INITIAL PUBLIC OFFERING PROSPECTUS
BANNER HOLDING CORP.
120 North U.S. Highway One
Tequesta, Florida 33469
(561) 747-0244
Minimum 200,000 Shares of Common Stock
Maximum 1,000,000 Shares of Common Stock
Offering Price
$.25 Per Share
PROSPECTUS
May 3, 2000
Banner Holding Corp., a Florida corporation (the "Company"), hereby offers
1,000,000 shares of Common Stock, par value $.01 per share (the "Shares"). See
"Description of Securities." The Company is a "blank check" company (as
described below) and has not engaged in any business and has no specific plans
for any given business or industry. Prior to this offering there has been no
public market for the Shares. The initial public offering price of the Shares
has been arbitrarily determined by the Company and does not bear any
relationship to such established valuation criteria as assets, book value or
prospective earnings. Company officers John M. O'Keefe and Vicki J. Lavache,
president and secretary/treasurer respectively, are the only persons who shall
offer and sell the Shares.
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK AND IMMEDIATE
SUBSTANTIAL DILUTION. SEE "RISK FACTORS" BEGINNING ON PAGE 13 AND "DILUTION."
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THE COMPANY HAS REGISTERED THE SHARES ONLY IN NEW YORK AND NOT IN ANY
OTHER STATE. THE SHARES MAY ONLY BE TRADED IN NEW YORK. THERE CAN BE NO
ASSURANCES THAT THE SHARES WILL BE ELIGIBLE FOR SALE OR RESALE IN ANY
JURISDICTION OTHER THAN NEW YORK. THE COMPANY MAY APPLY TO REGISTER THE SHARES
IN SEVERAL STATES FOR OFFER HEREUNDER OR FOR SECONDARY TRADING, HOWEVER IT IS
UNDER NO REQUIREMENT TO DO SO. THE COMPANY SHALL AMEND THIS PROSPECTUS FOR THE
PURPOSE OF DISCLOSING THE SEVERAL STATES, IF ANY, IN WHICH THE COMPANY'S SHARES
ARE REGISTERED.
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THE SECURITIES OFFERED HEREBY HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
There can be no assurance that a regular trading market will develop for the
Shares after this offering or that, if developed, any such market will be
sustained. The Company anticipates that trading of the Shares will be con-
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ducted through what is customarily known as the "pink sheets" and/ or on the
National Quotation Bureau's Over-The-Counter Electronic Bulletin Board (the
"Bulletin Board"). Any market for the Shares which may result will likely be
less well developed than if the Shares were traded on NASDAQ or on an exchange.
See "Risk Factors" and "The Offering."
THE COMPANY IS CONDUCTING A "BLANK CHECK" OFFERING SUBJECT TO RULE 419 OF
REGULATION C AS PROMULGATED BY THE U.S. SECURITIES AND EXCHANGE COMMISSION (THE
"S.E.C.") UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT").
THE NET OFFERING PROCEEDS, AFTER DEDUCTION FOR OFFERING EXPENSES (ESTIMATED AT
$25,000) AND SALES COMMISSIONS, AND THE SECURITIES TO BE ISSUED TO INVESTORS
MUST BE DEPOSITED IN AN ESCROW ACCOUNT (THE "DEPOSITED FUNDS" AND "DEPOSITED
SECURITIES," RESPECTIVELY). WHILE HELD IN THE ESCROW ACCOUNT, THE DEPOSITED
SECURITIES MAY NOT BE TRADED OR TRANSFERRED. EXCEPT FOR AN AMOUNT UP TO 10% OF
THE DEPOSITED FUNDS OTHERWISE RELEASABLE UNDER RULE 419, THE DEPOSITED FUNDS AND
THE DEPOSITED SECURITIES MAY NOT BE RELEASED UNTIL AN ACQUISITION MEETING
CERTAIN SPECIFIED CRITERIA HAS BEEN CONSUMMATED AND A SUFFICIENT NUMBER OF
INVESTORS RECONFIRM THEIR INVESTMENT IN ACCORDANCE WITH THE PROCEDURES SET FORTH
IN RULE 419. PURSUANT TO THESE PROCEDURES, A NEW PROSPECTUS, WHICH DESCRIBES AN
ACQUISITION CANDIDATE AND ITS BUSINESS AND INCLUDES AUDITED FINANCIAL
STATEMENTS, WILL BE DELIVERED TO ALL INVESTORS. THE COMPANY MUST RETURN THE PRO
RATA PORTION OF THE DEPOSITED FUNDS TO ANY INVESTOR WHO DOES NOT ELECT TO REMAIN
AN INVESTOR. UNLESS A SUFFICIENT NUMBER OF INVESTORS ELECT TO REMAIN INVESTORS,
ALL INVESTORS WILL BE ENTITLED TO THE RETURN OF A PRO RATA PORTION OF THE
DEPOSITED FUNDS (PLUS INTEREST) AND NONE OF THE DEPOSITED SECURITIES WILL BE
ISSUED TO INVESTORS. IN THE EVENT AN ACQUISITION IS NOT CONSUMMATED WITHIN 18
MONTHS OF THE EFFECTIVE DATE OF THIS PROSPECTUS, THE DEPOSITED FUNDS WILL BE
RETURNED ON A PRO RATA BASIS TO ALL INVESTORS. SEE "RISK FACTORS" AND "RELEASE
OF DEPOSITED SECURITIES AND DEPOSITED FUNDS."
SINGLE STATE REGISTRATION
THE SHARES MAY ONLY BE OFFERED OR TRADED IN NEW YORK. PURCHASERS OF SHARES
EITHER IN THIS OFFERING OR IN ANY SUBSEQUENT TRADING MARKET WHICH MAY DEVELOP
MUST BE RESIDENTS OF NEW YORK OR STATES IN WHICH THE SHARES ARE EXEMPT FROM
REGISTRATION. THE COMPANY SHALL AMEND THIS PROSPECTUS FOR THE PURPOSE OF
DISCLOSING THE SEVERAL STATES, IF ANY, IN WHICH THE COMPANY'S SHARES ARE
REGISTERED.
The Company intends to provide its shareholders with complete disclosure
documentation, including audited financial statements, concerning an acquisition
or merger target and its business prior to any merger or acquisition.
UNTIL 90 DAYS AFTER THE DATE FUNDS AND SECURITIES ARE RELEASED FROM THE ESCROW
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OR TRUST ACCOUNT PURSUANT TO RULE 419, ALL DEALERS EFFECTING TRANSACTIONS IN THE
REGISTERED SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE
REQUIRED TO DELIVER A PROSPECTUS.
Price to public(1) Underwriting Proceeds to
discounts and issuer(3)
commissions(2)
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Per Share $ .25 $ .025 $ .225
Total Minimum
(200,000) $ 50,000 $ 5000 $ 45,000
Total Maximum
(1,000,000) $250,000 $25,000 $225,000
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(1) Subscribers purchasing shares should make their check payable to "REPUBLIC
SECURITY BANK ESCROW AGENT." The address of Republic Security Bank is 777 S.
Flagler Dr. #134E, W. Palm Beach, Florida 33401. All proceeds from subscriptions
to purchase Shares will be transmitted by the Company and any participating
dealer to the escrow account by noon of the next business day after receipt. The
Shares are offered by the Company on a "best efforts" 200,000 Share minimum,
1,000,000 Share maximum, basis. In the event that the minimum of 200,000 Shares
is not sold by June 30, 2000, all proceeds raised will be returned promptly to
subscribers in full with interest thereon. Subscribers will not be entitled to a
return of funds from the escrow account during the offering period.
(2) The Company intends to offer the Shares through John O'Keefe and Vicki
Lavache, its officers and directors, without the use of a professional
underwriter, and by selected broker-dealers who are members of the National
Association of Securities Dealers, Inc. (the "N.A.S.D.") who agree to sell the
shares in conformity with the NASD Rules of Fair Practice. On sales made by
brokers a maximum commission of 10% will be allowed plus a 3% non-accountable
expense allowance. No selected dealers have yet been identified by the Company.
The Company will amend the registration statement of which this Prospectus is a
part following its effectiveness to identify a selected broker-dealer at such
time as such broker-dealer sells shares offered in this offering. Prior to such
involvement, the Company shall obtain a "no objection" position from the NASD
regarding the contemplated underwriting compensation and arrangements. No
commissions will be paid for sales effected by officers and directors, however
these figures assume payment of commissions on the sale of all Shares. Such
persons will rely on the safe harbor from broker-dealer registration set forth
in Rule 3a4-1 as promulgated under the Securities Exchange Act of 1934. Neither
Mr. O'Keefe nor Ms. Lavache (a) is subject to a statutory disqualification (as
defined in Sec. 3(a)(35), (b) is paid commissions or other remuneration for
securities transactions, or (c) is an associated person of a broker or dealer.
Each of them performs primarily and shall at the conclusion of this offering
perform primarily substantial duties for the Company other than securities
transactions. Neither of them was a broker or dealer or associated therewith
within the last 12 months and neither of them will participate in selling an
offering of securities for any issuer more than once every 12 months.
(3) The proceeds to the Company have been computed before deduction of costs
that will be incurred in connection with this offering (excluding underwriting
discounts and commissions), including filing, printing, legal, accounting,
transfer agent and escrow agent fees estimated at $63,000.
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THE SHARES ARE BEING OFFERED BY THE COMPANY SUBJECT TO PRIOR SALE WHEN, AS AND
IF DELIVERED TO AND ACCEPTED BY THE COMPANY, AND SUBJECT TO APPROVAL OF CERTAIN
LEGAL MATTERS BY COUNSEL AND CERTAIN OTHER CONDITIONS. THE COMPANY RESERVES THE
RIGHT TO WITHDRAW, CANCEL OR MODIFY THIS OFFERING AND TO REJECT ANY ORDER IN
WHOLE OR IN PART.
BANNER HOLDING CORP.
120 U.S. Highway One
Tequesta, Florida 33469
The date of this Prospectus is May 3, 2000
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TABLE OF CONTENTS
PAGE
Single State Registration.................................................. 2
Rights and Protections under Rule 419...................................... 5
Prospectus Summary......................................................... 8
Risk Factors............................................................... 14
Use of Proceeds............................................................ 30
Dilution................................................................... 33
Legal Proceedings.......................................................... 34
Capitalization............................................................. 34
Management................................................................. 35
Principal Shareholders..................................................... 37
Description of Securities.................................................. 38
Indemnification............................................................ 40
Proposed Business.......................................................... 41
Management's Discussion and Analysis or Plan of Operation.................. 51
Certain Transactions....................................................... 52
The Offering............................................................... 52
Legal Matters.............................................................. 54
Experts.................................................................... 54
Available Information...................................................... 54
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RIGHTS AND PROTECTIONS UNDER RULE 419
ESCROW OF 90% OF THE PROCEEDS DERIVED HEREBY
UPON COMPLETION OF THIS OFFERING, 90% OF THE NET PROCEEDS THEREFROM WILL BE
PLACED IN AN ESCROW ACCOUNT WITH REPUBLIC SECURITY BANK AS ESCROW AGENT, SUBJECT
TO RELEASE UPON THE EARLIER OF (i) WRITTEN NOTIFICATION BY THE COMPANY OF ITS
NEED FOR ALL, OR SUBSTANTIALLY ALL, OF SUCH NET PROCEEDS FOR THE PURPOSE OF
FACILITATING A BUSINESS COMBINATION; OR (ii) 18 MONTHS AFTER THE EFFECTIVE DATE
OF THIS REGISTRATION STATEMENT. SEE "RISK FACTORS" AND "PROPOSED BUSINESS."
ESCROWED FUNDS NOT TO BE USED FOR SALARIES OR REIMBURSABLE EXPENSES
NO FUNDS (INCLUDING ANY INTEREST EARNED THEREON) WILL BE DISBURSED FROM THE
ESCROW ACCOUNT FOR THE PAYMENT OF SALARIES OR REIMBURSEMENT OF EXPENSES INCURRED
ON THE COMPANY'S BEHALF BY THE COMPANY'S OFFICERS AND DIRECTORS. OTHER THAN THE
FOREGOING, THERE IS NO LIMIT ON THE AMOUNT OF SUCH REIMBURSABLE EXPENSES, AND
THERE WILL BE NO REVIEW OF THE REASONABLENESS OF SUCH EXPENSES BY ANYONE OTHER
THAN THE COMPANY'S BOARD OF DIRECTORS, BOTH OF WHOM ARE OFFICERS. IN NO EVENT
WILL THE ESCROWED FUNDS (INCLUDING ANY INTEREST EARNED THEREON) BE USED FOR ANY
PURPOSE OTHER THAN IMPLEMENTATION OF A BUSINESS COMBINATION. SEE "RISK FACTORS,"
"USE OF PROCEEDS" AND "CERTAIN TRANSACTIONS."
NO PRIOR CONTACT WITH OTHER ENTITIES
REGARDING POSSIBLE BUSINESS COMBINATIONS
NONE OF THE COMPANY'S OFFICERS, DIRECTORS OR GREATER THAN 10% SHAREHOLDERS OR
PERSONS WHO DIRECTLY OR INDIRECTLY CONTROL, ARE CONTROLLED BY OR ARE UNDER
COMMON CONTROL WITH, THE COMPANY OR PERSONS WHO MAY BE DEEMED PROMOTERS OF THE
COMPANY HAS HAD ANY PRELIMINARY CONTACT OR DISCUSSIONS WITH ANY REPRESENTATIVE
OF ANY ENTITY REGARDING THE POSSIBILITY OF A BUSINESS COMBINATION BETWEEN THE
COMPANY AND SUCH OTHER ENTITY.
MATERIAL PERSONS
THE OFFICERS, DIRECTORS AND MAJOR SHAREHOLDERS OF THE COMPANY ARE THE ONLY
PERSONS WHO HAVE BEEN INSTRUMENTAL IN ARRANGING THE CAPITALIZATION OF THE
COMPANY TO DATE. NEITHER OF THE OFFICERS OR DIRECTORS OF THE COMPANY IS ACTING
AS NOMINEE FOR ANY PERSONS OR IS OTHERWISE UNDER THE CONTROL OF ANY PERSON OR
PERSONS. THERE ARE NO AGREEMENTS, AGREEMENTS IN PRINCIPLE, OR UNDERSTANDINGS
WITH REGARD TO COMPENSATION TO BE PAID BY THE COMPANY TO ANY OFFICER OR DIRECTOR
OF THE COMPANY.
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INVESTORS SHOULD CAREFULLY REVIEW THE FINANCIAL STATEMENTS WHICH ARE AN INTEGRAL
PART OF THIS PROSPECTUS.
DEALERS PARTICIPATING IN THIS OFFERING ARE REQUIRED TO DELIVER A COPY OF THE
FINAL PROSPECTUS TO ANY PERSON WHO IS EXPECTED TO RECEIVE A CONFIRMATION OF THE
SALE AT LEAST 48 HOURS PRIOR TO THE MAILING OF THE CONFIRMATION.
INVESTOR SUITABILITY STANDARDS
The purchase of Shares being offered hereby involves certain risks and is
suitable only for persons of adequate means with no need for liquidity in their
investment. Each potential investor should realize that the Shares may be
subject to certain restrictions on their transfer, and there may be no public
market for the Shares and no assurance that one will develop. See "Risk
Factors."
Because of the various risk factors and the lack of liquidity of the Shares,
each investor must represent and warrant that he is of sufficient financial
means to apprise himself of, and assume the risks inherent in, the purchase of
Shares, including the lack of liquidity of his investment, and must evaluate
whether such investment is suitable for him based upon his investment
objectives, financial situation and needs.
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A subscription, once made, is irrevocable. The Company will review the
subscriptions and representations of prospective investors and, based upon
information appearing therein, may make such further inquiry as it deems
appropriate with regard to the suitability of the investment for such investors.
The Company may reject any subscription, in whole or in part, for the purchase
of Shares.
Investors are strongly urged to consult with their legal, financial and tax
advisors before investing in the Shares.
