U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-SB/A2
GENERAL FORM FOR REGISTRATION OF SECURITIES OF SMALL
BUSINESS ISSUERS
UNDER SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
INTERNATIONAL CAPITAL FUNDING, INC.
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(Name of small business issuer in its charter)
Colorado 84-1434313
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3140 SO. PEORIA STREET, SUITE K230
AURORA, CO 80014
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (303) 755-9832
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Securities to be registered under Section 12(b) of the Act: NONE
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Securities registered under Section 12(g) of the Act:
COMMON STOCK, $.0001 PAR VALUE
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PART I
ITEM 1. DESCRIPTION OF BUSINESS.
General
International Capital Funding, Inc. (the "Company"), was incorporated on
June 10, 1991 under the laws of the State of Colorado, to engage in any lawful
corporate undertaking, including, but not limited to, selected mergers and
acquisitions. The Company has had no activity since inception and has no
operations to date. Other than issuing shares to its original shareholders, the
Company never commenced any operational activities. The Board of Directors of
the Company has elected as this time to attempt to locate and consummate a
merger or acquisition with a private entity as the Company's principal business
purpose described below.
The Company can be defined as a "shell" company whose sole purpose at this
time is to locate and consummate a merger or acquisition with a private entity.
As part of its business plan, this Company is filing this registration statement
on Form 10-SB on a voluntary basis in order to become a "public" company by
virtue of being subject to the reporting requirements of the Securities Exchange
Act of 1934 (the "Act"). The Company anticipates it will voluntarily file
periodic reports in the event its obligation to file such reports is terminated
under the Act. Another aspect of its business plan which the Company intends to
implement after this registration statement becomes effective and a merger or
business combination has been consummated, is to seek to facilitate the eventual
creation of a public trading market in its then outstanding securities.
The proposed business activities described herein classify the Company as a
"blank check" company. Many states have enacted statutes, rules and regulations
limiting the sale of securities of "blank check" companies in their respective
jurisdictions. In order to comply with these various limitations, management
does not intend to undertake any efforts to sell any additional securities of
the Company or cause a market to develop in the Company's securities until such
time as the Company has successfully located and consummated a merger or
business combination described herein. Accordingly, each shareholder of the
Company has executed and delivered a "no sale" letter agreement, agreeing that
they shall not sell or transfer in any way, their respective shares of the
Company's Common Stock until such time as the Company has successfully
consummated a merger or acquisition and the Company is no longer classified as a
"blank check" company. In order to provide further assurances that no trading
will occur in the Company's securities until a merger or acquisition has been
consummated, each shareholder has agreed to place their respective stock
certificates in a Company escrow account. The Company will not release these
respective certificates until such time as a merger or acquisition has been
successfully consummated.
The Company's business plan is to seek, investigate, and, if warranted,
acquire one or more properties or businesses, and to pursue other related
activities intended to enhance shareholder value. The acquisition of a business
opportunity may be made by purchase, merger, exchange of stock, or otherwise,
and may encompass assets or a business entity, such as a corporation, joint
venture, or partnership. The Company has very limited capital, and it is
unlikely that the Company will be able to take advantage of more than one such
business opportunity. The Company intends to seek opportunities demonstrating
the potential of long-term growth as opposed to short-term earnings.
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At the present time the Company has not identified any business opportunity
that it plans to pursue, nor has the Company reached any agreement or definitive
understanding with any person concerning an acquisition. The Company's Officers
and Directors have previously been involved in transactions involving a merger
between an established company and a shell entity, and has a number of contacts
within the field of corporate finance. As a result, they have had preliminary
contacts with representatives of numerous companies concerning the general
possibility of a merger or acquisition by a shell company. However, none of
these preliminary contacts or discussions involved the possibility of a merger
or acquisition transaction with the Company.
It is anticipated that the Company's Officers and Directors will contact
broker-dealers and other persons with whom they are acquainted who are involved
in corporate finance matters to advise them of the Company's existence and to
determine if any companies or businesses they represent have an interest in
considering a merger or acquisition with the Company. No assurance can be given
that the Company will be successful in finding or acquiring a desirable business
opportunity, given the lack of any funds available for acquisitions, or that any
acquisition that occurs will be on terms that are favorable to the Company or
its stockholders.
The Company's search will be directed toward small and medium-sized
enterprises which have a desire to become public corporations and which are able
to satisfy, or anticipate in the reasonably near future being able to satisfy,
the minimum asset requirements in order to qualify shares for trading on NASDAQ
or on a stock exchange (See "Investigation and Selection of Business
Opportunities"). The Company believes a merger would appeal to these types of
companies because of the difficulty and expense of obtaining public financing or
lack of interest in their industry segment by the investment community. In
addition, many companies do not wish to incur the dilution of ownership which
occurs in a public offering and/or are not in the need for cash.
The Company anticipates that the business opportunities presented to it
will (i) be recently organized with no operating history, or a history of losses
attributable to under-capitalization or other factors; (ii) be experiencing
financial or operating difficulties; (iii) be in need of funds to develop a new
product or service or to expand into a new market; (iv) be relying upon an
untested product or marketing concept; or (v) have a combination of the
characteristics mentioned in (i) through (iv). The Company intends to
concentrate its acquisition efforts on properties or businesses that it believes
to be undervalued. Given the above factors, investors should expect that any
acquisition candidate may have a history of losses or low profitability.
The Company does not propose to restrict its search for investment
opportunities to any particular geographical area or industry, and may,
therefore, engage in essentially any business, to the extent of its limited
resources. This includes industries such as service, finance, natural resources,
manufacturing, high technology, product development, medical, communications and
others. The Company's discretion in the selection of business opportunities is
unrestricted, subject to the availability of such opportunities, economic
conditions, and other factors.
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As a consequence of this registration of its securities, any entity which
has an interest in being acquired by, or merging into the Company, is expected
to be an entity that desires to become a public company and eventually establish
a public trading market for its securities. In connection with such a merger or
acquisition, it is highly likely that an amount of stock constituting control of
the Company would be issued by the Company or purchased from the current
principal shareholders of the Company by the acquiring entity or its affiliates.
If stock is purchased from the current shareholders, the transaction is very
likely to result in substantial gains to them relative to their purchase price
for such stock. In the Company's judgment, none of its Officers and Directors
would thereby become an "underwriter" within the meaning of the Section 2(11) of
the Securities Act of 1933, as amended.
Depending upon the nature of the transaction, the current Officers and
Directors of the Company may resign their management positions with the Company
in connection with the Company's acquisition of a business opportunity. See
"Form of Acquisition," below, and "Risk Factors - The Company - Lack of
Continuity in Management." In the event of such resignations, the Company's
current management would not have any control over the conduct of the Company's
business following the Company's combination with a business opportunity.
It is anticipated that business opportunities will come to the Company's
attention from various sources, including its Officers and Directors, its other
stockholders, professional advisors such as attorneys and accountants,
securities broker-dealers, venture capitalists, members of the financial
community, and others who may present unsolicited proposals. In this regard, the
Company may utilize selected mailings, "word of mouth" referrals, advertisements
and/or personal phone calls by the Company's Officers and Directors, however,
the Company is unable to predict the number of persons or entities to be
contacted. It is anticipated the majority, if not all of the contacts made will
be to persons currently unknown to the Company's current management. The Company
has no plans, understandings, agreements, or commitments with any individual for
such person to act as a finder of opportunities for the Company.
The Company will not enter into a merger or acquisition transaction with
any business with which its Officers or Directors are currently affiliated. The
Company will not pay a finders' fee to any or other related acquisition fee to
its Officers, Directors, promoters or their affiliates or associates from
revenues or other funds of an acquisition or merger candidate or by the issuance
of debt or equity of such an entity. In addition, the Company will not obtain an
independent appraisal of any proposed business opportunity due to the cost.
Investigation and Selection of Business Opportunities
To a large extent, a decision to participate in a specific business
opportunity may be made upon management's analysis of the quality of the other
company's management and personnel, the anticipated acceptability of new
products or marketing concepts, the merit of technological changes, the
perceived benefit the company will derive from becoming a publicly held entity,
and numerous other factors which are difficult, if not impossible, to analyze
through the application of any objective criteria. In many instances, it is
anticipated that the historical operations of a specific business opportunity
may not necessarily be indicative of the potential for the future because of the
possible need to shift marketing approaches substantially, expand significantly,
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change product emphasis, change or substantially augment management, or make
other changes. The Company will be dependent upon the owners of a business
opportunity to identify any such problems which may exist and to implement, or
be primarily responsible for the implementation of, required changes. Because
the Company may participate in a business opportunity with a newly organized
firm or with a firm which is entering a new phase of growth, it should be
emphasized that the Company will incur further risks, because management in many
instances will not have proved its abilities or effectiveness, the eventual
market for such company's products or services will likely not be established,
and such company may not be profitable when acquired.
It is anticipated that the Company will not be able to diversify, but will
essentially be limited to one such venture because of the Company's limited
financing. This lack of diversification will not permit the Company to offset
potential losses from one business opportunity against profits from another, and
should be considered an adverse factor affecting any decision to purchase the
Company's securities.
It is emphasized that management of the Company may effect transactions
having a potentially adverse impact upon the Company's shareholders pursuant to
the authority and discretion of the Company's management to complete
acquisitions without submitting any proposal to the stockholders for their
consideration. Holders of the Company's securities should be aware that the
Company will not furnish such holders, prior to any merger or acquisition, with
financial statements, or any other documentation, concerning a target company or
its business. The proposed participation in a business opportunity will not be
submitted to the stockholders for their consideration.
Shareholders are cautioned that any civil remedies available under Colorado
corporate law for a breach of management's fiduciary duties will most likely be
prohibitively expensive and time consuming to pursue.
The analysis of business opportunities will be undertaken by or under the
supervision of the Company's President, who is not a professional business
analyst. See "Management." The Company will not use outside consultants and/or
advisors to assist in the investigation or selection of business opportunities.
The Company anticipates that it will consider, among other things, the following
factors:
1. Potential for growth and profitability, indicated by new
technology, anticipated market expansion, or new products;
2. The Company's perception of how any particular business
opportunity will be received by the investment community and by
the Company's stockholders;
3. Whether, following the business combination, the financial
condition of the business opportunity would be, or would have a
significant prospect in the foreseeable future of becoming
sufficient to enable the securities of the Company to qualify for
listing on an exchange or on a national automated securities
quotation system, such as NASDAQ, so as to permit the trading of
such securities to be exempt from the requirements of Rule 15c2-6
recently adopted by the Securities and Exchange Commission. See
"Risk Factors - The Company - Regulation of Penny Stocks."
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4. Capital requirements and anticipated availability of required
funds, to be provided by the Company or from operations, through
the sale of additional securities, through joint ventures or
similar arrangements, or from other sources;
5. The extent to which the business opportunity can be advanced;
6. Competitive position as compared to other companies of similar
size and experience within the industry segment as well as within
the industry as a whole;
7. Strength and diversity of existing management, or management
prospects that are scheduled for recruitment;
8. The cost of participation by the Company as compared to the
perceived tangible and intangible values and potential; and
9. The accessibility of required management expertise, personnel,
raw materials, services, professional assistance, and other
required items.
In regard to the possibility that the shares of the Company would qualify
for listing on the NASDAQ SmallCap Market, the current standards include the
requirements that the issuer of the securities that are sought to be listed have
net tangible assets of at least $4,000,000 or a market capitalization of $50
million or $950,000 in net income in the latest fiscal year. Many, and perhaps
most, of the business opportunities that might be potential candidates for a
combination with the Company would not satisfy the NASDAQ listing criteria.
No one of the factors described above will be controlling in the selection
of a business opportunity, and management will attempt to analyze all factors
appropriate to each opportunity and make a determination based upon reasonable
investigative measures and available data. Potentially available business
opportunities may occur in many different industries and at various stages of
development, all of which will make the task of comparative investigation and
analysis of such business opportunities extremely difficult and complex.
