long-Term Compensation
-----------------------------------------------------------------------
Awards Payout
-------------------------------------------
Securities
Other Under-
Name and Annual Restricted lying All Other
Principal Compen- Stock Options/ LTIP Compen-
Position Year Salary Bonus sation Award(s) SARs Payout sation
($) ($) ($) ($) (#) ($) ($)
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Debra Janssen 1996 $0 $0 $0 $0 0 $0 $0
President, Chief
Executive Officer,
and Sole Director
1 The Summary Compensation Table reflects the compensation paid since May 1996, when the Company
was incorporated in Florida.
37
<PAGE>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
(INDIVIDUAL GRANTS)
Percent of
Number of Total Options/
Securities SARs Granted
Underlying to Employees Exercise or
Options/SARs in Fiscal Base Price Expiration
Name Granted (#) Year ($/Sh) Date
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Debra Janssen 0 0 0 0
President, Chief Executive
Officer, and Sole Director
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END
OPTION/SAR VALUES
Number of
Securities Value of
Underlying Unexercised
Shares Unexercised in-the-Money
Acquired Options/SARs Options/SARs
on Value at FY-End (#) at FY-End ($)
Exercise Realized Exercisable/ Exercisable/
Name (#) ($) Unexercisable Unexercisable
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Debra Janssen 0 $0 0 $0
President, Chief Executive
Officer, and Sole Director
LONG-TERM INCENTIVE PLANS - AWARDS IN LAST FISCAL YEAR
Number Performance Estimated Future Payout Under
of Shares, or Other Non-Stock Price-Based Plans
Units or Period Until ----------------------------------
Other Rights Maturation Threshold Target Maximum
Name (#) or Payout ($ or #) ($ or #) ($ or #)
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Debra Janssen 0 0 0 0 0
President, Chief
Executive Officer,
and Sole Director
</TABLE>
The Company has not paid any direct or indirect compensation to its sole
officer^ and director^ and none will be paid from the proceeds of this offering.
There are no understandings or arrangements otherwise relating to compensation.
Additionally, no options or SARs have been granted to any persons since the
Company's inception nor does the Company have any long-term incentive plans. The
Company has conducted no business, as of yet, and Ms. Debra Janssen, the
Company's sole officer and director, has done no work for the Company other than
the initial organizational activities. Ms. Janssen will look for potential
business combinations, primarily through her own efforts and inquiries, through
a variety of sources including business associates and opportunities presented
in business publications.
38
<PAGE>
STOCK OPTION PLAN
On June 25, 1996 the Board of Directors and shareholders approved a stock
option plan called the "1996 Stock Option Plan" (the "Plan"). Under the Plan,
the Company has reserved an aggregate of 500,000 shares of Common Stock for
issuance pursuant to options granted under the Plan ("Plan Options"). The Option
Committee of the Board of Directors (the "Committee") of the Company administers
the Plan including, without limitation, the selection of the persons who will be
granted Plan Options under the Plan, the type of Plan Options to be granted, the
number of shares subject to each Plan Option and the Plan Option price.
Plan Options granted under the Plan may either be options qualifying as
incentive stock options ("Incentive Options") under Section 422 of the Internal
Revenue Code of 1996, as amended or options that do not so qualify
("Non-Qualified Options"). In addition, the Plan also allows for the inclusion
of a reload option provision ("Reload Option"), which permits an eligible person
to pay the exercise price of the Plan Option with shares of Common Stock owned
by the eligible person and receive a new Plan Option to purchase shares of
Common Stock equal in number to the tendered shares. Any Incentive Option
granted under the Plan must provide for an exercise price of not less than 100%
of the fair market value of the underlying shares on the date of such grant, but
the exercise price of any Incentive Option granted to an eligible employee
owning more than 10% of the Company's Common Stock must be at least 110% of such
fair market value as determined on the date of the grant. The term of each Plan
Option and the manner in which it may be exercised is determined by the Board of
the Directors or the Committee, provided that no Plan Option may be exercisable
more than 10 years after the date of its grant and, in the case of an Incentive
Option granted to an eligible employee owning more than 10% of the Company's
Common Stock, no more than five years after date of the grant.
The exercise price of Non-Qualified Options shall be determined by the
Board of Directors or the Committee.
The per share purchase price of shares subject to Plan Options granted
under the Plan may be adjusted in the event of certain changes in the Company's
capitalization, but any such adjustment may not change the total purchase price
payable upon the exercise in full of Plan Options granted under the Plan.
Officers, directors, key employees and consultants of the Company and its
subsidiaries are eligible to receive Non-Qualified Options under the Plan. Only
officers, directors and employees of the Company who are employed by the Company
or by any subsidiary thereof are eligible to receive Incentive Options.
All Plan Options are nonassignable and nontransferable, except by will or
by the laws of descent and distribution, and during the lifetime of the
optionee, may be exercised only by such optionee. If an optionee's employment is
terminated for any reason, other than his death or disability or termination for
cause, or if an optionee is not an employee of the Company but is a member of
the Company's Board of Directors and his service as a director is terminated for
39
<PAGE>
any reason, other than death or disability, the Plan Option granted to him shall
lapse to the extent unexercised on the earlier of the expiration date or 30 days
following the date of termination. If the optionee dies during the term of his
employment, the Plan Option granted to him shall lapse to the extent unexercised
on the earlier of the expiration date of the Plan Option or the date one year
following the date of the optionee's death. If the optionee is permanently and
totally disabled within the meaning of Section 22(c)(3) of the Internal Revenue
Code of 1986, the Plan Option granted to him lapses to the extent unexercised on
the earlier of the expiration date of the option or one year following the date
of such disability.
The Board of Directors or Committee may amend, suspend or terminate the
Plan at any time, except that no amendment shall be made which (i) increases the
total number of shares subject to the Plan or changes the minimum purchase price
therefor (except in either case in the event of adjustments due to changes in
the Company's capitalization), (ii) affects outstanding Plan Options or any
exercise right thereunder, (iii) extends the term of any Plan Option beyond ten
years, or (iv) extends the termination date of the Plan. Unless the Plan shall
theretofore have been suspended or terminated by the Board of Directors, the
Plan shall terminate in June 25, 2006. Any such termination of the Plan shall
not affect the validity of any Plan Options previously granted thereunder.
To date, no options have been granted under the Plan. No determinations
have been made regarding the persons to whom options will be granted in the
future, the number of shares which will be subject to such options or the
exercise prices to be fixed with respect to any option.
CONFLICTS OF INTEREST
The proposed business of the Company is not anticipated to raise potential
conflicts of interest between the Company and its management. The Company has
been formed for the purpose of locating suitable business opportunities in which
to participate. However, Ms. Debra Janssen, the sole officer and director of the
Company, will devote only up to 50% of her available business time to the
Company, and is engaged in various other business activities. Accordingly, the
only conflict of interest anticipated by the Company is the demands on Ms.
Janssen's time from other business interests.
Directors of Florida corporations are required to bring business
opportunities to their corporations if their corporations could financially
undertake the opportunity, the opportunity is within the corporation's line of
business, and it would not be fair to the corporation and its shareholders for
the opportunity not to be brought to the corporation. Because the business of
the Company is to locate a suitable business venture, Ms. Janssen could possibly
be required to bring such business opportunities to the Company. Potential
conflicts may arise in the determinations by Ms. Janssen as to whether these
potential business opportunities are within the financial means and proposed
business program of the Company.
The Company will not invest the proceeds of this Blank Check Offering in
any entity affiliated with Ms. Janssen or any affiliates or associates of Ms.
40
<PAGE>
Janssen. Ms. Janssen does not anticipate being involved with any other Blank
Check Company or other business organization seeking acquisition opportunities
prior to any reconfirmation offering and business acquisition undertaken by the
Company. Furthermore, 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 Ms. Janssen to resolve
any conflicts of interest that were to develop for any reason in favor of the
Company may result in liability of Ms. Janssen to the Company. Ms. Janssen has
and will continue to have an affirmative obligation to disclose any potential or
actual conflicts of interest that may develop to the Company's Board of
Directors (following any subsequent expansion to include independent directors)
or, alternatively, to its shareholders.
CERTAIN TRANSACTIONS
Ms. Debra Janssen acquired 1,500,000 shares of Common Stock of the Company
in May, 1996 for a consideration of $3,000. In addition, in May, 1996, the
Company issued 400,000 shares of Common Stock to Atlas, Pearlman, Trop &
Borkson, P.A. in consideration for legal services rendered to the Company. The
current breakdown of share ownership is described under "Principal
Shareholders." The Company leases office space on a month-to-month, rent-free
basis from Debra Janssen, the Company's CEO.
The Board of Directors of the Company by resolution has estimated that the
out-of-pocket expenses in connection with consummating a Business Combination
expected to be incurred will approximate up to $17,000 and will not exceed
$17,000. Accordingly, Ms. Janssen is authorized by the Company to receive up to
$8,300 or $3,300 from the Deposited Funds assuming the Maximum Offering or
Minimum Offering, respectively, is sold.
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information regarding the
beneficial ownership of the shares of Common Stock of the Company as of the date
hereof, and as adjusted to reflect the sale of the shares offered hereby by (i)
each person known to the Company to be the beneficial owner of more than 5% of
the outstanding shares of Common Stock, (ii) each director and officer and (iii)
by all officers and directors of the Company as a group.
Number of
Shares of Percentage of
Name and Common Stock Company Owned Percentage of
Address of Beneficially Before Company Owned
Beneficial Owner Owned Offering After Offering(1)
- ---------------- ----- -------- -----------------
Ms. Debra Janssen 1,500,000 30.6% 30.0%
8700 N.W. 47th Drive
Coral Springs, FL 33067
41
<PAGE>
Lake Worth Holdings, Inc.(2) 3,000,000 61.2% 60.0%
c/o David Critchfield
11061 S.W. 1st Court
Coral Springs, FL 33071
Atlas, Pearlman, Trop
& Borkson, P.A.
