U. S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-SB
GENERAL FORM FOR REGISTRATION OF
SECURITIES OF
SMALL BUSINESS ISSUERS
Under Section 12(b) or (g) of the Securities
Exchange Act of 1934
SUNBURST ACQUISITIONS VII, INC.
(Name of Small Business Issuer in its charter)
Colorado 84-1466651
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4807 South Zang Way, Morrison, Colorado 80465
(Address of Principal Office) Zip Code
Issuer's telephone number: (303) 979-2404
Securities to be registered under Section 12(b) of the Act:
Title of each class to be so registered - N/A
Name of each exchange on which each class is to be registered
N/A
Securities to be registered under Section 12(g) of the Act:
Common Stock
(Title of class)
Series A Convertible Preferred Stock
(Title of class)
<PAGE>
PART I
Item 1. Description of Business.
General
Sunburst Acquisitions VII, Inc. (the "Company") was
incorporated under the laws of the State of Colorado on June 30,
1998, as a "shell" company, and is in the early developmental and
promotional stages. It was initially capitalized with approximately
$10,000, and as of June 30, 1998, had current assets of $10,000, no
liabilities, and stockholders' equity of $10,000. To date the
Company's only activities have been organizational ones, directed at
developing its business plan and raising its initial capital. The
Company has not commenced any commercial operations. The
Company has no full-time employees and owns no real estate.
The Company's business plan is to seek, investigate, and, if
warranted, acquire one or more properties or businesses, and to
pursue other related activities intended to enhance shareholder value.
The acquisition of a business opportunity may be made by purchase,
merger, exchange of stock, or otherwise, and may encompass assets
or a business entity, such as a corporation, joint venture, or
partnership. The Company has very limited capital, and it is unlikely
that the Company will be able to take advantage of more than one
such business opportunity.
At the present time the Company has not identified any
business opportunity that it plans to pursue, nor has the Company
reached any agreement or definitive understanding with any person
concerning an acquisition. Prior to the effective date of this
registration statement, it is anticipated that the Company's officers,
directors, and affiliates will contact broker-dealers and other persons
with whom they are acquainted who are involved in corporate finance
matters to advise them of the Company's existence and to determine if
any companies or businesses they represent have a general interest in
considering a merger or acquisition with a blind pool or blank check
entity. No direct discussions regarding the possibility of a merger
with the Company are expected to occur until after the effective date
of this registration statement. No assurance can be given that the
Company will be successful in finding or acquiring a desirable
business opportunity, given the limited funds that are expected to be
available for acquisition, or that any acquisition that occurs will be on
terms that are favorable to the Company or its stockholders.
The Company's search will be directed toward small and
medium-sized enterprises which have a desire to become public
corporations and which are able to satisfy, or anticipate in the
reasonably near future being able to satisfy, the minimum asset
requirements in order to qualify shares for trading on NASDAQ (See
"Investigation and Selection of Business Opportunities"). The
Company anticipates that the business opportunities presented to it
would not satisfy the types of requirements typically imposed by
broker-dealers which handle initial public offerings. Accordingly, it
is likely that such business opportunities will (i) either be in the
process of formation or be recently organized with limited operating
history, or a history of losses attributable to under-capitalization or
other factors; (ii) be experiencing financial or operating difficulties;
(iii) be in need of funds to develop a new product or service or to
expand into a new market; (iv) be relying upon an untested product or
marketing concept; or (v) have a combination of the characteristics
mentioned in (i) through (iv). The Company intends to concentrate its
acquisition efforts on properties or businesses that it believes to be
undervalued or that it believes may realize a substantial benefit from
being publicly owned. Given the above factors, investors should
expect that any acquisition candidate may have little or no operating
history, or a history of losses or low profitability.
The Company does not propose to restrict its search for
investment opportunities to any particular geographical area or
industry, and may, therefore, engage in essentially any business, to
the extent of its limited resources. This includes industries such as
service, finance, natural resources, manufacturing, high technology,
product development, medical, communications and others. The
Company's discretion in the selection of business opportunities is
unrestricted, subject to the availability of such opportunities,
economic conditions, and other factors.
The Company has elected to voluntarily file this registration
statement on Form 10-SB in order to become a reporting company
under the Securities Exchange Act of 1934, and currently anticipates
that it will voluntarily continue to file periodic reports even in the
event that its obligation to file reports is suspended under the
Exchange Act. As a consequence of this registration of its securities,
any entity which has an interest in being acquired by, or merging
into, the Company is expected to be an entity that desires to become a
public company and establish a public trading market for its
securities. In connection with such a merger or acquisition, it is
highly likely that an amount of stock constituting control of the
Company would be issued by the Company or purchased from the
current principal shareholders of the Company by the acquiring entity
or its affiliates. If stock is purchased from the current shareholders,
the transaction is very likely to be a private transaction rather than a
public distribution of securities, but is also likely to result in
substantial gains to them relative to their purchase price for such
stock. In the Company's judgment, none of its officers and directors
would thereby become an "underwriter" within the meaning of Section
2(11) of the Securities Act of 1933, as amended as long as the
transaction is a private transaction rather than a public distribution of
securities. The sale of a controlling interest by certain principal
shareholders of the Company could occur at a time when the other
shareholders of the Company remain subject to restrictions on the
transfer of their shares.
Depending upon the nature of the transaction, the current
officers and directors of the Company may resign their management
positions with the Company in connection with a change in control of
the Company or its acquisition of a business opportunity (See "Form
of Acquisition," below, and "Risk Factors - The Company - Lack of
Continuity in Management"). In the event of such a resignation, the
Company's current management would not have any control over the
conduct of the Company's business following the change in control of
the Company's combination with a business opportunity.
It is anticipated that business opportunities will come to the
Company's attention from various sources, including its officers and
directors, its other stockholders, professional advisors such as
attorneys and accountants, securities broker-dealers, venture
capitalists, members of the financial community, and others who may
present unsolicited proposals. The Company has no plans,
understandings, agreements, or commitments with any individual for
such person to act as a finder of opportunities for the Company.
The Company does not foresee that it would enter into a
merger or acquisition transaction with any business with which its
officers or directors are currently affiliated. Should the Company
determine in the future, contrary to the foregoing expectations, that a
transaction with an affiliate would be in the best interests of the
Company and its stockholders, the Company is in general permitted
by Colorado law to enter into such a transaction if:
(1) The material facts as to the relationship or interest of the
affiliate and as to the contract or transaction are disclosed or are
known to the Board of Directors, and the Board in good faith
authorizes the contract or transaction by the affirmative vote of a
majority of the disinterested directors, even though the disinterested
directors constitute less than a quorum; or
(2) The material facts as to the relationship or interest of the
affiliate and as to the contract or transaction are known to the
stockholders entitled to vote thereon, or are disclosed to such
stockholders in writing, and the contract or transaction is specifically
approved in good faith by vote of the stockholders; or
(3) The contract or transaction is fair as to the Company as of
the time it is authorized, approved or ratified, by the Board of
Directors or the stockholders.
It should be noted that members of management own a
sufficient number of shares to approve any matter submitted to the
shareholders for approval without any other votes. It should also be
noted that the "fairness" of a particular transaction will be determined
by an examination of all relevant facts and circumstances, including,
but not limited to, a comparison to other available options.
To the extent deemed necessary or appropriate, a written
opinion as to the "fairness" of a particular transaction may be
requested from an unrelated third party. However, as a result of the
limited resources available to the Company, it is not anticipated that
either a "fairness" opinion or an independent appraisal of the value of
the business or Company will be obtained in the event a related party
transaction is contemplated. The potential for management's fiduciary
duties to be compromised will therefore increase, and any remedies
available to shareholders under state law will most likely be
prohibitively expensive and time consuming.
Investigation and Selection of Business Opportunities
To a large extent, a decision to participate in a specific
business opportunity may be made upon management's analysis of the
quality of the other company's management and personnel, the
anticipated acceptability of new products or marketing concepts, the
merit of technological changes, the perceived benefit the Company
will derive from becoming a publicly held entity, and numerous other
factors which are difficult, if not impossible, to analyze through the
application of any objective criteria. In many instances, it is
anticipated that the historical operations of a specific business
opportunity may not necessarily be indicative of the potential for the
future because of the possible need to shift marketing approaches
substantially, expand significantly, change product emphasis, change
or substantially augment management, or make other changes. The
Company will be dependent upon the owners of a business
opportunity to identify any such problems which may exist and to
implement, or be primarily responsible for the implementation of,
required changes. Because the Company may participate in a business
opportunity with a newly organized firm or with a firm which is
entering a new phase of growth, the Company will incur further risks,
because management in many instances will not have proved its
abilities or effectiveness, the eventual market for such company's
products or services will likely not be established, and the company
may not be profitable when acquired.
It is anticipated that the Company will not be able to diversify,
but will essentially be limited to one such venture because of the
Company's limited financing. This lack of diversification will not
permit the Company to offset potential losses from one business
opportunity against profits from another, and should be considered an
adverse factor affecting any decision to purchase the Company's
securities.
It is emphasized that management of the Company may effect
transactions having a potentially adverse impact upon the Company's
shareholders pursuant to the authority and discretion of the
Company's management to complete acquisitions without submitting
any proposal to the stockholders for their consideration. Holders of
the Company's securities should not anticipate that the Company
necessarily will furnish such holders, prior to any acquisition, with
financial statements, or any other documentation, concerning a target
company or its business, although merger transactions would be
expected to require prior approval by the shareholders. In some
instances, however, a proposed acquisition transaction may be
submitted to the stockholders for their consideration, either voluntarily
by such directors to seek the stockholders' advice and consent or
because state law so requires.
The analysis of business opportunities will be undertaken by or
under the supervision of the Company's officers, directors and
affiliates, none of whom are professional business analysts (See
"Management"). Although there are no current plans to do so,
Company management might hire an outside consultant to assist in the
investigation and selection of business opportunities, and might pay a
finder's fee. Since Company management has no current plans to use
any outside consultants or advisors to assist in the investigation and
selection of business opportunities, no policies have been adopted
regarding use of such consultants or advisors, the criteria to be used
in selecting such consultants or advisors, the services to be provided,
the term of service, or regarding the total amount of fees that may be
paid. However, because of the limited resources of the Company, it
is likely that any such fee the Company agrees to pay would be paid
in stock and not in cash. Otherwise, the Company anticipates that,
although management has limited experience and a lack of expertise in
analysis of business opportunities, members of management will use
their best judgment to review factors they deem important. This
includes, among other things, the following factors:
(1) Potential for growth and profitability, indicated by new
technology, anticipated market expansion, or new products;
(2) The Company's perception of how any particular business
opportunity will be received by the investment community and by the
Company's stockholders;
(3) Whether, following the business combination, the financial
condition of the business opportunity would be, or would have a
significant prospect in the foreseeable future of becoming sufficient to
enable the securities of the Company to qualify for listing on an
exchange or on a national automated securities quotation system, such
as NASDAQ. This would permit the trading of such securities to be
exempt from the requirements of Rule 15c2-6 adopted by the
Securities and Exchange Commission and thereby allow the Company
to be in a position to attract interest from a larger number of broker-
dealers who may be interested in making a market in the Company's
securities or underwriting new offerings of the Company's securities.
(See "Risk Factors - The Company - Regulation of Penny Stocks")
(4) Capital requirements and anticipated availability of
required funds, to be provided by the Company or from operations,
through the sale of additional securities, through joint ventures or
similar arrangements, or from other sources;
(5) The extent to which the business opportunity can be
advanced;
(6) Competitive position as compared to other companies of
similar size and experience within the industry segment as well as
within the industry as a whole;
(7) Strength and diversity of existing management, or
management prospects that are scheduled for recruitment;
(8) The cost of participation by the Company as compared to
the perceived tangible and intangible values and potential; and
(9) The accessibility of required management expertise,
personnel, raw materials, services, professional assistance, and other
required items.
In regard to the possibility that the shares of the Company
would qualify for listing on NASDAQ, the current standards include
the requirements that the issuer of the securities that are sought to be
listed have either net tangible assets of $4,000,000, market
capitalization of $50,000,000, or net income of $750,000, as well as
satisfying other requirements relating to minimum bid price, number
of shares in the public float, number of shareholders, and operating
history of at least 1 year. Many, and perhaps most, of the business
opportunities that might be potential candidates for a combination with
the Company would not satisfy the NASDAQ listing criteria either
immediately or in the foreseeable future.
No one of the factors described above will be controlling in
the selection of a business opportunity, and management will attempt
to analyze all factors appropriate to each opportunity and make a
determination based upon its analysis of such factors and other data it
is able to obtain given its limited resources. Potentially available
business opportunities may occur in many different industries and at
various stages of development, all of which will make the task of
comparative investigation and analysis of such business opportunities
extremely difficult and complex. Potential investors must recognize
that, because of the Company's limited capital available for
investigation and management's limited experience in business
analysis, the Company may not discover or adequately evaluate
adverse facts about the opportunity to be acquired.
The Company is unable to predict when it may participate in a
business opportunity. It expects, however, that the analysis of
specific proposals and the selection of a business opportunity may take
several months or more.
Prior to making a decision to participate in a business
opportunity, the Company will generally request that it be provided
with written materials regarding the business opportunity containing
such items as a description of products, services and company history;
management resumes; financial information; available projections,
with related assumptions upon which they are based; an explanation of
proprietary products and services; evidence of existing patents,
trademarks, or services marks, or rights thereto; present and proposed
forms of compensation to management; a description of transactions
between such company and its affiliates during relevant periods; a
description of present and required facilities; an analysis of risks and
competitive conditions; a financial plan of operation and estimated
capital requirements; audited financial statements, or if they are not
available, unaudited financial statements, together with reasonable
assurances that audited financial statements would be able to be
produced within a reasonable period of time not to exceed 60 days
following completion of an acquisition transaction; and other
information deemed relevant.
As part of the Company's investigation, the Company's
executive officers and directors may meet personally with
management and key personnel, may visit and inspect material
facilities, obtain independent analysis or verification of certain
information provided, check references of management and key
personnel, and take other reasonable investigative measures, to the
extent of the Company's limited financial resources and management
expertise.
It is possible that the range of business opportunities that might
be available for consideration by the Company could be limited by the
impact of Securities and Exchange Commission regulations regarding
purchase and sale of "penny stocks." Such regulations restrict the
activities of broker-dealers with respect to "penny stocks" and, as a
result, limit the number of broker-dealers who are willing to make a
market in such securities. The regulations would affect, and possibly
impair, any market that might develop in the Company's securities
until such time as they qualify for listing on NASDAQ or on another
exchange which would make them exempt from applicability of the
"penny stock" regulations. (See "Risk Factors - Regulation of Penny
Stocks")
Company management believes that various types of potential
merger or acquisition candidates might find a business combination
with the Company to be attractive. These include acquisition
candidates desiring to create a public market for their shares in order
to enhance liquidity for current shareholders; acquisition candidates
which have long-term plans for raising capital through the public sale
of securities and believe that the possible prior existence of a public
market for their securities would be beneficial; and, acquisition
candidates which plan to acquire additional assets through issuance of
securities rather than for cash, and believe that the possibility of
development of a public market for their securities will be of
assistance in that process. Acquisition candidates which have a need
for an immediate cash infusion are not likely to find a potential
business combination with the Company to be an attractive alternative.
Form of Acquisition
It is impossible to predict the manner in which the Company
may participate in a business opportunity. Specific business
opportunities will be reviewed as well as the respective needs and
desires of the Company and the promoters of the opportunity and,
upon the basis of that review and the relative negotiating strength of
the Company and such promoters, the legal structure or method
deemed by management to be suitable will be selected. Such structure
may include, but is not limited to, leases, purchase and sale
agreements, licenses, joint ventures and other contractual
arrangements. The Company may act directly or indirectly through
an interest in a partnership, corporation or other form of organization.
Implementing such structure may require the merger,
consolidation or reorganization of the Company with other
corporations or forms of business organization. In addition, the
present management and stockholders of the Company most likely will
not have control of a majority of the voting shares of the Company
following a merger or reorganization transaction. As part of such a
transaction, the Company's existing directors may resign and new
directors may be appointed without any vote by stockholders.
It is likely that the Company will acquire its participation in a
business opportunity through the issuance of Common Stock or other
securities of the Company. Although the terms of any such
transaction cannot be predicted, it should be noted that in certain
circumstances the criteria for determining whether or not an
acquisition is a so-called "tax free" reorganization under the Internal
Revenue Code of 1986, depends upon the issuance to the stockholders
of the acquired company of a controlling interest (i.e. 80% or more)
of the common stock of the combined entities immediately following
the reorganization. If a transaction were structured to take advantage
of these provisions rather than other "tax free" provisions provided
under the Internal Revenue Code, the Company's current stockholders
would retain in the aggregate 20% or less of the total issued and
outstanding shares. This could result in substantial additional dilution
in the equity of those who were stockholders of the Company prior to
such reorganization. Any such issuance of additional shares might
also be done simultaneously with a sale or transfer of shares
representing a controlling interest in the Company by the current
officers, directors and principal shareholders. (See "Description of
Business - General").
It is anticipated that any new securities issued in any
reorganization would be issued in reliance upon exemptions, if any
are available, from registration under applicable federal and state
securities laws. In some circumstances, however, as a negotiated
element of the transaction, the Company may agree to register such
securities either at the time the transaction is consummated, or under
certain conditions or at specified times thereafter. The issuance of
substantial additional securities and their potential sale into any
trading market that might develop in the Company's securities may
have a depressive effect upon such market.
The Company will participate in a business opportunity only
after the negotiation and execution of a written agreement. Although
the terms of such agreement cannot be predicted, generally such an
agreement would require specific representations and warranties by all
of the parties thereto, specify certain events of default, detail the
terms of closing and the conditions which must be satisfied by each of
the parties thereto prior to such closing, outline the manner of bearing
costs if the transaction is not closed, set forth remedies upon default,
and include miscellaneous other terms.