Potential investors must recognize that, because of the Company's limited
capital available for investigation and management's limited experience in
business analysis, the Company may not discover or adequately evaluate adverse
facts about the opportunity to be acquired.
The Company is unable to predict when it may participate in a business
opportunity. It expects, however, that the analysis of specific proposals and
the selection of a business opportunity may take several months or more.
Prior to making a decision to participate in a business opportunity, the
Company will generally request that it be provided with written materials
regarding the business opportunity containing such items as a description of
products, services and company history; management resumes; financial
information; available projections, with related assumptions upon which they are
based; an explanation of proprietary products and services; evidence of existing
patents, trademarks, or services marks, or rights thereto; present and proposed
forms of compensation to management; a description of transactions between such
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company and its affiliates during relevant periods; a description of present and
required facilities; an analysis of risks and competitive conditions; a
financial plan of operation and estimated capital requirements; audited
financial statements, or if they are not available, unaudited financial
statements, together with reasonable assurances that audited financial
statements would be able to be produced within a reasonable period of time not
to exceed 60 days following completion of a merger transaction; and other
information deemed relevant.
As part of the Company's investigation, the Company's executive Officers
and Directors may meet personally with management and key personnel, may visit
and inspect material facilities, obtain independent analysis or verification of
certain information provided, check references of management and key personnel,
and take other reasonable investigative measures, to the extent of the Company's
limited financial resources and management expertise.
It is possible that the range of business opportunities that might be
available for consideration by the Company could be limited by the impact of
Securities and Exchange Commission regulations regarding purchase and sale of
"penny stocks." The regulations would affect, and possibly impair, any market
that might develop in the Company's securities until such time as they qualify
for listing on the NASDAQ SmallCap Market or on another exchange which would
make them exempt from applicability of the "penny stock" regulations. See "Risk
Factors - Regulation of Penny Stocks."
Company management believes that various types of potential merger or
acquisition candidates might find a business combination with the Company to be
attractive. These include acquisition candidates desiring to create a public
market for their shares in order to enhance liquidity for current shareholders,
acquisition candidates which have long-term plans for raising capital through
the public sale of securities and believe that the possible prior existence of a
public market for their securities would be beneficial, and acquisition
candidates which plan to acquire additional assets through issuance of
securities rather than for cash, and believe that the possibility of development
of a public market for their securities will be of assistance in that process.
Acquisition candidates which have a need for an immediate cash infusion are not
likely to find a potential business combination with the Company to be an
attractive alternative.
Form of Acquisition
It is impossible to predict the manner in which the Company may participate
in a business opportunity. Specific business opportunities will be reviewed as
well as the respective needs and desires of the Company and the promoters of the
opportunity and, upon the basis of that review and the relative negotiating
strength of the Company and such promoters, the legal structure or method deemed
by management to be suitable will be selected. Such structure may include, but
is not limited to leases, purchase and sale agreements, licenses, joint ventures
and other contractual arrangements. The Company may act directly or indirectly
through an interest in a partnership, corporation or other form of organization.
Implementing such structure may require the merger, consolidation or
reorganization of the Company with other corporations or forms of business
organization, and although it is likely, there is no assurance that the Company
would be the surviving entity. In addition, the present management and
stockholders of the Company most likely will not have control of a majority of
the voting shares of the Company following a reorganization transaction. As part
of such a transaction, the Company's existing directors may resign and new
directors may be appointed without any vote by stockholders.
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It is likely that the Company will acquire its participation in a business
opportunity through the issuance of Common Stock or other securities of the
Company. Although the terms of any such transaction cannot be predicted, it
should be noted that in certain circumstances the criteria for determining
whether or not an acquisition is a so-called "tax free" reorganization under the
Internal Revenue Code of 1986, depends upon the issuance to the stockholders of
the acquired company of a controlling interest (i.e. 80% or more) of the common
stock of the combined entities immediately following the reorganization. If a
transaction were structured to take advantage of these provisions rather than
other "tax free" provisions provided under the Internal Revenue Code, the
Company's current stockholders would retain in the aggregate 20% or less of the
total issued and outstanding shares. This could result in substantial additional
dilution in the equity of those who were stockholders of the Company prior to
such reorganization. Any such issuance of additional shares might also be done
simultaneously with a sale or transfer of shares representing a controlling
interest in the Company by the current Officers, Directors and principal
shareholders.
It is anticipated that any new securities issued in any reorganization
would be issued in reliance upon exemptions, if any are available, from
registration under applicable federal and state securities laws. In some
circumstances, however, as a negotiated element of the transaction, the Company
may agree to register such securities either at the time the transaction is
consummated, or under certain conditions or at specified times thereafter. The
issuance of substantial additional securities and their potential sale into any
trading market that might develop in the Company's securities may have a
depressive effect upon such market.
The Company will participate in a business opportunity only after the
negotiation and execution of a written agreement. Although the terms of such
agreement cannot be predicted, generally such an agreement would require
specific representations and warranties by all of the parties thereto, specify
certain events of default, detail the terms of closing and the conditions which
must be satisfied by each of the parties thereto prior to such closing, outline
the manner of bearing costs if the transaction is not closed, set forth remedies
upon default, and include miscellaneous other terms.
As a general matter, the Company anticipates that it, and/or its Officers
and principal shareholders will enter into a letter of intent with the
management, principals or owners of a prospective business opportunity prior to
signing a binding agreement. Such a letter of intent will set forth the terms of
the proposed acquisition but will not bind any of the parties to consummate the
transaction. Execution of a letter of intent will by no means indicate that
consummation of an acquisition is probable. Neither the Company nor any of the
other parties to the letter of intent will be bound to consummate the
acquisition unless and until a definitive agreement concerning the acquisition
as described in the preceding paragraph is executed. Even after a definitive
agreement is executed, it is possible that the acquisition would not be
consummated should any party elect to exercise any right provided in the
agreement to terminate it on specified grounds.
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It is anticipated that the investigation of specific business opportunities
and the negotiation, drafting and execution of relevant agreements, disclosure
documents and other instruments will require substantial management time and
attention and substantial costs for accountants, attorneys and others. If a
decision is made not to participate in a specific business opportunity, the
costs theretofore incurred in the related investigation would not be
recoverable. Moreover, because many providers of goods and services require
compensation at the time or soon after the goods and services are provided, the
inability of the Company to pay until an indeterminate future time may make it
impossible to procure goods and services.
The Company may borrow funds from its Officers, Directors and/or outside
sources, however, these funds will not be used to make payments to the Company's
management, promoters or their affiliates or associates.
Neither the Company, nor anyone acting on its behalf, has taken any
affirmative steps to request or encourage any broker-dealer to act as a market
maker for the Company's securities.
Investment Company Act and Other Regulation
The Company may participate in a business opportunity by purchasing,
trading or selling the securities of such business. The Company does not,
however, intend to engage primarily in such activities. Specifically, the
Company intends to conduct its activities so as to avoid being classified as an
"investment company" under the Investment Company Act of 1940 (the "Investment
Act"), and therefore to avoid application of the costly and restrictive
registration and other provisions of the Investment Act, and the regulations
promulgated thereunder.
Section 3(a) of the Investment Act contains the definition of an
"investment company," and it excludes any entity that does not engage primarily
in the business of investing, reinvesting or trading in securities, or that does
not engage in the business of investing, owning, holding or trading "investment
securities" (defined as "all securities other than government securities or
securities of majority-owned subsidiaries") the value of which exceeds 40% of
the value of its total assets (excluding government securities, cash or cash
items). The Company intends to implement its business plan in a manner which
will result in the availability of this exception from the definition of
"investment company." Consequently, the Company's participation in a business or
opportunity through the purchase and sale of investment securities will be
limited.
The Company's plan of business may involve changes in its capital
structure, management, control and business, especially if it consummates a
reorganization as discussed above. Each of these areas is regulated by the
Investment Act, in order to protect purchasers of investment company securities.
Since the Company will not register as an investment company, stockholders will
not be afforded these protections.
Any securities which the Company might acquire in exchange for its Common
Stock will be "restricted securities" within the meaning of the Securities Act
of 1933, as amended (the "Act"). If the Company elects to resell such
securities, such sale cannot proceed unless a registration statement has been
declared effective by the Securities and Exchange Commission or an exemption
from registration is available. Section 4(1) of the Act, which exempts sales of
securities not involving a distribution, would in all likelihood be available to
permit a private sale. Although the plan of operation does not contemplate
resale of securities acquired, if such a sale were to be necessary, the Company
would be required to comply with the provisions of the Act to effect such
resale.
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An acquisition made by the Company may be in an industry which is regulated
or licensed by federal, state or local authorities. Compliance with such
regulations can be expected to be a time-consuming and expensive process.
Competition
The Company expects to encounter substantial competition in its efforts to
locate attractive opportunities, primarily from business development companies,
venture capital partnerships and corporations, venture capital affiliates of
large industrial and financial companies, small investment companies, and
wealthy individuals. Many of these entities will have significantly greater
experience, resources and managerial capabilities than the Company and will
therefore be in a better position than the Company to obtain access to
attractive business opportunities. The Company also will experience competition
from other public "blind pool" companies, many of which may have more funds
available than does the Company, or from those formed in the future by the
Company's management, promoters or their affiliates or associates.
Corporate Offices
The Company currently maintains a mailing address at 3140 So. Peoria
Street, Suite K230, Aurora, Colorado 80014, which is the office address of its
President. The Company's telephone number is (303) 755-9832. Other than this
mailing address, the Company does not currently maintain any other office
facilities, and does not anticipate the need for maintaining office facilities
at any time in the foreseeable future. The Company pays no rent or other fees
for the use of this mailing address.
Employees
The Company is a development stage company and currently has no employees.
Management of the Company expects to use consultants, attorneys and accountants
as necessary, and does not anticipate a need to engage any full-time employees
so long as it is seeking and evaluating business opportunities. The need for
employees and their availability will be addressed in connection with the
decision whether or not to acquire or participate in specific business
opportunities.
Risk Factors
Current and prospective shareholders should carefully consider the
following risk factors, together with the other information contained in this
Form 10-SB, in evaluating the Company and its business. In particular, readers
should note the this Form 10-SB contains forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1996 and that actual
results could differ materially from those contemplated by such statements. The
factors listed below represent certain important factors the Company believes
could cause such results to differ. These factors are not intended to represent
a complete list of the general or specific risks that may affect the Company. It
should be recognized that other risks may be significant, presently or in the
future, and the risks set forth below may affect the Company to a greater extent
than indicated.
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Conflicts of Interest. Certain conflicts of interest exist between the
Company and all of its Officers and Directors. They have other business
interests to which they devote their attention, and they may be expected to
continue to do so in the future. As a result, conflicts of interest may arise
that can be resolved only through their exercise of such judgment as is
consistent with their fiduciary duties to the Company. See "Management," and
"Conflicts of Interest."
It is anticipated that Company's Officers and Directors may actively
negotiate or otherwise consent to the purchase of a portion of their common
stock as a condition to, or in connection with, a proposed merger or acquisition
transaction. In this process, the Company's Officers and Directors may receive a
"substantial premium" to acquire their shares in a merger or acquisition
transaction and could consider their own personal pecuniary benefit rather than
the best interests of other Company shareholders, and the other Company
shareholders will not be afforded the opportunity to approve or consent to any
particular stock buy-out transaction. See "Conflicts of Interest."
Possible Need for Additional Financing. The Company has virtually no cash
funds and has received a "going concern" qualification by its auditors for the
fiscal year ended November 20, 1997, and it may be impossible to take advantage
of any available business opportunities. Even if the lack of funds does not
hinder the acquisition or an interest in, or complete a transaction with, a
business opportunity, the Company will not, in all likelihood, have enough
capital to exploit the opportunity. Accordingly, the ultimate success of the
Company may depend upon its ability to raise additional capital. The Company has
not investigated the availability, source, or terms that might govern the
acquisition of additional capital and will not do so until it determines a need
for additional financing. If additional capital is needed, there is no assurance
that funds will be available from any source or, if available, that they can be
obtained on terms acceptable to the Company. If not available, the Company's
operations will be limited to those that can be financed with its debt/equity
securities.
