U.S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES OF SMALL
BUSINESS ISSUERS
Under Section 12(b) or (g) of the Securities Exchange Act of 1934
Jewelnique Designs, Inc.
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(Name of Small Business Issuer in its charter)
Colorado 84-1385900
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
2449 Lyric Avenue
Los Angeles, California 90027
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number, (213) 660-8665
Securities to be registered under Section 12(b) of the Act:
Title of each class Name of each exchange on which
to be so registered each class is to be registered
None
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Securities to be registered under Section 12(g) of the Act:
Common Stock, $.001 par value
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(Title of class)
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Item 1. Description of Business.
(a) Business Development.
Jewelnique Designs, Inc., formerly Blue Mountain Capital, Inc. (hereinafter
referred to as the "Company" or "JDI"), was organized under the laws of the
State of Colorado on March 6, 1997. The name of the Company was changed to
"Jewelnique Designs, Inc.," on June 20, 1997. The Company's executive offices
are presently located at 2449 Lyric Avenue, Los Angeles, California 90027, and
its telephone number is (213) 660-8665.
The Company has generally been inactive, having conducted no business
operations except organizational and fund raising activities since its
inception. JDI received gross proceeds in the amount of $20,000 from the sale of
a total of 200,000 shares of common stock, $.001 par value per share (the
"Common Stock"), in an offering conducted pursuant to Section 3(b) of the
Securities Act of 1933, as amended, and Rule 504 of Regulation D promulgated
thereunder.
See (b) "Business of Issuer" immediately below for a description of the
Company's proposed business of designing, manufacturing, marketing and
distributing a specialized line of jewelry products through, primarily,
boutiques, hair salons, beauty supply stores, department stores and children's
stores. As of the date hereof, the Company has no jewelry products available for
distribution.
(b) Business of Issuer.
General
Since its inception, the Company has conducted no business operations
except for organizational activities and an offering of Common Stock pursuant to
which it has received gross offering proceeds in the amount of $20,000. Further,
the Company has had no employees since its organization. It is anticipated that
the Company's executive officers and directors who, except for one lump-sum
consulting fee received by two such persons, have served in those positions
without compensation through the date hereof, will receive reasonable salaries
for services as exective officers at such time as the Company commences business
operations. (See Part I, Item 6., "Executive Compensation - Executive
Compensation.") The Company's executive officers and/or directors will devote
such time and effort as may be necessary to participate in the day-to-day
management of the Company. (See Part I, Item 5. "Directors, Executive Officers,
Promoters and Control Persons - Executive Officers and Directors.") The Company
has no plans to employ any individuals except its three executive officers on a
part-time basis for the foreseeable future. The Company proposes to engage in
business as a designer, manufacturer and distributor of a specialized line of
jewelry products which, except for the design of the "Face Jewel," JDI's initial
proposed product, has not yet been developed and which is intended to be
marketed, primarily, through boutiques, hair salons, beauty supply stores,
department stores and children's stores to a target market comprised of young
adults and children, especially, whose tastes in jewelry are expected to be
characterized by a desire for unique, different or unusual designs and products
at moderate prices. As of the date hereof, JDI has no jewelry products available
for distribution, although the Face Jewel is in the design stage.
The following discussion of the jewelry business, as it relates to the
Company's business objectives, is of course pertinent only if the Company is
successful in obtaining sufficient debt and/or equity financing to commence
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operations in the jewelry business and, in addition thereto, is able to generate
significant profits from operations (which are not expected in the foreseeable
future) and/or additional financing to continue in business and/or fund the
anticipated growth, assuming JDI's proposed product line is successful. There
can be no assurance such financing can be obtained or that the Company's
proposed product line will be successful. While each of Messrs. Roland W. Fink
and Kendall L. Dorsett, executive officers, directors and owners together of
approximately 62.7% of the outstanding common stock of JDI, has over twenty
years of business experience, having co-founded, managed, been employed by and
retained as consultants to a variety of companies, neither individual has any
specific experience or expertise in the jewelry business. (See Part I, Item 1.
"Description of Business," (b) "Business of Issuer - Risk Factors.")
The Company will be dependent upon its Executive Vice President, Ms.
Suzanne Sorensen, to develop the jewelry designs and products which will be
featured in JDI's proposed, specialized jewelry line. Ms. Sorensen has
approximately twenty-three years of experience in the jewelry business and has
managed Suzanne Designs, a family-owned jewelry business, since approximately
1976. The principal product of Suzanne Designs in recent years, the "Hair
Jewel," a unique, elegant, easy-to-use hair accessory made from fine Austrian
crystals, fourteen carat gold spirals and other fine materials, has been sold in
Nordstrom, Macy's, Dillard's, Bullock's, Accessory Place, Etcetera, Judy's and
Casual Corner; in most of the fifty states of the United States and in Japan,
Panama, Canada and Mexico; and continues to be re-ordered by customers after
nine years since its first availability. Ms. Sorensen's jewelry, clothing and
other product designs have been featured in advertisements in major U.S.
magazines, newspapers and other publications such as Women's Wear Daily; on
television productions, including the Donnie and Marie Show and CBS' The Young
and the Restless; and in several Hollywood feature films, including Steve
Martin's L.A. Stories and The Addams Family (Part II). The Company intends to
use to its advantage Ms. Sorensen's reputation in the jewelry business as a
creator of jewelry and other product designs so unique, different and unusual as
to readily attract media, even Hollywood's, attention and her creative talents
which have, in the past, resulted in continuous developments of new jewelry
designs and products available to consumers at moderate prices in an industry
dominated by mass merchandisers of inexpensive, unimaginative jewelry products
and fine jewelers whose high-end products are so costly as to be unavailable to
consumers of moderate means. Nevertheless, while Ms. Sorensen's jewelry designs
have been successful in the past, there can be no assurance that her designs for
JDI's proposed product line, including the Face Jewel, will be successful since
the popularity of any design is largely a measure of subjective public reaction.
Further, the Company has very limited financial, personnel and other resources
and lacks a customer base and market recognition. (See Part I, Item 1.
"Description of Business," (b) "Business of Issuer - Risk Factors.")
Ms. Sorensen may be subject to direct conflicts of interest, because of her
position as an executive officer of JDI and her management position with Suzanne
Designs, with regard to opportunities in the jewelry and accessories businesses
which come to her attention and concerning any possible business dealings
between JDI and Suzanne Designs. In any instance where such a conflict may
arise, the Company intends to employ certain safeguards, such as ensuring that
any agreement between the Company and Suzanne Designs conforms with standard
industry practice in the Pacific region and is fair and reasonable to the
Company. Further, Ms. Sorensen will abstain from voting as a member of the Board
of Directors on any such agreement in which Suzanne Designs is a party or has an
interest or with regard to any business opportunity which may be attractive to
both companies. The Company's Amended Articles of Incorporation provide that any
such related party contract or transaction must be authorized, approved or
ratified at a meeting of the Board of Directors by sufficient vote thereon by
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directors not interested therein or the contract or transaction must be fair and
reasonable to the Company. Accordingly, it is possible for the Company's Board
of Directors, by vote of a sufficient number of disinterested members thereof,
to authorize, approve or ratify a related party contract or transaction or
business opportunity involving Suzanne Designs which is unfair and/or
unreasonable to the Company, even though Ms. Sorensen abstains from voting
thereon. (See Part I, Item 1. "Description of Business," (b) "Business of Issuer
- - Risk Factors" - 10. "Conflicts of Interest.")
Business Strategy
The Company's business strategy, which is dependent upon its obtaining
sufficient financing with which to implement its business plan, is to provide a
specialized line of jewelry products and other fashion accessories to retailers
who target consumers, especially young adults and children, seeking unique,
different or unusual jewelry at moderate prices, as opposed to fine jewelry, and
who are willing to purchase jewelry and accessories at frequent intervals as
fashions and styles change. Management has made a conscious decision at this
time not to develop a line of traditional jewelry products which would force JDI
into direct competition, immediately, with the numerous large and small
manufacturers already established in the industry, many of which have
substantial resources and numerous other significant competitive advantages as
compared to the Company. However, depending upon the commercial success, no
assurance of which can be made, of the "Face Jewel," JDI's initial proposed
product, and specialized designs for other items of jewelry proposed to complete
a line of similar such unique, different or unusual products, the Company may in
the future develop a line of traditional jewelry if business conditions appear
to provide a niche or other opportunity in the traditional jewelry market which
management believes JDI could successfully exploit.
To accomplish this strategy and to stay abreast of changing styles and
tastes, design and marketing personnel anticipated to be employed by the
Company, assuming that sufficient operating capital becomes available, are
expected to work closely with suppliers, distributors and customers and
continually participate in jewelry fairs, trade shows and other industry forums.
JDI expects to introduce numerous designs and variations of those designs in
order to extend the length of time each design is marketable. In addition, the
Company plans to develop a sophisticated computerized system to track, and to
continuously engage in market research in order to monitor, new market trends,
seasonality factors and other critical information deemed relevant to JDI's
business.
Management hopes, in the event that JDI achieves commercial success
initially, to increase the Company's domestic market penetration and product
lines through selected acquisitions. Such acquisitions could include both
jewelry and non-jewelry businesses which could complement and be integrated into
the Company's product lines and/or operations. Management believes that, in the
current international trade environment, expansion into markets such as the
Canadian, Latin American and Asian markets, could be especially attractive.
However, foreign markets present certain unique challenges and risks, and there
could be no assurance that JDI, even if it were to be successful in establishing
foreign markets, could be expected to be successful in profitably penetrating
these potential markets.
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Proposed Product Line
Ms. Suzanne Sorensen, the Executive Vice President of the Company, has
managed Suzanne Designs, a family jewelry business, since 1976. In recent years,
the principal product of Suzanne Designs has been the "Hair Jewel," a unique,
elegant, easy-to-use hair accessory that works equally well in long, short,
normal or very fine hair. The Hair Jewel is suitable for evening wear, and can
be used to hold the hair up; hold the hair back; decorate braids or sweeps; or
help spike the hair for the "punkier" look. The Hair Jewel is made from the
finest Austrian Crystals, fourteen carat gold spirals and other fine materials.
The product has sold in Nordstrom, Macy's Dillard's, Bullock's, Asccessory
Place, Etcetera, Judy's and Casual Corner, and continues to be re-ordered by
customers since it first became available approximately nine years ago. The
product has been sold in most of the fifty states of the United States and in
Japan, Panama, Canada and Mexico. Ms. Sorensen has designed elegant, black
tassel, Austrian Crystal earrings featured inWomen's Wear Daily and the
eagle-feather jackets and long-feather earrings worn on the Donnie and Marie
Show. Her designs have also been featured on CBS' The Young and the Restless and
in several Hollywood feature films, including Steve Martin's L.A. Stories and
the Addams Family (Part II).
JDI intends to develop a line of specialized jewelry products and other
accessories similar, from the standpoint of novelty, moderate price and appeal
to youthful consumers, to that marketed and distributed by Suzanne Designs.
Along these lines, Ms. Sorensen has developed a design for the "Face Jewel," a
novel, elegantly sculpted earring that extends daringly out onto the face,
accentuating the graceful line of a woman's cheek. Management anticipates that
the Company's first product will be the Face Jewel currently under development,
while its ultimate product line, proposed to be developed from this initial
product, would include earrings, necklaces, bracelets, rings, pendants, pins,
brooches, ankle jewelry and decorations for other areas of the body or for
clothing, each of a unique or unusual design, hoped to be attractive to
consumers, particularly young adults and children, seeking to adorn themselves
other than with traditional jewelry. JDI's proposed products, including the Face
Jewel, are expected to be sold, primarily, through boutiques, hair salons,
beauty supply stores, department stores and children's stores.
Management is unable at this time to forecast with any degree of certainty
the average price or wholesale or retail price range of the Company's products;
however, JDI intends to design its products so that the retail prices will be
considered "moderate" by the Company's target markets.
Marketing and Distribution
The Company presently anticipates that the Face Jewel, together with the
other proposed products in its product line presently under development, will be
sold through the same distribution channels that Suzanne Designs' "Hair Jewel"
is currently being distributed, including, principally, boutiques, hair salons,
beauty supply stores, department stores and children's stores. Company
management hopes, but cannot assure, that JDI's proposed products will
eventually attract the attention of retail jewelry stores, mass merchandisers,
catalog showrooms, high-volume retailers, major discounters and specialty
marketers such as home shopping networks, direct marketers and mail order
companies as well. The Company intends to compete, assuming that it is
successful in obtaining sufficient financing with which to commence jewelry
production, primarily on the basis of its unique designs and by offering quality
products at modest prices in combination with marketing and customer support
services, and not solely on the basis of price.
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Management anticipates that its primary marketing efforts will be in the
areas of product design and customer support services, calculated to assure
JDI's timely response to fashion trends, quality products, favorable pricing and
accurate inventory control for the Company's customers. The Company's proposed
products are intended to be marketed, for the most part, through independent
third party sales representatives. However, the Company expects that it will
maintain a small sales force as well, which would be expected to work closely
with third party representatives and customers, as well as JDI's design, product
development and marketing support personnel proposed to be employed if adequate
financing becomes available. The Company believes that by utilizing independent
third party representatives, primarily, it will be able to penetrate additional
markets at a minimal cost and without the overhead associated with a large sales
force.
The Company's ability to develop and market its Executive Vice President's
designs is, of course, dependent upon management's ability to obtain the
necessary financing, of which there can be no assurance. Assuming the
availability of adequate funding, JDI intends to stay abreast of changing styles
and market tastes by ensuring that its design and product development personnel
work closely with suppliers, independent sales representatives and customers;
participating in jewelry fairs, trade shows and other industry forums; and
generating new designs and variations on earlier designs to remain competitive.
JDI does not anticipate obtaining long-term contracts with any distributors or
customers, but management believes that the loyalty of its distributors and
customers, if once obtained, could be maintained through product designs and
development which timely reflect fashion trends and changes and providing them
with proper marketing and customer support.
