As filed with the Securities and Exchange Commission on December 2, 1996
Registration No. 333-14477
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
(Amendment No. 1)
DURWOOD, INC.
(Name of small business issuer in its charter)
Delaware (State or other jurisdiction of incorporation or organization)
5996 (Primary Standard Industrial Classification Code Number)
87-0561426 (I.R.S. Employer Identification No.)
4085 West 4715 South, Kearns, Utah 84118 (801) 967-0777
(Address & telephone number of principal executive offices
& place of business)
Darren Heiselt, 4085 West 4715 South, Kearns, Utah 84118 (801) 967-0777
(Name, address & telephone number of agent for service)
Copies to:
Thomas G. Kimble & Van L. Butler
THOMAS G. KIMBLE & ASSOCIATES (801) 531-0066
311 South State Street, Suite 440, Salt Lake City, Utah 84111
Approximate date of proposed sale to the public: As soon as practicable after
the effective date of this registration statement.
______________________________________________________________________________
CALCULATION OF REGISTRATION FEE
(previously submitted)
Title of Each Class|Amount to be|Proposed Maximum |Proposed Maximum|Amount
of Securities to be|Registered |Offering Price/Unit|Aggregate Price |of fee
Registered
Common Stock 200,000 $ .50 $ 100,000 $100.00
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The registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said section
8(a), may determine.
<PAGE>
200,000 Shares
DURWOOD, INC.
Common Stock
Durwood, Inc. (the "Company"), is offering, on a "best efforts, minimum-
maximum" basis, up to 200,000 shares of its $.001 par value common stock, (the
"Shares") to the public at a price of $.50 per Share.
Prior to this offering, there has been no public market for the Shares.
The Shares will not be listed on an exchange or quoted on the NASDAQ system
upon completion of this offering and there can be no assurance that a market
will develop or, if a market should develop, that it will continue. The
initial public offering price has been arbitrarily determined by the Company
and bears no relationship to assets, shareholders' equity or any other
recognized criteria of value.
THESE SECURITIES INVOLVE A HIGH DEGREE OF RISK AND SUBSTANTIAL AND IMMEDIATE
DILUTION AND SHOULD NOT BE PURCHASED BY PERSONS WHO CANNOT AFFORD TO RISK THE
LOSS OF THEIR ENTIRE INVESTMENT. SEE "RISK FACTORS" on page 5.
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.
- ------------------------------------------------------------------------------
Price to Commissions & Proceeds to
Public(1) Discounts(1)(2) Company(2)(3)
Per Share $.50 $.07 $.43
Total Minimum $ 50,000 $ 7,000 $ 43,000
Total Maximum $ 100,000 $ 14,000 $ 86,000
- ------------------------------------------------------------------------------
(1) The offering price is payable in cash upon subscription. The offering
will be managed by the Company and the Shares will be offered and sold
by the Company without any discounts or other commissions, in reliance
upon Rule 3a4-1. Licensed NASD Broker-dealers may also participate and
receive commission of up to 14% of the offering price on sales made by
them, or the Company may pay finders fees to nonaffiliates for investor
introductions. The Company will update this prospectus to identify any
broker-dealers who become involved in the selling effort. See "Plan of
Distribution."
(2) Proceeds to the Company are shown assuming payment of commissions to
licensed NASD broker-dealers with respect to all shares sold, but before
deducting other offering expenses payable by the Company estimated at
$12,000, for legal and accounting fees and printing costs.
(3) Proceeds will be deposited no later than noon of the next business day
after receipt into an escrow account with Brighton Bank, 311 South State
Street, Salt Lake City, Utah 84111, pending receipt of subscriptions for
at least $50,000. If subscriptions for a minimum of 100,000 Shares have
not been received within 120 days from the date hereof (unless extended
by the Company for up to 30 additional days), all proceeds will be
promptly refunded to subscribers without interest thereon or deduction
therefrom. Subscribers will have no right to return or use of their
funds during the offering period, which may last up to 150 days.
Affiliates may purchase Shares in the offering and no limits have been
imposed in this regard, but no one has made any commitment to purchase
any portion of the offering in order to reach the minimum.
The Shares are being offered by the Company subject to prior sale,
receipt and acceptance by the Company, and approval of certain matters by
counsel. The Company reserves the right to withdraw or cancel such offer and
reject any order, in whole or in part.
The date of this Prospectus is , 1996
<PAGE> 1
AVAILABLE INFORMATION
The Company has filed with the United States Securities and Exchange
Commission (the "Commission") a Registration Statement on Form SB-2, under the
Securities Act of 1933, as amended (the "Securities Act), with respect to the
securities offered hereby. As permitted by the rules and regulations of the
Commission, this Prospectus does not contain all of the information contained
in the Registration Statement. For further information regarding both the
Company and the Securities offered hereby, reference is made to the
Registration Statement, including all exhibits and schedules thereto, which
may be inspected without charge at the public reference facilities of the
Commission's Washington, D.C. office, 450 Fifth Street, N.W., Washington, D.C.
20549. Copies may be obtained from the Washington, D.C. office upon request
and payment of the prescribed fee.
As of the date of this Prospectus, the Company became subject to the
informational requirements of the Securities Exchange Act of 1934, as amended
(The "Exchange Act") and, in accordance therewith, will file reports and other
information with the Commission. Reports and other information filed by the
Company with the Commission pursuant to the informational requirements of the
Exchange Act will be available for inspection and copying at the public
reference facilities maintained by the Commission at Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the following regional offices of
the Commission: New York Regional Office, 75 Park Place, New York, New York
10007; Chicago Regional Office, 500 West Madison Street, Chicago, Illinois
60661. Copies of such material may be obtained from the public reference
section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549,
at prescribed rates.
Copies of the Company's Annual, Quarterly and other Reports which will
be filed by the Company with the Commission commencing with the Quarterly
Report for the first quarter ended after the date of this Prospectus (due 45
days after the end of such quarter) will also be available upon request,
without charge, by writing Durwood, Inc., 4085 West 4715 South, Kearns, Utah
84118.
UNTIL [90 DAYS AFTER THE DATE OF THIS PROSPECTUS], 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 WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY ANY STATE SECURITIES
COMMISSION OR OTHER STATE REGULATORY AUTHORITY, AND NO SUCH REGULATORY
AUTHORITY HAS PASSED UPON THE TERMS OF THIS OFFERING OR APPROVED THE MERITS
THEREOF. INVESTORS MUST RELY ON THEIR OWN EXAMINATION OF THE COMPANY AND THE
TERMS OF THIS OFFERING IN EVALUATING THE MERITS AND RISKS OF THE OFFERING AND
MAKING AN INVESTMENT DECISION.
THIS PROSPECTUS SHOULD BE READ IN ITS ENTIRETY BY ANY PROSPECTIVE INVESTOR
PRIOR TO HIS OR HER INVESTMENT.
<PAGE> 2
PROSPECTUS SUMMARY
This summary is qualified in its entirety by the more detailed
information appearing elsewhere in the Prospectus.
The Company
Durwood, Inc. (the "Company") was recently incorporated under the laws
of the State of Delaware on July 12, 1996. The Company has not commenced
active business operations and is considered a development stage company.
The proposed business and purpose of the Company's formation is to engage in
the business of making and selling custom pool cues as collectors items as
well as for playing pool and billiards. The Company intends to use the
proceeds of this offering, if successful, to purchase equipment for
manufacturing custom pool cues and also wood and other raw materials for
manufacture into finished goods inventory, and for initial working capital to
begin active business operations upon completion of this offering.
The Company's mailing address and telephone number of its principal
executive offices are 4085 West 4715 South, Kearns, Utah 84118. (801) 967-
0777.
The Offering
Securities offered
200,000 Shares of Common Stock, $.001 par value ("Common Stock") of the
Company. See "Description of Securities".
Offering Price
$.50 Per Share.
Plan of Distribution
The offering will be managed by the Company and the Shares will be offered and
sold by the officers of the Company, without any discounts or other
commissions. Licensed NASD Broker-dealers may also participate and receive
commissions of up to 14% of the offering price on sales made by them.
Offering proceeds will be escrowed pending completion or termination of the
offering. The offering will terminate 120 days from the date hereof (or 150
days if extended by the Company for an additional 30 days), and funds held in
escrow will be promptly returned to subscribers, without interest thereon or
deduction therefrom, unless the offering is completed on or before that date
upon receipt of subscriptions for at least the minimum offering amount
($50,000). See "Plan of Distribution."
Escrow Agent
Brighton Bank, 311 South State Street, Salt Lake City, Utah 84111 will serve
as escrow agent for receipt of the proceeds from this offering.
Transfer Agent
American Registrar & Transfer Co., 10 Exchange Place, Suite 750, P.O Box 1798,
Salt Lake City, Utah 84110, (801) 363-9065, has agreed to serve as transfer
agent and registrar for the Company's outstanding securities upon completion
of the offering.
<PAGE> 3
Securities Outstanding
The Company is authorized to issue up to 50,000,000 shares of Common Stock and
presently has 1,000,000 shares of Common Stock issued and outstanding. Upon
completion of this offering, if all Shares offered herein are sold, 1,200,000
shares of Common Stock will then be issued and outstanding; 1,100,000 Shares
will be issued and outstanding if only the minimum number of Shares offered
herein are sold. In addition, the Company is authorized to issue up to
500,000 shares of Preferred Stock in one or more series with such rights and
preferences as the Board of Directors may designate. The Board of Directors
has not designated any such series and no preferred shares are presently
issued and outstanding.