Regulation of Penny Stocks. The Company's securities, when and if available
for trading, will be subject to a Securities and Exchange Commission rule that
imposes special sales practice requirements upon broker-dealers who sell such
securities to persons other than established customers or accredited investors.
For purposes of the rule, the phrase "accredited investors" means, in general
terms, institutions with assets in excess of $5,000,000, or individuals having a
net worth in excess of $1,000,000 or having an annual income that exceeds
$200,000 (or that, when combined with a spouse's income, exceeds $300,000). For
transactions covered by the rule, the broker-dealer must make a special
suitability determination for the purchaser and receive the purchaser's written
agreement to the transaction prior to the sale. Consequently, the rule may
affect the ability of broker-dealers to sell the Company's securities and also
may affect the ability of purchasers in this offering to sell their securities
in any market that might develop therefor.
In addition, the Securities and Exchange Commission has adopted a number of
rules to regulate "penny stocks." Such rules include Rules 3a51-1, 15g-1, 15g-2,
15g-3, 15g-4, 15g-5, 15g-6, and 15g-7 under the Securities Exchange Act of 1934,
as amended. Because the securities of the Company may constitute "penny stocks"
within the meaning of the rules, the rules would apply to the Company and to its
securities. The rules may further affect the ability of owners of Shares to sell
the securities of the Company in any market that might develop for them.
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Shareholders should be aware that, according to Securities and Exchange
Commission Release No. 34-29093, the market for penny stocks has suffered in
recent years from patterns of fraud and abuse. Such patterns include (i) control
of the market for the security by one or a few broker-dealers that are often
related to the promoter or issuer; (ii) manipulation of prices through
prearranged matching of purchases and sales and false and misleading press
releases; (iii) "boiler room" practices involving high-pressure sales tactics
and unrealistic price projections by inexperienced sales persons; (iv) excessive
and undisclosed bid-ask differentials and markups by selling broker-dealers; and
(v) the wholesale dumping of the same securities by promoters and broker-dealers
after prices have been manipulated to a desired level, along with the resulting
inevitable collapse of those prices and with consequent investor losses. The
Company's management is aware of the abuses that have occurred historically in
the penny stock market. Although the Company does not expect to be in a position
to dictate the behavior of the market or of broker-dealers who participate in
the market, management will strive within the confines of practical limitations
to prevent the described patterns from being established with respect to the
Company's securities.
No Operating History. The Company was formed in June 1991 for the purpose
of to engage in any lawful activity, however, the Company has no operating
history, revenues from operations, or assets other than services from private
sales of stock. The Company faces all of the risks of a new business and the
special risks inherent in the investigation, acquisition, or involvement in a
new business opportunity. The Company must be regarded as a new or "start-up"
venture with all of the unforeseen costs, expenses, problems, and difficulties
to which such ventures are subject.
No Assurance of Success or Profitability. There is no assurance that the
Company will acquire a favorable business opportunity. Even if the Company
should become involved in a business opportunity, there is no assurance that it
will generate revenues or profits, or that the market price of the Company's
Common Stock will be increased thereby.
Possible Business - Not Identified and Highly Risky. The Company has not
identified and has no commitments to enter into or acquire a specific business
opportunity and therefore can disclose the risks and hazards of a business or
opportunity that it may enter into in only a general manner, and cannot disclose
the risks and hazards of any specific business or opportunity that it may enter
into. A shareholder can expect a potential business opportunity to be quite
risky. The Company's acquisition of or participation in a business opportunity
will likely be highly illiquid and could result in a total loss to the Company
and its stockholders if the business or opportunity proves to be unsuccessful.
See Item 1 "Description of Business."
Type of Business Acquired. The type of business to be acquired may be one
that desires to avoid effecting its own public offering and the accompanying
expense, delays, uncertainties, and federal and state requirements which purport
to protect investors. Because of the Company's lack of capital, it is more
likely than not that any acquisition by the Company will involve other parties
whose primary interest is the acquisition of control of a publicly traded
company. Moreover, any business opportunity acquired may be currently
unprofitable or present other negative factors.
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Impracticability of Exhaustive Investigation. The Company's lack of funds
and the lack of full-time management will likely make it impracticable to
conduct a complete and exhaustive investigation and analysis of a business
opportunity before the Company commits its capital or other resources thereto.
Management decisions, therefore, will likely be made without detailed
feasibility studies, independent analysis, market surveys and the like which, if
the Company had more funds available to it, would be desirable. The Company will
be particularly dependent in making decisions upon information provided by the
promoter, owner, sponsor, or others associated with the business opportunity
seeking the Company's participation. A significant portion of the Company's
available funds may be expended for investigative expenses and other expenses
related to preliminary aspects of completing an acquisition transaction, whether
or not any business opportunity investigated is eventually acquired.
Lack of Diversification. Because of the lack of financial resources that
the Company has, it is unlikely that the Company will be able to diversify its
acquisitions or operations. The Company's probable inability to diversify its
activities into more than one area will subject the Company to economic
fluctuations within a particular business or industry and therefore increase the
risks associated with the Company's operations.
Possible Reliance upon Unaudited Financial Statements. The Company
generally will require audited financial statements from companies that it
proposes to acquire. No assurance can be given, however, that audited financials
will be available to the Company. In cases where audited financials are
unavailable, the Company will have to rely upon unaudited information received
from target companies' management that has not been verified by outside
auditors. The lack of the type of independent verification which audited
financial statements would provide, increases the risk that the Company, in
evaluating an acquisition with such a target company, will not have the benefit
of full and accurate information about the financial condition and operating
history of the target company. This risk increases the prospect that the
acquisition of such a company might prove to be an unfavorable one for the
Company or the holders of the Company's securities.
Moreover, the Company will be subject to the reporting provisions of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and thus will
be required to furnish certain information about significant acquisitions,
including audited financial statements for any business that it acquires.
Consequently, acquisition prospects that do not have, or are unable to provide
reasonable assurances that they will be able to obtain, the required audited
statements would not be considered by the Company to be appropriate for
acquisition so long as the reporting requirements of the Exchange Act are
applicable. Should the Company, during the time it remains subject to the
reporting provisions of the Exchange Act, complete an acquisition of an entity
for which audited financial statements prove to be unobtainable, the Company
would be exposed to enforcement actions by the Securities and Exchange
Commission (the "Commission") and to corresponding administrative sanctions,
including permanent injunctions against the Company and its management. The
legal and other costs of defending a Commission enforcement action are likely to
have material, adverse consequences for the Company and its business. The
imposition of administrative sanctions would subject the Company to further
adverse consequences.
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In addition, the lack of audited financial statements would prevent the
securities of the Company from becoming eligible for listing on NASDAQ, the
automated quotation system sponsored by the National Association of Securities
Dealers, Inc., or on any existing stock exchange. Moreover, the lack of such
financial statements is likely to discourage broker-dealers from becoming or
continuing to serve as market makers in the securities of the Company. Without
audited financial statements, the Company would almost certainly be unable to
offer securities under a registration statement pursuant to the Securities Act
of 1933, and the ability of the Company to raise capital would be significantly
limited until such financial statements were to become available.
Other Regulation. An acquisition made by the Company may be of a business
that is subject to regulation or licensing by federal, state, or local
authorities. Compliance with such regulations and licensing can be expected to
be a time-consuming, expensive process and may limit other investment
opportunities of the Company.
Dependence upon Management; Limited Participation of Management. The
Company currently has three individuals who serve as its Officers and directors.
The Company will be heavily dependent upon their skills, talents, and abilities
to implement its business plan, and may, from time to time, find that the
inability of the Officers and Directors to devote their full time attention to
the business of the Company results in a delay in progress toward implementing
its business plan. The Company does not and will not obtain "key man" life
insurance on either of these individuals. Furthermore, since only three
individuals are serving as the Officers and Directors of the Company, it will be
entirely dependent upon their experience in seeking, investigating, and
acquiring a business and in making decisions regarding the Company's operations.
The analysis of business opportunities will be primarily handled by the
Company's President who is not a professional business analyst. See
"Management." Because investors will not be able to evaluate the merits of
possible business acquisitions by the Company, they should critically assess the
information concerning the Company's Officers and Directors.
Lack of Continuity in Management. The Company does not have an employment
agreement with its Officers and Directors, and as a result, there is no
assurance that they will continue to manage the Company in the future. In
connection with acquisition of a business opportunity, it is likely the current
Officers and Directors of the Company may resign. A decision to resign will be
based upon the identity of the business opportunity and the nature of the
transaction, and is likely to occur without the vote or consent of the
stockholders of the Company.
Indemnification of Officers and Directors. The Company's Articles of
Incorporation provide for the indemnification of its Directors, Officers,
employees, and agents, under certain circumstances, against attorney's fees and
other expenses incurred by them in any litigation to which they become a party
arising from their association with or activities on behalf of the Company. The
Company will also bear the expenses of such litigation for any of its Directors,
Officers, employees, or agents, upon such person's promise to repay the Company
therefor if it is ultimately determined that any such person shall not have been
entitled to indemnification. This indemnification policy could result in
substantial expenditures by the Company which it will be unable to recoup.
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Director's Liability Limited. The Company's Articles of Incorporation
exclude personal liability of its Directors to the Company and its stockholders
for monetary damages for breach of fiduciary duty except in certain specified
circumstances. Accordingly, the Company will have a much more limited right of
action against its directors than otherwise would be the case. This provision
does not affect the liability of any director under federal or applicable state
securities laws.
Dependence upon Outside Advisors. To supplement the business experience of
its Officers and Directors, the Company may be required to employ accountants,
technical experts, appraisers, attorneys, or other consultants or advisors. Due
to the Company's limited financial resources, it may not be in a position to
retain outside advisors. The selection of any such advisors will be made by the
Company's President without any input from stockholders. Furthermore, it is
anticipated that such persons may be engaged on an "as needed" basis without a
continuing fiduciary or other obligation to the Company. In the event the
President of the Company considers it necessary to hire outside advisors, he may
elect to hire persons who are affiliates, if they are able to provide the
required services.
Leveraged Transactions. There is a possibility that any acquisition of a
business opportunity by the Company may be leveraged, i.e., the Company may
finance the acquisition of the business opportunity by borrowing against the
assets of the business opportunity to be acquired, or against the projected
future revenues or profits of the business opportunity. This could increase the
Company's exposure to larger losses. A business opportunity acquired through a
leveraged transaction is profitable only if it generates enough revenues to
cover the related debt and expenses. Failure to make payments on the debt
incurred to purchase the business opportunity could result in the loss of a
portion or all of the assets acquired. There is no assurance that any business
opportunity acquired through a leveraged transaction will generate sufficient
revenues to cover the related debt and expenses.
Competition. The search for potentially profitable business opportunities
is intensely competitive. The Company expects to be at a disadvantage when
competing with many firms that have substantially greater financial and
management resources and capabilities than the Company. These competitive
conditions will exist in any industry in which the Company may become
interested.
No Foreseeable Dividends. The Company has not paid dividends on its Common
Stock and does not anticipate paying such dividends in the foreseeable future.
Loss of Control by Present Management and Stockholders. The Company may
consider an acquisition in which the Company would issue as consideration for
the business opportunity to be acquired an amount of the Company's authorized
but unissued Common Stock that would, upon issuance, represent the great
majority of the voting power and equity of the Company. The result of such an
acquisition would be that the acquired company's stockholders and management
would control the Company, and the Company's management could be replaced by
persons unknown at this time. Such a merger would result in a greatly reduced
percentage of ownership of the Company by its current shareholders. In addition,
the Company's President could sell his control block of stock at a premium price
to the acquired company's stockholders.