Competition
The jewelry industry in the United States is highly fragmented, with little
significant brand name recognition or customer loyalty. Selection is generally a
function of design appeal, preceived high value and quality in relation to
price. Jewelry stores alone account for an estimated $15 billion in annual sales
in the United States. Retail jewelry sales have historically increased at a rate
surpassing the inflation rate. This increase is primarily attributable to the
increasing disposable income of women in the United States as more and more
women, the largest group of jewelry purchasers, enter the workforce and achieve
higher salaries and more responsible positions. Working women are often
responsible for the purchase of jewelry by teenagers and children as well. The
rise in the number of women in the workforce has also increased the overall
demand for women's clothing and accessories of all types, including jewelry.
While JDI expects to compete on the basis of the uniqueness of its designs,
its reputation among customers as a quality provider of products in tandem with
marketing and customer support services, and, to a lesser extent, on the basis
of price, its opportunity to obtain customers may be limited by its financial
and other resources. In this regard, many of the companies and other
organizations with which the Company will be in competition are established and
have far greater resources, substantially greater experience and larger staffs
than the Company expects to have for the foreseeable future. Additionally, many
of these companies and organizations have proven operating histories, which the
Company lacks.
While the competition may, among other things, "knock off" the Company's
designs, offer a wider selection of products, undercut JDI's prices and employ
any number of other strategies and tactics against the Company, management hopes
that the Company's unique designs, which are expected in many cases to be
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proprietary and/or copyrighted, together with its anticipated close relationship
with its customers, vendors and distributors, will enable it to maintain a
competitive position in the specialized jewelry and accessory market segment.
The Company further believes, but cannot assure, that its net profit margins
will be equal to, or in excess of, many of its competitors and that its capital
costs will be lower. Therefore, although competition is expected to be intense,
management hopes to position the Company strategically in the jewelry industry.
Seasonality
The jewelry business is highly seasonal in general, with the fourth
calendar quarter (which includes the Christmas shopping season) historically
contributing the highest sales of any quarter during the year. Nevertheless,
seasonality cannot be predicted because of customer promotions and special
events which may occur throughout the year. Management intends that the Company
participate in promotions and other events conducted by retailers at times of
the year other than Christmas, and conduct similar such special events and
promotions and take other measures to minimize the impact of seasonality on its
business to the extent possible.
Purchasing, Manufacturing and Assembly
At least initially, the Company intends to purchase most of its jewelry and
accessories in an assembled state from suppliers located inside the United
States. At most, management expects that the Company will be required to perform
a minimal amount of light assembly of the items received into jewelry and
accessory products. Management expects to purchase jewelry from a number of
suppliers based on quality, pricing and available quantities. While purchases of
materials are expected to be made from a relatively small number of suppliers,
the Company believes, but cannot assure, that there will be numerous alternative
sources for all materials, and that the failure of any principal supplier(s)
would not have a material adverse effect on operations or JDI's financial
condition. The Company does not expect to experience any difficulty in securing
product.
Management expects that manufacturing and assembly operations conducted by
the Company to be limited primarily to designing jewelry and other accessories,
and some light assembly of products. Upon completing a design, depending upon
the nature of the product, the Company will either purchase the materials and
subcontract the manufacture or assembly of the product, or provide such design
to its suppliers which will purchase the raw materials and manufacture the
product or subcontract for its manufacture. Management believes that the use of
third party manufacturers will enable the Company to substantially shift the
risk and capital cost of manufacturing to the third party. Depending upon the
availability of funding, the Company has preliminary plans to maintain a light
manufacturing and assembly operation in the United States for the purpose of
producing prototype designs and to fulfill custom orders for specialized
products and short-run orders required to be shipped within several days of the
order date. While JDI may in the future establish its own manufacturing
operations and facilities if substantial savings in the cost of inventory
appears likely and the necessary capital becomes available, the Company's
financial position does not permit management to consider such a course of
action at this time.
Employees and Consultants
The Company has had no employees since its organization. Except for a lump
sum consulting fee received by each of Messrs. Roland W. Fink and Kendall L.
Dorsett, JDI's executive officers and directors, including Messrs. Fink and
Dorsett and Ms. Suzanne Sorensen, have served in those positions without
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compensation through the date hereof. Messrs. Fink and Dorsett were compensated
for certain specialized services, including the preparation of a business plan
and the performance of certain financial consulting services, commonly performed
by outside consultants, despite their positions as executive officers and
directors of JDI, because the Company does not presently have the financial
capability to pay management salaries or retain outside consultants on an
ongoing basis. It is anticipated that at such time, if ever, as the Company's
financial position permits, assuming that JDI is successful in raising adequate
funding through equity and/or debt financing and/or generating a sufficient
level of revenue from operations, Messrs. Fink and Dorsett and Ms. Sorensen and
any other executive officers the Company may employ, will receive appropriate
compensation, in addition to salaries, which may include bonuses, coverage under
medical and/or life insurance benefits plans and participation in stock option
and/or other profit sharing or pension plans, for services as executive officers
of the Company. Additionally, directors may receive fees for their attendance at
meetings of the Board of Directors of the Company. While JDI may retain
consultants to perform services for the Company in the future, it does not
intend to retain members of management or other affiliated person(s) in this
capacity or pay consulting fees to any such person(s).
Facilities
The Company maintains its offices rent free at the home of its Executive
Vice President located at 2449 Lyric Avenue, Los Angeles, California 90027. Its
telephone number is (213) 660-8665. The Company anticipates that it will have
continued use of the Executive Vice President's home on a rent-free basis for
the foreseeable future and that this arrangement will be adequate for the
Company's needs while it is in the development stage. Assuming that JDI obtains
the necessary additional financing and is successful in implementing its
business plan, no assurance of which can be made, the Company will require its
own commercial facilities, including sufficient space to establish the intended
light assembly operation. In such event, management believes that JDI would be
able to locate adequate facilities at reasonable rental rates in the Los Angeles
area suitable for its future needs.
Before making an investment decision, prospective investors in the
Company's Common Stock should carefully consider, along with other matters
referred to herein, the following risk factors inherent in and affecting the
business of the Company.
Risk Factors
1. Development Stage Company. JDI was only very recently organized on March
6, 1997, and, accordingly, is in the early form of development stage and must be
considered promotional. Management's efforts, since inception, have been
allocated primarily to organizational and fund raising activities and the
ability of the Company to establish itself as a going concern is dependent upon
the receipt of additional funds from operations or other sources to continue
those activities. Potential investors should be aware of the difficulties
normally encountered by a new enterprise in its development stage, including
undercapitalization, cash shortages, limitations with respect to personnel,
technological, financial and other resources and lack of a customer base and
market recognition, most of which are beyond the Company's control. The
likelihood that the Company will succeed must be considered in light of the
problems, expenses and delays frequently encountered in connection with the
competitive environment in which the Company will operate. The Company's success
depends to a large extent on gauging public tastes in jewelry and accessories
and its ability to design products which will capture the public eye and hold
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the public's attention. There is no guarantee that the Company's proposed
products, initially the Face Jewel, will attain the level of popularity
necessary for the Company to find a niche in the jewelry industry or achieve
profitable operations. There are numerous manufacturers of jewelry and
accessories already positioned in the business which are better financed than
the Company. There can be no assurance that the Company, with its very limited
capitalization, will be able to compete with these companies and achieve
profitability. (See Part I, Item 1. "Description of Business.")
2. No Operating History, Revenues or Earnings. As of the date hereof, the
Company has not yet commenced operations and, accordingly, has received no
operating revenues or earnings. Since inception, most of the time and resources
of JDI's management have been spent in organizing the Company, obtaining interim
financing and developing a business plan. The Company's success is dependent
upon its obtaining additional financing from intended operations or otherwise.
The Company's success in the business of designing, manufacturing, merchandising
and distributing unique jewelry and accessory products on a wholesale basis is
dependent upon the receipt of profits from operations, which are not expected
for the foreseeable future, and/or additional financing to enable the Company to
continue in operation. There is no assurance that JDI will be able to obtain
additional debt or equity financing from any source. The Company, during the
development stage of its operations, can be expected to sustain substantial
operating expenses without generating any operating revenues or the operating
revenues generated can be expected to be insufficient to cover expenses. Thus,
for the foreseeable future, unless the Company attains profitable operations,
which is not anticipated, the Company's financial statements will show an
increasing net operating loss. (See Part I, Item 1. "Description of Business.")
3. Minimal Assets, Working Capital and Net Worth. As of March 31, 1997, the
Company's total assets in the amount of $5,444 consisted, principally, of the
sum of $4,950 in cash. As a result of its having minimal assets and a net loss
from operations in the amount of $11,061 as of March 31, 1997, the Company has
very minimal net worth presently. Further, JDI's working capital is presently
minimal and there can be no assurance that the Company's financial condition
will improve. The Company is expected to continue to have minimal working
capital or a working capital deficit as a result of current liabilities. Messrs.
Roland W. Fink and Kendall L. Dorsett, executive officers and/or directors of
JDI, each contributed services valued by them at $128 (a total of $256) in
consideration for 128,000 shares of the Company's Common Stock received by each.
Additionally, Patricia Cudd, Esq., received an aggregate of 64,000 shares of
Common Stock in consideration for her performance of legal services for JDI
valued at $64. Even though management believes, without assurance, that it will
obtain sufficient capital with which to implement its business plan on a limited
scale, the Company is not expected to continue in operation, without an infusion
of capital, after the expiration of a period of six months to one year from the
date hereof. In order to obtain additional equity financing, management may be
required to dilute the interest of existing shareholders or forego a substantial
interest in its revenues, if any. (See Part I, Item 1. "Description of
Business.")
4. Need for Additional Capital; Going Concern Qualification Expressed by
Auditor. Without an infusion of capital or profits from operations, the Company
is not expected to continue in operation after the expiration of the period of
six months to one year from the date hereof. Accordingly, the Company is not
expected to become a viable business entity unless additional equity and/or debt
financing is obtained. JDI's independent certified public accountant has
expressed this as a "going concern" qualification in the footnotes to the
Company's financial statements. The Company does not anticipate the receipt of
operating revenues until management successfully implements its business plan,
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which is not assured. Further, JDI may incur significant unanticipated
expenditures which deplete its capital at a more rapid rate because of, among
other things, the development stage of its business, its limited personnel and
other resources and its lack of a customer base and market recognition. Because
of these and other factors, management is presently unable to predict what
additional costs might be incurred by the Company beyond those currently
contemplated to obtain additional financing and achieve market penetration on a
commercial scale in its proposed line of business, i.e., the design,
manufacturing, merchandising and wholesale distribution of specialized jewelry
and accessory products. JDI has no identified sources for funds, and there can
be no assurance that resources will be available to the Company when needed.
(See Part I, Item 1. "Description of Business," - (b) "Business of Issuer - Risk
Factors" - 10. "Conflicts of Interest.")
5. Dependence on Management; Directors' Lack of Experience in Jewelry
Business . The possible success of the Company is expected to be largely
dependent on the continued service of its Executive Vice President, Ms. Suzanne
Sorensen, because Messrs. Roland W. Fink and Kendall L. Dorsett, the directors
and the other executive officers of JDI, have no experience or expertise in the
jewelry business. Virtually all decisions concerning the design and proposed
manufacture, marketing and distribution of jewelry and accessories by the
Company will be made or significantly influenced by Ms. Sorensen. She is
presently serving as the manager of Suzanne Designs, a closely-held jewelry
business owned by her family since 1976, and is required to devote a significant
amount of her time to the conduct of that company's business. Ms. Sorensen, Mr.
Fink and Mr. Dorsett are expected to devote only such time and effort to the
business and affairs of the Company as may be necessary to perform their
responsibilities as executive officers and/or directors of JDI. The loss of the
services of Ms. Sorensen would adversely affect the conduct of the Company's
business and its prospects for the future. The Company presently holds no
key-man life insurance on the lives of, and has no employment contract or other
agreement with, Ms. Sorensen or Messrs. Fink or Dorsett. (See Part I, Item
1."Description of Business," - (b) "Business of Issuer - Risk Factors" - 10.
"Conflicts of Interest.")
6. No Jewelry or Accessory Products or Customer Base. The Company was only
very recently organized. While JDI intends to engage in the design, manufacture,
merchandising and wholesale distribution of a specialized line of jewelry and
accessory products, the Company's initial proposed product, the "Face Jewel" is
only in the design stage and no other jewelry or accessory products are
presently being designed or manufactured. Further, the very limited funding
currently available to the Company will not permit it to commence business
operations in the jewelry industry except on a very limited scale. There can be
no assurance that the debt and/or equity financing, which is expected to be
required by the Company in order for JDI to continue in business after the
expiration of the next six months to one year, will be available. The Company
has no customers presently and there can be no assurance that it will be
successful in obtaining any customers in the major prospective market segments,
including boutiques, hair salons, beauty supply stores, department stores and
children's stores, which JDI intends to target for wholesale distribution of its
proposed products. JDI does not expect to have long-term contracts with any
customers; thus, management believes that the Company must, in order to survive,
ultimately obtain the loyalty of large volume purchasers through design and
product development which timely reflects fashion trends and changes and proper
customer and marketing support. The Company expects to be limited in the number
of designers and customer and marketing support personnel it is capable of
employing as a result of its limited operating capital. Thus, the Company could
be expected to experience substantial difficulty in attracting the high volume
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customers in the prospective target markets which would enable JDI to achieve
commercial viability. The Company will be dependent upon its Executive Vice
President, Ms. Suzanne Sorensen, who has approximately twenty-one years of
experience in managing her family's jewelry business, to design the Company's
proposed jewelry and accessory products; nevertheless, there can be no assurance
that designs for such products, including the Face Jewel, will have a chance of
achieving popular and commercial success. (See Part I, Item 1. "Description of
Business," (b) "Business of Issuer - Business Strategy; - Proposed Product Line;
- - Marketing and Distribution; and Purchasing, Manufacturing and Assembly."