Risk Factors
The Company is a start up company with no operating history; consequently, an
investment in the Company is highly speculative. Investors will suffer
substantial dilution in the book value per share of the Common Stock compared
to the purchase price. In seeking to implement its proposed business, the
Company could incur substantial losses during the development stage, and
require additional funding for which it has no commitments. Management has
other interests which may conflict with the interests of the Company. Until
such time, if ever, that the Company generates sufficient revenue to pay
management a salary, management will not be employed full time and will only
devote a minimal amount of time to the affairs of the Company. There is no
assurance that the proposed business of the Company will be successful, nor
any assurance the Company could find other business ventures in the event the
proposed business fails. There are presently no plans, commitments or
arrangement with respect to any other potential business venture. No person
should invest in the Company who cannot afford to risk loss of the entire
investment. See "Risk Factors."
<PAGE> 4
RISK FACTORS
The securities being offered hereby involve a high degree of risk.
Prospective investors should carefully consider the following risk factors
before investing in the Company.
Risks Inherent in a New Start Up Company
No Operating History. The Company was only recently incorporated, has
no significant assets, no current business operations nor any history of
operations and is considered to be a development stage enterprise. There is
absolutely no assurance that the Company will be able, upon completion of this
offering, to successfully implement its proposed business or that it will ever
operate profitably. In the event the proposed business is unsuccessful, there
is no assurance the Company could successfully become involved in any other
business venture. The Company presently has no plans, commitments or
arrangements with respect to any other potential business venture. See
"Management's Plan of Operation," "Business" and financial statements.
Limited Capital/Need for Additional Capital. The Company presently has
no significant operating capital and is totally dependent upon receipt of the
proceeds of this offering to provide the minimum capital necessary to commence
its proposed business. Upon completion of the offering, the amount of capital
available to the Company will still be extremely limited, especially if only
the minimum amount of the offering is raised. The Company has no commitments
for additional cash funding beyond the proceeds expected to be received from
this offering. In the event that the proceeds from this offering are not
sufficient, the Company may need to seek additional financing from commercial
lenders or other sources, for which it presently has no commitments or
arrangements. See "Management's Plan of Operation," "Business" and financial
statements.
Dependence Upon Sole Officer/Director; Time Conflicts. The Company will
be totally dependent in the conduct of its proposed business upon the
knowledge, skills and experience of the President of the Company; Darren
Heiselt. As compared to many other public companies, the Company does not
have a depth of managerial and technical personnel. Accordingly, there is a
greater likelihood that loss of the services of this person would have a
material adverse impact upon the Company. The Company has no employment
contract with or key man life insurance on the President. Furthermore, the
President of the Company will not be employed full time, at least initially,
and has other employment which could give rise to conflicts of interest with
respect to the business of and amount of time devoted to the Company. There
is no assurance such conflicts will be resolved favorably to the Company. See
"Certain Transactions - Conflicts of Interest".
Other Conflicts of Interest. The Company will be dependent initially
upon the availability of office and workshop facilities provided by a
shareholder and tools, supplies and machine equipment provided by its
President for the ability to conduct its proposed business. There is no
assurance that such facilities and equipment will continue to be available for
any specified length of time. The arrangements under which these facilities
and equipment are made available to the Company are determined by the
President and shareholder and are not the result of arms length negotiation.
Management intends that these and any other transactions with affiliates be
entered into on a fair and reasonable basis to the Company on terms no less
favorable than could be obtained from unaffiliated parties; however, due to
the non arms length nature of such transactions, there is no assurance of
this. See "Certain Transactions."
No Dividends. The Company does not currently intend to pay cash
dividends on its Common Stock and does not anticipate paying such dividends at
<PAGE> 5
any time in the foreseeable future. At present, the Company will follow a
policy of retaining all of its earnings, if any, to finance development and
expansion of its business. See "Dividend Policy."
Limited Liability of Management. The Company has adopted provisions to
its Articles of Incorporation and Bylaws which limit the liability of Officers
and Directors and provides for indemnification by the Company of Officers and
Directors to the full extent permitted by Delaware law, which provides that
officers and directors shall have no personal liability to a Company or its
stockholders for monetary damages for breach of fiduciary duties as directors,
except for a breach of their duty of loyalty, acts or omissions not in good
faith or which involve intentional misconduct or knowing violation of law,
unlawful payment of dividends or unlawful stock purchases or redemptions, or
any transaction from which a director derives an improper personal benefit.
Such provisions substantially limit the shareholders' ability to hold officers
and directors liable for breaches of fiduciary duty, and may require the
Company to indemnify its officers and directors. See "Certain Transactions -
Conflicts of Interest".
Risks Related to the Nature of the Proposed Business
Limited Experience of Management and Lack of Established Reputation.
Although the President of the Company has developed some limited knowledge,
skills and experience as a cuemaker, neither he nor the Company are well known
or have established any significant reputation or prominence, and there is no
assurance the Company will be able to produce cues of sufficient quality to be
sought after custom pool cues in demand as collectors items or for playing.
See "Business" and "Management."
Competitive, Specialized Market/Limited Supply & Demand. The Company
will operate in a highly competitive environment. The market for handmade,
custom pool cues of collectible quality is very specialized and limited and is
composed of a very small number of private collectors, players and other
buyers. See "Business - Competition and Markets".
Risks of Loss from Damage, Theft, Etc. The cues most highly sought
after as collectors' items can become extremely valuable, which creates a
significant need for security precautions to reduce the risk of theft or other
loss. The Company will be dependent upon its President to maintain security,
insurance and provide handling for its cues, but there is no assurance any
measures taken will be adequate to prevent loss. See "Business."
Risks Related to the Offering
Lack of Underwriter Participation. Because the Company has not engaged
the services of an Underwriter with respect to this offering, the independent
due diligence review of the Company, its affairs and financial condition,
which would ordinarily be performed by an underwriter and its legal counsel,
has not been performed with respect to the Company and investors will not have
the benefit of an underwriter's independent due diligence review.
Dilution. Investors in this offering will suffer substantial dilution
in the purchase price of the Shares compared to the net tangible book value
per share immediately after the offering. See "Dilution."
Purchases by Affiliates. Current shareholders, which includes all
promoters and affiliates of the Company, may purchase Shares in the Offering
and no limits have been imposed in this regard, but no one, including such
affiliates, has made any commitment, nor indicated they intend, to do so.
Purchases by affiliates, if any, may include purchases made in order to reach
the minimum offering amount, thereby enabling the offering to close
notwithstanding the fact that all the Shares would not be sold to unaffiliated
<PAGE> 6
purchasers. Any Shares purchased by affiliates would be subject to certain
restrictions on resale.
Best Efforts Offering/No Firm Commitment. The Shares are offered by the
Company on a "best efforts, minimum-maximum basis"; there is no underwriter
and no firm commitment from anyone to purchase all or any of the Shares
offered. No assurance can be given that all or any of the Shares will be
sold. However, escrow provisions have been made to insure that if
subscriptions for a minimum of 100,000 Shares are not received within the
offering period, plus any extensions, all funds received will be promptly
refunded within 5 days to subscribers, without interest thereon or deduction
therefrom. During the offering period, which could last up to 150 days,
subscribers will receive no interest on their funds nor have any use or right
to return of the funds. See "Plan of Distribution".
Benefits to Present Stockholders/Disproportionate Risks. The 1,000,000
shares of the Company's presently outstanding Common Stock are owned by the
President and founders of the Company, for which they paid $10,000 cash. If
all Shares offered are sold, immediately after completion of the offering,
present stockholders will own 80% of the then outstanding Common Stock, and
investors in this offering will own the other 20%, for which they will have
paid $100,000 cash. If only the minimum number of Shares offered is sold,
present stockholders will own 89% of the then outstanding Common Stock, and
investors in this offering will own the other 11%, for which they will have
paid $50,000 cash. Thus, investors in this offering will contribute to
capital of the Company disproportionately more than the percentage of
ownership they receive. Present stockholders will benefit from a greater
share of the Company if successful, while investors in this offering risk a
greater loss of cash invested if the Company is not successful. See
"Comparative Data."
Continuation of Management Control. Upon completion of this offering,
present shareholders, which includes current management of the Company, will
own a majority of the total outstanding securities and will have absolute
control of the Company. Investors in this offering as a group will have no
ability to remove, control or direct such management. Only one third of the
outstanding shares is required to constitute a quorum at any stockholders'
meeting, and action may be taken by a majority of the voting power present at
a meeting, or may be taken without a meeting by written consent of
stockholders holding a majority of the total voting power. See "Principal
Stockholders" and "Description of Securities."
Arbitrary Determination of Offering Price. The public offering price of
the Shares of Common Stock offered hereby was arbitrarily determined by
management of the Company and was set at a level substantially in excess of
the price recently paid by such management for securities of the same class,
namely, the presently outstanding shares of common stock. The price bears no
relationship to the Company's assets, book value, net worth or other economic
or recognized criteria of value. In no event should the public offering price
be regarded as an indicator of any future market price of the Company's
securities. See Cover Page, "Comparative Data" and "Certain Transactions".
No Assurance of a Liquid Public Market for Securities. There has been
no public market for the Shares prior to the offering made hereby. The Shares
will not be listed on an exchange or quoted on the NASDAQ system upon
completion of this offering and there can be no assurance any market will
develop for the securities or that if a market does develop, that it will
continue. There can also be no assurance as to the depth or liquidity of any
market for Common Stock or the prices at which holders may be able to sell the
securities. As a result, an investment in the Shares may be totally illiquid
and investors may not be able to liquidate their investment readily or at all
when they need or desire to sell. See "Plan of Distribution."
<PAGE> 7
Volatility of Stock Prices. In the event a public market does develop
for the Shares, market prices will be influenced by many factors, and will be
subject to significant fluctuation in response to variations in operating
results of the Company and other factors such as investor perceptions of the
Company, supply and demand, interest rates, general economic conditions and
those specific to the industry, international political conditions,
developments with regard to the Company's activities, future financial
condition and management.
Shares Eligible for Future Sale. All of the shares of Common Stock
presently outstanding are restricted securities which are not presently, but
may in the future be sold, pursuant to Rule 144, into any public market that
may develop for the Common Stock. Future sales by current shareholders could
depress the market prices of the Common Stock in any such market. See "Shares
Eligible for Future Sale".