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The acquisition will, in all probability, be structured as a tax-free
exchange under the Internal Revenue Code of 1986 to facilitate the shareholders
of the business entity to be acquired. If so structured, the Company's
shareholders will not be impacted either positively or negatively.
No Public Market Exists. There is no public market for the Company's Common
Stock, and no assurance can be given that a market will develop or that a
shareholder ever will be able to liquidate his investment without considerable
delay, if at all. If a market should develop, the price may be highly volatile.
Factors such as those discussed in this "Risk Factors" section may have a
significant impact upon the market price of the securities offered hereby. Owing
to the low price of the securities, many brokerage firms may not be willing to
effect transactions in the securities. Even if a shareholder finds a broker
willing to effect a transaction in these securities, the combination of
brokerage commissions, state transfer taxes, if any, and any other selling costs
may exceed the selling price. Further, many lending institutions will not permit
the use of such securities as collateral for any loans.
Blue Sky Considerations. Because the securities registered hereunder have
not been registered for resale under the blue sky laws of any state, the holders
of such shares and persons who desire to purchase them in any trading market
that might develop in the future, should be aware that there may be significant
state blue-sky law restrictions upon the ability of investors to sell the
securities and of purchasers to purchase the securities. Some jurisdictions may
not under any circumstances allow the trading or resale of blind-pool or
"blank-check" securities. Accordingly, shareholders of the Company should
consider the secondary market for the Company's securities to be a limited one.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATIONS.
Forward-Looking Statements May Not Prove Accurate
When used in this Form 10-SB, the words "anticipate," "estimate," "expect,"
"project," and similar expressions are intended to identify forward-looking
statements. Such statements are subject to certain risks, uncertainties and
assumptions including the possibility that the Company's Internet backbone will
fail to generate projected revenues or the Company will be unable to satisfy
certain settlement agreements. Should one or more of these risks or
uncertainties materialize, or should underlying assumptions prove incorrect,
actual results may vary materially from those anticipated, estimated or
projected.
Liquidity and Capital Resources
The Company is in the development stage and, since inception, has
experienced no significant change in liquidity or capital resources or
stockholder's equity other than the receipt of services valued in the amount of
$1,500. The Company's balance sheet as of September 30, 1997, reflects no assets
and no liabilities. Further, there exists no agreements or understandings with
regard to loan agreements by or with the Officers, Directors, principals or
affiliates of the Company.
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The Company will attempt to carry out its plan of business as discussed
above. The Company cannot predict to what extent its lack of liquidity and
capital resources will hinder its business plan prior to the consummation of a
business combination.
Results of Operations
During the period from September 30, 1996 through September 30, 1997 and
from June 1991 (inception) through September 30, 1997, the Company has engaged
in no significant operations other than organizational activities and the
preparation for registration of its securities under the Securities Exchange Act
of 1934, as amended. No revenues have been received by the Company during this
period.
The Company anticipates that until a business combination is completed with
an acquisition candidate, it will not generate revenues and may operate at a
loss after completing a business combination, depending upon the performance of
the acquired business.
Need for Additional Financing
The Company believes that its existing capital will not be sufficient to
meet the Company's cash needs, including the costs of compliance with the
continuing reporting requirements of the Securities Exchange Act of 1934, as
amended. Once a business combination is completed, the Company's needs for
additional financing are likely to increase substantially, however, there
currently exists no plan or understanding by which the Company will raise
capital, either debt or equity, over the next twelve (12) months..
No commitments to provide additional funds have been made by management or
other stockholders. Accordingly, there can be no assurance that any funds will
be available to the Company to allow it to cover its expenses.
The Company might seek to compensate providers of services by issuances of
stock in lieu of cash.
Impact of the Year 2000 Issue
The Year 2000 Issue is the result of computer programs being written using
two digits rather than four to define the applicable year. Any of the Company's
computer programs that have date-sensitive software may recognize a date using
"00" as the year 1900 rather than the year 2000. This could result in a system
failure or miscalculations causing disruptions of operations, including, among
other things, a temporary inability to process transactions, send invoices, or
engage in similar normal business activities.
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Based on a recent assessment, the Company, in its present status,
determined that it will not be required to modify or replace significant
portions of its software so that its computer systems will properly utilize
dates beyond December 31, 1999.
ITEM 3. DESCRIPTION OF PROPERTY.
The Company does not currently maintain an office or any other facilities.
It does currently maintain a mailing address at 3140 So. Peoria Street, Suite
K230, Aurora, Colorado 80014, which is the office address of its President. The
Company pays no rent for the use of this mailing address. The Company does not
believe that it will need to maintain an office at any time in the foreseeable
future in order to carry out its plan of operations described herein. The
Company's telephone number is (303) 755-9832.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth, as of the date of this Registration
Statement, the number of shares of Common Stock owned of record and beneficially
by executive Officers, Directors and persons who hold 5.0% or more of the
outstanding Common Stock of the Company. Also included are the shares held by
all executive Officers and Directors as a group.
Number of
Shares Owned Percent of
Name and Address Beneficially Class Owned
- ---------------- ------------ -----------
Mathew J. Kavanagh III 255,000 51%
3140 South Peoria
Suite K230
Aurora, CO 80014
Anthony M. Griffin 1,000 *
7345 E. Peakview Avenue
Englewood, CO 80111
Gary M. Griffin 50,000 (1) *
7345 E. Peakview Avenue
Englewood, CO 80111
Terry Whiteside 50,000 10%
7345 E. Peakview Avenue
Englewood, CO 80111
Marshal Griffin 50,000 10%
Muntaner 72
Barcelona, Spain
Duane Peterson 25,000 5%
44-100 Monterey, #206
Palm Desert, CA 92260
Alex Herman 25,000 5%
Hong Kong
Equitus Corp. 90,000 (2) 18%
0832-1020 World Trade Center
Panama, Republic de Panama
All Directors and Executive 306,000 61%
Officers as a group (3 persons)
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- -------------------
* Less than 1%
(1) Mr. Griffin may be deemed to be the beneficial owner of 50,000 shares
of the Company's Common Stock by virtue of his wife's ownership of said
shares, however, Mr. Griffin disclaims any beneficial ownership with
respect to these shares.
(2) Mr. Jose Severino is the sole equity owner of Equitus Corp. Mr.
Severino's activities are not material to the Company's operations and
he is not in a position to influence or control the Company's
operations.
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS.
The Directors and executive Officers currently serving the Company are as
follows:
Name Age Positions Held and Tenure
Matthew J. Kavanagh III 62 President, Treasurer and Director since
January 13, 1995
Anthony M. Griffin 29 Secretary and Director since January 13, 1995
Gary M. Griffin 56 Director since January 13, 1995
The Directors named above will serve until the next annual meeting of the
Company's stockholders. Thereafter, Directors will be elected for one-year terms
at the annual stockholders' meeting. Officers will hold their positions at the
pleasure of the Board of Directors, absent any employment agreement, of which
none currently exists or is contemplated. There is no arrangement or
understanding between the Directors and Officers of the Company and any other
person pursuant to which any Director or Officer was or is to be selected as a
Director or Officer of the Company.
There is no family relationship between or among any Officer and Director
except that Gary M. Griffin and Anthony M. Griffin are father and son.
The Directors and Officers of the Company will devote their time to the
Company's affairs on an "as needed" basis. As a result, the actual amount of
time which he will devote to the Company's affairs is unknown and is likely to
vary substantially from month to month.
The Company has no audit or compensation committee.
Biographical Information
Matthew J. Kavanagh III. Mr. Kavanagh, who is the Company's President and
Treasurer, has served as an Officer and Director of the Company since January
13, 1995.
Since September 1982, to the present, Mr. Kavanagh has been the President
of The Amherst Group, Ltd, a private business consulting firm located in Aurora,
Colorado. From July 1983 to February 1986, Mr. Kavanagh served as Vice President
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of Operations for The Charles Golding Company, a private commercial real estate
development company located in Englewood, Colorado. From October 1986 to January
1988, Mr. Kavanagh was a business consultant with the Laurance Group, a private
business consulting firm located in Englewood, Colorado. From October 1986 to
December 1987, Mr. Kavanagh was an Officer and Director of Clearview Capital
Corporation, a public "blank check" company located in Englewood, Colorado. In
December 1987, Clearview Capital Corporation merged with a Houston, Texas based,
Mexican Restaurant operation and changed its name to Arriba Fajita Holdings Inc.
From February 1987 to February 1988, Mr. Kavanagh served as an Officer of
Medical Ancillary Services, Inc. a publicly-owned company located in Los
Angeles, California. This company provided "one call" medical services to
convalescent and nursing homes. From May 1987, to January 1988, Mr. Kavanagh
served as an Officer and Director of Tonga Capital Corporation, a public "blank
check" company located in Englewood, Colorado. In October 1987, Tonga commenced
an initial public offering of its securities, raising net proceeds of $146,250,
through the offer and sale of units comprised of one share of common stock and
one common stock purchase warrant at the price of $.01 per unit. Mr. Kavanagh
resigned as an Officer and Director of Tonga in January 1988, prior to Tonga
having entered into a merger or acquisition agreement with any business. During
the course of Mr. Kavanagh's tenure with the company, Tonga completed its
initial public offering of securities and had begun the search for a merger or
acquisition candidate. As an Officer and Director of the Company. Mr. Kavanagh
had the opportunity to purchase 1,000,000 shares of Tonga's common stock for
$100.00. Upon his resignation from Tonga, Mr. Kavanagh re-contributed the
1,000,000 shares to the Company's treasury. From September 1987 to January 1988,
Mr. Kavanagh served as an Officer and Director of Hydropower Development
Systems, Inc., a publicly-owned company located in Englewood, Colorado. During
Mr. Kavanagh's tenure, Hydropower had no material assets or operations. From
September 1987 to January 1988, Mr. Kavanagh served as an Officer and Director
of Continental Power Systems, Inc. of Englewood, Colorado. This publicly-traded
company planned to design, construct and operate plants which would convert
waste tires to energy. From September 1987 to January 1988, Mr. Kavanagh served
as an Officer and Director of publicly-traded, McGregor Capital Corporation
McGregor Capital had previously completed its initial public offering, having
raised a net proceeds of approximately $135,000 at a price of $.01 per unit.
During the course of Mr. Kavanagh's four month tenure, McGregor was actively
seeing a merger or acquisition candidate. However, Mr. Kavanagh resigned as an
Officer and Director of the Corporation prior to McGregor having entered into
any merger or acquisition agreement with any candidate. Mr. Kavanagh received
1,250,000 shares of McGregor's common stock for services he rendered to McGregor
during this time as an Officer and Director. In January 1988, Mr. Kavanagh
became an Officer and Director of Huntington Capital Corporation of Englewood,
Colorado. The corporation was originally formed as Lakeshore Capital on July 6,
1988, but changed its name to Huntington Capital Corporation, November 1, 1988.
Its purpose was to create a vehicle to obtain capital to take advantage of
business opportunities which may have potential profit. Mr. Kavanagh purchased
5,500,000 founding shares for $1,100 which he still owns. There were no public
funds raised and the corporation remained inactive until recently. Mr. Kavanagh
submitted his resignation as an Officer and Director on April 26, 1996, and has
no current management involvement. The corporation is now being reactivated and
re-registered by another group of participants. From August 1994 to September
1996, Mr. Kavanagh was an Officer and Director of Ogden, McDonald and Company.
The company was sold in September 1996 to American Petromoly, Inc. This Houston
company is a manufacturer of oil derivative products. Mr. Kavanagh resigned as
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an Officer and Director upon the sale of the corporation. In August 1996, Mr.
Kavanagh was elected and currently serves as an Officer and Director of
publicly-traded USAsurance, Group, Inc. - a speciality finance company located
in Englewood, Colorado.
