U. S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-SB/12g
CIK No.: 0001049103
GENERAL FORM FOR REGISTRATION OF SECURITIES
OF SMALL BUSINESS ISSUERS
Under Section 12(b) or (g) of the Securities Exchange Act of 1934
Eastport Red's Incorporated
(Name of Small Business Issuer in its charter)
Nevada 84-1416078
(State or Other Jurisdiction of (IRS Employer ID Number)
Incorporation or Organization)
2133 E. 9400 S., Suite 151, Sandy, Utah 84093
(Address of Principal Executive Offices and Zip Code)
Issuer's telephone number: (801) 944-0701
Securities to be registered under Section 12(b) of the Act:
Title of each class to be so registered: Not Applicable
Name of each exchange on which each class is to be registered: Not Applicable
Securities to be registered under Section 12(g) of the Act:
Common Stock, Par Value $0.001
(Title of class)
Total Number of Pages: 58
Index to Exhibits is Located on Page: 43
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TABLE OF CONTENTS
PART I
Item Number and Caption Page
Item 1. Description of Business. . . . . . . . . . . . . . . . . . . . . . 3
Item 2. Management's Discussion and Analysis of Operations or Plan of
Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Item 3. Description of Property. . . . . . . . . . . . . . . . . . . . . . 18
Item 4. Security Ownership of Certain Beneficial Owners and Management . . 18
Item 5. Directors, Executive Officers, Promoters and Control Persons . . . 19
Item 6. Executive Compensation . . . . . . . . . . . . . . . . . . . . . . 21
Item 7. Certain Relationships and Related Transactions . . . . . . . . . . 21
Item 8. Description of Securities. . . . . . . . . . . . . . . . . . . . . 22
PART II
Item 1. Market Price of and Dividends on the Registrant's Common Equity and
Other Shareholder Matters. . . . . . . . . . . . . . . . . . . . . 23
Item 2. Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . . . . 23
Item 3. Changes in and Disagreements with Accountants. . . . . . . . . . . 23
Item 4. Recent Sales of Unregistered Securities. . . . . . . . . . . . . . 23
Item 5. Indemnification of Directors and Officers. . . . . . . . . . . . . 24
PART F/S
Audited Financial Statements and Supplementary Data . . . . . . . . . . . . 25
Unaudited Financial Statement and Supplementary Data. . . . . . . . . . . . 36
PART III
Item 1. Index to Exhibits. . . . . . . . . . . . . . . . . . . . . . . . . 43
Item 2. Description of Exhibits. . . . . . . . . . . . . . . . . . . . . . 43
SIGNATURES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
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PART I
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Item 1. Description of Business
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General
The Company was incorporated under the laws of the State of Nevada on
July 18, 1997, and is in the early developmental and promotional stages. To
date the Company's activities have been organizational, directed at
developing its business plan and raising initial capital. The Company has no
commercial operations as of the date hereof. The Company has no full-time
employees and owns no real estate.
The Company is a "shell" company and its only current 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 no capital, and it is unlikely that the Company will be able to
take advantage of more than one such business opportunity.
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 is filing Form 10-SB on a voluntary basis in order to become a 12(g)
registered company under the Securities Exchange Act of 1934. As a "reporting
company", the Company may be more attractive to a private acquisition target
because it may be eventually listed to trade its shares on the Over-The-
Counter Bullet Board "OTCBB".
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 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. Such sale may occur at a price not
relative to or reflective of any value of the shares held by such parties, and
at a price which may not be achieved by other individual shareholders at the
time. Additionally, the sale of a controlling interest by certain principal
shareholders of the Company could occur at a time when the other shareholders
of the Company remain subject to restrictions on the transfer of their shares.
In the Company's judgment, none of its officers and directors would
become an "underwriter" within the meaning of the Section 2(11) of the
Securities Act of 1933, as amended, with regards to such sales as such sales
would likely be made in non-public transactions.
Depending upon the nature of the transaction, the current officers and
directors of the Company may resign their positions with the Company in
connection with the Company's acquisition of a business opportunity. In the
event of such a resignation, 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.
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The Company does not foresee that it would enter into a merger or
acquisition transaction with any business with which its officers or directors
are currently affiliated. Should the Company determine in the future,
contrary to foregoing expectations, that a transaction with an affiliate would
be in the best interests of the Company and its stockholders, the Company may
enter into such a transaction only if: a) The material facts as to the
relationship or interest of the affiliate and as to the contract or
transaction are disclosed or are known to the Board of Directors, and the
Board in good faith authorizes the contract or transaction by the affirmative
vote of a majority of the disinterested directors, even though the
disinterested directors constitute less than a quorum; b) The material facts
as to the relationship or interest of the affiliate and as to the contract or
transaction are disclosed or are known to the stockholders entitled to vote
thereon, and the contract or transaction is specifically approved in good
faith by vote of the stockholders; and c) The contract or transaction is fair
as to the Company as of the time it is authorized, approved or ratified, by
the Board of Directors or the stockholders.
Investigation and Selection of Business Opportunities
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 market 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, 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.
The Company's search will be directed toward small and medium sized
enterprises with or without revenues and earnings 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 a stock exchange. The
Company intends to seek opportunities demonstrating the potential of long term
growth as opposed to short term earnings. Business opportunities presented to
it may (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.
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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.
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.
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.
Lack of diversification
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 not anticipate that
the Company necessarily will furnish such holders, prior to any merger or
acquisition, with financial statements, or any other documentation, concerning
a target company or its business. In some instances, however, the proposed
participation in a business opportunity may be submitted to the stockholders
for their consideration, either voluntarily by such directors to seek the
stockholders' advice and consent or because state law so requires.
Sources of Opportunities
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". Although there are no current plans to do so,
Company management might hire an outside consultant to assist in the
investigation and selection of business opportunities, and might pay a
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finder's fee. Business opportunities may come to the Company's attention from
various sources, including its officer and director, 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. 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. No assurance can be given
that the Company will be successful in finding or acquiring a desirable
business opportunity, given that no funds that are available for acquisitions,
or that any acquisition that occurs will be on terms that are favorable to the
Company or its stockholders.
Since Company's management has no current plans to use any outside
consultants or advisors to assist in the investigation and selection of
business opportunities, no policies have been adopted regarding use of such
consultants or advisors, the criteria to be used in selecting such consultants
or advisors, the services to be provided, the term of service, or regarding
the total amount of fees that may be paid. However, because of the limited
resources of the Company, it is likely that any such fee the Company agrees to
pay would be paid in stock and not in cash.
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 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. However,
it is also possible that an investigation of such opportunities may be
exclusively by phone, mail, facsimile, email or other methods not involving a
physical meeting or inspection with such opportunities.
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 NASDAQ or on another exchange which would
make them exempt from applicability of the "penny stock" regulations. See
"Risk Factors - - Regulation of Penny Stocks."
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There are no loan arrangements or arrangements for any financing
whatsoever relating to any business opportunities.
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.
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. (See
"Description of Business - General").
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. Any
securities which the Company might acquire in exchange for its Common Stock
are expected to 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. 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
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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.
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 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.
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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.
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
possibly experience competition from other public "blank check" companies,
some of which may have more funds available than does the Company.
No Rights of Dissenting Shareholders
The Company does not intend to provide Company shareholders with
complete disclosure documentation including audited financial statements,
concerning a possible target company prior to acquisition, because Nevada
Business Corporation Act vests authority in the Board of Directors with
written consent of a majority of shares outstanding to decide and approve
matters involving acquisitions within certain restrictions. The Company may
adopt an amendment to its Articles of Incorporation which precludes the
anti-takeover provisions of Nevada Revised Statutes 78/378 to 78.3793. A
transaction could be structured as an acquisition, not a merger, with the
Registrant being the parent company and the acquiree being merged into a
wholly owned subsidiary. Therefore, a shareholder would have no right of
dissent under Nevada law, if a majority of shareholders consent in writing to
the transaction.
No Target Candidates for Acquisition
None of the Company's Officers, Directors, promoters, affiliates, or
associates have had any preliminary contact or discussion with any specific
candidate for acquisition. There are no present plans, proposals,
arrangements, or understandings with any representatives of the owners of any
business or company regarding the possibility of an acquisition transaction.
Administrative Offices
The Company currently maintains a mailing address at 2133 E. 9400 S.,
Suite 151 Sandy, Utah 84093. 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.
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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. Although there is no current
plan with respect to its nature or amount, remuneration may be paid to or
accrued for the benefit of, the Company's officers prior to, or in conjunction
with, the completion of a business acquisition for services actually rendered,
if for. See "Executive Compensation" and under "Certain Relationships and
Related Transactions."
Risk Factors
1. Conflicts of Interest. Certain conflicts of interest may exist
between the Company and its officers and directors. They have other business
interests to which they devote their attention, and may be expected to
continue to do so although management time should be devoted to the business
of the Company. As a result, conflicts of interest may arise that can be
resolved only through exercise of such judgment as is consistent with
fiduciary duties to the Company. 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. Certain of the officers and directors of the
Company may be directors and/or principal shareholders of other companies and,
therefore, could face conflicts of interest with respect to potential
acquisitions. In addition, officers and directors of the Company may in the
future participate in business ventures which could be deemed to compete
directly with the Company. Additional conflicts of interest and non-arms
length transactions may also arise in the future in the event the Company's
officers or directors are involved in the management of any firm with which
the Company transacts business. The Company's Board of Directors has adopted
a policy that the Company will not seek a merger with, or acquisition of, any
entity in which management serve as officers or directors, or in which they or
their family members own or hold a controlling ownership interest. Although
the Board of Directors could elect to change this policy, the Board of
Directors has no present intention to do so. In addition, if the Company and
other companies with which the Company's officers and directors are affiliated
both desire to take advantage of a potential business opportunity, then the
Board of Directors has agreed that said opportunity should be available to
each such company in the order in which such companies registered or became
current in the filing of annual reports under the Exchange Act subsequent to
January 1, 1997.
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.
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2. Need For Additional Financing. The Company has very limited funds,
and such funds may not be adequate to take advantage of any available business
opportunities. Even if the Company's funds prove to be sufficient to acquire
an interest in, or complete a transaction with, a business opportunity, the
Company may not have enough capital to exploit the opportunity. 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 modest capital.
3. Regulation of Penny Stocks. The Company's securities, when 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 therefore.
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, 15g-7, and 15g-9 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.
Shareholders should be aware that, according to Securities and Exchange
Commission, 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.