Potential Issuance of Additional Common and Preferred Stock. The
Company is authorized to issue up to 50,000,000 shares of Common Stock, of
which only 1,200,000 shares at most will be issued and outstanding upon
completion of this offering. To the extent of such authorization, the Board
of Directors of the Company will have the ability, without seeking shareholder
approval, to issue additional shares of Common Stock in the future for such
consideration as the Board of Directors may consider sufficient. The issuance
of additional Common Stock in the future will reduce the proportionate
ownership and voting power of the Common Stock offered hereby. The Company is
also authorized to issue up to 500,000 shares of preferred stock, the rights
and preferences of which may be designated in series by the Board of
Directors. To the extent of such authorization, such designations may be made
without shareholder approval. The Board of Directors has not designated any
series or issued any shares of preferred stock. The designation and issuance
of series of preferred stock in the future would create additional securities
which would have dividend and liquidation preferences over the Common Stock
offered hereby. See "Description of Securities."
Potential Anti-Takeover Measures. Certain provisions in the articles of
incorporation or bylaws of the Company, such as the authorization to issue
additional common or preferred stock and designate the rights and preferences
of the preferred stock without further approval of shareholders, could be used
as anti-takeover measures. Though not adopted specifically for such purpose,
provisions such as these could result in the Company being less attractive to
anyone who might consider a takeover attempt, and result in shareholders
receiving less than they otherwise might in the event of a takeover attempt.
Applicability of Penny Stock Risk Disclosure Requirements. The
securities of the Company will be considered a "penny stock" as that term is
defined in rules promulgated under the Exchange Act. Under these rules,
broker-dealers participating in transactions in penny stocks must first
deliver a Schedule 15G risk disclosure document which describes the risks
associated with penny stocks, the broker-dealer's duties, the customer's
rights and remedies, and certain market and other information, and make a
suitability determination approving the customer for penny stock transactions
based on the customer's financial situation, investment experience and
objectives. Broker-dealers must also disclose these restrictions in writing
to the customer and obtain specific written consent of the customer, and
provide monthly account statements to the customer. With all these
restrictions, the likely effect of designation as a penny stock will be to
decrease the willingness of broker-dealers to make a market for the stock, to
decrease the liquidity of the stock and increase the transaction cost of sales
and purchases of penny stocks compared to other securities.
<PAGE> 8
DILUTION
Dilution is the difference between the public offering price of $.50 per
share for the Common Stock offered herein, and the net tangible book value per
share of the Common Stock immediately after its purchase. The Company's net
tangible book value per share is calculated by subtracting the Company's total
liabilities from its total assets less any intangible assets, and then
dividing by the number of shares then outstanding.
The net tangible book value of the Company prior to the offering, based
on the July 31, 1996 financial statements, was $10,000 or $.01 per common
share. Prior to selling any shares in this offering, the Company has
1,000,000 shares of Common Stock outstanding.
If all Shares offered herein are sold, the Company will have 1,200,000
Shares outstanding upon completion of the offering. The estimated post
offering pro forma net tangible book value of the Company, which gives effect
to receipt of the estimated net proceeds from the offering and issuance of the
additional Shares of Common Stock in the offering, but does not take into
consideration any other changes in the net tangible book value of the Company
after July 31, 1996, will be $84,000 or approximately $.07 per share. This
would result in dilution to investors in this offering of $.43 per share, or
86% of the public offering price of $.50 per share. Net tangible book value
per share would increase to the benefit of present stockholders from $.01
prior to the offering to $.07 after the offering, or an increase of $.06 per
share attributable to the purchase of the Shares by investors in this
offering.
If only the minimum number of Shares is sold, the Company will have
1,100,000 Shares outstanding upon completion of the offering. The post
offering pro forma net tangible book value of the Company, would be $41,000 or
approximately $.037 per share. This would result in dilution to investors in
this offering of $.463 per share, or 92.6% from the public offering price of
$.50 per share. Net tangible book value per share would increase to the
benefit of present stockholders from $.01 prior to the offering to $.037 after
the offering, or an increase of $.027 per share attributable to the purchase
of the Shares by investors in this offering.
The following table sets forth the estimated net tangible book value
("NTBV") per share after the offering and the dilution to persons purchasing
Shares based on the foregoing minimum and maximum offering assumptions.
Minimum Maximum
Public offering price/share $.50 $.50
NTBV/share prior to offering $.01 $.01
Increase attributable to new investors .027 .06
----- -----
Post offering pro forma NTBV/share .037 .07
---- ----
Dilution $.463 $.43
COMPARATIVE DATA
The following charts illustrate the pro forma proportionate ownership in
the Company, upon completion of the offering under alternative minimum and
maximum offering assumptions, of present stockholders and of investors in this
offering, compared to the relative amounts paid and contributed to capital of
the Company by present stockholders and by investors in this offering,
<PAGE> 9
assuming no changes in net tangible book value other than those resulting from
the offering.
MINIMUM OFFERING Shares Owned Percent Cash Paid Percent Per share
Present Shareholders 1,000,000 91% $ 10,000 17% $0.01
New Investors 100,000 9% $ 50,000 83% $0.50
MAXIMUM OFFERING Shares Owned Percent Cash Paid Percent Per share
Present Shareholders 1,000,000 83% $ 10,000 9% $0.01
New Investors 200,000 17% $100,000 91% $0.50
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 200,000 Shares
offered hereby at a public offering price of $.50 per Share will vary
depending upon the total number of Shares sold and the amount of any
commissions paid to licensed NASD broker-dealers in connection with such
sales. (Licensed NASD Broker-dealers may participate and receive commissions
of up to 14% of the offering price on sales made by them, or the Company may
pay finders fees if no commission is paid and the payment of such fees is
permissible under applicable law.) Regardless of the amount of any
commissions paid, the Company also expects to incur other offering expenses
estimated at $12,000 for legal, accounting, printing and other costs in
connection with the offering. The following table sets forth gross and net
proceeds, alternatively under the minimum and maximum offering, assuming that
commissions are paid with respect to all sales, and management's present
estimate of the allocation and prioritization of net proceeds expected to be
received from this offering. Actual receipts and expenditures may vary from
these estimates. Pending use, the Company will invest the net proceeds in
investment-grade, short-term, interest bearing securities.
Minimum Offering Maximum Offering
Gross Proceeds $ 50,000 $100,000
Commissions (1) 7,000 14,000
Other Offering Expenses (2) 12,000 12,000
NET OFFERING PROCEEDS $ 31,000 $ 74,000
Acquisition of Equipment and Inventory (3) $ 9,000 $ 12,000
Marketing and Travel (4) 10,000 15,000
Initial Operating Expenses & Working Capital (5) 12,000 47,000
TOTAL $ 31,000 $ 74,000
(1) The foregoing amount assumes payment of sales commissions with respect
to all Shares sold. The Company will pay a commission of up to 14% of
the offering price to any licensed NASD Broker-dealers who participate
in the offering, but only with respect to sales made by them. To the
extent that sales are made by the officers of the Company without the
payment of any sales commission or discount, the amount allocated above
<PAGE> 10
for the payment of commissions will be reallocated and used as
additional working capital.
(2) Regardless of the number of Shares sold in the offering and the amount
of any commissions paid, the Company will incur other offering expenses
for legal and accounting fees and costs, printing and transfer agent
costs, filing fees, etc.
(3) This is the approximate amount of net proceeds of the offering which
management estimates will be used to acquire various items of equipment
necessary to manufacture the pool cues, including inlay machines, cue
smiths, cutting bits, spindle bores and chucks, drill presses, belt
sander, scroll saw, work benches, etc., as well as make initial
purchases of a supply of wood and other raw materials with which to
manufacture the cues.
(4) This represents the approximate amount management estimates it will
expend during the initial start up period (approximately one year) for
advertising in such magazines as Billard News and Billiard Digest and
for traveling to shows, conventions and other gatherings of pool players
and pool cue makers and collectors where the Company's cues can be
displayed or advertised to become more well known.
(5) The Company intends to use the remaining portion of the net proceeds to
cover rent and other operating expenses and provide working capital
during the initial start up of operations.
MANAGEMENT'S PLAN OF OPERATION
The following discussion should be read in conjunction with the
Company's consolidated financial statements and the notes associated with them
contained elsewhere in this prospectus.
Plan of Operations.
The Company was only recently incorporated on July 12, 1996. The
Company has not commenced planned principal operations and is considered a
development stage company. The Company has no significant assets, no active
business operations nor any results therefrom. To date, activities have been
limited to organizational matters and the preparation and filing of the
registration statement of which this prospectus is a part.
Management's plan of operation for the next twelve months is first to
raise funds from this offering, and if the offering is successful, to commence
operations. The Company will use the net proceeds to purchase various items
of equipment needed to turn out and finish the custom pool cues, as well as
initial supplies of wood and other raw materials from which to make the cues.
The remaining portion of the proceeds will be used to pay rent and other
operating expenses of the Company and otherwise provide initial working
capital for the operation of the Company's proposed business. The net
proceeds from this offering are the sole anticipated source of funds other
than any revenues generated from operations, of which there is no assurance,
and the Company is totally dependent upon the successful completion of this
offering and receipt of the proceeds therefrom, of which there is also no
assurance, for the ability to commence its intended business operations. The
Company was formed to engage in the business of manufacturing or otherwise
acquiring custom pool cues of collectible quality, as well as quality custom
pool cues for pool and billiards players. The Company intends to market such
pool cues to private collectors and the general public. The Company has not
engaged in any operations nor conducted any research and development
activities to date, but will use the knowledge, skills and experience of its
President, who has been making custom pool cues for the past several years, to
<PAGE> 11
attempt to produce high quality custom pool cues and market them to pool and
billiards players, collectors and investors. Although the President has
produced and sold approximately twenty handmade, custom pool cues in the past,
the Company has not produced or sold any products yet, and there is absolutely
no assurance that the proposed business will succeed and that the Company will
be able, with the proceeds of this offering, to make and acquire custom pool
cues of the type that will be considered collectible or that pool and
billiards players desire to acquire. In the event the proposed business is
unsuccessful, there is no assurance the Company could successfully become
involved in any other business venture. The Company presently has no plans,
commitments or arrangements with respect to any other proposed business
venture.