200 East Las Olas Blvd.
Suite 1900
Fort Lauderdale, FL 33301 400,000 8.2% 8.0%
All Executive Officers
and Directors as a
Group (1 Person) 1,500,000 30.6% 30.0%
___________________________
(1) Assumes completion of the maximum offering of 100,000 Shares, of which
there are no assurances.
(2) Lake Worth Holdings, Inc. a privately held corporation, engages in the
business of Real Estate and Communications. David Critchfield of LWH has
no affiliation with the Company or its sole officer and director. Mr.
Critchfield has no prior experience in blank check offerings.
DESCRIPTION OF SECURITIES
Units
- -----
The Company is offering for sale up to a maximum of 100,000 Units at a
purchase price of $1.00 per Unit. Each Unit consists of one share of Common
Stock and ten Common Stock Purchase Warrants. The Units, Shares and Warrants are
not separately transferable until the Company acquires a Business Combination.
Common Stock
- ------------
The Company has 20,000,000 shares of authorized Common Stock $.001 par
value per share. As of the date of this Prospectus, 4,900,000 shares are issued
and outstanding.
Each shareholder is entitled to one vote for each share of Common Stock
owned of record. The holders of shares do not possess cumulative voting rights,
which means that the holders of more than 50% of the outstanding shares voting
for the election of directors can elect all of the directors, and in such event
the holders of the remaining shares will be unable to elect any of the Company's
directors. Action can be taken without a meeting if a written consent setting
forth the action taken is signed by holders of not less than the minimum number
of shares necessary to authorize the action at a meeting if all shares entitled
to vote were present and voted. If the consent of all shares entitled to vote is
not obtained within 10 days of obtaining the consent by a sufficient number of
shares to approve the vote, subsequent notice must be given to holders who did
not so consent.
42
<PAGE>
Holders of outstanding shares of Common Stock are entitled to receive
dividends out of assets legally available therefor at such times and in such
amounts as the Board of Directors may from time to time determine. Upon the
liquidation, dissolution, or winding up of the Company, the assets legally
available for distribution to the shareholders will be distributable ratably
among the holders of the shares outstanding at the time. Holders of the shares
of Common Stock have no preemptive, conversion, or subscription rights, and
shares are not subject to redemption. All outstanding shares of Common Stock
are, and the shares being offered hereby will be, fully paid and nonassessable.
As to the Company's dividend policy, see "Risk Factors -- No Dividends
Anticipated."
Warrants
- --------
The Warrants will be issued in registered form pursuant to an agreement,
dated the date of this Prospectus (the "Warrant Agreement"), between the Company
and Florida Atlantic Stock Transfer, Inc., as Warrant Agent (the "Warrant
Agent").
Each of the Warrants entitles the registered holder to purchase one share
of Common Stock. The Warrants are exercisable at a price of $1.20 subject to
certain adjustments. The Warrants are entitled to the benefit of adjustments in
their exercise prices and in number of shares of Common Stock or other
securities deliverable upon the exercise thereof in the event of a stock
dividend, stock split, reclassification, reorganization, consolidation or merger
The Warrants are redeemable by the Company for $.01 per Warrant, at any
time commencing thirty days from the closing of a Business Acquisition, upon
thirty (30) days prior written notice, and upon thirty (30) days prior written
notice to all holders of the Warrants, the Company shall have the right to
reduce the exercise price and/or extend the term of the Warrants in compliance
with the requirements of Rule 13e-4 to the extent applicable.
The Warrants can only be exercised when there is a current effective
registration statement covering the shares of Common Stock underlying the
Warrants. If the Company does not or is unable to maintain a current effective
registration statement for the Warrants, the holders will be unable to exercise
the Warrants and the Warrants may become valueless. Moreover, if the shares of
Common Stock underlying the Warrants are not registered or qualified for sale in
the state in which the warrant holder resides, such holder will not be permitted
to exercise the Warrant. See "Risk Factor No. 32 - Requirements of Current
Prospectus and State Blue Sky Registration in Connection with the Exercise of
the Warrants Which May Not be Exercisable and May Therefore be Valueless".
Each Warrant may be exercised by surrendering the Warrant certificate,
with a form of election to purchase on the reverse side of the Warrant
certificate properly completed and executed, together with payment of the
43
<PAGE>
exercise price to the Warrant Agent. The Warrants may be exercised in whole or
from time to time in part. If less than all of the Warrants evidenced by a
Warrant certificate are exercised, a new Warrant certificate will be issued for
the remaining number of Warrants.
For the life of the Warrants, subject to their redemption provisions, the
holders thereof are given the opportunity to profit from a rise in the market
price of the Common Stock of the Company. The exercise of the Warrants will
result in the dilution of the then book value of the Common Stock of the Company
held by the public investors and would result in a dilution of their percentage
ownership of the Company. The terms upon which the Company may obtain additional
capital may be adversely affected through the period that the Warrants remain
exercisable. The holders of the Warrants may be expected to exercise them at a
time when the Company would, in all likelihood, be able to obtain equity capital
on terms more favorable than those provided for by the Warrants.
Because the Warrants may be transferred, it is possible that the Warrants
may be acquired by persons residing in states where the Company has not
registered, or is not exempt from registration such that the shares of Common
Stock underlying the Warrants may not be sold or transferred upon exercise of
the Warrants. Warrant holders residing in those states would have no choice but
to attempt to sell their Warrants or to let them expire unexercised. Also, it is
possible that the Company may be unable, for unforeseen reasons, to cause a
registration statement covering the shares underlying the Warrants to be in
effect when the Warrants are exercisable. In that event, the Warrants may expire
unless extended by the Company as permitted by the Warrant because a
registration statement must be in effect, including audited financial statements
for companies acquired, in order for Warrant Holders to exercise their Warrants.
Preferred Stock
- ---------------
The Company is authorized to issue 5,000,000 shares of preferred stock,
par value $.001 per share ("Preferred Stock"), issuable in such series and
bearing such voting, dividend, conversion, liquidation and other rights and
preferences as the Board of Directors may determine. No shares of the Company's
Preferred Stock are outstanding as of the date of this Prospectus, but any
future issuances of Preferred Stock could dilute the voting rights and economic
interests of holders of shares of the Company's Common Stock.
Over-the-Counter Market
- -----------------------
The Shares of Common Stock offered hereby may be traded in the
over-the-counter market should a market develop therefor. There is, however, no
assurance that such a market will develop, or if developed, will be sustained.
Transfer Agent
- --------------
The Transfer Agent for the Common Stock of the Company is Florida Atlantic
Stock Transfer, Inc., 5701 North Pine Island Road, Suite 310A, Tamarac, FL
33321.
44
<PAGE>
PLAN OF DISTRIBUTION
The Company intends to sell a minimum amount of 50,000 Units offered on a
"best efforts-all or none" basis and the remaining 50,000 Units on a "best
efforts" basis. The Units are offered by the Company for a period of 90 days
from the date hereof (which period may be extended for an additional 90 days by
the Company), or until such earlier date as all such Units are sold. Any
subscription received after the Company has sold all of the Units will be
promptly returned to the investor without interest or deductions. Pending the
sale of the Units, all proceeds will be deposited by noon of the first business
day following receipt into a non-interest-bearing escrow account with United
National Bank, Escrow Agent for this Blank Check Offering and in accordance with
Rule 419 of the Securities Act. See "Prospectus Summary," "Use of Proceeds," and
Form and Structure of Acquisition."
The Company intends to sell the Units offered hereby through Ms. Janssen
who will receive no commission for selling any Units offered hereby. The Company
does not intend to retain any broker-dealers as selling agents.
Neither Ms. Janssen, nor any officer, director, nor Principal Stockholders
of the Company (including any affiliates thereof) will purchase any of the Units
in this Blank Check Offering.
Method of Subscribing
- ---------------------
Persons may subscribe at $1.00 per Unit up to 50,000 Units on a "best
efforts, all or none" basis, and an additional 50,000 Units on a "best efforts"
basis, by filling in and signing the subscription agreement and delivering it to
the Company, prior to _____________, 1997 (90 days from the date hereof), unless
extended for an additional period of up to 90 days at the discretion of
management of the Company. The subscription price of $1.00 per Unit must be paid
in cash or by check, bank draft or postal express money order payable in United
States dollars to the order of "United National Bank as Escrow Agent for
Win-Gate Equity Group, Inc." Certificates for shares of Common Stock subscribed
for will be issued as soon as practicable after subscriptions have been accepted
and promptly deposited into escrow upon issuance in accordance with Rule 419. If
subscriptions exceed 100,000 Units, all excess subscriptions will be promptly
returned to subscribers without interest or deductions. Subscriptions may not be
withdrawn once made, except in accordance with applicable law (in this regard,
see "Prospectus Summary Investor Rights to Reconfirm Under Rule 419") and
subscriptions for fractional share amounts will not be accepted.
Expiration Date
- ---------------
The subscription offer will expire at 5:00 p.m. on _____________, 1997, 90
days from the date of this Prospectus or 5:00 p.m. on ______________, 1997, 180
days from the date of this Prospectus if extended by the Company's management,
currently comprised of Ms. Debra Janssen, acting as the Company's sole officer
and director.
45
<PAGE>
Right to Reject
- ---------------
The Company reserves the right to reject any subscription in whole or in
part in its sole discretion for any reason whatsoever, notwithstanding tender of
payment and to withdraw this Blank Check Offering at any time prior to
acceptance by the Company of the subscriptions received.