As a general matter, the Company anticipates that it, and/or its
principal shareholders, will enter into a letter of intent with the
management, principals or owners of a prospective business
opportunity prior to signing a binding agreement. Such a letter of
intent will set forth the terms of the proposed acquisition but will not
bind any of the parties to consummate the transaction. Execution of a
letter of intent will by no means indicate that consummation of an
acquisition is probable. Neither the Company nor any of the other
parties to the letter of intent will be bound to consummate the
acquisition unless and until a definitive agreement concerning the
acquisition as described in the preceding paragraph is executed. Even
after a definitive agreement is executed, it is possible that the
acquisition would not be consummated should any party elect to
exercise any right provided in the agreement to terminate it on
specified grounds.
It is anticipated that the investigation of specific business
opportunities and the negotiation, drafting and execution of relevant
agreements, disclosure documents and other instruments will require
substantial management time and attention and substantial costs for
accountants, attorneys and others. If a decision is made not to
participate in a specific business opportunity, the costs theretofore
incurred in the related investigation would not be recoverable.
Moreover, because many providers of goods and services require
compensation at the time or soon after the goods and services are
provided, the inability of the Company to pay until an indeterminate
future time may make it impossible to procure goods and services.
Investment Company Act and Other Regulation
The Company may participate in a business opportunity by
purchasing, trading or selling the securities of such business. The
Company does not, however, intend to engage primarily in such
activities. Specifically, the Company intends to conduct its activities
so as to avoid being classified as an "investment company" under the
Investment Company Act of 1940 (the "Investment Act"), and
therefore to avoid application of the costly and restrictive registration
and other provisions of the Investment Act, and the regulations
promulgated thereunder.
The Company's plan of business may involve changes in its
capital structure, management, control and business, especially if it
consummates a reorganization as discussed above. Each of these
areas is regulated by the Investment Act in order to protect purchasers
of investment company securities. Since the Company will not
register as an investment company, stockholders will not be afforded
these protections.
Any securities which the Company might acquire in exchange
for its Common Stock are expected to be "restricted securities" within
the meaning of the Securities Act of 1933, as amended (the "Act"). If
the Company elects to resell such securities, such sale cannot proceed
unless a registration statement has been declared effective by the
Securities and Exchange Commission or an exemption from
registration is available. Section 4(1) of the Act, which exempts sales
of securities not involving a public distribution by persons other than
the issuer, would in all likelihood be available to permit a private
sale. Although the plan of operation does not contemplate resale of
securities acquired, if such a sale were to be necessary, the Company
would be required to comply with the provisions of the Act to effect
such resale.
An acquisition made by the Company may be in an industry
which is regulated or licensed by federal, state or local authorities.
Compliance with such regulations can be expected to be a
time-consuming and expensive process.
Competition
The Company expects to encounter substantial competition in
its efforts to locate attractive opportunities, primarily from business
development companies, venture capital partnerships and corporations,
venture capital affiliates of large industrial and financial companies,
small investment companies, and wealthy individuals. Many of these
entities will have significantly greater experience, resources and
managerial capabilities than the Company and will therefore be in a
better position than the Company to obtain access to attractive
business opportunities. The Company also will experience competition
from other public "blind pool" companies, many of which may have
more funds available than does the Company.
Administrative Offices
The Company currently maintains a mailing address at 4807 S.
Zang Way, Morrison, Colorado 80465, which is the office address of
its President. The Company's telephone number there is (303) 979-
2404. Other than this mailing address, the Company does not
currently maintain any other office facilities, and does not anticipate
the need for maintaining office facilities at any time in the foreseeable
future. The Company pays no rent or other fees for the use of this
mailing address.
Employees
The Company is a development stage company and currently
has no employees. Management of the Company expects to use
consultants, attorneys and accountants as necessary, and does not
anticipate a need to engage any full-time employees so long as it is
seeking and evaluating business opportunities. The need for
employees and their availability will be addressed in connection with
the decision whether or not to acquire or participate in specific
business opportunities.
Risk Factors
A. Conflicts of Interest. Certain conflicts of interest exist
between the Company and its officers and directors. They have other
business interests to which they currently devote attention, and may be
expected to continue to do so although management time should be
devoted to the business of the Company. As a result, conflicts of
interest may arise that can be resolved only through their exercise of
judgment in a manner which is consistent with their fiduciary duties to
the Company. (See "Management," and "Conflicts of Interest.")
In particular, the Company's officers and directors currently
have an interest in six other blind pool or blank check companies.
Sunburst Acquisitions I, Inc., which was formed in February, 1997;
Sunburst Acquisitions III, Inc, Sunburst Acquisitions IV, Inc., each of
which was formed in August, 1997; and Sunburst Acquisitions V, Inc.
and Sunburst Acquisitions VI, Inc. which were formed in April, 1998,
have all completed their registrations under the Securities Exchange
Act of 1934. Although each of them has a business plan which is
identical to that of the Company, each of them also has certain
shareholders who are not also shareholders of the Company. Thus, to
an extent, they are in a conflict of interest position with respect to the
Company. Sunburst Acquisitions VIII, Inc., was formed in June,
1998, at the same time as the Company. It has a capital structure and
a business plan which is identical to that of the Company, and has the
same shareholders as the Company. Thus, its existence does not
create a conflict of interest. Company management may, in the
future, form additional blind pool or blank check companies with a
business plan similar or identical to that of the Company. Additional
blind pool or blank check companies formed in the future, which do
not have the same capital structure and shareholders as the Company,
may be considered to be in a conflict of interest position with the
Company, and as a result, may also be considered to be in direct
competition with the Company for available business opportunities.
(See Item 5 - "Directors, Executive Officers, Promoters and Control
Persons - Conflicts of Interest")
It is anticipated that the Company's principal shareholders may
actively negotiate or otherwise consent to the purchase of a portion of
their common stock as a condition to, or in connection with, a
proposed merger or acquisition transaction, and it is anticipated that a
substantial premium may be paid by the purchaser in conjunction with
any sale of shares by members of Company management which is
made as a condition to, or in connection with, a proposed merger or
acquisition transaction. In this process, the Company's principal
shareholders may consider their own personal pecuniary benefit rather
than the best interests of other Company shareholders, and the other
Company shareholders are not expected to be afforded the opportunity
to approve or consent to any particular stock buy-out transaction.
(See "Conflicts of Interest.")
B. Possible Need for Additional Financing. The Company
has very limited funds, and such funds may not be adequate to take
advantage of any available business opportunities. Even if the
Company's funds prove to be sufficient to acquire an interest in, or
complete a transaction with, a business opportunity, the Company
may not have enough capital to exploit the opportunity. The ultimate
success of the Company may depend upon its ability to raise
additional capital. The Company has not investigated the availability,
source, or terms that might govern the acquisition of additional capital
and will not do so until it determines a need for additional financing.
If additional capital is needed, there is no assurance that funds will be
available from any source or, if available, that they can be obtained
on terms acceptable to the Company. If not available, the Company's
operations will be limited to those that can be financed with its modest
capital. The Company has no current plans, proposals, arrangements
or understandings with respect to the sale or issuance of additional
securities prior to the location of an acquisition or merger candidate
or over the next twelve month period.
C. Regulation of Penny Stocks. The Company's
securities, when available for trading, will be subject to a Securities
and Exchange Commission rule that imposes special sales practice
requirements upon broker-dealers who sell such securities to persons
other than established customers or accredited investors. For
purposes of the rule, the phrase "accredited investors" means, in
general terms, institutions with assets in excess of $5,000,000, or
individuals having a net worth in excess of $1,000,000 or having an
annual income that exceeds $200,000 (or that, when combined with a
spouse's income, exceeds $300,000). For transactions covered by the
rule, the broker-dealer must make a special suitability determination
for the purchaser and receive the purchaser's written agreement to the
transaction prior to the sale. Consequently, the rule may affect the
ability of broker-dealers to sell the Company's securities and also may
affect the ability of purchasers in this offering to sell their securities
in any market that might develop therefor.
In addition, the Securities and Exchange Commission has
adopted a number of rules to regulate "penny stocks." Such rules
include Rules 3a51-1, 15g-1, 15g-2, 15g-3, 15g-4, 15g-5, 15g-6, and
15g-7 under the Securities Exchange Act of 1934, as amended.
Because the securities of the Company may constitute "penny stocks"
within the meaning of the rules, the rules would apply to the
Company and to its securities. The rules may further affect the
ability of owners of shares to sell the securities of the Company in
any market that might develop for them. Under the Securities
Enforcement Remedies and Penny Stock Reform Act of 1990, broker-
dealers which engage in transactions in penny stocks have additional
disclosure requirements, including the requirement to deliver a
standardized risk disclosure document that provides information about
penny stocks and the risks in the penny stock market. Broker-dealers
must also provide customers with current bid and offer quotations for
the penny stock, the compensation of the broker-dealer and its
salesperson in the transaction, and monthly statements showing the
market value of each penny stock held in the customer's account.
Shareholders should be aware that, according to Securities and
Exchange Commission Release No. 34-29093, the market for penny
stocks has suffered in recent years from patterns of fraud and abuse.
Such patterns include (i) control of the market for the security by one
or a few broker-dealers that are often related to the promoter or
issuer; (ii) manipulation of prices through prearranged matching of
purchases and sales and false and misleading press releases; (iii)
"boiler room" practices involving high-pressure sales tactics and
unrealistic price projections by inexperienced sales persons; (iv)
excessive and undisclosed bid-ask differentials and markups by selling
broker-dealers; and (v) the wholesale dumping of the same securities
by promoters and broker-dealers after prices have been manipulated to
a desired level, along with the resulting inevitable collapse of those
prices and with consequent investor losses. The Company's
management is aware of the abuses that have occurred historically in
the penny stock market. Although the Company does not expect to be
in a position to dictate the behavior of the market or of broker-dealers
who participate in the market, management will strive within the
confines of practical limitations to prevent the described patterns from
being established with respect to the Company's securities.
D. No Operating History. The Company was formed in
June of 1998 for the purpose of registering its common stock under
the 1934 Act and acquiring a business opportunity. The Company has
no operating history, revenues from operations, or assets other than
cash from private sales of stock. The Company faces all of the risks
of a new business and the special risks inherent in the investigation,
acquisition, or involvement in a new business opportunity. The
Company must be regarded as a new or "start-up" venture with all of
the unforeseen costs, expenses, problems, and difficulties to which
such ventures are subject.
E. No Assurance of Success or Profitability. There is no
assurance that the Company will acquire a favorable business
opportunity. Even if the Company should become involved in a
business opportunity, there is no assurance that it will generate
revenues or profits, or that the market price of the Company's
Common Stock will
be increased thereby.
F. Possible Business Not Identified and Highly Risky.
The Company has not identified and has no commitments to enter into
or acquire a specific business opportunity and therefore can disclose
the risks and hazards of a business or opportunity that it may enter
into in only a general manner, and cannot disclose the risks and
hazards of any specific business or opportunity that it may enter into.
An investor can expect a potential business opportunity to be quite
risky. The Company's acquisition of or participation in a business
opportunity will likely be highly illiquid and could result in a total
loss to the Company and its stockholders if the business or
opportunity proves to be unsuccessful. (See Item 1 "Description of
Business.")
G. Type of Business Acquired. The type of business to be
acquired may be one that desires to avoid effecting its own public
offering and the accompanying expense, delays, uncertainties, and
federal and state requirements which purport to protect investors.
Because of the Company's limited capital, it is more likely than not
that any acquisition by the Company will involve other parties whose
primary interest is the acquisition of control of a publicly traded
company. Moreover, any business opportunity acquired may be
currently unprofitable or present other negative factors.
H. Impracticability of Exhaustive Investigation. The
Company's limited funds and the lack of full-time management will
likely make it impracticable to conduct a complete and exhaustive
investigation and analysis of a business opportunity before the
Company commits its capital or other resources thereto. Management
decisions, therefore, will likely be made without detailed feasibility
studies, independent analysis, market surveys and the like which, if
the Company had more funds available to it, would be desirable. The
Company will be particularly dependent in making decisions upon
information provided by the promoter, owner, sponsor, or others
associated with the business opportunity seeking the Company's
participation. A significant portion of the Company's available funds
may be expended for investigative expenses and other expenses related
to preliminary aspects of completing an acquisition transaction,
whether or not any business opportunity investigated is eventually
acquired.
I. Lack of Diversification. Because of the limited
financial resources that the Company has, it is unlikely that the
Company will be able to diversify its acquisitions or operations. The
Company's probable inability to diversify its activities into more than
one area will subject the Company to economic fluctuations within a
particular business or industry and therefore increase the risks
associated with the Company's operations.
J. Possible Reliance Upon Unaudited Financial
Statements. The Company generally will require audited financial
statements from companies that it proposes to acquire. No assurance
can be given, however, that audited financials will be available to the
Company. In cases where audited financials are unavailable, the
Company will have to rely upon unaudited information received from
target companies' management that has not been verified by outside
auditors. The lack of the type of independent verification which
audited financial statements would provide, increases the risk that the
Company, in evaluating an acquisition with such a target company,
will not have the benefit of full and accurate information about the
financial condition and operating history of the target company. This
risk increases the prospect that the acquisition of such a company
might prove to be an unfavorable one for the Company or the holders
of the Company's securities.
Moreover, the Company will, by virtue of this registration, be
subject to the reporting provisions of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and currently anticipates that
it would voluntarily continue to file periodic reports in the event that
its obligation to file such reports is suspended under the Exchange
Act. Thus, the Company will be required to furnish certain
information about significant acquisitions, including audited financial
statements for any business that it acquires. Consequently, acquisition
prospects that do not have, or are unable to provide reasonable
assurances that they will be able to obtain, the required audited
statements would not be considered by the Company to be appropriate
for acquisition so long as the reporting requirements of the Exchange
Act are applicable. Should the Company, during the time it remains
subject to the reporting provisions of the Exchange Act, complete an
acquisition of an entity for which audited financial statements prove to
be unobtainable, the Company would be exposed to enforcement
actions by the Securities and Exchange Commission (the
"Commission") and to corresponding administrative sanctions,
including permanent injunctions against the Company and its
management. The legal and other costs of defending a Commission
enforcement action are likely to have material, adverse consequences
for the Company and its business. The imposition of administrative
sanctions would subject the Company to further adverse consequences.
In addition, the lack of audited financial statements would
prevent the securities of the Company from becoming eligible for
listing on NASDAQ, the automated quotation system sponsored by the
National Association of Securities Dealers, Inc., or on any existing
stock exchange. Moreover, the lack of such financial statements is
likely to discourage broker-dealers from becoming or continuing to
serve as market makers in the securities of the Company. Without
audited financial statements, the Company would almost certainly be
unable to offer securities under a registration statement pursuant to the
Securities Act of 1933, and the ability of the Company to raise capital
would be significantly limited until such financial statements were to
become available.
K. Other Regulation. An acquisition made by the
Company may be of a business that is subject to regulation or
licensing by federal, state, or local authorities. Compliance with such
regulations and licensing can be expected to be a time-consuming,
expensive process and may limit other investment opportunities of the
Company.
L. Dependence upon Management; Limited Participation
of Management. The Company will be heavily dependent upon the
skills, talents, and abilities of its officers and directors to implement
its business plan, and may, from time to time, find that the inability
of such persons to devote their full time attention to the business of
the Company results in a delay in progress toward implementing its
business plan. Furthermore, the Company will be entirely dependent
upon the experience of its officers and directors in seeking,
investigating, and acquiring a business and in making decisions
regarding the Company's operations. See "Management." Because
investors will not be able to evaluate the merits of possible business
acquisitions by the Company, they should critically assess the
information concerning the Company's officers and directors.
M. Lack of Continuity in Management. The Company
does not have an employment agreement with any of its officers or
directors, and as a result, there is no assurance that they will continue
to manage the Company in the future. In connection with acquisition
of a business opportunity, it is likely the current officers and directors
of the Company may resign. A decision to resign will be based upon
the identity of the business opportunity and the nature of the
transaction, and is likely to occur without the vote or consent of the
stockholders of the Company.
N. Indemnification of Officers and Directors. The
Company's Articles of Incorporation provide for the indemnification
of its directors, officers, employees, and agents, under certain
circumstances, against attorney's fees and other expenses incurred by
them in any litigation to which they become a party arising from their
association with or activities on behalf of the Company. The
Company will also bear the expenses of such litigation for any of its
directors, officers, employees, or agents, upon such person's promise
to repay the Company therefor if it is ultimately determined that any
such person shall not have been entitled to indemnification. This
indemnification policy could result in substantial expenditures by the
Company which it will be unable to recoup.
O. Director's Liability Limited. The Company's Articles
of Incorporation exclude personal liability of its directors to the
Company and its stockholders for monetary damages for breach of
fiduciary duty except in certain specified circumstances. Accordingly,
the Company will have a much more limited right of action against its
directors than otherwise would be the case. This provision does not
affect the liability of any director under federal or applicable state
securities laws.
P. Dependence Upon Outside Advisors. To supplement
the business experience of its officers and directors, the Company
may be required to employ accountants, technical experts, appraisers,
attorneys, or other consultants or advisors. The selection of any such
advisors will be made by the Company's officers without any input
from stockholders. Furthermore, it is anticipated that such persons
may be engaged on an "as needed" basis without a continuing
fiduciary or other obligation to the Company. In the event the
officers of the Company consider it necessary to hire outside advisors,
they may elect to hire persons who are affiliates, if they are able to
provide the required services.
Q. Leveraged Transactions. There is a possibility that any
acquisition of a business opportunity by the Company may be
leveraged, i.e., the Company may finance the acquisition of the
business opportunity by borrowing against the assets of the business
opportunity to be acquired, or against the projected future revenues or
profits of the business opportunity. This could increase the
Company's exposure to larger losses. A business opportunity
acquired through a leveraged transaction is profitable only if it
generates enough revenues to cover the related debt and expenses.
Failure to make payments on the debt incurred to purchase the
business opportunity could result in the loss of a portion or all of the
assets acquired. There is no assurance that any business opportunity
acquired through a leveraged transaction will generate sufficient
revenues to cover the related debt and expenses.
R. Competition. The search for potentially profitable
business opportunities is intensely competitive. The Company expects
to be at a disadvantage when competing with many firms that have
substantially greater financial and management resources and
capabilities than the Company. These competitive conditions will
exist in any industry in which the Company may become interested.