4. Lack of Operating History. The Company was formed in July, 1997 for
the purpose of seeking a business opportunity. Due to 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.
11
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5. 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.
6. 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. An investor 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."
7. 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
limited 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.
8. Impracticability of Exhaustive Investigation. The Company's limited
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.
9. Lack of Diversification. Because of the limited 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.
10. Reliance upon Financial Statements. The Company generally will
require audited financial statements from companies that it proposes to
acquire. Given cases where audited financials are not available, the Company
will have to rely upon interim period 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 recent interim
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.
12
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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 would have material, adverse consequences for the Company
and its business. The imposition of administrative sanctions would subject
the Company to further adverse consequences.
In addition, the lack of audited financial statements would prevent the
securities of the Company from becoming eligible for listing on NASDAQ, 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.
11. 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.
12. Dependence upon Management; Limited Participation of Management.
The Company currently has only two individuals who are serving as its officers
and directors on a part time basis. 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. 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.
13. 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 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 subject to compliance
with Section 14f of the Securities Exchange Act of 1934. 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.
13
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14. Indemnification of Officers and Directors. Nevada Statutes 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.
15. Director's Liability Limited. Nevada Statutes 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.
16. 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. 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.
17. 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.
18. No Foreseeable Dividends. The Company has not paid dividends on its
Common Stock and does not anticipate paying such dividends in the foreseeable
future.
19. 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 major shareholders could sell control
blocks of stock at a premium price to the acquired company's stockholders.
14
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20. 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
purchaser 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.
22. Rule 144 Sales. All of the outstanding shares of Common Stock held
by present officers, directors, and stockholders are "restricted securities"
within the meaning of Rule 144 under the Securities Act of 1933, as amended.
As restricted shares, these shares may be resold only pursuant to an effective
registration statement or under the requirements of Rule 144 or other
applicable exemptions from registration under the Act and as required under
applicable state securities laws. Rule 144 provides in essence that a person
who has held restricted securities for one year may, under certain conditions,
sell every three months, in brokerage transactions, a number of shares that
does not exceed the greater of 1.0% of a company's outstanding common stock or
the average weekly trading volume during the four calendar weeks prior to the
sale. There is no limit on the amount of restricted securities that may be
sold by a non-affiliate after the restricted securities have been held by the
owner for a period of two years. A sale under Rule 144 or under any other
exemption from the Act, if available, or pursuant to subsequent registration
of shares of Common Stock of present stockholders, may have a depressive
effect upon the price of the Common Stock in any market that may develop. Of
the total, 10,000,000 shares become available for resale (subject to volume
limitations for affiliates) under Rule 144, within one year, all of which will
be subject to applicable volume restrictions under the Rule.
23. 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, investors should
consider the secondary market for the Company's securities to be a limited
one.
24. Blue Sky Restrictions. Many states have enacted statutes or rules
which restrict or prohibit the sale of securities of "blank check" companies
to residents so long as they remain without specific business companies. To
the extent any current shareholders or subsequent purchaser from a shareholder
may reside in a state which restricts or prohibits resale of shares in a
"blank check" company, warning is hereby given that the shares may be
"restricted" from resale as long as the Company is a shell company.
At the date of this registration statement, the Company has no intention
of offering further shares in a private offering to anyone. Further, the
policy of the Board of Directors is that any future offering of shares will
only be made after an acquisition has been made and can be disclosed in
appropriate 8-K filings.
In the event of a violation of state laws regarding resale of "blank
check" shares the Company could be liable for civil and criminal penalties
which would be a substantial impairment to the Company.
15
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Item 2. Management's Discussion and Analysis of Operations or Plan of
Operations.
- - - ------------------------------------------------------------------------------
Liquidity and Capital Resources for the Period Ended July 31, 1999 (Audited)
The Company remains in the development stage and, since inception, has
had no revenues. At July 31,1999 the Company had working capital of $9,018.
The Company had cash in the amount of $9,905. All cash raised by the Company
to date, has come from the sale of 10,000,000 shares of the Company's common
stock to First Avenue, Ltd. for $10,000, as well as a $750 loan to the Company
by its previous President, Marlon Hill. Ken W. Kurtz, the Company's President,
Secretary Treasurer and Director is a general and limited partner of First
Avenue, Ltd. The shares were sold to First Avenue, Ltd. to obtain capital to
pay the costs of becoming a reporting company under the Securities Exchange
Act of 1934. Management is hopeful that becoming a reporting company will
increase the number of prospective business ventures that may be available to
the Company.
During the period from July 18, 1997 (inception) through July 31, 1999
the Company has engaged in no significant operations other than organizational
activities, acquisition of capital and preparation for registration of its
securities under the Securities Exchange Act of 1934, as amended. No revenues
were received by the Company during this period. The Company has incurred
operating expenses since inception to the period ended July 31,1999 of
($1,982). The net loss on operations was ($148) from January 1, 1999 through
July 31, 1999. Such losses will continue unless revenues and business can be
acquired by the Company. There is no assurance that revenues or profitability
will ever be achieved by the Company.
Liquidity and Capital Resources for the Period Ended November 30, 1999
(unaudited).
The Company remains in the development stage and, since inception, has
had no revenues. At November 30,1999 the Company had working capital of
$6,888. The Company had cash in the amount of $7,800.
During the period from July 18, 1997 (inception) through November 30,
1999 the Company has engaged in no significant operations other than
organizational activities, acquisition of capital and preparation for
registration of its securities under the Securities Exchange Act of 1934, as
amended. No revenues were received by the Company during this period. The
Company has incurred operating expenses since inception of ($4,112). The net
loss on operations was ($2,278) from January 1, 1999 through November 30,
1999. Such losses will continue unless revenues and business can be acquired
by the Company. There is no assurance that revenues or profitability will
ever be achieved by the Company.
The Company will carry out its plan of business as discussed above. The
Company cannot predict to what extent its lack of liquidity and capital
resources will impair the consummation of a business combination or whether it
will incur further operating losses through any business entity which the
Company may eventually acquire.
Results of Operations
Period ended July 31, 1999 and Calendar Year Ended December 31, 1998 and from
inception on July 18, 1997 to December 31, 1997 (audited).
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The Company had no revenues for the period ended July 31, 1999 or for the
year ended December 1998 or from inception on July 18,1997 to December 31,
1997. The Company incurred $148 in expenses for the period ended July 31, 1999
as compared to $324 in expenses for the year ended December 1998 and $1,510
from inception on July 18, 1997 to December 31, 1997.
The net operating loss for the period ended July 31, 1999 of $(148);for
the year ended December 1998 of $(324); and from inception on July 18,1997 to
December 31, 1997 of $(1,510) resulted primarily from general and
administrative expenses and interest expense. The net loss per share for each
period was less than ($.01) per share.
Period ended November 30, 1999 and 1999 and from inception on July 18,1997 to
November 30, 1999 (unaudited).
The Company had no revenues for the period ended November 30, 1999 or
November 30, 1998 or from inception on July 18,1997 to November 30, 1999. The
Company incurred $2,278 in expenses for the period ended November 30, 1999 as
compared to $310 in expenses for the period ended November 30, 1998 and $4,112
from inception on July 18, 1997 to November 30, 1999.
The net operating loss for the period ended November 30, 1999 of
$(2,278); for the period ended November 30, 1998 of $(310); and from inception
on July 18,1997 to November 30, 1999 of $(4,112) resulted primarily from
general and administrative expenses and interest expense. The net loss per
share for each period was less than ($.01) per share.
For the current fiscal year, the Company anticipates incurring a loss as
a result of legal and accounting expenses, expenses associated with
registration under the Securities Exchange Act of 1934, and expenses
associated with locating and evaluating acquisition candidates. The Company
anticipates that until a business combination is completed with an acquisition
candidate, it will not generate revenues other than interest income, and may
continue to operate at a loss after completing a business combination,
depending upon the performance of the acquired business.
Need for Additional Financing
Management believes that the Company has sufficient cash to meet the
anticipated needs of the Company's operations through at least the first
calendar quarter of 2001. However, there can be no assurances to that effect,
as the Company has no revenues and the Company's need for capital may change
dramatically if it acquires an interest in a business opportunity during that
period. In the event the Company requires additional funds, the Company will
have to seek loans or equity placements to cover such cash needs. There is no
assurance additional capital will be available to the Company on acceptable
terms. In the event the Company is able to complete a business combination
during this period, lack of its existing capital may be a sufficient
impediment to prevent it from accomplishing the goal of completing a business
combination. There is no assurance, however, that without funds it will
ultimately allow registrant to complete a business combination. Once a
business combination is completed, the Company's needs for additional
financing are likely to increase substantially.
No commitments to provide additional funds have been made by management
or other stockholders. Accordingly, there can be no assurance that any
additional funds will be available to the Company to allow it to cover its
expenses as they may be incurred.
Irrespective of whether the Company's cash assets prove to be adequate
to meet the Company's operational needs, the Company might seek to compensate
providers of services by issuances of stock in lieu of cash.
17
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Year 2000 Issues
Year 2000 problems result primarily from the inability of some computer
software to property store, recall, or use data after December 31, 1999.
These problems may affect many computers and other devices that contain
embedded computer chips. The Company's operations, however, do not rely on
information technology (IT) systems. Accordingly, the Company does not
believe it will be material affected by Year 2000 problems.
The Company relies on non-IT systems that may suffer from Year 2000
problems, including telephone systems and facsimile and other office machines.
Moreover, the Company relies on third-parties that may suffer from Year 2000
problems that could affect the Company's operations, including banks, oil
field operators, and utilities. In light of the Company's substantially
reduced operations, the Company does not believe that such non-IT systems
or third-party Year 2000 problems will affect the Company in a manner that is
different or more substantial than such problems affect other similarly
situated companies or industry generally. Consequently, the Company does not
currently intend to conduct a readiness assessment of Year 2000 problems or to
develop a detailed contingency plan with respect to Year 2000 problems that
may affect the Company.
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Item 3. Description of Property
- - - ------------------------------------------------------------------------------
The Company has no property. The Company does not currently maintain an
office or any other facilities. It does currently maintain a mailing address
at 2133 D. 9400 S., Suite 151, Sandy, Utah 84903. 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.
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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.