Anthony Griffin. Mr. Griffin has been the Company's Secretary and a
Director since January 13, 1995. Mr. Griffin attended the University of
Colorado, Boulder full time through the Spring of 1992. He now holds a Bachelor
of Arts degree from that institution. From 1992 Mr. Griffin served as a manager
and employee benefits consultant with Scoure Financial Services, Inc. From 1994
through 1996, Mr. Griffin served in the same capacity with Benefits Inc. in
Denver, Colorado. Since that time, Mr. Griffin has served as the Managing
partner with Asset Partners, LLC, an employee benefit consulting firm.
Gary M. Griffin. Mr. Griffin has been a Director of the Company since
January 13, 1995. Since April 1988, Mr. Griffin has served as the President of
Consultant Group, Inc., Englewood, Colorado, a corporation solely-owned by him,
which provides financial public relations services and advice on corporate
restructuring to private and public corporations operating in the United States,
the United Kingdom and France. From January 1992 to November 1994, Mr. Griffin
was the President of Beneficial Capital Financial Services, Inc., a financial
consulting firm. He served as the Treasurer and Chairman of the Board of
Directors of Resource Finance Group, Ltd. ("RFG"), a public Colorado corporation
engaged in the business of providing operators of metal mines in selected
developing countries with mining and processing equipment and training in
exchange for a revenue interest in the mines, from August 1991 until RFG merged,
in April 1993, with Onyx Systems, Ltd. He received a Bachelor of Business
Administration from the University of Texas in 1964 and a Master's degree in
business administration from North Texas State University in 1965.
Indemnification of Officers and Directors
As permitted by Colorado law, the Company's Articles of Incorporation
provide that the Company will indemnify its Directors and Officers against
expenses and liabilities they incur to defend, settle, or satisfy any civil or
criminal action brought against them on account of their being or having been
Company Directors or Officers unless, in any such action, they are adjudged to
have acted with gross negligence or willful misconduct. Insofar as
indemnification for liabilities arising under the Securities Act of 1933 may be
permitted to Directors, Officers or persons controlling the Company pursuant to
the foregoing provisions, the Company has been informed that, in the opinion of
the Securities and Exchange Commission, such indemnification is against public
policy as expressed in that Act and is, therefore, unenforceable.
Exclusion of Liability
Pursuant to the Colorado Business Corporation Act, the Company's
Articles of Incorporation exclude personal liability for its directors for
monetary damages based upon any violation of their fiduciary duties as
directors, except as to liability for any breach of the duty of loyalty, acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, acts in violation of Section 7-106-401 of the Colorado
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<PAGE>
Business Corporation Act, or any transaction from which a director receives an
improper personal benefit. This exclusion of liability does not limit any right
which a director may have to be indemnified and does not affect any director's
liability under federal or applicable state securities laws.
Other Public Shell Activities
From October 1986 to December 1987, Mr. Kavanagh was an Officer and
Director of Clearview Capital Corporation (SEC File #33-12288), a public "blank
check" company located in Englewood, Colorado. The Company raised approximately
$200,000 and Mr. Kavanagh purchased 9,000,000 shares of its common stock for a
total of $2,700. In December 1987, Clearview Capital Corporation merged with a
Houston, Texas based, Mexican Restaurant operation and changed its name to
Arriba Fajita Holdings Inc. Mr. Kavanagh resigned as an officer and director of
Clearview upon completion of the merger and has had no subsequent involvement.
Mr. Kavanagh still owns his original 9,000,000 shares of Clearwater (Arriba)
common stock.
From May 1987 to January 1988, Mr. Kavanagh served as an Officer and
Director of Tonga Capital Corporation (SEC File #0-23726), a public "blank
check" company seeking a merger or acquisition with a private firm located in
Englewood, Colorado. In October 1987, Tonga commenced an initial public offering
of its securities, raising net proceeds of $146,250, through the offer and sale
of units comprised of one share of common stock and one common stock purchase
warrant at the price of $.01 per unit. Mr, Kavanagh resigned as an Officer and
Director of Tonga in January 1988, prior to Tonga having entered into a merger
or acquisition agreement with any business. During the course of Mr. Kavanagh's
tenure with Tonga, the company completed its initial public offering of
securities and had begun the search for a merger or acquisition candidate. As an
Officer and Director of the Company, Mr. Kavanagh had the opportunity to
purchase 1,000,000 shares of Tonga's common stock for $100.00. Upon his
resignation from Tonga, Mr. Kavanagh re-contributed the 1,000,000 shares to the
Company's treasury. Mr. Kavanagh is unaware of the present status of Tonga or
if, in fact, it ever consummated a merger or acquisition.
In January 1989, Mr. Kavanagh became an Officer and Director of Huntington
Capital Corporation of Englewood, Colorado (SEC File #33-26307). The corporation
was originally formed as Lakeshore Capital in July 6, 1988, but changed its name
to Huntington Capital Corporation, November 1, 1988. Its purpose was to create a
vehicle to obtain capital to take advantage of business opportunities which may
have potential profit. Mr. Kavanagh purchased 5,500,000 founding shares for
$1,100, which he still owns. There were no public funds raised and the
Corporation remained inactive until recently. Mr. Kavanagh submitted his
resignation as an Officer and Director April 26, 1996, and has no current
management involvement. It is believed this corporation is now being reactivated
and re-registered by another group of participants, however, no person
associated with the Company is involved in this process.
From August 1994 to September 1996, Mr. Kavanagh was an Officer and
Director of Ogden, McDonald and Company (SEC File #0-24682). The company was
sold in September 1996 to American Petromoly, Inc. This Houston located company
is a manufacturer of oil derivative products. Mr. Kavanagh resigned as an
Officer and Director upon the sale of the Corporation. For his services in
connection with the merger, he received 25,000 shares, which he sold for $6,000.
Mr. Gary Griffin was President of Beneficial Capital Financial Services,
Inc. ("Beneficial") (SEC File #0-23726) from January 1992 to November 1994. The
company filed a registration statement on Form 10-SB and it was declared
effective on June 18, 1994. No monies were raised in connection with the filing
of the registration statement. On November 3, 1994, Beneficial merged with
Golden Eagle International, Inc. In connection with the merger with Beneficial,
Mr. Griffin's wife sold her stock for approximately $30,000. Mr. Griffin
resigned as an Officer and Director of that corporation upon the close of the
merger and received no compensation in connection with the merger.
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No other Officer and/or Director of the Company has any prior involvement
with public shell companies or experience in identifying emerging companies for
investment and/or business combinations.
Conflicts of Interest
The Officers and Directors of the Company will devote only a small portion
of their time to the affairs of the Company, estimated to be no more than
approximately 10 hours per month. There will be occasions when the time
requirements of the Company's business conflict with the demands of their other
business and investment activities. Such conflicts may require that the Company
attempt to employ additional personnel. There is no assurance that the services
of such persons will be available or that they can be obtained upon terms
favorable to the Company.
The Company's Officers and Directors may elect, in the future, to form one
or more additional shell companies with a business plan similar or identical to
that of the Company. Any such additional shell companies would also be in direct
competition with the Company for available business opportunities. To avoid a
conflict in this regard, the Company's Officers and Directors will not submit a
business opportunity to any other shell company of which they are associated
until it has first been reviewed by the Company's Board of Directors and
accepted or rejected.
The Company's Officers and Directors may actively negotiate or otherwise
consent to the purchase of a portion of their common stock as a condition to, or
in connection with, a proposed merger or acquisition transaction. It is
anticipated that a substantial premium over the initial cost of such shares may
be paid by the purchaser in conjunction with any sale of shares by the Company's
Officers and Directors which is made as a condition to, or in connection with, a
proposed merger or acquisition transaction. The fact that a substantial premium
may be paid to the Company's Officers and Directors to acquire their shares
creates a potential conflict of interest for them in satisfying their fiduciary
duties to the Company and its other shareholders. Even though such a sale could
result in a substantial profit to them, they would be legally required to make
the decision based upon the best interests of the Company and the Company's
other shareholders, rather than their own personal pecuniary benefit.
ITEM 6. EXECUTIVE COMPENSATION.
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation
Name and Restricted
Principal Other Annual Stock Options/ LTIP All Other
Position Year Salary Bonuses($) Compensation Awards SARS Payouts($) Compensation
- --------- ---- ------ ---------- ------------ ---------- -------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Matthew J. Kavanagh 1997 $ -0- -0- $ -0- -0- -0- -0- -0-
President, 1996 N/A -0- $ -0- -0- -0- -0- -0-
Treasurer & Director 1995 N/A -0- $ -0- -0- -0- -0- -0-
</TABLE>
(1) Mr. Kavanagh received 225,000 shares of the Company's Common Stock valued
at $675 for services rendered the Company in 1995.
- 23 -
<PAGE>
The Company has no stock option, retirement, pension, or profit-sharing
programs for the benefit of Directors, Officers or other employees, but the
Board of Directors may recommend adoption of one or more such programs in the
future.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Prior to the date of this Registration Statement, the Company issued to
Matthew J. Kavanagh, Anthony Griffin and Gary Griffin, Officers and Directors of
the Company, and to Terry Whiteside, Marshal Griffin, Duane Peterson, Alex
Herman, Equitus Corp., Rachel Ellis, Mark Hogan, Michael Ferm and Keith Johnson,
the founding shareholders, a total of 500,000 shares of Common Stock for a total
of $1,500 in services valued at $1,500. Services included advise as to corporate
structure. Certificates evidencing the Common Stock issued by the Company to
these persons have all been stamped with a restrictive legend, and are subject
to stop transfer orders by the Company. In addition, these shares have been
placed in escrow with the Company only to be released upon the successful
completion of a merger or business combination as described herein.
No Officer, Director, promoter, or affiliate of the Company has or proposes
to have any direct or indirect material interest in any asset proposed to be
acquired by the Company through security holdings, contracts, options, or
otherwise.
The Company will adopt a policy under which any consulting or finder's fee
that may be paid to a third party for consulting services to assist management
in evaluating a prospective business opportunity would be paid in stock or in
cash. Any such issuance of stock would be made on an ad hoc basis. Accordingly,
the Company is unable to predict whether or in what amount such a stock issuance
might be made.
Although there is no current plan in existence, it is possible that the
Company will adopt a plan to pay or accrue compensation to its Officers and
Directors for services related to seeking business opportunities and completing
a merger or acquisition transaction.
The Company maintains a mailing address at the office of its President, but
otherwise does not maintain an office. As a result, it pays no rent and incurs
no expenses for maintenance of an office and does not anticipate paying rent or
incurring office expenses in the future. It is likely that the Company will
establish and maintain an office after completion of a business combination.
Although management has no current plans to cause the Company to do so, it
is possible that the Company may enter into an agreement with an acquisition
candidate requiring the sale of all or a portion of the Common Stock held by the
Company's current stockholders to the acquisition candidate or principals
thereof, or to other individuals or business entities, or requiring some other
form of payment to the Company's current stockholders, or requiring the future
employment of specified Officers and payment of salaries to them. It is more
likely than not that any sale of securities by the Company's current
stockholders to an acquisition candidate would be at a price substantially
higher than that originally paid by such stockholders. Any payment to current
stockholders in the context of an acquisition involving the Company would be
determined entirely by the largely unforeseeable terms of a future agreement
with an unidentified business entity.
- 24 -
<PAGE>
ITEM 8. DESCRIPTION OF SECURITIES.
Common Stock
The Company's Articles of Incorporation authorize the issuance of
500,000,000 shares of Common Stock. Each record holder of Common Stock is
entitled to one vote for each share held on all matters properly submitted to
the stockholders for their vote. Cumulative voting for the election of directors
is not permitted by the Articles of Incorporation.
Holders of outstanding shares of Common Stock are entitled to such
dividends as may be declared from time to time by the Board of Directors out of
legally available funds; and, in the event of liquidation, dissolution or
winding up of the affairs of the Company, holders are entitled to receive,
ratably, the net assets of the Company available to stockholders after
distribution is made to the preferred stockholders, if any, who are given
preferred rights upon liquidation. Holders of outstanding shares of Common Stock
have no preemptive, conversion or redemptive rights. All of the issued and
outstanding shares of Common Stock are, and all unissued shares when offered and
sold will be, duly authorized, validly issued, fully paid, and nonassessable. To
the extent that additional shares of the Company's Common Stock are issued, the
relative interests of then existing stockholders may be diluted.