FLORIDA TAKEOVER STATUTES
Section 607.0902 of the Florida Business Corporation Act (the "Corporation
Act") generally provides that certain transactions involving Control Shares (as
defined below) of a corporation that has: (a) 100 or more shareholders; (b) its
principal place of business, its principal office, or substantial assets in
Florida, and (c) either (1) more than 10% of its shareholders residing in
Florida, (2) more than 10% of its shares owned by Florida residents, or (3)
1,000 shareholders residing in Florida, must be approved by a majority of each
class of voting securities of the corporation before the Control Shares will be
granted any voting rights. "Control Shares" are defined in the Corporation Act
to be shares acquired in a Control Share Acquisition (as defined below) that
would entitle a person to exercise, either directly or indirectly, 20% or more
of all of the voting power of the corporation's voting securities. A "Control
Share Acquisition" is defined in the Corporation Act as an acquisition, either
directly or indirectly, by any person of ownership of, or the power to direct
the exercise of voting power with respect to, outstanding Control Shares.
Section 607.0902 of the Corporation Act further provides that prior to the
occurrence of a Control Share Acquisition involving a Florida corporation, such
corporation's Articles of Incorporation or Bylaws may specify that Section
607.0902 of the Corporation Act shall not apply to a Control Share Acquisition
involving the corporation. The Company's Articles of Incorporation, as amended,
expressly provide that the Company not be subject to Section 607.0902.
LEGAL MATTERS
The validity of the issuance of the Shares of Common Stock offered under
this Prospectus is being passed upon for the Company by Atlas, Pearlman, Trop &
Borkson, P.A., Fort Lauderdale, Florida. Atlas, Pearlman, Trop & Borkson, P.A.
owns 400,000 shares of the Company's Common Stock.
EXPERTS
The financial statements of the Company included in this Prospectus and
Registration Statement have been audited by Millward & Co., independent
certified public accountants, for the period indicated in their report thereon
which appears elsewhere herein and in the Registration Statement. The financial
statements audited by Millward & Co. have been included in reliance on the
report of such firm given on its authority as an expert in accounting and
auditing.
46
<PAGE>
INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Articles of Incorporation of the Company provide indemnification of
directors and officers and other corporate agents to the fullest extent
permitted pursuant to the laws of Florida. The Florida Business Corporations Act
contains provisions entitling directors and officers of the Company to
indemnification from judgments, fines, amounts paid in settlement and reasonable
expenses, including attorney's fees, as the result of an action or proceeding in
which they may be involved by reason of being or having been a director or
officer of the Company, provided said officers or directors acted in good faith.
Insofar as indemnification for liabilities arising under the Act 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 SEC 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
Company of expenses incurred or paid by a director, officer or controlling
person of the Company in the successful defense of any action, suit or
proceedings) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Company 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.
ADDITIONAL INFORMATION
The Company has filed with the SEC Atlanta, Georgia District Office a
Registration Statement on Form SB-2, as amended, under the Act with respect to
the securities offered hereby. This Prospectus does not contain all of the
information set forth in the Registration Statement and the exhibits thereto.
For further information about the Company and the securities offered hereby,
reference is made to the Registration Statement and to the exhibits filed as a
part thereof. The statements contained in this Prospectus as to the contents of
any contract or other document identified as exhibits in this Prospectus are not
necessarily complete and, in each instance, reference is made to the copy of
such contract or document filed as an exhibit to the Registration Statement,
each statement being qualified in any and all respects by such reference. The
Registration Statement including exhibits, may be inspected without charged at
the principal reference facilities maintained by the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, at the Northeast Regional Office, 7 World
Trade Center, Suite 1300, New York, New York 10048, and the Midwest Regional
Office, Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661. Copies of all or any part thereof may be obtained upon payment of fees
prescribed by the Commission from the Public Reference Section of the Commission
at its principal office in Washington, D.C. 450 Fifth Street, N.W., Washington,
D.C. 20549, as well as from the Northeast Regional Office, 7 World Trade Center,
Suite 1300, New York, New York 10048, and the Midwest Regional Office, Citicorp
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661.
47
<PAGE>
WIN-GATE EQUITY GROUP, INC.
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENT
June 30, 1997
CONTENTS
Page
Independent Auditors' Report............................................F-2
Financial Statements:
Balance Sheet.........................................................F-3
Notes to Financial Statements.......................................F-4-F-5
F-1
<PAGE>
To the Board of Directors
Win-Gate Equity Group, Inc.
INDEPENDENT AUDITORS' REPORT
We have audited the accompanying balance sheet of Win-Gate Equity Group, Inc. (A
Development Stage Company) as of June 30, 1997. This financial statement is the
responsibility of the Company's Management. Our responsibility is to express an
opinion on the financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statement referred to above presents fairly, in
all material respects, the financial position of Win-Gate Equity Group, Inc. as
of June 30, 1997 in conformity with generally accepted accounting principles.
Millward & Co., CPAs
Fort Lauderdale, Florida
September 2, 1997
F-2
<PAGE>
WIN-GATE EQUITY GROUP, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
June 30, 1997
ASSETS
<TABLE>
<CAPTION>
<S> <C>
CURRENT ASSETS:
Cash $ 152
Organizational Costs 400
Deferred Offering Costs 15,740
--------
Total Assets $ 16,292
========
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Accrued Expenses $ 6,000
Due to-Shareholder 3,600
--------
Total Liabilities 9,600
--------
SHAREHOLDERS' EQUITY:
Common Stock, par value $.001 per share; 20,000,000 shares authorized;
4,900,000 shares issued and outstanding 4,900
Preferred Stock, par value $.001 per share; 5,000,000 shares authorized;
no shares issued and outstanding 0
Additional Paid-in Capital 2,000
Accumulated Deficit (208)
--------
Total Shareholders' Equity 6,692
--------
Total Liabilities and Shareholders' Equity $ 16,292
========
</TABLE>
The accompanying notes are an integral part of this financial statement.
F-3
<PAGE>
WIN-GATE EQUITY GROUP, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
------------------------------------------
Business Activity
- -----------------
Win-Gate Equity Group, Inc. is a Florida corporation formed on May 17, 1996, to
seek and make one or more Business Combinations to the extent its limited
resources will allow. The Company is in the development stage and has no
operating history. The subsistence of the Company is dependent initially upon
sufficient proceeds being realized by the Company from a proposed Blank Check
Offering, of which there is no assurance. Proceeds of Blank Check Offering may
be insufficient to enable the Company to conduct potentially profitable
operations or otherwise to engage in any business endeavors, acquisitions or
mergers.
Basis of Presentation
- ---------------------
No income statement has been presented because the Company had incurred nominal
expenses of $208 for the period May 17, 1996 (date of inception) to June 30,
1997.
Fiscal Year
- -----------
The Company's year-end is December 31.
NOTE 2 - DEFERRED OFFERING COSTS
-----------------------
Deferred offering costs represent costs incurred pending completion of a
proposed public offering. At the time the offering is completed, such costs will
be netted against proceeds received. Should the offering be unsuccessful, these
costs will be expensed.
NOTE 3 - SHAREHOLDERS' EQUITY
--------------------
The Company is authorized to issue 20,000,000 shares of common stock having a
per share par value of $.001. As of June 30, 1997, the Company has issued
4,900,000 common shares to its shareholders in exchange for an aggregate of
$6,900. Each share of common stock entitles its owner to one vote.
The common shares carry no preemptive rights and are not redeemable. Cumulative
voting is not permitted.
The Company has authorized the issuance of 5,000,000 shares of Preferred Stock
with a par value of $.001 per share, bearing such voting, dividend, conversion,
liquidation and other rights and preferences as the Board of Directors may
determine. There has been no issuance of Preferred Stock.
NOTE 4 - DUE TO SHAREHOLDER
------------------
As of June 30, 1997, the President and Chief Executive Officer advanced $3,600
to the company to pay certain offering costs. Such amounts are non-interest
bearing and will be paid back upon the completion of the proposed blank check
offering.
F-4
<PAGE>
WIN-GATE EQUITY GROUP, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (Continued)
NOTE 5 - COMMITMENTS
-----------
The Company is conducting its proposed offering subject to the Securities and
Exchange Commission's Rule 419 of Regulation C under the Securities Act of 1933,
as amended. 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 as investors or require the return of their investment funds. Any
investors not making any decision within such 45-day period are to automatically
receive a return of their investment funds.
NOTE 6 - STOCK OPTION PLAN
-----------------
On June 25, 1996, the Board of Directors and shareholders approved a stock
option plan called the "1996 Stock Option Plan" (the "Plan"). Under the Plan,
the Company has reserved an aggregate of 500,000 shares of Common Stock for
issuance pursuant to options granted under the Plan ("Plan Options"). The Option
Committee of the Board of Directors (the "Committee") of the Company administers
the Plan including, without limitation, the selection of the persons who will be
granted Plan Options under the Plan, the type of Plan Options to be granted, the
number of shares subject to each Plan Option and the Plan Option price.
Plan Options granted under the Plan may either be options qualifying as
incentive stock options ("Incentive Options") under Section 422 of the Internal
Revenue Code of 1996, as amended or options that do not so quality
("Non-Qualified Options"). In addition, the Plan also allows for the inclusion
of a reload option provision ("Reload Option"), which permits an eligible person
to pay the exercise price of the Plan Option with shares of Common Stock owned
by the eligible person and receive a new Plan Option to purchase shares of
Common Stock equal in number to the tendered shares. Any Incentive Option
granted under the Plan must provide for an exercise price of not less than 100%
of the fair market value of the underlying shares on the date of such grant, but
the exercise price of any Incentive Option granted to an eligible employee
owning more than 10% of the Company's Common Stock must be at least 110% of such
fair market value as determined on the date of the grant. The term of each Plan
Option and the manner in which it may be exercised is determined by the Board of
the Directors or the Committee, provided that no Plan Option may be exercisable
more than 10 years after the date of its grant and, in the case of an Incentive
Option granted to an eligible employee owning more than 10% of the Company's
Common Stock, no more than five years after date of the grant.