OWNERSHIP
SHAREHOLDERS AND BENEFICIAL OWNERS NUMBER OF SHARES PERCENTAGE
- - - ---------------------------------- ---------------- ----------
First Avenue, Ltd.(1)
2133 E. 9400 S., Suite 151
Sandy, Utah 84093 10,000,000 90%
All directors and executive 10,000,000 90%
officers as a group
(1) Ken W. Kurtz, the Company's President, Secretary, Treasurer and
Director is a general and limited partner of First Avenue, Ltd. Mr. Kurtz may
be deemed to have investment power and voting power over the shares.
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Item 5. Directors, Executive Officers, Promoters and Control Persons
- - - ------------------------------------------------------------------------------
The directors and executive officers currently serving the Company are
as follows:
NAME AGE POSITION HELD SINCE
------ ----- --------------- -------
Ken W. Kurtz 32 President, Secretary, 1999
Treasurer and Director
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.
The directors and officers of the Company will devote such time to the
Company's affairs on an "as needed" basis, but less than 20 hours per month.
As a result, the actual amount of time which they will devote to the Company's
affairs is unknown and is likely to vary substantially from month to month.
Biographical Information
Ken W. Kurtz, age 32: Mr. Kurtz has been since February 1992, the
president, sole director and sole shareholder of Park Street Investments,
Inc., a Utah corporation. Through Park Street Investments, Inc., Mr. Kurtz
provides consulting services to public and private companies on mergers,
recapitalizations, and other forms of corporate reorganization. Mr. Kurtz is,
and additionally, Mr. Kurtz has served on the board of directors and as an
officer of other reporting publicly held companies including Hamilton
Exploration Co., Inc. in 1995; Area Investment and Development Company since
1997; Score One, Inc. since 1999; and is or has been deemed a control person
of Black Stallion Management and Nugget Exploration, Inc. Mr. Kurtz graduated
from the University of Utah with a Bachelor's of Science degree in Finance.
Mr. Kurtz is currently an officer, director, and controlling stockholder
of Score One, Inc. and Area Investment and Development Company; he is also a
controlling stockholder of Black Stallion Management, all publicly held shell
corporations seeking a business acquisition. The possibility exists that Mr.
Kurtz could become an officer, director, or major stockholder of other shell
companies in the future. Certain conflicts of interest are inherent in the
participation of the Company's officers and directors as management in other
shell companies, which may be difficult, if not impossible, to resolve in all
cases in the best interests of the Company. No policy has been adopted by the
Company to resolve these conflicts. These conflicts could affect the timing
and quality of an acquisition by the Company, and therefore affect the value,
liquidity, and duration of an investment in the Company. Failure by
management to conduct the Company's business in its best interests may result
in liability of management of the Company to the shareholders. See Item I
"Risk Factors - (1) Conflicts of Interest".
Management will devote minimal time to the operations of the Company, and
any time spent will be devoted to screening and assessing and, if warranted,
negotiating to acquire business opportunities.
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None of the Company's officers and/or directors receives any compensation
for their respective services rendered to the Company, nor have they received
such compensation in the past. They all have agreed to act without
compensation until authorized by the Board of Directors, which is not expected
to occur until the Company has generated revenues from operations after
consummation of a merger or acquisition. As of the date of filing this report,
the Company has no funds available to pay officers or directors. Further,
none of the officers or directors is accruing any compensation pursuant to any
agreement with the Company. No retirement, pension, profit sharing, stock
option or insurance programs or other similar programs have been adopted by
the Company for the benefit of its employees.
It is possible that, after the Company successfully consummates a merger
or acquisition with an unaffiliated entity, that entity may desire to employ
or retain one or a number of members of the Company's management for the
purposes of providing services to the surviving entity, or otherwise provide
other compensation to such persons. However, the Company has adopted a policy
whereby the offer of any post-transaction remuneration to members of
management will not be a consideration in the Company's decision to undertake
any proposed transaction. Each member of management has agreed to disclose to
the Company's Board of Directors any discussions concerning possible
compensation to be paid to them by any entity which proposes to undertake a
transaction with the Company and further, to abstain from voting on such
transaction. Therefore, as a practical matter, if each member of the Company's
Board of Directors were offered compensation in any form from any prospective
merger or acquisition candidate, the proposed transaction would not be
approved by the Company's Board of Directors as a result of the inability of
the Board to affirmatively approve such a transaction.
It is possible that persons associated with management may refer a
prospective merger or acquisition candidate to the Company. In the event the
Company consummates a transaction with any entity referred by associates of
management, it is possible that such an associate will be compensated for
their referral in the form of a finder's fee. It is anticipated that this fee
will be either in the form of restricted Common Stock issued by the Company as
part of the terms of the proposed transaction, or will be in the form of cash
consideration. However, if such compensation is in the form of cash, such
payment will be tendered by the acquisition or merger candidate, because the
Company has insufficient cash available. The amount of such finder's fee
cannot be determined as of the date of filing this report, but is expected to
be comparable to consideration normally paid in like transactions. No member
of management of the Company will receive any finders fee, either directly or
indirectly, as a result of their respective efforts to implement the Company's
business plan outlined herein.
The Company has adopted a policy that its affiliates and management shall
not be issued further common shares of the Company, except in the event
discussed in the preceding paragraphs.
Exclusion of Liability
The Nevada Corporation Act excludes 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 the Nevada 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.
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Item 6. Executive Compensation
- - - ------------------------------------------------------------------------------
No officer or director has received any other remuneration in the two
year period prior to the filing of this registration statement. 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. See "Certain Relationships and Related Transactions."
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.
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Item 7. Certain Relationships and Related Transactions
- - - ------------------------------------------------------------------------------
The Company issued to its founding directors a total of 1,000,000 shares
of Common Stock for services rendered in connection with the Company's
formation with a value of $1,000. On May 3,1999 the Company issued to First
Avenue, Ltd. a total of 10,000,000 shares of Common Stock for $10,000. Ken W.
Kurtz, the Company's President, Secretary Treasurer and Director is a general
and limited partner of First Avenue, Ltd.
Notes Payable: During October 1997, a previous officer/shareholder of the
Company advanced $750 to the Company. The note is payable upon demand and
accrues interest at 10% per annum. Accrued interest amounted to $162 at
November 30, 1999.
No officer, director, 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 has adopted a policy under which any consulting or finder's
fee that may be paid to a third party or affiliate 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.
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.
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Item 8. Description of Securities
- - - ------------------------------------------------------------------------------
Common Stock
The Company's Articles of Incorporation authorize the issuance of
20,000,000 shares of Common Stock $.001 par value. 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
5,000,000 shares of preferred stock at $.001 per value. The Board of
Directors of the Company is authorized to issue the preferred stock from time
to time in classes and series and is further authorized to establish such
classes and series, to fix and determine the variations in the relative rights
and preferences as between series, to fix voting rights, if any, for each
class or series, and to allow for the conversion of preferred stock into
Common Stock. No Preferred Stock has been issued by the Company. Preferred
Stock may be utilized in making acquisitions.
Shareholders
Each shareholder has sole investment power and sole voting power over the
shares owned by such shareholder. No shareholder has entered into or
delivered any lock up agreement or letter agreement regarding their shares or
options thereon.
Transfer Agent
The Company has engaged Interwest Transfer Company, 1981 East Murray-
Holladay Road, Salt Lake City, Utah 84117 as its transfer agent.
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. 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, and to file
unaudited quarterly reports and annual reports with audited financial
statements as required by the Securities Exchange Act of 1934.
22
<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 although its
common stock is listed for quotation on the National Quotation Bureau's "Pink
Sheets". There is currently no quoted price. There were twenty-four (24)
holders of record of the Company's common stock on December 10, 1999. 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 any litigation.
- - - ------------------------------------------------------------------------------
Item 3. Changes in and Disagreements with Accountants
- - - ------------------------------------------------------------------------------
Not applicable.
- - - ------------------------------------------------------------------------------
Item 4. Recent Sales of Unregistered Securities.
- - - ------------------------------------------------------------------------------
Since July 17, 1997 (the date of the Company's formation), the Company
has sold its Common Stock to the persons listed in the table below in
transactions summarized as follows:
DATE OF PURCHASE PRICE
PURCHASER PURCHASE PER SHARE SHARES
- - - ---------- --------- --------------- -------
First Avenue, Ltd.(1) May 3, 1999 $0.001 10,000,000
Marlon Hill (2) July 19, 1997 $0.001 500,000
Harold Hill (2) July 19, 1997 $0.001 500,000
(1) Sold for cash
(2) Sold for services.
Ken W. Kurtz, the Company's President, Secretary Treasurer and Director
is a general and limited partner of First Avenue, Ltd.
23
<PAGE>
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. The Company had reasonable grounds to believe immediately prior to
making an offer to the private investors, and did in fact believe, 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. At the time of issuance, an
appropriate restrictive legend was imprinted upon each of the certificates
representing such shares, and stop-transfer instructions would have been
entered in the Company's transfer records at the time of their issuance. All
such sales were effected without the aid of underwriters, and no sales
commissions were paid.
- - - ------------------------------------------------------------------------------
Item 5. Indemnification of Directors and Officers
- - - ------------------------------------------------------------------------------
As permitted by Nevada Statutes, the Company may 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.
PART F/S
Filed herewith are the Company's audited financial statements for the
periods from inception on July 18, 1997 through December 31, 1997 and July 31,
1999, for the seven months ended July 31, 1999 and for the calendar year ended
December 31, 1998. Also filed herewith are the Company's unaudited financial
statements for the eleven months ended November 30, 1999 and 1998 and from
inception on July 18, 1997 through November 30, 1999.
[THIS SPACE WAS INTENTIONALLY LEFT BLANK]
24
<PAGE>
EASTPORT RED'S INCORPORATED
[A Development Stage Company]
FINANCIAL STATEMENTS
JULY 31, 1999 AND DECEMBER 31, 1998
PRITCHETT, SILER & HARDY, P.C.