OFFERING CONDUCTED IN ACCORDANCE WITH RULE 419
The Company's offering is being conducted in accordance with S.E.C. Rule 419
which was adopted to strengthen the regulation of securities offerings by "blank
check" companies, which Congress found to have been common vehicles for fraud
and manipulation in the penny stock market. Accordingly, investors in the
offering will receive the substantive protection provided by Rule 419. Rule 419
requires that the securities to be issued and the funds received in a blank
check offering be deposited and held in an escrow account until an acquisition
meeting specified criteria is completed. Before the acquisition can be completed
and before the Deposited Funds and Deposited Securities can be released, the
"blank check" company is required to update the registration statement with a
post-effective amendment; after the effective date thereof, the Company is
required to furnish investors with the prospectus produced thereby containing
information, including audited financial statements, regarding the proposed
acquisition candidate and its business. According to the rule, the investors
must have no fewer than 20 and no more than 45 days from the effective date of
the post-effective amendment to decide to remain investors or require the return
of their investment funds. Any investor not making a decision within said 45 day
period is automatically to receive a return of his investment funds. Unless a
sufficient number of investors elect to remain investors, all of the Deposited
Funds in the escrow account must be returned to all investors and none of the
Deposited Securities will be issued. Rule 419 further provides that if the
"blank check" company does not complete an acquisition meeting specified
criteria within 18 months of the date of this prospectus, all of the Deposited
Funds in the escrow account must be returned to investors.
JURISDICTIONAL NOTICES
IN MAKING AN INVESTMENT DECISION, INVESTORS MUST RELY ON THEIR OWN EXAMINATION
OF THE COMPANY AND THE TERMS OF THE OFFERING, INCLUDING THE MERITS AND RISKS
INVOLVED.
THE SHARES HAVE NOT BEEN RECOMMENDED BY ANY FEDERAL OR STATE SECURITIES
COMMISSION OR REGULATORY AUTHORITY. FURTHERMORE, THE FOREGOING AUTHORITIES
HAVE NOT CONFIRMED THE ACCURACY OR DETERMINED THE ADEQUACY OF THIS DOCUMENT.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE SHARES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES LAWS OF ANY STATE OR
JURISDICTION OTHER THAN NEW YORK, WHERE THE SHARES HAVE BEEN REGISTERED UNDER
SECTION 359-E OF THE GENERAL BUSINESS LAW OF NEW YORK.
THE SHARES CANNOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF TO ANY PERSON OR
ENTITY UNLESS THEY ARE REGISTERED OR AN EXEMPTION FROM REGISTRATION IN THE
PARTICULAR STATE IS AVAILABLE. THE COMPANY SHALL AMEND THIS PROSPECTUS FOR THE
PURPOSE OF DISCLOSING THE SEVERAL STATES, IF ANY, IN WHICH THE COMPANY'S SHARES
ARE REGISTERED.
OTHER JURISDICTIONS MAY PLACE CERTAIN RESTRICTIONS ON THE OFFER AND SALE OF
SECURITIES TO RESIDENTS THEREOF, AND NO PURCHASE WILL BE CONFIRMED UNTIL SUCH
RESTRICTIONS ARE COMPLIED WITH BY THE RESIDENT AND THE COMPANY.
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PROSPECTUS SUMMARY
THE FOLLOWING IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE MORE DETAILED
INFORMATION AND FINANCIAL STATEMENTS, INCLUDING THE NOTES THERETO, APPEARING
ELSEWHERE IN THIS PROSPECTUS. EACH PROSPECTIVE INVESTOR IS URGED TO READ THIS
PROSPECTUS IN ITS ENTIRETY.
THE COMPANY
Banner Holding Corp. (the "Company") was incorporated in the State of Florida on
January 26, 1998, to seek and make one or more Business Combinations (defined
below) to the extent its limited assets will allow. See "Risk Factors" and
"Proposed Business." The Company is in the development stage and has no
operating history. No representation is made or implied that the Company will be
able to carry on its activities profitably. The subsistence of the Company is
dependent initially upon sufficient proceeds being realized by the Company from
this blank check offering, of which there is no assurance. Proceeds of this
blank check offering may be insufficient to enable the Company to conduct
potentially profitable operations or otherwise to engage in any business en-
deavors. The likelihood of the success of the Company must be considered in
light of the expenses, difficulties and delays frequently encountered in
connection with the formation of any new business. Further, no assurance can be
given that the Company will have the ability to acquire assets, businesses or
properties with any value to the Company. The Company's office is located at
120 North U.S. Highway One, Tequesta, Florida 33469 and its telephone number is
(561) 747-0244.
The Company intends to use the net proceeds of this blank check offering to
effect a merger, acquire the assets or the capital stock of existing businesses
or other similar business combination (a "Business Combination"), of which no
assurances are given. The Company shall seek to employ qualified, but as yet
unidentified, individuals to manage such business. No assurance can be given
that the net proceeds of the maximum number of shares offered in this blank
check offering or any lesser net amount will be sufficient to accomplish the
Company's goals or that any business acquired by the Company will become
profitable. In the event that substantially less than the net proceeds from the
maximum offering are raised, the Company's plans may be materially and adversely
affected in that the Company may find it even more difficult, if not impossible,
to realize its goals. Further, the Company has not identified any business to be
acquired. Investors will be providing their funds to management who will have
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complete discretion as to their expenditure. See "Risk Factors", "Use of
Proceeds" and "Proposed Business."
If proceeds from this offering are insufficient, the Company may be required to
seek additional capital. No assurance can be given that the Company will be able
to obtain such additional capital, or even if available, that such additional
capital will be available on terms acceptable to the Company. In the event that
management determines that the Company is unable to conduct any business
whatsoever, management, subject to the requirements of Rule 419, which provides
that the Deposited Funds will be returned on a pro rata basis if an acquisition
meeting certain prescribed criteria is not consummated within 18 months of the
date of this prospectus, may, in its sole discretion, seek shareholder approval
to liquidate the Company. In the event such a liquidation were to occur at some
point in time after the Company's compliance with the provisions of Rule 419,
all shareholders of the Company, including those owning shares purchased
privately at less than the public offering price (see "Dilution"), will receive
the liquidated assets on a pro rata basis (as opposed to being based on the
amounts paid for such Shares). While management has not established any
guidelines for determining at what point in time it might elect to discontinue
its efforts to engage in a Business Combination and seek shareholder approval
to liquidate the Company, management is subject to the 18 month time frame set
forth in Rule 419 in which to effect an acquisition.
THE OFFERING
Minimum Maximum
Securities offered:
Common Stock, par
value $0.01 per share 200,000 1,000,000
Common Stock to
be outstanding after
the offering 3,200,000 4,000,000
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USE OF PROCEEDS
The Company intends to apply substantially all of the net proceeds of this
offering (other than the proceeds to be deposited into the escrow account) to
cover costs and expenses incurred in attempting to effect a Business
Combination, including selecting and evaluating targets and structuring and
consummating a Business Combination. The proceeds deposited into the escrow
account shall not be used by the Company for any Company payment of salaries or
expenses to Company officers or directors. They shall only be used, if at all,
for the implementation of a Business Combination. See "Use of Proceeds,"
"Proposed Business" and "Certain Transactions."
RISK FACTORS
The Shares offered hereby involve a high degree of risk and immediate
substantial dilution and should not be purchased by investors who cannot afford
the loss of their entire investment. Such risks include, among others: the
Company's mere 26-month existence and limited resources; the discretionary use
of proceeds; and intense competition in effecting a Business Combination. See
"Risk Factors," "Dilution" and "Use of Proceeds."
DEPOSIT OF OFFERING PROCEEDS AND SECURITIES
Rule 419 requires that the net offering proceeds, after deduction for
underwriting compensation and offering costs, and all securities to be issued be
deposited into an escrow or trust account (the "Deposited Funds" and "Deposited
Securities," respectively) governed by an agreement which contains certain terms
and provisions specified by the rule. Under Rule 419, the Deposited Funds and
Deposited Securities will be released to the Company and to investors,
respectively, only after the Company has met the following three conditions:
First, the Company must execute an agreement for an acquisition(s) meeting
certain prescribed criteria; second, the Company must successfully complete a
reconfirmation offering which includes certain prescribed terms and conditions;
and third, the acquisition(s) meeting the prescribed criteria must be
consummated.
Accordingly, the Company has entered into an escrow agreement with a Bank (the
"Escrow Agent") which provides that:
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(1) The net proceeds of this offering are to be deposited into an escrow
account maintained by the Escrow Agent. The Deposited Funds and interest
or dividends thereon, if any, are to be held for the sole benefit of the
investors and can only be invested in bank deposits, in money mutual funds
or federal government securities or securities for which the principal or
interest is guaranteed by the federal government;
(2) All securities issued in connection with this offering and any other
securities issued with respect to such securities, including securities
issued with respect to stock splits, stock dividends or similar rights,
are to be deposited directly into the escrow account promptly upon
issuance. The identities of the investors are to be reflected on the stock
certificates or other documents evidencing the securities. The securities
held in the escrow account are to remain as issued and deposited and are
to be held for the sole benefit of the investors who retain the voting
rights, if any, with respect to the securities held in their names. The
securities held in the escrow account may not be transferred or disposed
of, other than by will or the laws of descent and distribution, or
pursuant to a qualified domestic relations order as defined by the
Internal Revenue Code of 1986 or the Employee Retirement Income Security
Act; and
(3) Warrants, convertible securities or other derivative securities
relating to securities held in the escrow account may be exercised or
converted in accordance with their terms, provided, however, that the
securities received upon exercise or conversion together with any cash or
other consideration paid in connection with the exercise or conversion
are to be promptly deposited into the escrow account.
PRESCRIBED ACQUISITION CRITERIA
Rule 419 requires that before the Deposited Funds and the Deposited Securities
can be released, the Company must first execute an agreement(s) to acquire an
acquisition candidate(s) meeting certain specified criteria. The agreement must
provide for the acquisition of a business(es) or assets valued at not less than
80% of the maximum offering proceeds, but excluding underwriting commissions,
underwriting expenses and dealer allowances payable to non-affiliates. Once the
acquisition agreements meeting the above criteria have been executed, the
Company must successfully complete the mandated reconfirmation offering and
consummate the acquisitions(s).
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POST-EFFECTIVE AMENDMENT
Once the agreement(s) governing the acquisition(s) of a business(es) meeting the
above criteria has (have) been executed, Rule 419 requires the Company to update
the registration statement of which this prospectus is a part with a
post-effective amendment. The post-effective amendment must contain information
about: the proposed acquisition candidate(s) and its business(es), including
audited financial statements; the results of this offering; and the use of the
funds disbursed from the escrow account. The post-effective amendment must also
include the terms of the reconfirmation offer mandated by Rule 419. The offer
must include certain prescribed conditions which must be satisfied before the
Deposited Funds and Deposited Securities can be released from escrow.
RECONFIRMATION OFFERING
The reconfirmation offer must commence within five business days after the
effective date of the post-effective amendment. Pursuant to Rule 419, the terms
of the reconfirmation offer must include the following conditions:
(1) The prospectus contained in the post-effective amendment will be sent
to each investor whose securities are held in the escrow account within five
business days after the effective date of the post-effective amendment;
(2) Each investor will have no fewer than 20, and no more than 45, business
days from the effective date of the post-effective amendment to notify the
Company in writing that the investor elects to remain an investor;
(3) If the Company does not receive written notification from any investor
within 45 business days following the effective date, the pro rata portion of
the Deposited Funds (and any related interest or dividends) held in the escrow
account on such investor's behalf will be returned to the investor within five
business days by first class mail or other equally prompt means;
(4) The acquisition(s) will be consummated only if investors having
contributed 80% of the maximum offering proceeds elect to reconfirm their
investments; and
(5) If a consummated acquisition(s) has not occurred within 18
months from the date of this prospectus, the Deposited Funds held in the escrow
account shall be returned to all investors on a pro rata basis within five
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business days by first class mail or other equally prompt means.
RELEASE OF DEPOSITED SECURITIES AND DEPOSITED FUNDS
The Deposited Funds and Deposited Securities may be released to the Company and
the investors, respectively, after:
(1) the Escrow Agent has received written certification from the Company
and any other evidence acceptable by the Escrow Agent that the Company has
executed an agreement for the acquisition(s) of a business(es) the value of
which represents at least 80% of the maximum offering proceeds and has filed
the required post-effective amendment, the post-effective amendment has been
declared effective, the mandated reconfirmation offer having the conditions
prescribed by Rule 419 has been completed, and the Company has satisfied all of
the prescribed conditions of the reconfirmation offer; and
(2) the acquisition(s) of the business(es) the value of which represents
at least 80% of the maximum offering proceeds is (are) consummated.
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RISK FACTORS
THE SHARES OFFERED HEREBY ARE SPECULATIVE, INVOLVE IMMEDIATE SUBSTANTIAL
DILUTION AND A HIGH DEGREE OR RISK, INCLUDING, BUT NOT NECESSARILY LIMITED TO,
THE SEVERAL FACTORS DESCRIBED BELOW. EACH PROSPECTIVE INVESTOR SHOULD CAREFULLY
CONSIDER THE FOLLOWING RISK FACTORS INHERENT IN AND AFFECTING THE COMPANY AND
THIS OFFERING BEFORE MAKING AN INVESTMENT DECISION.
RULE 419 GENERALLY. Rule 419 generally requires that the securities to be issued
and the funds received in a blank check offering be deposited and held in an
escrow account until an acquisition meeting specified criteria is completed.
Before the acquisition can be completed and before the funds and securities can
be released, the issuer in a blank check offering is required to update its
registration statement with a post-effective amendment. After the effective date
of any such post-effective amendment, the Company is required to furnish
investors with the prospectus produced thereby containing information, including
audited financial statements, regarding the proposed acquisition candidate and
its business. Investors must be given no fewer than 20 and no more than 45
business days from the effective date of the post-effective amendment to decide
to remain investors or require the return of their investment funds. Any
investor not making a decision within said period is automatically to receive a
return of his investment funds.
CONFLICTS OF INTEREST - PURCHASE OF MANAGEMENT'S COMMON STOCK. While the Company
and its management intend that no Shares will be sold by any officers, directors
or greater-than-10% shareholders or persons who may be deemed promoters of the
Company without affording all shareholders of the Company a similar opportunity,
such parties may, nevertheless, sell all or a portion of their Shares as a
condition to or in connection with a proposed Business Combination. Such parties
paid $0.013 per Share. In connection with any such sale transaction, a premium
may be charged for such parties' Shares. The public investors in the Company
shall not receive any portion thereof in the event such premium may be paid. Any
transaction structured in such manner may present such insiders with conflicts
of interest and, as a result of such conflicts, may possibly compromise
management's fiduciary duties to the Company's shareholders, as the potential
would therefore exist for members of management to consider their own personal
pecuniary benefit rather than the best interests of the Company's other
shareholders. Proceeds from this blank check offering will not be utilized
directly or indirectly to purchase Shares from management.
Although investors may request the return of their investment funds in
connection with the reconfirmation offering required by Rule 419, the Company's
shareholders will not be afforded an opportunity specifically to approve or
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disapprove any particular transaction involving the purchase of Shares from
management. See Risk Factor entitled "Actual and Potential Conflicts of
Interest."
CONFLICTS OF INTEREST - PART-TIME MANAGEMENT. Neither of the Company's key
personnel is required to commit his or her full time to the affairs of the
Company and, accordingly, such personnel may have conflicts of interest in
allocating management time among various business activities. Messrs. O'Keefe
and Lavache intend to devote approximately 50% of their time to the affairs of
the Company. Such key personnel may in the future become affiliated with
entities, including other blank check companies, engaged in business activities
similar to those intended to be conducted by the Company. In the course of their
other business activities, including private investment activities, Messrs.
O'Keefe and Lavache may become aware of investment and business opportunities
which may be appropriate for presentation to the Company as well as the other
entities with which they are affiliated. Such persons may have conflicts of
interest in determining to which entity a particular business opportunity should
be presented. In general, officers and directors of Florida corporations are
required to present certain business opportunities to such corporations.
Accordingly, as a result of multiple business affiliations, Messrs. O'Keefe and
Lavache may have similar legal obligations relating to presenting certain
business opportunities to multiple entities. In addition, conflicts of interest
may arise in connection with evaluations of a particular business opportunity by
the Board of Directors with respect to the foregoing criteria. There can be no
assurance that any of the foregoing conflicts will be resolved in favor of the
Company. See "Proposed Business".
ACTUAL AND POTENTIAL CONFLICTS OF INTEREST. The Company's officers and directors
may engage in other business activities similar and dissimilar to those engaged
in by the Company. To the extent that such officers and directors engage in such
other activities, they will have possible conflicts of interest in diverting
opportunities to other companies, entities or persons with which they are or may
be associated or have an interest, rather than direct such opportunities to the
Company. Such potential conflicts of interest include, among other things, the
time, effort and corporate opportunity involved in their participation in other
business activities. The Company may be adversely affected should these
individuals choose to place their other business interests before those of the
Company.