S. No Foreseeable Dividends. The Company has not paid
dividends on its Common Stock and does not anticipate paying such
dividends in the foreseeable future.
T. Loss of Control by Present Management and
Stockholders. The Company may consider an acquisition in which the
Company would issue, as consideration for the business opportunity to
be acquired, an amount of the Company's authorized but unissued
Common Stock that would, upon issuance, represent the great
majority of the voting power and equity of the Company. The result
of such an acquisition would be that the acquired company's
stockholders and management would control the Company, and the
Company's management could be replaced by persons unknown at this
time. Such a merger would result in a greatly reduced percentage of
ownership of the Company by its current shareholders. In addition,
the Company's officers and directors could sell their control block of
stock at a premium price to the acquired company's stockholders.
U. No Public Market Exists. There is no public market
for the Company's common stock, and no assurance can be given that
a market will develop or that a shareholder ever will be able to
liquidate his investment without considerable delay, if at all. If a
market should develop, the price may be highly volatile. Factors such
as those discussed in this "Risk Factors" section may have a
significant impact upon the market price of the securities offered
hereby. Owing to the low price of the securities, many brokerage
firms may not be willing to effect transactions in the securities. Even
if a purchaser finds a broker willing to effect a transaction in these
securities, the combination of brokerage commissions, state transfer
taxes, if any, and any other selling costs may exceed the selling price.
Further, many lending institutions will not permit the use of such
securities as collateral for any loans.
V. Rule 144 Sales. All of the outstanding shares of
Common Stock and the outstanding shares of Class A Convertible
Preferred Stock held by present stockholders are "restricted securities"
within the meaning of Rule 144 under the Securities Act of 1933, as
amended. As restricted shares, these shares may be resold only
pursuant to an effective registration statement or under the
requirements of Rule 144 or other applicable exemptions from
registration under the Act and as required under applicable state
securities laws. Rule 144 provides in essence that a person who has
held restricted securities for a minimum of one year may, under
certain conditions, sell every three months, in brokerage transactions,
a number of shares that does not exceed the greater of 1.0% of a
company's outstanding shares or the average weekly trading volume
during the four calendar weeks prior to the sale. Rule 144 also
contains other restrictions on the manner of sale of restricted
securities which are applicable to affiliates of the Company and to
non-affiliates who have held their shares for less than two years. The
volume limitations and other restrictions imposed by Rule 144 are not
applicable to resales of restricted securities by non-affiliates who have
held their shares for more than two years. A sale under Rule 144 or
under any other exemption from the Act, if available, or pursuant to
subsequent registrations of shares of Common Stock of present
stockholders, may have a depressive effect upon the price of the
Common Stock in any market that may develop. A total of 1,899,000
shares of common stock held by present stockholders of the Company
will become available for resale under Rule 144 ninety (90) days after
the Company registers its common stock under Section 12(g) of the
Securities and Exchange Commission. All of the remaining issued
and outstanding common stock, as well as the 100,000 shares of Class
A Convertible Preferred Stock which are currently issued and
outstanding, and the shares of common stock into which such
preferred shares may be converted, will become available for resale
starting in June, 1999.
W. Blue Sky Considerations. Because the securities
registered hereunder have not been registered for resale under the blue
sky laws of any state, and the Company has no current plans to
register or qualify its shares in any state, the holders of such shares
and persons who desire to purchase them in any trading market that
might develop in the future, should be aware that there may be
significant state blue sky law restrictions upon the ability of investors
to sell the securities and of purchasers to purchase the securities. As a
result of recent changes in federal law, non-issuer trading or resale of
the Company's securities may be exempt from state registration or
qualification requirements. However, some states may continue to
attempt to restrict the trading or resale of blind-pool or "blank-check"
securities. Accordingly, although management is not currently aware
of any states in which investors will be unable to resell their shares,
investors should consider the secondary market for the Company's
securities to be a limited one.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OR PLAN OF OPERATIONS.
Liquidity and Capital Resources
The Company remains in the development stage and, since
inception, has experienced no significant change in liquidity or capital
resources or stockholder's equity other than the receipt of net
proceeds in the amount of $10,000 from its inside capitalization
funds. Consequently, the Company's balance sheet for the period
ending June 30, 1998, reflects both a current asset and a total asset
value of $10,000 which is all in the form of cash.
The Company will carry out its plan of business as discussed
above. The Company cannot predict to what extent its liquidity and
capital resources will be diminished prior to the consummation of a
business combination or whether its capital will be further depleted by
the operating losses (if any) of the business entity which the Company
may eventually acquire.
Results of Operations
The Company has not yet engaged in any significant operations
other than organizational activities, acquisition of capital and
preparation for filing of its Registration Statement on Form 10-SB for
purposes of registration of its securities under the Securities Exchange
Act of 1934, as amended. No revenues have been received by the
Company.
For the current fiscal year, the Company anticipates incurring
a loss as a result of organizational expenses, expenses associated with
registration under the Securities Exchange Act of 1934, and expenses
associated with locating and evaluating acquisition candidates. The
Company anticipates that until a business combination is completed
with an acquisition candidate, it will not generate revenues other than
interest income, and may continue to operate at a loss after
completing a business combination, depending upon the performance
of the acquired business.
Need for Additional Financing
The Company believes that its existing capital will be sufficient
to meet the Company's cash needs, including the costs of compliance
with the continuing reporting requirements of the Securities Exchange
Act of 1934, as amended, for a period of approximately one year.
Accordingly, in the event the Company is able to complete a business
combination during this period, it anticipates that its existing capital
will be sufficient to allow it to accomplish the goal of completing a
business combination. There is no assurance, however, that the
available funds will ultimately prove to be adequate to allow it to
complete a business combination, and once a business combination is
completed, the Company's needs for additional financing are likely to
increase substantially.
No commitments to provide additional funds have been made
by management or other stockholders. Accordingly, there can be no
assurance that any additional funds will be available to the Company
to allow it to cover its expenses.
Irrespective of whether the Company's cash assets prove to be
inadequate to meet the Company's operational needs, the Company
might seek to compensate providers of services by issuances of stock
in lieu of cash. For information as to the Company's policy in regard
to payment for consulting services, see "Certain Relationships and
Transactions."
CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE
HARBOR" PROVISIONS OF THE PRIVATE SECURITIES
LITIGATION REFORM ACT OF 1995. Except for historical
matters, the matters discussed in this Form 10-SB are forward-looking
statements based on current expectations, and involve risks and
uncertainties. Forward-looking statements include, but are not limited
to, statements under the following headings:
(i) "Description of Business - General" - the general
description of the Company's plan to seek a merger or acquisition
candidate, and the types of business opportunities that may be
pursued.
(ii) "Description of Business - Investigation and Selection
of Business Opportunities" - the steps which may be taken to
investigate prospective business opportunities, and the factors which
may be used in selecting a business opportunity.
(iii) "Description of Business - Form of Acquisition" - the
manner in which the Company may participate in a business
acquisition.
The Company wishes to caution the reader that there are many
uncertainties and unknown factors which could affect its ability to
carry out its business plan in the manner described herein. Many of
these uncertainties and unknown factors are discussed herein under the
heading "Risk Factors."
Item 3. DESCRIPTION OF PROPERTY.
The Company does not currently maintain an office or any
other facilities. It does currently maintain a mailing address at 4807
S. Zang Way, Morrison, Colorado 80465, which is the address of its
President. The Company pays no rent for the use of this mailing
address. The Company does not believe that it will need to maintain
an office at any time in the foreseeable future in order to carry out its
plan of operations described herein. The Company's telephone
number is (303) 979-2404.
Item 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT.
The following table sets forth, as of the date of this
Registration Statement, the number of shares of Common Stock
owned of record and beneficially by executive officers, directors and
persons who hold 5% or more of the outstanding Common Stock of
the Company. Also included are the shares held by all executive
officers and directors as a group.
<TABLE>
<CAPTION>
%
of
Number of Shares Class
Name and address Owned Beneficially Owned
<S> <C> <C>
Michael R. Quinn<F1>
2082 Cherry Street
Denver, Colorado 80207 837,000<F2><F3> 39.20%
Jay Lutsky<F1>
4807 S. Zang Way
Morrison, Colorado 80465 833,000<F2><F4> 39.02%
All directors and executive
officers (2 persons) 1,670,000 78.22%
<FN>
<F1> The person listed is an officer and a director of the Company.
<F2> Includes 15,000 shares of common stock issuable upon conversion of
7,500 shares of Series A Preferred Stock owned by Mr. Quinn, and 15,000
shares of common stock issuable upon conversion of 7,500 shares of Series A
Preferred Stock owned by Mr. Quinn's spouse, of which Mr. Quinn may be
deemed to be the beneficial owner. Each outstanding share of Series A
Preferred Stock is convertible into two shares of common stock at any time on
or after January 1, 1999.
<F3> Includes 1,000 shares of common stock owned by Mr. Quinn's
spouse, of which Mr. Quinn may be deemed to be the beneficial owner.
<F4> Includes 20,000 shares of common stock issuable upon conversion of
10,000 shares of Series A Preferred Stock owned by Mr. Lutsky. Each
outstanding share of Series A Preferred Stock is convertible into two shares of
common stock at any time on or after January 1, 1999.
<F5> Includes 5,000 shares of common stock owned by Mr. Lutsky's
spouse of which Mr. Lutsky may be deemed to be the beneficial owner.
</FN>
</TABLE>
Item 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS
AND CONTROL PERSONS.
The directors and executive officers currently serving the Company
are as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
Name Age Positions Held and Tenure
Jay Lutsky 54 President and Director
Michael R. Quinn 73 Secretary/Treasurer and Director
</TABLE>
The directors named above will serve until the first annual
meeting of the Company's stockholders. Thereafter, directors will be
elected for one-year terms at the annual stockholders' meeting.
Officers will hold their positions at the pleasure of the board of
directors, absent any employment agreement, of which none currently
exists or is contemplated. There is no arrangement or understanding
between any of the directors or officers of the Company and any other
person pursuant to which any director or officer was or is to be
selected as a director or officer. There are no agreements or
understandings for any officer or director to resign at the request of
another person, and none of the officers or directors are acting on
behalf of, or will act at the direction of, any other person.
The directors and officers will devote their time to the
Company's affairs on an "as needed" basis, which, depending on the
circumstances, could amount to as little as two hours per month, or
more than forty hours per month. More than likely, their time
commitment will fall within the range of five to ten hours per month.
Biographical Information
JAY LUTSKY
Mr. Lutsky has served as President and as a Director of the
Company since its inception. From 1968 to 1974, Mr. Lutsky was
employed at United Bank of Denver in various management positions,
including Guaranteed Check Manager, Corporate Programs Manager
and Executive Lending Officer. From April 1974 through April
1980, Mr. Lutsky was involved in the publishing and ski promotions
business, serving as President of Mountain States Ski Association, a
company he helped to start. From August 1983 through September
1985, Mr. Lutsky worked in the positions of General Manager of the
SumFun Program, Regional marketing Manager, and Investor
Relations Manager for Gold C Enterprises, Inc., a publicly-traded
Colorado corporation that published discount coupon books. Since
May of 1980, Mr. Lutsky has done business as Dolphin & Associates,
a private consulting firm and he has managed his personal investment
portfolio.
Mr. Lutsky has served on the board and been president of
several public companies. From December 1986 through May, 1990,
Mr. Lutsky served as president of Eagle Venture Acquisitions, Inc.
("Eagle"). Eagle merged with Network Financial Services, Inc.
("Network") in May 1990. Mr. Lutsky continued on the board of
Network which traded on the NASDAQ system until December,
1993. Mr. Lutsky was a vice-president and served on the board of
Starlight Acquisitions, Inc. ("Starlight") a blank check offering.
Starlight merged with Toucan Gold Corporation ("Toucan"), TUGO-
Bulletin Board, on May 10, 1996. Mr. Lutsky now serves as an
advisor to the current board of directors of Toucan. Until November,
1997, Mr. Lutsky was an officer and served on the board of directors
of Gatwick, Ltd., a Regulation A public company. In November,
1997, Gatwick, Ltd., changed its name to AIM Smart Corporation
and completed a share acquisition transaction with Smart AIM
Corporation, a Michigan corporation. Mr. Lutsky also currently
serves as an officer and director of Sunburst Acquisitions I, Inc.,
Sunburst Acquisitions III, Inc., Sunburst Acquisitions IV, Inc., and
Sunburst Acquisitions V, Inc., Sunburst Acquisitions VI, Inc., and
Sunburst Acquisitions VIII, Inc., all of which are blind pool or blank
check companies he has formed in conjunction with Mr. Quinn.
He earned a Bachelor of Science degree from Kent State
University in 1967.
MICHAEL R. QUINN
Mr. Quinn has served as Secretary and Director of the
Company since its inception. He has been involved with several
development stage companies. He consults with companies
contemplating trading publicly and his services consist of corporate
structuring, management, accounting, productions, sales, etc.
Mr. Quinn earned the degrees of Metallurgical Engineer and
Engineer of Mines at the Colorado School of Mines in 1946. He did
graduate work and was employed as a research assistant at MIT.
Over the last six years, Mr. Quinn has served as a consultant
to equity holders involved in a bankruptcy case, as a consultant and
lead plaintiff in three lawsuits, all of which have resulted in favorable
decisions for the plaintiff.
He served as President, Treasurer and Director of O.T.C.
Capital Corporation ("OTC"). OTC acquired Capital 2000 and is
currently actively trading. He was a founder of American Leverage,
Inc., and was its Secretary/Treasurer and a Director until American
Leverage, Inc. acquired Data National Corporation ("Data"). Data is
active, profitable and in a growth mode. Until November, 1997, Mr.
Quinn was an officer and served on the board of directors of Gatwick,
Ltd., a Regulation A public company. In November, 1997, Gatwick,
Ltd., changed its name to AIM Smart Corporation and completed a
share acquisition transaction with Smart AIM Corporation, a Michigan
corporation. Mr. Quinn also currently serves on the board of
directors of Sunburst Acquisition I, Inc., Sunburst Acquisition III,
Inc., Sunburst Acquisitions IV, Inc., Sunburst Acquisitions V, Inc.,
Sunburst Acquisitions VI, Inc., and Sunburst Acquisitions VIII, Inc.,
all of which are blind pool or blank check companies he has formed
in conjunction with Mr. Lutsky.
Indemnification of Officers and Directors
As permitted by Colorado law, the Company's Articles of
Incorporation provide that the Company will indemnify its directors
and officers against expenses and liabilities they incur to defend,
settle, or satisfy any civil or criminal action brought against them on
account of their being or having been Company directors or officers
unless, in any such action, they are adjudged to have acted with gross
negligence or willful misconduct. Insofar as indemnification for
liabilities arising under the Securities Act of 1933 may be permitted to
directors, officers or persons controlling the Company pursuant to the
foregoing provisions, the Company has been informed that, in the
opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in that Act and
is, therefore, unenforceable.
Exclusion of Liability
Pursuant to the Colorado Business Corporation Act, the
Company's Articles of Incorporation exclude personal liability for its
directors for monetary damages based upon any violation of their
fiduciary duties as directors, except as to liability for any breach of
the duty of loyalty, acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, acts in
violation of Section 7-106-401 of the Colorado Business Corporation
Act, or any transaction from which a director receives an improper
personal benefit. This exclusion of liability does not limit any right
which a director may have to be indemnified and does not affect any
director's liability under federal or applicable state securities laws.
Other Blind Pool Activities
Each of the Company's executive officers, directors, and
principal shareholders is also currently an officer, director and
shareholder of Sunburst Acquisitions I, Inc., Sunburst Acquisitions
III, Inc., Sunburst Acquisitions IV, Inc., Sunburst Acquisitions V,
Inc., Sunburst Acquisitions VI, Inc., and Sunburst Acquisitions VIII,
Inc., each of which is also a public shell corporation. The Company
and these other entities may be in competition with each other for
prospective companies to acquire. See "Conflicts of Interest" below.
On May 19, 1998, Sunburst Acquisitions I, Inc., entered into a
conditional agreement to acquire all of the issued and outstanding
capital stock of Invu, PLC, a company incorporated under English
law, in exchange for shares of common stock of Sunburst
Acquisitions, I, Inc, representing control of that company. Invu, PLC
is a software development company whose business is to develop and
sell software for electronic management of many types of information
and documents such as forms, correspondence, literature, faxes and
technical drawings. There is no assurance that the transaction
between Sunburst Acquisitions I, Inc., and Invu, PLC, will close as
contemplated, but in the event that all of the conditions precedent to
closing are satisfied, the transaction is scheduled to close on or before
August 17, 1998. The current officers and directors of Sunburst
Acquisitions I, Inc., will resign upon closing the contemplated
transaction with Invu, PLC.
In addition, the Company's officers and directors have each
been affiliated in the past with other blind pool companies. Such
other companies and affiliations are described below.
Mr. Quinn and Mr. Lutsky were founders and officers and
directors of Sunburst Acquisitions II, Inc., which was formed in
March, 1997. Mr. Quinn was one of the founders, and both Mr.
Quinn and Mr. Lutsky were officers, directors and principal
shareholders of Gatwick, Ltd., a blind pool formed in 1989.
Sunburst Acquisitions II, Inc., filed a registration statement
under the Securities Exchange Act of 1934 which became effective on
or about August 4, 1997. On or about May 8, 1998, Sunburst
Acquisitions II, Inc., acquired certain oil and gas properties and
contract rights from Vector Energy Corporation, a Texas corporation,
in exchange for the issuance of 19,710,000 shares of the authorized
but previously unissued shares of its common stock. In conjunction
with the acquisition of assets, the company changed its name to
Vector Energy Corporation, and Mr. Quinn and Mr. Lutsky resigned
as officers and directors of Sunburst Acquisitions II, Inc.. In
addition, certain shareholders of Sunburst Acquisitions II, Inc, sold
333,333 shares of common stock to a purchaser designated by Vector
Energy Corporation for a total purchase price of $100,000. There is
currently a trading market for the shares of Vector Energy
Corporation (formerly Sunburst Acquisitions II, Inc.) on the OTC
Bulletin Board, under the trading symbol "VECT."