F-5
<PAGE>
No person is authorized in connection with
any offering made hereby to give any
representation other than as contained in
this Prospectus, and if given or made, such
information or representation must not be
relied upon as having been authorized by the
Company or an Underwriter. This Prospectus
is not an offer to sell, or a solicitation
of an offer to buy, by any person in any
jurisdiction in which it is unlawful for
such person to make such an offer or
solicitation.
TABLE OF CONTENTS WIN-GATE EQUITY GROUP, INC.
Page (a Florida corporation)
----
Prospectus Summary................... 6
Risk Factors......................... 11 Minimum Offering
50,000 Units
Dilution............................. 22
Capitalization....................... 24 Maximum Shares
100,000 Units
Use of Proceeds ..................... 26
Management Discussion and
Analysis and Plan of Operation...... 28
_______________________
The Company ......................... 29
PROSPECTUS
Proposed Business ................... 31 _______________________
Management........................... 39
Conflicts of Interest................ 43
Certain Transactions................. 43
Principal Shareholders............... 44
Description of Securities............ 45
Plan of Distribution................. 47
Florida Takeover Statutes............ 48
Legal Matters........................ 49
Experts.............................. 49
Indemnification of Directors
and Officers ........................ 49
Additional Information............... 50
Index to Financial Statements....... F-1 September 5, 1997
Until 90 days after the date when the
Deposited Funds and Deposited Securities are
released from the Escrow Account, all
dealers effecting transactions in the
registered securities, whether or not
participating in this distribution, may be
required to deliver a Prospectus. This is in
addition to the obligation of dealers to
deliver a Prospectus when acting as
underwriters and with respect to their
unsold allotments or subscriptions.
_______________
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company has authority under Section 607.0850 of the Florida Business
Corporation Act to indemnify its directors and officers to the extent provided
for in such statute. The Company's Articles of Incorporation provide that the
Company shall indemnify and may insure its officers and directors to the fullest
extent permitted by law.
The provisions of the Florida Business Corporation Act that authorize
indemnification do not eliminate the duty of care of a director, and in
appropriate circumstances equitable remedies such as injunctive or other forms
of non-monetary relief will remain available under Florida law. In addition,
each director will continue to be subject to liability for (i) violations of
criminal laws, unless the director had reasonable cause to believe his conduct
was lawful or had no reasonable cause to believe his conduct was unlawful, (ii)
deriving an improper personal benefit from a transaction, (iii) voting for or
assenting to an unlawful distribution and (iv) willful misconduct or conscious
disregard for the best interests of the Company in a proceeding by or in the
right of the Company to procure a judgment in its favor or in a proceeding by or
in the right of a shareholder. The statute does not affect a director's
responsibilities under any other law, such as the Federal securities laws.
The effect of the foregoing is to require the Company to indemnify the
officers and directors of the Company for any claim arising against such persons
in their official capacities if such person acted in good faith and in a manner
that she reasonably believed to be in or not opposed to the best interests of
the corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers or persons controlling the
Company pursuant to the foregoing provisions, the Company 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.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the expenses (other than Underwriting
discounts and commissions) expected to be incurred in connection with the
offering described in this Registration Statement.
SEC Filing Fee $ 496.00
Initial Transfer Agent Fee* $ 500.00
Printing Costs (including stock certificates)* $ 2,000.00
Legal Expenses* $ 7,500.00
II-1
<PAGE>
Accounting Fees and Expenses* $ 3,000.00
Blue Sky Fees and Expenses* $ 400.00
Escrow Agent Fees and Expenses* $ 3,000.00
Other Expenses* $ 104.00
-----------
Total $17,000.00*
*Indicates expenses that have been estimated for the purpose of this filing.
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.
The following shares of Common Stock were issued by the Company since its
inception and prior to the date of filing of this Registration Statement. There
were no underwriting discounts or commissions paid in connection with the
issuance of any of these securities.
(a) On May 24, 1996, the Company issued a total of 1,500,000 shares of
its Common Stock (par value $.001 per share) to Ms. Debra Janssen and a total of
3,000,000 shares of Common Stock to Lake Worth Equities, Inc. In addition, on
May 24, 1996, the Company issued 400,000 shares to Atlas, Pearlman, Trop &
Borkson, P.A. in consideration for legal services rendered to the Company.
(b) The sales set forth above (giving effect to the integration of such
transactions) are claimed to be exempt from registration with the Securities and
Exchange Commission pursuant to Section 4(2) of the Securities Act of 1933, as
amended, as transactions by an issuer not involving any public offering, in that
such transactions involved the issuance and sale by the Company of shares of its
Common Stock to financially sophisticated individuals and to the Company's
securities counsel and another sophisticated investor. All of such investors are
fully aware of the Company's activities, as well as its business and financial
condition, and acquired said securities for investment purposes and understood
the restrictions pertaining thereto. All certificates representing the shares
issued and currently outstanding by the Company herein have been properly
legended.
ITEM 27. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
Exhibit No. Description of Exhibit
- ----------- ----------------------
3.1 Articles of Incorporation
3.2 By-Laws
4.1 Specimen Common Stock Certificate
4.2 Warrant Certificate
4.3 Warrant Agreement
II-2
<PAGE>
5.1 Opinion of Atlas, Pearlman, Trop & Borkson, P.A. as to the
legality of the securities being registered for sale
10.1 Forms of Subscription Documentation for prospective investors
10.2 1996 Stock Option Plan
10.3 Loan Agreement
11 Escrow Agreements
23.1 Consent of Atlas, Pearlman, Trop & Borkson, P.A. (included in
Exhibit 5.1)
23.2 Consent of Millward & Co., Independent Certified Public Accoun-
tants(1)
____________
1 Filed herewith
2 To be filed
ITEM 28. UNDERTAKINGS.
ITEM 512 UNDERTAKINGS WITH RESPECT TO RULE 415 UNDER THE SECURITIES ACT
-----------------------------------------------------------------------
Insofar as indemnification for liabilities arising under the Securities
Act of 1933, as amended (the "Act") may be permitted to directors, officers and
controlling persons of the Company pursuant to the foregoing provisions, or
otherwise, the Company 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
Company of expenses incurred or paid by a director, officer or controlling
person of the Company 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 Company 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 its is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
The undersigned Company hereby undertakes that:
1. To file, during any period in which it offers or sales are being
made, a post-effective amendment to this Registration Statement to:
II-3
<PAGE>
(a) include any Prospectus required by Section 10(a)(3) of the
Act;
(b) 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;
(c) 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 purposes of determining any liability under the Act,
each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
3. To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the Blank Check Offering.
4. For purposes of determining any liability under the Act, the
information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in the form of
Prospectus filed by the Registrant pursuant to Rule 424(b)(i) or (4) or 497(h)
under the Act shall be deemed to be part of this Registration Statement as of
the time it was declared effective.
5. For the purpose of determining any liability under the Act, each
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.
II-4
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form SB-2 and authorized this Amendment to the
Registration Statement to be signed on its behalf by the undersigned, in the
City of Ft. Lauderdale, State of Florida, on this 5th day of September, 1997.
WIN-GATE EQUITY GROUP, INC.
By:/s/Debra Janssen
------------------------
Debra Janssen, President,
Chief Executive Officer
In accordance with the requirements of the Securities Act of 1933, this
Registration Statement on Form SB-2 has been signed by the following persons in
the capacities and on the dates indicated.
Signatures Title Date
---------- ----- ----
President, Chief Executive Officer
(Principal Executive Financial
/s/Debra Janssen and Accounting Officer) and Director
- -------------------------
Debra Janssen September 9, 1997
II-5
<PAGE>
EXHIBIT INDEX
Sequential
Page
Exhibit No. Description Number
- ----------- ----------- ------
4.2 Warrant Certificate
4.3 Warrant Agreement
23.2 Consent of Millward & Co.,
Independent Certified Public
Accountants
II-6
[FORM OF FACE OF WARRANT CERTIFICATE]
No.___ ____ Warrants
VOID AFTER ___, 200__
WARRANT CERTIFICATE FOR PURCHASE
OF COMMON STOCK
WIN-GATE EQUITY GROUP, INC.
This certifies that FOR VALUE RECEIVED, ____________________________ or
registered assigns (the "Registered Holder") is the owner of the number of
Warrants ("Warrants") specified above. Each Warrant represented hereby entitles
the Registered Holder to purchase, subject to the terms and conditions set forth
in this Warrant Certificate and the Warrant Agreement of even date herewith (the
"Warrant Agreement"), one fully paid and nonassessable share of Common Stock,
par value $.001 per share ("Common Stock"), of WIN-GATE EQUITY GROUP, INC., a
Florida corporation (the "Company") at any time commencing _______________,
199__, and expiring on the Expiration Date (as hereinafter defined), upon the
presentation and surrender of this Warrant Certificate with the Subscription
Form on the reverse side hereof duly executed, at the corporate office of
Florida Atlantic Stock Transfer, Inc., as Warrant Agent, or its successor (the
"Warrant Agent"), accompanied by payment of $1.20 per share (subject to
adjustment) (the "Purchase Price") in the lawful money of the United States of
America in cash or by official bank or certified check made payable to the
Company. The Company shall have the right to reduce the exercise price and/or
extend the term of the Warrants in compliance with the requirements of Rule
13e-4 to the extent applicable.
This Warrant Certificate, and each Warrant represented hereby, is issued
pursuant to and is subject in all respects to the terms and conditions set forth
in the Warrant Agreement by and among the Company and the Warrant Agent.
In the event of certain contingencies provided for in the Warrant
Agreement, the Purchase Price or the number of shares of Common Stock subject to
purchase upon the exercise of each Warrant represented hereby are subject to
modification or adjustment.
Each Warrant represented hereby is exercisable at the option of the
Registered Holder, but no fractional shares of Common Stock will be issued. In
the case of the exercise of less than all the Warrants represented hereby, the
Company shall cancel this Warrant Certificate upon the surrender hereof and
shall execute and deliver a new Warrant Certificate or Warrant Certificates of
like tenor, which the Warrant Agent shall countersign, for the balance of such
Warrants.