In addition, any officer, director or shareholder of the Company or their
affiliates may receive personal financial gain, other than from the proceeds of
this blank check offering, by means of a share-for-share exchange transaction or
other means, including: (i) payment of consulting fees: (ii) payment of
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finder's fees; (iii) sales of affiliates' stock; (iv) payment of salaries; or
(v) other methods of payment by which affiliates may receive cash, stock or
other assets.
The potential exists that finder's fees or other merger or acquisition-related
compensation may be paid to the Company's officers, directors, promoters or
their affiliates or associates from revenues or other funds of an acquisition or
merger candidate, or by the issuance of debt or equity of such entity; the
possibility, therefore, exists that such fees may become a factor in
negotiations and present conflicts of interest.
The Company has not and does not presently intend to impose any limits or other
restrictions on the amount or circumstances under which any of such transactions
may occur, except that none of the Company's officers, directors or their
affiliates shall receive any personal financial gain from the proceeds of this
blank check offering except for reimbursement for out-of-pocket offering
expenses. See "Use of Proceeds". No assurance can be given that any of such
potential conflicts of interest will be resolved in favor of the Company or will
otherwise not cause the Company to lose potential opportunities.
PROHIBITION TO SELL OR OFFER TO SELL SHARES IN ESCROW ACCOUNT. According to Rule
15g-8 as promulgated by the S.E.C. under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), it shall be unlawful for any person to sell or
offer to sell Shares (or any interest in or related to the Shares) held in the
Rule 419 escrow account other than pursuant to a qualified domestic relations
order or by will or the laws of descent and distribution. As a result, contracts
for sale to be satisfied by delivery of the Deposited Securities (e.g.,
contracts for sale on a when, as, and if issued basis) are prohibited.
RECENTLY ORGANIZED COMPANY; LIMITED RESOURCES; NO PRESENT SOURCE OF REVENUES;
REPORT OF INDEPENDENT AUDITORS. The Company, which was incorporated on January
26, 1998 and is in the development stage, has not as yet attempted to seek a
Business Combination. Management has no prior experience with respect to a
transaction involving the proposed combination of entities, including a blank
check company. None of the Company's officers has had prior experience relating
to the identification, evaluation and acquisition of a merger or acquisition
target (a "Target"). See "Management." Thus the Company has no experience in
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consummating a Business Combination and, accordingly, there is only a limited
basis upon which to evaluate the Company's prospects for achieving its intended
business objectives. To date, the Company's efforts have been limited primarily
to organizational activities. The Company has limited resources and has had no
revenues to date. In addition, the Company will not achieve any revenues (other
than interest accruing on the proceeds of this offering) until the consummation
of a Business Combination, if at all. Moreover, there can be no assurance that
any Target, at the time of the Company's consummation of a Business Combination,
or at any time thereafter, will derive any material revenues from its operations
or operate on a profitable basis. The Company's independent auditors' report on
the Company's financial statements includes an explanatory paragraph stating
that the Company's ability to commence operations is dependent on the sale of
the Shares or other fund raising, which raises substantial doubt about its
ability to continue as a going concern. See "Proposed Business" and the
Financial Statements of the Company included elsewhere in this Prospectus.
DISCRETIONARY USE OF PROCEEDS; "BLANK CHECK" OFFERING. As a result of
management's broad discretion with respect to the specific application of the
net proceeds of this offering, this offering can be characterized as a "blank
check" offering. Although substantially all of the net proceeds of this offering
are intended generally to be applied toward effecting a Business Combination,
such proceeds are not otherwise being designated for any more specific purposes.
Accordingly, prospective investors will invest in the Company without an
opportunity to evaluate the specific merits or risks of any one or more Business
Combinations. There can be no assurance that determinations ultimately made by
the Company relating to the specific allocation of the net proceeds of this
offering will permit the Company to achieve its business objectives. See
"Proposed Business."
ABSENCE OF SUBSTANTIVE DISCLOSURE RELATING TO PROSPECTIVE BUSINESS COMBINATIONS;
INVESTMENT IN THE COMPANY VERSUS INVESTMENT IN A TARGET. Blank check offerings
are inherently characterized by an absence of substantive disclosure (other than
general descriptions relating to the intended application of the net proceeds of
the offering). The Company has not yet identified a Target. Accordingly,
investors in this offering will have virtually no substantive information
available for advance consideration of any specific Business Combination. The
absence of disclosure can be contrasted with the disclosure which would be made
if the Company had already identified a Target as a Business Combination
candidate or if the Target were to effect an offering of its securities directly
to the public. There can be no assurance that an investment in the securities
offered hereby will not ultimately prove to be less favorable to investors in
this offering than direct investment, if such opportunity were available, in a
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Target. See "Proposed Business."
TARGET DESIRE TO ACHIEVE PUBLIC TRADING STATUS THROUGH BUSINESS COMBINATION.
While a prospective Target may deem a Business Combination with the Company
desirable for diverse reasons, a Business Combination may involve the
acquisition, reorganization, merger, or some other form of business combination
with an entity which does not need substantial additional capital but which
desires to establish a public trading market for its shares, while avoiding what
it may deem to be undesirable consequences of undertaking a public offering
itself, such as time delays, significant expense, loss of voting control and
compliance with various federal and securities laws enacted for the protection
of investors. See the Risk Factors below entitled "Unspecified Industry;
Unascertainable Risks" and "No Assurance of Public Market; Arbitrary
Determination of Offering Price."
NO PRESENT IDENTIFICATION OF INDUSTRY AND/OR ACQUISITION PROSPECTS;
UNAVAILABILITY OF CONVENTIONAL PRIVATE OR PUBLIC OFFERINGS OF SECURITIES OR
CONVENTIONAL BANK FINANCING. Management has not identified any specific business
or even any specific industry which it intends to enter through the purchase of
a business. Neither the Company nor any of its affiliates has any present plan,
proposals, arrangements or understandings with respect to any possible Business
Combination. None of the Company's officers, directors, promoters, their
affiliates or associates has had any preliminary contact or discussions with any
representative of any entity regarding the possibility of an acquisition or
merger transaction as contemplated hereby. While management will have sole
discretion to determine which businesses, if any, are intended to be acquired,
as well as the intended terms of any acquisition, investors in this blank check
offering will have the opportunity to evaluate the merits and risks of an
acquisition and be entitled to make an election as to whether they desire to
remain investors in the Company. An acquisition or merger will only be
consummated if investors having contributed 80% of the maximum offering proceeds
reconfirm their investment in the Company. Management has no present intention
of (a) considering a Business Combination with entities owned or controlled by
affiliates of the Company; (b) creating subsidiary entities with a view to
distributing their securities to the shareholders of the Company; or (c) selling
any securities owned or controlled by affiliates of the Company in connection
with any Business Combination transaction without affording all shareholders a
similar opportunity. The success or failure of an investment in the Shares will
depend entirely upon the ability of management to acquire successful businesses
and to continue to operate them and obtain additional capital to support the
working capital requirements of these businesses after their acquisition, of
which no assurances are given. See "Use of Proceeds" and "Proposed Business."
Investors should recognize that an investment herein may prove substantially
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less favorable than a similar investment made directly in an entity which has a
current business or stated business prospects. Further, it may be expected that
any Target will present such a level of risk that conventional private or public
offerings of securities or conventional bank financing will not be available.
UNSPECIFIED INDUSTRY; UNASCERTAINABLE RISKS. To date, the Company has not
selected any particular industry in which to concentrate its Business
Combination efforts. Accordingly, there is no current basis for prospective
investors in this offering to evaluate the possible merits or risks of any
Target or the particular industry in which the Company may ultimately operate.
However, in connection with seeking shareholder approval of a Business
Combination, the Company intends to furnish its shareholders with proxy
solicitation materials prepared in accordance with the Exchange Act, which,
among other matters, will include a description of the operations of the Target
candidate and audited financial statements thereof. To the extent the Company
effects a Business Combination with a financially unstable company or an entity
in its early stage of development or growth (including entities without
established records of sales or earnings), the Company will become subject to
numerous risks inherent in the business operations of financially unstable and
early stage or potential emerging growth companies. In addition, to the extent
that the Company effects a Business Combination with an entity in an industry
characterized by a high level of risk, the Company will become subject to the
currently unascertainable risk of that industry. An extremely high level of risk
frequently characterizes certain industries which experience rapid growth.
Although management will endeavor to evaluate the risks inherent in a particular
Target or industry, there can be no assurance that the Company will properly
ascertain or assess all such significant risk factors. See "Proposed Business."
PROBABLE LACK OF BUSINESS DIVERSIFICATION. While the Company may, under certain
circumstances, seek to effect Business Combinations with more than one Target,
it is likely that the Company will have the ability to effect only a single
Business Combination. Accordingly, the prospects for the Company's success will
be entirely dependent upon the future performance of a single business. Unlike
certain entities which have the resources to consummate several Business
Combinations of entities operating in multiple industries or multiple areas of a
single industry, it is highly likely that the Company will not have the
resources to diversify its operations or benefit from the possible spreading of
risks or offsetting of losses. In addition, by consummating a Business
Combination with only a single entity, the prospects for the Company's success
may become dependent upon the development or market acceptance of a single or
limited number of products, processes or services. Consequently, there can be no
assurance that the Target will prove to be commercially viable. See
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"Proposed Business."
DEPENDENCE UPON KEY PERSONNEL. The ability of the Company successfully to effect
a Business Combination will be largely dependent upon the efforts of John M.
O'Keefe and Vicki J. Lavache, the Company's President and Secretary/Treasurer,
respectively. It is anticipated that Messrs. O'Keefe and Lavache are the only
persons whose activities will be material to the operations of the Company
pending the Company's identification and consummation of a Business Combination.
The Company has not entered into employment agreements with any officer. It is
anticipated that each of Messrs. O'Keefe and Lavache will devote approximately
50% of his time to the affairs of the Company. The Company has not obtained "key
person" life insurance on the lives of either of the officers. The loss of the
services of such key personnel before suitable replacements are obtained could
have a material adverse effect on the Company's capacity successfully to achieve
its business objectives. Neither of the Company's key personnel is required to
commit his full time to the affairs of the Company and, accordingly, such
personnel may have conflicts of interest in allocating management time among
various business activities. In addition, the success of the Company may be
dependent upon its ability to retain additional personnel with specific
knowledge or skills necessary to assist the Company in evaluating a potential
Business Combination. There can be no assurance than the Company will be able to
retain such necessary additional personnel. See "Proposed Business" and
"Management."
LACK OF EXPERIENCE OF MANAGEMENT. Messrs. O'Keefe and Lavache have no prior
experience with respect to completion of a Business Combination and limited
experience with "blank check" companies. See "Management: Current Blank Check
Companies."
PROBABLE CHANGE IN CONTROL AND MANAGEMENT. Although the Company has no present
plans, understandings or arrangements respecting any Business Combination, the
successful completion of such a transaction will, in all likelihood, result in a
change in control of the Company. This could result from the issuance of a large
percentage of the Company's authorized but unissued securities or the sale by
the present shareholders of all or a portion of their stock or a combination
thereof. Any change in control will, in all likelihood, also result in the
resignation or removal of the Company's present officers and directors. If there
is a change in management, no assurance can be given as to the experience or
qualifications of the persons who replace present management with respect to
either the operation of the Company's activities or the operation of the
business, assets or property acquired.
NATURE OF TRANSACTION; BENEFITS TO MANAGEMENT. In a merger or acquisition, the
Company's officers may be able to negotiate the sale of their Shares at a
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premium price. After the merger, the investors in this offering may be left with
management whose background and competence are unknown, stock worth
substantially less than the price paid, and a greatly reduced percentage of
ownership.
REIMBURSEMENT OF EXPENSES TO OFFICERS AND DIRECTORS. No funds will be disbursed
from the escrow account for the reimbursement of expenses incurred by the
Company's officers and directors on behalf of the Company. Notwithstanding the
foregoing, there is no limit on the amount of such reimbursable expenses, and
there will be no review of the reasonableness of such expenses by anyone other
than the Company's Board of Directors, both of the members of which are Company
officers. See "Use of Proceeds", "Proposed Business" and "Management".
LACK OF BUSINESS OPPORTUNITIES. Although the Company will attempt to locate
potential Targets, there is no assurance that any business or assets worthy of
even preliminary investigation will come to the Company's attention, or that any
significant amount of funds will be expended in the actual acquisition of
assets.
RISK OF MINIMUM OFFERING. The Company will only raise $50,000 in the event only
the minimum offering amount is sold. Under this condition, in view of the
limited funds available, the attractiveness of the Company to potential Targets
would be materially diminished. In the event that less than the net proceeds
from the maximum offering are raised, the Company's plans may be materially and
adversely affected in that the Company may find it even more difficult, if not
impossible, to realize its goals. Furthermore there can be no assurance that the
minimum offering amount will be sold.
MANAGEMENT PARTICIPATION IN THIS OFFERING. The Company will not sell shares to
its current officers or directors insofar as none of the current officers or
directors of the Company is a New York resident.
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LOSS FROM ANALYSIS AND INVESTIGATION OF BUSINESS PROSPECTS. The Company will be
required, in all probability, to expend funds in the preliminary investigation
or examination of assets, businesses or properties, whether or not a Business
Combination occurs. To the extent management determines that a potential Target
has little or no value, the monies spent on such investigation will be a total
loss. In no event will the funds placed in the escrow account, including any
interest earned thereon, be used for expenses associated with the evaluation and
structuring of a contemplated Business Combination.
LIMITED ABILITY TO EVALUATE TARGET MANAGEMENT. While the Company's ability
successfully to effect a Business Combination will be dependent upon its key
personnel, the future role of such personnel in the Target cannot presently be
stated with any certainty. While it is possible that either of the Company's key
personnel will remain associated in some capacities with the Company following a
Business Combination, it is likely that such key personnel will not be
associated with the Company subsequent thereto except as shareholders. Moreover,
it is likely that such personnel will have little if any experience or knowledge
relating to the operations of the particular Target. Furthermore, although the
Company intends closely to scrutinize the management of a prospective Target in
connection with evaluating the desirability of effecting a Business Combination,
there can be no assurance that the Company's assessment of such management will
prove to be correct, especially in light of the inexperience of current key
personnel of the Company in evaluating businesses. In addition, there can be no
assurance that future management will have the necessary skills, qualifications
or abilities to manage a public company. The Company may also seek to recruit
additional managers to supplement the incumbent management of the Target. There
can be no assurance that the Company will have the ability to recruit such
additional managers, or that such additional managers will have the requisite
skills, knowledge or experience necessary to enhance the incumbent management.
See "Proposed Business".
COMPETITION. The Company expects to encounter intense competition from other
entities having a business objective similar to that of the Company. Many of
these entities are well established and have extensive experience in connection
with identifying and effecting Business Combinations directly or through
affiliates. Many of these competitors possess greater financial, technical,
personnel and other resources than the Company. There can be no assurance that
the Company will have the ability to compete successfully. The Company's
financial resources will be relatively limited when contrasted with those of
many of its competitors. This inherent competitive limitation may compel the
Company to select certain less attractive Targets. See "Proposed Business".
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UNCERTAINTY OF COMPETITIVE ENVIRONMENT OF TARGET. In the event that the Company
succeeds in effecting a Business Combination, the Company will, in all
likelihood, become subject to intense competition from competitors of the
Target. In particular, certain industries which experience rapid growth
frequently attract an increasingly larger number of competitors, including
competitors with increasingly greater financial, marketing, technical and other
resources than the initial competitors in the industry. The degree of
competition characterizing the industry of any prospective Target cannot
presently be ascertained. There can be no assurance that, subsequent to a
Business Combination, the Company will have the resources to compete
effectively, especially to the extent that the Target is in a high growth
industry. See "Proposed Business".