7. No Marketing Organization; Limited Marketing Capability. The Company's
success depends in large part upon its ability to identify and adequately
penetrate the markets for its potential jewelry and accessory products. As
compared to JDI, which lacks the financial, personnel and other resources
required to compete with its larger, better-financed competitors, virtually all
of the Company's competitors have much larger budgets for marketing, advertising
and promotion. Except for its Executive Vice President, JDI presently has no
design, product development, marketing or customer support personnel whatsoever
and, accordingly, management expects that the Company's products will be
marketed, for the most part, through third party independent sales
representatives. Depending upon the level of funding obtained by the Company,
management believes, without assurance, that it will be possible for JDI to
attract qualified personnel in the areas of jewelry design, product development
and marketing and customer support to work closely with both the third party
sales force and with the suppliers and customers and to participate in jewelry
fairs. However, in the event that only limited funds are obtained, the Company
anticipates that its limited finances and other resources may be a determinative
factor in the decision of any prospective employee as to whether to become
employed by JDI. Until such time, if ever, as the Company is successful in
attracting and employing capable design, product development, marketing and
customer support personnel, it intends to rely upon the judgment and conclusions
of its Executive Vice President based upon her knowledge and experience gained
in managing a family-owned jewelry business, relative to the Company's needs for
marketing and related expertise in these areas. However, the fact that neither
Mr. Fink nor Mr. Dorsett, executive officers and directors of JDI, has any
specific experience in the jewelry industry may adversely impact the Company's
chances for success. (See Part I, Item 1. "Description of Business," (b)
"Business of Issuer - Marketing and Distribution.")
8. High Risks and Unforeseen Costs Associated with JDI's Entry into the
Jewelry Business. There can be no assurance that the design, manufacturing,
merchandising, distribution and other costs incurred by JDI will not be
significantly greater than those estimated by Company management. Therefore, the
Company may expend significant unanticipated funds or significant funds may be
expended by JDI without the development of commercially viable jewelry or
accessory products or customer or marketing support services. There can be no
assurance that cost overruns will not occur or that such cost overruns will not
adversely affect the Company. Further, unfavorable general economic conditions
and/or a downturn in consumer confidence has in the past had, and could be
expected in the future to have, an adverse effect on consumer spending
preferences which could, in turn, adversely affect the Company's business.
Additionally, competitive pressures and changes in customer mix, among other
things, which management expects the Company to experience in the uncertain
event that it achieves commercial viability, could reduce the Company's gross
profit margin from time to time. Accordingly, there can be no assurance that JDI
will be capable of establishing itself in a commercially viable position in the
worldwide jewelry distribution market despite the uniqueness of its designs or
the modesty of its pricing. (See Part I, Item 1. "Description of Business," (b)
"Business of Issuer.")
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<PAGE>
9. Dependency on Suppliers and Customers. The Company's ability to
manufacture and distribute jewelry on a profitable and timely basis depends, at
least initially, upon the availability of jewelry products assembled to
management's specifications. There can be no assurance that assembled products
will be readily available from numerous sources and/or at prices acceptable to
JDI in accordance with management's belief. Further, even if the Company
receives sufficient proceeds from equity and/or debt financing or otherwise,
thus enabling it to employ the design, manufacturing, marketing and other
personnel needed to implement its business plan, it will nevertheless be
dependent upon the availability of raw materials, primarily precious metals and
gemstones, which management believes, without assurance, to be readily available
from numerous suppliers. Increases in the prices of raw materials and/or
limitations on the availability of such raw materials may adversely affect JDI's
ability to manufacture and distribute jewelry to customers on a timely basis or
at prices acceptable to the Company and its customers, if any. Additionally,
because a substantial portion of the jewelry products proposed to be distributed
by the Company is expected to be purchased from third party suppliers, failure
by such suppliers to deliver jewelry on a timely basis and increases in the
costs charged by such suppliers could adversely affect the Company's
relationship with its customers. While management hopes to sell products to a
large number of customers in a broad range of markets, to the extent that a few
large volume customers account for the bulk of its product sales, the loss of
any of these customers, or a significant reduction in their orders, could have a
material adverse effect on JDI's business. The Company does not anticipate that
it will have long-term contracts with its prospective customers. (See Part I,
Item 1. "Description of Business," (b) "Business of Issuer - Marketing and
Distribution; - Purchasing, Manufacturing and Assembly.")
10. Conflicts of Interest. There are existing and potential conflicts of
interest, including time, effort and corporate opportunity, involved in the
participation by the Company's executive officers and directors in other
business entities and transactions. Ms. Suzanne Sorensen, the Company's
Executive Vice President and the manager of Suzanne Designs, an affiliate of the
Company, will divide her time and effort between and among the Company, Suzanne
Designs and her other business obligations. Accordingly, Ms. Sorensen and/or
other members of management of the Company may be subject to direct conflicts of
interest and the corporate opportunities doctrine with respect to business
opportunities in the jewelry and accessory business which come to their
attention. The Company's Amended Articles of Incorporation provide that any
related party contract or transaction must be authorized, approved or ratified
at a meeting of the Board of Directors by sufficient vote thereon by directors
not interested therein or the transaction must be fair and reasonable to the
Company. Accordingly, while Ms. Sorensen will abstain from voting on any related
party contract or transaction involving Suzanne Designs, it is nevertheless
possible for the Company's Board of Directors, by vote of a sufficient number of
disinterested members thereof, to authorize, approve or ratify such a contract
or transaction even if it is not fair or reasonable to the Company.
Because of existing and/or potential future associations of the Company's
executive officers and directors in various capacities with other firms involved
in a range of business activities and because of the limited or minimal amount
of time and effort which is expected to be devoted to the Company by such
persons, there are existing and potential continuing conflicts of interest in
their acting as executive officers and/or directors of the Company. None of the
executive officers or directors of the Company will be able to devote a
significant amount of time or effort to the business and affairs of the Company
- 12 -
<PAGE>
because of their simultaneous participation in, employment by and/or commitments
to other firms involved in a range of business activities. In addition, all of
such persons are or may become, in their individual capacities, officers,
directors, controlling shareholders and/or partners of other entities (in
addition to Suzanne Designs) engaged in a variety of businesses which are
engaged, or may in the future engage, in various transactions, or compete
directly, with the Company. Conflicts of interest and transactions which are not
at arm's-length may arise in the future because the Company's executive officers
and/or directors are involved in the management of any company which transacts
business, or competes directly, with the Company. (See Part I, Item 1.
"Description of Business," (b) "Business of Issuer - General.")
11. Competition. Competition is intense within the jewelry industry in
general and in the specialized jewelry and accessory market segment in which JDI
proposes to operate. It is anticipated that the jewelry industry may be subject
to changes in the general state of the economy, shifts in the demographic
structure, changes in the buying habits of the public, the availability of
alternative products and the increased cost of doing business. Further, there
may be significant technological advances in the future and the Company may not
have adequate creative management and resources to enable it to take advantage
of such advances. The Company anticipates that virtually all of its many
competitors, both domestic and international, will have substantially greater
technical, financial and marketing resources than the Company. While JDI expects
to compete on the basis of the uniqueness of its designs, its reputation among
customers as a quality provider of products and marketing and customer support
services together with its anticipated close relationship with its customers,
vendors and distributors and, to a lesser extent, on the basis of price, its
opportunity to obtain customers may be limited by its financial resources and
other assets. In this regard, many of the companies and other organizations with
which JDI will be in competition are established and have far greater financial
resources, substantially greater experience and larger staffs than the Company
and are expected to to offer a wider selection of products than the Company.
Additionally, many of such organizations have proven operating histories, which
the Company lacks. JDI expects to face strong competition from both such
well-established companies and small independent companies like itself. In
addition, the Company's proposed business may be subject to decline because of
the general state of the economy and generally increasing costs and expenses of
doing business, thus further increasing anticipated competition. While
management hopes that the Company's proposed products will be well-positioned
and competitive under current market conditions, there can be no assurance that
any such products will continue to be competitive in the face of changes in
product design, changes in fashion and the entry of new competitors into the
market. (See Part I, Item 1. "Description of Business," (b) "Business of Issuer
- - Competition.")
12. Absence of Public Market for Shares. The Company's shares of Common
Stock are not registered with the U.S. Securities and Exchange Commission under
the Securities Act of 1933, as amended (hereinafter referred to as the "Act").
There is no public market for the shares of Common Stock and no assurance that
one will develop. Of such shares, 80,000 thereof are "free-trading" because of
their issuance to persons unaffiliated with JDI pursuant to the exemption from
registration provided by Rule 504 of Regulation D promulgated under Section 3(b)
of the Act, and the balance of 328,000 of such shares are "restricted
securities." Rule 144 of the Act provides, in essence, that holders of
restricted securities for a period of one year after the acquisition thereof
from the Company or an affiliate of the Company, may, every three months, sell
to a market maker or in ordinary brokerage transactions an amount equal to one
per cent of the Company's then outstanding securities. Nonaffiliates of the
Company who hold restricted securities for a period of two years may sell their
securities without regard to volume limitations or other restriction. Resales of
- 13 -
<PAGE>
the free-trading shares of Common Stock by "affiliates, control persons and/or
underwriters" of JDI, as those terms are defined in the Act, will be subject to
the volume limitations described in paragraph (e) of Rule 144. Any transfer or
resale of the shares of JDI's Common Stock will be subject, in addition to the
Federal securities laws, to the "blue sky" laws of each state in which such
transfer or resale occurs. A total of 320,000 shares and 8,000 shares of the
Company's Common Stock will be available for resale under Rule 144 commencing in
March and April 1998, respectively. Sales of shares of Common Stock under Rule
144 may have a depressive effect on the market price of the Company's Common
Stock, should a public market develop for such stock. Such sales might also
impede future financing by the Company.
13. No Dividends. While payment of dividends on the Common Stock rests with
the discretion of the Board of Directors, there can be no assurance that
dividends can or will ever be paid. Payment of dividends is contingent upon,
among other things, future earnings, if any, and the financial condition of the
Company, capital requirements, general business conditions and other factors
which cannot now be predicted. It is highly unlikely that cash dividends on the
Common Stock will be paid by the Company in the foreseeable future. (See Part I,
Item 8. "Description of Securities - Description of Common Stock - Dividend
Policy.")
14. No Cumulative Voting. The election of directors and other questions
will be decided by majority vote. Since cumulative voting is not permitted and
one-third of the Company's outstanding shares constitutes a quorum, investors
who purchase shares of the Company's Common Stock may not have the power to
elect even a single director and, as a practical matter, the current management
will continue to effectively control the Company. (See Part I, Item 4. "Security
Ownership of Certain Beneficial Owners and Management" and Part I, Item 8.
"Description of Securities - Descrition of Common Stock.")
15. Control by Present Shareholders. The present shareholders of the
Company's outstanding Common Stock will, by virtue of their percentage share
ownership and the lack of cumulative voting, be able to elect the entire Board
of Directors, establish the Company's policies and generally direct its affairs.
Accordingly, persons investing in the Company's Common Stock will have no
significant voice in Company management, and cannot be assured of ever having
representation on the Board of Directors. "See Part I, Item 4. "Security
Ownership of Certain Beneficial Owners and Management.")
16. Potential Anti-Takeover and Other Effects of Issuance of Preferred
Stock May Be Detrimental to Common Shareholders. The Company is authorized to
issue up to 10,000,000 shares of preferred stock, $.01 par value per share
(hereinafter referred to as the "Preferred Stock"); none of which shares has
been issued. The issuance of Preferred Stock does not require approval by the
shareholders of the Company's Common Stock. The Board of Directors, in its sole
discretion, has the power to issue shares of Preferred Stock in one or more
series and establish the dividend rates and preferences, liquidation
preferences, voting rights, redemption and conversion terms and conditions and
any other relative rights and preferences with respect to any series of
Preferred Stock. Holders of Preferred Stock may have the right to receive
dividends, certain preferences in liquidation and conversion and other rights;
any of which rights and preferences may operate to the detriment of the
shareholders of the Company's Common Stock. Further, the issuance of any shares
of Preferred Stock having rights superior to those of the Company's Common Stock
may result in a decrease in the value or market price of the Common Stock,
- 14 -
<PAGE>
provided a market exists, and, additionally, could be used by the Board of
Directors as an anti-takeover measure or device to prevent a change in control
of the Company. (See Part I, Item 8. "Description of Securities - Description of
Preferred Stock.")
17. No Secondary Trading Exemption. Secondary trading in the Common Stock
will not be possible in each state until the shares of Common Stock are
qualified for sale under the applicable securities laws of that state or the
Company verifies that an exemption, such as listing in certain recognized
securities manuals, is available for secondary trading in that state. There can
be no assurance that the Company will be successful in registering or qualifying
the Common Stock for secondary trading, or availing itself of an exemption for
secondary trading in the Common Stock, in any state. If the Company fails to
register or qualify, or obtain or verify an exemption for the secondary trading
of, the Common Stock in any particular state, the shares of Common Stock could
not be offered or sold to, or purchased by, a resident of that state. In the
event that a significant number of states refuse to permit secondary trading in
the Company's Common Stock, a public market for the Common Stock will fail to
develop and the shares could be deprived of any value.
Item 2. Management's Discussion and Analysis or Plan of Operation.
Plan of Operations
- ------------------
Since its inception, the Company, which is now known as "Jewelnique
Designs, Inc.," has conducted no business operations except for organizational
and capital raising activities. For the period from inception (March 6, 1997)
through March 31, 1997, the Company had no income from operations and operating
expenses aggregating $11,061. The Company proposes to engage in business in the
design, manufacture, marketing and wholesale distribution of a specialized line
of jewelry products. Management expects that the Company's proposed product line
will initially be distributed through the identical distribution channels,
including boutiques, hair salons, beauty supply stores, department stores and
children's stores, presently being utilized to distribute the jewelry products
manufactured, marketed and distributed by Suzanne Designs, a closely-held
jewelry business owned and operated by the Sorensen family since approximately
1976. If the Company is unable to generate sufficient revenue from operations,
management intends to explore all available alternatives for debt and/or equity
financing, including but not limited to private and public securities offerings.