However, upon completion of this offering, if successful, the Company's
plan of operation for the next 12 months is to use approximately $5,000 of the
net proceeds from the offering to acquire various items of equipment necessary
to manufacture the pool cues, including inlay machines, cue smiths, cutting
bits, spindle bores and chucks, drill presses, belt sander, scroll saw, work
benches, etc. This is in addition to the tools, supplies and machine
equipment already owned by the President, which will be made available to the
Company. The President believes, but there is no assurance, that acquisition
of the additional equipment which the Company intends to purchase using
proceeds of this offering, will enable him to significantly increase the
number of cues in process that he can work on at the same time, and thus
substantially increase the number of cues he can produce within a given period
of time, while at the same time also improving the quality of the finished
product. Also, the President believes, but there is no assurance, that he
would be able to increase both the amount and intricacy of both the woodwork
and inlay work to produce custom cues in higher price ranges, where profit
margins would typically (but not necessarily) be greater. It is presently
anticipated that the Company will begin producing custom cues that will sell
for a few hundred dollars, but as the knowledge, skills and experience of the
President increases over time, it is hoped that the Company will be able to
attract as buyers of its products persons interested in spending several
hundred or even more than a thousand dollars for a high quality, custom
cuestick. The difference in price of cuesticks relates primarily to the
amount and intricacy of the inlay work and woodwork, as well as the materials
used and the quality of construction. The Company also intends to use at
least approximately $4,000 of net proceeds from the offering, and more if more
than the minimum offering amount is raised, to purchase supplies of wood and
other raw materials inventory to use in the production of finished cues. In
addition, the Company has allocated between $10-15,000 of the proceeds of the
offering for marketing costs. It is presently anticipated that this money
will be expended for advertising in such magazines as Billard News and
Billiard Digest and for traveling to shows, conventions and other gatherings
of pool players and pool cue makers and collectors where the Company's cues
can be displayed or advertised to become more well known. The President's
reputation as a cuemaker is not well known outsided the patrons of the
billiards establishment where he works and the Company will be operating in a
highly competitive industry that is very specialized and limited. Many, if
not most of the Company's competitors have substantially greater financial
resources, technical expertise, management resources and capabilities than the
Company.
Management intends to commence operations as soon as possible after the
offering is completed and the proceeds therefrom received by the Company. At
this time, no assurances can be given with respect to the exact timing of
commencement of operations or the length of time after commencement that it
will be necessary to fund operations from proceeds of this offering.
Management believes that the proceeds of this offering will be sufficient to
cover the operating expenses of the Company for six months to a year after
commencement of operations, during which time managment is hopeful that the
<PAGE> 12
company will begin generating sufficient revenues from sales and operations to
thereafter cover ongoing expenses. However, there is absolutely no assurance
of this, especially if only the minimum amount of the offering is raised, and
if the Company is unable to generate sufficient revenues from operations to
cover expenses within such time frame, it may have to seek additional debt or
equity financing for which it has no commitments. In the event such funding
is not available on acceptable terms, the Company may have to reduce
operations.
BUSINESS
History of the Company
Durwood, Inc. (the "Company") was recently incorporated under the laws
of the State of Delaware on July 12, 1996. The Company has not commenced
business operations and is considered a development stage company. To date,
activities have been limited to organizational matters and the preparation and
filing of the registration statement of which this prospectus is a part. In
connection with the organization of the Company, the President and founders of
the Company contributed $10,000 cash to initially capitalize the Company in
exchange for 1,000,000 shares of Common Stock. The Company has no significant
assets, and is totally dependent upon the successful completion of this
offering and receipt of the proceeds therefrom, of which there is no
assurance, for the ability to commence its proposed business operations.
Proposed Business of the Company
The proposed business and purpose of the Company's formation is to
engage in the business of manufacturing or otherwise acquiring and marketing
custom pool cues. The Company's business plan is to take advantage of what
management believes is an escalating market in the cue-as-art industry, as
well as build quality custom pool cues for pool and billiards players. There
is no assurance that the proposed business of the Company will be successful,
and the Company presently has no plans, commitments or arrangements with
respect to any other potential business venture.
The President of the Company, Darren Heiselt, who will have operational
and production management of the Company, has been making custom pool cues for
the past several years. Mr. Heiselt has been employed since 1991 at EO's
Society Billiards and Cafe, first as Assistant Manager and currently as
Manager. During and prior to that time, because of his interest in the game,
he has developed as a sideline custom cuemaking and has acquired certain
knowledge, skills and experience related to cuemaking, which includes having
produced and sold approximately twenty handmade, custom pool cues for prices
ranging from approximately $300 up to $1,100. Mr. Heiselt's cuemaking skills
have developed to the point that he has an existing backlog of approximately
18 orders for handmade custom pool cues which, at current rates of production,
would take him in excess of six months to fill. Mr. Heiselt believes that
acquisition of the additional equipment which the Company intends to purchase
using proceeds of this offering, will enable him to significantly increase the
number of cues in process that he can work on at the same time, and thus
substantially increase the number of cues he can produce within a given period
of time, while at the same time also improving the quality of the finished
product. Also, he would be able to increase both the amount and intricacy of
both the woodwork and inlay work to produce custom cues in higher price
ranges, where profit margins would typically (but not necessarily) be greater.
(Different cues made by the same person will most likely have the same hit and
quality of construction, but the difference between a $300 cue and a $3,000
cue might be rarer or more exotic woods, more inlays, more intricate inlays
and more exotic materials.)
Mr. Heiselt will continue to be employed at EO's Society Billiards and
<PAGE> 13
Cafe, and the Company will rent space at that location where Mr. Heiselt can
keep the equipment and materials to set up shop. This arrangement is intended
to make it more convenient for him to be able to devote several (approximately
8-20) hours per week of spare time to the production of cues. In addition to
facilitating Mr. Heiselt's ability to devote time to the business of the
Company, it is believed that this arrangement will enable his work and work
product to be on display in a setting frequented by pool and billiard's
players and others potentially interested in buying and collecting custom pool
cues.
Historical Background of Billiards, Cuemaking and the Cue Art Industry
The various forms of the basic game of billiards are of unknown origin,
but the game billiards is known to have been played as early as the
16th-century in England. The word billiards is derived from the Old French
billart, meaning "curved stick." All billiards games are played on a
rectangular, slate-topped table twice as long as it is wide and covered with a
felt cloth. The playing area is surrounded by rubber cushions, or rails. Two
basic types of billiards exist today: pocket billiards, which is also called
pool, is played on a table with six pockets, and carom billiards, is usually
played on a table with no pockets. The game of pocket billiards, or pool, is
played with a white cue ball, and in the form played in the United States, 15
object balls numbered 1-15 (1-8, solid; 9-15, striped). Pocket billiards also
requires the use of cue sticks, and as such, is the form of the game of
billiards that has given rise to an industry centered around the making of
finely crafted, custom cue sticks or pool cues.
The cue stick developed from the common habit of using the thin shaft of
the Mace (a curved mallet evidently borrowed from the lawn games from which
billiards developed) to strike the balls lying near the cushion. It evolved
as a separate instrument during the period from 1680 to 1780. Today, the cue
stick is a straight, tapered instrument used for striking the cue ball, which
is usually made principally of wood and is approximately 57 inches long. Cue
sticks have been made of a wide variety of woods including Ash, Maple,
Cocobolo, and other materials such as aluminum and graphite. The principal
parts of a modern day cuestick consist of the tip, the ferrule, the shaft, the
joint and the butt or handle.
The tip was unknown in the eighteenth century and, for this reason, only
good players were allowed to use the cue out of fear that lesser players would
tear the cloth. The first tip was cut out of a leather harness, and is said
to have been invented sometime between 1807 and 1823. The tip is a rounded
patch of material, usually leather, affixed to the narrow end of a cue stick.
The tip is needed to prevent the cue from slopping off the ball as it is being
struck. It increases the friction between the two surfaces and, because it is
compressible, increases the amount of time the stick and the ball are in
contact, which permits more English, or spin, to be applied to the ball.
Application of chalk further increases the friction.
The ferrule is the segment of a cue stick below the tip, fastened to the
shaft on a projection known as the tennon. The ferrule forms a flat base for
attaching the tip and prevents the shaft from splintering. The shaft is the
thinner section of a cue stick extending from the joint to the tip, away from
the butt end. The shaft is generally made from Maple.
The joint is the fitting at which a two piece cue or jointed cue can be
broken down. (The piece that joins the butt and the shaft.) The jointed cue
or two piece cue appeared in 1829 and became popular in the late nineteenth
century for convenience in carrying and storage. Joints may be "piloted" or
"flat faced," referring to the manner in which the butt and the shaft are
placed in contact. A flat joint is formed by mounting a screw in the butt
end, leaving exposed wood surrounding the screw so that wood meets wood when
<PAGE> 14
the cue is screwed together. A piloted joint is one in which a metal fitting
is inserted into the shaft and a screw protrudes from the butt and in which
metal meets metal when the cue is assembled for play.
In addition to the woods previously mentioned, butts are often made
using Walnut, Ebony or Rosewood. The butt of a cue is often spliced because
it is not desireable to make a cue out of a single type of wood. A cue made
entirely of Maple (a good shaft material) would be too light, one made
entirely of Rosewood or Ebony would be too heavy. The splice is made by
fitting together two positions composed of long, thin triangles known as
points or prongs. A wrap is sometimes placed on a cue, it is a covering for
that portion of the butt of a cue stick that is grasped by the player. The
function of the wrap is to improve the players hold on the cue and, in the
case of cloth and cork wraps, to absorb perspiration.