POSSIBLE NEED FOR ADDITIONAL FINANCING. The Company has had no revenues to date
and is entirely dependent upon the proceeds of this offering to commence
operations relating to selection of a prospective Target. The Company will not
receive any revenues until the consummation of a Business Combination. Although
the Company believes that the proceeds of this offering (provided that the
maximum offering amount is sold) will be sufficient to effect a Business
Combination, inasmuch as the Company has not yet identified any prospective
Target candidates, the Company cannot ascertain with any degree of certainty the
capital requirements for any particular transaction. In the event that the net
proceeds of this offering prove to be insufficient for purposes of effecting a
Business Combination (because of the size of the Business Combination or the
depletion of 10% of the portion of the net proceeds available to the Company for
the search for a Target), the Company will be required to seek additional
financing. In the event no Target is identified or no Business Combination has
been consummated, and all of the net proceeds other than the Deposited Funds
have been expended, the Company currently has no plans or arrangements with
respect to additional financing which may be required to continue the operations
of the Company. In such event, Messrs. O'Keefe and Lavache may consider lending
the Company funds for operations. Although there are no plans or arrangements
with respect to such loans, Messrs. O'Keefe and Lavache do not currently
anticipate such loans, if any, will be made on terms other than for market
interest rates. There can be no assurance that Messrs. O'Keefe and Lavache will
make such loans to the Company, or if made that such will be made on terms
favorable to the Company. The Deposited Funds, including any interest earned
thereon, however, will not be used for expenses associated with the evaluation
and structuring of a contemplated Business Combination. There can be no
assurance that such financing would be available on acceptable terms, if at all.
To the extent that such additional financing proves to be unavailable when
needed to consummate a particular Business Combination, the Company would, in
all likelihood, be compelled to restructure the transaction or abandon that
particular Business Combination and seek an alternative Target candidate. See
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See "Proposed Business".
POSSIBLE NEED FOR ADDITIONAL FINANCING FOR TARGET. In the event of the
consummation of a Business Combination, the Company cannot ascertain with any
degree of certainty the capital requirements for any particular Target inasmuch
as the Company has not yet identified any prospective Target candidates. To the
extent the Business Combination results in the Target requiring additional
financing, such additional financing (which, among other forms, could be derived
from the public or private offering of securities or from conventional bank
financing), may not be available, as a result of, among other things, the Target
not having sufficient (i) credit or operating history; (ii) income stream; (iii)
profit level; (iv) asset base eligible to be collateralized; or (v) market for
its securities.
Because no specific Business Combination or industry has been targeted, it is
not possible to predict the specific reasons why conventional private or public
financing or conventional bank financing might not be available. There can be no
assurances that, in the event of consummation of a Business Combination,
sufficient financing to fund the operations or growth of the Target will be
available upon terms satisfactory to the Company, nor can there be any assurance
that financing would be available at all.
POSSIBLE USE OF DEBT FINANCING; DEBT OF A TARGET. There are currently no
limitations relating to the Company's ability to borrow funds to increase the
amount of capital available to the Company to effect a Business Combination or
otherwise finance the operations of a Target. The amount and nature of any
borrowing by the Company will depend on numerous considerations, including the
Company's capital requirements, the Company's perceived ability to meet debt
service on any such borrowing and then prevailing conditions in the financial
markets, as well as general economic conditions. There can be no assurance that
debt financing, if required or otherwise sought, would be available on terms
deemed to be commercially acceptable and in the best interests of the Company.
The inability of the Company to borrow funds required to effect or facilitate a
Business Combination, or to provide funds for an additional infusion of capital
into a Target, may have a material adverse effect on the Company's financial
condition and future prospects. Additionally, to the extent that debt funding
ultimately proves to be available, any borrowing may subject the Company to
various risks traditionally associated with incurring indebtedness, including
the risks of interest rate fluctuations and insufficiency of cash flow to pay
principal and interest. Furthermore, a Target may have already incurred debt
financing and, therefore, all the risks inherent thereto. See "Use of Proceeds"
and "Proposed Business."
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AUTHORIZATION OF ADDITIONAL SECURITIES. The Company's Articles of Incorporation
authorize the issuance of 25,000,000 shares of Common Stock and 5,000,000 shares
of preferred stock, par value $.01 per share. Upon completion of this offering,
assuming all of the Shares offered hereby are sold, there will be 21,000,000
authorized but unissued shares of Common Stock available for issuance. Although
the Company has no commitments as of the date of this prospectus to issue any
shares of Common Stock other than as described in this prospectus, the Company
will, in all likelihood, issue a substantial number of additional Shares in
connection with a Business Combination. To the extent that additional shares of
Common Stock are issued, dilution of the interests of the Company's then current
shareholders will occur. Additionally, if a substantial number of shares of
Common Stock are issued in connection with a Business Combination, a change in
control of the Company may occur which may impact, among other things, the
utilization of net operating losses, if any. Furthermore, the issuance of a
substantial number of shares of Common Stock may adversely affect prevailing
market prices, if any, for the Common Stock, and could impair the Company's
ability to raise additional capital through the sale of equity securities. See
"Proposed Business" and "Description of Securities."
ACQUISITION DILUTION AND CONTROL. The Company plans to acquire another company
or companies through the issuance of Shares. See "Proposed Business". Any such
acquisition effected by the Company will result in the issuance of additional
shares of Common Stock which will result in substantial dilution in the
percentage of the Company's Common Stock then held by the Company's
shareholders, including investors in this offering. Moreover, the Shares issued
in any such acquisition or merger transaction may be valued on an arbitrary or
non arms-length basis by management of the Company. In addition, a merger will,
in all likelihood, involve the appointment of additional members to the
Company's Board of Directors. Any such acquisition or merger may not legally
require shareholder approval, however, the Company plans to hold a shareholders'
meeting to vote on any acquisition or merger and provide a proxy statement to
shareholders at least 10 days prior thereto. Such transaction will likely be
structured so that the owners of a Target being acquired will be issued an
amount of the Company's Shares sufficient to provide them an 80% equity
ownership interest in the Company.
INVESTMENT COMPANY ACT CONSIDERATIONS. The regulatory scope of the Investment
Company Act of 1940, as amended (the "Investment Company Act"), which was
enacted principally for the purpose of regulating vehicles for pooled
investments in securities, extends generally to companies engaged primarily in
the business of investing, reinvesting, owning, holding or trading in
securities. The Investment Company Act may, however, also be deemed to be
applicable to an entity which does not intend to be characterized as an
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investment company but which, nevertheless, engages in activities which may be
deemed to be within the definitional scope of certain provisions of the
Investment Company Act. The Company believes that its anticipated activities,
which will involve acquiring control of a Target, will not subject the Company
to regulation under the Investment Company Act. Nevertheless, there can be no
assurance that the Company will not be deemed to be an investment company,
especially during the period prior to a Business Combination. In the event the
Company is deemed to be an investment company, the Company may become subject to
certain restrictions relating to the Company's activities, including
restrictions on the nature of its investments and the issuance of securities. In
addition, the Investment Company Act imposes certain requirements on entities
deemed to be within its regulatory scope, including registration as an
investment company, adoption of a specific form of corporate structure and
compliance with certain reporting, recordkeeping, voting, proxy, disclosure and
other rules and regulations. In the event of characterization of the Company as
an investment company, the failure by the Company to satisfy regulatory
requirements, whether on a timely basis or at all, would, under certain
circumstances, have a material adverse effect on the Company. See "Proposed
Business."
TAX CONSIDERATIONS. As a general rule, federal and state tax laws and
regulations have a significant impact upon the structuring of Business
Combinations. The Company will evaluate the possible tax consequences of any
prospective Business Combination and will endeavor to structure its Business
Combination so as to achieve the most favorable tax treatment to the Company,
the Target and their respective shareholders. There can be no assurance,
however, that the Internal Revenue Service (the "IRS") or appropriate state tax
authorities will ultimately assent to the Company's tax treatment of a
consummated Business Combination. To the extent the IRS or state tax authorities
ultimately prevail in recharacterizing the tax treatment of a Business
Combination, there may be adverse tax consequences to the Company, the Target
and their respective shareholders. See "Proposed Business".
POSSIBLE PAYMENT OF FINDER'S FEES. In the event that a person or entity assists
the Company in connection with the introduction to a prospective Target with
which a Business Combination is ultimately consummated, such person or entity
may be entitled to receive a finder's fee in consideration for such
introduction. Such person may be required to be registered as, among other
things, an agent or broker-dealer under the laws of certain jurisdictions. The
Company is not presently obligated to pay any finder's fees. The officers and
directors of the Company will not be entitled to receive a finder's fee in the
event they originate a Business Combination. See "Proposed Business" and
"Management".
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CONTROL BY PRESENT SHAREHOLDERS. Upon consummation of the offering, if the
maximum number of Shares offered is sold, the present shareholders (who are also
the present officers and directors) of the Company, will collectively own 75% of
the then issued and outstanding Shares. In the election of directors,
shareholders are not entitled to accumulate their votes for nominees.
Accordingly, the current shareholders will be able to elect all of the Company's
directors of the Company. See "Principal Shareholders," "Certain Transactions"
and "Description of Securities."
NO DIVIDENDS. The Company has not paid any dividends on its Common Stock to date
and does not presently intend to pay cash dividends prior to the consummation of
a Business Combination. The payment of dividends after any such Business
Combination, if any, will be contingent upon the Company's revenues and
earnings, if any, capital requirements and general financial condition
subsequent to consummation of a Business Combination. The payment of any
dividends subsequent to a Business Combination will be within the discretion of
the Company's then Board of Directors. It is the present intention of the Board
of Directors to retain all earnings, if any, for use in the Company's business
operations and, accordingly, the Board does not anticipate paying any cash
dividends in the foreseeable future. See "Description of Securities".
NO COMMITMENT TO PURCHASE SHARES. No commitment exists by anyone to purchase any
of the Shares offered. Consequently, no assurance can be given that any Shares
will be sold. This offering is being made on a "best efforts" 200,000 Share
minimum, 1,000,000 Share maximum basis. In the event that the minimum of 200,000
Shares is not sold by June 30, 2000, all proceeds raised will be returned
promptly to subscribers in full with interest. Subscribers will not be entitled
to a return of funds from the escrow account during the offering period. See
"The Offering".
NO ASSURANCE OF PUBLIC MARKET; ARBITRARY DETERMINATION OF OFFERING PRICE. Prior
to this offering, there has been no public trading market for the Shares. The
initial public offering price of the Shares has been arbitrarily selected by the
Company and does not bear any relationship to such established valuation
criteria as assets, book value or prospective earnings. There can be no
assurance that a regular trading market will develop for the Shares after this
offering or that, if developed, that any such market will be sustained. The
Shares will likely appear in what is customarily known as the "pink sheets" or
on the Bulletin Board, thus limiting their marketability. So long as the Company
27
<PAGE>
has net tangible assets of $2,000,000 or less, transactions in the Shares shall
be subject to Rule 15c2-6 promulgated under the Exchange Act. Under such rule,
broker-dealers who recommend such securities to persons other than established
customers and accredited investors (generally institutions with assets in excess
of $5,000,000 or individuals with net worth in excess of $1,000,000 or annual
income exceeding $200,000 or $300,000 jointly with spouse) must make a special
written suitability determination and receive a written agreement to a
transaction prior to sale. Transactions are exempt from this rule if the market
price of the Shares is at least $5.00. If the Shares become subject to Rule
15c2-6, broker-dealers may find it difficult to effectuate customer transactions
and/or trading activity in the Shares, thus, the market price, if any, may be
depressed, and an investor may find it more difficult to dispose of the Shares.
As of the date hereof, the Company has had no discussions and there are no
understandings with any firm regarding the participation of such firm as a
market maker in the Shares. See "The Offering."
NO PRESENT PLANS FOR THE DEVELOPMENT OF A TRADING MARKET. There are currently no
plans, proposals, arrangements or understandings with any person with regard to
the development of a trading market in the Shares.
IMMEDIATE SUBSTANTIAL DILUTION; DISPARITY OF CONSIDERATION. Assuming all Shares
offered are sold, investors in this offering will incur an immediate and
substantial dilution of approximately $.194 per Share between the pro forma net
tangible book value per Share after the offering of $.056 and the public
offering price of $.25 per share. The existing shareholders of the Company
acquired their Shares at a nominal price and, accordingly, new investors will
bear virtually all of the risks inherent in an investment in the Company. See
"Dilution."
SHARES ELIGIBLE FOR FUTURE SALE. All 3,000,000 Shares of the Company's Common
Stock outstanding are "restricted securities" and under certain circumstances
may in the future be sold in compliance with Rule 144 promulgated under the
Securities Act. Future sales of those shares under Rule 144 could depress the
market price of the Shares in any market which may develop. The Company believes
that the current outstanding Shares became eligible for sale pursuant to Rule
144 on January 26, 2000. However, the S.E.C. staff has expressed the opinion to
N.A.S.D. Regulation, Inc. that securities issued by "blank check" companies to
promoters, affiliates or their transferees cannot be resold under Rule 144.
In general, under Rule 144 as currently in effect, subject to the satisfaction
of certain other conditions, a person, including an affiliate of the Company (or
persons whose shares are aggregated) who has owned restricted shares
beneficially for at least one year is entitled to sell, within any three-month
period, a number of shares that does not exceed the greater of 1% of the
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<PAGE>
total number of outstanding shares of the same class or, if the shares are
quoted on NASDAQ, the average weekly trading volume during the four calendar
weeks preceding the sale. A person who has not been an affiliate of the Company
for at least three months immediately preceding the sale and who has
beneficially owned shares for at least two years is entitled to sell such shares
under Rule 144 without regard to any of the limitations described above. No
prediction can be made as to the effect, if any, that sales of restricted shares
or the availability of such shares for sale will have on the market prices
prevailing from time to time. Nevertheless, the possibility that substantial
amounts of restricted shares may be sold in the public market may adversely
affect prevailing market prices for the Shares and could impair the Company's
ability to raise capital through the sale of equity securities. See "Principal
Shareholders" and "Description of Securities."
REGULATIONS CONCERNING "BLANK CHECK" ISSUERS. The ability to register or qualify
for sale the Shares for both initial sale and secondary trading is limited
because a number of states have enacted regulations pursuant to their securities
or "blue sky" laws restricting or, in some instances, prohibiting, the sale of
securities of "blank check" issuers, such as the Company, within that state. In
addition, many states, while not specifically prohibiting or restricting "blank
check" companies, may not register the Shares for sale in their states. Because
of such regulations and other restrictions, the Company's selling efforts, and
any secondary market which may develop, may only be conducted in those
jurisdictions where an applicable exemption is available or a blue sky
application has been filed and accepted or where the Shares have been
registered.
The Company has not applied to register the Shares in any state other than New
York. The Company may seek to obtain an exemption from registration to offer the
Shares in various states and may apply to register the Shares in some states in
addition to New York. Purchasers of the Shares in this offering must be
residents of such jurisdictions which either provide an applicable exemption or
in which the Shares are registered. In order to prevent resale transactions in
violation of states' securities laws, public shareholders may only engage in
resale transactions in the Shares in such jurisdictions in which an applicable
exemption is available or a registration application has been filed and
accepted. As a matter of notice to the holders thereof, the Common Stock
certificates shall contain information with respect to resale of the Shares.
Further, the Company will advise market makers in the Shares, if any, of such
restriction on resale. Such restriction on resales may limit the ability of
investors to resell the Shares purchased in this offering. The Company shall
amend this prospectus for the purpose of disclosing the several states other
than New York, if any, in which the Company's shares are registered.
Several states may permit secondary market sales of the Shares (i) once or after
29
<PAGE>
certain financial and other information with respect to the Company is published
in a recognized securities manual such as Standard & Poor's Corporation Records,
(ii) after a certain period has elapsed from the date hereof, or (iii) pursuant
to exemptions applicable to certain investors. However, because the Company is a
"blank check" company, it may not be able to be listed in a recognized
securities manual until after the consummation of the first Business
Combination.
USE OF PROCEEDS
Because management has no specific business contemplated for the Company, it is
unable to indicate precisely categories for the use of proceeds from this blank
check offering. However, the following table sets forth management's estimate as
to how the proceeds will likely be allocated:
Minimum Maximum
Gross Gross
Proceeds Proceeds
DESCRIPTION Raised Raised(l)
Working capital available for
operations and other business
endeavors(2) $44,000 $224,000
Offering expenses(3) $ 1,000 $ 1,000
Underwriting commissions $ 5,000 $ 25,000
======= ========
TOTAL $50,000 $250,000
- ----------------------------
(1)The Company intends to utilize the proceeds from this blank check offering in
the priority set forth in this column whether or not such gross proceeds or a
lesser amount are raised. No assurances are given that the Company will sell any
Shares.