Financial Condition, Capital Resources and Liquidity
- ----------------------------------------------------
At March 31, 1997, the Company had assets totaling $4,950 and $210 in
liabilities. Since the Company's inception, it has received $20,000 in cash
contributed as consideration for the issuance of shares of Common Stock.
The Company has no potential capital resources.
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<PAGE>
Item 3. Description of Property.
The Company's executive offices are located at 2449 Lyric Avenue, Los
Angeles, California 90027, and its telephone number is (213) 660-8665. The
Company owns no real or personal property.
Item 4. Security Ownership of Certain Beneficial Owners and Management.
The following table sets forth information as of June 26, 1997, regarding
the ownership of the Company's Common Stock by each shareholder known by the
Company to be the beneficial owner of more than five per cent of its outstanding
shares of Common Stock, each director and all executive officers and directors
as a group. Except as otherwise indicated, each of the shareholders has sole
voting and investment power with respect to the shares of Common Stock
beneficially owned.
<TABLE>
<CAPTION>
Amount
Name and Address of Beneficially Percent of
Beneficial Owner Owned Class
---------------- ------------ -----------
<S> <C> <C>
Roland W. Fink 128,000 31.4%
1201 North Pacific Avenue, Suite #104
Glendale, California 91202
Kendall L. Dorsett 128,000 31.4%
1201 North Pacific Avenue, Suite #104
Glendale, California 91202
Patricia Cudd 64,000 15.7%
50 South Steele Street, Suite #222
Denver, Colorado 80209
Suzanne Sorensen 8,000 2.0%
2449 Lyric Avenue
Los Angeles, California 90027
All Executive Officers and Directors as 264,000 64.7%
a Group (three persons)
</TABLE>
Item 5. Directors, Executive Officers, Promoters and Control Persons.
Executive Officers and Directors
Set forth below are the names, ages, positions with the Company and
business experiences of the executive officers and directors of the Company.
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<PAGE>
Name Age Position(s) with Company
---- --- ------------------------
Roland W. Fink 41 President and Director
Kendall L. Dorsett 54 Secretary, Treasurer and Director
Suzanne Sorensen 49 Executive Vice President
- -------------------
*Except for Ms. Sorensen, who had no role in founding or organizing the
Company, the above-named persons may be deemed to be "promoters" and "parents"
of the Company, as those terms are defined under the Rules and Regulations
promulgated under the Securities Act of 1933, as amended.
All directors hold office until the next annual meeting of the Company's
shareholders and until their successors have been elected and qualify. Officers
serve at the pleasure of the Board of Directors. Messrs. Fink and Dorsett and
Ms. Sorensen will devote such time and effort to the business and affairs of the
Company as may be necessary to perform their responsibilities as executive
officers and/or directors of the Company.
Family Relationships
There are no family relationships between or among the executive officers
and directors of the Company.
Business Experience
Roland W. Fink has served as the President and a director of the Company
since its inception on March 6, 1997. Since March 1997, Mr. Fink, together with
Mr. Dorsett, have been general partners of Fink & Dorsett, Glendale, California,
a consulting firm specializing in corporate finance. He was the managing partner
of Greenberg & Jackson, a Los Angeles-based certified public accounting firm,
from May 1992 through October 1995. Mr. Fink, from 1983 through 1992, served as
the Vice President and Controller of WellTech Inc. ("WellTech"), a major
Houston-based oil field services commpany. Prior to his tenure with WellTech,
Mr. Fink was employed by a "Big Six" accounting firm and a large local
accounting firm with offices in Fort Wayne, Indiana. He received a B.S. degree
in accounting from Manchester College, North Manchester, Indiana, in 1977. He is
a certified public accountant.
Suzanne Sorensen has served as the Executive Vice President of the Company
since April 2, 1997. Ms. Sorensen has managed Suzanne Designs, Los Angeles,
California, a family-owned jewelry business, where she has been responsible for
the design, manufacture, marketing and distribution of a variety of jewelry and
other fashion accessory items, since 1976.
Kendall L. Dorsett has served as the Secretary, Treasurer and a director of
the Company since the organization of JDI on March 6, 1997. He has been a
general partner, together with Mr. Fink, of Fink & Dorsett, a consulting firm
specializing in corporate finance, since March 1997. From 1990 to January 1995,
Mr. Dorsett served as the Vice President of Shareholder Relations for American
Technologies Group, Inc., a publicly-held corporation whose securities trade on
the Over-the-Counter Bulletin Board under the symbol "ATEG." Prior to 1990, he
was a registered representative with a number of New York Stock Exchange-listed
- 17 -
<PAGE>
brokerage firms, including Shearson Lehman Brothers, Prudential Securities and
others. Mr. Dorsett received his B.A. degree in economics from the University of
California at Santa Barbara in 1966.
Item 6. Executive Compensation.
Executive Compensation
Except for certain shares of the Company's Common Stock issued and sold to
each of the three executive officers and/or directors of the Company in
consideration for various services performed for the Company by each of them and
a lump-sum consulting fee in the amount of $5,000 paid to each of Messrs. Roland
W. Fink and Kendall L. Dorsett, no cash or non-cash compensation was awarded to,
earned by or paid to any executive officer or director of the Company for all
services rendered in all capacities to the Company during the approximate three
and one-half month period since the Company's inception on March 6, 1997. On
March 6, 1992, the Company issued and sold 128,000 shares of Common Stock,
representing approximately 31.4% of the total number of shares of Common Stock
of the Company outstanding on the date hereof, to each of Messrs. Fink and
Dorsett for services rendered as consultants to the Corporation (an aggregate of
256,000 shares of Common Stock). Ms. Suzanne Sorensen, on April 1, 1997,
received a total of 8,000 shares of Common Stock, representing approximately
2.0% of the total number of outstanding shares of the Company's Common Stock as
of the date hereof, in consideration for certain business consulting services
performed by her for the Company. Except for the above-described compensation,
it is not anticipated that any executive officer of the Company will receive any
cash or non-cash compensation for his or her services in all capacities to the
Company until such time as the Company commences business operations. At such
time as JDI commences operations, it is expected that the Board of Directors
will approve the payment of salaries in a reasonable amount to each of Mr. Fink,
Ms. Sorensen and Mr. Dorsett for their services in the positions of President,
Executive Vice President and Secretary/Treasurer, respectively, of the Company.
At such time, the Board of Directors may, in its discretion, approve the payment
of additional cash or non-cash compensation to the foregoing for their services
to the Company.
The Company does not provide officers with pension, stock appreciation
rights, long-term incentive or other plans and has no intention of implementing
any such plans for the foreseeable future.
Compensation of Directors
The Company has no standard arrangements for compensating the directors of
the Company for their attendance at meetings of the Board of Directors.
Item 7. Certain Relationships and Related Transactions.
On March 6, 1997, the Company issued and sold 128,000 shares of Common
Stock to each of Messrs. Roland W. Fink and Kendall L. Dorsett (a total of
256,000 shares of Common Stock), the President and Secretary/Treasurer,
respectively, of the Company and record and beneficial owners each of
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<PAGE>
approximately 31.4% of the Company's outstanding Common Stock, in consideration
and exchange therefor of services valued at $128 (an aggregate of $256)
performed for the Company by each such person. The services performed by Mr.
Roland W. Fink include the preparation of a business plan for the Company and
Mr. Dorsett performed certain financial consulting services for the Company.
The Company issued and sold, on March 6, 1997, an aggregate of 64,000
shares of its Common Stock to Patricia Cudd, Esq., the owner of record and
beneficially of approximately 15.7% of the Company's outstanding shares of
Common Stock and the sole proprietor of Patricia Cudd & Associates, Denver,
Colorado, which firm has passed upon the legality of the Common Stock and
certain other matters in connection with this Form 10-SB Registration Statement.
The shares were issued to Ms. Cudd in consideration for her performance of
certain legal services related to the organization of the Company; which
services were valued at $64.
On April 2, 1997, the Company issued and sold a total of 8,000 shares of
Common Stock to Ms. Suzanne Sorensen, the Executive Vice President of the
Company and the record and beneficial owner of approximately 2.0% of the
Company's outstanding Common Stock, as consideration for certain business
consulting services performed for the Company relating to, among other things,
jewelry design, fabrication and marketing, valued at $2,000.
Item 8. Description of Securities.
Description of Capital Stock
- ----------------------------
The Company's authorized capital stock consists of 100,000,000 shares of
Common Stock, $.001 par value per share, and 10,000,000 shares of Preferred
Stock, $.01 par value per share.
Description of Common Stock
- ---------------------------
All shares of Common Stock have equal voting rights and, when validly
issued and outstanding, are entitled to one vote per share in all matters to be
voted upon by shareholders. The shares of Common Stock have no preemptive,
subscription, conversion or redemption rights and may be issued only as
fully-paid and nonassessable shares. Cumulative voting in the election of
directors is not permitted; which means that the holders of a majority of the
issued and outstanding shares of Common Stock represented at any meeting at
which a quorum is present will be able to elect the entire Board of Directors if
they so choose and, in such event, the holders of the remaining shares of Common
Stock will not be able to elect any directors. In the event of liquidation of
the Company, each shareholder is entitled to receive a proportionate share of
the Company's assets available for distribution to shareholders after the
payment of liabilities and after distribution in full of preferential amounts,
if any, to be distributed to holders of the Preferred Stock. All shares of the
Company's Common Stock issued and outstanding are fully-paid and nonassessable.
Dividend Policy. Holders of shares of Common Stock are entitled to share
pro rata in dividends and distributions with respect to the Common Stock when,
as and if declared by the Board of Directors out of funds legally available
therefor, after requirements with respect to
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<PAGE>
preferential dividends on, and other matters relating to, the Preferred Stock,
if any, have been met. The Company has not paid any dividends on its Common
Stock and intends to retain earnings, if any, to finance the development and
expansion of its business. Future dividend policy is subject to the discretion
of the Board of Directors and will depend upon a number of factors, including
future earnings, capital requirements and the financial condition of the
Company.
Transfer Agent and Registrar. The Transfer Agent and Registrar for the
Company's Common Stock is U.S. Stock Transfer Corporation, 1745 Gardena Avenue,
Suite #200, Glendale, California 91204.
Description of Preferred Stock
- ------------------------------
Shares of Preferred Stock may be issued from time to time in one or more
series as may be determined by the Board of Directors. The voting powers and
preferences, the relative rights of each such series and the qualifications,
limitations and restrictions thereof shall be established by the Board of
Directors, except that no holder of Preferred Stock shall have preemptive
rights. The Company has no shares of Preferred Stock outstanding, and the Board
of Directors has no plan to issue any shares of Preferred Stock for the
foreseeable future unless the issuance thereof shall be in the best interests of
the Company.
PART II
Item 1. Market Price of and Dividends on the Registrant's Common Equity and
Other Shareholder Matters.
(a) Market Information.
There has been no established public trading market for the Common Stock
since the Company's inception on March 6, 1997.
(b) Holders.
As of June 26, 1997, the Company had twenty-four shareholders of record of
its 408,000 outstanding shares of Common Stock.
(c) Dividends.
The Company has never paid or declared any dividends on its Common Stock
and does not anticipate paying cash dividends in the foreseeable future.
Item 2. Legal Proceedings.
The Company knows of no legal proceedings to which it is a party or to
which any of its property is the subject which are pending, threatened or
contemplated or any unsatisfied judgments against the Company.
- 20 -
<PAGE>
Item 3. Changes in and Disagreements with Accountants.
Because the Company has been generally inactive since its inception, it has
had no independent accountant until the retention of Janet Loss, C.P.A., P.C.,
9101 East Kenyon Avenue, Suite #2000, Denver, Colorado 80237, in May 1997. There
has been no change in the Company's independent accountant during the period
commencing with the Company's retention of Janet Loss, C.P.A., P.C., in May,
1997, through the date hereof.
Item 4. Recent Sales of Unregistered Securities.
On March 6, 1997, the Company issued and sold to each of Mr. Roland W.
Fink, the President and a director of the Company, and Kendall L. Dorsett, the
Secretary/Treasurer and a director of the Company, 128,000 shares of the
Company's Common Stock (a total of 256,000 shares of Common Stock), in
consideration, in each case, for services valued at $128 (services valued at an
aggregate of $256). The Company, on March 6, 1997, issued and sold an aggregate
of 64,000 shares of its Common Stock to Patricia Cudd, Esq., the sole proprietor
of the law firm which has passed upon the legality of the Common Stock and
certain other matters in connection with this Form 10-SB Registration Statement,
in consideration for her performance of certain legal services valued at $64. On
April 1, 1997, the Company issued and sold to its Executive Vice President, Ms.
Suzanne Sorensen, a total of 8,000 shares of Common Stock in consideration for
certain business consulting services performed by her for the Company valued at
$2,000. The Company relied, in connection with each of the transactions
described in this Item 4. whereby the Company issued and sold shares of its
common stock in consideration and exchange for various types of services, upon
the exemption from registration afforded by Section 4(2) of the Act for sales of
securities by an issuer not constituting a public securities offering. (See Part
I, Item 7. "Certain Relationships and Related Transactions.")
Item 5. Indemnification of Directors and Officers.
Article VII of the Company's Articles of Incorporation contains provisions
providing for the indemnification of directors and officers of the Company as
follows:
(a) The corporation shall indemnify any person who was or is a party, or is
threatened to be made a 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 otherwise 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 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 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 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 reasonable cause to believe the action was unlawful.
- 21 -
<PAGE>
(b) The corporation shall 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 he
reasonably believed to be in, or not opposed to, the best interests of the
corporation, except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable for negligence or misconduct in the performance of his duty to the
corporation, unless, and only to the extent that, 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 circumstances of the case, such
person is fairly and reasonably entitled to indemnification for such expenses
which such court deems proper.