Preferred Stock
The Company's Articles of Incorporation authorize the issuance of
100,000,000 shares of preferred stock. The Board of Directors of the Company is
authorized to issue the preferred stock from time to time in series and is
further authorized to establish such series, to fix and determine the variations
in the relative rights and preferences as between series, to fix voting rights,
if any, for each series, and to allow for the conversion of preferred stock into
Common Stock. No preferred stock has been issued by the Company. The Company
anticipates that preferred stock may be utilized in making acquisitions.
Transfer Agent
The Company is currently serving as its own transfer agent, and plans to
continue to serve in that capacity until such time as management believes it is
necessary or appropriate to employ an independent transfer agent in order to
facilitate the creation of a public trading market for the Company's securities.
Since the Company does not currently expect any public market to develop for its
securities until after it has completed a business combination, it does not
currently anticipate that it will seek to employ an independent transfer agent
until it has completed such a transaction.
Reports to Stockholders
The Company plans to furnish its stockholders with an annual report for
each fiscal year containing financial statements audited by its independent
certified public accountants. In the event the Company enters into a business
combination with another company, it is the present intention of management to
continue furnishing annual reports to stockholders. Additionally, the Company
may, in its sole discretion, issue unaudited quarterly or other interim reports
to its stockholders when it deems appropriate. The Company intends to comply
with the periodic reporting requirements of the Securities Exchange Act of 1934
for so long as it is subject to those requirements.
- 25 -
<PAGE>
PART II
ITEM 1. MARKET PRICE AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND OTHER
SHAREHOLDER MATTERS
No public trading market exists for the Company's securities and all of its
outstanding securities are restricted securities as defined in Rule 144 of the
Securities Act of 1933, as amended. There were eleven (11) holders of record of
the Company's common stock on September 30, 1997 and with the exception of the
shares held by the Company's Officers, Directors and 10% shareholders, all
shares have been held in excess of two years as of June 16, 1997 and pursuant to
Rule 144k, are free of restriction on transfer. Shares held by the Officers,
Directors and other affiliates (ie 10% shareholders) continue to be subject to
the provisions of Rule 144 and are not free of restriction. Accordingly, these
individuals must comply with the provisions of Rule 144, including the volume
limitations and may not sell their shares in excess of 1% of the Company's
issued and outstanding shares every ninety (90) days. No dividends have been
paid to date and the Company's Board of Directors does not anticipate paying
dividends in the foreseeable future.
ITEM 2. LEGAL PROCEEDINGS
The Company is not a party to any pending legal proceedings, and no such
proceedings are known to be contemplated.
No Director, Officer or affiliate of the Company, and no owner of record or
beneficial owner of more than 5.0% of the securities of the Company, or any
associate of any such Director, Officer or security holder is a party adverse to
the Company or has a material interest adverse to the Company in reference to
pending litigation.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS.
Not applicable.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES.
Since the Company's inception, the Company has sold its Common Stock to the
persons listed in the table below in transactions summarized as follows:
Aggregate Purchase
Date of Purchase Price
Name Sale Shares Price(1)(2) per Share
- ---- ------- ------ ----------- ---------
Matthew J. Kavanagh 06/13/95 255,000 $ 675 $.0003
Anthony Griffin 06/13/95 1,000 $ 3 $.0003
Terry Whiteside 06/13/95 50,000 $ 150 $.0003
Marshal Griffin 06/13/95 50,000 $ 150 $.0003
Duane Peterson 06/13/95 25,000 $ 75 $.0003
Alex Herman 06/13/95 25,000 $ 75 $.0003
Equitas, Corp. 06/13/95 90,000 $ 270 $.0003
Richard Ellis 06/13/95 1,000 $ 3 $.0003
Mark Hogan 06/13/95 1,000 $ 3 $.0003
Michael Ferm 06/13/95 1,000 $ 3 $.0003
Keith Johnson 06/13/95 1,000 $ 3 $.0003
- 26 -
<PAGE>
- -------------------
(1) Consideration consisted of services rendered to the Company related to
investigating and developing the Company's proposed business plan and
capital structure and completing the organization of the Company. Officers
and Directors met on several occasions to discuss and formate the corporate
structure and plan.
(2) Total aggregate consideration consisted of services valued by the Company's
Board of Directors at $1,500.00.
Each of the sales listed above was made for services. All of the listed
sales were made in reliance upon the exemption from registration offered by
Section 4(2) of the Securities Act of 1933, as amended and applicable state
private offering exemptions. Based upon Subscription Agreements completed by
each of the shareholders and the pre-existing relationship between the
shareholders and the Company, the Company believes it had reasonable grounds to
believe immediately prior to making an offer to the private investors, and did
in fact believe, when such subscriptions were accepted, that such purchasers (1)
were purchasing for investment and not with a view to distribution, and (2) had
such knowledge and experience in financial and business matters that they were
capable of evaluating the merits and risks of their investment and were able to
bear those risks. The purchasers had access to pertinent information enabling
them to ask informed questions. The shares were issued without the benefit of
registration. An appropriate restrictive legend is imprinted upon each of the
certificates representing such shares, and stop-transfer instructions have been
entered in the Company's transfer records. All such sales were effected without
the aid of underwriters, and no sales commissions were paid.
Until such time as a business combination has been consummated and a
trading market exists, if ever, the Company's shares will not be qualified or
registered for sale by the existing shareholders in any state unless or until an
exemption from registration exists under federal and state securities laws
and/or a registration statement is filed and declared effective by the
Securities and Exchange Commission. At such time as a trading market exists, the
Company's shares may be sold in the secondary trading market if in compliance
with state regulations.
The Company will not issue any additional securities unless or until it has
received legal advise as to full compliance with federal and state securities
laws.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Articles of Incorporation and the Bylaws of the Company, filed as
Exhibits 3.1 and 3.2, respectively, provide that the Company will indemnify its
Officers and Directors for costs and expenses incurred in connection with the
defense of actions, suits, or proceedings where the Officer or Director acted in
good faith and in a manner he reasonably believed to be in the Company's best
interest and is a party by reason of his status as an Officer or Director,
absent a finding of negligence or misconduct in the performance of duty.
- 27 -
<PAGE>
INTERNATIONAL CAPITAL FUNDING, INC.
Audited Financial Statements
For the Fiscal Years Ended September 30, 1997 and 1996
and the Period June 10, 1991 (Inception)
through September 30, 1997
- 28 -
<PAGE>
INTERNATIONAL CAPITAL FUNDING, INC.
TABLE OF CONTENTS
Page
----
Independent Auditors' Report F-1
Financial Statements
Balance Sheet F-2
Statement of Operations F-3
Statement of Cash Flow F-4
Statement of Shareholders' Equity F-5
Notes to the Financial Statements F-6 to F-7
Unaudited Financial Statements F-8
- 29 -
<PAGE>
KISH * LEAKE & ASSOCIATES, P.C.
Certified Public Accountants
J.D. Kish, C.P.A., M.B.A. 7901 E. Belleview Ave., Suite 220
James D. Leake, C.P.A., M.T. Englewood, Colorado 80111
- --------------------------- Telephone: (303) 779-5006
Arleen R. Brogan, C.P.A. Facsimile (303) 779-5724
Independent Auditors' Report
----------------------------
We have audited the accompanying balance sheet of International Capital Funding,
Inc. (a Developmental Stage Company), as of September 30, 1997 and the related
statements of income, shareholders' equity, and cash flows for the fiscal years
ended September 30, 1997 and 1996 and period June 10, 1991 (Inception) through
September 30, 1997. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of International Capital Funding,
Inc. at September 30, 1997 and the results of its operations and its cash flows
for the fiscal years ended September 30, 1997 and 1996 and the period June 10,
1991 (Inception) through September 30, 1997 in conformity with generally
accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 5, the Company is
in the development stage and has no operations as of September 30, 1997. The
deficiency in working capital as of September 30, 1997 raises substantial doubt
about its ability to continue as a going concern. Management's plans concerning
these matters are described in Note 5. The financial statements do not include
any adjustments that might result from the outcome of these uncertainties.
/s/ KISH, LEAKE & ASSOCIATES, P.C.
Kish, Leake & Associates, P.C.
Certified Public Accountants
Englewood, Colorado
October 2, 1997
-F1-
<PAGE>
International Capital Funding, Inc.
(A Development Stage Company)
Balance Sheet
- -------------------------------------------------------------------------
NOTES September
----- 30, 1997
--------
ASSETS
Current Assets $0
--
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES $0
--
SHAREHOLDERS' EQUITY 1,2
Preferred Stock, $.01Par Value
Authorized 100,000,000 shares;
Issued And Outstanding At
September 30, 1997 -0- Shares
Common Stock, $.0001Par Value
Authorized 500,000,000 shares;
Issued And Outstanding At
September 30, 1997 500,000 Shares 50
Capital Paid In Excess Of Par Value 1,450
Deficit Accumulated During
The Development Stage (1,500)
------
TOTAL SHAREHOLDERS' EQUITY 0
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $0
======
The Accompanying Notes Are An Integral Part Of These Financial Statements.
-F2-
<PAGE>
International Capital Funding, Inc.
(A Development Stage Company)
Statement Of Operations
- --------------------------------------------------------------------------------
June 10,
1991
(Inception)
Year Ended Year Ended Through
September September September
Notes 30, 1997 30, 1996 30, 1997
----- -------- -------- --------
Revenue $0 $0 $0
-- -- --
Expenses:
Administrative 0 0 1,500
- - -----
Total Expenses 0 0 1,500
- - -----
Net (Loss) $0 0 (1,500)
-- - ------
Net (Loss) Per Common Share 1 $0.00 $0.00 ($0.00)
----- ----- ------
Common Shares Outstanding 2 500,000 500,000 500,000
------- ------- -------
The Accompanying Notes Are An Integral Part Of These Financial Statements.
-F3-
<PAGE>
International Capital Funding, Inc.
(A Development Stage Company)
Statement Of Cash Flow
- --------------------------------------------------------------------------------
June 10,
1991
(Inception)
Year Ended Year Ended Through
September September September
Notes 30, 1997 30, 1996 30, 1997
----- -------- -------- --------
Net (Loss) $0 $0 ($1,500)
-- -- ------
Plus Items Not Affecting
Cash Flow: 0 0 0
Services Rendered For Stock 0 0 1,500
- - -----
Net Cash Flows From Operations 0 0 0
- - -
Cash Flows From Investing
Activities:
Net Cash Flows From Investing: 0 0 0
- - -
Cash Flows From Financing
Activities:
0 0 0
- - -
Net Cash Flows From Financing: 0 0 0
- - -
Net Increase (Decrease) In Cash 0 0 0
Cash At Beginning Of Period 0 0 0
- - -
Cash At End Of Period $0 $0 $0
-- -- --
Summary Of Non-Cash Investing
And Financing Activities:
Common Stock Issued For services $0 $0 $1,500
-- -- ------
The Accompanying Notes Are An Integral Part Of These Financial Statements.
-F4-
<PAGE>
International Capital Funding, Inc.
(A Development Stage Company)
Statement Of Shareholders' Equity
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Net (Loss)
Number Number Capital Accumulated
Of Of Paid In During
Shares Shares Common Excess Of Preferred Development
NOTES Common Preferred Stock Par Value Stock Stage Total
----- ------ --------- ----- --------- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance At June 10, 1991 2 0 0 $0 $0 $0 $0 $0
January 13, 1995 issued
500,000 Shares Of $.0001
Par Value Common Stock
for services valued at
$1,500 or $.003 per share 500,000 0 50 1,450 0 1,500
Net (Loss) (1,500) (1,500)
------- ------- ------- ------- ------ ------- -------
Balance At September 30,
1995, 1996 And 1997 500,000 0 $50 $1,450 $0 ($1,500) $0
------- ------- ------- ------- ------ ------- -------
</TABLE>
The Accompanying Notes Are An Integral Part Of These Financial Statements.