(2)The working capital (i.e., monies to be used in connection with a potential
acquisition, including but not limited to due diligence, travel and related
out-of-pocket expenses, and consulting fees, if any) that will be available
should be considered to be uncommitted because the Company is not presently
planning to invest in any specific business or property, and the Company has no
understanding, arrangement or contractual commitment to participate in, or
acquire, any business or property. Such funds, however, may be used in
connection with the Company's acquisition of a business or property, including
the costs of such acquisition. Substantial funds could be expended in connection
with preparing for an acquisition that is not consummated. Working capital also
will be used to pay other costs of the Company's operations, including legal
fees and costs incurred in filing periodic reports under the federal securities
laws. No portion of the proceeds raised hereby will be paid to officers,
directors and promoters and their affiliates or associates, directly or
indirectly, as consultants' fees, advisors' fees, officers' salaries, directors'
fees, finders' fees for acquisitions, purchase of Shares or other payments, in
accordance with an informal understanding among management. Management is not
aware of any circumstances under which such policy may be changed. Working
capital also may be used to obtain the services of independent outside
consultants to evaluate
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<PAGE>
prospective acquisitions for the Company. If the Company uses outside
consultants, it will compensate such consultants at competitive rates. The
Company is not presently under any agreement or understanding to use the
services of any outside consultant for such purposes. Indeed, the Company may
choose to enter into acquisitions or other business endeavors without seeking
such consulting services.
(3)Includes legal, accounting, printing and transfer agent fees, and other
miscellaneous expenses not paid by the Company.
- -----------------------------
The Company received a total of $62,807 in capital contributions from its
founders. See "Certain Transactions." This amount was used as seed money to
finance the expenses of this blank check offering, including legal fees, audit
and accounting fees and printing fees. Such fees are not impacted by the success
of the full amount of the offering being sold. The Company estimates that it
will have available as working capital for acquisitions and other business
endeavors an aggregate of approximately $224,000, assuming all of the Shares
offered hereby are sold and underwriting commissions and offering expense are
paid (an aggregate sum of $26,000). The Company estimates that it will have
available as working capital approximately $44,000 assuming the minimum number
of Shares offered hereby is sold and underwriting commissions and offering
expenses are paid (an aggregate sum of $6000).
The Company presently anticipates that it will be able to locate and acquire
suitable business interests or properties utilizing the net proceeds of this
blank check offering, assuming all or substantially all of the net proceeds from
the maximum offering are raised. In the event that substantially less than the
net proceeds from the maximum offering are raised, the Company's plans may be
materially and adversely affected in that the Company may find it even more
difficult, if not impossible, to realize its goals. In any event, if the Company
eventually determines that a business opportunity requires additional funds,
regardless of the level of net proceeds raised, the Company may seek such
additional financing through loans, additional equity issuances or through other
financing arrangements. No such financing arrangements presently exist, and no
assurances can be given that such additional financing will be available, or, if
available, on terms acceptable to the Company. Investors buying Shares in this
blank check offering will not, unless otherwise required by law, participate in
the determination of whether to obtain additional financing or as to the terms
of any such financing. See "Proposed Business".
The net proceeds of this blank check offering may be used, in management's
discretion, to make loans (other than to officers and other affiliates); no
restrictions exist, other than as set forth above, as to whom loans may be made.
Further, no criteria have as yet been established for determining whether or not
to make loans, whether any such loans will be secured or limitations as to
amount.
The Company has not and does not presently intend to impose any limits or other
restrictions on the amount or circumstances under which any of such transactions
may occur, except that none of the Company's officers, directors or their
affiliates shall receive any personal financial gain from the proceeds of this
blank check offering except for reimbursement of out-of-pocket offering
31
<PAGE>
expenses. No assurance can be given that any of such potential conflicts of
interest will be resolved in favor of the Company or will otherwise not cause
the Company to lose potential opportunities.
None of the proceeds raised hereby will be used to make any loans to the
Company's promoters, management or their affiliates or associates of any of the
Company's shareholders. Further, the Company may not borrow funds and use the
proceeds therefrom to make payments to the Company's promoters, management or
their affiliates or associates.
It is contemplated that the Deposited Funds will be invested in one of the
following, pending the consummation of any acquisition effected in accordance
with Rule 419:
(a) an obligation that constitutes a "deposit," as that term is
defined in Section 3(1) of the Federal Deposit Insurance Act [12 U.S.C. 1813(1)
(1991)];
(b) securities of an open-end investment company registered under the
Investment Company Act that holds itself out as a money market fund meeting the
conditions of paragraph (c)(2), (c)(3) and (c)(4) of Rule 2a-7 (17 CFR 270.2a-7)
under the Investment Company Act; or
(c) securities that are direct obligations of, or obligations
guaranteed as to principal or interest by, the United States.
The Company believes that the proceeds from this blank check offering will be
sufficient to satisfy the Company's cash needs through consummation of a
Business Combination provided that the maximum offering amount is sold. The
Company may be deemed an "investment company" should the net proceeds of this
blank check offering remain uninvested for more than one year. Being deemed an
investment company without registration under the Investment Company Act can
result in civil liability and criminal penalties to controlling persons in
certain instances, as well as civil liabilities and unenforceability of
contracts with regard to the Company. In the event the Company has not completed
an acquisition of a business within one year of the closing of this blank check
offering, the Company will take such actions as it deems necessary to avoid
being classified as an "investment company." Such measures may include a
decision, if deemed necessary, to seek shareholder approval to liquidate the
Company. If there is such a liquidation, all investors in this blank check
offering will receive the liquidated assets comprised of the Deposited Funds on
a pro-rata basis.
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<PAGE>
DILUTION
The difference between the public offering price per Share and the pro forma net
tangible book value per Share after this offering constitutes the dilution to
investors in this offering. Net tangible book value per Share is determined by
dividing the net tangible book value of the Company (total tangible assets less
total liabilities) by the number of outstanding Shares.
At January 31, 2000, the net tangible book value of the Company was $61,622 or
$.021 per Share. After giving effect to the sale of 1,000,000 Shares offered
hereby and the application of the estimated net proceeds therefrom, the pro
forma net tangible book value of the Company at January 31, 2000 would have been
$223,622 or $.056 per Share, representing an immediate increase in net tangible
book value of $162,000 or $.038 per Share to existing shareholders and an
immediate dilution of $.194 per Share to investors in this offering. There are
currently no plans, proposals, arrangements or understandings with respect to
the sale of additional securities to any persons for the period commencing with
the closing of this offering and the Company's identification of a Business
Combination. See "The Offering."
The following table illustrates the foregoing information with respect to
dilution to new investors on a per-Share basis after the offering assumes all
Shares offered are sold:
Public offering price per Share $ .25
Net tangible book value per
Share, before this offering $ .021
Increase per Share attributable
to investments by new investors $ .035
Net tangible book value per Share,
after this offering $ .056
Dilution to new investors per Share $ .194
The following table sets forth, as of the date of this prospectus, with respect
to existing shareholders and new investors, a comparison of the number of Shares
acquired, their percentage ownership of such Shares, the total consideration
paid, the percentage of total consideration paid and the average price per
Share:
PERCENTAGE CONSIDERATION PERCENTAGE OF PRICE PER
AMOUNT OF SHARES PAID CONSIDERATION SHARE
Existing
Shareholders 3,000,000 75.0% $ 62,807.00 20.1% $.21
New Investors 1,000,000 25.0% $250,000.00 79.9% $.25
--------- ------ ----------- ------
Total 4,000,000 100.0% $312,807.00 100.0%
33
<PAGE>
LEGAL PROCEEDINGS
The Company is not a party to, nor is it aware of, any threatened litigation of
any nature.
CAPITALIZATION
The following table sets forth the capitalization of the Company as of January
31, 2000, and as adjusted to give effect to the sale of the minimum and maximum
number of Shares being offered hereby and the application of the estimated net
proceeds therefrom:
Minimum - 200,000 Shares
OUTSTANDING AS
ADJUSTED
Shareholders' equity
Preferred Stock, $.01 par value,
5,000,000 shares authorized, none
issued;
Common Stock, $.01 par $ - $ -
value, 25,000,000 shares
authorized, 3,000,000 shares issued,
3,200,000 as adjusted $ 30,000 $ 32,000
Capital in excess of par value(1) $ 44,807 $ 24,807
Deficit accumulated during
development stage $(13,185) $(13,185)
--------- ---------
Total shareholders' equity $ 61,622 $ 43,622
--------- ---------
Total capitalization $ 61,622 $ 43,622
--------- ---------
Maximum - 1,000,000 Shares
OUTSTANDING AS
ADJUSTED
Shareholders' equity
Preferred Stock, $.01 par value,
5,000,000 shares authorized,
none issued; $ - $ -
Common Stock, $.01
par value, 25,000,000 shares
authorized, 3,000,000 shares
issued, 4,000,000 as adjusted $ 30,000 $ 40,000
Capital in excess of par value(2) $ 44,807 $196,807
Deficit accumulated during
development stage $(13,185) $(13,185)
--------- --------
Total Shareholders' equity $ 61,622 $223,622
--------- --------
Total capitalization $ 61,622 $223,622
--------- --------
- ------------------------------------
(1) Net of underwriting discounts and commissions of $5,000 and expenses of
the offering estimated at $63,000.
(2) Net of underwriting discounts and commissions of $25,000 and expenses of
the offering estimated at $63,000.
34
<PAGE>
MANAGEMENT
DIRECTORS AND OFFICERS
NAME AGE TITLE
- ---- --- -----
John M. O'Keefe 57 President, Director
Vicki J. Lavache 53 Secretary/Treasurer, Director
Mr. O'Keefe serves as chief executive officer of Merit First, Inc., an
investment banking firm in Tequesta, Florida which he formed in June 1996, that
specializes in advising development stage enterprises concerning finance. Prior
to that, he served as chief financial officer of Eutro Group Holding Inc., a
publicly-traded company located in Jupiter, Florida in the medical diagnostic
business, since 1993. Earlier in his career, Mr. O'Keefe sold life and health
insurance and worked as a bank loan officer. He spent four years in the U.S.
Navy after graduating from Fordham University in New York in 1964.
Ms. Lavache serves as secretary/treasurer of Merit First. Previously, she served
as Mr. O'Keefe's assistant at Eutro Group Holding. From 1986 through 1995 she
owned and operated Executive Line Business Services Inc. in Jupiter, Florida, a
provider of secretarial, bookkeeping and other business services.
The directors of the Company hold office until the next annual meeting of the
shareholders and until their successors have been elected and qualified.
The directors receive no compensation for serving as such, other than
reimbursement of reasonable expenses incurred in attending meetings. Officers
are appointed by the Board of Directors and serve at the discretion of the
Board. Messrs. O'Keefe and Lavache, the current executive officers of the
Company, intend to devote approximately 50% of their time to the affairs of the
Company.
There are no agreements or understandings for any officer or director to resign
at the request of another person and neither of the officers or directors is
acting on behalf of or will act at the direction of any other person.
EXECUTIVE COMPENSATION
No compensation has been paid to any officers or directors since inception. The
Company does not expect to pay any direct or indirect compensation to its
officers and directors except for reimbursement for reasonable out-of-pocket
expenses. There are no understandings or arrangements otherwise relating to
compensation. Management anticipates that shares of the Company's authorized
35
<PAGE>
but unissued Common Stock may be utilized in connection with a business
acquisition or combination and not as compensation to the Company's management,
promoters, or their affiliates or associates. See "Use of Proceeds", "Management
- - Conflicts of Interest" and "Certain Transactions".
CURRENT BLANK CHECK COMPANIES; CONFLICTS OF INTEREST
The proposed business of the Company raises potential conflicts of interest
between the Company and its officers and directors. The Company has been formed
for the purpose of locating suitable business opportunities in which to
participate. Each member of management will be devoting not more than half of
his or her time to the Company and is engaged in various other business
activities. From time to time, in the course of such activities they may become
aware of investment and business opportunities and may be faced with the issue
of whether to involve the Company in such transactions.
Management of the Company is required by the Company's By-Laws to bring business
opportunities to the Company insofar as they relate to business opportunities in
which the Company has expressed an interest. Because the business of the Company
is to locate a suitable business venture, management is required to bring such
business opportunities to the Company. Potential conflicts may arise if a member
of management does not disclose such potential business opportunities.
Recently, Company management has filed registration statements under the
Securities Exchange Act of 1934 on Form 10-SB for the following four "blank
check" companies:
FILE NO./
COMPANY FILING DATE STATUS
- -------------------- ----------- -----------------------
Zenith Holding Corp. 0-29271 automatically effective
2/1/00 4/1/00(*)
Greenhold Group Inc. 0-29707 automatically effective
2/25/00 4/25/00(*)
Haven Holding Inc. 0-29977 under review
3/17/00
Liege Holding Inc. 0-29979 under review
3/17/00
- --------------------
* A registration statement filed on Form 10-SB is automatically effective 60
days after filing. On the above effective dates, the S.E.C. had no unaddressed
comments on the filings.
- --------------------
None of these companies has entered into an agreement for a Business
Combination.
It is possible that management may organize other "blank check" companies in the
future and offer their securities to the public. Management may have conflicts
in the event that another "blank check" company associated with management is
actively seeking the acquisition of properties and businesses that are identical
or similar to those that the Company may seek, should the Company complete this
offering. A conflict will not be present between the Company and another
affiliated "blank check" company if, before the Company begins seeking
acquisitions, such other "blank check" company (i) enters into an understanding,
arrangement or contractual commitment to participate in, or acquire, any
business or property, and (ii) ceases its search for additional properties or
businesses identical or similar to those the Company may seek. Conflicts also
may not be present to the extent that potential business opportunities are
appropriate for the Company but not for other affiliated "blank check" companies
(or vice versa), because of such factors as the difference in working capital
available. If, however, at any time the Company and any other entities
affiliated with management are simultaneously seeking business opportunities,
management may face the conflict of whether to submit a potential business
acquisition to the Company or to such other entities. In the event that an
opportunity is appropriate to both the Company and another affiliated
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<PAGE>
"blank check" entity, management intends first to offer such opportunity to that
entity that first closed on the sale of its securities.
The Company will not invest the proceeds of this blank check offering in any
entity affiliated with management without the approval of shareholders holding a
majority of the Company's Shares not owned by the Company's officers and
directors. Further, and in any event, the Company must comply with the
reconfirmation offering requirements of Rule 419. The Company has established no
other guidelines or procedures for resolving potential conflicts. Failure by
management to resolve conflicts of interest in favor of the Company may result
in the liability of management to the Company. Management has and will continue
to have an affirmative obligation to disclose conflicts of interest to the
Company' Board of Directors or shareholders.
PRINCIPAL SHAREHOLDERS
The following table sets forth information as of the date hereof and as adjusted
to reflect the sale of the Shares offered hereby, based on information obtained
from the persons named below, with respect to the beneficial ownership of shares
of Common Stock by (i) each person known by the Company to be the owner of more
than 5% of the outstanding shares of Common Stock, (ii) each director, and (iii)
officers and directors as a group:
AMOUNT AND APPROXIMATE
PERCENTAGE OF OUTSTANDING SHARES
BENEFICIAL BEFORE AFTER
SHAREHOLDER OWNERSHIP OFFERING OFFERING
John M. O'Keefe(1) 1,650,000 55% 41.25%
8671 SE Somerset Island Way
Jupiter, Florida 33458
Vicki J. Lavache(1) 1,350,000 45% 33.75%
1510 Seabrook Road
Jupiter, Florida 33469
Officers and directors 3,000,000 100% 75.00%
as a group (2 persons)
(1) An officer and director
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<PAGE>
Unless otherwise noted, the persons named in the table have sole voting and
investment power with respect to all Shares beneficially owned by them. Neither
person named in the table is acting as nominee for any persons or is otherwise
under the control of any person or group of persons.
Messrs. O'Keefe and Lavache may be deemed to be "promoters" and "parents" of the
Company, as such terms are defined under the federal securities laws.
DESCRIPTION OF SECURITIES
GENERAL
The Company is authorized to issue 25,000,000 shares of Common Stock, par value
$.01 per share. Prior to this offering, 3,000,000 shares of Common Stock were
outstanding, held of record by two persons. The Company is authorized to issue
5,000,000 shares of Preferred Stock, par value $.01 per share, none of which is
outstanding.