CERTIFIED PUBLIC ACCOUNTANTS
25
<PAGE>
EASTPORT RED'S INCORPORATED
[A Development Stage Company]
CONTENTS PAGE
-------- ----
Independent Auditors' Report 1
Balance Sheets, July 31, 1999
and December 31, 1998 2
Statements of Operations, for the seven month period
ended July 31, 1999, for the year ended December 31,
1998 and for the periods from inception on July 18,
1997 through December 31, 1997 and July 31, 1999 3
Statement of Stockholders' Equity, from inception on
July 18, 1997 through July 31, 1999 4
Statements of Cash Flows, for the seven month period
ended July 31, 1999, for the year ended December 31,
1998 and for the periods from inception on July 18,
1997 through December 31, 1997 and July 31, 1999 5 - 6
Notes to Financial Statements 7 - 9
26
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors
EASTPORT RED'S INCORPORATED
Salt Lake City, Utah
We have audited the accompanying balance sheets of Eastport Red's Incorporated
[a development stage company] at July 31, 1999 and December 31, 1998, and the
related statements of operations, stockholders' equity and cash flows for the
seven month period ended July 31, 1999, for the year ended December 31, 1998
and for the periods from inception on July 18, 1997 through December 31, 1997
and July 31, 1999. 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 audits to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements audited by us present fairly, in all
material respects, the financial position of Eastport Red's Incorporated [a
development stage company] as of July 31, 1999 and December 31, 1998, and the
results of its operations and its cash flows for the seven month period ended
July 31, 1999, for the year ended December 31, 1998 and for the periods from
inception on July 18, 1997 through December 31, 1997 and July 31, 1999, in
conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. As discussed in Note 5 to the financial
statements, the Company was only recently formed, has incurred losses since
its inception and has not yet been successful in establishing profitable
operations, raising substantial doubt about its ability to continue as a going
concern. Management's plans in regards to these matters are also described in
Note 5. The financial statements do not include any adjustments that might
result from the outcome of these uncertainties.
/s/ Pritchett, Siler & Hardy, P.C.
PRITCHETT, SILER & HARDY, P.C.
August 10, 1999
Salt Lake City, Utah
27
<PAGE>
EASTPORT RED'S INCORPORATED
[A Development Stage Company]
BALANCE SHEETS
ASSETS
July 31, December 31,
1999 1998
___________ ___________
CURRENT ASSETS:
Cash in bank $ 9,905 $ 10
___________ ___________
Total Current Assets 9,905 10
___________ ___________
$ 9,905 $ 10
___________ ___________
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Notes payable - related party $ 750 $ 750
Accrued interest payable -
related party 137 94
___________ ___________
Total Current Liabilities 887 884
___________ ___________
STOCKHOLDERS' DEFICIT:
Preferred stock, $.001 par value,
5,000,000 shares authorized,
0 shares issued and outstanding - -
Common stock, $.001 par value,
20,000,000 shares authorized,
11,000,000 and 1,000,000
shares issued and outstanding,
respectively 11,000 1,000
Capital in excess of par value - -
Deficit accumulated during the
development stage (1,982) (1,834)
___________ ___________
Total Stockholders' Deficit 9,018 (834)
___________ ___________
$ 9,905 $ 10
___________ ___________
The accompanying notes are an integral part of these financial statements.
28
<PAGE>
EASTPORT RED'S INCORPORATED
[A Development Stage Company]
STATEMENTS OF OPERATIONS
For the Seven From Inception on
Month Period For the July 18, 1997 Through
Ended Year Ended _______________________
July 31, December 31, December 31, July 31,
1999 1998 1997 1999
__________ __________ __________ __________
REVENUE $ - $ - $ - $ -
EXPENSES:
General and
Administrative (105) (249) (1,491) (1,845)
__________ __________ __________ __________
LOSS BEFORE OTHER
EXPENSES (105) (249) (1,491) (1,845)
OTHER EXPENSES:
Interest Expense (43) (75) (19) (137)
__________ __________ __________ __________
LOSS BEFORE INCOME
TAXES (148) (324) (1,510) (1,982)
CURRENT TAX EXPENSE - - - -
DEFERRED TAX EXPENSE - - - -
__________ __________ __________ __________
NET LOSS $ (148) $ (324) $ (1,510) $ (1,982)
__________ __________ __________ __________
LOSS PER COMMON SHARE $ (.00) $ (.00) $ (.00) $ (.00)
__________ __________ __________ __________
The accompanying notes are an integral part of these financial statements.
29
<PAGE>
EASTPORT RED'S INCORPORATED
[A Development Stage Company]
STATEMENT OF STOCKHOLDERS' EQUITY
FROM THE DATE OF INCEPTION ON JULY 18, 1997
THROUGH JULY 31, 1999
Capital Deficit
in Accumulated
Preferred Stock Common Stock Excess During the
_______________ ___________________ of Development
Shares Amount Shares Amount Par Value Stage
_______ _______ _________ _________ ________ ________
BALANCE, July 18, 1997 - $ - - $ - $ - $ -
Issuance of 1,000,000
shares common stock
for services at $.001
per share, July, 1997 - - 1,000,000 1,000 - -
Net loss for the period
ended December 31, 1997 - - - - - (1,510)
_______ _______ _________ _________ ________ ________
BALANCE, December 31, 1997 - - 1,000,000 1,000 - (1,510)
Net loss for the year
ended December 31, 1998 - - - - - (324)
_______ _______ _________ _________ ________ ________
BALANCE, December 31,1998 - - 1,000,000 1,000 - (1,834)
Issuance of 10,000,000
shares common stock
for cash at $.001
per share, May, 1999 - - 10,000,000 10,000 - -
Net loss for the period
ended July 31, 1999 - - - - - (148)
_______ _______ _________ _________ ________ ________
BALANCE, July 31, 1999 - $ - 11,000,000 $ 11,000 $ - $(1,982)
_______ _______ _________ _________ ________ ________
The accompanying notes are an integral part of this financial statement.
30
<PAGE>
EASTPORT RED'S INCORPORATED
[A Development Stage Company]
STATEMENT OF CASH FLOWS
For the Seven From Inception on
Month Period For the July 18, 1997 Through
Ended Year Ended _______________________
July 31, December 31, December 31, July 31,
1999 1998 1997 1999
____________ ____________ ____________ ___________
Cash Flows Provided by
Operating Activities:
Net loss $ (148) $ (324) $ (1,510) $ (1,982)
Adjustments to
reconcile net loss to
net cash used by
operating activities:
Stock issued for
services - - 1,000 1,000
Changes in assets
and liabilities:
Increase in
accrued interest
- related party 43 75 19 137
____________ ____________ ____________ ___________
Net Cash
Provided (Used)
by Operating
Activities (105) (249) (491) (845)
____________ ____________ ____________ ___________
Cash Flows Provided by
Investing Activities: - - - -
____________ ____________ ____________ ___________
Net Cash Provided by
Investing Activities - - - -
____________ ____________ ____________ ___________
Cash Flows Provided by
Financing Activities:
Proceeds from issuance
of common stock 10,000 - - 10,000
Increase in notes
payable - related party - - 750 750
____________ ____________ ____________ ___________
Net Cash
Provided by
Financing
Activities 10,000 - 750 10,750
____________ ____________ ____________ ___________
Net Increase in Cash 9,895 (249) - 9,905
Cash at Beginning of
Period 10 259 - -
____________ ____________ ____________ ___________
Cash at End of Period $ 9,905 $ 10 $ 259 $ 9,905
____________ ____________ ____________ ___________
Supplemental Disclosures of
Cash Flow Information:
Cash paid during the
period for:
Interest $ - $ - $ - $ -
Income taxes $ - $ - $ - $ -
[Continued]
31
<PAGE>
EASTPORT RED'S INCORPORATED
[A Development Stage Company]
STATEMENT OF CASH FLOWS
[CONTINUED]
Supplemental Schedule of Noncash Investing and Financing Activities:
For the period ended July 31, 1999:
None
For the year ended December 31, 1998:
None
For the period ended December 31,1997:
The Company issued 1,000,000 shares of its common stock for services
valued at $1,000.
The accompanying notes are an integral part of these financial statements.
32
<PAGE>
EASTPORT RED'S INCORPORATED
[A Development Stage Company]
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization - Eastport Red's Incorporated (the "Company") was organized
under the laws of the State of Nevada on July 18, 1997. The Company has
not commenced planned principal operations and is considered a development
stage company as defined in SFAS No. 7. The Company is seeking potential
business ventures. The Company has, at the present time, not paid any
dividends and any dividends that may be paid in the future will depend upon
the financial requirements of the Company and other relevant factors.
Organization Costs - Organization costs, which reflect amounts expended to
organize the Company, amounted to $1,000 and were expensed during the
period ended December 31,1997.
Loss Per Share - The computation of loss per share is based on the weighted
average number of shares outstanding during the period presented in
accordance with Statement of Financial Accounting Standards No. 128,
"Earnings Per Share". [See Note 6]
Cash and Cash Equivalents - For purposes of the statement of cash flows,
the Company considers all highly liquid debt investments purchased with a
maturity of three months or less to be cash equivalents.
Accounting Estimates - The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities, the disclosures of contingent assets and
liabilities at the date of the financial statements, and the reported
amount of revenues and expenses during the reported period. Actual results
could differ from those estimated.
Recently Enacted Accounting Standards - SFAS No. 130, "Reporting
Comprehensive Income", SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information", SFAS No. 132, "Employer's Disclosure
about Pensions and Other Postretirement Benefits", SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities", and SFAS
No. 134, "Accounting for Mortgage-Backed Securities.." were recently
issued. SFAS No. 130, 131, 132, 133 and 134 have no current applicability
to the Company or their effect on the financial statements would not have
been significant.
NOTE 2 - CAPITAL STOCK
Common Stock - During July 1997, in connection with its organization, the
Company issued 1,000,000 shares of its previously authorized, but unissued
common stock. The shares were issued for services rendered at $1,000 (or
$.001 per share).
During May 1999, the Company issued 10,000,000 shares of its previously
authorized, but unissued common stock for cash of $10,000 (or $.001 per
share).
33
<PAGE>
EASTPORT RED'S INCORPORATED
[A Development Stage Company]
NOTES TO FINANCIAL STATEMENTS
NOTE 3 - INCOME TAXES
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109 "Accounting for Income Taxes". FASB
109 requires the Company to provide a net deferred tax asset/liability
equal to the expected future tax benefit/expense of temporary reporting
differences between book and tax accounting methods and any available
operating loss or tax credit carryforwards. At July 31, 1999 and December
31, 1998 and 1997 there were no material deferred tax assets or
liabilities, current or deferred tax expense, or net operating loss
carryforwards.
NOTE 4 - RELATED PARTY TRANSACTIONS
Management Compensation - As of July 1999, the Company has not paid any
compensation to an officer/director of the Company. Office Space - The
Company has not had a need to rent office space. An officer/shareholder of
the Company is allowing the Company to use his/her home as a mailing
address, as needed, at no expense to the Company.