-F5-
<PAGE>
International Capital Funding, Inc.
(A Development Stage Company)
Notes to Financial Statements
For The Fiscal Years Ended September 30, 1997 and 1996
- --------------------------------------------------------------------------------
Note 1 - Organization and Summary of Significant Accounting Policies
- --------------------------------------------------------------------
Organization:
On May 10, 1993, International Capital Funding, Inc. (the Company) was
incorporated under the laws of Colorado to engage in any lawful business allowed
by the state of Colorado.
Development Stage:
The company entered the Development stage in accordance with SFAS No. 7 on
January 13, 1995. Its purpose is to evaluate, structure and complete a merger
with, or acquisition a privately owned corporation.
Statement of Cash Flows:
For the purpose of the statement of cash flows, the company considers demand
deposits and highly liquid-debt instruments purchased with a maturity of three
months or less to be cash equivalents.
Cash paid for interest in fiscal year ended September 30, 1997 and 1996 was
$-0-. Cash paid for income taxes in fiscal year ended September 30, 1997 and
1996 was $-0-.
Net (Loss) per Common Share:
Net (Loss) per common share is computed by dividing the net loss for the period
by the number of shares outstanding at September 30, 1997 and 1996.
Use of Estimates:
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts. Actual results could differ from those estimates.
-F6-
<PAGE>
International Capital Funding, Inc.
(A Development Stage Company)
Notes to Financial Statements
For The Fiscal Years Ended September 30, 1997 and 1996
- --------------------------------------------------------------------------------
Note 2 - Capital Stock and Capital in Excess of Par Value
- ---------------------------------------------------------
The Company initially authorized 500,000,000 shares of $.0001 par value common
stock and 100,000,000 shares of $.01 par value preferred stock. On January 13,
1995, the company issued 500,000 shares of common stock valued at $1,500 for
services and cash advances paid on behalf of the Company.
Note 3 - Related Party Events
- -----------------------------
The Company maintains a mailing address at a shareholders place of business.
This address is located at 3140 S Peoria Street - K230, Aurora, Colorado 80014.
At this time the Company has no need for an office other than to maintain a
mailing address. Management has incurred a minimal amount of time and expense on
behalf of the Company.
Note 4 - Income Taxes
- ---------------------
At September 30, 1997, the company had net operating loss carryforwards
available for financial statement and Federal income tax purposes of
approximately $1,500 which, if not used, will expire in the year 2008.
The Company follows Financial Accounting Standards Board Statement No. 109,
"Accounting for Income Taxes" (SFAS #109), which requires, among other things,
an asset and liability approach to calculating deferred income taxes. As of
September 30, 1997, the Company has a deferred tax asset of $300 primarily for
its net operating loss carryforward which has been fully reserved through a
valuation allowance. The change in the valuation allowance for September 30,
1997 is $-0-.
Note 5 - Basis of Presentation
- ------------------------------
In the course of its development activities the Company has sustained continuing
losses and expects such losses to continue for the foreseeable future. The
Company's management plans on advancing funds on an as needed basis and in the
longer term, revenues from the operations of a merger candidate, if found. The
Company's ability to continue as a going concern is dependent on these
additional management advances, and, ultimately, upon achieving profitable
operations through a merger candidate.
Note 6 - Subsequent Events
- --------------------------
The Company will be filing a Form 10 with the Securities and Exchange Commission
to become a 34 Act reporting company.
-F7-
<PAGE>
International Capital Funding, Inc.
(A Development Stage Company)
Balance Sheet
- --------------------------------------------------------------------------------
Unaudited Audited
June September
30, 1998 30, 1997
ASSETS
Current Assets:
Total Current Assets $0 $0
-- --
TOTAL ASSETS $0 $0
== ==
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES - Accounts Payable 0 0
-- --
SHAREHOLDERS' EQUITY:
Preferred Stock, Par Value $.01 Per Share;
Authorized 100,000,000 Shares; Issued
and outstanding -0-
Common Stock, $.0001 Par Value;
Authorized 500,000,000 Shares; Issued
and outstanding 500,000 shares. 50 50
Additional Paid-In Capital 7,773 1,450
Deficit Accumulated During The
Development Stage (7,823) (1,500)
TOTAL SHAREHOLDERS' EQUITY 0 0
-- --
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $0 $0
== ==
See Accompanying Notes To These Unaudited Financial Statements.
-F8-
<PAGE>
International Capital Funding, Inc.
(A Development Stage Company)
Unaudited Statement Of Operations
- --------------------------------------------------------------------------------
3 Months 3 Months
Ended Ended
June June
30, 1998 30, 1997
-------- --------
Revenue: $0 $0
Consulting 0 0
Office 0 0
Legal & Accounting 0 0
-- --
Total Expenses 0 0
-- --
Net (Loss) 0 0
== ==
Basic (Loss) Per Common Share $0.00 $0.00
====== =====
Weighted Average Common Shares Outstanding 500,000 500,000
======= =======
See Accompanying Notes To These Unaudited Financial Statements.
-F9-
<PAGE>
International Capital Funding, Inc.
(A Development Stage Company)
Unaudited Statement Of Operations
- --------------------------------------------------------------------------------
June 10,
1991
9 Months 9 Months (Inception)
Ended Ended Through
June June June
30, 1998 30, 1997 30, 1998
-------- -------- --------
Revenue: $0 $0 $0
Consulting 0 0 1,500
Office 1,230 0 1,230
Legal & Accounting 5,093 0 5,093
----- -- -----
Total Expenses 6,323 0 7,823
----- -- -----
Net (Loss) (6,323) 0 (7,823)
===== == =====
Basic (Loss) Per Common Share ($0.01) $0.00 ($0.02)
===== == =====
Weighted Average Common Shares Outstanding 500,000 500,000 500,000
======= ======= =======
See Accompanying Notes To These Unaudited Financial Statements.
-F10-
<PAGE>
International Capital Funding, Inc.
(A Development Stage Company)
Unaudited Statement Of Cash Flow
- --------------------------------------------------------------------------------
June 10,
1991
9 Months 9 Months (Inception)
Ended Ended Through
June June June
30, 1998 30, 1997 30, 1998
-------- -------- --------
Cash Flows From Operating Activities:
Net (Loss) ($6,323) $0 ($7,823)
Items Not Affecting Cash Flow:
Stock Issued For Services 0 0 1,500
Expenses Paid By Shareholder On
Behalf Of Company 6,323 0 6,323
0 0 0
-------- -------- --------
Net Cash Flows From Operations 0 0 0
-------- -------- --------
Cash Flows From Investing Activities:
Net Cash Flows Provided By Investing: 0 0 0
-------- -------- --------
Cash Flows From Financing Activities:
Net Cash Flows Provided By Financing 0 0 0
-------- -------- --------
Net Increase (Decrease) In Cash 0 0 0
Cash At Beginning Of Period 0 0 0
-------- -------- --------
Cash At End Of Period $0 $0 $0
======== ======== ========
Supplementary Disclosure Of Cash Flow Information:
Noncash Financing Activities: -
Stock Issued For Services $0 $0 $1,500
======== ======== ========
Expenses Paid By Shareholder
On Behalf Of Company $6,323 0 $6,323
======== ======== ========
See Accompanying Notes To These Unaudited Financial Statements.
-F11-
<PAGE>
International Capital Funding, Inc.
(A Development Stage Company)
Unaudited Statement Of Shareholders' Equity
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Net (Loss)
Accumulated
Number Of Number Of Capital Paid During The
Shares Shares Common In Excess Of Preferred Development
Common Preferred Stock Par Value Stock Stage Total
--------- --------- ------ ------------ --------- ----------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance At June 10, 1991 0 0 $0 $0 $0 $0 $0
January 13, 1995 issued
500,000 Shares Of $.0001
Par Value Common Stock for
services valued at $1,500
or $.003 per share 500,000 0 50 1,450 0 1,500
Net (Loss) (1,500) (1,500)
-------- ------ ------ ------ ---- ------- -------
Balance At September 30, 1995,
1996 And 1997 500,000 0 50 1,450 0 (1,500) 0
Expenses Paid By Shareholder 6,323 6,323
Net (Loss) (6,323) (6,323)
-------- ------ ------ ------ ---- ------- -------
Balance At March 31, 1998 500,000 0 $50 $7,773 $0 ($7,823) $0
======== ====== ====== ====== ==== ======= =======
</TABLE>
See Accompanying Notes To These Unaudited Financial Statements.
-F12-
<PAGE>
International Capital Finding, Inc.
Notes To Unaudited Finaicial Statements
For The Nine Month Period Ended June 30, 1998
- --------------------------------------------------------------------------------
Note 1 - Unaudited Financial Information
The unaudited finaicial information included for the three month and nine month
periods ended June 30, 1998 and June 30, 1997 were taken from the books and
records without audit. However, such information reflects all adjustments
(consisting only of normal recurring adjustments, which are of the opinion of
management, necessary to reflect properly the results of interim periods
presented.) The results of operations for the nine month period ended June 30,
1998 are not necessarily indicative of the results expected for the results
expected for the year ended September 30, 1998.
-F13-
<PAGE>
PART III
ITEMS 1 AND 2. INDEX AND DESCRIPTION TO EXHIBITS
The Exhibits listed below are filed as part of this Registration Statement.
Exhibit
No. Document
- --------- -------------
EX-3.(i) Articles of Incorporation dated June 11, 1991*
EX-3.(ii) Bylaws of the Company*
EX-10.1 Lock-up Agreement with the Company and Matthew J. Kavanagh
EX-10.2 Lock-up Agreement with the Company and Anthony Griffin
EX-10.3 Lock-up Agreement with the Company and Terry Whiteside
EX-10.4 Lock-up Agreement with the Company and Marshal Griffin
EX-10.5 Lock-up Agreement with the Company and Duane Peterson
EX-10.6 Lock-up Agreement with the Company and Alex Herman
EX-10.7 Lock-up Agreement with the Company and Equitas, Corp.
EX-10.8 Lock-up Agreement with the Company and Richard Ellis
EX-10.9 Lock-up Agreement with the Company and Mark Hogan
EX-10.10 Lock-up Agreement with the Company and Michael Ferm
EX-10.11 Lock-up Agreement with the Company and Keith Johnson
EX-27.1 Financial Data Schedule*
EX-27.2 Financial Data Schedule*
EX-27.3 Financial Data Schedule
- -------------------
* previously submitted
- 30 -
<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.
INTERNATIONAL CAPITAL FUNDING, INC.
By: /s/ MATTHEW J. KAVANAGH
---------------------------------------------
Matthew J. Kavanagh III, President, Treasurer
and Director (Principal Executive Officer and
Principal Financial Officer)
Date: August 3, 1998
By: /s/ ANTHONY GRIFFIN
---------------------------------------------
Anthony Griffin, Secretary
Date: August 3, 1998
- 31 -
<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-SB/A2
GENERAL FORM FOR REGISTRATION OF SECURITIES OF SMALL
BUSINESS ISSUERS
Under Section 12(b) or (g) of the Securities Exchange Act of 1934
INTERNATIONAL CAPITAL FUNDING, INC.
----------------------------------------------------------
(Name of small business issuer in its charter)
Colorado 84-1434313
------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3140 So. Peoria Street, Suite K230
Aurora, CO 80114
---------------------------------------------------
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (303) 755-9832
----------------
EXHIBIT INDEX
-------------
Exhibit Page Number in
No. Document Sequentially Numbered System
EX-3.(i) Articles of Incorporation*
EX-3.(ii) Bylaws*
EX-10.1 Lock-up Agreement with the Company and
Matthew J. Kavanagh
EX-10.2 Lock-up Agreement with the Company and
Anthony Griffin
EX-10.3 Lock-up Agreement with the Company and
Terry Whiteside
EX-10.4 Lock-up Agreement with the Company and
Marshal Griffin
EX-10.5 Lock-up Agreement with the Company and
Duane Peterson
EX-10.6 Lock-up Agreement with the Company and
Alex Herman
EX-10.7 Lock-up Agreement with the Company and
Equitas, Corp.