The term "Expiration Date" shall mean 5:00 p.m. (Florida time) on _______,
200__, or such earlier date as the Warrants shall be redeemed. If such date
shall in the State of Florida be a holiday or a day on which banks are
authorized to close, then the Expiration Date shall mean 5:00 p.m. (Florida
time) the next following day which in the State of Florida is not a holiday or a
day on which banks are authorized to be closed.
<PAGE>
The Company shall not be obligated to deliver any securities pursuant to
the exercise of the Warrants represented hereby unless a registration statement
for the underlying shares of Common Stock is effective under the Securities Act
of 1933, as amended, and a registration statement for the underlying shares of
Common Stock is effective in the state in which the Warrant holder resides
unless the Common Stock is exempt from registration in the Warrant holder's
state of residence. The Company has covenanted and agreed that it will file a
registration statement and will use its best efforts to cause the same to become
effective and to keep such registration statement current while any of the
Warrants are outstanding. The Warrants represented hereby shall not be
exercisable by a Registered Holder in any state where such exercise would be
unlawful.
This Warrant Certificate is exchangeable, upon the surrender hereof by the
Registered Holder at the corporate office of the Warrant Agent, for a new
Warrant Certificate or Warrant Certificates of like tenor representing an equal
aggregate number of Warrants, each of such new Warrant Certificates to represent
such number of Warrants as shall be designated by such Registered Holder at the
time of such surrender. Upon due presentment, with the appropriate transfer fee
per certificate in addition to any tax or other governmental charge imposed in
connection therewith, for registration of transfer of this Warrant Certificate
at such office, a new Warrant Certificate or Warrant Certificates representing
an equal aggregate number of Warrants will be issued to the transferee in
exchange therefor, subject to the limitations provided in the Warrant Agreement.
Prior to the exercise of any Warrant represented hereby, the Registered
Holder shall not be entitled to any rights of a stockholder of the Company,
including, without limitation, the right to vote or to receive dividends or
other distributions, and shall not be entitled to receive any notice of any
proceedings of the Company, except as provided in the Warrant Agreement.
The Warrants represented hereby may be redeemed at the option of the
Company, at a redemption price of $.01 per Warrant at any time commencing thirty
(30) days from the closing of a Business Acquisition as defined in the Company's
Prospectus dated , 1997, upon thirty (30) days prior written notice and upon
thirty (30) days prior written notice to all holders of the Warrants. On and
after the date of for redemption, the Registered Holder shall have no rights
with respect to the Warrants represented hereby except to receive the $.01 per
Warrant upon surrender of this Warrant Certificate.
Prior to due presentment for registration of transfer hereof, the Company
and the Warrant Agent may deem and treat the Registered Holder as the absolute
owner hereof and of each Warrant represented hereby (notwithstanding any
notations of ownership or writing hereon made by anyone other than a duly
authorized officer of the Company or the Warrant Agent) for all purposes and
shall not be affected by any notice to the contrary.
This Warrant Certificate shall be governed by and construed in accordance
with the laws of the State of Florida.
This Warrant Certificate is not valid unless countersigned by the Warrant
Agent.
2
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to be
duly executed, manually or in facsimile, by its duly authorized President and a
facsimile of its corporate seal to be imprinted hereon.
WIN-GATE EQUITY GROUP, INC.
Dated__________________, 199__ By:___________________________________
Name:_________________________________
Title:________________________________
[corporate seal]
Countersigned:
FLORIDA ATLANTIC STOCK TRANSFER, INC.,
as Warrant Agent
By:___________________________________
Authorized Officer
3
<PAGE>
[FORM OF REVERSE OF WARRANT CERTIFICATE]
SUBSCRIPTION FORM
To Be Executed by the Registered Holder
in Order to Exercise Warrants
The undersigned Registered Holder hereby irrevocably elects to exercise
____________________ Warrants represented by this Warrant Certificate, and to
purchase the securities issuable upon the exercise of such Warrants, and
requests that certificates for such securities shall be issued in the name of
PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER
______________________________________
______________________________________
______________________________________
______________________________________
[please print or type name and address]
and be delivered to
______________________________________
______________________________________
______________________________________
______________________________________
[please print or type name and address]
and if such number of Warrants shall not be all the Warrants evidenced by this
Warrant Certificate, that a new Warrant Certificate for the balance of such
Warrants be registered in the name of, and delivered to, the Registered Holder
at the address stated below.
Dated: ____________________ X_________________________________
Signature
__________________________________
__________________________________
Address
<PAGE>
______________________________________
Taxpayer Identification Number
______________________________________
Signature Guaranteed
______________________________________
THE SIGNATURE TO THE SUBSCRIPTION FORM MUST CORRESPOND TO THE NAME AS WRITTEN
UPON THE FACE OF THIS WARRANT CERTIFICATE IN EVERY PARTICULAR, WITHOUT
ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATSOEVER, AND MUST BE GUARANTEED BY A
MEMBER OF THE MEDALLION STAMP PROGRAM.
<PAGE>
ASSIGNMENT
To Be Executed by the Registered Holder
in Order to Assign Warrants
FOR VALUE RECEIVED, _________________hereby sells, assigns and transfers unto
PLEASE INSERT SOCIAL SECURITY OR
OTHER IDENTIFYING NUMBER OF TRANSFEREE
[please print or type name and address]
___________of the Warrants represented by this Warrant Certificate, and hereby
irrevocably constitutes and appoints ____________________ Attorney to transfer
this Warrant Certificate on the books of the Company, with full power of
substitution in the premises.
Dated: ____________________ X_________________________________
Signature
__________________________________
__________________________________
Address
______________________________________
Taxpayer Identification Number
______________________________________
Signature Guaranteed
THE SIGNATURE TO THE ASSIGNMENT MUST CORRESPOND TO THE NAME AS WRITTEN UPON THE
FACE OF THIS WARRANT CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION OR
ENLARGEMENT OR ANY CHANGE WHATSOEVER, AND MUST BE GUARANTEED BY A MEMBER OF THE
MEDALLION STAMP PROGRAM.
_____________________________________________________________
Win-Gate Equity Group, Inc.
and
Florida Atlantic Stock Transfer, Inc.
________________________________________________
Warrant Agreement
________________________________________________
Dated as of _________ , 1997
_____________________________________________________________
<PAGE>
TABLE OF CONTENTS
Page
----
PARTIES........................................................................1
RECITALS.......................................................................1
Section 1. Appointment of Warrant Agent................................ 1
Section 2. Form of Warrant............................................. 1
Section 3. Countersignature and Registration........................... 2
Section 4. Transfers and Exchanges..................................... 2
Section 5. Exercise of Warrants........................................ 2
Section 6. Payment of Taxes............................................ 3
Section 8. Reservation of Common Stock................................. 4
Section 9. Warrant Price............................................... 4
Section 10. Adjustments................................................ 5
Section 11. Fractional Interest........................................ 6
Section 13. Disposition of Proceeds on Exercise of Warrants............ 6
Section 14. Merger or Consolidation or Change of Name of Warrant Agent. 7
Section 15. Reorganization of the Company.............................. 7
Section 16. When Issuance or Payment May Be Deferred................... 8
Section 17. Redemption................................................. 8
Section 18. Duties of Warrant Agent.................................... 9
Section 19. Change of Warrant Agent.................................... 10
Section 20. Identity of Transfer Agent................................. 11
Section 21. Notices.................................................... 11
Section 22. No Stockholder Rights...................................... 12
Section 23. Supplements and Amendments................................. 12
Section 24. Successors................................................. 12
Section 25. Governing Law.............................................. 12
Section 26. Benefits of This Agreement................................. 12
Section 27. Counterparts............................................... 13
EXHIBIT A - (Form of Common Stock Purchase Warrant, including election to
Purchase and Assignment).......................................A-1
i
<PAGE>
WARRANT AGREEMENT
THIS WARRANT AGREEMENT dated as of , 1997, between Win-Gate Equity
Group, Inc., a Florida corporation (hereinafter called the "Company"), and
Florida Atlantic Stock Transfer, Inc., as warrant agent (hereinafter called the
"Warrant Agent").
WHEREAS, the Company proposes to issue and sell up to a maximum of
100,000 units (the "Units") at a purchase price of $1.00 per Unit. Each Unit
consists of one share of Common Stock, par value $.001 per share (the "Common
Stock" or the "Shares"), and ten Common Stock Purchase Warrants (the "Warrants")
of the Company. The Units, Shares and Warrants are not separately transferable
until the Company acquires a Business Combination as defined in the Company's
Prospectus dated ________________. Each Warrant entitles the holder thereof to
purchase one share of Common Stock at an exercise price of $1.20 per Warrant at
any time during the five (5) year period commencing on the date of the Company's
Prospectus dated ____________ relating to the Units.
WHEREAS, the Company desires the Warrant Agent to act on behalf of the
Company, and the Warrant Agent is willing so to act, in connection with the
issuance, registration, transfer, exchange and exercise of the Warrants.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, the parties hereto agree as follows:
Section 1. Appointment of Warrant Agent.
-----------------------------
The Company hereby appoints the Warrant Agent to act as Agent for the
Company in accordance with the instructions hereinafter set forth in this
Agreement and the Warrant Agent hereby accepts such appointment.
Section 2. Form of Warrant.
----------------
The certificates evidencing the Warrants (the "Warrant Certificates")
and the form of election to purchase shares to be printed on the reverse thereof
shall be substantially as set forth in Exhibit "A" attached hereto. The per
share warrant price and the number of shares issuable upon exercise of the
Warrants are subject to adjustment upon the occurrence of certain events, all as
hereinafter provided. The Warrants shall be executed on behalf of the Company by
the manual or facsimile signature of the present or any future Chairman of the
Board, President or Vice President of the Company, attested by the manual or
facsimile signature of the present or any future Secretary or Assistant
Secretary of the Company.