Gatwick, Ltd., filed a Regulation A Offering Statement with
the Securities and Exchange Commission in 1988. In October, 1997,
Gatwick changed its name to AIM Smart Corporation. Thereafter,
pursuant to a Share Exchange Agreement dated November 14, 1997,
AIM Smart Corporation (formerly Gatwick) acquired all of the issued
and outstanding stock of Smart AIM Corporation, a Michigan
corporation, in exchange for the issuance of 22,665,000 shares of its
authorized but previously unissued shares of common stock, thereby
making Smart AIM Corporation a wholly owned subsidiary. In
conjunction with this transaction, Infoplan, Inc., a Delaware
corporation purchased 1,097,167 shares of the issued and outstanding
stock of AIM Smart Corporation from a group of its former
shareholders. The shares of AIM Smart Corporation (formerly
Gatwick) trade on the OTC Bulletin Board under the symbol AIMS.
Conflicts of Interest
None of the officers of the Company will devote more than a
portion of his time to the affairs of the Company. There will be
occasions when the time requirements of the Company's business
conflict with the demands of the officers' other business and
investment activities. Such conflicts may require that the Company
attempt to employ additional personnel. There is no assurance that
the services of such persons will be available or that they can be
obtained upon terms favorable to the Company.
Each of the Company's officers and directors is also an officer
and director of four other development-stage corporations in the same
business as the Company. See "Other Blind Pool Activities." These
companies will be in direct competition for available opportunities.
When a business opportunity comes to the attention of any of
the Company's officers or directors, he intends to inform the other
officers and directors of the Company, and together, they will
determine which blind pool or public shell company will have the first
option to consider an acquisition of the particular target. It is
presently anticipated that the officers and directors will pursue a
policy whereby the opportunity will be presented to the public
company that has had its securities registered pursuant to Section
12(g) of the 1934 Act for the longest period of time. In the event that
none of the pools is more mature than the others, the officers and
directors will arbitrarily assign the particular business opportunity to
one of the pool companies. Potential investors should expect that,
because of the policy that will be employed by the Company's officers
and directors as set forth above, whereby more "mature" pool
companies will have business opportunities presented to them first, the
Company and its shareholders may have to wait a significant amount
of time before an appropriate business opportunity for the Company is
identified.
Members of management have a fiduciary obligation to the
stockholders of the Company, as well as to the stockholders of other
companies with which they are affiliated. Should a business
opportunity that would be appropriate for consideration by the
Company arise and be presented by an officer or director of the
Company to another company with which one of them is affiliated,
and not be presented to the Company, then any one or all of them
may be unable to satisfy his fiduciary obligation to the Company's
stockholders. Notwithstanding the foregoing, however, as of the date
of this registration statement, the Company and the other blind-pool
company described herein, have the same shareholders. It is also
anticipated that both such companies will continue to have the same
shareholders until such time as a public market, if any, develops for
their shares. Since a public market is not expected to develop for the
shares of the Company, or for the other blind-pool company, until
they have completed the acquisition of a business opportunity, the
possibility of claims by a shareholder of the Company, or of the other
blind pool company, alleging breach of fiduciary duty by the officers
and directors, is substantially reduced or eliminated.
Company management intends to actively negotiate or
otherwise consent to the purchase of a portion of their common stock
as a condition to, or in connection with, a proposed merger or
acquisition transaction. Members of management acquired their
shares for services rendered at a price of $0.001 per share, and the
total purchase price for all presently issued and outstanding shares,
including both common stock of Series A Convertible Preferred Stock
was $11,935, of which $10,000 was paid in cash and $1,935 was paid
in the form of performance of services. It is anticipated that a
substantial premium may be paid by the purchaser in conjunction with
any sale of shares by members of Company management which is
made as a condition to, or in connection with, a proposed merger or
acquisition transaction. The fact that a substantial premium may be
paid to members of Company management to acquire their shares
creates a conflict of interest for them and may compromise their state
law fiduciary duties to the Company's other shareholders. In making
any such sale, members of Company management may consider their
own personal pecuniary benefit rather than the best interests of the
Company and the Company's other shareholders, and the other
shareholders are not expected to be afforded the opportunity to
approve or consent to any particular buy-out transaction involving
shares held by members of Company management.
Item 6. EXECUTIVE COMPENSATION.
At inception of the Company, the Company's two directors
each received 825,000 shares of common stock valued at $0.001 per
share which were issued for services rendered to the Company in
investigating and developing the Company's business plan and for
agreeing to be a Director. No officer or director has received any
other remuneration. Until the Company acquires additional capital, it
is not intended that any officer or director will receive compensation
from the Company other than reimbursement for out-of-pocket
expenses incurred on behalf of the Company. See "Certain
Relationships and Related Transactions." The Company has no stock
option, retirement, pension, or profit-sharing programs for the benefit
of directors, officers or other employees, but the Board of Directors
may recommend adoption of one or more such programs in the future.
The Company has employed the law firm of Frascona, Joiner
& Goodman, P.C., in which one of its shareholders, Gary S. Joiner,
is a shareholder, to provide legal services in connection with
registration of the Company's shares. It may also employ the same
law firm to provide legal services in connection with the acquisition of
a business. Mr. Joiner and any other members of his firm, if
employed, would be paid their normal hourly rate for legal services
provided.
Item 7. CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS.
Prior to the date of this Prospectus, the Company issued to its
officers, directors, and others a total of 1,935,000 shares of Common
Stock, valued at $0.001 per share, or an aggregate total of $1,935, for
services rendered to the Company. The company also sold a total of
100,000 shares of its Series A Convertible Preferred Stock at a price
of $0.10 per share. Each share of Series A Convertible Preferred
Stock is convertible into two shares of common stock on or after
November 1, 1998. Upon conversion of the outstanding Series A
Convertible Preferred Stock to common stock, the effective price per
share of common stock paid by the persons who purchased preferred
stock will be $0.05 per share. For additional information concerning
restrictions that are imposed upon the securities held by current
stockholders, and the responsibilities of such stockholders to comply
with federal securities laws in the disposition of such Common Stock,
see "Risk Factors - Rule 144 Sales."
On or about July 15, 1998, two of the officers and directors of
the company made gifts of a portion of their common shares to
various friends and family members. Michael R. Quinn transferred a
total of 19,000 shares to 88 people, and Jay Lutsky transferred a total
of 17,000 shares to 17 people. The shares which were transferred by
gift are considered restricted securities in the hands of the donees.
No officer, director, promoter, or affiliate of the Company has
or proposes to have any direct or indirect material interest in any asset
proposed to be acquired by the Company through security holdings,
contracts, options, or otherwise.
The Company has adopted a policy under which any consulting
or finder's fee that may be paid to a third party for consulting services
to assist management in evaluating a prospective business opportunity
would be paid in stock or in cash. Any such issuance of stock would
be made on an ad hoc basis. Accordingly, the Company is unable to
predict whether or, in what amount, such a stock issuance might be
made.
It is not currently anticipated that any salary, consulting fee, or
finder's fee shall be paid to any of the Company's directors or
executive officers, or to any other affiliate of the Company except as
described under "Executive Compensation" above.
The Company maintains a mailing address at the residence of
its President, for which it pays no rent, and for which it does not
anticipate paying rent in the future. The Company anticipates that
following the consummation of a business combination with an
acquisition candidate, the Company's office will be moved, but cannot
predict future office or facility arrangements with officers, directors
or affiliates of the Company.
Although management has no current plans to cause the
Company to do so, it is possible that the Company may enter into an
agreement with an acquisition candidate requiring the sale of all or a
portion of the Common Stock or Series A Convertible Preferred Stock
held by the Company's current stockholders to the acquisition
candidate or principals thereof, or to other individuals or business
entities, or requiring some other form of payment to the Company's
current stockholders, or requiring the future employment of specified
officers and payment of salaries to them. It is more likely than not
that any sale of securities by the Company's current stockholders to
an acquisition candidate would be at a price substantially higher than
that originally paid by such stockholders. Any payment to current
stockholders in the context of an acquisition involving the Company
would be determined entirely by the largely unforeseeable terms of a
future agreement with an unidentified business entity.
Item 8. DESCRIPTION OF SECURITIES.
Common Stock
The Company's Articles of Incorporation authorize the
issuance of 100,000,000 shares of Common Stock. Each record
holder of Common Stock is entitled to one vote for each share held on
all matters properly submitted to the stockholders for their vote.
Cumulative voting for the election of directors is not permitted by the
Articles of Incorporation.
Holders of outstanding shares of Common Stock are entitled to
such dividends as may be declared from time to time by the Board of
Directors out of legally available funds; and, in the event of
liquidation, dissolution or winding up of the affairs of the Company,
holders are entitled to receive, ratably, the net assets of the Company
available to stockholders after distribution is made to the preferred
stockholders, if any, who are given preferred rights upon liquidation.
Holders of outstanding shares of Common Stock have no preemptive,
conversion or redemptive rights. All of the issued and outstanding
shares of Common Stock are, and all unissued shares when offered
and sold will be, duly authorized, validly issued, fully paid, and
nonassessable. To the extent that additional shares of the Company's
Common Stock are issued, the relative interests of then existing
stockholders may be diluted.
Preferred Stock
The Company's Articles of Incorporation authorize the
issuance of 20,000,000 shares of preferred stock. The Board of
Directors of the Company is authorized to issue the preferred stock
from time to time in series and is further authorized to establish such
series, to fix and determine the variations in the relative rights and
preferences as between series, to fix voting rights, if any, for each
series, and to allow for the conversion of preferred stock into
Common Stock. The Board of Directors has authorized the issuance
of 100,000 shares of Series A Convertible Preferred Stock. This
Series A Convertible Preferred Stock is redeemable in whole or in
part, at the option of the Company, at a redemption price of $0.15 per
share, plus accrued and unpaid dividends, at any time after the earlier
of July 1, 2000, or the date upon which the Company completes a
merger, acquisition, reorganization or other transaction resulting in a
change of control. Each share of Series A Convertible Preferred
Stock has a preferential liquidation value of $0.10 per share, and is
convertible at the option of the holder into two shares of common
stock at any time on or after January 1, 1999. No dividends are
payable on the Series A Convertible Preferred Stock on or before July
1, 2000. Thereafter, dividends equal to $0.01 per annum per share
are payable quarterly in arrears when and as declared by the board of
directors. Payment of dividends on the Series A Convertible
Preferred Stock is preferred and has priority over payment of
dividends on the outstanding common stock of the Company. Holders
of Series A Convertible Preferred Stock have no voting rights.
Reports to Stockholders
The Company plans to furnish its stockholders with an annual
report for each fiscal year ending June 30 containing financial
statements audited by its independent certified public accountants. In
the event the Company enters into a business combination with
another company, it is the present intention of management to
continue furnishing annual reports to stockholders. Additionally, the
Company may, in its sole discretion, issue unaudited quarterly or
other interim reports to its stockholders when it deems appropriate.
The Company intends to comply with the periodic reporting
requirements of the Securities Exchange Act of 1934.
PART II
Item 1. Market Price and Dividends on the Registrant's Common
Equity and Other Shareholder Matters
No public trading market exists for the Company's securities
and all of its outstanding securities are restricted securities as defined
in Rule 144. There are no current plans, proposals, arrangements or
understandings with any person with regard to the development of a
trading market in any of the Company's securities. There were 110
holders of record of the Company's common stock on July 24, 1998.
No dividends have been paid to date and the Company's Board of
Directors does not anticipate paying dividends in the foreseeable
future.
Item 2. Legal Proceedings
The Company is not a party to any pending legal proceedings,
and no such proceedings are known to be contemplated.
No director, officer or affiliate of the Company, and no owner
of record or beneficial owner of more than five percent (5%) of the
securities of the Company, or any associate of any such director,
officer or security holder is a party adverse to the Company or has a
material interest adverse to the Company in reference to pending
litigation.
Item 3. Changes in and Disagreements with Accountants.
Not applicable.
Item 4. Recent Sales of Unregistered Securities.
Since June 30, 1998 (the date of the Company's formation),
the Company has sold its common stock to the persons listed in the
table below in transactions summarized as follows:
<TABLE>
<CAPTION>
Name Date of Shares Aggregate Price
Sale Purchase Per
Price Share
<S> <C> <C> <C> <C>
Jay Lutsky 6/30/98 825,000 825<F1> 0..001
Michael R. Quinn 6/30/98 825,000 825<F1> 0.001
Gary S. Joiner 6/30/98 95,000 95<F1> 0.001
Grant W. Peck 6/30/98 95,000 95<F1> 0.001
Dean F. Sessions 6/30/98 95,000 95<F1> 0.001
<FN>
<F1> Consideration consisted of pre-incorporation consulting
services rendered to the Registrant related to investigating and
developing the Registrant's proposed business plan and capital
structure and completing the organization and incorporation of the
Registrant.
</FN>
</TABLE>
Since June 30, 1998 (date of the Company's formation), the
Company has sold its Series A Convertible Preferred Stock to the
persons listed in the table below in transaction summarized as follows:
<TABLE>
<CAPTION>
Name Date of Shares Aggregate Price
Sale Purchase Per
Price Share
<S> <C> <C> <C> <C>
Michael R. Quinn 6/30/98 7,500 750 0.10
Jay Lutsky 6/30/98 10,000 1,000 0.10
John B. Marvin 6/30/98 10,000 1,000 0.10
R. Gerald Spehar
and Susan M. Spehar,
Joint Tenants 6/30/98 15,000 1,500 0.10
Clayton Wood 6/30/98 15,000 1,500 0.10
J.L. Evans 6/30/98 15,000 1,500 0.10
Kip Pedrie 6/30/98 10,000 1,000 0.10
Helen K. Quinn 6/30/98 7,500 750 0.10
Ronald Como 6/30/98 5,000 500 0.10
William Drubel 6/30/98 5,000 500 0.10
</TABLE>
Each of the sales of Series A Convertible Preferred Stock
listed above was made for cash and each of the sales of Common
Stock listed above was made for services rendered to the Company.
The listed sales of common stock were made in reliance upon the
exemption from registration provided by Rule 701 adopted pursuant to
Section 3(b) of the Securities Act of 1933. The listed sales of
preferred stock were made in reliance upon the exemption from
registration offered by Section 4(2) of the Securities Act of 1933.
Based upon Purchaser Questionnaires and/or Consultation and
Subscription Agreements completed by each of the subscribers and the
pre-existing relationship between the subscribers of the Company's
officers and directors, the Company had reasonable grounds to believe
immediately prior to making an offer to the private investors, and did
in fact believe, when such subscriptions were accepted, that such
purchasers (1) were purchasing for investment and not with a view to
distribution, and (2) had such knowledge and experience in financial
and business matters that they were capable of evaluating the merits
and risks of their investment and were able to bear those risks. The
purchasers had access to pertinent information enabling them to ask
informed questions. The shares were issued without the benefit of
registration. An appropriate restrictive legend is imprinted upon each
of the certificates representing such shares, and stop-transfer
instructions have been entered in the Company's transfer records. All
such sales were effected without the aid of underwriters, and no sales
commissions were paid.
Item 5. Indemnification of Directors and Officers
The Articles of Incorporation and the Bylaws of the Company,
filed as Exhibits 3.1 and 3.2, respectively, provide that the Company
will indemnify its officers and directors for costs and expenses
incurred in connection with the defense of actions, suits, or
proceedings where the officer or director acted in good faith and in a
manner he reasonably believed to be in the Company's best interest
and is a party by reason of his status as an officer or director, absent
a finding of negligence or misconduct in the performance of duty.<PAGE>
SUNBURST ACQUISITIONS VII, Inc.
INDEX TO FINANCIAL STATEMENTS
Report of Independent Certified Public Accountant
Balance Sheet
Statement of Loss and Accumulated Deficit
Statement of Stockholders' Equity
Statement of Cash Flows
Notes to Financial Statements<PAGE>
REPORT OF CERTIFIED PUBLIC ACCOUNTANT
The Board of Directors and Stockholders of
Sunburst Acquisitions VII, Inc.
We have audited the accompanying balance sheet of Sunburst
Acquisitions VII, Inc. (a development stage company) as of June 30,
1998, and the related statement of loss and accumulated deficit,
stockholders' equity, and cash flows for the period from inception
(June 30, 1998) to June 30, 1998. These financial statements are the
responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Sunburst
Acquisitions VII, Inc., as of June 30, 1998, and the results of its
operations and its cash flows for the initial period then ended in
conformity with generally accepted accounting principles.
Comiskey & Co.
A Professional Corporation
Denver, Colorado
July 17, 1998<PAGE>
SUNBURST ACQUISITIONS VII, Inc.
(A Development Stage Company)
BALANCE SHEET
June 30, 1998
<TABLE>
<CAPTION>
<S> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents 10,000
Total current assets 10,000
OTHER ASSETS
TOTAL ASSETS 10,000
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES -
Total current liabilities -
STOCKHOLDERS' EQUITY
Preferred stock, no par value
20,000,000 shares authorized;
100,000 shares issued and outstanding 10,000
Common stock, no par value
100,000,000 shares authorized;
1,935,000 shares issued and
outstanding 1,935
Deficit accumulated during the
development stage (1,935)
Total stockholders' equity 10,000
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY 10,000
</TABLE>
The accompanying notes are an integral part of the financial statements.<PAGE>
SUNBURST ACQUISITIONS VII, Inc.
(A Development Stage Company)
STATEMENT OF LOSS AND ACCUMULATED DEFICIT
For the period from inception (June 30, 1998)
to June 30, 1998
<TABLE>
<CAPTION>
<S> <C>
REVENUES -
EXPENSES
Consulting fees 1,935
Total expenses 1,935
NET LOSS (1,935)
Accumulated deficit
Balance, beginning of period -
Balance, end of period (1,935)
NET LOSS PER SHARE (NIL)
WEIGHTED AVERAGE NUMBER
OF SHARES OF COMMON STOCK
AND COMMON STOCK EQUIVALENTS
OUTSTANDING 2,135,000
</TABLE>
The accompanying notes are an integral part of the financial statements.<PAGE>
SUNBURST ACQUISITIONS VII, Inc.