(c) To the extent that a director, officer, employee or agent of the
corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in Sections (a) and (b) of this Article,
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 Section (a) or (b) of this Article (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 officer, director
and employee or agent is proper in the circumstances, because he has met the
applicable standard of conduct set forth in Section (a) or (b) of this Article.
Such determination shall be made (i) by the Board of Directors by a majority
vote of a quorum consisting of directors who were not parties to such action,
suit or proceeding, or (ii) if such quorum is not obtainable or, even if
obtainable, a quorum of disinterested directors so directs, by independent legal
counsel in a written opinion, or (iii) by the affirmative vote of the holders of
a majority of the shares of stock entitled to vote and represented at a meeting
called for such purpose.
(e) Expenses (including attorneys' fees) incurred in defending a civil or
criminal action, suit or proceeding may be paid by the corporation in advance of
the final disposition of such action, suit or proceeding, as authorized in
Section (d) of this Article, upon receipt of an understanding by or on behalf of
the director, officer, employee or agent to repay such amount, unless it shall
ultimately be determined that he is entitled to be indemnified by the
corporation as authorized in this Article.
(f) The Board of Directors may exercise the corporation's 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 Article.
- 22 -
<PAGE>
(g) The indemnification provided by this Article shall not be deemed
exclusive of any other rights to which those seeking indemnification may be
entitled under these Articles of Incorporation, the Bylaws, agreements, vote of
the shareholders or disinterested directors, or otherwise, both as to action in
his official capacity and as to action in another capacity while holding such
office, and shall continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the heirs and
personal representatives of such a person.
The Company has no agreements with any of its directors or executive
officers providing for indemnification of any such persons with respect to
liability arising out of their capacity or status as officers and directors.
At present, there is no pending litigation or proceeding involving a
director or executive officer of the Company as to which indemnification is
being sought.
PART F/S
The Financial Statements of Jewelnique Designs, Inc., required by
Regulation S-X commence on page F-1 hereof in response to Part F/S of this
Registration Statement on Form 10-SB and are incorporated herein by this
reference.
PART III
Item 1. Index to Exhibits.
Item
Number Description
- ------- ---------------------------------------------------------------
2.1* Articles of Incorporation of Blue Mountain, Inc.,
filed March 6, 1997.
2.2* Articles of Amendment to the Articles of Incorporation of Blue
Mountain Capital, Inc., filed June 20, 1997.
2.3* Bylaws of Blue Mountain Capital, Inc.
- ------------------
*Filed herewith.
Item 2. Description of Exhibits.
The documents required to be filed as Exhibit Number 2 in Part III of Form
1-A filed as part of this Registration Statement on Form 10-SB are listed in
Item 1 of this Part III above. No documents are required to be filed as Exhibit
Numbers 3, 5, 6 or 7 in Part III of Form 1-A, and the reference to such Exhibit
Numbers is therefore omitted. No additional exhibits are filed hereto.
- 23 -
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
registrant caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized.
JEWELNIQUE DESIGNS, INC.
(Registrant)
Date: June 26, 1997 By: /s/ Roland W. Fink
------------------------------
Roland W. Fink, President
- 24 -
<PAGE>
JEWELNIQUE DESIGNS, INC.
Formerly, Blue Mountain Capital, Inc.
(A DEVELOPMENT STAGE COMPANY)
AUDIT REPORT
------------
March 31, 1997
--------------
Index to Financial Statements
-----------------------------
Page
----
Independent Auditor's Report F-2
Balance Sheet F-3
Statement of Operations F-4
Statement of Stockholders' Equity F-5
Statement of Cash Flows F-6
Notes to Financial Statements F-7 through F-8
<PAGE>
Janet Loss, C.P.A.,P.C.
Certified Public Accountant
9101 E. Kenyon Avenue, Suite 2000
Denver, Colorado 80237
Board of Directors
Jewelnique Designs, Inc.
I have audited the accompanying balance sheet of Jewelnique Designs, Inc. (a
development stage company) as of March 31, 1997, and the related statements of
operations, stockholders' equity and cash flows for the period from March 6,
1997 (inception) through March 31, 1997. These financial statements are the
responsibility of the company's management. My responsibility is to express an
opinion on these financial statements based on my audit.
I conducted my audit in accordance with generally accepted accounting standards.
These standards require that I plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall
financial statement presentation. I believe that my audit provides a reasonable
basis for my opinion.
In my opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Jewelnique Designs, Inc. (a
development stage company) as of March 6, 1997, and the results of its operation
and its cash flow for the period from March 6, 1997 (inception) through March
31, 1997.
/s/ JANET LOSS, C.P.A., P.C.
Janet Loss, C.P.A., P.C.
June 18, 1997
F-2
<PAGE>
JEWELNIQUE DESIGNS, INC.
Formerly, Blue Mountain Capital, Inc.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
-------------
March 31, 1997
--------------
ASSETS
------
CURRENT ASSETS:
Cash in checking $ 4,950
--------
OTHER ASSETS:
Organization Costs, net of amortization 494
--------
TOTAL ASSETS $ 5,444
========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES;
Accrued Management Fees $ 210
STOCKHOLDERS' EQUITY:
Preferred Stock, 10,000,000
shares authorized, $.01 par
value per share, none issued --
Common Stock, 100,000,000 shares
authorized, $.001 par value per share,
400,000 shares issued and outstanding 400
Additional Paid in Capital 15,895
Deficit (11,061)
--------
TOTAL STOCKHOLDERS' EQUITY $ 5,234
--------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 5,444
========
The accompanying notes are an integral part of the financial statements.
F-3
<PAGE>
JEWELNIQUE DESIGNS, INC.
Formerly, Blue Mountain Capital, Inc.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF OPERATIONS
-----------------------
For the Period From March 6, 1997 (Inception) through March 31, 1997
--------------------------------------------------------------------
REVENUES: $ 0
--------
OPERATING EXPENSES:
Amortization $ 6
Consulting Fees 8,242
Filing Fees 50
Legal Fees 2,553
Management Fees 210
--------
TOTAL OPERATING EXPENSES 11,061
--------
NET (LOSS) $(11,061)
========
NET (LOSS) PER SHARE $ (.03)
========
The accompanying notes are an integral part of the financial statements.
F-4
<PAGE>
<TABLE>
<CAPTION>
JEWELNIQUE DESIGNS, INC.
(Formerly, Blue Mountain Capital, Inc.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF STOCKHOLDERS' EQUITY
---------------------------------
For the Period From March 6, 1997 (Inception) through March 31, 1997
--------------------------------------------------------------------
Common Stock
------------------------ Total
Number Additional Stockholders'
of Shares Amount Paid-in-Capital (Deficit) Equity
--------- ------ --------------- --------- -------------
<S> <C> <C> <C> <C> <C>
Issuance of
Stock for Cash,
($.001 par value
per share) 80,000 $ 80 $ 15,895 $ -- $ 15,975
Issuance of
Stock for Services
($.001 par value
per share) 320,000 320 -- -- 320
Net Loss for Period
From March 6, 1997
(Inception) to
March 31, 1997 (11,061) (11,061)
-----------------------------------------------------------------------------------
Balance,
March 31, 1997 400,000 $ 400 $ 15,895 $(11,061) $ 5,234
===================================================================================
The accompanying notes are an integral part of these financial statements.
F-5
</TABLE>
<PAGE>
JEWELNIQUE DESIGNS, INC.
Formerly, Blue Mountain Capital, Inc.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS
-----------------------
For the Period From March 6, 1997 (Inception) through March 31, 1997
--------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (Loss) $(11,061)
ADJUSTMENTS TO RECONCILE NET (LOSS) TO
NET CASH USED BY OPERATING ACTIVITIES:
Amortization 6
Stock Issued for Services 320
CHANGES IN OPERATING ASSETS AND LIABILITIES:
Increase (decrease) in current liabilities 210
--------
NET CASH (USED) BY OPERATING ACTIVITIES $(10,525)
CASH USED FROM INVESTING ACTIVITIES:
Organization Costs (500)
--------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock, net of
$4,025 in offering expenses 15,975
--------
NET INCREASE IN CASH $ 4,950
CASH, BEGINNING OF PERIOD 0
--------
CASH, END OF PERIOD $ 4,950
========
The accompanying notes are an integral part of the financial statements.
F-6
<PAGE>
JEWELNIQUE DESIGNS, INC.
Formerly, Blue Mountain Capital, Inc.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
-----------------------------
NOTE 1 - HISTORY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES.
- ----------------------------------------------------------------
Jewelnique Designs, Inc., a Colorado Corporation, was incorporated March 6, 1997
for the purpose to design, manufacture, market and distribute a specialized line
of jewelry products to be sold primarily through stores. The Company is
currently in the development stage.
Year-End
--------
The Company has elected a calendar year-end.
Accounting Method
-----------------
The Company records income and expenses on the accrual method of
accounting.
Organization Costs
------------------
Costs incurred in organizing the Company are being amortized over a
sixty-month period.
Deferred Offering Costs
-----------------------
Costs associated with the Company's initial public offering have been
charged to the proceeds of the offering.
Loss Per Share
--------------
Net loss is calculated by dividing the net loss by the weighted average
number of common shares outstanding. Shares issued to insiders are
considered outstanding since inception.
NOTE 2 - RELATED PARTY TRANSACTIONS
- -----------------------------------
The Company maintains its offices in space provided by an officer of the Company
pursuant to an oral agreement on a rent-free basis with reimbursement for
out-of-pocket expenses, such as telephone.
The Company has paid $15,050 for legal and consulting fees to related parties.
The Company has also issued 320,000 shares of common stock to related parties
for services rendered that were valued at $320.00.
NOTE 3 - NAME CHANGE
The corporate name has been changed from Blue Mountain Capital, Inc. to
Jewelnique Designs, Inc. on May 14, 1997.
F-7
<PAGE>
JEWELNIQUE DESIGNS, INC.
Formerly, Blue Mountain Capital, Inc.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
-----------------------------
(cont.)
NOTE 4 - GOING CONCERN
- ----------------------
The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles, which contemplate continuation of the
Company as a going concern. The Company's ability to continue as a going concern
is dependent upon the Company's ability to obtain financing.
NOTE 5 - CAPITALIZATION
- -----------------------
On March 8, 1997, the Company closed its initial public offering realizing
proceeds of $15,975, net of $4,025 in offering expenses.
F-8
ARTICLES OF INCORPORATION
OF
BLUE MOUNTAIN CAPITAL, INC.
KNOW ALL MEN BY THESE PRESENTS:
That I, PATRICIA CUDD, desiring to establish a corporation under the name
of BLUE MOUNTAIN CAPITAL, INC., for the purpose of becoming a body corporate
under and by virtue of the laws of the State of Colorado and, in accordance with
the provisions of the laws of said State, do hereby make, execute and
acknowledge this certificate in writing of my intention to become a body
corporate, under and by virtue of said laws.
ARTICLE I
The name of the corporation shall be: BLUE MOUNTAIN CAPITAL, INC.
ARTICLE II
The nature of the business and the objects and purposes to be transacted,
promoted and carried on are to do any or all of the things herein mentioned as
fully and to the same extent as natural persons might or could do, and in any
part of the world, viz:
(a) To transact all lawful business for which corporations may be
incorporated pursuant to the Colorado Corporation Code.
(b) To manufacture, purchase or otherwise acquire and to hold, own,
mortgage or otherwise lien, pledge, lease, sell, assign, exchange, transfer
or in any manner dispose of, and to invest, deal and trade in and with
goods, wares, merchandise and personal property of any and every class and
description, within or without the State of Colorado.
(c) To acquire the goodwill, rights and property and to undertake the
whole or any part of the assets and liabilities of any person, firm,
association or corporation; to pay for the same in cash, the stock of the
corporation, bonds or otherwise; to hold or in any manner dispose of the
whole or any part of the property so purchased; to conduct in any lawful
manner the whole or any part of any business so acquired and to exercise
all the powers necessary or convenient in and about the conduct and
management of such business.
(d) To guarantee, purchase or otherwise acquire, hold, sell, assign,
transfer, mortgage, pledge or otherwise dispose of shares of the capital
stock, bonds or other evidences of indebtedness created by other
corporations and, while the holder of such stock, to exercise all the
rights and privileges of ownership, including the right to vote thereon, to
the same extent as natural persons might or could do.
- 1 -
<PAGE>
(e) To purchase or otherwise acquire, apply for, register, hold, use,
sell or in any manner dispose of and to grant licenses or other rights in
and in any manner deal with patents, inventions, improvements, processes,
formulas, trademarks, trade names, rights and licenses secured under
letters patent, copyright or otherwise.
(f) To enter into, make and perform contracts of every kind for any
lawful purpose, with any person, firm, association or corporation, town,
city, county, body politic, state, territory, government, colony or
dependency thereof.
(g) To borrow money for any of the purposes of the corporation and to
draw, make, accept, endorse, discount, execute, issue, sell, pledge or
otherwise dispose of promissory notes, drafts, bills of exchange, warrants,
bonds, debentures and other negotiable or non-negotiable, transferable or
nontransferable instruments and evidences of indebtedness, and to secure
the payment thereof and the interest thereon by mortgage or pledge,
conveyance or assignment in trust of the whole or any part of the property
of the corporation at the time owned or thereafter acquired.
(h) To lend money to, or guarantee the obligations of, or to otherwise
assist the directors of the corporation or of any other corporation the
majority of whose voting capital stock is owned by the corporation, upon
the affirmative vote of at least a majority of the outstanding shares
entitled to vote for directors.
(i) To purchase, take, own, hold, deal in, mortgage or otherwise
pledge, and to lease, sell, exchange, convey, transfer or in any manner
whatever dispose of real property, within or without the State of Colorado.
(j) To purchase, hold, sell and transfer the shares of its capital
stock.