The question whether metal-to-metal or wood-to-wood joint is superior is
not yet settled. Debate also rages over such things as whether or not the
prongs at the butt play a role in shock absorption, whether a cue with a
flexible shaft or a stiff shaft is preferable, and so forth.
The popularity and longevity of the game has resulted in an interest
among aficionados of the game in buying, selling, and collecting custom pool
cues that are finely crafted, not only in the sense of their playability, or
suitability for playing the game, but also in the sense of being intricately
and ornately handcrafted, highly decorative art objects that collectors are
holding for investment. An immense amount of creativity goes into decorating
cues with complex inlays of wood, Ivory, or mother-of-pearl. Inlays are a
method of decorating the butt of a cue stick by setting material into a groove
cut in the wood.
According to an article in the Wall Street Journal dated January 3,
1996, for about a decade now, the cue-as-art market for custom pool cues has
been escalating. According to the article, ornately crafted pool cues
painstakingly turned out by a small clique of American artisans are taking the
symbol of the billiard hustler to new levels. Indeed, the article itself was
occasioned by, and highlighted a convention or gathering held the preceding
month at the Biltmore Hotel in Los Angeles, which was billed as the Showcase
of American Cue Art, and reportedly had the largest group of collectible art
cues ever assembled and presented to the public in one place at one time.
In addition to the traditional interest of pool and billiards players,
collectors whose primary interest is investment are now taking an interest in
high quality, custom pool cues, according to the article. It is not unusual
to find a cue that is more expensive than the table on which it is being used.
Custom cues now begin at prices ranging from around $300 to $500; collectors
have forced the price of cues made by the finest cue-makers to over $3000. A
surprising number of cues have sold for just under $10,000 in the United
States, and there are stories of cues with inlaid jewels and precious metals
that have sold in the Orient for five times that amount. Yet it is precisely
because custom pool cues - some intricately adorned with inlays of ivory,
gold, and even gemstones - have become so artistic and such hot investments
that customers are reluctant to bang up their sticks by actually playing with
them.
There is also much lore associated with cue manufacture; sticks from
certain makers such as Herman Rambow and George Balabushka are of legendary
quality and price. Cuemakers can spend hours, days, or weeks producing a
single cue as they combine handicraft with high tech. A cue maker carefully
chooses and seasons different types of exotic woods, before tapering and
sanding down on a lathe. Industrial sized jigsaws are used to carve out inlay
pieces from dyed wood, ivory and shell. The pieces are, in turn, inlaid by
hand and then buffed and varnished. There is always interest in cues made by
<PAGE> 15
such famed craftsmen as Rambow, Balabushka, Martin, Bill Stroud, and Szamboti.
These instruments are felt to have properties such as the hit or feel of the
stick as it strokes the ball, and quality of construction, that are not
readily duplicated.
The President of the Company, Mr. Heiselt, is not well known as a
cuemaker outside the patrons of the billiards establishment where he works,
and his reputation is not well established; therefore, it is not anticipated
that the custom pool cues to be sold by the Company will have any intrinsic
value or worth from the fact that they will be made by Mr. Heiselt. Rather,
it is anticipated that the value of the pool cues will depend on the perceived
quality of construction and playability, as well as the types of woods and
other materials used and the amount and intricacy of the inlay work and
woodwork done. Using the knowledge, skills and experience of its President,
the Company will attempt to produce and sell handmade, custom cuesticks or
pool cues that will be in demand for playing because of their quality, and
also for their artistic value because of the amount and intricacy of the inlay
work and woodwork. The President believes that with the funding provided by
this offering, the Company will be able to acquire additional equipment and
tools that will enable him to produce more cues of higher quality and value,
to take advantage of what is believed to be a developing market for such
cuesticks. However, there is absolutely no assurance that the Company will be
successful in this effort and will be able to compete with other, more well
known cuemakers.
Competition
The Company will operate in a highly competitive environment. Many, if
not most competitors have substantially greater financial resources, technical
expertise, management resources and capabilities than the Company. Major
competitors known to management of the Company include Joss Cues, Ltd.,
McDermott Cue Manufacturing, Inc., Viking Cue Manufacturing, Inc., Heubler
Industries, Inc., Karella Corp., Dufferin, Inc., Mali & Co., Inc., Meucci
Originals and Cuetec. The market for custom pool cues of collectible quality
is very specialized and limited and is composed of a relatively small number
of cuemakers, private collectors, pool players, and other buyers. There is no
assurance the Company will be able to produce custom pool cues of sufficient
quality to be of interest to private collectors, pool and billiards players or
the general public.
Advertising and Marketing Strategy
The Company will attempt to create a high end line of cues that will be
advertised in selected billiards publications (Billiards Digest, Billiard
Exchange, Breaking News). The Company will also mail flyers to numerous
billiard rooms and billiard accessory retailers in an attempt to market its
products. Also, the Company's workshop and production facilities will be
located in a pool and billiards establishment where the finished pool cues and
also the work in process will be on display among the patrons of such
establishment, which averages in excess of a hundred customers per day.
Management believes this ongoing exposure to pool and billiards players will
generate interest among the patrons of this establishment in the Company's
products and business, and that they will become potential customers.
Physical Facilities and Employees
The Company presently has no office facilities but upon completion of
the offering will rent space on a month to month basis for $500 per month at
EO's Society Billiards and Cafe in Kearns, Utah, where Mr. Darren Heiselt, the
Company's President, is presently employed. The Company will use these
facilities as its principal place of business for the time being, and does not
intend to seek other office arrangements unless and until the Company's
<PAGE> 16
business requires more extensive facilities, which is not anticipated in the
foreseeable future. The Company presently has no employees, and does not
presently anticipate the need to hire employees (other than Mr. Heiselt) upon
completion of the offering. It is presently anticipated that Mr. Heiselt will
initially work for the Company on a commission or piecework basis, under which
he will receive a set amount or percentage of the sales price of each custom
pool cue produced and sold, but will not receive a regular salary or wage.
MANAGEMENT
Executive Officers, Directors and Significant Employees
The following table sets forth the directors and executive officers of
the Company, their ages, term served and all offices and positions with the
Company. A director is elected for a period of one year and thereafter serves
until his or her successor is duly elected by the stockholders and qualifies.
Officers and other employees serve at the will of the Board of Directors.
Name of Director Age Term Served Positions with Company
Darren Heiselt 30 Since inception President, & Secretary/Treasurer
This individual will serve as management of the Company. A brief
description of his background and business experience is as follows:
Darren Heiselt will serve as President, Secretary/Treasurer and Director
of the Company. Mr. Heiselt attended Kearns High School from which he
graduated in 1983. Following graduation, he worked for various contractors in
the construction industry becoming a supervising Foreman for Jacobsen
Construction Company, (a Salt Lake City based contractor), from 1985 to 1987.
From 1988 to 1991 Mr. Heiselt worked for Gregory & Cook as a supervisory
Foreman. Beginning in 1991 to the present Mr. Heiselt has worked for Maxim
Management Corp. as Assistant Manager and now Manager for EO's Society
Billiards and Cafe, where he has assisted in putting on clinics and
tournaments, and arranging special events for the company, including booking
top name players to appear at EO's (former world champions Buddy Hall and
Grady Mathews). In 1992 Mr. Heiselt created his own pro shop where he did cue
repair and manufacture of custom cues. Due to his involvement in the billiard
industry, Mr. Heiselt was exposed to numerous cuemakers where he learned the
art of the trade, and began to develop his own designs. Mr. Heiselt was one
of the first to offer these services in Salt Lake City. He has been invited
to set up on a temporary basis to do cue repair at regional tournaments, which
has helped establish his name and reputation in the intermountain area.
The director holds no directorships in any other companies subject to
the reporting requirements of the Securities Exchange Act of 1934.
Executive Compensation
The Company was only recently incorporated, has not yet commenced
planned operations and has not paid any compensation to its executive officer
or director to date.
Proposed Compensation. Upon the completion of the offering, the sole
officer/director will be entitled to reimbursement of any out of pocket
expenses reasonably and actually incurred on behalf of the Company.
Initially, it is anticipated that the officer will only devote a portion of
his time to the affairs of the Company. He will not be employed full time and
will not receive a regular salary or wage for his time, unless and until the
Company's business operations develop to the point where a full time or other
extensive time commitment is required. In lieu thereof, Mr. Heiselt will
initially work for the Company on a commission or piecework basis, under which
<PAGE> 17
he will receive a set amount or percentage of the sales price of each custom
pool cue produced and sold. The Company presently has no formal written
employment agreements or other arrangements or understandings with the officer
regarding the commitment of time or the payment of salaries or other
compensation, and there is no assurance that the presently contemplated
arrangements will continue for any specified length of time in the future, nor
any assurance with respect to the continued availability to the Company of Mr.
Heiselt's services. However, Mr. Heiselt presently is prepared to devote such
time as may be necessary to the development of the Company's business,
including full time, if that becomes necessary.
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information with respect to the
beneficial ownership of the Company's common stock with respect to each
director of the Company, each person known to the Company to be the beneficial
owner of more than five percent (5%) of said securities, and all directors and
executive officers of the Company as a group:
Title Amount and Nature of Percent % After
Name and Address of Class Beneficial Ownership of Class Offering
Darren Heiselt Common 200,000 shares 20% 16.7%
4871 S. 4055 W.
Kearns, UT 84118
Cowbell, Inc. Common 400,000 shares 40% 33.3%
1173 A 2nd Ave.
N.Y., N.Y. 10021
Elvena, Inc. Common 400,000 shares 40% 33.3%
666 Fith Ave. #159
N.Y., N.Y. 10103
All officers and directors Common 200,000 shares 20% 16.7%
as a group (1 person)
Prior to the sale of any Shares in this offering, these are the only
shareholders of the Company. Cowbell, Inc. and Elvena, Inc. are private
investment corporations solely owned by Eslie Barlow and Lynn Dixon,
respectively, who may be deemed to be promoters with respect to the Company.