Notes Payable - During October 1997, an officer/shareholder of the Company
advanced $750 to the Company. The note is payable upon demand and accrues
interest at 10% per annum. Accrued interest amounted to $137 at July 31,
1999.
NOTE 5 - GOING CONCERN
The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles, which contemplate continuation of
the Company as a going concern. However, the Company was only recently
formed, has incurred losses since its inception and has not yet been
successful in establishing profitable operations.
These factors raise substantial doubt about the ability of the Company to
continue as a going concern. In this regard, management is proposing to
raise any necessary additional funds not provided by operations through
additional sales of its common stock. There is no assurance that the
Company will be successful in raising this additional capital or achieving
profitable operations. The financial statements do not include any
adjustments that might result from the outcome of these uncertainties.
34
<PAGE>
EASTPORT RED'S INCORPORATED
[A Development Stage Company]
NOTES TO FINANCIAL STATEMENTS
NOTE 6 - LOSS PER SHARE
The following data shows the amounts used in computing loss per share:
For the Seven From Inception on
Month Period For the July 18, 1997 Through
Ended Year Ended _______________________
July 31, December 31, December 31, July 31,
1999 1998 1997 1999
____________ ____________ ____________ ___________
Loss from continuing
operations available
to common shareholders
(numerator) $ (148) $ (324) $ (1,510) $ (1,982)
____________ ____________ ____________ ___________
Weighted average
number of common
shares outstanding
used in loss per
share for the period
(denominator) 5,198,113 1,000,000 1,000,000 2,196,501
____________ ____________ ____________ ___________
35
<PAGE>
EASTPORT RED'S INCORPORATED
[A Development Stage Company]
FINANCIAL STATEMENTS
(Unaudited)
NOVEMBER 30, 1999 AND NOVEMBER 30, 1998
36
<PAGE>
Eastport Red's Incorporated
(A Development Stage Company)
Unaudited Balance Sheet
ASSETS
--------
November 30,
1999
-----------
CURRENT ASSETS
Cash $ 7,800
-----------
Total Current Assets 7,800
-----------
TOTAL ASSETS $ 7,800
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
--------------------------------------
CURRENT LIABILITIES
Note payable - (Note 4) $ 750
Accrued interest - (Note 4) $ 162
-----------
Total Current Liabilities 912
-----------
STOCKHOLDERS' EQUITY (DEFICIT)
Preferred stock, $0.001 par value,
5,000,000 shares authorized, -0- shares
issued and outstanding --
Common stock, $0.001 par value,
20,000,000 shares authorized, 11,000,000
issued and outstanding 11,000
Deficit accumulated during the development stage (4,112)
-----------
Total Stockholders' equity (Deficit) 6,888
-----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 7,800
===========
The accompanying notes are an integral part of these financial statements.
37
<PAGE>
Eastport Red's Incorporated
(A Development Stage Company)
Unaudited Statements of Operations
From
Inception on
For the July 18,
Eleven Months Ended 1997 Through
November 30, November 30,
1999 1998 1999
---------- ---------- ----------
NET SALES $ -- $ -- $ --
---------- ---------- ----------
COST OF SALES -- -- --
---------- ---------- ----------
GROSS MARGIN -- -- --
---------- ---------- ----------
EXPENSES
General and administrative 2,210 241 3,950
---------- ---------- ----------
Interest expense 68 69 162
---------- ---------- ----------
Total Expenses 2,278 310 4,112
---------- ---------- ----------
LOSS FROM OPERATIONS $ (2,278) $ (310) $ (4,112)
---------- ---------- ----------
NET LOSS $ (2,278) $ (310) $ (4,112)
========== ========== ==========
BASIC LOSS PER SHARE (0.00) (0.00)
========== ==========
WEIGHTED AVERAGE NUMBER
OF SHARES OUTSTANDING 7,347,305 1,000,000
========== ==========
The accompanying notes are an integral part of these financial statements.
38
<PAGE>
Eastport Red's Incorporated
(A Development Stage Company)
Unaudited Statements of Stockholders' Equity (Deficit)
From Inception on July 18, 1997 through November 30, 1999
Deficit
Accumulated
Preferred Stock Common Stock During the
--------------- -------------------------- Development
Shares Amount Shares Amount Stage
------- ------- ----------- ------------- -----------
Balance, at inception
on July 18, 1997 -- -- -- -- $ --
Issuance of common
stock for services at
$0.001 per share -- -- 1,000,000 1,000 --
Net loss from
Inception on July 18,
1997 through
December 31, 1997 -- -- -- -- (1,510)
------- ------- ----------- ------------- -----------
Balance, December 31,
1997 -- -- 1,000,000 1,000 $ (1,510)
Net loss for the year
ended December 31, 1998 -- -- -- -- ( 324)
------- ------- ----------- ------------- -----------
Balance, December 31,
1998 -- -- 1,000,000 1,000 $ (1,834)
Issuance of common
stock for cash at
$0.001 per share -- -- 10,000,000 10,000 --
Net loss for the period
ended November 30, 1999 -- -- -- -- (2,278)
------- ------- ----------- ------------- -----------
Balance, November 30,
1999 -- -- 11,000,000 11,000 $ (4,112)
======= ======= =========== ============= ===========
The accompanying notes are an integral part of these financial statements.
39
<PAGE>
Eastport Red's Incorporated
(A Development Stage Company)
Unaudited Statements of Cash Flows
From
Inception on
For the July 18,
Eleven Months Ended 1997 Through
November 30, November 30,
1999 1998 1999
---------- ---------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (2,278) $ 310 $ (4,112)
Adjustments to reconcile net loss
to net cash used by operating
activities:
Common stock issued for services -- -- 1,000
Accrued Interest 68 69 162
---------- ---------- -------------
Net Cash Used by Operating
Activities (2,210) 241 (2,950)
---------- ---------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES -- -- --
---------- ---------- -------------
CASH FLOWS FORM FINANCING ACTIVITIES
Proceeds from note payable -- -- 750
Sale of Stock for cash 10,000 -- 10,000
---------- ---------- -------------
Net Cash Provided by Financing
Activities 10,000 -- 10,750
---------- ---------- -------------
NET INCREASE (DECREASE) IN CASH 7,790 241 7,800
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 10 258 --
---------- ---------- -------------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 7,800 $ 17 $ 7,800
========== ========== =============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest paid $ -- $ -- $ --
Income taxes paid $ -- $ -- $ --
SCHEDULE OF NON-CASH FINANCING ACTIVITIES:
Common stock issued for services $ -- $ -- $ 1,000
The accompanying notes are an integral part of these financial statements.
40
<PAGE>
Eastport Red's Incorporated
(A Development Stage Company)
Notes to Unaudited Financial Statements
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization - Eastport Red's Incorporated (the "Company") was organized
under the laws of the State of Nevada on July 18, 1997. The Company has
not commenced planned principal operations and is considered a development
stage company as defined in SFAS No. 7. The Company is seeking potential
business ventures. The Company has, at the present time, not paid any
dividends and any dividends that may be paid in the future will depend upon
the financial requirements of the Company and other relevant factors.
Organization Costs - Organization costs, which reflect amounts expended to
organize the Company, amounted to $1,000 and were expensed during the
period ended December 31,1997.
Loss Per Share - The computation of loss per share is based on the weighted
average number of shares outstanding during the period presented in
accordance with Statement of Financial Accounting Standards No. 128,
"Earnings Per Share".
Cash and Cash Equivalents - For purposes of the statement of cash flows,
the Company considers all highly liquid debt investments purchased with a
maturity of three months or less to be cash equivalents.
Accounting Estimates - The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities, the disclosures of contingent assets and
liabilities at the date of the financial statements, and the reported
amount of revenues and expenses during the reported period. Actual results
could differ from those estimated.
Recently Enacted Accounting Standards - SFAS No. 130, "Reporting
Comprehensive Income", SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information", SFAS No. 132, "Employer's Disclosure
about Pensions and Other Postretirement Benefits", SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities", and SFAS
No. 134, "Accounting for Mortgage-Backed Securities.." were recently
issued. SFAS No. 130, 131, 132, 133 and 134 have no current applicability
to the Company or their effect on the financial statements would not have
been significant.
NOTE 2 - CAPITAL STOCK
Common Stock - During July 1997, in connection with its organization, the
Company issued 1,000,000 shares of its previously authorized, but unissued
common stock. The shares were issued for services rendered at $1,000 (or
$.001 per share).
During May 1999, the Company issued 10,000,000 shares of its previously
authorized, but unissued common stock for cash of $10,000 (or $.001 per
share).
41
<PAGE>
Eastport Red's Incorporated
(A Development Stage Company)
Notes to Unaudited Financial Statements
NOTE 3 - INCOME TAXES
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109 "Accounting for Income Taxes". FASB
109 requires the Company to provide a net deferred tax asset/liability
equal to the expected future tax benefit/expense of temporary reporting
differences between book and tax accounting methods and any available
operating loss or tax credit carryforwards. At November 30, 1999 and 1998
there were no material deferred tax assets or liabilities, current or
deferred tax expense, or net operating loss carryforwards.
NOTE 4 - RELATED PARTY TRANSACTIONS
Management Compensation - As of July 1999, the Company has not paid any
compensation to an officer/director of the Company. Office Space - The
Company has not had a need to rent office space. An officer/shareholder of
the Company is allowing the Company to use his/her home as a mailing
address, as needed, at no expense to the Company.
Notes Payable - During October 1997, an officer/shareholder of the Company
advanced $750 to the Company. The note is payable upon demand and accrues
interest at 10% per annum. Accrued interest amounted to $162 at November
30, 1999.
42
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PART III
- - - ------------------------------------------------------------------------------
Item 1. Index to Exhibits
Item 2. Description of Exhibits
- - - ------------------------------------------------------------------------------
SEC Ref. Exhibit Page
No. No. No. Description
- - - --------- --------- ------ -------------
Ex-3(i) 1 44 Articles of Incorporation, as amended
Ex-3(ii) 2 46 By-laws
Ex-10 3 57 Promissory Note made by the Company to the
order of Marlon Hill, dated October 1, 1997
Ex-23 4 58 Consent of Pritchett, Siler & Hardy, P.C.,
Independent Public Accountants
Ex-27 5 * Financial Data Schedule
* The Financial Data Schedule is presented only in the electronic filing
with the Securities and Exchange Commission.