(k) To have one or more offices and to conduct any and all operations
and business and to promote its objects, within or without the State of
Colorado, without restrictions as to place or amount.
(l) To do any or all of the things herein set forth as principal,
agent, contractor, trustee, partner or otherwise, alone or in company with
others.
(m) The objects and purposes specified herein shall be regarded as
independent objects and purposes and, except where otherwise expressed,
shall be in no way limited or restricted by reference to or inference from
the terms of any other clauses or paragraph of these Articles of
Incorporation.
(n) The foregoing shall be constructed both as objects and powers and
the enumeration thereof shall not be held to limit or restrict in any
manner the general powers conferred on this corporation by the laws of the
State of Colorado.
ARTICLE III
The total number of shares of all classes of capital stock which the
corporation shall have authority to issue is 110,000,000 of which 10,000,000
shall be shares of preferred stock, $.01 par value per share, and 100,000,000
- 2 -
<PAGE>
shall be shares of common stock, $.001 par value per share, and the
designations, preferences, limitations and relative rights of the shares of each
class shall be as follows:
(a) Shares of Preferred Stock. The corporation may divide and issue
the shares of preferred stock in series. Shares of preferred stock of each
series, when issued, shall be designated to distinguish them from the
shares of all other series. The Board of Directors is hereby vested with
authority to divide the class of shares of preferred stock into series and
to fix and determine the relative rights and preferences of the shares of
any such series so established to the full extent permitted by these
Articles of Incorporation and the Colorado Corporation Code in respect of
the following:
(i) The number of shares to constitute such series, and the
distinctive designations thereof;
(ii) The rate and preference of dividends, if any, the time of
payment of dividends, whether dividends are cumulative and the date
from which any dividends shall accrue;
(iii) Whether shares may be redeemed and, if so, the redemption
price and the terms and conditions of redemption;
(iv) The amount payable upon shares in event of involuntary
liquidation;
(v) The amount payable upon shares in event of voluntary
liquidation;
(vi) Sinking fund or other provisions, if any, for the redemption
or purchase of shares;
(vii) The terms and conditions upon which shares may be
converted, if the shares of any series are issued with the privilege
of conversion;
(viii) Voting powers, if any; and
(ix) Any other relative rights and preferences of shares of such
series, including, without limitation, any restriction on an increase
in the number of shares of any series theretofore authorized and any
limitation or restriction of rights or powers to which shares of any
future series shall be subject.
(b) Shares of Common Stock. The rights of holders of shares of common
stock to receive dividends or share in the distribution of assets in the
event of liquidation, dissolution or winding up of the affairs of the
corporation shall be subject to the preferences, limitations and relative
rights of the shares of preferred stock fixed in the resolution or
resolutions which may be adopted from time to time by the Board of
Directors of the corporation providing for the issuance of one or more
series of shares of preferred stock.
- 3 -
<PAGE>
The capital stock, after the subscription price has been paid in, shall not
be subject to assessment to pay the debts of the corporation. Any stock of the
corporation may be issued for money, property, services rendered, labor done,
cash advances for the corporation or for any other assets of value in accordance
with the action of the Board of Directors, whose judgment as to value received
in return therefor shall be conclusive and said stock when issued shall be
fully-paid and nonassessable.
ARTICLE IV
The corporation shall have perpetual existence.
ARTICLE V
The governing board of this corporation shall be known as the Board of
Directors, and the number of directors may from time to time be increased or
decreased in such manner as shall be provided by the Bylaws of this corporation.
The name and post office address of the incorporator is as follows:
Patricia Cudd 50 South Steele Street, Suite #222
Denver, Colorado 80209
The name and post office address of the director comprising the original
Board of Directors of the corporation is as follows:
Roland W. Fink 506 Paula Avenue
Glendale, California 91201
Kendall L. Dorsett 506 Paula Avenue
Glendale, California 91201
In furtherance and not in limitation of the powers conferred by statute,
the Board of Directors is expressly authorized:
(a) To manage and govern the corporation by majority vote of members
present at any regular or special meeting at which a quorum shall be
present unless the act of a greater number is required by the laws of the
state of incorporation, these Articles of Incorporation or the Bylaws of
the Corporation.
(b) To make, alter, or amend the Bylaws of the corporation at any
regular or special meeting.
(c) To fix the amount to be reserved as working capital over and above
its capital stock paid in.
(d) To authorize and cause to be executed mortgages and liens upon the
real and personal property of this corporation.
(e) To designate one or more committees, each committee to consist of
two or more of the directors of the corporation, which, to the extent
provided by resolution or in the Bylaws of the corporation, shall have and
may exercise the powers of the Board of Directors in the management of the
business and affairs of the corporation. Such committee or committees shall
have such name or names as may be stated in the Bylaws of the corporation
or as may be determined from time to time by resolution adopted by the
Board of Directors.
- 4 -
<PAGE>
The Board of Directors shall have power and authority to sell, lease,
exchange or otherwise dispose of all or substantially all of the property and
assets of the corporation, if in the usual and regular course of its business,
upon such terms and conditions as the Board of Directors may determine without
vote or consent of its shareholders.
The Board of Directors shall have power and authority to sell, lease,
exchange or otherwise dispose of all or substantially all the property or assets
of the corporation, including its goodwill, if not in the usual and regular
course of its business, upon such terms and conditions as the Board of Directors
may determine, provided that such sale shall be authorized or ratified by the
affirmative vote of the shareholders of at least a majority of the shares
entitled to vote thereon at a shareholders' meeting called for that purpose, or
when authorized or ratified by the written consent of all the shareholders of
the shares entitled to vote thereon.
The Board of Directors shall have the power and authority to merge or
consolidate the corporation upon such terms and conditions as the Board of
Directors may authorize, provided that such merger or consolidation is approved
or ratified by the affirmative vote of the shareholders of at least a majority
of the shares entitled to vote thereon at a shareholders meeting called for that
purpose, or when authorized or ratified by the written consent of all the
shareholders of the shares entitled to vote thereon.
The corporation shall be dissolved upon the affirmative vote of the
shareholders of at least a majority of the shares entitled to vote thereon at a
meeting called for that purpose, or when authorized or ratified by the written
consent of all the shareholders of the shares entitled to vote thereon.
The corporation shall revoke voluntary dissolution proceedings upon the
affirmative vote of the shareholders of at least a majority of the shares
entitled to vote at a meeting called for that purpose, or when authorized or
ratified by the written consent of all the shareholders of the shares entitled
to vote thereon.
ARTICLE VI
The following provisions are inserted for the management of the business
and for the conduct of the affairs of the corporation, and the same are in
furtherance of and not in limitation of the powers conferred by law.
No contract or other transactions of the corporation with any other person,
firm or corporation, or in which this corporation is interested, shall be
affected or invalidated by (a) the fact that any one or more of the directors or
officers of this corporation is interested in or is a director or officer of
such other firm or corporation; or (b) the fact that any director or officer of
this corporation, individually or jointly with others, may be a party to or may
be interested in any such contract or transaction, so long as the contract or
transaction is authorized, approved or ratified at a meeting of the Board of
Directors by sufficient vote thereon by directors not interested therein, to
whom such fact or relationship or interest has been disclosed, or so long as the
contract or transaction is fair and reasonable to the corporation. Each person
who may become a director or officer of the corporation is hereby relieved from
any liability that might otherwise arise by reason of his contracting with the
corporation for the benefit of himself or any firm or corporation in which he
may be in any way interested.
- 5 -
<PAGE>
The officers, directors and other members of management of this corporation
shall be subject to the doctrine of corporate opportunities only insofar as it
applies to business opportunities in which this corporation has expressed an
interest as determined from time to time by the corporation's Board of Directors
as evidenced by resolutions appearing in the corporation's minutes. When such
areas of interest are delineated, all such business opportunities within such
areas of interest which come to the attention of the officers, directors and
other members of management of this corporation shall be disclosed promptly to
this corporation and made available to it. The Board of Directors may reject any
business opportunity presented to it and thereafter any officer, director or
other member of management may avail himself of such opportunity. Until such
time as this corporation, through its Board of Directors, has designated an area
of interest, the officers, directors and other members of management of this
corporation shall be free to engage in such areas of interest on their own and
the provisions hereof shall not limit the rights of any officer, director or
other member of management of this corporation to continue a business existing
prior to the time that such area of interest is designated by this corporation.
This provision shall not be construed to release any employee of the corporation
(other than an officer, director or member of management) from any duties which
he may have to the corporation.
ARTICLE VII
Each director and officer of the corporation shall be indemnified by the
corporation as follows:
(a) The corporation shall indemnify any person who was or is a party,
or is threatened to be made a 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 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 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 reasonable cause to believe that his conduct was
unlawful.
(b) The corporation shall 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,
- 6 -
<PAGE>
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 attorney's 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 he reasonably believed
to be in, or not opposed to, the best interests of the corporation, except
that no indemnification shall be made in respect of any claim, issue or
matter as to which such person shall have been adjudged to be liable for
negligence or misconduct in the performance of his duty to the corporation,
unless, and only to the extent that, 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 circumstances of the case, such person is
fairly and reasonably entitled to indemnification for such expenses which
such court deems proper.
(c) To the extent that a director, officer, employee or agent of the
corporation has been successful on the merits or otherwise in defense of
any action, suit or proceeding referred to in Sections (a) and (b) of this
Article, 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 Section (a) or (b) of this Article
(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 officer, director and employee or agent is proper in the
circumstances, because he has met the applicable standard of conduct set
forth in Section (a) or (b) of this Article. Such determination shall be
made (i) by the Board of Directors by a majority vote of a quorum,
consisting of directors who were not parties to such action, suit or
proceeding, or (ii) if such quorum is not obtainable or, even if
obtainable, if a quorum of disinterested directors so directs, by
independent legal counsel in a written opinion, or (iii) by the affirmative
vote of the holders of a majority of the shares of stock entitled to vote
and represented at a meeting called for such purpose.
(e) Expenses (including attorneys' fees) incurred in defending a civil
or criminal action, suit or proceeding may be paid by the corporation in
advance of the final disposition of such action, suit or proceeding, as
authorized in Section (d) of this Article, upon receipt of an undertaking
by or on behalf of the director, officer, employee or agent to repay such
amount, unless it shall ultimately be determined that he is entitled to be
indemnified by the corporation as authorized in this Article.
(f) The Board of Directors may exercise the corporation's 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 Article.
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<PAGE>
(g) The indemnification provided by this Article shall not be deemed
exclusive of any other rights to which those seeking indemnification may be
entitled under these Articles of Incorporation, the Bylaws, agreements,
vote of the shareholders or disinterested directors, or otherwise, both as
to action in his official capacity and as to action in another capacity
while holding such office, and shall continue as to a person who has ceased
to be a director, officer, employee or agent and shall inure to the benefit
of the heirs and personal representatives of such a person.
ARTICLE VIII
The initial registered and principal office of said corporation shall be
located at 50 South Steele Street, Suite #222, Denver, Colorado 80209, and the
initial registered agent of the corporation at such address shall be Patricia
Cudd.
Part or all of the business of said corporation may be carried on in the
County of Denver, or any other place in the State of Colorado or beyond the
limits of the State of Colorado, in other states or territories of the United
States and in foreign countries.
ARTICLE IX
Whenever a compromise or arrangement is proposed by the corporation between
it and its creditors or any class of them, and/or between said corporation and
its shareholders or any class of them, any court of equitable jurisdiction may,
on the application in a summary way by said corporation, or by a majority of its
stock, or on the application of any receiver or receivers appointed for said
corporation, or on the application of trustees in dissolution, order a meeting
of the creditors or class of creditors and/or of the shareholders or class of
shareholders of said corporation, as the case may be, to be notified in such
manner as the said court decides. If a majority in number, representing at least
three-fourths in amount of the creditors or class of creditors, and/or the
holders of a majority of the stock or class of stock of said corporation, as the
case may be, agree to any compromise or arrangement and/or to any reorganization
of said corporation, as a consequence of such compromise or arrangement, the
said compromise or arrangement and/or the said reorganization shall, if
sanctioned by the court to which the said application has been made, be binding
upon all the creditors or class of creditors, and/or on all the shareholders or
class of shareholders of said corporation, as the case may be, and also on said
corporation.
ARTICLE X
No shareholder in the corporation shall have the preemptive right to
subscribe to any or all additional issues of stock and/or other securities of
any or all classes of this corporation or securities convertible into stock or
carrying stock purchase warrants, options or privileges.
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<PAGE>
ARTICLE XI
Meetings of shareholders may be held at any time and place as the Bylaws
shall provide. At all meetings of the shareholders, one-third of all shares
entitled to vote shall constitute a quorum.
ARTICLE XII
Cumulative voting shall not be allowed.
ARTICLE XIII
These Articles of Incorporation may be amended by resolution of the Board
of Directors if no shares have been issued, and if shares have been issued, by
affirmative vote of the shareholders of at least a majority of the shares
entitled to vote thereon at a meeting called for that purpose, or, when
authorized, when such action is ratified by the written consent of all the
shareholders of the shares entitled to vote thereon.
ARTICLE XIV
Any action for which the laws of the State of Colorado require the approval
of two-thirds of the shares of any class or series entitled to vote with respect
thereto, unless otherwise provided in the Articles of Incorporation, shall
require for approval the affirmative vote of a majority of the shares of any
class or series outstanding and entitled to vote thereon.
ARTICLE XV
No director shall be personally liable to the corporation or any
shareholder for monetary damages for breach of fiduciary duty as a director,
except for any matter in respect of which such director shall be liable under
Section 7-5-114 of the Colorado Revised Statutes, or any amendment thereto or
successor provision thereto and except for any matter in respect of which such
director shall be liable by reason that he (i) has breached his duty of loyalty
to the corporation or its shareholders, (ii) has not acted in good faith or, in
failing to act, has not acted in good faith, (iii) has acted in a manner
involving intentional misconduct or a knowing violation of law or, in failing to
act, has acted in a manner involving intentional misconduct or a knowing
violation of law, or (iv) has derived an improper personal benefit. Neither the
amendment nor repeal of this Article XV, nor the adoption of any provision of
the Articles of Incorporation inconsistent with this Article XV, shall eliminate
or reduce the effect of this Article XV in respect of any matter occurring, or
any cause of action, suit or claim that, but for this Article XV would accrue
or arise prior to such amendment, repeal or adoption of an inconsistent
provision.