(A Development Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY
(Page 1 of 2)
For the period from inception (June 30, 1998) to June 30, 1998
<TABLE>
<CAPTION>
Preferred Stock Common stock
Number of Number of
shares Amount shares Amount
S> <C> <C> <C> <C>
Preferred stock issued for
cash, June 1998
at $0.10 per
share 100,000 10,000 - -
Common stock issued for
services, June 1998
at $.001 per
share 1,935,000 1,935
Net loss for the period
ended June 30, 1998 - - - -
Balance
June 30, 1998 100,000 10,000 1,935,000 1,935
</TABLE>
The accompanying notes are an integral part of the financial statements.<PAGE>
SUNBURST ACQUISITIONS VII, Inc.
(A Development Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY
(Page 2 of 2)
For the period from inception (June 30, 1998) to June 30, 1998
<TABLE>
<CAPTION>
Deficit
accumulated
during the Total
development stockholders'
stage equity
<S> <C> <C)
Preferred stock issued for
cash, June 1998
at $0.10 per share - 10,000
Common stock issued for
services, June 1998
at $.001 per share 1,935
Net loss for the period
ended June 30, 1998 (1,935) (1,935)
Balance,
June 30, 1998 (1,935) 10,000
</TABLE>
The accompanying notes are an integral part of the financial statements.<PAGE>
SUNBURST ACQUISITIONS VII, Inc.
(A Development Stage Company)
STATEMENT OF CASH FLOWS
For the period from inception (June 30, 1998) to June 30, 1998
<TABLE>
<CAPTION>
<S> <C>
CASH FLOWS FROM
OPERATING ACTIVITIES
Net Loss (1,935)
Adjustments to reconcile
net loss to net cash used
by operating activities:
Stock issued for consulting fees 1,935
Net cash used from
operating activities -
CASH FLOWS FROM INVESTING ACTIVITIES -
Net cash from
investing activities -
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of preferred stock 10,000
Net cash provided by
financing activities 10,000
NET INCREASE IN CASH
AND CASH EQUIVALENTS 10,000
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD -
CASH AND CASH EQUIVALENTS,
END OF PERIOD 10,000
</TABLE>
The accompanying notes are an integral part of the financial statements.<PAGE>
SUNBURST ACQUISITIONS VII, Inc.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
June 30, 1998
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Development stage company.
SUNBURST ACQUISITIONS VII, Inc. (a development stage
company) (the "Company") was incorporated under the laws of the
State of Colorado on June 30, 1998. The initial principal office of the
corporation is 4807 S. Zang Way, Morrison, Colorado 80465.
The Company is a new enterprise in the development stage as defined
by Statement No. 7 of the Financial Accounting Standards Board and
has not engaged in any business other than organizational efforts. It
has
no full-time employees and owns no real property. The Company
intends to operate as a capital market access corporation by registering
with the U.S. Securities and Exchange Commission under the
Securities Exchange Act of 1934. After this, the Company intends to
seek to acquire one or more existing businesses which have existing
management, through merger or acquisition. Management of the
Company will have virtually unlimited discretion in determining the
business activities in which the Company might engage.
Accounting method
The Company records income and expenses on the accrual method.
Fiscal year
The fiscal year of the Company shall be established by the board of
directors.
Loss per share
Loss per share was computed using the weighted number of common
shares and common share equivalents outstanding during the period.
Organization costs
Costs to incorporate the Company have been capitalized and will be
amortized over a sixty-month period.
Statement of cash flows
For the purposes of the statement of cash flows, the Company
considers all highly liquid debt instruments purchased with an original
maturity of three months or less to be cash equivalents.
Financial Instruments
Unless otherwise indicated, the fair value of all reported assets and
liabilities which represent financial instruments (none of which are
held for trading purposes) approximate the carrying values of such
amount.
Use of estimates
The preparation of the Company's financial statements in conformity
with generally accepted accounting principals requires the Company's
management to make estimates and assumptions that affect the
amounts reported in these financial statements and accompanying
notes. Actual results could differ from those estimates.
2. STOCKHOLDERS' EQUITY
As of June 30, 1998, 1,935,000 shares of the Company's no
par value common stock had been issued for consulting services
provided. The services were converted to shares at $0.001 per share.
As of June 30, 1998, 100,000 shares of the Company's no par
value Series A preferred stock had been issued at $0.10 per share.
Commencing on June 30, 2000, the holders of record of shares
of this Series A preferred stock shall be entitled to receive, when and
as declared by the board of directors out of funds legally available
therefor, cash dividends at the rate of $0.01 per share per annum,
payable quarterly, in arrears, on such dates as may from time to time
be determined by the board of directors.
In the event of a liquidation, dissolution or winding up of the
Corporation, the holders of shares of this Series A shall be entitled to
receive out of the assets of the Corporation an amount equal to $0.10
per share, plus any accrued and unpaid dividends thereon to the date
fixed for distribution. This distribution shall be in preference and
have priority over any such distribution upon the common stock of the
Corporation and all other preferred stock of the Corporation. If the
assets of the Corporation are not sufficient to pay such amount in full
to the holders of this Series A and all other Series of Preferred stock
of the Corporation ranking equally as to liquidation preferences with
the shares of this Series A, then the holders of this Series A and of all
such other Series shall share ratably in any such distribution of assets
in accordance with the amounts which would be payable on such
distribution if the amounts to which the holders of this and all such
other Series are entitled were paid in full.
To the extent not previously converted into shares of common
stock, this Series A may be redeemed, in whole or in part, at the
option of the Corporation by resolution of its board of directors at a
redemption price per share of $0.15, plus any accrued and unpaid
dividends thereon to the date fixed for redemption.
The holders of shares of this Series A shall have the right, at
their option, to convert such shares into fully paid and nonassessable
shares of common stock of the Corporation at any time on or after
January 1, 1999. Each outstanding share of this Series A shall be
convertible into two shares of common stock of the Corporation.
The holders of this Series A shall have no right to vote either
in the election of directors or in any other matter.
3. RELATED PARTY TRANSACTIONS
As of the date hereof, Michael R. Quinn and Jay Lutsky are
the officers and directors of the Company, and are the owners of
1,650,000 shares of its issued and outstanding common stock,
constituting approximately 85% of the Company's issued and
outstanding common stock. If the purchasers of the Series A shares
exercise the conversion privilege, Jay Lutsky and Michael R. Quinn
will own 1,685,000 shares constituting approximately 79% of the
Company's issued and outstanding shares.
The Company's President is providing office space at no
charge to the Company. For purposes of the financial statements, the
Company is accruing $50 per month as additional paid-in capital for
this use.
4. INCOME TAXES
The Company has Federal net operating loss carryforwards of
approximately $1,935 expiring in the year 2013. The tax benefit of
this net operating loss is approximately $400 and has been offset by a
full allowance for realization. This carryforward may be limited upon
the consummation of a business combination under IRC Section 381.
For the period ended June 30, 1998, the valuation allowance increased
by $400.
5. SUPPLEMENTAL DISCLOSURE OF NON-CASH
FINANCING ACTIVITIES
During the year ended June 30, 1998, the Company elected not
to accumulate any amortization of the organization costs, as one
month of amortization is immaterial to the financial statements taken
as a whole.
Similarly, the Company elected to forego any rent expense for
the year ended June 30, 1998, but will begin recording the rent
expense as additional paid-in capital during the year ended June 30,
1999.
<PAGE>
PART III
Item 1. Index to Exhibits
The Exhibits listed below are filed as part of this Registration
Statement.
Exhibit
No. Document
2.1 Articles of Incorporation
2.2 Bylaws
3.1 Specimen Common Stock Certificate
3.2 Specimen Class A Convertible Preferred Stock
Certificate
27 Financial Data Schedule
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act
of 1934, the registrant caused this registration statement to be signed
on its behalf by the undersigned, thereunto duly authorized.
SUNBURST ACQUISITIONS VII, Inc.
By: /s/
Jay Lutsky
President and Director
(Principal Executive Officer)
Date: July 29, 1998
By: /s/
Michael R. Quinn
Secretary, Treasurer and Director
(Principal Financial Officer)
Date: July 29, 1998<PAGE>
U. S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-SB
GENERAL FORM FOR REGISTRATION OF
SECURITIES OF
SMALL BUSINESS ISSUERS
Under Section 12(b) or (g) of the Securities Exchange Act of 1934
SUNBURST ACQUISITIONS VII, INC.
(Name of Small Business Issuer in its charter)
Colorado 84-1466651
State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4807 S. Zang Way, Morrison, Colorado 80465
(Address of principal executive offices)
Issuer's telephone number, (303) 979-2404
EXHIBIT INDEX
Exhibit
No. Document
2.1 Articles of Incorporation
2.2 Bylaws
3.1 Specimen Common Stock Certificate
3.2 Specimen Series A Convertible Preferred Stock Certificate
27 Financial Data Schedule<PAGE>
EXHIBIT 2.1
ARTICLES OF INCORPORATION
OF
SUNBURST ACQUISITIONS VII, Inc.
The undersigned, who, if a natural person, is eighteen years of
age or older, hereby establishes a corporation pursuant to the
Colorado Business Corporation Act as amended and adopts the
following Articles of Incorporation:
FIRST: The name of the corporation is Sunburst
Acquisitions VII, Inc.
SECOND: The corporation shall have and may exercise all
of the rights, powers and privileges now or hereafter conferred upon
corporations organized under the laws of Colorado. In addition, the
corporation may do everything necessary, suitable or proper for the
accomplishment of any of its corporate purposes. The corporation
may conduct part or all of its business in any part of Colorado, the
United States or the world and may hold, purchase, mortgage, lease
and convey real and personal property in any of such places.
THIRD: The aggregate number of shares which the
corporation shall have authority to issue is one hundred twenty million
(120,000,000) shares of which a portion shall be common stock and a
portion shall be preferred stock, all as described below.
A. Common Stock. The aggregate number of common
shares which the corporation shall have the authority to issue is one
hundred million (100,000,000), which shares shall be designated
"Common Stock." Subject to all the rights of the Preferred Stock as
expressly provided herein, by law or by the Board of Directors
pursuant to this Article, the Common Stock of the corporation shall
possess all such rights and privileges as are afforded to capital stock
by applicable law in the absence of any express grant of rights or
privileges in these Articles of Incorporation, including, but not limited
to, the following rights and privileges:
(a) dividends may be declared and paid or set apart for
payment on the Common Stock out of any assets or funds of the
corporation legally available for the payment of dividends;
(b) the holders of Common Stock shall have unlimited
voting rights, including the right to vote for the election of directors
and on all other matters requiring stockholder action. Cumulative
voting shall not be permitted in the election of directors or otherwise.
(c) on the voluntary or involuntary liquidation, dissolution
or winding up of the corporation, and after paying or adequately
providing for the payment of all of its obligations and amounts
payable in liquidation, dissolution or winding up, and subject to the
rights of the holders of Preferred Stock, if any, the net assets of the
corporation shall be distributed pro rata to the holders of the Common
Stock.
B. Preferred Stock. The aggregate number of
preferred shares which this corporation shall have the authority to
issue is twenty million (20,000,000) shares, each with no par value,
which shares shall be designated "Preferred Stock." Shares of
Preferred Stock may be issued from time to time in one or more
series as determined by the Board of Directors. The Board of
Directors is hereby authorized, by resolution or resolutions, to
provide from time to time, out of the unissued shares of Preferred
Stock not then allocated to any series of Preferred Stock, for a series
of the Preferred Stock. Each such series shall have distinctive serial
designations. Before any shares of any such series of Preferred Stock
are issued, the Board of Directors shall fix and determine, and is
hereby expressly empowered to fix and determine, by resolution or
resolutions, the voting powers, full or limited, or no voting powers,
and the designations, preferences and relative, participating, optional
or other special rights, and the qualifications, limitations and
restrictions thereof as provided by Colorado law. Before issuing any
shares of a class or series, the corporation shall deliver to the
secretary of state for filing articles of amendment to these articles of
incorporation that set forth information required by Colorado law,
including but not limited to, the designations, preferences, limitations,
and relative rights of the class or series of shares.
C. Voting. Unless otherwise ordered by a court of
competent jurisdiction, at all meetings of shareholders one-third of the
shares of a voting group entitled to vote at such meeting, represented
in person or by proxy, shall constitute a quorum of that voting group.
D. Series A Convertible Preferred Stock. A class of
preferred stock designated as the Series A Convertible Preferred Stock
is hereby created out of the Preferred Stock authorized by these
Articles of Incorporation. The aggregate number of Series A
Convertible Preferred shares which this corporation shall have the
authority to issue is one hundred thousand (100,000) shares, each with
no par value, which shares shall be designated "as the Series A
Preferred Stock."
The preferences, limitations and relative rights of this Series A
Preferred Stock are as follows:
(1) Dividends.
Commencing on July 1, 2000, the holders of record of shares
of this Series A shall be entitled to receive, when and as declared by
the board of directors out of funds legally available therefor, cash
dividends at the rate of $0.01 per share per annum, payable quarterly,
in arrears, on such dates as may from time to time be determined by
the board of directors. The payment of dividends on this Series A
shall be in preference to and in priority over dividends upon the
Common Stock of the Corporation and all other shares of Preferred
Stock of the Corporation which are by their terms expressly made
junior as to dividends to this Series A, but subject to the prior rights
of the holders of shares of other Series of Preferred Stock of the
Corporation which are by their terms expressly made senior as to
dividends to this Series A. The holders of shares of this Series A
shall not be entitled to any dividends other than the cash dividends
provided for in this Section 1. No dividends shall be declared or paid
on the Common Stock of the Corporation during any period when the
Corporation has failed to pay a quarter-annual dividend on this Series
A for any preceding quarter.
(2) Liquidation.
In the event of a liquidation, dissolution, or winding up of the
Corporation, the holders of shares of this Series A shall be entitled to
receive out of the assets of the Corporation an amount equal to $0.10
per share, plus any accrued and unpaid dividends thereon to the date
fixed for distribution, in preference to and in priority over any such
distribution upon the Common Stock of the Corporation and all other
shares of Preferred Stock of the Corporation which are by their terms
expressly made junior as to liquidation preferences to this Series A,
but subject to the prior rights of the holders of shares of other Series
of Preferred Stock of the Corporation which are by their terms
expressly made senior as to liquidation preferences to this Series A.
If the assets of the Corporation are not sufficient to pay such amount
in full to the holders of this Series A and all other Series of Preferred
Stock of the Corporation ranking equally as to liquidation preferences
with the shares of this Series A, then the holders of this Series A and
of all such other Series shall share ratably in any such distribution of
assets in accordance with the amounts which would be payable on
such distribution if the amounts to which the holders of this and all
such other Series are entitled were paid in full.
(3) Redemption.
To the extent not previously converted into shares of common
stock, this Series A may be redeemed, in whole or in part, at the
option of the Corporation by resolution of its board of directors at a
redemption price per share of $0.15, plus any accrued and unpaid
dividends thereon to the date fixed for redemption, at any time and
from time to time on or after the earlier of (i) July 1, 2000, or (ii) the
date upon which the Corporation completes a merger, acquisition,
reorganization or other transaction resulting in a change of control.
For purposes of the foregoing, a change in control shall be deemed to
have occurred at any time that the combined stock ownership of
Michael R. Quinn and Jay Lutsky consists of less than 51% of all
classes of the issued and outstanding voting stock of the Corporation.
In the event that less than the entire number of the shares of
this Series A outstanding as of any redemption date is to be redeemed
by the Corporation at that time, the shares to be redeemed shall be
selected by lot in a manner determined by the board of directors of
the Corporation.
Not less than ten, nor more than thirty days prior to the date
fixed for any redemption of this Series A or any part thereof, a notice
specifying the time and place of such redemption shall be given by
first-class mail, postage prepaid, to the holders of record of the shares
of this Series A selected for redemption at their respective addresses
as the same shall appear on the books of the Corporation, but no
failure to mail such notice or any defect therein or in the mailing
thereof shall affect the validity of the proceedings for redemption.
Any notice which was mailed in the manner herein provided shall be
conclusively presumed to have been duly given whether or not the
holder receives the notice.
After the giving of any notice of redemption and prior to the
close of business on the date fixed for such redemption, the holders of
shares of this Series A called for redemption may convert such stock
into Common Stock of the Corporation in accordance with the
conversion privileges set forth in Section 5. After the date fixed for
the redemption of shares of this Series A by the Corporation, the
holders of shares selected for redemption shall cease to be
stockholders, with respect to such shares and shall have no interest in
or claims against the Corporation by virtue thereof and shall have no
rights with respect to such shares, except the right to receive the
moneys payable upon such redemption from the Corporation, without
interest thereon, upon surrender (and endorsement, if required by the
corporation) of their certificates, and the shares represented thereby
shall no longer be deemed to be outstanding.
(4) Conversion Privilege and Price.
The holders of shares of this Series A shall have the right, at
their option, to convert such shares into fully-paid and nonassessable
shares of Common Stock of the Corporation at any time on or after
January 1, 1999. Each outstanding share of this Series A shall be
convertible into two shares of Common Stock of the Corporation.
In case shares of this Series A are called for redemption by the
Corporation pursuant to Section 3, the right to convert such shares
shall cease and terminate at the close of business on the date fixed for
redemption by the Corporation.
(5) Conversion Procedure.
In order to convert shares of this Series A into Common
Stock, the holder shall surrender at the office of any transfer agent for
this Series A designated for that purpose by the board of directors, or
at any such other office as may be designated by the board of
directors, the certificate or certificates therefor, duly endorsed or
assigned to the Corporation or in blank, and shall give written notice
to the Corporation at said office that he elects to convert such shares.
Shares of this Series A surrendered for conversion during the period
from the close of business on any record date for the payment of a
dividend on the shares of this Series A to the opening of business on
the date for payment of such dividend shall (except in the case of
shares of this Series A which have been called for redemption by the
Corporation pursuant to Section 3 on a date within such period) be
accompanied by payment to the Corporation of an amount equal to the
dividend payable on such dividend payment date on the shares of this
Series A being surrendered for conversion. Except as provided in the
preceding sentence, no payment or adjustment shall be made upon any
conversion on account of any dividends accrued on the shares of this
Series A surrendered for conversion or on account of any dividends
on the Common Stock issued upon conversion.