EX-10.8 Lock-up Agreement with the Company and
Richard Ellis
EX-10.9 Lock-up Agreement with the Company and
Mark Hogan
EX-10.10 Lock-up Agreement with the Company and
Michael Ferm
EX-10.11 Lock-up Agreement with the Company and
Keith Johnson
EX-27.1 Financial Data Schedule*
EX-27.2 Financial Data Schedule*
EX-27.3 Financial Data Schedule
* previously submitted
- 32 -
<PAGE>
[LETTERHEAD]
August 3, 1998
VIA: EDGAR
Mr. Richard K. Wulff
Securities and Exchange Commission
450 Fifth Street, N. W.
Washington, D.C. 20549
Re: International Capital Funding, Inc.
Amendment No. 2 to Form 10-SB
SEC File No. 0-23391
Gentlemen:
Filed electronically on behalf of International Capital Funding, Inc. (the
"Registrant" or "Company") is Amendment No. 2 to Form 10-SB submitted in
response to the Staff's comment letter of April 1, 1998. This letter describes
the Registrant's response to each comment and the location in the filing where
the changes have been made:
GENERAL
Comment No. 1
Comment complied with at pages 10 and 16 of the Registration Statement.
Comment No. 2
Comment complied with at page 5 of the Registration Statement.
Comment No. 3
The undersigned has been advised by the Company's President that Mr.
Severino's activities are not material to the Company's activities and he has no
role in the decision making process of the Company. Additional disclosure has
been added at page 20 of the Registration Statement.
Comment No. 4
Comment complied with at page 23 of the Registration Statement.
Comment No. 5
The disclosure on Clearwater Capital has been revised to include the
suggested disclosure at page 23 of the Registration Statement.
<PAGE>
Securities and Exchange Commission
August 3, 1998
Page 2
Comment No. 6
Comment complied with at page 23 of the Registration Statement.
Comment No. 7
Comment complied with at page 23 of the Registration Statement.
Comment No. 8
A discussion of Mr. Griffin's activities with Beneficial Capital has been
added to the Registration Statement at page 24.
Comment No. 9
The lock-up agreements with the Company's shareholders have been filed as
exhibits in accordance with the Staff's comment.
Thank you for your assistance. If I can be of any assistance in connection
with the Staff's review of the enclosed, please do not hesitate to contact the
undersigned at your earliest convenience.
Very truly yours,
By: /s/ MATTHEW J. KAVANAGH
-------------------------
Matthew J. Kavanagh, III
President
Enclosures
INTERNATIONAL CAPITAL FUNDING, INC.
NO SALE AGREEMENT
-----------------
The undersigned agrees with International Funding, Inc. (the "Company") to
not sell or offer to sell or otherwise dispose of any shares (the "Lock-up
Shares") of the undersigned's securities until such time as the Company has
successfully consummated a merger or acquisition and the Company is no longer
characterized as a "blank check" company. This agreement shall also cover any
securities of the Company acquired by the undersigned pursuant to the exercise
of any options or warrants of the Company, presently or hereafter acquired. The
undersigned further represents to the Company that the Lock-up Shares are free
and clear of any encumbrance, equity or claim.
Dated: April 13, 1998 By: /s/ Matthew J. Kavanagh
----------------------- --------------------------------
Matthew J. Kavanagh
----------------------------------------
(Print name here)
INTERNATIONAL CAPITAL FUNDING, INC.
NO SALE AGREEMENT
-----------------
The undersigned agrees with International Funding, Inc. (the "Company") to
not sell or offer to sell or otherwise dispose of any shares (the "Lock-up
Shares") of the undersigned's securities until such time as the Company has
successfully consummated a merger or acquisition and the Company is no longer
characterized as a "blank check" company. This agreement shall also cover any
securities of the Company acquired by the undersigned pursuant to the exercise
of any options or warrants of the Company, presently or hereafter acquired. The
undersigned further represents to the Company that the Lock-up Shares are free
and clear of any encumbrance, equity or claim.
Dated: 5/18/98 By: /s/ Anthony M. Griffin
----------------------- --------------------------------
Anthony M. Griffin
----------------------------------------
(Print name here)
INTERNATIONAL CAPITAL FUNDING, INC.
NO SALE AGREEMENT
-----------------
The undersigned agrees with International Funding, Inc. (the "Company") to
not sell or offer to sell or otherwise dispose of any shares (the "Lock-up
Shares") of the undersigned's securities until such time as the Company has
successfully consummated a merger or acquisition and the Company is no longer
characterized as a "blank check" company. This agreement shall also cover any
securities of the Company acquired by the undersigned pursuant to the exercise
of any options or warrants of the Company, presently or hereafter acquired. The
undersigned further represents to the Company that the Lock-up Shares are free
and clear of any encumbrance, equity or claim.
Dated: 5/18/98 By: /s/ Terry A. Whiteside
----------------------- --------------------------------
Terry A. Whiteside
----------------------------------------
(Print name here)
INTERNATIONAL CAPITAL FUNDING, INC.
NO SALE AGREEMENT
-----------------
The undersigned agrees with International Funding, Inc. (the "Company") to
not sell or offer to sell or otherwise dispose of any shares (the "Lock-up
Shares") of the undersigned's securities until such time as the Company has
successfully consummated a merger or acquisition and the Company is no longer
characterized as a "blank check" company. This agreement shall also cover any
securities of the Company acquired by the undersigned pursuant to the exercise
of any options or warrants of the Company, presently or hereafter acquired. The
undersigned further represents to the Company that the Lock-up Shares are free
and clear of any encumbrance, equity or claim.
Dated: May 12, 1998 By: /s/ Marshall Griffen
----------------------- --------------------------------
Marshall Griffen
----------------------------------------
(Print name here)
INTERNATIONAL CAPITAL FUNDING, INC.
NO SALE AGREEMENT
-----------------
The undersigned agrees with International Funding, Inc. (the "Company") to
not sell or offer to sell or otherwise dispose of any shares (the "Lock-up
Shares") of the undersigned's securities until such time as the Company has
successfully consummated a merger or acquisition and the Company is no longer
characterized as a "blank check" company. This agreement shall also cover any
securities of the Company acquired by the undersigned pursuant to the exercise
of any options or warrants of the Company, presently or hereafter acquired. The
undersigned further represents to the Company that the Lock-up Shares are free
and clear of any encumbrance, equity or claim.
Dated: April 20, 1998 By: /s/ Duane Peterson
----------------------- --------------------------------
Duane Peterson
----------------------------------------
(Print name here)
INTERNATIONAL CAPITAL FUNDING, INC.
NO SALE AGREEMENT
-----------------
The undersigned agrees with International Funding, Inc. (the "Company") to
not sell or offer to sell or otherwise dispose of any shares (the "Lock-up
Shares") of the undersigned's securities until such time as the Company has
successfully consummated a merger or acquisition and the Company is no longer
characterized as a "blank check" company. This agreement shall also cover any
securities of the Company acquired by the undersigned pursuant to the exercise
of any options or warrants of the Company, presently or hereafter acquired. The
undersigned further represents to the Company that the Lock-up Shares are free
and clear of any encumbrance, equity or claim.
Dated: 5-17-98 By: /s/ Alex Herman
----------------------- --------------------------------
Alex Herman
----------------------------------------
(Print name here)
INTERNATIONAL CAPITAL FUNDING, INC.
NO SALE AGREEMENT
-----------------
The undersigned agrees with International Funding, Inc. (the "Company") to
not sell or offer to sell or otherwise dispose of any shares (the "Lock-up
Shares") of the undersigned's securities until such time as the Company has
successfully consummated a merger or acquisition and the Company is no longer
characterized as a "blank check" company. This agreement shall also cover any
securities of the Company acquired by the undersigned pursuant to the exercise
of any options or warrants of the Company, presently or hereafter acquired. The
undersigned further represents to the Company that the Lock-up Shares are free
and clear of any encumbrance, equity or claim.
Dated: 5-18-98 By: /s/ Equitor Corpp.
----------------------- --------------------------------
Equitor Corpp.
----------------------------------------
(Print name here)
INTERNATIONAL CAPITAL FUNDING, INC.
NO SALE AGREEMENT
-----------------
The undersigned agrees with International Funding, Inc. (the "Company") to
not sell or offer to sell or otherwise dispose of any shares (the "Lock-up
Shares") of the undersigned's securities until such time as the Company has
successfully consummated a merger or acquisition and the Company is no longer
characterized as a "blank check" company. This agreement shall also cover any
securities of the Company acquired by the undersigned pursuant to the exercise
of any options or warrants of the Company, presently or hereafter acquired. The
undersigned further represents to the Company that the Lock-up Shares are free
and clear of any encumbrance, equity or claim.
Dated: 5-15-98 By: /s/ Richard Ellis
----------------------- --------------------------------
Richard Ellis
----------------------------------------
(Print name here)
INTERNATIONAL CAPITAL FUNDING, INC.
NO SALE AGREEMENT
-----------------
The undersigned agrees with International Funding, Inc. (the "Company") to
not sell or offer to sell or otherwise dispose of any shares (the "Lock-up
Shares") of the undersigned's securities until such time as the Company has
successfully consummated a merger or acquisition and the Company is no longer
characterized as a "blank check" company. This agreement shall also cover any
securities of the Company acquired by the undersigned pursuant to the exercise
of any options or warrants of the Company, presently or hereafter acquired. The
undersigned further represents to the Company that the Lock-up Shares are free
and clear of any encumbrance, equity or claim.
Dated: May 2, 1998 By: /s/ Mark Hogan
----------------------- --------------------------------
Mark Hogan
----------------------------------------
(Print name here)
INTERNATIONAL CAPITAL FUNDING, INC.
NO SALE AGREEMENT
-----------------
The undersigned agrees with International Funding, Inc. (the "Company") to
not sell or offer to sell or otherwise dispose of any shares (the "Lock-up
Shares") of the undersigned's securities until such time as the Company has
successfully consummated a merger or acquisition and the Company is no longer
characterized as a "blank check" company. This agreement shall also cover any
securities of the Company acquired by the undersigned pursuant to the exercise
of any options or warrants of the Company, presently or hereafter acquired. The
undersigned further represents to the Company that the Lock-up Shares are free
and clear of any encumbrance, equity or claim.
Dated: --5-98 By: /s/ Mike Fern
----------------------- --------------------------------
Mike Fern
----------------------------------------
(Print name here)
INTERNATIONAL CAPITAL FUNDING, INC.
NO SALE AGREEMENT
-----------------
The undersigned agrees with International Funding, Inc. (the "Company") to
not sell or offer to sell or otherwise dispose of any shares (the "Lock-up
Shares") of the undersigned's securities until such time as the Company has
successfully consummated a merger or acquisition and the Company is no longer
characterized as a "blank check" company. This agreement shall also cover any
securities of the Company acquired by the undersigned pursuant to the exercise
of any options or warrants of the Company, presently or hereafter acquired. The
undersigned further represents to the Company that the Lock-up Shares are free
and clear of any encumbrance, equity or claim.
Dated: May 14, 1998 By: /s/ Keith Johnson
----------------------- --------------------------------
Keith Johnson
----------------------------------------
(Print name here)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
</LEGEND>
<CIK> 0001048501
<NAME> INTERNATIONAL CAPITAL FUNDING, INC.
<MULTIPLIER> 1
<CURRENCY> U.S.DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-START> APR-01-1998
<PERIOD-END> JUN-30-1998
<EXCHANGE-RATE> 1
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 0
<CURRENT-LIABILITIES> 3
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> (5)
<TOTAL-LIABILITY-AND-EQUITY> 0
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 4
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