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<PAGE>
IN TESTIMONY WHEREOF, I have hereunto set my hand on this 6th day of March,
1997, and, by my signature below, I hereby further consent to my appointment as
the initial registered agent of the corporation.
/s/ PATRICIA CUDD
------------------------------------
Patricia Cudd
STATE OF COLORADO )
) ss.
COUNTY OF DENVER )
I, ________________, a Notary Public, in and for the said county and state,
hereby certify that there personally appeared before me, Patricia Cudd, who
being first duly sworn, declared that he is the person who executed the
foregoing document as the incorporator and the initial registered agent of the
corporation, and that the statements therein contained are true.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this 6th day of
March, 1997.
My commission expires: 12/17/97. /s/ CHRISTA ADDINGTON
-----------------------------------
Notary Public
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ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
OF
BLUE MOUNTAIN CAPITAL, INC.
Pursuant to the provisions of the Colorado Business Corporation Act, the
undersigned corporation adopts the following Articles of Amendment to its
Articles of Incorporation:
FIRST: The name of the Corporation is Blue Mountain Capital, Inc.
SECOND: The following amendment to the Articles of Incorporation was
adopted on May 14, 1997, as prescribed by the Colorado Business Corporation Act,
in the manner marked with an X below:
_____ No shares have been issued or Directors Elected - Action by
Incorporators
_____ No shares have been issued but Directors Elected - Action by
Directors
_____ Such amendment was adopted by the board of directors where shares
have been issued.
__X__ Such amendment was adopted by a vote of the shareholders. The number
of shares voted for the amendment was sufficient for approval.
Article I of the Articles of Incorporation shall be amended so that, as
amended, Article I reads in its entirety as follows:
ARTICLE I
Name
----
The name of the corporation is JEWELNIQUE DESIGNS, INC.
THIRD: The manner, if not set forth in such amendment, in which any
exchange, reclassification, or cancellation of issued shares provided for in the
amendment shall be effected, is as follows: None.
If these amendments are to have a delayed effective date, please list that
date: Not applicable. (Not to exceed ninety (90) days from the date of filing)
BLUE MOUNTAIN CAPITAL, INC.
By: /S/ ROLAND W. FINK
-------------------------------------
Roland W. Fink, President
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BYLAWS
OF
BLUE MOUNTAIN CAPITAL, INC.
ARTICLE I
OFFICES
-------
The registered office of Blue Mountain Capital, Inc. (the "Corporation"),
shall be located in the State of Colorado. The Corporation may have its
principal office and such other offices either within or without the State of
Colorado as the Board of Directors of the Corporation (the "Board") may
designate or as the business of the Corporation may require.
The registered office of the Corporation in the Articles of Incorporation
(the "Articles") need not be identical with the principal office.
ARTICLE II
SHAREHOLDERS
------------
Section 1. Annual Meeting. The annual meeting of the shareholders shall be
held each year on a date and at a time and place to be determined by resolution
of the Board, for the purpose of electing directors and for the transaction of
such other business as may come before the meeting. If the election of directors
shall not be held on the day designated for the annual meeting of the
shareholders, or at any adjournment thereof, the Board shall cause the election
to be held at a special meeting of the shareholders.
Section 2. Special Meetings. Special meetings of the shareholders for any
purpose, unless otherwise provided for by statute, may be called by the
president, the Board or by the president at the request of the holders of not
less than one-tenth of all the shares of the Corporation entitled to vote at the
meeting.
Section 3. Place of Meeting. The Board may designate any place, either
within or without the State of Colorado, as the place of meeting for any annual
or special meeting. If no designation is made, the place of meeting shall be the
registered office of the Corporation in the State of Colorado.
Section 4. Notice of Meeting. Written notice, stating the place, day and
hour of the meeting and, in case of a special meeting, the purpose or purposes
for which the meeting is called, shall be delivered as the laws of the State of
Colorado shall provide.
Section 5. Fixing of Record Date. For the purpose of determining
shareholders entitled to notice of or to vote at any meeting of shareholders or
any adjournment thereof, or shareholders entitled to receive payment of any
dividend, or in order to make a determination of shareholders for any other
proper purpose, the Board may fix in advance a date (the "Record Date") for any
such determination of shareholders, which date shall be not more than 50 days
prior to the date on which the particular action requiring such determination of
shareholders is to be taken. If no Record Date is fixed by the Board, the Record
Date for any such purpose shall be ten days before the date of such meeting or
action. The Record Date determined for the purpose of ascertaining the number of
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<PAGE>
shareholders entitled to notice of or to vote at a meeting may not be less than
ten days prior to the meeting. When a Record Date has been determined for the
purpose of a meeting, the determination shall apply to any adjournment thereof.
Section 6. Quorum. If less than a quorum of the outstanding shares as
provided for in the Articles are represented at a meeting, such meeting may be
adjourned without further notice for a period which shall not exceed 60 days. At
such adjourned meeting, at which a quorum shall be present, any business may be
transacted which might have been transacted at the original meeting. Once a
quorum is present at a duly organized meeting, the shareholders present may
continue to transact business until adjournment, notwithstanding any departures
of shareholders during the meeting which leave less than a quorum.
Section 7. Voting of Shares. Each outstanding share entitled to vote shall
be entitled to one vote upon each matter submitted to a vote at a meeting of
shareholders.
Section 8. Proxies. At all meetings of shareholders, a shareholder may vote
by proxy executed in writing by the shareholder or by his duly authorized
attorney-in-fact. Such proxy shall be filed with the Secretary of the
Corporation before or at the time of the meeting. No proxy shall be valid after
11 months from the date of its execution, unless otherwise provided in the
proxy. Proxies shall be in such form as shall be required by the Board of
Directors and as set forth in the notice of meeting and/or proxy or information
statement concerning such meeting.
Section 9. Voting of Shares by Certain Holders. Shares standing in the name
of another corporation may be voted by agent or proxy as the bylaws of such
corporation may prescribe or, in the absence of such provision, as the Board of
Directors of such corporation may determine as evidenced by a duly certified
copy of either the bylaws or corporate resolution.
Neither treasury shares nor shares held by another corporation, if the
majority of the shares entitled to vote for the election of directors of such
other corporation is held by the Corporation, shall be voted at any meeting or
counted in determining the total number of outstanding shares at any given time.
Shares held by an administrator, executor, guardian or conservator may be
voted by such fiduciary, either in person or by proxy, without a transfer of
such shares into the name of such fiduciary. Shares standing in the name of a
trustee may be voted by such trustee, either in person or by proxy, but no
trustee shall be entitled to vote shares held by a trustee without a transfer of
the shares into such trust.
Shares standing in the name of a receiver may be voted by such receiver and
shares held by or under the control of a receiver may be voted by such receiver,
without the transfer thereof into the name of such receiver if authority so to
do is contained in an appropriate order of the court by which the receiver was
appointed.
A shareholder whose shares are pledged shall be entitled to vote such
shares until the shares have been transferred on the books of the Corporation
into the name of the pledgee, and thereafter the pledgee shall be entitled to
vote the shares so transferred.
Section 10. Action by Consent of all Shareholders. Any action required to
be taken, or which may be taken at a meeting of the shareholders may be taken
without a meeting, if a consent in writing, setting forth the action so taken,
shall be signed by all of the shareholders entitled to vote with respect to the
subject matter thereof. Such written consent or consents shall be filed with the
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<PAGE>
minutes of the Corporation. Such action by written consent of all entitled to
vote shall have the same force and effect as a unanimous vote of such
shareholders.
Section 11. Inspectors. The Board may, in advance of any meeting of
shareholders, appoint one or more inspectors to act at such meeting or any
adjournment thereof. If the inspectors shall not be so appointed or if any of
them shall fail to appear or act, the chairman of the meeting may appoint
inspectors. Each inspector, before entering upon the discharge of his duties,
shall take and sign an oath faithfully to execute the duties of inspector at
such meeting with strict impartiality and according to the best of his ability.
The inspectors shall determine the number of shares outstanding and the voting
power of each, the number of shares represented at the meeting, the existence of
a quorum, the validity and effect of proxies and shall receive votes, ballots or
consents, hear and determine all challenges and questions arising in connection
with the right to vote, count and tabulate all votes, ballots or consents,
determine the result and do such acts as are proper to conduct the election or
vote with fairness to all shareholders. On request of the chairman of the
meeting or any shareholder entitled to vote thereat, the inspectors shall make a
report in writing of any challenge, request or matter determined by them and
shall execute a certificate of any fact found by them.
ARTICLE III
BOARD OF DIRECTORS
------------------
Section 1. General Powers. The Board shall have the power to manage the
business and affairs of the Corporation in such manner as it sees fit. In
addition to the powers and authorities expressly conferred upon it, the Board
may do all lawful acts which are not directed to be done by the shareholders by
statute, by the Articles or by these Bylaws.
Section 2. Number, Tenure and Qualifications. The number of directors of
the Corporation shall not be less than one. Each director shall hold office
until the next annual meeting of shareholders and until a successor director has
been elected and qualified, or until the death, resignation or removal of such
director. Directors need not be residents of the State of Colorado or
shareholders of the Corporation.
Section 3. Regular Meetings. A regular meeting of the Board shall be held,
without other notice than this Bylaw, immediately after and at the same place as
the annual meeting of shareholders. The Board may provide, by resolution, the
time and place, either within or without the State of Colorado, for the holding
of additional regular meetings, without other notice than such resolution.
Section 4. Special Meetings. Special meetings of the Board may be called by
or at the request of the Chairman of the Board, the Chief Executive Officer or
any two directors. The person or persons authorized to call special meetings of
the Board may fix any place, either within or without the State of Colorado, as
the place for holding any special meeting of the Board called by them.
Section 5. Telephonic Meetings. Members of the Board and committees thereof
may participate and be deemed present at a meeting by means of conference
telephone or similar communications equipment by which all persons participating
in the meeting can hear each other at the same time.
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<PAGE>
Section 6. Notice. Notice of any special meeting of the Board shall be
given by telephone, telegraph or written notice sent by mail. Notice shall be
delivered at least one day prior to the meeting (five days before the meeting if
the meeting is held outside the State of Colorado) if given by telephone or
telegram or if delivered personally. If notice is given by telegram, such notice
shall be deemed to be delivered when the telegram is delivered by the telegraph
company. Written notice may be delivered by mail to each director at such
director's business or home address and, if mailed, shall be delivered at least
five days prior to the meeting. If mailed, such notice shall be deemed to be
delivered when deposited in the United States mail so addressed with postage
thereon prepaid. Any director may waive notice of any meeting. The attendance of
a director at a meeting shall constitute a waiver of notice of such meeting,
except where a director attends a meeting for the express purpose of objecting
to the transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the Board need be specified in the notice or
waiver of notice of such meeting.
Section 7. Quorum. A majority of the total membership of the Board shall
constitute a quorum for the transaction of business at any meeting of the Board,
but if a quorum shall not be present at any meeting or adjournment thereof, a
majority of the directors present may adjourn the meeting without further
notice.
Section 8. Action by Consent of All Directors. Any action required to be
taken, or which may be taken at a meeting of the Board may be taken without a
meeting, if a consent in writing, setting forth the action so taken, shall be
signed by all of the directors entitled to vote with respect to the subject
matter thereof. Such written consent or consents shall be filed with the minutes
of the Corporation. Such action by written consent of all entitled to vote shall
have the same force and effect as a unanimous vote of such directors at a
meeting of directors at which a quorum is present.
Section 9. Manner of Acting. The act of a majority of the directors present
at a meeting at which a quorum is present shall be an act of the Board.
The order of business at any regular or special meeting of the Board shall
be:
1. Record of those present.
2. Secretary's proof of notice of meeting, if notice is not
waived.
3. Reading and disposal of unapproved minutes, if any.
4. Reports of officers, if any.
5. Unfinished business, if any.
6. New business.
7. Adjournment.
Section 10. Vacancies. Any vacancy occurring in the Board by reason of an
increase in the number specified in these Bylaws, or for any other reason, may
be filled by the affirmative vote of a majority of the remaining directors,
though less than a quorum of the Board may remain at the time such meeting
considering filling such vacancies is held.
Section 11. Compensation. By resolution of the Board, the directors may be
paid their expenses, if any, for attendance at each meeting of the Board and may
be paid a fixed sum for attendance at each meeting of the Board and a stated
salary as director. No such payment shall preclude any director from serving the
Corporation in any other capacity and receiving compensation therefor or from
receiving compensation for any extraordinary or unusual services as a director.
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<PAGE>
Section 12. Presumption of Assent. A director of the Corporation who is
present at a meeting of the Board at which action on any corporate matter is
taken shall be presumed to have assented to the action taken unless the dissent
of such director shall be entered in the minutes of the meeting, filed in
writing with the person acting as the secretary of the meeting before the
adjournment thereof or forwarded by registered mail to the Secretary of the
Corporation immediately after the meeting. Such right to dissent shall not apply
to a director who voted in favor of such action.
Section 13. Executive or Other Committees. The Board, by resolution adopted
by a majority of the entire Board, may designate among its members an executive
committee and one or more other committees, each of which, to the extent
provided in the resolution, shall have all of the authority of the Board, but no
such committee shall have the authority of the Board in reference to amending
the Articles, adopting a plan of merger or consolidation, recommending to the
shareholders the sale, lease, exchange or other disposition of all or
substantially all of the property and assets of the Corporation otherwise than
in the usual and regular course of its business, recommending to the
shareholders a voluntary dissolution of the Corporation or a revocation thereof,
or amending the Bylaws. The designation of such committees and the delegation
thereto of authority shall not operate to relieve the Board, or any member
thereof, of any responsibility imposed by law.