Warrants shall be dated as of the date of issuance by the Warrant Agent
either upon initial issuance or upon transfer or exchange.
1
<PAGE>
Section 3. Countersignature and Registration.
----------------------------------
The Warrant Agent shall maintain books for the transfer and
registration of the Warrants. Upon the initial issuance of the Warrants, the
Warrant Agent shall issue and register the Warrants in the names of the
respective holders thereof. The Warrants shall be countersigned manually or by
facsimile by the Warrant Agent (or by any successor to the Warrant Agent then
acting as warrant agent under this Agreement) and shall not be valid for any
purpose unless so countersigned. Warrants may be so countersigned, however, by
the Warrant Agent (or by its successor as warrant agent) and be delivered by the
Warrant Agent, notwithstanding that the persons whose manual or facsimile
signatures appear thereon as proper officers of the Company shall have ceased to
be such officers at the time of such countersignature or delivery, provided such
persons were proper officers of the Company at the time of such original
signing. The Warrant Agent shall deem and treat the registered holder(s) of the
Warrant Certificates as the absolute owner(s) thereof.
Section 4. Transfers and Exchanges.
------------------------
The Warrant Agent shall from time to time register the transfer of any
outstanding Warrant Certificate upon the books to be maintained by the Warrant
Agent for that purpose, upon surrender thereof for transfer properly endorsed or
accompanied by appropriate instructions for transfer in form satisfactory to the
Warrant Agent, duly executed by the registered holder(s) thereof or by the duly
appointed legal representative thereof or by a duly authorized attorney. Upon
any such registration of transfer, a new Warrant Certificate shall be issued to
the transferee(s) and the surrendered Warrant Certificate shall be canceled by
the Warrant Agent. Warrant Certificates so canceled shall be delivered by the
Warrant Agent to the Company from time to time upon request. Warrant
Certificates may be exchanged at the option of the holder thereof, when
surrendered at the office of the Warrant Agent, for another Warrant Certificate,
or other Warrant Certificate of different denominations, of like tenor and
representing in the aggregate the right to purchase a like number of shares of
Common Stock. Warrant Certificates surrendered for exchange shall be canceled by
the Warrant Agent and delivered to the Company from time to time upon request.
Section 5. Exercise of Warrants.
---------------------
Each registered holder of Warrants shall have the right to exercise
such Warrants only if a current registration statement covering the shares of
Common Stock underlying the Warrants is effective. If a current effective
registration statement as described herein is effective, each registered holder
of Warrants may exercise such Warrant commencing at the opening of business
Florida time on and terminating at 5:00 p.m., Florida time, on (the "Expiration
Date"), to purchase from the Company (and the Company shall issue and sell to
such registered holder of Warrants) the number of fully paid and non-assessable
shares of Common Stock which the holder may at the time be entitled to receive,
upon surrender to the Company at the office of the Warrant Agent of the Warrant
Certificates evidencing such Warrants, with the form of election to purchase on
2
<PAGE>
the reverse thereof duly filled in and executed, and upon payment to the Company
of the Warrant Price, determined in accordance with the provisions of Sections 9
and 10 of this Agreement, for the number of shares in respect of which such
Warrants are then exercised. Payment of such Warrant Price shall be made in cash
or by certified check or bank draft payable, in United States dollars, to the
order of the Company. No adjustment shall be made for any dividends on any
shares of Common Stock issuable upon exercise of any warrant of the Company
outstanding on the date hereof. Subject to Section 6, upon such surrender of the
Warrants and payment of the Warrant Price as aforesaid, the Company shall issue
and cause to be delivered with all reasonable dispatch, upon the written order
of the registered holder of such Warrants, and in such name or names as such
registered holder may designate, a certificate or certificates for the number of
full shares of Common Stock so purchased upon the exercise of such Warrants. No
fractional shares of Common Stock will be issued. Such certificate or
certificates shall be deemed to have been issued and any person so designated to
be named therein shall be deemed to have become a holder of record of such
shares as of the date of the surrender of such Warrants and payment of the
Warrant Price as aforesaid; provided, however, that if, at the date of surrender
of such Warrants and payment of such Warrant Price, the transfer books for the
shares of Common Stock or other class of stock purchasable upon the exercise of
such Warrants shall be closed, the certificates for the shares in respect to
which such Warrants are then exercised shall be deemed to have been issued as of
the date on which such books shall be opened (whether before, on or after the
Expiration Date) and until such date the Company shall be under no duty to
deliver any certificate for such shares; provided, further, however, that such
transfer books, unless otherwise required by law or by applicable rule of any
national securities exchange, shall not be closed at any one time for a period
longer than 20 days. The rights of purchase represented by the Warrants shall be
exercisable, at the election of the registered holders thereof, either as an
entirety or from time to time for part only of the shares specified therein and,
in the event that any Warrant is exercised in respect of fewer than all of the
shares specified therein at any time prior to the Expiration Date, a new Warrant
Certificate evidencing the remaining Warrant or Warrants will be issued to such
registered holder for the remaining number of shares specified in the Warrant so
surrendered, and the Warrant Agent is hereby irrevocably authorized to
countersign and to deliver the required new Warrants pursuant to the provisions
of this Section and of Section 3 of this Agreement; and the Company, whenever
requested by the Warrant Agent, will supply the Warrant Agent with Warrant
Certificates duly executed on behalf of the Company for such purpose. After the
respective Expiration Dates of the Warrants any such Warrants which have not
been exercised shall be void.
Section 6. Payment of Taxes.
-----------------
The Company will pay any documentary stamp taxes attributable to the
initial issuance of Common Stock upon the exercise of the Warrants by the
registered holder thereof; provided, however, that the Company shall not be
required to pay any tax or taxes which may be payable in respect to any transfer
of a Warrant or in respect to any transfer involved in the issue or delivery of
any certificates for shares of Common Stock in a name other than that of the
registered holder of Warrants in respect of which such shares are issued, and in
such case neither the Company nor the Warrant Agent shall be required to issue
3
<PAGE>
or deliver any certificate for shares of Common Stock or any Warrant until the
person requesting the same has paid to the Company or Warrant Agent the amount
of such tax or has established to the Company's and to the Warrant Agent's
satisfaction that such tax has been paid.
Section 7. Mutilated or Missing Warrants.
------------------------------
In case any of the Warrant Certificates shall be mutilated, lost,
stolen or destroyed, the Company may in its discretion issue, and the Warrant
Agent shall then countersign and deliver, in exchange and substitution for and
upon cancellation of the mutilated Warrant Certificate, or in lieu of and
substitution for the Warrant Certificate lost, stolen or destroyed, a new
Warrant Certificate of like tenor and representing an equivalent right or
interest, but only upon receipt of evidence satisfactory to the Company and the
Warrant Agent of such loss, theft or destruction of such Warrant Certificate
and, in the case of a lost, stolen or destroyed Warrant Certificate, indemnity,
if requested, also satisfactory to them. Applicants for such substitute Warrant
Certificate shall also comply with such other reasonable regulations and pay
such reasonable charges as the Company or the Warrant Agent may prescribe.
Section 8. Reservation of Common Stock.
----------------------------
There has been reserved, and the Company shall at all times keep
reserved, free from preemptive rights, out of the authorized and unissued shares
of Common Stock, or its authorized and issued Common Stock held in its treasury,
a number of shares sufficient to satisfy any obligation to issue shares of
Common Stock upon the exercise of the Warrants; and the Transfer Agent for the
shares of Common Stock and every subsequent transfer agent for any shares of the
Company's capital stock issuable upon the exercise of any of the rights of
purchase aforesaid are hereby irrevocably authorized and directed at all times
to reserve such number of authorized and unissued shares as shall be requisite
for such purpose. The Company agrees that all shares of Common Stock issued upon
exercise of the Warrants shall be, at the time of delivery of the certificates
for such shares of Common Stock, duly authorized, validly issued and
outstanding, fully paid and non-assessable. The Company will keep a copy of this
Agreement on file with the Transfer Agent for the shares of Common Stock and
with every subsequent transfer agent for any shares of the Company's capital
stock issuable upon the exercise of the rights of purchase represented by the
Warrants. The Warrant Agent is hereby irrevocably authorized to requisition from
time to time from such Transfer Agent stock certificates required to honor
outstanding Warrants. The Company will supply such Transfer Agent with duly
executed stock certificates for such purpose. All Warrants surrendered in the
exercise of the rights thereby evidenced shall be canceled by the Warrant Agent
and shall thereafter be delivered to the Company, and such canceled Warrants
shall constitute sufficient evidence of the number of shares of Common Stock
which have been issued upon the exercise of such Warrants. Promptly after the
Expiration Date, the Warrant Agent shall certify to the Company as to the total
aggregate amount of Warrants then outstanding, and thereafter no shares of
Common Stock shall be subject to reservation in respect of such Warrants which
shall have expired.
4
<PAGE>
Section 9. Warrant Price.
--------------
The Warrant Price at which Common Stock shall be purchasable pursuant
to the Warrants shall be $1.20 per share. The Warrant Price is subject to
adjustment, as provided in Section 10 hereof.
Section 10. Adjustments.
------------
Any and all of the shares of the Common Stock of the Company which may
be acquired by a Warrant holder or his registered assigns as a result of the
exercise, in whole or in part, of this Warrant, shall be subject to the
anti-dilution adjustments set forth below. It is expressly understood that the
Warrant Price set forth below (before giving effect to any adjustments) shall
mean $1.20 per share of Common Stock. Notwithstanding the foregoing, the Company
shall have the right to reduce the exercise price and/or extend the term of the
Warrants in compliance with the requirements of Rule 13e-4 to the extent
applicable.