SIGNATURES:
Pursuant to the requirements of Section 12 of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
Dated: December 07, 1999 Eastport Red's Incorporated
By: /s/ Ken W. Kurtz
-------------------------------------
Ken W. Kurtz, President, Secretary &
Treasurer
In accordance with the Exchange Act, this registration statement has been
signed by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.
Dated: December 07, 1999 By: /s/ Ken W. Kurtz
-------------------------------------
Ken W. Kurtz, Director
43
Exhibit No. 1
ARTICLES OF INCORPORATION
OF
EASTPORT RED'S INCORPORATED
FIRST. The name of the Company shall be Eastport Red's Incorporated.
SECOND. The resident agent and registered office located within the
State of Nevada is:
LaVonne L. Frost
711 South Carson Street
Carson City, Nevada 89702
THIRD. The purpose for which the corporation is formed is for the
purpose of transacting any lawful business, or promoting or conducting any
legitimate object or purpose, under and subject to the laws of the State of
Nevada.
FOURTH. The stock of the corporation is divide into two classes: (1)
Common Stock in the amount of Twenty Million (20,000,000) shares having a par
value of $0.001 each; and (2) Preferred Stock in the amount of (5,000,000)
shares having a par value of $0.001 each. The Board of Directors shall have
the authority, by resolution or resolutions, (1) to divide the Preferred Stock
into more than one class of stock or more than one series of any class; (2) to
establish and fix the distinguishing designation of each such series and the
number of shares thereof, which number, by like action of the Board of
Directors, from time to time thereafter, may be increased, except when
otherwise provided by the Board of Directors in creating such series, or may
be decreased, but not below the number of shares thereof then outstanding; and
(3) within the limitations of applicable law of the State of Nevada or as
otherwise set forth in this Article, to fix and determine the relative voting
powers, designations, preferences, limitations, restrictions and relative
rights of the various classes or stock or series thereof and the
qualifications, limitations or restrictions such rights of each series so
established prior to the issuance thereof. There shall be no cumulative
voting by shareholders.
FIFTH. The corporation, by action of its directors, and without action
by its shareholders, may purchase its own shares in accordance with the
provisions of the Nevada Revised Statutes. Such purchases may be made either
in the open market or at a public or private sale, in such manner and amounts,
from such holder or holders of outstanding shares of the corporation and at
such prices as the directors shall from time to time determine.
SIXTH, No holder of shares of the corporation of any class, as such,
shall have any preemptive right to purchase or subscribe for shares of the
corporation, of any class, whether now or hereafter authorized.
44
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SEVENTH. The Board of Directors shall consist of no fewer than one
member and no more than seven members. The initial Board of Directors will
consist of the following member(s) (with their address indicated) as follows:
Marlon Hill Harold Hill
366 South 500 East 366 South 500 East
Salt Lake City, Utah 84112 Salt Lake City, Utah 84112
EIGHTH. No officer or director shall be personally liable to the
corporation or its shareholders for money damages except as provided pursuant
to the Nevada Revised Statutes.
NINTH. The name and address of the Incorporator of the corporation is
as follows:
Marlon Hill
366 South 500 East
Salt Lake City, Utah 84112
IN WITNESS WHEREOF, these Articles of Incorporation are hereby executed
this 30th day of June, 1997.
/s/ Marlon Hill
- - - ----------------------------
Marlon Hill, Incorporator
NOTARIZATION OF SIGNATURE OF THE INCORPORATOR
State of Utah )
)
County of Salt Lake )
On this 30th day of June, 1997 before me, Vicki L. Crocker, a notary
public, personally appeared Marlon Hill, the person whose name is
subscribed to this instrument and who has acknowledged that he executed the
same as the Incorporator of Eastport Red's Incorporated.
/s/ Vicki Crocker
S --------------------------------
E Notary Public
A
L Dec. 4, 1999
--------------------------------
My Commission Expires
45
Exhibit No. 2
BYLAWS
FOR THE REGULATION, EXCEPT AS OTHERWISE
PROVIDED BY STATUTE OR ITS ARTICLES OF INCORPORATION,
OF
EASTPORT RED'S INCORPORATED
ARTICLE 1
Offices
Section 1.01 -- Principal And Registered Office.
The principal and registered office for the transaction of the business of the
Corporation is hereby fixed and located at: c/o LaVonne L. Frost, 711 South
Carson Street, Carson City, Nevada 89702. The Corporation may have such other
offices, either within or without the State of Nevada as the Corporation's
Board of Directors (the "Board) may designate or as the business of the
Corporation may require from time to time.
Section 1.02 -- Other Offices.
Branch or subordinate offices may at any time be established by the Board at
any place or places wherein the Corporation is qualified to do business.
ARTICLE 2
Meetings of Shareholders
Section 2.01 -- Meeting Place.
All annual meetings of shareholders and all other meetings of shareholders
shall be held either at the principal office or at any other place within or
without the State of Nevada which may be designated either by the Board,
pursuant to authority hereinafter granted, or by the written consent
of all shareholders entitled to vote thereat, given either before or after the
meeting and filed with the secretary of the Corporation.
Section 2.02 -- Annual Meetings.
A. The annual meetings of shareholders shall be held on the anniversary date
of the date of incorporation at the hour of 2:00 o'clock p.m., commencing with
the year 1996, provided, however, that should the day of the annual meeting
fall upon a legal holiday, then any such annual meeting of shareholders shall
be held at the same time and place on the next business day thereafter which
is not a legal holiday.
B. Written notice of each annual meeting signed by the president or vice
president, or the secretary, or an assistant secretary, or by such other
person or persons as the Board may designate, shall be given to each
shareholder entitled to vote thereat, either personally or by mail
or other means of written communication, charges prepaid, addressed to such
shareholder at his address appearing on the books of the Corporation or given
by him to the Corporation for the purpose of notice. If a shareholder gives
no address, notice shall be deemed to have been given to him if sent by mail
or other means of written communication addressed to the place where the
46
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principal office of the Corporation is situated, or if published at least once
in some newspaper of general circulation in the county in which said office is
located. All such notices shall be sent to each shareholder entitled thereto,
or published, not less than ten (10) nor more than sixty (60) days before each
annual meeting, and shall specify the place, the day, and the hour of such
meeting, and shall also state the purpose or purposes for which the meeting is
called.
C. Failure to hold the annual meeting shall not constitute dissolution or
forfeiture of the Corporation, and a special meeting of the shareholders may
take the place thereof.
Section 2.03 -- Special Meetings.
Special meetings of the shareholders, for any purpose or purposes whatsoever,
may be called at any time by the President, or by the Board, or by one or more
shareholders holding not less that ten percent (10%) of the voting power of
the Corporation. Except in special cases where other express provision is
made by statute, notice of such special meetings shall be given in the same
manner as for annual meetings of shareholders. Notices of any special meeting
shall specify in addition to the place, day, and hour of such meeting, the
purpose or purposes for which the meeting is called.
Section 2.04 -- Adjourned Meetings And Notice Thereof.
A. Any shareholders' meeting, annual or special, whether or not a quorum is
present, may be adjourned from time to time by the vote of a majority of the
shares, the holders of which are either present in person or represented by
proxy thereat, but in the absence of a quorum, no other business may be
transacted at any such meeting.
B. When any shareholders' meeting, either annual or special, is adjourned for
thirty (30) days or more, notice of the adjourned meeting shall be given as in
the case of an original meeting. Otherwise, it shall not be necessary to give
any notice of an adjournment or of the business to be transacted at an
adjourned meeting, other than by announcement at the meeting at which such
adjournment is taken.
Section 2.05 -- Entry Of Notice.
Whenever any shareholder entitled to vote has been absent from any meeting of
shareholders, whether annual or special, an entry in the minutes to the effect
that notice has been duly given shall be conclusive and incontrovertible
evidence that due notice of such meeting was given to such shareholder, as
required by law and these Bylaws.
Section 2.06 -- Voting.
At all annual and special meetings of shareholders, each shareholder entitled
to vote thereat shall have one vote for each share of stock so held and
represented at such meetings, either in person or by written proxy, unless the
Corporation's Articles of Incorporation ("Articles") provide otherwise, in
which event, the voting rights, powers, and privileges prescribed in the
Articles shall prevail. Voting for Directors and, upon demand of any
shareholder, upon any question at any meeting, shall be by ballot. If a
quorum is present at a meeting of the shareholders, the vote of a majority of
the shares represented at such meeting shall be sufficient to bind the
Corporation, unless otherwise provided in the Bylaws or the Articles.
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Section 2.07 -- Quorum.
The presence in person or by proxy of the holders of a majority of the shares
entitled to vote at any meeting shall constitute a quorum for the transaction
of business. The shareholders present at a duly called or held meeting at
which a quorum is present may continue to do business until adjournment,
notwithstanding the withdrawal of enough shareholders to leave less than a
quorum.
Section 2.08 -- Consent Of Absentees.
The transactions of any meeting of shareholders, either annual or special,
however called and notice given thereof, shall be as valid as though done at a
meeting duly held after regular call and notice, if a quorum be present either
in person or by proxy, and if, either before of after the meeting, each of the
shareholders entitled to vote, not present in person or by proxy, sign a
written Waiver of Notice, or a consent to the holding of such meeting, or an
approval of the Minutes thereof. All such waivers, consents or approvals
shall be filed with the corporate records or made a part of the Minutes of
such meeting.
Section 2.09 -- Proxies.
Every person entitled to vote or execute consents shall have the right to do
so either in person or by an agent or agents authorized by a written proxy
executed by such person or his duly authorized agent and filed with the
secretary of the Corporation; provided however, that no such proxy shall be
valid after the expiration of eleven (11) months from the date of its
execution, unless the shareholder executing it specifies therein the length of
time for which such proxy is to continue in force, which in no case shall
exceed seven (7) years from the date of its execution.
Section 2.10 -- Shareholder Action Without A Meeting.
Any action required or permitted to be taken at a meeting of the shareholders
may be taken without a meeting if a written consent thereto is signed by
shareholders holding at least a majority of the voting power, except that if a
different proportion of voting power is required for such an action at a
meeting, then that proportion of written consents is required. In no instance
where action is authorized by this written consent need a meeting of
shareholders be called or notice given. The written consent must be filed
with the proceedings of the shareholders.
ARTICLE 3
Board of Directors
Section 3.01 -- Powers.