Any action required to be taken, or which may be taken at a meeting of a
committee designated in accordance with this Section of the Bylaws, may be taken
without a meeting, if a consent in writing setting forth the action so taken
shall be signed by all those entitled to vote with respect to the subject matter
thereof. Such written consent or consents shall be filed with the minutes of the
Corporation. Such action by written consent of all entitled to vote shall have
the same force and effect as a unanimous vote of such persons.
Section 14. Resignation of Officers or Directors. Any director or officer
may resign at any time by submitting a resignation in writing. Such resignation
takes effect from the time of its receipt by the Corporation unless a date or
time is fixed in the resignation, in which case it will take effect from that
time. Acceptance of the resignation shall not be required to make it effective.
Section 15. Notice Requirements for Director Nominations. Any nomination
for election to the Board of Directors by the stockholders otherwise than
pursuant to Board resolution must be submitted to the Corporation's secretary no
later than 25 days and no more than 60 days prior to the meeting of stockholders
at which such nominations are to be submitted. In the event notice of the
meeting at which such nomination is desired to be submitted is not mailed or
otherwise sent to the stockholders of the Corporation at least 30 days prior to
the meeting, the Corporation must receive the notice of intent to nominate no
later than seven days after notice of the meeting is mailed or sent to the
stockholders by the Corporation. Notices to the Corporation's Secretary of
intent to nominate a candidate for election as a director must give the name,
age, business address and principal occupation of such nominee and the number of
shares of stock of the Corporation held by such nominee Within seven days after
filing of the notice, a signed and completed questionnaire relating to the
proposed nominee (which questionnaire will be supplied by the Corporation to the
person submitting the notice) must be filed with the Secretary of the
Corporation. Unless this notice procedure is followed, the chairman of a
stockholders' meeting may declare the nomination defective and it may be
disregarded.
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<PAGE>
ARTICLE IV
OFFICERS
--------
Section 1. Number. The officers of the Corporation shall be a president, a
secretary and a treasurer, all of whom shall be executive officers and each of
whom shall be elected by the Board, and such other officers as the Board may
designate from time to time. A Chairman of the Board, Vice Chairman of the Board
and one or more Vice Presidents shall be executive officers if the Board so
determines by resolution. Such other officers and assistant officers, as may be
deemed necessary, shall be designated administrative assistant officers and may
be appointed and removed as the Chief Executive Officer decides. Any two or more
offices may be held by the same person, except the offices of President and
Secretary.
Section 2. Election and Term of Office. The executive officers of the
Corporation, to be elected by the Board, shall be elected annually by the Board
at its first meeting held after each annual meeting of the shareholders or at a
convenient time soon thereafter. Each executive officer shall hold office until
the resignation of such officer or until a successor shall be duly elected and
qualified, until the death of such executive officer, or until removal of such
officer in the manner herein provided.
Section 3. Removal. Any officer or agent elected or appointed by the Board
may be removed by the Board whenever, in its judgment, the best interests of the
Corporation would be served thereby, but such removal shall be without prejudice
to the contract rights, if any, of the person so removed.
Section 4. Vacancies. A vacancy in any executive office because of death,
resignation, removal, disqualification or otherwise may be filled by the Board
for the unexpired portion of the term.
Section 5. The Chairman of the Board. If a Chairman of the Board (the
"Chairman") shall be elected by the Board, the Chairman shall preside at all
meetings of the shareholders and of the Board. The Chairman may sign, with the
officers authorized by the Chief Executive Officer or the Board, certificates
for the shares of the Corporation and shall perform such other duties as from
time to time are assigned by the Chief Executive Officer or the Board. The
Chairman of the Board may be elected as the Chief Executive Officer, in which
case the Chairman shall perform the duties hereinafter set forth in Article IV,
Section 7, of these Bylaws.
Section 6. The President. The President may sign, with the officers
authorized by the Chief Executive Officer or the Board, certificates for shares
of the Corporation and shall perform such other duties as from time to time are
assigned by the Chief Executive Officer or the Board. The President may be
elected as the Chief Execttive Officer of the Corporation, in which case, the
President shall perform the duties hereinafter set forth in Article IV, Section
7, of these Bylaws.
Section 7. The Chief Executive Officer. If no Chairman shall be elected by
the Board, the President shall be the Chief Executive Officer of the
Corporation. If a Chairman is elected by the Board, the Board shall designate,
as between the Chiarman and the President, who shall be the Chief Executive
Officer. The Chief Executive Officer shall be, subject to the control of the
Board, in general charge of the affairs of the Corporation. The Chief Executive
Officer may sign, with the other officers of the Corporation authorized by the
Board, deeds, mortgages, bonds, contracts or other instruments whose execution
the Board has authorized, except in cases where the signing and execution
thereof shall be expressly delegated by the Board or these Bylaws to some other
officer or agent of the Corporation, or shall be required by law to be otherwise
signed or executed.
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<PAGE>
Section 8. The Vice Chairman of the Board. If a Chairman shall be elected
by the Board, the Board bay also elect a Vice Chairman of the Board (the "Vice
Chairman"). In the absence of the Chairman or in the event of the death or
inability or refusal to act of the Chairman, the Vice Chairman shall perform the
duties of the Chairman and when so acting shall have all of the powers of and be
subject to all of the restrictions upon the Chairman. The Vice Chairman may
sign, with the other officers authorized by the Chief Executive Officer or the
Board, certificates for shares of the Corporation and shall perform such other
duties as from time to time may be assigned by the Chief Executive Officer or
the Board.
Section 9. The Vice President. In the absence of the President or in the
event of the death or inability or refusal to act of the President, the Vice
President shall perform the duties of the President, and when so acting shall
have all the powers of and be subject to all the restrictions upon the
President. In the event there is more than one Vice President, the Vice
Presidents in the order designated at the time of their election, or in the
absence of any designation, then in the order of their election, shall perform
the duties of the President and, when so acting, shall have all the powers of
and shall be subject to all the restrictions upon the President. Any Vice
President may sign, with the other officers authorized by the Chief Executive
Officer or the Board, certificates for shares of the Corporation and shall
perform such other duties as from time to time may be assigned by the Chief
Executive Officer or the Board.
Section 10. The Secretary. Unless the Board otherwise directs, the
Secretary shall keep the minutes of the shareholders' and directors' meetings in
one or more books provided for that purpose. The Secretary shall also see that
all notices are duly given in accordance with the law and the provisions of the
Bylaws; be custodian of the corporate records and the seal of the Corporation;
affix the seal or direct its affixation to all documents, the execution of which
on behalf of the Corporation is duly authorized; keep a list of the address of
each shareholder; sign, with the other officers authorized by the Chief
Executive Officer or the Board, certificates for shares of the Corporation; have
charge of the stock transfer books of the Corporation and perform all duties
incident to the office of Secretary and such other duties as may be assigned by
the Chief Executive Officer or by the Board.
Section 10. The Treasurer. If required by the Board, the Treasurer shall
give a bond for the faithful discharge of his duties in such sum and with such
surety or sureties as the Board shall determine. He shall have charge and
custody of and be responsible for all funds and securities of the Corporation,
receive and give receipts for monies due and payable to the Corporation from any
source whatsoever and deposit all such monies in the name of the Corporation in
such banks, trust companies or other depositories as shall be selected in
accordance with the provisions of the Bylaws. The Treasurer may sign, with the
other officers athorized by the Chief Executive Officer or the Board,
certificates for shares of the Corporation and shall perform all duties incident
to the office of Treasuer and such other duties as from time to time may be
assigned by the Chief Executive Officer or the Board.
Section 11. Assistant Officers. The Chief Executive Officer may appoint
such other officers and agents as may be necessary or desirable for the business
of the Corporation. Such other officers shall include one or more assistant
secretaries and treasurers who shall have the power and authority to act in
place of the officer for whom they are elected or appointed as an assistant in
the event of the officer's inability or unavailability to act in his official
capacity. The assistant secretary or secretaries or assistant treasurer or
treasuers may sign, with the other officers authorized by the Chief Executive
Officer or the Board, certificates for shares of the Corporation. The assistant
treasurer or treasurers shall, if required by the Board, give bonds for the
faithful discharge of their duties in such sums and with such sureties as the
Board shall determine. The assistant secretaries and assistant treasurers, in
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general, shall perform such duties as shall be assigned to them by the Secretary
or the Treasurer, respectively, or by the Chief Executive Officer or the Board.
Section 12. Salaries. The salaries of the executive officers shall be fixed
by the Board and no officer shall be prevented from receiving such salary by
reason of the fact that such officer is also a director of the Corporation. The
salaries of the administrative assistant officers shall be fixed by the Chief
Executive Officer.
ARTICLE V
CONTRACTS, LOANS, CHECKS AND DEPOSITS
-------------------------------------
Section 1. Contracts. The Board may authorize any officer or officers,
agent or agents, to enter into any contract on behalf of the Corporation and
such authority may be general or confined to specific instances.
Section 2. Checks, Drafts, Etc. All checks, drafts or other orders for the
payment of money, notes or other evidence of indebtedness, issued in the name of
the Corporation, shall be signed by such officer or officers, agent or agents,
of the Corporation and in such manner as shall from time to time be determined
by resolution of the Board.
Section 3. Deposits. All funds of the Corporation not otherwise employed
shall be deposited from time to time to the credit of the Cororation in such
banks, trust companies or other depositories as the Board may select.
ARTICLE VI
CERTIFICATES FOR SECURITIES AND THEIR TRANSFER
----------------------------------------------
Section 1. Certificates for Securities. Certificates representing
securities of the Corporation (the "Securities") shall be in such form as shall
be determined by the Board. To be effective, such certificates for Securities
(the "Certificates") shall be signed by (i) the Chairman or Vice Chairman or by
the President or a Vice President; and (ii) the Secretary or an assistant
Secretary or by the Treasurer or an assistant treasurer of the Corporation. Any
of all of the signatures may be facsimiles if the Certificate is either
countersigned by the transfer agent, or countersigned by the facsimile signature
of the transfer agent and registered by the written signature of an officer of
any company designated by the Board as registrar of transfers so long as that
officer is not an employee of the Corporation.
A Certificate signed or impressed with the facsimile signature of an
officer, who ceases by death, resignation or otherwise to be an officer of the
Corporation before the Certificate is delivered by the Corporation, is valid
though signed by a duly elected, qualified and authorized officer, provided that
such Certificate is countersigned by the signature of the transfer agent or
facsimile signature of the transfer agent of the Corporation and registered as
aforesaid.
All Certificates shall be consecutively numbered or otherwise identified.
Certificates shall state the jurisdiction in which the Corporation is organized,
the name of the person to whom the Securities are issued, the designation of the
series, if any, and the par value of each share represented by the Certificate,
or a statement that the shares are without par value. The name and address of
the person to whom the Securities represented hereby are issued, the number of
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Securities, and date of issue, shall be entered on the Security transfer books
of the Corporation. All Certificates surrendered to the Corporation for transfer
shall be cancelled and no new Certificate shall be issued until the former
Certificate for a like number of shares shall have been surrendered and
cancelled, except that, in case of a lost, destroyed or mutilated Certificate, a
new one may be issued therefor upon such terms and indemnity to the Corporation
as the Board may prescribe.
Section 2. Transfer of Securities. Transfers of Securities shall be made
only on the security transfer books of the Corporation by the holder of record
thereof, by the legal representative of the holder who shall furnish proper
evidence of authority to transfer, or by an attorney authorized by a power of
attorney which was duly executed and filed with the Secretary of the Corporation
and a surrender for cancellation of the certificate for such shares. The person
in whose name Securities stand on the books of the Corporation shall be deemed
by the Corporation to be the owner thereof for all purposes.
ARTICLE VII
FISCAL YEAR
-----------
The fiscal year of the Corporation shall be determined by resolution of the
Board.
ARTICLE VIII
DIVIDENDS
---------
The Board may declare, and the Corporation may pay in cash, stock or other
property, dividends on its outstanding shares in the manner and upon the terms
and conditions provided by law and its Articles.
ARTICLE IX
SEAL
----
The Board shall provide a corporate seal, circular in form, having
inscribed thereon the corporate name, the state of incorporation and the word
"Seal." The seal on Securities, any corporate obligation to pay money or any
other document may be facsimile, or engraved, embossed or printed.
ARTICLE X
WAIVER OF NOTICE
----------------
Whenever any notice is required to be given to any shareholder or director
of the Corporation under the provisions of these Bylaws or under the provisions
of the Articles or under the provisions of the applicable laws of the State of
Colorado, a waiver thereof in writing, signed by the person or persons entitled
to such notice, whether before, at or after the time stated therein, shall be
deemed equivalent to the giving of such notice.
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ARTICLE XI
INDEMNIFICATION
---------------
The Corporation shall have the power to indemnify any director, officer,
employee or agent of the Corporation or any person serving at the request of the
Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise to the fullest extent
permitted by the laws of the State of Colorado.
ARTICLE XII
AMENDMENTS
----------
These Bylaws may be altered, amended, repealed or replaced by new Bylaws by
the Board at any regular or special meeting of the Board.
ARTICLE XIII
UNIFORMITY OF INTERPRETATION AND SEVERABILITY
---------------------------------------------
These Bylaws shall be so interpreted and construed as to conform to the
Articles and the statutes of the State of Colorado or of any other state in
which conformity may become necessary by reason of the qualification of the
Corporation to do business in such foreign state, and where conflict between
these Bylaws and the Articles or a statute has arisen or shall arise, the Bylaws
shall be considered to be modified to the extent, but only to the extent,
conformity shall require. If any Bylaw provision or its application shall be
deemed invalid by reason of the said nonconformity, the remainder of the Bylaws
shall remain operable in that the provisions set forth in the Bylaws are
severable.
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