Shares of this Series A shall be deemed to have been converted
immediately prior to the close of business on the day of the surrender
of such shares for conversion in accordance with the foregoing
provisions and the person or persons entitled to receive the Common
Stock issuable upon such conversion shall be treated for all purposes
as the record holder or holders of such Common Stock at such time.
As promptly as practicable on or after the conversion date, the
Company shall issue and shall deliver at said office a certificate or
certificates for the number of full shares of Common Stock issuable
upon such conversion.
The Corporation will pay any and all documentary, stamp, or
similar taxes that may be payable in respect of the issuance or
delivery of shares of Common Stock on conversion of shares of this
Series A. The Corporation shall not, however, be required to pay any
such tax which may be payable in respect of any transfer involved in
the issue and delivery of shares of Common Stock in a name other
than that in which the shares of this Series A so converted were
registered, and no such issuance or delivery shall be made unless and
until the person requesting such issuance has paid to the Corporation
the amount of any such tax, or has established, to the satisfaction of
the Corporation, that such tax has been paid.
The Corporation shall at all times reserve and keep available,
free from preemptive rights, out of its authorized but unissued
Common Stock, for the purpose of effecting the conversion of the
shares of this Series A, the full number of shares of Common Stock
then deliverable upon the conversion of all shares of this Series A
then outstanding.
(6) Voting.
The holders of this Series A shall have no right to vote either
in the election of directors or in any other matter.
FOURTH: The number of directors of the corporation shall
be fixed by the bylaws, or if the bylaws fail to fix such a number,
then by resolution adopted from time to time by the board of
directors, provided that the number of directors shall not be more than
five (5) nor less than one (1). Two (2) directors shall constitute the
initial board of directors. The following persons are elected to serve
as the corporation's initial directors until the first annual meeting of
shareholders or until their successors are duly elected and qualified:
Name/Address:
Michael R. Quinn
2082 Cherry Street
Denver, Colorado 80207
Jay Lutsky
4807 S. Zang Way
Morrison, Colorado 80465
FIFTH: The street address of the initial registered office
of the corporation is 4750 Table Mesa Drive, Boulder, Colorado
80303. The name of the initial registered agent of the corporation at
such address is Gary S. Joiner.
SIXTH: The address of the initial principal office of the
corporation is 4807 S. Zang Way, Morrison, Colorado 80465.
SEVENTH: The following provisions are inserted for the
management of the business and for the conduct of the affairs of the
corporation, and the same are in furtherance of and not in limitation
or exclusion of the powers conferred by law.
(a) Conflicting Interest Transactions. As used in
this paragraph, "conflicting interest transaction" means any of the
following: (i) a loan or other assistance by the corporation to a
director of the corporation or to an entity in which a director of the
corporation is a director or officer or has a financial interest; (ii) a
guaranty by the corporation of an obligation of a director of the
corporation or of an obligation of an entity in which a director of the
corporation is a director or officer or has a financial interest; or (iii) a
contract or transaction between the corporation and a director of the
corporation or between the corporation and an entity in which a
director of the corporation is a director or officer or has a financial
interest. No conflicting interest transaction shall be void or voidable,
be enjoined, be set aside, or give rise to an award of damages or
other sanctions in a proceeding by a shareholder or by or in the right
of the corporation, solely because the conflicting interest transaction
involves a director of the corporation or an entity in which a director
of the corporation is a director or officer or has a financial interest, or
solely because the director is present at or participates in the meeting
of the corporation's board of directors or of the committee of the
board of directors which authorized, approves or ratifies a conflicting
interest transaction, or solely because the director's vote is counted
for such purpose if: (A) the material facts as to the director's
relationship or interest and as to the conflicting interest transaction are
disclosed or are known to the board of directors or the committee,
and the board of directors or committee in good faith authorizes,
approves or ratifies the conflicting interest transaction by the
affirmative vote of a majority of the disinterested directors, even
though the disinterested directors are less than a quorum; or (B) the
material facts as to the director's relationship or interest and as to the
conflicting interest transaction are disclosed or are known to the
shareholders entitled to vote thereon, and the conflicting interest
transaction is specifically authorized, approved or ratified in good
faith by a vote of the shareholders; or (C) a conflicting interest
transaction is fair as to the corporation as of the time it is authorized,
approved or ratified by the board of directors, a committee thereof, or
the shareholders. Common or interested directors may be counted in
determining the presence of a quorum at a meeting of the board of
directors or of a committee which authorizes, approves or ratifies the
conflicting interest transaction.
(b) Loans and Guaranties for the Benefit of
Directors. Neither the board of directors nor any committee thereof
shall authorize a loan by the corporation to a director of the
corporation or to an entity in which a director of the corporation is a
director or officer or has a financial interest, or a guaranty by the
corporation of an obligation of a director of the corporation or of an
obligation of an entity in which a director of the corporation is a
director or officer or has a financial interest, until at least ten days
after written notice of the proposed authorization of the loan or
guaranty has been given to the shareholders who would be entitled to
vote thereon if the issue of the loan or guaranty were submitted to a
vote of the shareholders. The requirements of this paragraph (b) are
in addition to, and not in substitution for, the provisions of paragraph
(a) of Article SEVENTH.
(c) Indemnification. The corporation shall
indemnify, to the maximum extent permitted by law, any person who
is or was a director, officer, agent, fiduciary or employee of the
corporation against any claim, liability or expense arising against or
incurred by such person made party to a proceeding because he is or
was a director, officer, agent, fiduciary or employee of the
corporation or because he was a director, officer, agent, fiduciary or
employee of the corporation or because he is or was serving another
entity as a director, officer, partner, trustee, employee, fiduciary or
agent at the corporation's request. The corporation shall further have
the authority to the maximum extent permitted by law to purchase and
maintain insurance providing such indemnification.
(d) Limitation on Director's Liability. No director
of this corporation shall have any personal liability for monetary
damages to the corporation or its shareholders for breach of his
fiduciary duty as a director, except that this provision shall not
eliminate or limit the personal liability of a director to the corporation
or its shareholders for monetary damages for: (i) any breach of the
director's duty of loyalty to the corporation or its shareholders; (ii)
acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law; (iii) voting for or assenting
to a distribution in violation of Colorado Revised Statutes Section7-
106-401 or the articles of incorporation if it is established that the
director did not perform his duties in compliance with Colorado
Revised Statutes Section7-108-401, provided that the personal liability
of a director in this circumstance shall be limited to the amount of the
distribution which exceeds what could have been distributed without
violation of Colorado Revised Statutes Section7-106-401 or the
articles of incorporation; or (iv) any transaction from which the
director directly or indirectly derives an improper personal benefit.
Nothing contained herein will be construed to deprive any director of
his right to all defenses ordinarily available to a director nor will
anything herein be construed to deprive any director of any right he
may have for contribution from any other director or other person.
(e) Negation of Equitable Interests in Shares or
Rights. Unless a person is recognized as a shareholder through
procedures established by the corporation pursuant to Colorado
Revised Statutes Section7-107-204 or any similar law, the corporation
shall be entitled to treat the registered holder of any shares of the
corporation as the owner thereof for all purposes permitted by the
Colorado Business Corporation Act, including without limitation all
rights deriving from such shares, and the corporation shall not be
bound to recognize any equitable or other claim to, or interest in,
such shares or rights deriving from such shares on the part of any
other person including without limitation, a purchaser, assignee or
transferee of such shares, unless and until such other person becomes
the registered holder of such shares or is recognized as such, whether
or not the corporation shall have either actual or constructive notice of
the claimed interest of such other person. By way of example and not
of limitation, until such other person has become the registered holder
of such shares or is recognized pursuant to Colorado Revised Statutes
Section7-107-204 or any similar applicable law, he shall not be
entitled: (i) to receive notice of the meetings of the shareholders; (ii)
to vote at such meetings; (iii) to examine a list of the shareholders;
(iv) to be paid dividends or other distributions payable to
shareholders; or (v) to own, enjoy and exercise any other rights
deriving from such shares against the corporation. Nothing contained
herein will be construed to deprive any beneficial shareholder, as
defined in Colorado Revised Statutes Section7-113-101(1), of any
right he may have pursuant to Article 113 of the Colorado Business
Corporation Act or any subsequent law.
EIGHTH: The name and address of the incorporator is:
Gary S. Joiner
4750 Table Mesa Drive
Boulder, Colorado 80303
DATED the 29th day of June, 1998.
/s/ Gary S. Joiner
Incorporator
Gary S. Joiner hereby consents to the appointment as the initial
registered agent for Sunburst Acquisitions VII, Inc.
/s/ Gary S. Joiner
Initial Registered Agent<PAGE>
EXHIBIT 2.2
BYLAWS
OF
SUNBURST ACQUISITIONS VII, Inc.
TABLE OF CONTENTS
Article
I. Offices.
II. Shareholders.
III. Board of Directors.
IV. Officers and Agents.
V. Stock.
VI. Indemnification of Certain Persons.
VII. Provision of Insurance.
VIII. Miscellaneous.
Effective: June 30, 1998<PAGE>
BYLAWS
OF
SUNBURST ACQUISITIONS VII, INC.
ARTICLE I
Offices
The principal office of the corporation shall be designated from
time to time by the corporation and may be within or outside of
Colorado.
The corporation may have such other offices, either within or
outside Colorado, as the board of directors may designate or as the
business of the corporation may require from time to time.
The registered office of the corporation required by the Colorado
Business Corporation Act to be maintained in Colorado may be, but
need not be, identical with the principal office, and the address of the
registered office may be changed from time to time by the board of
directors.
ARTICLE II
Shareholders
Section 1. Annual Meeting. The annual meeting of the shareholders
shall be held during the month of July of each year on a date and at a
time fixed by the board of directors of the corporation (or by the
president in the absence of action by the board of directors), beginning
with the year 1999, for the purpose of electing directors and for the
transaction of such other business as may come before the meeting. If
the election of directors is not held on the day fixed as provided herein
for any annual meeting of the shareholders, or any adjournment thereof,
the board of directors shall cause the election to be held at a special
meeting of the shareholders as soon thereafter as it may conveniently be
held.
A shareholder may apply to the district court in the county in
Colorado where the corporation's principal office is located or, if the
corporation has no principal office in Colorado, to the district court of
the county in which the corporation's registered office is located to seek
an order that a shareholder meeting be held (i) if an annual meeting was
not held within six months after the close of the corporation's most
recently ended fiscal year or fifteen months after its last annual meeting,
whichever is earlier, or (ii) if the shareholder participated in a proper
call of or proper demand for a special meeting and notice of the special
meeting was not given within thirty days after the date of the call or the
date the last of the demands necessary to require calling of the meeting
was received by the corporation pursuant to C.R.S. s. 7-107-102(1)(b),
or the special meeting was not held in accordance with the notice.
Section 2. Special Meetings. Unless otherwise prescribed by statute,
special meetings of the shareholders may be called for any purpose by
the president or by the board of directors. The president shall call a
special meeting of the shareholders if the corporation receives one or
more written demands for the meeting, stating the purpose or purposes
for which it is to be held, signed and dated by holders of shares
representing at least ten percent of all the votes entitled to be cast on any
issue proposed to be considered at the meeting.
Section 3. Place of Meeting. The board of directors may designate
any place, either within or outside Colorado, as the place for any annual
meeting or any special meeting called by the board of directors. A
waiver of notice signed by all shareholders entitled to vote at a meeting
may designate any place, either within or outside Colorado, as the place
for such meeting. If no designation is made, or if a special meeting is
called other than by the board, the place of meeting shall be the principal
office of the corporation.
Section 4. Notice of Meeting. Written notice stating the place, date,
and hour of the meeting shall be given not less than ten nor more than
sixty days before the date of the meeting, except that (i) if the number
of authorized shares is to be increased, at least thirty days' notice shall
be given, or (ii) any other longer notice period is required by the
Colorado Business Corporation Act. The secretary shall be required to
give such notice only to shareholders entitled to vote at the meeting
except as otherwise required by the Colorado Business Corporation Act.
Notice of a special meeting shall include a description of the purpose
or purposes of the meeting. Notice of an annual meeting need not
include a description of the purpose or purposes of the meeting except
the purpose or purposes shall be stated with respect to (i) an amendment
to the articles of incorporation of the corporation, (ii) a merger or share
exchange in which the corporation is a party and, with respect to a share
exchange, in which the corporation's shares will be acquired, (iii) a sale,
lease, exchange or other disposition, other than in the usual and regular
course of business, of all or substantially all of the property of the
corporation or of another entity which this corporation controls, in each
case with or without the goodwill, (iv) a dissolution of the corporation,
(v) restatement of the articles of incorporation, or (vi) any other purpose
for which a statement of purpose is required by the Colorado Business
Corporation Act. Notice shall be given personally or by mail, private
carrier, telegraph, teletype, electronically transmitted facsimile or other
form of wire or wireless communication by or at the direction of the
president, the secretary, or the officer or persons calling the meeting, to
each shareholder of record entitled to vote at such meeting. If mailed
and if in a comprehensible form, such notice shall be deemed to be given
and effective when deposited in the United States mail, properly
addressed to the shareholder at his address as it appears in the
corporation's current record of shareholders, with first class postage
prepaid. If notice is given other than by mail, and provided that such
notice is in a comprehensible form, the notice is given and effective on
the date actually received by the shareholder.
If requested by the person or persons lawfully calling such meeting,
the secretary shall give notice thereof at corporate expense. No notice
need be sent to any shareholder if three successive notices mailed to the
last known address of such shareholder have been returned as
undeliverable until such time as another address for such shareholder is
made known to the corporation by such shareholder. In order to be
entitled to receive notice of any meeting, a shareholder shall advise the
corporation in writing of any change in such shareholder's mailing
address as shown on the corporation's books and records.
When a meeting is adjourned to another date, time or place, notice
need not be given of the new date, time or place if the new date, time
or place of such meeting is announced before adjournment at the meeting
at which the adjournment is taken. At the adjourned meeting the
corporation may transact any business which may have been transacted
at the original meeting. If the adjournment is for more than 120 days, or
if a new record date is fixed for the adjourned meeting, a new notice of
the adjourned meeting shall be given to each shareholder of record
entitled to vote at the meeting as of the new record date.
A shareholder may waive notice of a meeting before or after the
time and date of the meeting by a writing signed by such shareholder.
Such waiver shall be delivered to the corporation for filing with the
corporate records, but this delivery and filing shall not be conditions to
the effectiveness of the waiver. Further, by attending a meeting either
in person or by proxy, a shareholder waives objection to lack of notice
or defective notice of the meeting unless the shareholder objects at the
beginning of the meeting to the holding of the meeting or the transaction
of business at the meeting because of lack of notice or defective notice.
By attending the meeting, the shareholder also waives any objection to
consideration at the meeting of a particular matter not within the purpose
or purposes described in the meeting notice unless the shareholder
objects to considering the matter when it is presented.
Section 5. Fixing of Record Date. For the purpose of determining
shareholders entitled to (i) notice of or vote at any meeting of
shareholders or any adjournment thereof, (ii) receive distributions or
share dividends, (iii) demand a special meeting, or (iv) make a
determination of shareholders for any other proper purpose, the board
of directors may fix a future date as the record date for any such
determination of shareholders, such date in any case to be not more than
seventy days, and, in case of a meeting of shareholders, not less than ten
days, prior to the date on which the particular action requiring such
determination of shareholders is to be taken. If no record date is fixed
by the directors, the record date shall be the day before the notice of the
meeting is given to shareholders, or the date on which the resolution of
the board of directors providing for a distribution is adopted, as the case
may be. When a determination of shareholders entitled to vote at any
meeting of shareholders is made as provided in this section, such
determination shall apply to any adjournment thereof unless the board of
directors fixes a new record date, which it must do if the meeting is
adjourned to a date more than 120 days after the date fixed for the
original meeting. Unless otherwise specified when the record date is
fixed, the time of day for such determination shall be as of the
corporation's close of business on the record date.
Notwithstanding the above, the record date for determining the
shareholders entitled to take action without a meeting or entitled to be
given notice of action so taken shall be the date a writing upon which the
action is taken is first received by the corporation. The record date for
determining shareholders entitled to demand a special meeting shall be
the date of the earliest of any of the demands pursuant to which the
meeting is called.
Section 6. Voting Lists. After a record date is fixed for a
shareholders' meeting, the secretary shall make, at the earlier of ten days
before such meeting or two business days after notice of the meeting has
been given, a complete list of the shareholders entitled to be given notice
of such meeting or any adjournment thereof. The list shall be arranged
by voting groups and within each voting group by class or series of
shares, shall be in alphabetical order within each class or series, and
shall show the address of and the number of shares of each class or
series held by each shareholder. For the period beginning the earlier of
ten days prior to the meeting or two business days after notice of the
meeting is given and continuing through the meeting and any
adjournment thereof, this list shall be kept on file at the principal office
of the corporation, or at a place (which shall be identified in the notice)
in the city where the meeting will be held. Such list shall be available
for inspection on written demand by any shareholder (including for the
purpose of this Section 6 any holder of voting trust certificates) or his
agent or attorney during regular business hours and during the period
available for inspection. The original stock transfer books shall be prima
facie evidence as to who are the shareholders entitled to examine such
list or transfer books or to vote at any meeting of shareholders.
Any shareholder, his agent or attorney may copy the list during
regular business hours and during the period it is available for
inspection, provided (i) the shareholder has been a shareholder for at
least three months immediately preceding the demand or holds at least
five percent of all outstanding shares of any class of shares as of the date
of the demand, (ii) the demand is made in good faith and for a purpose
reasonably related to the demanding shareholder's interest as a
shareholder, (iii) the shareholder describes with reasonable particularity
the purpose and the records the shareholder desires to inspect, (iv) the
records are directly connected with the described purpose, and (v) the
shareholder pays a reasonable charge covering the costs of labor and
material for such copies, not to exceed the estimated cost of production
and reproduction.