Subject to the limitations of the Articles, these Bylaws, and the provisions
of Nevada corporate law as to action to be authorized or approved by the
shareholders, and subject to the duties of Directors as prescribed by these
Bylaws, all corporate powers shall be exercised by or under the authority of,
and the business and affairs of the Corporation shall be controlled by, the
Board. Without prejudice to such general powers, but subject to the same
limitations, it is hereby expressly declared that the Directors shall have the
following powers:
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A. To select and remove all the other officers, agents, and employees of the
Corporation, prescribe such powers and duties for them as are not inconsistent
with law, with the Articles, or these Bylaws, fix their compensation, and
require from them security for faithful service.
B. To conduct, manage, and control the affairs and business of the
Corporation, and to make such rules and regulations therefore not inconsistent
with the law, the Articles, or these Bylaws, as they may deem best.
C. To change the principal office for the transaction of the business if such
change becomes necessary or useful; to fix and locate from time to time one or
more subsidiary offices of the Corporation within or without the State of
Nevada, as provided in Section 1.02 of Article 1 hereof; to designate any
place within or without the State of Nevada for the holding of any
shareholders' meeting or meetings; and to adopt, make, and use a corporate
seal, and to prescribe the forms of certificates of stock, and to alter the
form of such seal and of such certificates from time to time, as in their
judgment they may deem best, provided such seal and such certificates
shall at all times comply with the provisions of law.
D. To authorize the issuance of shares of stock of the Corporation from time
to time, upon such terms as may be lawful, in consideration of money paid,
labor done or services actually rendered, debts or securities canceled, or
tangible or intangible property actually received, or in the case of
shares issued as a dividend, against amounts transferred from surplus to
stated capital.
E. To borrow money and incur indebtedness for the purposes of the
Corporation, and to cause to be executed and delivered therefore, in the
corporate name, promissory notes, bonds, debentures, deeds of trust,
mortgages, pledges, hypothecation, or other evidences of debt and
securities therefore.
F. To appoint an executive committee and other committees and to delegate to
the executive committee any of the powers and authority of the Board in
management of the business and affairs of the Corporation, except the power to
declare dividends and to adopt, amend, or repeal Bylaws. The Executive
Committee shall be composed of one or more Directors.
Section 3.02 -- Number And Qualification Of Directors.
The authorized number of Directors of the Corporation shall not be less than
one (1) nor more than twelve (12).
Section 3.03 -- Election And Term Of Office.
The Directors shall be elected at each annual meeting of shareholders, but if
any such annual meeting is not held, or the Directors are not elected thereat,
the Directors may be elected at any special meeting of shareholders. All
Directors shall hold office until their respective successors are elected.
Section 3.04 -- Vacancies.
A. Vacancies in the Board may be filled by a majority of the remaining
Directors, though less than a quorum, or by a sole remaining Director, and
each Director so elected or appointed shall hold office until his successor is
elected at an annual or a special meeting of the shareholders.
B. A vacancy or vacancies in the Board shall be deemed to exist in case of
the death, resignation, or removal of any Director, or if the authorized
number of Directors be increased, or if the shareholders fail at any annual or
special meeting of shareholders at which any Director or Directors are elected
to elect the full authorized number of Directors to be voted for at that
meeting.
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C. The shareholders may elect a Director or Directors at any time to fill any
vacancy or vacancies not filled by the Directors.
D. No reduction of the authorized number of Directors shall have the effect
of removing any Director unless also authorized by a vote of the shareholders.
ARTICLE 4
Meetings of the Board of Directors
Section 4.01 -- Place Of Meetings.
Regular meetings of the Board shall be held at any place within or without the
State of Nevada which has been designated from time to time by resolution of
the Board or by written consent of all members of the Board. In the absence
of such designation, regular meetings shall be held at the principal office of
the Corporation. Special meetings of the Board may be held either at a
place so designated, or at the principal office. Failure to hold an annual
meeting of the Board shall not constitute forfeiture or dissolution of the
Corporation.
Section 4.02 -- Organization Meeting.
Immediately following each annual meeting of shareholders, the Board shall
hold a regular meeting for the purpose of organization, election of officers,
and the transaction of other business. Notice of such meeting is hereby
dispensed with.
Section 4.03 -- Other Regular Meetings.
Other regular meetings of the Board shall be held, whether monthly or
quarterly or by some other schedule, at a day and time as set by the
President; provided however, that should the day of the meeting fall upon a
legal holiday, then such meeting shall be held at the same time on the next
business day thereafter which is not a legal holiday. Notice of all such
regular meetings of the Board is hereby required.
Section 4.04 -- Special Meetings.
A. Special meetings of the Board may be called at any time for any purpose or
purposes by the President, or, if he is absent or unable or refuses to act, by
any Vice President or by any two Directors.
B. Written notice of the time and place of special meetings shall be
delivered personally to each Director or sent to each Director by mail
(including overnight delivery services such as Federal Express) or telegraph,
charges prepaid, addressed to him at his address as it is shown upon the
records of the Corporation, or if it is not shown upon such records or is not
readily ascertainable, at the place in which the regular meetings of the
Directors are normally held. No such notice is valid unless delivered to the
Director to whom it was addressed at least twenty-four (24) hours
prior to the time of the holding of the meeting. However, such mailing,
telegraphing, or delivery as above provided herein shall constitute prima
facie evidence that such director received proper and timely notice.
Section 4.05 -- Notice Of Adjournment.
Notice of the time and place of holding an adjourned meeting need not be given
to absent Directors, if the time and place be fixed at the meeting adjourned.
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Section 4.06 -- Waiver Of Notice.
The transactions of any meeting of the Board, however called and noticed or
wherever held, shall be as valid as though a meeting had been duly held after
regular call and notice, if a quorum be present, and if, either before or
after the meeting, each of the Directors not present sign a written waiver of
notice or a consent to holding such meeting or an approval of the Minutes
thereof. All such waivers, consents, or approvals shall be filed with the
corporate records or made a part of the Minutes of the meeting.
Section 4.07 -- Quorum.
If the Corporation has only one Director, then the presence of that one
Director constitutes a quorum. If the Corporation has only two Directors,
then the presence of both such Directors is necessary to constitute a quorum.
If the Corporation has three or more Directors, then a majority of those
Directors shall be necessary to constitute a quorum for the transaction of
business, except to adjourn as hereinafter provided. A Director may be
present at a meeting either in person or by telephone. Every act or decision
done or made by a majority of the Directors present at a meeting duly held at
which a quorum is present, shall be regarded as the act of the Board, unless
a greater number be required by law or by the Articles.
Section 4.08 -- Adjournment.
A quorum of the Directors may adjourn any Directors' Meeting to meet again at
a stated day and hour; provided however, that in the absence of a quorum, a
majority of the Directors present at any Directors' Meeting, either regular or
special, may adjourn such meeting only until the time fixed for the next
regular meeting of the Board.
Section 4.09 -- Fees And Compensation.
Directors shall not receive any stated salary for their services as Directors,
but by resolution of the Board, a fixed fee, with or without expenses of
attendance, may be allowed for attendance at each meeting. Nothing stated
herein shall be construed to preclude any Director from serving the
Corporation in any other capacity as an officer, agent, employee, or
otherwise, and receiving compensation therefore.
Section 4.10 -- Action Without A Meeting.
Any action required or permitted to be taken at a meeting of the Board, or a
committee thereof, may be taken without a meeting if, before or after the
action, a written consent thereto is signed by all the members of the Board or
of the Committee. The written consent must be filed with the proceedings of
the Board or Committee.
ARTICLE 5
Officers
Section 5.01 -- Executive Officers.
The executive officers of the Corporation shall be a President, a Secretary,
and a Treasurer/Chief Financial Officer. The Corporation may also have, at
the direction of the Board, a Chairman of the Board, one or more Vice
Presidents, one or more Assistant Secretaries, one or more Assistant
Treasurers, and such other officers as may be appointed in accordance with the
provisions of Section 5.03 of this Article. Officers other than the President
and the Chairman of the Board need not be Directors. Any one person may hold
two or more offices, unless otherwise prohibited by the Articles or by law.
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Section 5.02 -- Appointment.
The officers of the Corporation, except such officers as may be appointed in
accordance with the provisions of Sections 5.03 and 5.05 of this Article,
shall be appointed by the Board, and each shall hold his office until he
resigns or is removed or otherwise disqualified to serve, or his
successor is appointed and qualified.
Section 5.03 -- Subordinate Officers.
The Board may appoint such other officers as the business of the Corporation
may require, each of whom shall hold office for such period, have such
authority, and perform such duties as are provided in these Bylaws or as the
Board may from time to time determine.
Section 5.04 -- Removal And Resignation.
A. Any officer may be removed, either with or without cause, by a majority of
the Directors at the time in office, at any regular or special meeting of the
Board.
B. Any officer may resign at any time by giving written notice to the Board
or to the President or Secretary. Any such resignation shall take effect on
the date such notice is received or at any later time specified therein; and,
unless otherwise specified therein, the acceptance of such resignation shall
not be necessary to make it effective.
Section 5.05 -- Vacancies.
A vacancy in any office because of death, resignation, removal,
disqualification, or any other cause shall be filled in the manner prescribed
in these Bylaws for regular appointments to such office.
Section 5.06 -- Chairman Of The Board.
The Chairman of the Board, if there be such an officer, shall, if present,
preside at all meetings of the Board, and exercise and perform such other
powers and duties as may be from time to time assigned to him by the Board or
prescribed by these Bylaws.
Section 5.07 -- President.
Subject to such supervisory powers, if any, as may be given by the Board to
the Chairman of the Board (if there be such an officer), the President shall
be the Chief Executive Officer of the Corporation and shall, subject to the
control of the Board, have general supervision, direction, and control of the
business and officers of the Corporation. He shall preside at all meetings of
the shareholders and, in the absence of the Chairman of the Board, or if there
be none, at all meetings of the Board. He shall be an ex-officio member of
all the standing committees, including the Executive Committee, if any, and
shall have the general powers and duties of management usually vested in the
office of president of a corporation, and shall have such other powers and
duties as may be prescribed by the Board or these Bylaws.
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Section 5.08 -- Vice President.
In the absence or disability of the President, the Vice Presidents, in order
of their rank as fixed by the Board, or if not ranked, the Vice President
designated by the Board, shall perform all the duties of the President and
when so acting shall have all the powers of, and be subject to all the
restrictions upon, the President. The Vice Presidents shall have such other
powers and perform such other duties as from time to time may be prescribed
for them respectively by the Board or these Bylaws.
Section 5.09 -- Secretary.