(a) In case the Company shall (i) declare a dividend on its Common
Stock in shares of its capital stock, (ii) subdivide its outstanding Common
Stock into a greater number of shares, (iii) combine its outstanding Common
Stock into a smaller number of shares, or (iv) issue any shares by
reclassification of its Common Stock (including any such reclassification in
connection with a consolidation or merger in which the Company is the continuing
corporation), the Warrant Price in effect at the time of the record date for
such dividend or of the effective date of such subdivision, combination or
reclassification shall be proportionately adjusted so that the warrantholder
shall be entitled to receive the kind and aggregate number of shares of Common
Stock which it would have owned or would have been entitled to receive after the
happening of any of the events described above on any record date with respect
thereto, if this Warrant had been exercised immediately prior to such time such
dividend, subdivision, combination or reclassification occurred. Such adjustment
shall be made successively whenever any event listed above shall occur. If after
an adjustment a holder of a Warrant upon exercise of it may receive shares of
two or more classes of capital stock of the Company, the Company shall determine
the allocation of the adjusted Warrant Price between the classes of capital
stock. After such allocation, the exercise privilege and the Warrant Price of
each class of capital stock shall thereafter be subject to adjustment on terms
comparable to those applicable to Common Stock in this Section.
(b) Whenever the Warrant Price payable upon exercise of this Warrant
is adjusted pursuant to paragraph (a) above, the number of shares of Common
Stock purchasable upon exercise of this Warrant shall simultaneously be adjusted
by multiplying the number of shares of Common Stock initially issuable upon
exercise of this Warrant by the Warrant Price in effect on the date immediately
preceding such event and dividing the product so obtained by the Warrant Price,
as adjusted.
(c) No adjustment in the Warrant Price shall be required unless such
adjustment would require an increase or decrease of at least 1% in such price,
5
<PAGE>
provided, however, that any adjustments which by reason of this paragraph (c)
are not required to be made shall be carried forward and taken into account in
any subsequent adjustment. All calculations under this Section 10 shall be made
to the nearest cent or to the nearest one-tenth of a share, as the case may be.
Anything in this Section 10 to the contrary notwithstanding, the Company shall
be entitled, but shall not be required, to make such changes in the Warrant
Price, in addition to those required by this Section 10, as it, in its
discretion, shall determine to be advisable in order that any share, dividend or
subdivision of Common Stock shall not result in any tax to the holders of its
Common Stock or securities convertible into Common Stock.
(d) The form of Warrants need not be changed because of any change
pursuant to this Section, and Warrants issued after such change may state the
same Warrant Price and the same number of shares as is stated in such Warrants
initially issued pursuant to this agreement. However, the Company may at any
time in its sole discretion (which shall be conclusive) make any change in the
form of Warrants that the Company may deem appropriate and that does not affect
the substance thereof; and any Warrant thereafter issued or countersigned,
whether in exchange or substitution for an outstanding Warrant or otherwise, may
be in the form as so changed.
Section 11. Fractional Interest.
--------------------
The Company shall not be required to issue fractions of shares of
Common Stock on the exercise of the Warrants. If more than one Warrant shall be
surrendered for exercise at one time by the same holder, the number of full
shares which shall be issuable upon exercise thereof shall be computed on the
basis of the aggregate number of shares of Common Stock purchasable on exercise
Warrants so presented. If any fraction of a share would, except for the
provisions of this Section 11, be issuable upon exercise of a Warrant, the
Company shall pay an amount in cash equal to the Warrant Price on the day
immediately preceding the date the Warrant is presented for exercise, multiplied
by such fraction.
Section 12. Notices to Warrantholders.
--------------------------
Upon any adjustment of the Warrant Price and the number of shares
issuable on exercise of a Warrant, then and in each such case the Company shall
give written notice thereof to the Warrant Agent, which notice shall state the
Warrant Price resulting from such adjustment and the increase or decrease, if
any, in the number of shares purchasable at such price upon the exercise of a
Warrant, setting forth in reasonable detail the method of calculation and the
facts upon which such calculation is based.
Section 13. Disposition of Proceeds on Exercise of Warrants.
------------------------------------------------
(a) The Warrant Agent shall promptly forward to the Company all
monies received by the Warrant Agent for the purchase of shares of Common Stock
through the exercise of Warrants.
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(b) The Warrant Agent shall keep copies of this Agreement available
for inspection by holders of Warrants during normal business hours.
Section 14. Merger or Consolidation or Change of Name of Warrant Agent.
-----------------------------------------------------------
(a) Any corporation or company which may succeed to the business of
the Warrant Agent by any merger or consolidation or otherwise to which the
Warrant Agent shall be a party, or any corporation or company succeeding to the
corporate trust business of the Warrant Agent, shall be the successor to the
Warrant Agent hereunder without the execution or filing of any paper or any
further act on the part of any of the parties hereto, provided that such
corporation would be eligible for appointment as a successor Warrant Agent under
the provisions of Section 18 of this Agreement. In case at the time such
successor to the Warrant Agent shall succeed to the agency created by this
Agreement, any of the Warrants shall have been countersigned but not delivered,
any such successor to the Warrant Agent may adopt the countersignature of the
original Warrant Agent and deliver such Warrants so countersigned; and in case
at that time any of the Warrants shall not have been countersigned, any
successor to the Warrant Agent shall countersign such Warrants in its own name;
and in all such cases such Warrants shall have the full force provided in the
Warrants and in this Agreement.
(b) In case at any time the name of the Warrant Agent shall be
changed and at such time any of the Warrants shall have been countersigned but
not delivered, the Warrant Agent may adopt the countersignature under its prior
name and deliver Warrants so countersigned; and in case at that time any of the
Warrants shall have been countersigned, the Warrant Agent may countersign such
Warrants either in its prior name or in its changed name; and in all such cases
such Warrants shall have the full force provided in the Warrants and in this
Agreement.
Section 15. Reorganization of the Company.
------------------------------
If the Company consolidates or merges with or into, or transfers or
leases all or substantially all its assets to, any person, upon consummation of
such transaction the Warrants shall automatically become exercisable for the
kind and amount of securities, cash or other assets which the holder of a
Warrant would have owned immediately after the consolidation, merger, transfer
or lease if the holder had exercised the Warrant immediately before the
effective date of the transaction. Concurrently with the consummation of such
transaction, the corporation formed by or surviving any such consolidation or
merger if other than the Company, or the person to which such sale or conveyance
shall have been made, shall enter into a supplemental Warrant Agreement so
providing and further providing for adjustments which shall be as nearly
equivalent as may be practical to the adjustments provided for in Section 10
hereof. The successor Company shall mail to Warrant holders a notice describing
the supplemental Warrant Agreement or the primary exchange on which the Common
Stock is traded. If the issuer of securities deliverable upon exercise of
Warrants under the supplemental Warrant Agreement is an affiliate of the formed,
surviving, transferee or lessee corporation, that issuer shall join in the
supplemental Warrant Agreement. If this Section 15 applies, subsection (a) of
Section 10 shall not apply.
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Section 16. When Issuance or Payment May Be Deferred.
-----------------------------------------
In any case in which Section 10 hereof shall require that an adjustment
in the Warrant Price be made effective as of a record date for a specified
event, the Company may elect to defer until the occurrence of such event (i)
issuing to the holder of any Warrant exercised after such record date the shares
of Common Stock or other capital stock of the Company, if any, issuable upon
such exercise on the basis of the Warrant Price and (ii) paying to such holder
any amount in cash in lieu of a fractional share pursuant to Section 12;
provided, however, that the Company shall deliver to such holder a due bill or
other appropriate instrument evidencing such holder's right to receive such
additional shares of Common Stock, other capital stock and cash upon the
occurrence of the event requiring such adjustment.
Section 17. Redemption.
-----------
(a) The Warrants are redeemable by the Company for $.01 per Warrant,
at any time commencing thirty days from the closing of a Business Acquisition as
defined in the Company's Prospectus dated , upon thirty (30) days prior written
notice, and upon thirty (30) days prior written notice to all holders of the
Warrants.
(b) In the event the conditions set forth in Section 17(a) are met,
and the Company shall desire to exercise its right so to redeem the Warrants, it
shall mail a notice of redemption to the holders of the Warrants to be redeemed,
first class, postage prepaid, not later than the twentieth day before the date
fixed for redemption, at his/her last address as shall appear on the records of
the Company. Any notice mailed in the manner provided herein shall be
conclusively presumed to have been duly given whether or not the holder receives
such notice.
(c) The notice of redemption shall specify the (i) redemption price,
(ii) the date fixed for redemption, (iii) the place where the Warrant
Certificates shall be delivered and the redemption price paid, and (iv) that the
right to exercise the Warrant shall terminate at 5:00 p.m. (New York time) on
the business day immediately proceeding the date fixed for redemption. The date
fixed for redemption of the Warrants shall be the Redemption Date. No failure to
mail such notice nor any defect therein or in the mailing thereof shall affect
the validity of the proceedings for such redemption except as to a holder (a) to
whom notice was not mailed; or (b) whose notice was defective. An affidavit of
the Secretary or an Assistant Secretary of the Company that notice of redemption
has been mailed shall, in the absence of fraud, be prima facie evidence of the
facts stated therein.
(d) Except as provided herein, any right to exercise a Warrant shall
terminate at 5:00 p.m. (Florida time) on the business day immediately proceeding
the Redemption Date. On and after the Redemption Date, the Warrantholders shall
have no further rights except to receive, upon surrender of the Warrant, the
redemption price.
(e) From and after the Redemption Date, the Company shall, at the
place specified in the notice of redemption, upon presentation and surrender to
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the Company by or on behalf of the holder thereof of one or more Warrants to be
redeemed, deliver or cause to be delivered to or upon the written order of such
holder a sum in cash equal to the redemption price of each such Warrant. From
and after the date fixed for redemption and upon the deposit or setting aside by
the Company of a sum sufficient to redeem all the Warrants called for
redemption, such Warrants shall expire and become void and all rights hereunder
and under the Warrant Certificates, except the right to receive payment of the
redemption price, shall cease.