Section 7. Recognition Procedure for Beneficial Owners. The board
of directors may adopt by resolution a procedure whereby a shareholder
of the corporation may certify in writing to the corporation that all or a
portion of the shares registered in the name of such shareholder are held
for the account of a specified person or persons. The resolution may set
forth (i) the types of nominees to which it applies, (ii) the rights or
privileges that the corporation will recognize in a beneficial owner,
which may include rights and privileges other than voting, (iii) the form
of certification and the information to be contained therein, (iv) if the
certification is with respect to a record date, the time within which the
certification must be received by the corporation, (v) the period for
which the nominee's use of the procedure is effective, and (vi) such
other provisions with respect to the procedure as the board deems
necessary or desirable. Upon receipt by the corporation of a certificate
complying with the procedure established by the board of directors, the
persons specified in the certification shall be deemed, for the purpose or
purposes set forth in the certification, to be the registered holders of the
number of shares specified in place of the shareholder making the
certification.
Section 8. Quorum and Manner of Acting. One-third of the votes
entitled to be cast on a matter by a voting group represented in person
or by proxy, shall constitute a quorum of that voting group for action on
the matter. If less than one-third of such votes are represented at a
meeting, a majority of the votes so represented may adjourn the meeting
from time to time without further notice, for a period not to exceed 120
days for any one adjournment. If a quorum is present at such adjourned
meeting, any business may be transacted which might have been
transacted at the meeting as originally noticed. The shareholders present
at a duly organized meeting may continue to transact business until
adjournment, notwithstanding the withdrawal of enough shareholders to
leave less than a quorum, unless the meeting is adjourned and a new
record date is set for the adjourned meeting.
If a quorum exists, action on a matter other than the election of
directors by a voting group is approved if the votes cast within the
voting group favoring the action exceed the votes cast within the voting
group opposing the action, unless the vote of a greater number or voting
by classes is required by law or the articles of incorporation.
Section 9. Proxies. At all meetings of shareholders, a shareholder
may vote by proxy by signing an appointment form or similar writing,
either personally or by his duly authorized attorney-in-fact. A
shareholder may also appoint a proxy by transmitting or authorizing the
transmission of a telegram, teletype, or other electronic transmission
providing a written statement of the appointment to the proxy, a proxy
solicitor, proxy support service organization, or other person duly
authorized by the proxy to receive appointments as agent for the proxy,
or to the corporation. The transmitted appointment shall set forth or be
transmitted with written evidence from which it can be determined that
the shareholder transmitted or authorized the transmission of the
appointment. The proxy appointment form or similar writing shall be
filed with the secretary of the corporation before or at the time of the
meeting. The appointment of a proxy is effective when received by the
corporation and is valid for eleven months unless a different period is
expressly provided in the appointment form or similar writing.
Any complete copy, including an electronically transmitted facsimile,
of an appointment of a proxy may be substituted for or used in lieu of
the original appointment for any purpose for which the original
appointment could be used.
Revocation of a proxy does not affect the right of the corporation to
accept the proxy's authority unless (i) the corporation had notice that the
appointment was coupled with an interest and notice that such interest is
extinguished is received by the secretary or other officer or agent
authorized to tabulate votes before the proxy exercises his authority
under the appointment, or (ii) other notice of the revocation of the
appointment is received by the secretary or other officer or agent
authorized to tabulate votes before the proxy exercises his authority
under the appointment. Other notice of revocation may, in the discretion
of the corporation, be deemed to include the appearance at a
shareholders' meeting of the shareholder who granted the proxy and his
voting in person on any matter subject to a vote at such meeting.
The death or incapacity of the shareholder appointing a proxy does
not affect the right of the corporation to accept the proxy's authority
unless notice of the death or incapacity is received by the secretary or
other officer or agent authorized to tabulate votes before the proxy
exercises his authority under the appointment.
The corporation shall not be required to recognize an appointment
made irrevocable if it has received a writing revoking the appointment
signed by the shareholder (including a shareholder who is a successor to
the shareholder who granted the proxy) either personally or by his
attorney-in-fact, notwithstanding that the revocation may be a breach of
an obligation of the shareholder to another person not to revoke the
appointment.
Subject to Section 11 and any express limitation on the proxy's
authority appearing on the appointment form, the corporation is entitled
to accept the proxy's vote or other action as that of the shareholder
making the appointment.
Section 10. Voting of Shares. Each outstanding share, regardless of
class, shall be entitled to one vote, except in the election of directors,
and each fractional share shall be entitled to a corresponding fractional
vote on each matter submitted to a vote at a meeting of shareholders,
except to the extent that the voting rights of the shares of any class or
classes are limited or denied by the articles of incorporation as permitted
by the Colorado Business Corporation Code. Cumulative voting shall not
be permitted in the election of directors or for any other purpose. Each
record holder of stock shall be entitled to vote in the election of directors
and shall have as many votes for each of the shares owned by him as
there are directors to be elected and for whose election he has the right
to vote.
At each election of directors, that number of candidates equaling the
number of directors to be elected, having the highest number of votes
cast in favor of their election, shall be elected to the board of directors.
Except as otherwise ordered by a court of competent jurisdiction
upon a finding that the purpose of this Section would not be violated in
the circumstances presented to the court, the shares of the corporation
are not entitled to be voted if they are owned, directly or indirectly, by
a second corporation, domestic or foreign, and the first corporation
owns, directly or indirectly, a majority of the shares entitled to vote for
directors of the second corporation except to the extent the second
corporation holds the shares in a fiduciary capacity.
Redeemable shares are not entitled to be voted after notice of
redemption is mailed to the holders and a sum sufficient to redeem the
shares has been deposited with a bank, trust company or other financial
institution under an irrevocable obligation to pay the holders the
redemption price on surrender of the shares.
Section 11. Corporation's Acceptance of Votes. If the name signed
on a vote, consent, waiver, proxy appointment, or proxy appointment
revocation corresponds to the name of a shareholder, the corporation, if
acting in good faith, is entitled to accept the vote, consent, waiver,
proxy appointment or proxy appointment revocation and give it effect as
the act of the shareholder. If the name signed on a vote, consent,
waiver, proxy appointment or proxy appointment revocation does not
correspond to the name of a shareholder, the corporation, if acting in
good faith, is nevertheless entitled to accept the vote, consent, waiver,
proxy appointment or proxy appointment revocation and to give it effect
as the act of the shareholder if:
(i) the shareholder is an entity and the name signed purports to be
that of an officer or agent of the entity;
(ii) the name signed purports to be that of an administrator,
executor, guardian or conservator representing the shareholder and, if
the corporation requests, evidence of fiduciary status acceptable to
the corporation has been presented with respect to the vote, consent,
waiver, proxy appointment or proxy appointment revocation;
(iii) the name signed purports to be that of a receiver or trustee in
bankruptcy of the shareholder and, if the corporation requests, evidence
of this status acceptable to the corporation has been presented with
respect to the vote, consent, waiver, proxy appointment or proxy
appointment revocation;
(iv) the name signed purports to be that of a pledgee, beneficial
owner or attorney-in-fact of the shareholder and, if the corporation
requests, evidence acceptable to the corporation of the signatory's
authority to sign for the shareholder has been presented with respect to
the vote, consent, waiver, proxy appointment or proxy appointment
revocation;
(v) two or more persons are the shareholder as co-tenants or
fiduciaries and the name signed purports to be the name of at least one
of the co-tenants or fiduciaries, and the person signing appears to be
acting on behalf of all the co-tenants or fiduciaries; or
(vi) the acceptance of the vote, consent, waiver, proxy appointment
or proxy appointment revocation is otherwise proper under rules
established by the corporation that are not inconsistent with this Section
11.
The corporation is entitled to reject a vote, consent, waiver,
proxy appointment or proxy appointment revocation if the secretary or
other officer or agent authorized to tabulate votes, acting in good faith,
has reasonable basis for doubt about the validity of the signature on it or
about the signatory's authority to sign for the shareholder.
Neither the corporation nor its officers nor any agent who accepts
or rejects a vote, consent, waiver, proxy appointment or proxy
appointment revocation in good faith and in accordance with the
standards of this Section is liable in damages for the consequences of the
acceptance or rejection.
Section 12. Informal Action by Shareholders. Any action required
or permitted to be taken at a meeting of the shareholders may be taken
without a meeting if a written consent (or counterparts thereof) that sets
forth the action so taken is signed by all of the shareholders entitled to
vote with respect to the subject matter thereof and received by the
corporation. Such consent shall have the same force and effect as a
unanimous vote of the shareholders and may be stated as such in any
document. Action taken under this Section 12 is effective as of the date
the last writing necessary to effect the action is received by the
corporation, unless all of the writings specify a different effective date,
in which case such specified date shall be the effective date for such
action. If any shareholder revokes his consent as provided for herein
prior to what would otherwise be the effective date, the action proposed
in the consent shall be invalid. The record date for determining
shareholders entitled to take action without a meeting is the date the
corporation first receives a writing upon which the action is taken.
Any shareholder who has signed a writing describing and consenting
to action taken pursuant to this Section 12 may revoke such consent by
a writing signed by the shareholder describing the action and stating that
the shareholder's prior consent thereto is revoked, if such writing is
received by the corporation before the effectiveness of the action.
Section 13. Meetings by Telecommunication. Any or all of the
shareholders may participate in an annual or special shareholders'
meeting by, or the meeting may be conducted through the use of, any
means of communication by which all persons participating in the
meeting may hear each other during the meeting. A shareholder
participating in a meeting by this means is deemed to be present in
person at the meeting.
ARTICLE III
Board of Directors
Section 1. General Powers. All corporate powers shall be exercised
by or under the authority of, and the business and affairs of the
corporation shall be managed under the direction of, its board of
directors, except as otherwise provided in the Colorado Business
Corporation Act or the articles of incorporation.
Section 2. Number, Qualifications and Tenure. The number of
directors of the corporation shall be fixed from time to time by the board
of directors, within a range of no less than one or more than five, but
no decrease in the number of directors shall have the effect of shortening
the term of any incumbent director. A director shall be a natural person
who is eighteen years of age or older. A director need not be a resident
of Colorado or a shareholder of the corporation.
Directors shall be elected at each annual meeting of shareholders.
Each director shall hold office until the next annual meeting of
shareholders following his election and thereafter until his successor shall
have been elected and qualified. Directors shall be removed in the
manner provided by the Colorado Business Corporation Act. Any
director may be removed by the shareholders of the voting group that
elected the director, with or without cause, at a meeting called for that
purpose. The notice of the meeting shall state that the purpose or one of
the purposes of the meeting is removal of the director. A director may
be removed only if the number of votes cast in favor of removal exceeds
the number of votes cast against removal.
Section 3. Vacancies. Any director may resign at any time by giving
written notice to the secretary. Such resignation shall take effect at the
time the notice is received by the secretary unless the notice specifies a
later effective date. Unless otherwise specified in the notice of
resignation, the corporation's acceptance of such resignation shall not be
necessary to make it effective. Any vacancy on the board of directors
may be filled by the affirmative vote of a majority of the shareholders
at a special meeting called for that purpose or by the board of directors.
If the directors remaining in office constitute fewer than a quorum of the
board, the directors may fill the vacancy by the affirmative vote of a
majority of all the directors remaining in office. If elected by the
directors, the director shall hold office until the next annual
shareholders' meeting at which directors are elected. If elected by the
shareholders, the director shall hold office for the unexpired term of his
predecessor in office; except that, if the director's predecessor was
elected by the directors to fill a vacancy, the director elected by the
shareholders shall hold office for the unexpired term of the last
predecessor elected by the shareholders.
Section 4. Regular Meetings. A regular meeting of the board of
directors shall be held without notice immediately after and at the same
place as the annual meeting of shareholders. The board of directors may
provide by resolution the time and place, either within or outside
Colorado, for the holding of additional regular meetings without other
notice.
Section 5. Special Meetings. Special meetings of the board of
directors may be called by or at the request of the president or chief
executive officer or any director. The person or persons authorized to
call special meetings of the board of directors may fix any place, either
within or outside Colorado, as the place for holding any special meeting
of the board of directors called by them, provided that no meeting shall
be called outside the State of Colorado unless a majority of the board of
directors has so authorized.
Section 6. Notice. Notice of the date, time and place of any special
meeting shall be given to each director at least two days prior to the
meeting by written notice either personally delivered or mailed to each
director at his business address, or by notice transmitted by private
courier, telegraph, telex, electronically transmitted facsimile or other
form of wire or wireless communication. If mailed, such notice shall be
deemed to be given and to be effective on the earlier of (i) five days
after such notice is deposited in the United States mail, properly
addressed, with first class postage prepaid, or (ii) the date shown on the
return receipt, if mailed by registered or certified mail return receipt
requested, provided that the return receipt is signed by the director to
whom the notice is addressed. If notice is given by telex, electronically
transmitted facsimile or other similar form of wire or wireless
communication, such notice shall be deemed to be given and to be
effective when sent, and with respect to a telegram, such notice shall be
deemed to be given and to be effective when the telegram is delivered
to the telegraph company. If a director has designated in writing one or
more reasonable addresses or facsimile numbers for delivery of notice
to him, notice sent by mail, telegraph, telex, electronically transmitted
facsimile or other form of wire or wireless communication shall not be
deemed to have been given or to be effective unless sent to such
addresses or facsimile numbers, as the case may be.
A director may waive notice of a meeting before or after the time
and date of the meeting by a writing signed by such director. Such
waiver shall be delivered to the secretary for filing with the corporate
records, but such delivery and filing shall not be conditions to the
effectiveness of the waiver. Further, a director's attendance at or
participation in a meeting waives any required notice to him of the
meeting unless at the beginning of the meeting, or promptly upon his
later arrival, the director objects to holding the meeting or transacting
business at the meeting because of lack of notice or defective notice and
does not thereafter vote for or assent to action taken at the meeting.
Neither the business to be transacted at, nor the purpose of, any regular
or special meeting of the board of directors need be specified in the
notice or waiver of notice of such meeting.
Section 7. Quorum. A majority of the number of directors fixed by
the board of directors pursuant to Article III, Section 2 or, if no number
is fixed, a majority of the number in office immediately before the
meeting begins, shall constitute a quorum for the transaction of business
at any meeting of the board of directors.
Section 8. Manner of Acting. The act of the majority of the directors
present at a meeting at which a quorum is present shall be the act of the
board of directors.
Section 9. Compensation. By resolution of the board of directors,
any director may be paid any one or more of the following: his
expenses, if any, of attendance at meetings, a fixed sum for attendance
at each meeting, a stated salary as director, or such other compensation
as the corporation and the director may reasonably agree upon. No such
payment shall preclude any director from serving the corporation in any
other capacity and receiving compensation therefor.
Section 10. Presumption of Assent. A director of the corporation
who is present at a meeting of the board of directors or committee of the
board at which action on any corporate matter is taken shall be presumed
to have assented to all action taken at the meeting unless (i) the director
objects at the beginning of the meeting, or promptly upon his arrival, to
the holding of the meeting or the transaction of business at the meeting
and does not thereafter vote for or assent to any action taken at the
meeting, (ii) the director contemporaneously requests that his dissent or
abstention as to any specific action taken be entered in the minutes of the
meeting, or (iii) the director causes written notice of his dissent or
abstention as to any specific action to be received by the presiding
officer of the meeting before its adjournment or by the secretary
promptly after the adjournment of the meeting. A director may dissent
to a specific action at a meeting, while assenting to others. The right to
dissent to a specific action taken at a meeting of the board of directors
or a committee of the board shall not be available to a director who
voted in favor of such action.
Section 11. Committees. By resolution adopted by a majority of all
the directors in office when the action is taken, the board of directors
may designate from among its members an executive committee and one
or more other committees, and appoint one or more members of the
board of directors to serve on them. To the extent provided in the
resolution, each committee shall have all the authority of the board of
directors, except that no such committee shall have the authority to (i)
authorize distributions, (ii) approve or propose to shareholders actions
or proposals required by the Colorado Business Corporation Act to be
approved by shareholders, (iii) fill vacancies on the board of directors
or any committee thereof, (iv) amend articles of incorporation, (v) adopt,
amend or repeal the bylaws, (vi) approve a plan of merger not requiring
shareholder approval, (vii) authorize or approve the reacquisition of
shares unless pursuant to a formula or method prescribed by the board
of directors, or (viii) authorize or approve the issuance or sale of shares,
or contract for the sale of shares or determine the designations and
relative rights, preferences and limitations of a class or series of shares,
except that the board of directors may authorize a committee or officer
to do so within limits specifically prescribed by the board of directors.
The committee shall then have full power within the limits set by the
board of directors to adopt any final resolution setting forth all
preferences, limitations and relative rights of such class or series and to
authorize an amendment of the articles of incorporation stating the
preferences, limitations and relative rights of a class or series for filing
with the Secretary of State under the Colorado Business Corporation
Act.
Sections 4, 5, 6, 7, 8 or 12 of Article III, which govern meetings,
notice, waiver of notice, quorum, voting requirements and action without
a meeting of the board of directors, shall apply to committees and their
members appointed under this Section 11.
Neither the designation of any such committee, the delegation of
authority to such committee, nor any action by such committee pursuant
to its authority shall alone constitute compliance by any member of the
board of directors or a member of the committee in question with his
responsibility to conform to the standard of care set forth in Article III,
Section 14 of these bylaws.
Section 12. Informal Action by Directors. Any action required or
permitted to be taken at a meeting of the directors or any committee
designated by the board of directors may be taken without a meeting if
a written consent (or counterparts thereof) that sets forth the action so
taken is signed by all of the directors entitled to vote with respect to the
action taken. Such consent shall have the same force and effect as a
unanimous vote of the directors or committee members and may be
stated as such in any document. Unless the consent specifies a different
effective time or date, action taken under this Section 12 is effective at
the time or date the last director signs a writing describing the action
taken, unless, before such time, any director has revoked his consent by
a writing signed by the director and received by the president or the
secretary of the corporation.
Section 13. Telephonic Meetings. The board of directors may permit
any director (or any member of a committee designated by the board) to
participate in a regular or special meeting of the board of directors or a
committee thereof through the use of any means of communication by
which all directors participating in the meeting can hear each other
during the meeting. A director participating in a meeting in this manner
is deemed to be present in person at the meeting.