See "Certain Transactions."
CERTAIN TRANSACTIONS
In connection with the organization of the Company, its founding
shareholders paid an aggregate of $10,000 cash to purchase 1,000,000 shares of
Common Stock of the Company at a price of $.01 per share. See "Principal
Shareholders."
It is contemplated that the Company may enter into certain transactions
with officers, directors or affiliates of the Company which, even though they
may involve conflicts of interest in that they are not arms' length
transactions, are believed to be fair and equitable transactions in the best
interest of the Company. The Company's policy is that all transactions
between the Company and any affiliates be on terms no less favorable to the
Company than could be obtained from unaffiliated parties. These transactions
include the following:
The Company presently has no office facilities but upon completion of
the offering the Company will use as its principal place of business certain
facilities located at the address of the Company as set forth herein. This is
<PAGE> 18
also the business address of EO's Society Billiards and Cafe, a pool and
billiards establishment owned and operated by Maxim Management Corp., an
entity with which Mr. Eslie Barlow, a principal shareholder of the Company, is
affiliated, as President. Darren Heiselt, the President of the Company, is
presently employed there and will also provide certain equipment used in the
making of pool cues. These facilities will be available to the Company for
the time being, until such time as the business operations of the Company may
require more extensive facilities and the Company has the financial ability to
pay for more extensive facilities. It is presently contemplated that the
Company will be charged $500 per month for the use of such facilities,
including phone and other utilities, on a month to month basis. There is
presently no formal written agreement for the use of such facilities, and no
assurance that such facilities will be available to the Company on such a
basis for any specific length of time. Mr. Heiselt anticipates initially
devoting up to approximately 20% of his time to the affairs of the Company.
If and when the business operations of the Company increase and a more
extensive time commitment is needed, Mr. Heiselt is prepared to devote more
time to the Company, in the event that becomes necessary.
The Company has no formal written employment agreement or other
contracts with its President, and there is no assurance that the services and
facilities to be provided by Mr. Heiselt will be available for any specific
length of time in the future. The amounts of compensation and other terms of
any full time employment arrangements with Mr. Heiselt would be determined if
and when such arrangements become necessary.
Conflicts of Interest
Other than as described herein the Company is not expected to have
significant further dealings with affiliates. However, if there are such
dealings the parties will attempt to deal on terms competitive in the market
and on the same terms that either party would deal with an unrelated third
person. Presently no officer or director of the Company has any transactions
which they contemplate entering into with the Company, nor has the Company any
transactions which it contemplates entering into with any affiliates, aside
from the matters described herein.
Management will attempt to resolve any conflicts of interest that may
arise in favor of the Company. Failure to do so could result in fiduciary
liability to management.
Indemnification and Limitation of Liability of Management
The General Corporation Law of Delaware permits provisions in the
articles, by-laws or resolutions approved by shareholders which limit
liability of directors for breach of fiduciary duty to certain specified
circumstances, namely, breaches of their duties of loyalty, acts or omissions
not in good faith or which involve intentional misconduct or knowing violation
of law, acts involving unlawful payment of dividends or unlawful stock
purchases or redemptions, or any transaction from which a director derives an
improper personal benefit. The Company's by-laws indemnify its Officers and
Directors to the full extent permitted by Delaware law. The by-laws with
these exceptions eliminate any personal liability of a Director to the Company
or its shareholders for monetary damages for the breach of a Director's
fiduciary duty and therefore a Director cannot be held liable for damages to
the Company or its shareholders for gross negligence or lack of due care in
carrying out his fiduciary duties as a Director. The Company's Articles
provide for indemnification to the full extent permitted under law which
includes all liability, damages and costs or expenses arising from or in
connection with service for, employment by, or other affiliation with the
Company to the maximum extent and under all circumstances permitted by law.
Delaware law permits indemnification if a director or officer acts in good
<PAGE> 19
faith in a manner reasonably believed to be in, or not opposed to, the best
interests of the corporation. A director or officer must be indemnified as to
any matter in which he successfully defends himself. Indemnification is
prohibited as to any matter in which the director or officer is adjudged
liable to the corporation. Insofar as indemnification for liabilities arising
under the Securities 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.
DESCRIPTION OF SECURITIES
The following statements are qualified in their entirety by reference to
the detailed provisions of the Company's Articles of Incorporation and Bylaws,
copies of which will be furnished to an investor upon written request
therefor. The Shares being registered pursuant to the registration statement
of which this prospectus is a part are shares of Common Stock, all of the same
class and entitled to the same rights and privileges as all other shares of
Common Stock.
Common Stock
The Company is presently authorized to issue 50,000,000 shares of $.001
par value Common Stock. The holders of common stock, including the Shares
offered hereby, are entitled to equal dividends and distributions, per share,
with respect to the common stock when, as and if declared by the Board of
Directors from funds legally available therefor. No holder of any shares of
common stock has a pre-emptive right to subscribe for any securities of the
Company nor are any common shares subject to redemption or convertible into
other securities of the Company. Upon liquidation, dissolution or winding up
of the Company, and after payment of creditors and preferred stockholders, if
any, the assets will be divided pro-rata on a share-for-share basis among the
holders of the shares of common stock. All shares of common stock now
outstanding are fully paid, validly issued and non-assessable. Each share of
common stock is entitled to one vote with respect to the election of any
director or any other matter upon which shareholders are required or permitted
to vote. Holders of the Company's common stock do not have cumulative voting
rights, so that the holders of more than 50% of the combined shares voting for
the election of directors may elect all of the directors, if they choose to do
so and, in that event, the holders of the remaining shares will not be able to
elect any members to the Board of Directors. The Company's bylaws provide
that a quorum at any meeting of stockholders is one third of the shares
outstanding and entitled to vote. Delaware law requires a majority of the
voting power present at a meeting to take action, or permits action to be
taken by written consent without a meeting if stockholders holding a majority
of the voting power consent. The bylaws also permit action by written consent
if the same percentage as would be required at a meeting (i.e. a majority) of
all the shareholders entitled to vote, consent in writing.
The Company has reserved from its authorized but unissued shares a
sufficient number of shares of Common Stock for issuance of the Shares offered
hereby. The shares of Common Stock issuable on completion of the offering
will be, when issued in accordance with the terms of the offering, fully paid
and non-assessable.
During the pendency of the offering, subscribers will have no rights as
stockholders of the Company until the offering has been completed and the
Shares have been issued to them.
<PAGE> 20
Preferred Stock
The Company is also presently authorized to issue 500,000 shares of
$.001 par value Preferred Stock. Under the Company's Articles of
Incorporation, as amended, the Board of Directors has the power, without
further action by the holders of the Common Stock, to designate the relative
rights and preferences of the preferred stock, and issue the preferred stock
in such one or more series as designated by the Board of Directors. The
designation of rights and preferences could include preferences as to
liquidation, redemption and conversion rights, voting rights, dividends or
other preferences, any of which may be dilutive of the interest of the holders
of the Common Stock or the Preferred Stock of any other series. The issuance
of Preferred Stock may have the effect of delaying or preventing a change in
control of the Company without further shareholder action and may adversely
effect the rights and powers, including voting rights, of the holders of
Common Stock. In certain circumstances, the issuance of preferred stock could
depress the market price of the Common Stock. The Board of Directors effects
a designation of each series of Preferred Stock by filing with the Delaware
Secretary of State a Certificate of Designation defining the rights and
preferences of each such series. Documents so filed are matters of public
record and may be examined in accordance with procedures of the Delaware
Secretary of State, or copies thereof may be obtained from the Company.
Transfer Agent
American Registrar & Transfer Co., 10 Exchange Place, Suite 750, P.O.
Box 1798, Salt Lake City, Utah 84110, (801) 363-9065, has agreed to serve as
transfer agent and registrar for the Company's outstanding securities upon
completion of the offering.
Dividend Policy
The Company has not previously paid any cash dividends on Common Stock
and does not anticipate or contemplate paying dividends on Common Stock in the
foreseeable future. It is the present intention of management to utilize all
available funds for the development of the Company's business. The only
restrictions that limit the ability to pay dividends on common equity or that
are likely to do so in the future, are those restrictions imposed by law.
Under Delaware corporate law, no dividends or other distributions may be made
which would render the Company insolvent or reduce assets to less than the sum
of its liabilities plus the amount needed to satisfy outstanding liquidation
preferences.
SHARES ELIGIBLE FOR FUTURE SALE
All 1,000,000 shares of Common Stock currently outstanding are
"restricted securities," as that term is defined under Rule 144 promulgated
under the Securities Act of 1933, as amended, in that such shares were issued
and sold by the Company without registration, in private transactions not
involving a public offering, and/or are securities held by affiliates.
Although such restricted and affiliate securities are not presently tradeable
in any public market which may develop for the Common Stock, such securities
may in the future be publicly sold into any such market, if such a market
should develop, in accordance with the provisions of Rule 144. In general,
under Rule 144 as currently in effect, a person (or group of persons whose
share are aggregated), including affiliates of the Company, can sell within
any three-month period, a number of shares of restricted securities that does
not exceed the greater of 1% of the total number of outstanding shares of the
same class, or (if the Stock becomes quoted on NASDAQ or a stock exchange),
the reported average weekly trading volume during the four calendar weeks
preceding the sale; provided, that at least two years have elapsed since the
restricted securities being sold were acquired from the Company or any
<PAGE> 21
affiliate of the Company, and provided further that certain other conditions
are also satisfied. If at least three years have elapsed since the restricted
securities were acquired from the Company or an affiliate of the Company, a
person who has not been an affiliate of the Company for at least three months
is entitled to sell such restricted shares under Rule 144 without regard to
any limitations on the amount.