A. The Secretary shall keep, or cause to be kept, at the principal office or
such other place as the Board may direct, a book of (i) Minutes of all
meetings of directors and shareholders, with the time and place of holding,
whether regular or special, and if special, how authorized, the notice
thereof given, the names of those present and absent at Directors' Meetings,
the number of shares present or represented at Shareholders' Meetings, and the
proceedings thereof; and (ii) any waivers, consents, or approvals authorized
to be given by law or these Bylaws.
B. The Secretary shall keep, or cause to be kept, at the principal office, a
share register, or a duplicate share register, showing (i) the name of each
shareholder and his or her address; (ii) the number and class or classes of
shares held by each, and the number and date of certificates issued
for the same; and (iii) the number and date of cancellation of every
certificate surrendered for cancellation.
C. The Secretary shall give, or cause to be given, notice of all the meetings
of the shareholders and of the Board required by these Bylaws or by law to be
given, and he shall keep the seal of the Corporation, if any, in safe custody,
and shall have such other powers and perform such other duties as may be
prescribed by the Board or these Bylaws.
Section 5.10 -- Treasurer/Chief Financial Officer.
A. The Treasurer/Chief Financial Officer shall keep and maintain, or cause to
be kept and maintained, adequate and correct accounts of the properties and
business transactions of the Corporation, including accounts of its assets,
liabilities, receipts, disbursements, gains, losses, capital, surplus, and
shares. Any surplus, including earned surplus, paid-in surplus, and surplus
arising from a reduction of stated capital, shall be classified according to
source and shown in a separate account. The books of account shall at all
times be open to inspection by any Director.
B. The Treasurer/Chief Financial Officer shall deposit all monies and other
valuables in the name and to the credit of the Corporation with such
depositories as may be designated by the Board. He shall disburse the funds of
the Corporation as may be ordered by the Board, shall render to the President
and Directors, whenever they request it, an account of all of his transactions
as Treasurer and of the financial condition of the Corporation, and shall have
such other powers and perform such other duties as may be prescribed by the
Board or these Bylaws.
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ARTICLE 6
Miscellaneous
Section 6.01 -- Record Date And Closing Stock Books.
The Board may fix a time in the future, for the payment of any dividend or
distribution, or for the allotment of rights, or when any change or conversion
or exchange of shares shall go into effect, as a record date for the
determination of the shareholders entitled to notice of and to vote at any
such meeting, or entitled to receive any such dividend or distribution, or any
such allotment of rights, or to exercise the rights in respect to any such
change, conversion or exchange of shares, and in such case only shareholders
of record on the date so fixed shall be entitled to notice of and to vote at
such meetings, or to receive such dividend, distribution, or allotment of
rights, or to exercise such rights, as the case may be, notwithstanding any
transfer of any shares on the books of the Corporation after any record date
fixed as herein set forth. The Board may close the books of the Corporation
against transfers of shares during the whole, or any part, of any such
period.
Section 6.02 -- Inspection Of Corporate Records.
The Share Register or Duplicate Share Register, the Books of Account, and
Records of Proceedings of the Shareholders and Directors shall be open to
inspection upon the written demand of any shareholder or the holder of a
voting trust certificate, at any reasonable time, and for a purpose reasonably
related to his interests as a shareholder or as the holder of a voting trust
certificate, and shall be exhibited at any time when required by the demand of
ten percent (10%) of the shares represented at any shareholders' meeting.
Such inspection may be made in person or by an agent or attorney, and shall
include the right to make extracts. Demand of inspection other than at a
Shareholders' Meeting shall be made in writing upon the President, Secretary,
or Assistant Secretary, and shall state the reason for which inspection is
requested.
Section 6.03 -- Checks, Drafts, Etc.
All checks, drafts or other orders for payment of money, notes or other
evidences of indebtedness, issued in the name of or payable to the
Corporation, shall be signed or endorsed by such person or persons and in such
manner as, from time to time, shall be determined by resolution of the
Board.
Section 6.04 -- Annual Report.
The Board shall cause to be sent to the shareholders, not later than one
hundred twenty (120) days after the close of the fiscal or calendar year, an
annual report.
Section 6.05 -- Contracts: How Executed.
The Board, except as otherwise provided in these Bylaws, may authorize any
officer, officers, agent, or agents, to enter into any contract, deed, or
lease, or execute any instrument in the name of and on behalf of the
Corporation, and such authority may be general or confined to specific
instances; and unless so authorized by the Board, no officer, agent, or
employee shall have any power or authority to bind the Corporation by any
contract or engagement or to pledge its credit or render it liable for any
purpose or for any amount.
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Section 6.06 -- Certificates Of Stock.
A certificate or certificates for shares of the capital stock of the
Corporation shall be issued to each shareholder when any such shares are fully
paid up. All such certificates shall be signed by the President or a Vice
President and the Secretary or an Assistant Secretary, or be authenticated by
facsimiles of the signature of the President and Secretary or by a facsimile
of the signatures of the President and the written signature of the Secretary
or an Assistant Secretary. Every certificate authenticated by a facsimile of
a signature must be countersigned by a transfer agent or transfer clerk.
Section 6.07 -- Representations Of Shares Of Other Corporations.
The President or any Vice President and the Secretary or Assistant Secretary
of this Corporation are authorized to vote, represent, and exercise on behalf
of this Corporation, all rights incident to any and all shares of any other
corporation or corporations standing in the name of this Corporation. The
authority herein granted to said officers to vote or represent on behalf of
this Corporation or corporations may be exercised either by such officers in
person or by any person authorized so to do by proxy or power of attorney duly
executed by said officers.
Section 6.08 -- Inspection Of Bylaws.
The Corporation shall keep in its principal office for the transaction of
business the original or a copy of these Bylaws, as amended or otherwise
altered to date, certified by the Secretary, which shall be open to inspection
by the shareholders at all reasonable times during office hours.
Section 6.09 -- Indemnification.
A. The Corporation shall indemnify its officers and directors for any
liability including reasonable costs of defense arising out of any act or
omission of any officer or director on behalf of the Corporation to the full
extent allowed by the laws of the State of Nevada, if the officer or
director acted in good faith and in a manner the officer or director
reasonably believed to be in, or not opposed to, the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe the conduct was unlawful.
B. Any indemnification under this section (unless ordered by a court) shall
be made by the Corporation only as authorized in the specific case upon a
determination that indemnification of the director or officer is proper in the
circumstances because the officer or director has met the applicable standard
of conduct. Such determination shall be made by the Board of Directors by
a majority vote of a quorum consisting of Directors who were not parties to
such action, suit, or proceeding, or, regardless of whether or not such a
quorum is obtainable and a quorum of disinterested Directors so directs, by
independent legal counsel in a written opinion, or by the stockholders.
ARTICLE 7
Amendments
Section 7.01 -- Power Of Shareholders.
New Bylaws may be adopted, or these Bylaws may be amended or repealed, by the
affirmative vote of the shareholders collectively having a majority of the
voting power or by the written assent of such shareholders.
55
<PAGE>
Section 7.02 -- Power Of Directors.
Subject to the rights of the shareholders as provided in Section 7.01 of this
Article, Bylaws other than a bylaw, or amendment thereof, changing the
authorized number of Directors, may also be adopted, amended, or repealed by
the Board.
Certificate
The undersigned does hereby certify that the undersigned is the President of
the Corporation as named at the outset in these Bylaws, a corporation duly
organized and existing under and by virtue of the laws of the State of Nevada;
that the above and foregoing Bylaws of said corporation were duly and
regularly adopted as such by the Board of Directors of the Corporation at a
meeting of said Board, which was duly held on the 20th day of April, 1996,
that the above and foregoing Bylaws are now in full force and effect.
DATED this 30th day of June, 1997.
/s/ Marlon Hill
---------------------------------------
Marlon Hill, President & Director
56
Exhibit No. 3
$750.00 Date: October 1, 1997
PROMISSORY NOTE
FOR VALUE RECEIVED, The undersigned, jointly and severally ("Maker"),
promises to pay to Marlon Hill, the principal sum of seven hundred fifty
dollars ($750.00), together with interest thereon from October 1, 1997 at the
rate of ten percent (10%) per annum on the unpaid principal.
1. Payments. The principal amount of $750.00 and accrued interest on the
principal obligation represented hereby shall be repaid upon demand.
2. Type and Place of Payments. Payments of principal and interest shall be
made in lawful money of the United States of America to the above-named
Holder and mailed to 366 South 500 East, Salt Lake City, Utah 84112.
3. Penalty. Maker shall pay a penalty equal to one percent (1%) of the
current unpaid principal balance due for each month any payment is past
due beyond demand. Advance payment or payments may be made on the
principal or interest, without penalty or forfeiture. There shall be no
penalty for any prepayment.
4. Default. Upon the occurrence or during the continuance of any one or
more of the events listed below, Holder may, by notice in writing to the
Maker, declare the unpaid balance of the principal and interest on the
Note to be immediately due and payable, and the principal and interest
shall then be immediately due and payable without presentation, demand,
protest, notice of protest, or other notice of dishonor, all of which
are hereby expressly waived by Maker, such events being as follows:
(a) Default in any portion of the payment of the principal and
interest of this Note when the same shall become due and
payable, unless cured within five (5) days after notice
thereof by Holder or the holder of such Note to Maker.
(b) Maker shall file a voluntary petition in bankruptcy or a
voluntary petition seeking reorganization, or shall file an
answer admitting the jurisdiction of the court and any
material allegations of an involuntary petition filed
pursuant to bankruptcy or any form of insolvency, or Maker
shall make an assignment to an agent authorized to liquidate
any part of its assets; or
5. Attorneys' Fees. Maker shall be responsible to Holder for any costs
incurred by Holder in collecting on the obligation herein including
reasonable attorney's fees.
6. Construction. This Note shall be governed by and construed in
accordance with the laws of Utah.
EASTPORT RED'S INCORPORATED
/s/ Marlon Hill
- - - ------------------------------
Marlon Hill, President
APPROVED BY:
/s/ Marlon Hill
------------------------------
Marlon Hill
57
Exhibit No. 4
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in this Registration Statement on Form 10-SB for
Eastport Red's Incorporated, of our report dated August 10, 1999, relating to
the July 31, 1999 and December 1998 financial statements of Eastport Red's
Incorporated, which appears in such registration statement.
/s/ Pritchett, Siler & Hardy, P.C.
PRITCHETT, SILER & HARDY, P.C.
Salt Lake City, Utah
December 6, 1999
58
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