COMMON STOCK
The holders of Common Stock are entitled to one vote for each share held of
record on all matters to be voted on by shareholders. There is no cumulative
voting with respect to the election of directors, with the result that the
holders of more than 50% of the Shares voted for the election of directors can
elect all of the directors. The holders of Common Stock are entitled to receive
dividends when, as and if declared by the Board of Directors out of funds
legally available therefor. In the event of liquidation, dissolution or winding
up of the Company, the holders of Common Stock are entitled to share ratably in
all assets remaining available for distribution to them after payment of
liabilities and after provision has been made for each class of stock, if any,
having preference over the Common Stock. Holders of shares of Common Stock, as
such, have no conversion, preemptive or other subscription rights, and, except
as noted herein, there are no redemption provisions applicable to the Common
Stock. All of the outstanding shares of Common Stock are, and the Shares when
issued and paid for as set forth in this prospectus, will be, fully paid and
nonassessable.
PREFERRED STOCK
The Board of Directors of the Company is authorized (without any further action
by the shareholders) to issue Preferred Stock in one or more series and to fix
the voting rights, liquidation preferences, dividend rates, conversion rights,
redemption rights and terms, including sinking fund provisions, and certain
other rights and preferences. Satisfaction of any dividend preferences
38
<PAGE>
of outstanding Preferred Stock would reduce the amount of funds available for
the payment of dividends, if any, on the Common Stock. Also, holders of the
Preferred Stock would normally be entitled to receive a preference payment in
the event of any liquidation, dissolution or winding up of the Company before
any payment is made to holders of Common Stock. In addition, under certain
circumstances, the issuance of Preferred Stock may render more difficult or tend
to discourage a merger, tender offer or proxy contest, the assumption of control
by a holder of a large block of the Company's securities, or the removal of
incumbent management. The Board of Directors of the Company, without shareholder
approval, may issue Preferred Stock with dividend, liquidation, redemption,
voting and conversion rights which could adversely affect the holders of Common
Stock.
DIVIDENDS
The Company has not paid any dividends on its Common Stock to date and does not
presently intend to pay cash dividends prior to the consummation of a Business
Combination. The payment of cash dividends in the future, if any, will be
contingent upon the Company's revenues and earnings, if any, capital
requirements and general financial condition subsequent to consummation of a
Business Combination. The payment of any dividends subsequent to a Business
Combination will be within the discretion of the Company's then Board of
Directors. It is the present intention of the Board of Directors to retain all
earnings, if any, for use in the Company's business operations and, accordingly,
the Board does not anticipate paying any cash dividends in the foreseeable
future.
TRANSFER AGENT
After completion of this offering, the transfer agent for the Company's Common
Stock will be Florida Atlantic Stock Transfer, Inc., 7130 Nob Hill Rd., Tamarac,
Florida 33321. Currently the Company is acting as its own transfer agent.
SHARES ELIGIBLE FOR FUTURE SALE
Upon consummation of the sale of the maximum amount of Shares offered in this
offering, the Company will have 4,000,000 Shares outstanding. Of these, the
1,000,000 Shares sold in this offering will be freely tradeable without
restriction or further registration under the Securities Act, except for any
Shares purchased by an "affiliate" of the Company (in general, a person who has
a control relationship with the Company) which will be subject to the
limitations of Rule 144 promulgated by the S.E.C. under the Securities Act. All
of the remaining 3,000,000 shares are "restricted securities," as that term is
defined under Rule 144, in that such Shares were issued in private
39
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transactions not involving a public offering.
In general, under Rule 144 as currently in effect, subject to the satisfaction
of certain other conditions, a person, including an affiliate of the Company (or
persons whose Shares are aggregated), who has owned restricted shares
beneficially for at least one year, is entitled to sell, within any three-month
period, a number of Shares that does not exceed the greater of 1% of the total
number of outstanding Shares of the same class, or the average weekly trading
volume during the four calendar weeks preceding the sale. A person who has not
been an affiliate of the Company for at least the three months immediately
preceding the sale and who has beneficially owned Shares for at least two years
is entitled to sell such Shares under Rule 144 without regard to any of the
limitations described above. However, the S.E.C. staff has expressed the opinion
to N.A.S.D. Regulation Inc. that securities issued by "blank check" companies to
promoters, affiliates or their transferees cannot be resold under Rule 144.
Prior to this offering, there has been no market for the Shares, and no
prediction can be made as to the effect, if any, that market sales of restricted
shares or the availability of such restricted shares for sale will have on the
market prices prevailing from time to time. Nevertheless, the possibility that
substantial amounts of Common Stock may be sold in the public market may
adversely affect the price for the sale of the Company's Shares in any trading
market which may develop.
INDEMNIFICATION
The Company's Articles of Incorporation and Florida law contain provisions
relating to the indemnification of officers and directors. Generally, they
provide that the Company may indemnify any person who was or is a party to any
threatened, pending, or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, except for an action by or in right
of the Company, by reason of the fact that he is or was a director, officer,
employee or agent of the Company. It must be shown that he acted in good faith
and in a manner which he reasonably believed to be in or not opposed to the best
interests of the Company. Generally, no indemnification may be made where the
person has been determined to be negligent or guilty of misconduct in the
performance of his duty to the Company.
Insofar as indemnification for liabilities arising under the Securities Act may
be permitted to directors, officers or persons controlling the Company pursuant
to the foregoing provisions, or otherwise, the Company has been informed that in
the opinion of the S.E.C. such indemnification is against public policy as
expressed in the Securities Act and is therefore unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Company of expenses incurred or paid by a director, officer or
controlling person of the Company in the successful defense of any
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action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the Company will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
PROPOSED BUSINESS
INTRODUCTION
The Company was formed in January 1998 to effect a merger, exchange of capital
stock, asset acquisition or other similar business combination (a "Business
Combination") with an operating business (a "Target") which the Company believes
has significant growth potential. The Company will not engage in any substantive
commercial business immediately following this offering and for an indefinite
period of time following this offering. The Company has no plan, proposal,
agreement, understanding or arrangement to acquire or merge with any specific
business or entity and the Company has not identified any specific business or
entity for investigation and evaluation. The Company intends to utilize cash (to
be derived from the proceeds of this offering), equity, debt or a combination
thereof in effecting a Business Combination. It is likely that the Company will
have the ability to effect only a single Business Combination. The Company may
effect a Business Combination with a Target which may be financially unstable or
in its early stage of development or growth.
"BLANK CHECK" OFFERING
As a result of management's broad discretion with respect to the specific
application of the net proceeds of this offering, this offering can be
characterized as a "blank check" offering. Although substantially all of the net
proceeds of this offering are intended to be generally applied toward effecting
a Business Combination, such proceeds are not otherwise being designated for any
more specific purposes. Accordingly, prospective investors will invest in the
Company without an opportunity to evaluate the specific merits or risks of any
one or more Business Combinations. A Business Combination may involve the
acquisition of, or merger with, an entity which does not need substantial
additional capital but which desires to establish public trading status, while
avoiding what it may deem to be adverse consequences of undertaking a public
offering itself, such as time delays, significant expense, loss of voting
control and compliance with various federal and state securities laws.
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None of the Company's officers, directors, promoters, their affiliates or
associates has had any preliminary contact or discussions with any
representative or the owner of any business or entity regarding the possibility
of an acquisition or merger transaction contemplated hereby. While management
will have sole discretion to determine which businesses, if any, are intended to
be acquired, as well as the intended terms of any acquisition, investors in this
blank check offering will have the opportunity to evaluate the merits and risks
of an acquisition and be entitled to make an election as to whether they desire
to remain investors in the Company. An acquisition will only be consummated if
investors representing 80% of the maximum offering proceeds reconfirm their
investment. Management has no present intention of (a) considering a Business
Combination with entities owned or controlled by affiliates or associates of the
Company (a "related party transaction"), (b) creating subsidiary entities with a
view to distributing their securities to the shareholders of the Company, or (c)
selling any securities owned or controlled by affiliates or associates of the
Company in connection with any Business Combination transaction without
affording all shareholders a similar opportunity. In the event management
contemplates a related party transaction it will obtain an independent appraisal
of the value of the business or assets to be acquired and no transaction will be
structured unless it is at a price which is lesser or equal to the value
determined by the independent appraisal. Such a related party transaction is not
an arms-length tranaction because management would be on both sides of the
transaction and may have financial interests which are adverse to the
shareholders of the Company. Such a situation creates a potential for
management's fiduciary duties to the shareholders of the Company to be
compromised and the interests of the shareholders to be affected adversely. See
"Risk Factors". If management's fiduciary duties are compromised, any remedy
available to shareholders under state corporate law will most likely be
prohibitively expensive and time consuming.
To date, the Company has not selected any particular industry or any Target in
which to concentrate its Business Combination efforts. Accordingly, there is no
current basis for prospective investors in this offering to evaluate the
possible merits or risks of a Target or the particular industry in which the
Company may ultimately operate. However, in connection with seeking shareholder
approval of a Business Combination, the Company, as a result of its intention to
register its Common Stock under the Exchange Act and thereby become subject to
the proxy solicitation rules contained therein, intends to furnish its
shareholders with proxy solicitation materials prepared in accordance with the
Exchange Act which, among other matters, will include a description of the
operations of the Target candidate and audited historical financial statements
thereof. To the extent the Company effects a Business Combination with a
financially unstable entity or an entity in its early stage of development or
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growth (including entities without established records of sales or earnings),
the Company will become subject to numerous risks inherent in the business and
operations of financially unstable and early stage or potential emerging growth
entities. In addition, to the extent that the Company effects a Business
Combination with an entity in an industry characterized by a high level of risk,
the Company will become subject to the currently unascertainable risks of that
industry. An extremely high level of risk frequently characterizes certain
industries which experience rapid growth. Although management will endeavor to
evaluate the risks inherent in a particular industry or Target, there can be no
assurance that the Company will properly ascertain or assess all significant
risk factors.
The Company may, under certain circumstances, seek to effect Business
Combinations with more than one Target although it is likely that the Company
will have the ability to effect only a single Business Combination. Accordingly,
the prospects for the Company's success will be entirely dependent upon the
future performance of a single business. Unlike certain entities which have the
resources to consummate several Business Combinations of entities operating in
multiple industries or multiple areas of a single industry, it is highly likely
that the Company will not have the resources to diversify its operations or
benefit from the possible spreading of risks or offsetting of losses. The
Company's probable lack of diversification may subject the Company to numerous
economic, competitive and regulatory developments, any or all of which may have
a substantial adverse impact upon the particular industry in which the Company
may operate subsequent to a Business Combination. In addition, by consummating a
Business Combination with only a single entity, the prospects for the Company's
success may become dependent upon the development or market acceptance of a
single or limited number of products, processes or services. Accordingly,
notwithstanding the possibility of capital investment in and management
assistance to the Target by the Company, there can be no assurance that the
Target will prove to be commercially viable. Prior to the consummation of a
Business Combination, the Company has no intention to purchase or acquire a
minority interest in any entity.
The investors in this offering will, in all likelihood, neither receive nor
otherwise have the opportunity to evaluate any financial or other information
which will be made available to the Company in connection with selecting a
potential Business Combination until after the Company has entered into an
agreement to effectuate a Business Combination. Such agreement to effectuate a
Business Combination, however, will be subject to shareholder approval as
discussed elsewhere herein. As a result, investors in this offering will be
almost entirely dependent on the judgment of management in connection with the
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selection and ultimate consummation of a Business Combination. In connection
with seeking shareholder approval of a Business Combination, the Company intends
to furnish its shareholders with proxy solicitation materials prepared in
accordance with the Exchange Act which, among other matters, will include a
description of the operations of the Target candidate and audited historical
financial statements thereof.
While the Company's ability successfully to effect a Business Combination will
be dependent upon Messrs. O'Keefe and Lavache, the future role of such personnel
in the Target cannot presently be stated with any certainty. While it is
possible that certain of the Company's key personnel will remain associated in
some capacities with the Company following a Business Combination, it is likely
that such key personnel will no longer be involved in the Company subsequent
thereto. Moreover, such personnel will have little if any experience or
knowledge relating to the operations of a particular Target. Furthermore,
although the Company intends closely to scrutinize the management of a
prospective Target in connection with evaluating the desirability of effecting a
Business Combination, there can be no assurance that the Company's assessment of
such management will prove to be correct, especially in light of the
inexperience of current key personnel of the Company in evaluating businesses.
Furthermore, there can be no assurance that such future management will have the
necessary skills, qualifications or abilities to manage a public company. The
Company may also seek to recruit additional managers to supplement the incumbent
management of the Target. There can be no assurance that the Company will have
the ability to recruit additional managers, or that such additional managers
will have the requisite skill, knowledge or experience necessary or desirable to
enhance the incumbent management.
Management anticipates that the selection of a Target will be complex and risky
because of competition for such business opportunities among all segments of the
financial community. The nature of the Company's search for a Target requires
maximum flexibility inasmuch as the Company will be required to consider various
factors and divergent circumstances which may preclude meaningful direct
comparison among the various business enterprises, products or services
investigated. Investors should recognize that the possible lack of
diversification among the Company's acquisitions may not permit the Company to
offset potential losses from one venture against profits from another. This
should be considered a negative factor affecting any decision to purchase the
Shares. Management of the Company will have virtually unrestricted flexibility
in identifying and selecting a prospective Target. In addition, in evaluating a
prospective Target, management will consider, among other factors, the
following:
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- costs associated with effecting the Business Combination;
- equity interest in and possible management participation in the Target;
- growth potential of the Target and the industry in which it operates;
- experience and skill of management and availablity of additional
personnel of the Target;
- capital requirements of the Target;
- competitive position of the Target;
- stage of development of the product, process or service of the Target;
- degree of current or potential market acceptance of the product,
process or service of the Target;
- possible proprietary features and possible other protection of the
product, process or service of the Target; and
- regulatory environment of the industry in which the Target operates.
The foregoing criteria are not intended to be exhaustive; any evaluation
relating to the merits of a particular Business Combination will be based, to
the extent relevant, on the above factors as well as other considerations deemed
relevant by management in connection with effecting a Business Combination
consistent with the Company's business objective. In connection with its
evaluation of a prospective Target, management anticipates that it will conduct
an extensive due diligence review which will encompass, among other things,
meetings with incumbent management and inspection of facilities, as well as
review of financial or other information which will be made available to the
Company.
The Company will consider the quality of the management of any Target candidate,
its operating results, the soundness of the service or product to be developed
or being developed, the effect of market and economic conditions and
governmental policies on the business and its products, the nature of its
competition, and the total projected required capital.
The time and costs required to select and evaluate a Target candidate (including
conducting a due diligence review) and to structure and consummate the Business
Combination (including negotiating relevant agreements and preparing requisite
documents for filing pursuant to applicable securities laws and state
corporation laws) cannot presently be ascertained with any degree of certainty.
Messrs. O'Keefe and Lavache, the current executive officers of the Company,
intend to devote approximately 50% of their respective time to the affairs of
the Company and, accordingly, consummation of a Business Combination may require
a greater period of time than if the Company's executive officers devoted their
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full time to the Company's affairs. Any costs incurred in connection with the
identification and evaluation of a prospective Target with which a Business
Combination is not ultimately consummated will result in a loss to the Company
and reduce the amount of capital available to complete a Business Combination.
The Company anticipates that it will make contact with Target prospects
primarily through the efforts of its officers, who will meet personally with
Target candidate management and key personnel, visit and inspect facilities,
assets, products and services belonging to such prospects, and undertake such
further reasonable investigation as management deems appropriate, to the extent
of its limited financial resources. The Company anticipates that certain Target
candidates may be brought to its attention from various unaffiliated sources,
including securities broker-dealers, investment bankers, venture capitalists,
bankers, other members of the financial community, and affiliated sources. While
the Company does not presently anticipate engaging the services of professional
firms that specialize in business acquisitions on any formal basis, the Company
may engage such firms in the future, in which event the Company may pay a
finder's fee or other compensation. See "Management" and "Certain Transactions."
As part of the Company's investigation of prospective enterprises, products and
services, management intends to request that current owners of a prospective
Target provide, among other things, written materials regarding the current
owner's business, product or service, available market studies as well as the
assumptions upon which they are made, appropriate title documentation with
respect to the assets, products and services of the potential Target, detailed
written descriptions of any transactions between the potential Target and any of
its affiliates, copies of pleadings of material litigation, if any, copies of
material contracts and any and all other information deemed relevant.