PLAN OF DISTRIBUTION
The Company is offering up to 200,000 Shares of its $.001 par value
Common Stock to the public on a "best efforts, 100,000 shares minimum, 200,000
shares maximum" basis, at a price of $.50 per share. The offering will be
managed by the Company without an underwriter. The Company may enter into
agreements with securities broker-dealers who are members of the National
Association of Securities Dealers, Inc. (NASD), whereby these broker-dealers
will be involved in the sale of the Shares and will be paid a commission by
the Company of up to 14% of the offering price of the Shares sold by them.
There are presently no plans, proposals, arrangements or understandings with
any broker-dealers to participate in the offering. If the Company enters into
any agreements with broker-dealers, it intends to amend the registration
statement to update this prospectus and identify the broker-dealers that
become involved in the selling effort. In addition, the Shares will be
offered and sold by the officer of the Company, who will receive no sales
commissions or other compensation in connection with the offering, except for
reimbursement of expenses actually incurred on behalf of the Company in
connection with such activities. This will not involve any reallocations
between NASD members and non-members. The Company will not compensate any of
its officers or directors for sale of securities hereunder but may pay a
finders fee (not to exceed 14%) to other persons not affiliated with the
Company who introduce investors, where no sales commission is paid and such
payment is permitted under applicable state law. There are presently no
plans, proposals, arrangements or understandings with respect to the payment
of any finders fees for investor introductions. Any sales made by officers or
anyone associated with the Company will comply with the provisions of Rule
3a4-1 promulgated by the Securities and Exchange Commission, in that no
associated person of the Company is an associated person of a broker or dealer
or subject to any statutory disqualification as defined in Section 3(a)(39) of
the Securities Act, nor will any such person be compensated in connection with
his participation in the offering. Each such person will perform substantial
duties for the Company otherwise than in connection with the offering and/or
will limit his participation in the offering to distributing this prospectus
or other written communication (the content of which is approved by an officer
or director of the Company), by mail or other means that does not involve oral
solicitation, responding to inquiries of prospective purchasers with
information contained herein and performing ministerial and clerical work
involved in effecting sales transactions.
There is no assurance that all or any of the Shares will be sold. If
the Company fails to receive subscriptions for a minimum of 100,000 Shares
within 120 days from the date of this Prospectus (or 150 days if extended by
the Company), the offering will be terminated and any subscription payments
received will be promptly refunded within 5 days to subcribers, without any
deduction therefrom or any interest thereon. If subscriptions for at least
the minimum amount are received within such period, funds will not be returned
to investors and the Company may continue the offering until such periods
expires or subscriptions for all 200,000 Shares have been received, whichever
occurs first. Current shareholders may purchase up to 10 percent of the
shares offered hereby. Any such purchases will be made for investment
purposes only and not with a view toward further resale, and may be made for
the purpose of completing at least the minimum amount of the offering.
All subscription payments should be made payable to Brighton Bank as
<PAGE> 22
Escrow Agent for the Company. The Company and any participating broker-
dealers will mail or otherwise forward all subcription payments received, by
noon of the next business day following receipt, to Brighton Bank at 311 South
State Street, Salt Lake City, Utah 84111 for deposit into the escrow account
being maintained by Brighton Bank as escrow agent for the Company, pending
receipt of subscriptions for at least a minimum of 100,000 Shares or
expiration of the offering period, whichever occurs first. Subcription
payments will only be disbursed from the escrow account to the Company if at
least 100,000 Shares are sold, or if not sold, for the purpose of refunding
subscription payments to the subscribers. Subscribers will have no right to
return or use of their funds during the offering period, which may last up to
150 days.
LEGAL MATTERS
To the knowledge of management, there is no material litigation pending
or threatened against the Company. The validity of the issuance of the Shares
offered hereby will be passed upon for the Company by Thomas G. Kimble &
Associates, Salt Lake City, Utah.
EXPERTS
The consolidated financial statements of Durwood, Inc. as of July 31,
1996, included in this Prospectus have been examined by Jones, Jensen & Co.,
independent certified public accountants, as indicated in their report with
respect thereto, and are included herein in reliance on such report given upon
the authority of that firm as experts in accounting and auditing.
<PAGE> 23
DURWOOD, INC.
(A Development Stage Company)
FINANCIAL STATEMENTS
July 31, 1996
<PAGE> 24
C O N T E N T S
Independent Auditors' Report . . . . . . . . . . . . . . . . 3
Balance Sheet . . . . . . . . . . . . . . . . . . . . . . . 4
Statement of Operations . . . . . . . . . . . . . . . . . . 5
Statement of Stockholders' Equity . . . . . . . . . . . . . 6
Statement of Cash Flows . . . . . . . . . . . . . . . . . . 7
Notes to the Financial Statements . . . . . . . . . . . . . 8
<PAGE> 25
JONES, JENSEN & COMPANY
CERTIFIED PUBLIC ACCOUNTANTS
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Durwood, Inc.
Salt Lake City, Utah
We have audited the accompanying balance sheet of Durwood, Inc. (a
development stage company) as of July 31, 1996 and the related
statements of operations, stockholders' equity, and cash flows from
inception on July 12, 1996 through July 31, 1996. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial
statements based on our 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 statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit
provides a reasonable basis for our opinion.
In our opinion the financial statements referred to above present
fairly, in all material respects, the financial position of
Durwood, Inc. (a development stage company) as of July 31, 1996 and
the results of its operations and its cash flows from inception on
July 12, 1996 through July 31, 1996 in conformity with generally
accepted accounting principles.
Jones, Jensen & Company
August 5, 1996
349 South 200 East, Suite 500, Salt Lake City, Utah 84111
<PAGE> 26
DURWOOD, INC.
(A Development Stage Company)
Balance Sheet
ASSETS
July 31,
1996
CURRENT ASSETS
Cash $ 10,000
Total Current Assets 10,000
TOTAL ASSETS $ 10,000
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ -
Total Current Liabilities -
TOTAL LIABILITIES -
STOCKHOLDERS' EQUITY
Preferred stock: 500,000 shares
authorized of $0.001 par value
but unissued -
Common stock: 50,000,000 shares
authorized of $0.001 par value,
1,000,000 shares issued and outstanding 1,000
Additional paid-in capital 9,000
Total Stockholders' Equity 10,000
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 10,000
The accompanying notes are an integral part of these financial statements
<PAGE> 27
DURWOOD, INC.
(A Development Stage Company)
Statement of Operations
From
Inception on
July 12,
1996 Through
July 31,
1996
REVENUES $ -
EXPENSES -
NET INCOME (LOSS) $ -
NET EARNINGS (LOSS)
PER SHARE OF
COMMON STOCK $ 0.00
The accompanying notes are an integral part of these financial statements
<PAGE> 28
DURWOOD, INC.
(A Development Stage Company)
Statement of Stockholders' Equity
Additional
Common Stock Paid-in
Shares Amount Capital Total
Balance, July 12, 1996 - $ - $ - $ -
Common stock issued for
cash at $0.01 per share
on July 15, 1996 1,000,000 1,000 9,000 10,000
Balance, July 31, 1996 1,000,000 $ 1,000 $ 9,000 $ 10,000
The accompanying notes are an integral part of these financial statements
<PAGE> 29
DURWOOD, INC.
(A Development Stage Company)
Statement of Cash Flows
From
Inception on
July 12,
1996 Through
July 31,
1996
CASH FLOWS FROM FINANCING ACTIVITIES
Common stock issued for cash $ 10,000
Net Cash Provided By Financing Activities 10,000
NET INCREASE IN CASH AND CASH EQUIVALENTS 10,000
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD -
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 10,000
Cash Paid For:
Interest $ -
Income taxes $ -
The accompanying notes are an integral part of these financial statements
<PAGE> 30
DURWOOD, INC.
(A Development Stage Company)
Notes to the Financial Statements
July 31, 1996
NOTE 1 - ORGANIZATION AND HISTORY
a. Organization
Durwood, Inc. (the "Company") was recently incorporated under the
laws of the State of Delaware on July 12, 1996. The Company has not
commenced active business operations and is considered a development
stage company. The proposed business and purpose of the Company's
formation is to engage in the business of making and selling custom
pool cues as collectors items as well as for playing pool and
billiards; and to engage in and perform any and all acts and
activities customary in connection therewith, or incident thereto.
The Company intends to use the proceeds of its proposed public
offering, if successful, to purchase equipment for manufacturing
custom pool cues and also wood and other raw materials for
manufacture into finished goods inventory, and for initial working
capital to begin active business operations upon completion of this
offering.
b. Accounting Method
The Company's financial statements are prepared using the accrual
method of accounting. The Company has elected a July 31, year end.
c. Cash and Cash Equivalents
Cash equivalents include short-term, highly liquid investments with
maturities of three months or less at the time of acquisition.
d. Earnings (Loss) Per Share
The computations of earnings per share of common stock are based on
the weighted average number of shares outstanding at the date of the
financial statements.
e. Income Taxes
The Company provides for income taxes based on income reported for
financial reporting purposes. At July 31, 1996, the Company has not
reported any income or loss, and has therefore not recorded any
deferred income taxes.
f. Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results
could differ from those estimates.
<PAGE> 31
DURWOOD, INC.
(A Development Stage Company)
Notes to the Financial Statements
July 31, 1996
NOTE 2 - PROPOSED PUBLIC OFFERING
The Company is offering, on a "best efforts, minimum - maximum"
basis up to 200,000 shares of its common stock to the public at
$0.50 per share. The offering will terminate 120 days from the
effective date thereof (or 150 days if extended by the Company)
unless a minimum of $50,000 of subscriptions have been received.