Section 18. Duties of Warrant Agent.
------------------------
The Warrant Agent undertakes the duties and obligations imposed by this
Agreement upon the following terms and conditions, by all of which the Company
and the holders of Warrants, by their acceptance thereof, shall be bound:
(a) The statements of fact and recitals contained herein and in the
Warrants shall be taken as statements of the Company; and the Warrant Agent
assumes no responsibility for the correctness of any of the same except such as
describe the Warrant Agent and assumes no responsibility with respect to the
distribution of the Warrants except as herein expressly provided.
(b) The Warrant Agent shall not be responsible for any failure of
the Company to comply with any of the covenants contained in this Agreement or
in the Warrants to be complied with by the Company.
(c) The Warrant Agent may consult at any time with counsel
satisfactory to it (who may be counsel for the Company) and the Warrant Agent
shall incur no liability or responsibility to the Company or to any holder of
any Warrant in respect of any action taken, suffered or omitted by it hereunder
in good faith and in accordance with the opinion or the advice of such counsel.
(d) The Warrant Agent shall incur no liability or responsibility to
the Company or to any holder of any Warrant for any action taken in reliance on
any notice, resolution, waiver, consent, order, certificate, or other paper,
document or instrument believed by it to be genuine and to have been signed,
sent or presented by the proper party or parties.
(e) The Company agrees to pay to the Warrant Agent reasonable
compensation for all services rendered by the Warrant Agent in the execution of
this Agreement, to reimburse the Warrant Agent for all expenses, taxes and
governmental charges and other charges of any kind and nature incurred by the
Warrant Agent in the execution of this Agreement and to indemnify the Warrant
Agent and save it harmless against any and all liabilities, including judgments,
costs and reasonable counsel fees, for anything done or omitted by the Warrant
Agent in the execution of this Agreement except as a result of the Warrant
Agent's negligence, willful misconduct or bad faith.
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(f) The Warrant Agent shall be under no obligation to institute any
action, suit or legal proceeding or to take any other action likely to involve
expenses unless the Company or one or more registered holders of Warrants shall
furnish the Warrant Agent with reasonable security and indemnity for any costs
and expenses which may be incurred, but this provision shall not affect the
power of the Warrant Agent to take such action as the Warrant Agent may consider
proper, whether with or without any such security or indemnity. All rights of
action under this Agreement or under any of the Warrants may be enforced by the
Warrant Agent without the possession of any of the Warrants or the production
thereof at any trial or other proceeding relative thereto, and any such action,
suit or proceeding instituted by the Warrant Agent shall be brought in its name
as Warrant Agent, and any recovery of judgment shall be for the ratable benefit
of the registered holders of the Warrants, as their respective rights or
interests may appear.
(g) The Warrant Agent and any stockholder, director, officer,
partner or employee of the Warrant Agent may buy, sell or deal in the Warrants
or other securities of the Company or become pecuniarily interested in any
transaction in which the Company may be interested, or contract with or lend
money to or otherwise act as fully and freely as though it were not the Warrant
Agent under this Agreement. Nothing herein shall preclude the Warrant Agent from
acting in any other capacity for the Company or for any other legal entity.
(h) The Warrant Agent shall act hereunder solely as agent and not in
a ministerial capacity, and its duties shall be determined solely by the
provisions hereof. The Warrant Agent shall not be liable for anything which it
may do or refrain from doing in connection with this Agreement except for its
own negligence, willful misconduct or bad faith.
(i) The Warrant Agent may execute and exercise any of the rights or
powers hereby vested in it or perform any duty hereunder either itself or by or
through its attorneys or agents, and the Warrant Agent shall not be answerable
or accountable for any act, default, neglect or misconduct of any such attorneys
or agents or for any loss to the Company resulting from such neglect or
misconduct, provided reasonable care had been exercised in the selection and
continued employment thereof.
(j) Any request, direction, election, order or demand of the Company
shall be sufficiently evidenced by an instrument signed in the name of the
Company by its President or Vice President or its Secretary or an Assistant
Secretary or its Treasurer or an Assistant Treasurer (unless other evidence in
respect thereof be herein specifically prescribed); and any resolution of the
Board of Directors may be evidenced to the Warrant Agent by a copy thereof
certified by the Secretary or an Assistant Secretary of the Company.
Section 19. Change of Warrant Agent.
------------------------
The Warrant Agent may resign and be discharged from its duties under
this Agreement by giving to the Company notice in writing, and to the holders of
the Warrants notice by mailing such notice to the holders at their addresses
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appearing on the Warrant register, of such resignation, specifying a date when
such resignation shall take effect. The Warrant Agent may be removed by like
notice to the Warrant Agent from the Company and by like mailing of notice to
the holders of Warrants. If the Warrant Agent shall resign or be removed or
shall otherwise become incapable of acting, the Company shall appoint a
successor to the Warrant Agent. If the Company shall fail to make such
appointment within a period of 30 days after such removal or after it has been
notified in writing of such resignation or incapacity by the resigning or
incapacitated Warrant Agent or by the registered holder of a Warrant (who shall,
with such notice, submit his Warrant for inspection by the Company), then the
registered holder of any Warrant may apply to any court of competent
jurisdiction for the appointment of a successor to the Warrant Agent. Any
successor warrant agent, whether appointed by the Company or by such a court,
shall be a bank or trust company, in good standing, incorporated under the laws
of any state in the United States of America. After appointment, the successor
warrant agent shall be vested with the same powers, rights, duties and
responsibilities as if it had been originally named as Warrant Agent without
further act or deed; but the former Warrant Agent shall deliver and transfer to
the successor warrant agent all canceled Warrants, records and property at the
time held by it hereunder, and execute and deliver any further assurance,
conveyance, act or deed necessary for the purpose. Failure to file or mail any
notice provided for in this Section, however, or any defect therein, shall not
affect the legality or validity of the resignation or removal of the Warrant
Agent or the appointment of the successor warrant agent, as the case may be.
Section 20. Identity of Transfer Agent.
---------------------------
Forthwith upon the appointment of any Transfer Agent for the shares of
Common Stock or of any subsequent transfer agent for shares of Common Stock or
other shares of the Company's capital stock issuable upon the exercise of the
rights of purchase represented by the Warrants, the Company shall file with the
Warrant Agent a statement setting forth the name and address of such Transfer
Agent.
Section 21. Notices.
--------
Any notice pursuant to this Agreement to be given or made by the
Warrant Agent or by the registered holder of any Warrant to or on the Company
shall be sufficiently given or made if sent by prepaid, addressed (until another
address is filed in writing by the Company with the Warrant Agent) as follows:
Win-Gate Equity Group, Inc.
8700 N.W. 47th Drive
Coral Springs, FL 33067
Any notice pursuant to this Agreement to be given or made by the
Company or by the registered holder of any Warrant to or on the Warrant Agent
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shall be sufficiently given or made if sent by first-class mail of the United
States Postal Service, postage prepaid, addressed (until another address is
filed in writing by the Warrant Agent with the Company) as follows:
Florida Atlantic Stock Transfer, Inc.
5701 North Pine Island Road
Tamarac, FL 33321
Section 22. No Stockholder Rights.
----------------------
Nothing contained in this Agreement or in any of the Warrant
Certificates shall be construed as conferring upon the holders thereof the right
to vote or to consent or to receive notice as stockholders in respect of the
meetings of stockholders or the election of Directors of the Company or any
other matter, or any rights whatsoever as stockholders of the Company.
Section 23. Supplements and Amendments.
--------------------------
The Company and the Warrant Agent may from time to time supplement or
amend this Agreement in order to cure any ambiguity or to correct or supplement
any provision contained herein which may be defective or inconsistent with any
other provision herein, or to make any other provision in regard to matters or
questions arising hereunder which the Company and the Warrant Agent may deem
necessary or desirable and which shall not be inconsistent with the provisions
of the Warrants and which shall not adversely affect the interest of the holders
of Warrants.
Section 24. Successors.
----------
All the covenants and provisions of this Agreement by or for the
benefit of the Company or the Warrant Agent shall bind and inure to the benefit
of their respective successors and assigns hereunder.
Section 25. Governing Law.
-------------
This Agreement and each Warrant issued hereunder shall be deemed to be
a contract made under the laws of the State of Florida and for all purposes
shall be construed in accordance with the internal laws of said State applicable
to agreements and instruments made and to be performed entirely in such state
without giving effect to the conflicts of law principles thereof.
Section 26. Benefits of This Agreement.
--------------------------
Nothing in this Agreement shall be construed to give to any person or
corporation other than the Company, the Warrant Agent, the Representative and
the registered holders of the Warrants any legal or equitable right, remedy or
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claim under this Agreement; but this Agreement shall be for the sole and
exclusive benefit of the Company, the Warrant Agent and the registered holders
of the Warrants.
Section 27. Counterparts.
-------------
This Agreement may be executed in any number of counterparts and each
of such counterparts shall for all purposes be deemed to be an original, and all
such counterparts shall together constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, as of the day and year first above written.
WIN-GATE EQUITY GROUP, INC.
By:
______________________________________
FLORIDA ATLANTIC STOCK TRANSFER, INC.
By:
_____________________________________
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Consent of Millward & Co.,
Independent Certified Public Accountants
================================================================================
CONSENT OF INDEPENDENT ACCOUNTS
We hereby consent to the use in the Registration Statement of our report dated
September 2, 1997 relating to the financial statements of Win-Gate Equity Group,
Inc., which appears in the Registration Statement. We also consent to the
reference to us under the heading "Experts" in such Prospectus.
Millward & Co., CPAs
Fort Lauderdale, Florida
September 3, 1997
II-7