Additionally, the Company may verify such information, if possible, by
interviewing competitors, certified public accountants and other persons in a
position to have independent knowledge regarding the product or service as well
as the financial condition of the potential Target.
As a general rule, federal and state tax laws and regulations have a significant
impact upon the structuring of business combinations. The Company will evaluate
the possible tax consequences of any prospective Business Combination and will
endeavor to structure the Business Combination so as to achieve the most
favorable tax treatment to the Company, the Target and their respective
shareholders. There can be no assurance that the IRS or appropriate state tax
authorities will ultimately assent to the Company's tax treatment of a
particular consummated Business Combination. To the extent the IRS or state tax
authorities ultimately prevail in recharacterizing the tax treatment of a
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Business Combination, there may be adverse tax consequences to the Company, the
Target and their respective shareholders. Tax considerations as well as other
relevant factors will be evaluated in determining the precise structure of a
particular Business Combination, which could be effected through various forms
of a merger, consolidation or stock or asset acquisition.
The Company may utilize cash (derived from the proceeds of this offering),
equity, debt or a combination of these as consideration in effecting a Business
Combination. Although the Company has no commitments as of the date of this
prospectus to issue any Shares other than as described in this prospectus, the
Company will, in all likelihood, issue a substantial number of additional Shares
in connection with a Business Combination. To the extent that such additional
Shares are issued, dilution to the interests of the Company's shareholders will
occur. Additionally, if a substantial number of Shares is issued in connection
with a Business Combination, a change in control of the Company may occur.
If securities of the Company are issued as part of an acquisition, it cannot be
predicted whether such securities will be issued in reliance upon exemptions
from registration under applicable federal or state securities laws or will be
registered for public distribution. When registration of securities is required,
substantial cost may be incurred and time delays encountered. In addition, the
issuance of additional securities and their potential sale in any trading market
which may develop in the Company's securities, of which there is no assurance,
may depress the price of the Company's securities in any market which may
develop in the Company's securities. Additionally, such issuance of additional
securities of the Company would result in a decrease in the percentage ownership
of the Company of purchasers of the Shares being offered hereby.
The Company's operations may be limited by the Investment Company Act. Unless
the Company registers with the S.E.C. as an investment company, it will not,
among other things, be permitted to own investment securities, exclusive of
government securities and cash items, which have a value exceeding 40% of the
value of the Company's total assets on an unconsolidated basis. It is not
anticipated that the Company will have a policy restricting the type of
investments it may make. While the Company will attempt to conduct its
operations so as not to require registration under the Investment Company Act,
there can be no assurances that the Company will not be deemed to be subject to
the Investment Company Act.
There are currently no limitations relating to the Company's ability to borrow
funds to increase the amount of capital available to the Company to effect a
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Business Combination or otherwise finance the operations of the selected Target.
The amount and nature of any borrowings by the Company will depend on numerous
considerations, including the Company's capital requirements, the Company's
perceived ability to meet debt service on such borrowings and then prevailing
conditions in the financial markets, as well as general economic conditions.
There can be no assurance that debt financing, if required or otherwise sought,
would be available on terms deemed to be commercially acceptable and in the best
interests of the Company. The inability of the Company to borrow funds for an
additional infusion of capital into a Target may have material adverse effects
on the Company's financial condition and future prospects. To the extent that
debt financing ultimately proves to be available, any borrowings may subject the
Company to various risks traditionally associated with incurring indebtedness,
including the risks of interest rate fluctuations and insufficiency of cash flow
to pay principal and interest. Furthermore, a Target may have already incurred
debt financing and, therefore, all the risks inherent thereto.
Because of the Company's small size, investors in the Company should carefully
consider the business constraints on its ability to raise additional capital
when needed. Until such time as any enterprise, product or service which the
Company acquires generates revenues sufficient to cover operating costs, it is
conceivable that the Company could find itself in a situation where it needs
additional funds in order to continue its operations. This need could arise at a
time when the Company is unable to borrow funds and/or when market acceptance
for the sale of additional shares of the Company's Common Stock does not exist.
In connection with the consummation of a Business Combination, the Company may
become obligated to pay fees to certain persons. No officers, directors or
current shareholders shall be paid any consulting fees or salaries for services
rendered by such persons in connection with a Business Combination. The Company
shall reimburse officers and directors for any accountable reasonable expenses
incurred in connection with activities on behalf of the Company. The Deposited
Funds (including any interest earned thereon) will not be used for salaries. No
funds (including any interest earned thereon) will be disbursed from the
Deposited Funds for reimbursement of expenses. Other than the foregoing, there
is no limit on the amount of such reimbursable expenses and there will be no
review of the reasonableness of such expenses by anyone other than the Board of
Directors, both of the members of which are officers. Subsequent to the
consummation of a Business Combination, to the extent current officers,
directors and/or shareholders of the Company provide services to the Company,
such persons may receive from the Company consulting fees and/or salaries. The
Company has no present intention to pay to anyone any consulting fees or
salaries. The Company is not aware of any plans, proposals, understandings or
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arrangements with respect to the sale of any shares of Common Stock of the
Company by any current shareholders. Further, there are no plans, proposals,
understandings or arrangements with respect to the transfer by the Company to
any of the current shareholders of any funds, securities or other assets of the
Company.
The Company expects to encounter intense competition from other entities having
a business objective similar to that of the Company. Many of these entities are
well established and have extensive experience in connection with identifying
and effecting Business Combinations directly or through affiliates. Many of
these competitors possess greater financial, technical, personnel and other
resources than the Company and there can be no assurance that the Company will
have the ability to compete successfully. Inasmuch as the Company may not have
the ability to compete effectively with its competitors in selecting a
prospective Target, the Company may be compelled to evaluate certain less
attractive prospects. There can be no assurance that such prospects will permit
the Company to meet its stated business objective.
In the event that the Company succeeds in effecting a Business Combination, the
Company will, in all likelihood, become subject to intense competition from
competitors of the Target. In particular, certain industries which experience
rapid growth frequently attract an increasingly larger number of competitors,
including competitors with increasingly greater financial, marketing, technical
and other resources than the initial competitors in the industry. The degree of
competition characterizing the industry of any prospective Target cannot
presently be ascertained. There can be no assurance that, subsequent to a
Business Combination, the Company will have the resources to compete
effectively, especially to the extent that the Target is in a high growth
industry.
This blank check offering is subject to Rule 419 under the Securities Act. As
such, any agreement to acquire a Target must provide that the fair market value
of the business or assets to be acquired represents at least 80% of the maximum
offering proceeds, less underwriting commissions, if any, and expenses and
dealer allowances payable to non-affiliates. Once an acquisition agreement
meeting the above criteria has been executed, the Company must successfully
complete a reconfirmation offering. See "The Offering".
The Company has agreed that contemporaneous with the sale of the Shares it will
file an application with the S.E.C. to register its Common Stock under the
provisions of Section 12(g) of the Exchange Act, and that it will use it best
efforts to continue to maintain such registration for a minimum of two years
from the date of this prospectus. Such registration will require the Company to
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comply with periodic reporting, proxy solicitations and certain other
requirements of the Exchange Act.
If the Company seeks shareholder approval of a Business Combination at such time
as the Company's securities are registered pursuant to Section 12 of the
Exchange Act, the Company's proxy solicitation materials required to be
transmitted to shareholders may be subject to prior review by the S.E.C.
Under the federal securities laws, public companies must furnish certain
information about significant acquisitions, which information may require
audited financial statements of an acquired entity with respect to one or more
fiscal years, depending upon the relative size of the acquisition. Consequently,
if a prospective Target did not have available and was unable reasonably to
obtain the requisite audited financial statements, the Company could, in the
event of consummation of a Business Combination with such entity, be precluded
from (i) any public financing of its own securities for a period of as long as
three years, as such financial statements would be required to undertake
registration of such securities for sale to the public; and (ii) registration of
its securities under the Exchange Act. Consequently, it is unlikely that the
Company would seek to consummate a Business Combination with such a Target. See
"Risk Factors."
The Company is currently not seeking listing of the Shares on NASDAQ. So long as
the Company has net tangible assets of $5,000,000 or less, transactions in the
Shares shall be subject to Rule 15g promulgated under the Exchange Act. Under
such rule, broker-dealers who recommend such securities to persons other than
established customers and accredited investors (generally institutions with
assets in excess of $5,000,000 or individuals with net worth in excess of
$1,000,000 or annual income exceeding $200,000 or $300,000 jointly with spouse)
must make a special written suitability determination for the purchaser and
receive the purchaser's written agreement to a transaction prior to sale.
Transactions are exempt from this rule if the market price of the Shares is at
least $5.00 per share. Rule 3a51-1 generally defines a penny stock to be any
equity security that has a market price of less than $5.00 per share, subject to
certain exemptions. Such exemptions include an equity security issued by an
issuer that has (i) net tangible assets of at least $2,000,000, if such issuer
has been in continuous operation for at least three years, (ii) net tangible
assets of at least $5,000,000, if such issuer has been in continuous operation
for less than three years, or (iii) average revenue of at least $6,000,000 for
the preceding three years. Unless an exemption is available, Rule 15g requires
the delivery, prior to any transaction involving a penny stock, of a disclosure
schedule explaining the penny stock market and the risks associated therewith.
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Because the Shares are subject to Rule 15g, broker-dealers may find it difficult
to effectuate customer transactions and/or trading activity in the Shares. Thus,
the market price, if any, may be depressed, and an investor may find it more
difficult to dispose of the Shares. Also, the market liquidity for the Company's
Shares could be adversely affected by limiting the ability of broker/dealers to
sell the Shares and the ability of investors in this offering to sell their
Shares in the secondary market.
Pursuant to an oral agreement with the President, the Company shares with
related companies executive offices rent-free in approximately 1200 square feet
of office space located at 120 North U.S. Highway One, Tequesta, Florida 33469.
The Company considers this space to be adequate for its needs and has no
preliminary agreements or understandings with respect to office space in the
future.
As of the date of this prospectus, the Company's employees consist of its two
executive officers, each of whom will devote approximately 50% of his working
time to the affairs of the Company once it is funded.
MANAGEMENT'S DISCUSSION AND
ANALYSIS OR PLAN OF OPERATION
The Company, a development stage entity, has neither engaged in any operations
nor generated any revenues to date. Its entire activity since its inception has
been to prepare for its proposed fund raising through an offering of equity
securities as contemplated herein.
The Company's expenses to date, all of which are attributable to its formation
and proposed fund raising are approximately $65,000. In addition, the Company
expensed $12,000 in non-cash general and administrative expenses.
Substantially all of the Company's working capital needs subsequent to this
offering will be attributable to the identification of a suitable Target, and
thereafter to effectuate a Business Combination with such Target. Such working
capital needs are expected to be satisfied from the net proceeds of this
offering. Although no assurances can be made, the Company believes it can
satisfy its cash requirements until a Business Combination is consummated with
10% of the net proceeds derived hereby. Because of the possible indefinite
period of time to consummate a Business Combination and the nature and cost of
the Company's expenses related to the Company's search for and analysis of a
Target, there can be no assurances that the Company's cash requirements until a
Business Combination is consummated will be satisfied with 10% of the net
proceeds of this offering. Prior to the conclusion of this offering the Company
currently anticipates its expenses to be limited to accounting fees, legal fees,
telephone, mailing, filing fees, escrow agent fees and transfer agent fees. See
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"Risk Factors."
CERTAIN TRANSACTIONS
On January 26, 1998, the Company issued 1,650,000 shares of its Common Stock to
John M. O'Keefe, the Company's President and a Director, and 1,350,000 shares to
Vicki J. Lavache, the Company's Secretary/Treasurer and a Director,
respectively, for cash and a demand note aggregating $39,000. Each paid $0.013
per share. Mr. O'Keefe paid $13,415 in cash and gave the Company a promissory
note for $8035. The note was paid by Mr. O'Keefe prior to October 31, 1999. Ms.
Lavache paid $17,550 in cash. In addition, the shareholders contributed $23,807
for offering and administrative expenses during the nine month period ended
January 31, 2000.
Since inception, the Company, pursuant to a an oral agreement with the
President, has maintained at no cost to the Company its executive offices in
approximately 1200 square feet of office space located at 120 North U.S. Highway
One, Tequesta, Florida 33469.
On March 1, 1998, the Company issued a warrant to Mirkin & Woolf, P.A., counsel
to the Company, to purchase 150,000 Shares at $0.75 per share, exercisable
through February 28, 2001.
The Company shall not make any loans to any officers or directors following this
offering. Further, the Company shall not borrow funds for the purpose of making
payments to the Company's officers, directors, promoters, management or their
affiliates or associates.
THE OFFERING
The offering is being conducted directly by the Company without the use of a
professional underwriter.
The Company proposes to offer the Shares through John O'Keefe and Vicki Lavache,
its officers and directors, and selected broker-dealers who are members of the
NASD and who agree to sell the Shares in conformity with the NASD Rules of Fair
Practice. Messrs. O'Keefe and Lavache shall distribute the prospectus related to
this offering to acquaintances, friends and business associates. Such selected
broker-dealers may receive as maximum compensation for sales hereunder a 10%
selling commission and a 3% non-accountable expense allowance. No selected
dealers have yet been identified by the Company. The Company will amend the
registration statement of which this prospectus is a part following its
effectiveness to identify a selected broker-dealer at such time as such
broker-dealer sells Shares offered in this offering. A broker-dealer that sells
securities in this type of an offering would be deemed an underwriter as defined
in Section 2(11) of the Securities Act. Prior to the involvement of any
broker-dealer in the offering, the Company must obtain a "no objection" position
from the NASD regarding the contemplated underwriting compensation and
arrangements.
Prior to this offering, there has been no public market for the Shares.
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<PAGE>
Consequently, the initial public offering price for the Shares has been
arbitrarily selected by the Company. No assurance can be given that a public
market for the Shares will develop after the close of the offering, or if a
public market in fact develops, that such public market will be sustained, or
that the Shares can be resold at any time at the offering or any other price.
See "Risk Factors -- No Assurance of Public Market; Arbitrary Determination of
Offering Price."
53
<PAGE>
LEGAL MATTERS
Mirkin & Woolf, P.A., West Palm Beach, Florida, has rendered an opinion (which
is filed as an exhibit to the registration statement of which this prospectus is
a part) to the effect that the Shares, when issued and paid for as described
herein, will constitute legally issued securities of the Company, fully paid and
non-assessable. Mirkin & Woolf, P.A. holds a warrant to purchase 150,000 Shares.
See "Certain Transactions".
EXPERTS
The financial statements included in this prospectus have been audited by
Sweeney, Gates & Co., independent public accountants, as indicated in its report
with respect thereto, and are included herein in reliance upon the authority of
said firm as experts in accounting and auditing in giving said report. Reference
is made to the opinion in said report that the Company's ability to commence
operations is dependent, among other factors, upon the success of this offering
or other fund raising.
AVAILABLE INFORMATION
The Company has filed with the S.E.C. a registration statement on Form SB-2 (the
"Registration Statement") under the Securities Act with respect to the Shares.
This prospectus does not contain all of the information set forth in the
Registration Statement, certain parts of which are omitted in accordance with
54
<PAGE>
the rules and regulations of the S.E.C. For further information with respect to
the Company and this offering, reference is made to the Registration Statement,
including the exhibits filed therewith, which may be examined at the S.E.C.'s
principal office, Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, the
New York Regional Office of the S.E.C. at 7 World Trade Center, New York, New
York 10007 and the Chicago Regional Office of the S.E.C., Northwest Atrium, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661, where copies may be
obtained upon payment of the fees prescribed by the S.E.C.
Descriptions contained in this prospectus as to the contents of any contract or
other document filed as an exhibit to the Registration Statement are not
necessarily complete and each such description is qualified by reference to such
contract or document. References in this prospectus to various documents,
statutes, regulations and agreements do not purport to be complete and are
qualified in their entirety by reference to such documents, statutes,
regulations and agreements. The Company will provide without charge to each
person who receives a prospectus, upon written request of such person, a copy of
any of the information that is incorporated by reference in the prospectus.
The S.E.C. maintains a world wide web site that contains reports, proxy and
information statements and other information regarding issuers that file
electronically with the S.E.C. The S.E.C.'s address on the Web is
http://www.sec.gov.
55
<PAGE>
BANNER HOLDING CORP.