<PAGE> 32
[OUTSIDE BACK COVER PAGE BEGINS HERE]
No dealer, salesman or other person is authorized to give any information or
to make any representations other that those contained in this Prospectus in
connection with the offer made hereby. If given or made, such information or
representations 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 an offer to buy any of the securities covered hereby in any
jurisdiction or to any person to whom it is unlawful to make such offer or
solicitation in such jurisdiction. Neither the delivery of this Prospectus
nor any sale made hereunder shall, in any circumstances, create any
implication that there has been no change in the affairs of the Company since
the date hereof.
TABLE OF CONTENTS Page
AVAILABLE INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . 2
PROSPECTUS SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
DILUTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
COMPARATIVE DATA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
USE OF PROCEEDS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
MANAGEMENT'S PLAN OF OPERATION . . . . . . . . . . . . . . . . . . . . . . 11
BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
PRINCIPAL SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . 18
CERTAIN TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
DESCRIPTION OF SECURITIES. . . . . . . . . . . . . . . . . . . . . . . . . 20
SHARES ELIGIBLE FOR FUTURE SALE. . . . . . . . . . . . . . . . . . . . . . 21
PLAN OF DISTRIBUTION . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
LEGAL MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
EXPERTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . See Index
DURWOOD INC.
200,000 Shares
Common Stock
PROSPECTUS
, 1996
PART II - INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. Indemnification of Directors and Officers
The statutes, charter provisions, bylaws, contracts or other arrangements
under which controlling persons, directors or officers of the issuer are
insured or indemnified in any manner against any liability which they may
incur in such capacity are as follows:
1. Section 145 of the Delaware General Corporation Law provides that each
corporation shall have the following powers:
(a) A corporation may indemnify any person who was or is a party or is
threatened to be made party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative,
(other than an action by or in the right of the corporation) by reason of the
fact that he is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by him in connection with such action, suit or proceeding
if he acted in good faith and in a manner which he reasonably believed to be
in or not opposed to the best interests of the corporation, and, with respect
to any criminal action or proceeding, had no reasonable cause to believe his
conduct was unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo contendere or
its equivalent, shall not, of itself create a presumption that the person did
not act in good faith and in a manner which he reasonably believed to be in or
not opposed to the best interests of the corporation, and that, with respect
to any criminal action or proceeding, had reasonable cause to believe that his
conduct was unlawful.
(b) A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action
or suit by or in the right of the corporation to procure a judgment in its
favor by reason of the fact that he is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted
in good faith and in a manner which he reasonably believed to be in or not
opposed to the best interests of the corporation and except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged liable to the corporation unless
and only to the extent that the Court of Chancery or the court in which such
action or suit was brought shall determine upon application that, despite the
adjudication of liability but in view of all the circumstances of the case,
such person is fairly and reasonably entitled to indemnity for such expenses
which the Court of Chancery or such other court shall deem proper.
(c) To the extent that a director, officer, employee or agent of a corporation
has been successful on the merits or otherwise in defense of any action, suit
or proceeding referred to in subsections (a) and (b) of this section, or in
defense of any claim, issue or matter therein, he shall be indemnified against
expenses (including attorneys' fees) actually and reasonably incurred by him
in connection therewith.
(d) Any indemnification under subsections (a) and (b) of this section (unless
ordered by a court) shall be made by the corporation only as authorized in the
specific case upon a determination that indemnification of the director,
officer, employee or agent is proper in the circumstances because he has met
the applicable standard of conduct set forth in subsections (a) and (b) of
this section. Such determination shall be made (1) by majority vote of
directors who were not parties to such action, suit or proceeding, even though
less than a quorum, or (2) if there are no such directors, or if such
directors so direct, by independent legal counsel in a written opinion, or (3)
by the stockholders;
(e) Expenses (including attorneys' fees) incurred by an officer or director in
defending any civil, criminal, administrative or investigative action, suit or
proceeding may be paid by the corporation in advance of the final disposition
of such action, suit or proceeding upon receipt of an undertaking by or on
behalf of such director or officer to repay the amount if it shall ultimately
be determined that he is not entitled to be indemnified by the corporation as
authorized in this section. Such expenses (including attorneys' fees)
incurred by other employees and agents may be paid upon such terms and
conditions, if any, as the board of directors deems appropriate.
(f) The indemnification and advancement of expenses provided by, or granted
pursuant to, other subsections of this section shall not be deemed exclusive
of any other rights to which those seeking indemnification or advancement of
expenses may be entitled under any bylaw, agreement, vote of stockholders or
disinterested directors or otherwise, both as to action in his official
capacity and as to action in another capacity while holding such office.
(g) A corporation shall have power to purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against any liability asserted
against him and incurred by him in any such capacity, or arising out of his
status as such, whether or not the corporation would have the power to
indemnify him against such liability under this section.
(h) For purposes of this section, references to "the corporation" shall
include, in addition to the resulting corporation, any constituent corporation
(including any constituent of a constituent) absorbed in a consolidation or
merger which, if its separate existence had continued, would have had the
power and authority to indemnify its directors, officers, and employees or
agents, so that any person who is or was a director, officer, employee or
agent of such constituent corporation, or is or was serving at the request of
such constituent corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
shall stand in the same position under this section with respect to the
resulting or surviving corporation as he would have with respect to such
constituent corporation if its separate existence had continued.
(i) For purposes of this section, references to "other enterprises" shall
include employee benefit plans; references to "fines" shall include any excise
taxes assessed on a person with respect to any employee benefit plan; and
references to "serving at the request of the corporation" shall include any
service as a director, officer, employee or agent of the corporation which
imposes duties on, or involves services by, such director, officer employee or
agent with respect to an employee benefit plan, its participants or
beneficiaries; and a person who acted in good faith and in a manner he
reasonably believed to be in the interest of the participants and
beneficiaries of the employee benefit plan shall be deemed to have acted in a
manner "not opposed to the best interests of the corporation" as referred to
in this section.
(j) The indemnification and advancement of expenses provided by, or granted
pursuant to this section shall, unless otherwise provided when authorized or
ratified, continues as to a person who has ceased to be a director, officer,
employee or agent and shall inure to the benefit of the heirs, executors and
administrators of such a person.
2. The Issuer's Articles of Incorporation limit liability of its Officers and
Directors to the full extent permitted by the Delaware General Corporation
Law. The bylaws provide for indemnification in accordance with the foregoing
statutory provisions.
ITEM 25. Other Expenses of Issuance and Distribution*
The following table sets forth all estimated costs and expenses, other than
underwriting discounts, commissions and expense allowances, payable by the
issuer in connection with the maximum offering for the securities included in
this registration statement:
Amount
SEC registration fee $ 100.00
Blue sky fees and expenses 1,000.00
Printing and shipping expenses 300.00
Legal fees and expenses 10,000.00
Accounting fees and expenses 500.00
Transfer and Miscellaneous expenses 100.00
-----------
Total $ 12,000.00
* All expenses are estimated except the Commission filing fee.
ITEM 26. Recent Sales of Unregistered Securities
In connection with the organization of the Company, its founding shareholders
paid an aggregate of $10,000 cash to purchase 1,000,000 shares of Common Stock
of the Company. These transactions were not registered under the Securities
Act of 1933 (the "Act") in reliance on the exemption from registration in
Section 4(2) of the Act. The securities were offered and sold without any
general solicitation to persons affiliated with the Issuer as founding
shareholders, are subject to the resale provisions of Rule 144 and may not be
sold or transferred without registration except in accordance with Rule 144.
Certificates representing the securities will bear such a legend.
ITEM 27. Exhibits Index (exhibits marked with * were previously filed)
SEC No. Document Exhibit No.
1 Form of Dealer Agreement 1.1*
3 Articles of Incorporation 3.1*
3 By-Laws 3.3*
4 Common Stock Specimen Certificate 4.1*
5,24 Opinion & Consent of Counsel 5.1 & 24.1*
20 Subscription Agreement 20.1*
23 Consent of Accountants 23.1
27 Financial Data Schedule 27.1*
ITEM 28. Undertakings
The issuer hereby undertakes that it will:
(1) File, during any period in which it offers or sells securities, a post-
effective amendment to this Registration Statement to:
(i) Include any prospectus required by section 10(a)(3) of the Securities Act
of 1933;
(ii) Include any additional or changed material information on the plan of
distribution; and
(iii) Reflect in the prospectus any facts or events which, individually or
together, represent a fundamental change in the information in the
Registration Statement.
(2) For determining any liability under the Securities Act, treat each post-
effective amendment as a new Registration Statement of the securities offered,
and the offering of the securities at that time to be the initial bona fide
offering.
(3) File a post-effective amendment to remove from registration any of the
securities that remain unsold at the end of the offering.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the
registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with
the securities being registered, the registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Act and will be governed by
the final adjudication of such issue.
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the issuer
certifies that it has reasonable grounds to believe that it meets all of the
requirements of filing on Form SB-2 and authorized this Registration Statement
to be signed on its behalf by the undersigned, in the City of Salt Lake ,
State of Utah, on December 2nd , 1996.
DURWOOD, INC.
By: /s/ Darren Heiselt
President (Chief Executive and Financial Officer)
In accordance with the requirements of the Securities Act of 1933, this
Registration Statement was signed by the following persons in the capacities
and on the dates indicated.
Signature: /s/ Darren Heiselt
Title: President & Director (Chief Executive and Financial Officer)
Date: December 2nd , 1996
JONES, JENSEN & COMPANY
CERTIFIED PUBLIC ACCOUNTANTS
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
November 27, 1996
Durwood, Inc.
Dear Sirs:
We hereby consent to the use of our audit report dated August 5,
1996 in the form SB-2 registration statement of Durwood, Inc.
/s/ Jones, Jensen & Company
Jones, Jensen & Company
349 South 200 East, Suite 500, Salt Lake City, Utah 84111