(a development stage company)
FINANCIAL STATEMENTS
TABLE OF CONTENTS
PAGE
----
Report of Independent Certified Public Accountants ....................... F-1
Balance Sheets ........................................................... F-2
Statements of Operations ................................................. F-3
Statement of Changes in Stockholders' Equity ............................. F-4
Statements of Cash Flows ................................................. F-5
Notes to Financial Statements ............................................ F-6
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors and Stockholders
Banner Holding Corp. (a development stage company)
We have audited the accompanying balance sheet of Banner Holding Corp. (a
development stage company) as of April 30, 1999, and the related statements of
operations, stockholders' equity and cash flows for the period from January 26,
1998 (inception) to April 30, 1998, and for the year ended April 30, 1999, and
for the period from January 26, 1998 (inception) to April 30, 1999. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on the financial statements based upon
our audit.
We conducted our audits 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 audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above, present fairly, in
all material respects, the financial position of Banner Holding Corp. (a
development stage company) as of April 30, 1999, and the results of its
operations and its cash flows for the period from January 26, 1998 (inception)
to April 30, 1998, and for the year ended April 30, 1999, and for the period
from January 26, 1998 (inception) to April 30, 1999, in conformity with
generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. However, the Company has minimal
capital resources presently available to meet obligations, which normally can be
expected to be incurred by similar companies, and with which to carry out its
planned activities. These factors raise substantial doubt about the Company's
ability to continue as a going concern. Management's plans in regard to this
matter are discussed in Note 2. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
Sweeney, Gates & Co.
Fort Lauderdale, Florida
November 30, 1999
<PAGE>
BANNER HOLDING CORP.
(a development stage company)
BALANCE SHEETS
April 30, January 31,
1999 2000
-------- --------
(unaudited)
ASSETS
Current assets:
Cash ....................................... $ 747 $ 121
-------- --------
--
Total current assets ................... 747 121
--
Other assets: ................................. --
Deferred offering costs .................... 45,273 63,147
-------- --------
$ 46,020 $ 63,268
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses ...... $ 17,061 $ 1,646
-------- --------
Total current liabilities .............. 17,061 1,646
-------- --------
Stockholders' equity:
Preferred stock, $.01 par value,
5,000,000 shares authorized
no shares issued or outstanding ........ -- --
Common stock, $.01 par value,
25,000,000 shares authorized,
3,000,000 shares issued and outstanding 30,000 30,000
Additional paid-in capital ................. 16,500 44,807
Deficit accumulated during the
development stage ...................... (7,958) (13,185)
Stockholders' receivable ................... (9,583) --
-------- --------
Total stockholders' equity ............. 28,959 61,622
-------- --------
$ 46,020 $ 63,268
======== ========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
F-2
<PAGE>
BANNER HOLDING CORP.
(a development stage company)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
NINE MONTHS ENDED JANUARY 31, JANUARY 26, 1998 JANUARY 26, 1998 JANUARY 26, 1998
---------------------------- (INCEPTION) TO YEAR ENDED (INCEPTION) TO (INCEPTION) TO
2000 1999 JANUARY 31, 2000 APRIL 30, 1999 APRIL 30, 1998 APRIL 30, 1999
---------- ---------- ---------------- -------------- ---------------- ----------------
(unaudited) (unaudited)
<S> <C> <C> <C> <C> <C> <C>
Revenues ................... $ -- $ -- $ -- $ -- $ -- $ --
General and
administrative expenses . 5,227 4,500 13,185 6,458 1,500 7,958
---------- ---------- ---------- ---------- ---------- ----------
Net loss ................... $ 5,227 $ 4,500 $ 13,185 $ 6,458 $ 1,500 $ 7,958
========== ========== ========== ========== ========== ==========
Loss per share, basic
and diluted ............. $ 0.00 $ 0.00 $ 0.00 $ 0.00
========== ========== ========== ==========
Weighted averages
shares outstanding ...... 3,000,000 3,000,000 3,000,000 3,000,000
========== ========== ========== ==========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
F-3
<PAGE>
BANNER HOLDING CORP.
(a development stage company)
STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
DEFICIT
ACCUMULATED
PREFERRED STOCK COMMON STOCK ADDITIONAL DURING THE
---------------- --------------------- PAID-IN DEVELOPMENT STOCKHOLDERS'
SHARES AMOUNT SHARES AMOUNT CAPITAL STAGE RECEIVABLE TOTAL
------ ------ --------- --------- --------- ----------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Issuance of founders shares ........... -- $-- 3,000,000 $ 30,000 $ 9,000 $ -- $ (29,528) $ 9,472
Non-cash credit for general and
administrative expenses ......... -- -- -- -- 1,500 -- -- 1,500
Net loss .......................... -- -- -- -- -- (1,500) -- (1,500)
------ ------ --------- --------- --------- --------- ---------- ---------
Balance, April 30, 1998 ............... -- -- 3,000,000 30,000 10,500 (1,500) (29,528) 9,472
Payment of stockholders' receivable -- -- -- -- -- -- 19,945 19,945
Non-cash credit for general and
administrative expenses ......... -- -- -- -- 6,000 -- -- 6,000
Net loss .......................... -- -- -- -- -- (6,458) -- (6,458)
------ ------ --------- --------- --------- --------- ---------- ---------
Balance, April 30, 1999 ............... -- -- 3,000,000 30,000 16,500 (7,958) (9,583) 28,959
Payment of stockholders' receivable -- -- -- -- -- -- 9,583 9,583
Contribution to capital ........... -- -- -- -- 23,807 -- -- 23,807
Non-cash credit for general and
administrative expenses ......... -- -- -- -- 4,500 -- -- 4,500
Net loss (unaudited) .............. -- -- -- -- -- (5,227) -- (5,227)
------ ------ --------- --------- --------- --------- ---------- ---------
Balance, January 31, 2000 (unaudited) . -- $-- 3,000,000 $ 30,000 $ 44,807 $ (13,185) $ -- $ 61,622
====== ====== ========= ========= ========= ========= ========== =========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
F-4
<PAGE>
BANNER HOLDING CORP.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
JANUARY 31, JANUARY 26, 1998 JANUARY 26, 1998 JANUARY 26, 1998
--------------------- (INCEPTION) TO YEAR ENDED (INCEPTION) TO (INCEPTION) TO
2000 1999 JANUARY 31, 1999 APRIL 30, 1999 APRIL 30, 1998 TO APRIL 30, 1999
-------- -------- ---------------- -------------- ---------------- -----------------
(unaudited) (unaudited)
<S> <C> <C> <C> <C> <C> <C>
Cash flows from
operating activities:
Net loss ........................... $ (5,227) $ (4,500) $(13,158) $ (6,458) $ (1,500) $ (7,958)
Adjustments to
reconcile net loss to
net cash used in
operating activities:
Non-cash charge
for general and
administrative expenses ... 4,500 4,500 12,000 6,000 1,500 7,500
Changes in assets
and liabilities:
Increase (decrease)
in accounts
payable and accrued
expenses ................ (15,415) 2,017 1,646 12,208 4,853 17,061
---------- -------- -------- -------- -------- ---------
Net cash provided by
operating activities .. (16,142) 2,017 461 11,750 4,853 16,603
---------- -------- -------- -------- -------- ---------
Cash flows from financing activities:
Increase in deferred offering
costs ........................... (17,874) (23,510) (63,147) (31,948) (13,325) (45,273)
Contribution of capital ........... 23,807 -- 23,807 -- -- --
Proceeds stockholder receivable ... 9,583 21,493 39,000 19,945 9,472 29,417
---------- -------- -------- -------- -------- ---------
Net cash used in
financing activities 15,516 (2,017) (340) (12,003) (3,853) (15,856)
---------- -------- -------- -------- -------- ---------
Net increase (decrease)
in cash and cash
equivalents: ........ (626) -- 121 (253) 1,000 747
---------- -------- -------- -------- -------- ---------
Cash and cash equivalents,
beginning of period ............... 747 1,000 -- 1,000 -- --
---------- -------- -------- -------- -------- ---------
Cash and cash equivalents,
end of period ...................... $ 121 $ 1,000 $ 121 $ 747 $ 1,000 $ 747
========== ======== ======== ======== ======== =========
Supplemental disclosure of cash
flow information:
Cash paid for interest during
the period ...................... $ -- $ -- $ -- $ -- $ -- $ --
========== ======== ======== ======== ======== =========
Cash paid for income taxes
during the period .............. $ -- $ -- $ -- $ -- $ -- $ --
========== ======== ======== ======== ======== =========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
F-5
<PAGE>
BANNER HOLDING CORP.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION - Banner Holding Corp. (the "Company"), was incorporated in Florida
on January 26, 1998. The Company is a development stage company, formed to
consummate a Blank Check Offering (See Note 5).
The Company intends to seek, investigate and, if such investigation warrants,
acquire an interest in a business. These opportunities will be presented by
persons who, or firms which, desire to employ the Company's funds in their
business or seek the perceived advantages of a publicly held corporation.
UNAUDITED INTERIM FINANCIAL STATEMENTS - The accompanying financial statements
of the Company for the nine months ended January 31, 2000 and 1999 are
unaudited, but, in the opinion of management, reflect adjustments, all of which
are of a normal recurring nature, necessary for the fair presentation of such
financial statements in accordance with generally accepted accounting
principles. The results of operations for an interim period are not necessarily
indicative of results for a full year.
DEFERRED OFFERING COSTS - Amounts paid or accrued for costs related to the
anticipated public offering will be recorded as a reduction of the proceeds when
the offering is completed. If the offering is not completed, the costs will be
expensed. To date these costs have been legal, auditing and printing services.
INCOME TAXES - The Company accounts for income taxes on an asset and liability
approach to financial accounting. Deferred income tax assets and liabilities are
computed annually for the difference between the financial statement and tax
basis of assets and liabilities that will result in taxable or deductible
amounts in the future, based on enacted tax laws and rates applicable to the
periods in which the differences are expected to affect taxable income.
Valuation allowances are established when it is more likely than not that some
or all of the deferred tax assets will not be realized. Income tax expense is
the tax payable or refundable for the period, plus or minus the change during
the period in deferred tax assets and liabilities.
ESTIMATES - The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
LOSS PER SHARE - Financial Accounting Standards No. 128, "Earnings per Share"
("FAS 128"), requires presentation of earnings or loss per share on basic and
diluted earnings per share. The company has potentially dilutive shares;
however, because the Company has a loss, the shares are deemed anti-dilutive.
Loss per share is computed by dividing net income by the weighted average number
of shares outstanding during the period.
F-6
<PAGE>
BANNER HOLDING CORP.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
RECENT ACCOUNTING PRONOUNCEMENTS - In April 1998, the Accounting Standards
Executive Committee of the AICPA issued Statement of Position 98-5, "Reporting
on the Costs of Start-Up Activities" ("SOP 98-5"). SOP 98-5 requires that
start-up costs, including organizational costs be expensed as incurred. The
Company accepted early adoption of SOP 98-5 and has expensed all start-up costs.
2. GOING CONCERN CONTINGENCY
The Company has minimal capital available to meet future obligations and to
carry out its planned operations. The Company is dependent upon its shareholders
for its financial support. These factors raise substantial doubt about the
Company's ability to continue as a going concern.
In order to begin any significant operations, the Company will have to pursue
other sources of capital, such as raising equity as discussed in Note 6 and a
merger with an operating company. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
3. RELATED PARTY TRANSACTIONS
The Company shares facilities and certain other resources free of charge with a
Company owned by the President and principal stockholders. The Company provided
a non-cash charge of $500 per month or $12,000 for the period from January 26,
1998 to January 31, 2000, for these expenses. The expense allocation was based
on an estimate of the usage of the officers' time, rent and general and
administative expenses, such as copying, faxes and telephone charges. The
credits are reflected as contributions to capital.
Between April 30, 1999 and October 31, 1999, another company wholly owned by the
stockholders of the Company loaned the Company funds to pay for offering and
other administrative expenses. This amounted to $12,974 as of October 31, 1999
and was evidenced by a note payable for the same amount. During the period ended
January 31, 2000, the stockholders of the other company paid the note in full by
contributing it to additional paid-in capital and an additional $10,833 incurred
during the three months ended January 31, 2000, which was utilized for offering
and other administrative expenses. The total amount of $23,807 was contributed
to capital during the period ended January 31, 2000.
The Company had no activity other than the preparation of the proposed public
offering mentioned in Note 5.
F-7
<PAGE>
BANNER HOLDING CORP.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
4. STOCKHOLDERS' EQUITY
In 1998, the Company issued 3,000,000 shares of stock to its founding
stockholders for $39,000. The Company received a commitment for a total of
$39,000 in capital contributions for these shares. These funds were used to
finance the expenses of the offering (see Note 5). As of April 30, 1999, the
founders owed the Company $9,583 as stockholders' receivable, which amount was
paid in full as of January 31, 2000.
On March 1, 1998, the Company issued a warrant to the Company's law firm, to
purchase 150,000 shares of common stock at $.75 per share, exercisable through
February 28, 2001. In accordance with APB 25, "Accounting for Stock Issued to
Employees" and related interpretations, no expense has been recognized because
the exercise price of the warrants was in excess of the market price of the
underlying stock on the date of the warrant.
5. PROPOSED PUBLIC OFFERING OF COMMON STOCK
The Company is preparing to commence an offering which calls for a minimum of
200,000 or a maximum of 1,000,000 common shares to be sold at $.25 per share on
a "best efforts" basis. If proceeds from this offering are insufficient, the
Company may be required to seek additional capital. No assurance can be given
that the Company will be able to obtain such additional capital, or even if
available, that such additional capital will be available on terms acceptable to
the Company. In the event that management determines that the Company is unable
to conduct any business whatsoever, management, subject to the requirements of
SEC Rule 419, which provides that the deposited funds will be returned on a pro
rata basis if an acquisition meeting certain prescribed criteria is not
consummated within 18 months of the date of this prospectus, may, in its sole
discretion, seek stockholders approval to liquidate the Company. In the event
such a liquidation were to occur at some point in time after the Company's
compliance with the provisions of Rule 419, all stockholders of the Company,
including those owning shares purchased privately at less than the public
offering price, will receive the liquidated assets on a pro rata basis (as
opposed to being based on the amounts paid for such shares). While management
has not established any guidelines for determining at what point in time it
might elect to discontinue its efforts to engage in a business combination and
seek stockholder approval to liquidate the Company, management is subject to the
18 month time frame set forth in Rule 419 in which to effect an acquisition.
The Company has no revenues to date and is entirely dependent upon the proceeds
of this offering to commence operations relating to selection of a prospective
target. The Company will not receive any revenues until the consummation of a
business combination. Although the Company believes that the proceeds of this
offering will be sufficient to effect a business combination, inasmuch as the
Company has not yet identified any prospective target candidates, the Company
cannot ascertain with
F-8
<PAGE>
BANNER HOLDING CORP.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
5. PROPOSED PUBLIC OFFERING OF COMMON STOCK (CONTINUED)
any degree of certainty the capital requirements for any particular transaction.
In the event that the net proceeds of this offering prove to be insufficient for
purposes of effecting a business combination (because of the size of the
business combination or the depletion of 10% of the portion of the net proceeds
available to the Company for the search for a target), the Company will be
required to seek additional financing. In the event no target is identified or
no business combination is consummated, and all of the net proceeds other than
the deposited funds have been expended, the Company currently has no plans to
continue the operations of the Company. In such event, the founding stockholders
may consider lending the Company funds for operations. Although there are no
plans or arrangements with respect to such loans, the founding stockholders do
not currently anticipate such loans, if any, will be made on terms other than
for market interest rates. There can be no assurance that the founding
stockholders will make such loans to the Company. The deposited funds, including
any interest earned thereon, however, will not be used for expenses associated
with the evaluation and structuring of a contemplated business combination.
There can be no assurance that such financing would be available on acceptable
terms, if at all. To the extent that such additional financing proves to be
unavailable when needed to consummate a particular business combination, the
Company would, in all likelihood, be compelled to restructure the transaction or
abandon that particular business combination and seek alternate target
candidates.
6. INCOME TAXES
The Company had available at April 30, 1999, a net operating loss carry-forward
for federal and state tax purposes of approximately $8,000 which could be
applied against taxable income in subsequent years through 2019. The tax effect
of the net operating loss is approximately $3,000, and a full valuation
allowance has been recorded, since realization is uncertain.
F-9