Section 14. Standard of Care. A director shall perform his duties as
a director, including without limitation his duties as a member of any
committee of the board, in good faith, in a manner he reasonably
believes to be in the best interests of the corporation, and with the care
an ordinarily prudent person in a like position would exercise under
similar circumstances. In performing his duties, a director shall be
entitled to rely on information, opinions, reports or statements, including
financial statements and other financial data, in each case prepared or
presented by the persons herein designated. However, he shall not be
considered to be acting in good faith if he has knowledge concerning the
matter in question that would cause such reliance to be unwarranted. A
director shall not be liable to the corporation or its shareholders for any
action he takes or omits to take as a director if, in connection with such
action or omission, he performs his duties in compliance with this
Section 14.
The designated persons on whom a director is entitled to rely are (i)
one or more officers or employees of the corporation whom the director
reasonably believes to be reliable and competent in the matters
presented, (ii) legal counsel, public accountant, or other person as to
matters which the director reasonably believes to be within such person's
professional or expert competence, or (iii) a committee of the board of
directors on which the director does not serve if the director reasonably
believes the committee merits confidence.
ARTICLE IV
Officers and Agents
Section 1. General. The officers of the corporation shall be as
determined by the board of directors from time to time, and may include
a president, one or more vice presidents, a secretary, a treasurer, and
such other officers, assistant officers, committees and agents, including
a chairman of the board, as the board may consider necessary. Each
officer shall be a natural person eighteen years of age or older, and one
person may hold more than one office. Except as expressly prescribed
by these bylaws, the board of directors or the officer or officers
authorized by the board shall from time to time determine the procedure
for the appointment of officers, their authority and duties and their
compensation, provided that the board of directors may change the
authority, duties and compensation of any officer who is not appointed
by the board.
Section 2. Appointment and Term of Office. The officers of the
corporation to be appointed by the board of directors shall be appointed
at each annual meeting of the board held after each annual meeting of
the shareholders. If the appointment of officers is not made at such
meeting or if an officer or officers are to be appointed by another officer
or officers of the corporation, such appointments shall be made as
determined by the board of directors or the appointing person or
persons. Each officer shall hold office until the first of the following
occurs: his successor shall have been duly appointed and qualified, his
death, his resignation, or his removal in the manner provided in Section
3.
Section 3. Resignation and Removal. An officer may resign at any
time by giving written notice of resignation to the president, secretary
or other person who appoints such officer. The resignation is effective
when the notice is received by the corporation unless the notice specifies
a later effective date.
Any officer or agent may be removed at any time with or without
cause by the board of directors or an officer or officers authorized by the
board. Such removal does not affect the contract rights, if any, of the
corporation or of the person so removed. The appointment of an officer
or agent shall not in itself create contract rights.
Section 4. Vacancies. A vacancy in any office, however occurring,
may be filled by the board of directors, or by the officer or officers
authorized by the board, for the unexpired portion of the officer's term.
If an officer resigns and his resignation is made effective at a later date,
the board of directors, or officer or officers authorized by the board,
may permit the officer to remain in office until the effective date and
may fill the pending vacancy before the effective date if the board of
directors or officer or officers authorized by the board provide that the
successor shall not take office until the effective date. In the alternative,
the board of directors, or officer or officers authorized by the board of
directors, may remove the officer at any time before the effective date
and may fill the resulting vacancy.
Section 5. President. The president shall preside at all meetings of
shareholders and all meetings of the board of directors unless the board
of directors has appointed a chairman, vice chairman, or other officer of
the board and has authorized such person to preside at meetings of the
board of directors. Subject to the direction and supervision of the board
of directors, the president shall be the chief executive officer of the
corporation, and shall have general and active control of its affairs and
business and general supervision of its officers, agents and employees.
Unless otherwise directed by the board of directors, the president shall
attend in person or by substitute appointed by him, or shall execute on
behalf of the corporation written instruments appointing a proxy or
proxies to represent the corporation, at all meetings of the stockholders
of any other corporation in which the corporation holds any stock. On
behalf of the corporation, the president may in person or by substitute
or by proxy execute written waivers of notice and consents with respect
to any such meetings. At all such meetings and otherwise, the president,
in person or by substitute or proxy, may vote the stock held by the
corporation, execute written consents and other instruments with respect
to such stock, and exercise any and all rights and powers incident to the
ownership of said stock, subject to the instructions, if any, of the board
of directors. The president shall have custody of the treasurer's bond, if
any. The president shall have such additional authority and duties as are
appropriate and customary for the office of president and chief executive
officer, except as the same may be expanded or limited by the board of
directors from time to time.
Section 6. Vice Presidents. The vice presidents shall assist the
president and shall perform such duties as may be assigned to them by
the president or by the board of directors. In the absence of the
president, the vice president, if any (or, if more than one, the vice
presidents in the order designated by the board of directors, or if the
board makes no such designation, then the vice president designated by
the president, or if neither the board nor the president makes any such
designation, the senior vice president as determined by first election to
that office), shall have the powers and perform the duties of the
president.
Section 7. Secretary. In the event a secretary is designated as an
officer of the corporation, the secretary shall (i) prepare and maintain as
permanent records the minutes of the proceedings of the shareholders
and the board of directors, a record of all actions taken by the
shareholders or board of directors without a meeting, a record of all
actions taken by a committee of the board of directors in place of the
board of directors on behalf of the corporation, and a record of all
waivers of notice of meetings of shareholders and of the board of
directors or any committee thereof, (ii) see that all notices are duly given
in accordance with the provisions of these bylaws and as required by
law, (iii) serve as custodian of the corporate records and of the seal of
the corporation and affix the seal to all documents when authorized by
the board of directors, (iv) keep at the corporation's registered office or
principal place of business a record containing the names and addresses
of all shareholders in a form that permits preparation of a list of
shareholders arranged by voting group and by class or series of shares
within each voting group, that is alphabetical within each class or series
and that shows the address of, and the number of shares of each class or
series held by, each shareholder, unless such a record shall be kept at
the office of the corporation's transfer agent or registrar, (v) maintain at
the corporation's principal office the originals or copies of the
corporation's articles of incorporation, bylaws, minutes of all
shareholders' meetings and records of all action taken by shareholders
without a meeting for the past three years, all written communications
within the past three years to shareholders as a group or to the holders
of any class or series of shares as a group, a list of the names and
business addresses of the current directors and officers, a copy of the
corporation's most recent corporate report filed with the Secretary of
State, and financial statements showing in reasonable detail the
corporation's assets and liabilities and results of operations for the last
three years, (vi) have general charge of the stock transfer books of the
corporation, unless the corporation has a transfer agent, (vii) authenticate
records of the corporation, and (viii) in general, perform all duties
incident to the office of secretary and such other duties as from time to
time may be assigned to him by the president or by the board of
directors. Assistant secretaries, if any, shall have the same duties and
powers, subject to supervision by the secretary. The directors and/or
shareholders may however respectively designate a person other than the
secretary or assistant secretary to keep the minutes of their respective
meetings.
Any books, records, or minutes of the corporation may be in written
form or in any form capable of being converted into written form within
a reasonable time.
Section 8. Treasurer. In the event a treasurer is designated as an
officer of the corporation, the treasurer shall be the principal financial
officer of the corporation, shall have the care and custody of all funds,
securities, evidences of indebtedness and other personal property of the
corporation and shall deposit the same in accordance with the
instructions of the board of directors. Subject to the limits imposed by
the board of directors, he shall receive and give receipts and acquittances
for money paid in on account of the corporation, and shall pay out of the
corporation's funds on hand all bills, payrolls and other just debts of the
corporation of whatever nature upon maturity. He shall perform all other
duties incident to the office of the treasurer and, upon request of the
board, shall make such reports to it as may be required at any time. He
shall, if required by the board, give the corporation a bond in such sums
and with such sureties as shall be satisfactory to the board, conditioned
upon the faithful performance of his duties and for the restoration to the
corporation of all books, papers, vouchers, money and other property of
whatever kind in his possession or under his control belonging to the
corporation. He shall have such other powers and perform such other
duties as may from time to time be prescribed by the board of directors
or the president. The assistant treasurers, if any, shall have the same
powers and duties, subject to the supervision of the treasurer.
The treasurer shall also be the principal accounting officer of the
corporation. He shall prescribe and maintain the methods and systems of
accounting to be followed, keep complete books and records of account
as required by the Colorado Business Corporation Act, prepare and file
all local, state and federal tax returns, prescribe and maintain an
adequate system of internal audit and prepare and furnish to the president
and the board of directors statements of account showing the financial
position of the corporation and the results of its operations.
ARTICLE V
Stock
Section 1. Certificates. The board of directors shall be authorized to
issue any of its classes of shares with or without certificates. The fact
that the shares are not represented by certificates shall have no effect on
the rights and obligations of shareholders. If the shares are represented
by certificates, such shares shall be represented by consecutively
numbered certificates signed, either manually or by facsimile, in the
name of the corporation by the president and the secretary. In case any
officer who has signed or whose facsimile signature has been placed
upon such certificate shall have ceased to be such officer before such
certificate is issued, such certificate may nonetheless be issued by the
corporation with the same effect as if he were such officer at the date of
its issue. All certificates shall be consecutively numbered, and the names
of the owners, the number of shares, and the date of issue shall be
entered on the books of the corporation. Each certificate representing
shares shall state upon its face:
(i) That the corporation is organized under the laws of Colorado;
(ii) The name of the person to whom issued;
(iii) The number and class of the shares and the designation of the
series, if any, that the certificate represents;
(iv) The par value, if any, of each share represented by the
certificate;
(v) Either a summary on the front or the back, of the designations,
preferences, limitations, and relative rights applicable to each class, the
variations in preferences, limitations, and rights determined for each
series, and the authority of the board of directors to determine variations
for future classes or series, or a conspicuous statement, on the front or
the back, that the corporation will furnish such information to the
shareholder, on request in writing and without charge; and
(vi) Any restrictions imposed by the corporation upon the transfer of
the shares represented by the certificate.
If shares are not represented by certificates, within a reasonable time
following the issue or transfer of such shares, the corporation shall send
the shareholder a complete written statement of all of the information
required to be provided to holders of uncertificated shares by the
Colorado Business Corporation Act.
Section 2. Consideration for Shares. Certificated or uncertificated
shares shall not be issued until the shares represented thereby are fully
paid. The board of directors may authorize the issuance of shares for
consideration consisting of any tangible or intangible property or benefit
to the corporation, including cash, promissory notes, services performed
or other securities of the corporation. Future services shall not constitute
payment or partial payment for shares of the corporation. The
promissory note of a subscriber or an affiliate of a subscriber shall not
constitute payment or partial payment for shares of the corporation
unless the note is negotiable and is secured by collateral, other than the
shares being purchased, having a fair market value at least equal to the
principal amount of the note. For purposes of this Section 2,
"promissory note" means a negotiable instrument on which there is an
obligation to pay independent of collateral and does not include a
non-recourse note.
Section 3. Lost Certificates. In case of the alleged loss, destruction
or mutilation of a certificate of stock, the board of directors may direct
the issuance of a new certificate in lieu thereof upon such terms and
conditions in conformity with law as the board may prescribe. The board
of directors may in its discretion require an affidavit of lost certificate
and/or a bond in such form and amount and with such surety as it may
determine before issuing a new certificate.
Section 4. Transfer of Shares. Upon surrender to the corporation or
to a transfer agent of the corporation of a certificate of stock duly
endorsed or accompanied by proper evidence of succession, assignment
or authority to transfer, and receipt of such documentary stamps as may
be required by law and evidence of compliance with all applicable
securities laws and other restrictions, the corporation shall issue a new
certificate to the person entitled thereto, and cancel the old certificate.
Every such transfer of stock shall be entered on the stock books of the
corporation which shall be kept at its principal office or by the person
and at the place designated by the board of directors.
Except as otherwise expressly provided in Article II, Sections 7 and
11, and except for the assertion of dissenters' rights to the extent
provided in Article 113 of the Colorado Business Corporation Act, the
corporation shall be entitled to treat the registered holder of any shares
of the corporation as the owner thereof for all purposes, and the
corporation shall not be bound to recognize any equitable or other claim
to, or interest in, such shares or rights deriving from such shares on the
part of any person other than the registered holder, including without
limitation any purchaser, assignee or transferee of such shares or rights
deriving from such shares, unless and until such other person becomes
the registered holder of such shares, whether or not the corporation shall
have either actual or constructive notice of the claimed interest of such
other person.
Section 5. Transfer Agent, Registrars and Paying Agents. The board
may at its discretion appoint one or more transfer agents, registrars and
agents for making payment upon any class of stock, bond, debenture or
other security of the corporation. Such agents and registrars may be
located either within or outside Colorado. They shall have such rights
and duties and shall be entitled to such compensation as may be agreed.
ARTICLE VI
Indemnification of Certain Persons
Section 1. Indemnification. For purposes of Article VI, a "Proper
Person" means any person (including the estate or personal
representative of a director) who was or is a party or is threatened to be
made a party to any threatened, pending, or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative, and
whether formal or informal, by reason of the fact that he is or was a
director, officer, employee, fiduciary or agent of the corporation, or is
or was serving at the request of the corporation as a director, officer,
partner, trustee, employee, fiduciary or agent of any foreign or domestic
profit or nonprofit corporation or of any partnership, joint venture, trust,
profit or nonprofit unincorporated association, limited liability company,
or other enterprise or employee benefit plan. The corporation shall
indemnify any Proper Person against reasonably incurred expenses
(including attorneys' fees), judgments, penalties, fines (including any
excise tax assessed with respect to an employee benefit plan) and
amounts paid in settlement reasonably incurred by him in connection
with such action, suit or proceeding if it is determined by the groups set
forth in Section 4 of this Article that he conducted himself in good faith
and that he reasonably believed (i) in the case of conduct in his official
capacity with the corporation, that his conduct was in the corporation's
best interests, or (ii) in all other cases (except criminal cases), that his
conduct was at least not opposed to the corporation's best interests, or
(iii) in the case of any criminal proceeding, that he had no reasonable
cause to believe his conduct was unlawful. Official capacity means,
when used with respect to a director, the office of director and, when
used with respect to any other Proper Person, the office in a corporation
held by the officer or the employment, fiduciary or agency relationship
undertaken by the employee, fiduciary, or agent on behalf of the
corporation. Official capacity does not include service for any other
domestic or foreign corporation or other person or employee benefit
plan.
A director's conduct with respect to an employee benefit plan for a
purpose the director reasonably believed to be in the interests of the
participants in or beneficiaries of the plan is conduct that satisfies the
requirement in (ii) of this Section 1. A director's conduct with respect
to an employee benefit plan for a purpose that the director did not
reasonably believe to be in the interests of the participants in or
beneficiaries of the plan shall be deemed not to satisfy the requirement
of this section that he conduct himself in good faith.
No indemnification shall be made under this Article VI to a Proper
Person with respect to any claim, issue or matter in connection with a
proceeding by or in the right of a corporation in which the Proper
Person was adjudged liable to the corporation or in connection with any
proceeding charging that the Proper Person derived an improper personal
benefit, whether or not involving action in an official capacity, in which
he was adjudged liable on the basis that he derived an improper personal
benefit. Further, indemnification under this section in connection with
a proceeding brought by or in the right of the corporation shall be
limited to reasonable expenses, including attorneys' fees, incurred in
connection with the proceeding.
Section 2. Right to Indemnification. The corporation shall indemnify
any Proper Person who was wholly successful, on the merits or
otherwise, in defense of any action, suit, or proceeding as to which he
was entitled to indemnification under Section l of this Article VI against
expenses (including attorneys' fees) reasonably incurred by him in
connection with the proceeding without the necessity of any action by the
corporation other than the determination in good faith that the defense
has been wholly successful.
Section 3. Effect of Termination of Action. The termination of any
action, suit or proceeding by judgment, order, settlement or conviction,
or upon a plea of nolo contendere or its equivalent shall not of itself
create a presumption that the person seeking indemnification did not
meet the standards of conduct described in Section 1 of this Article VI.
Entry of a judgment by consent as part of a settlement shall not be
deemed an adjudication of liability, as described in Section 2 of this
Article VI.
Section 4. Groups Authorized to Make Indemnification
Determination. Except where there is a right to indemnification as set
forth in Sections 1 or 2 of this Article or where indemnification is
ordered by a court in Section 5, any indemnification shall be made by
the corporation only as determined in the specific case by a proper group
that indemnification of the Proper Person is permissible under the
circumstances because he has met the applicable standards of conduct set
forth in Section 1 of this Article. This determination shall be made by
the board of directors by a majority vote of those present at a meeting
at which a quorum is present, which quorum shall consist of directors
not parties to the proceeding ("Quorum"). If a Quorum cannot be
obtained, the determination shall be made by a majority vote of a
committee of the board of directors designated by the board, which
committee shall consist of two or more directors not parties to the
proceeding, except that directors who are parties to the proceeding may
participate in the designation of directors for the committee. If a Quorum
of the board of directors cannot be obtained and the committee cannot
be established, or even if a Quorum is obtained or the committee is
designated and a majority of the directors constituting such Quorum or
committee so directs, the determination shall be made by (i) independent
legal counsel selected by a vote of the board of directors or the
committee in the manner specified in this Section 4 or, if a Quorum of
the full board of directors cannot be obtained and a committee cannot be
established, by independent legal counsel selected by a majority vote of
the full board (including directors who are parties to the action) or (ii)
a vote of the shareholders.
Authorization of indemnification and advance of expenses shall be
made in the same manner as the determination that indemnification or
advance of expenses is permissible except that, if the determination that
indemnification or advance of expenses is permissible is made by
independent legal counsel, authorization of indemnification and advance
of expenses shall be made by the body that selected such counsel.
Section 5. Court-Ordered Indemnification. Any Proper Person may
apply for indemnification to the court conducting the proceeding or to
another court of competent jurisdiction for mandatory indemnification
under Section 2 of this Article, including indemnification for reasonable
expenses incurred to obtain court-ordered indemnification. If a court
determines that the Proper Person is entitled to indemnification under
Section 2 of this Article, the court shall order indemnification, including
the Proper Person's reasonable expenses incurred to obtain court-ordered
indemnification. If the court determines that such Proper Person is fairly
and reasonably entitled to indemnification in view of all the relevant
circumstances, whether or not he met the standards of conduct set forth
in Section 1 of this Article or was adjudged liable in the proceeding, the
court may order such indemnification as the court deems proper except
that if the Proper Person has been adjudged liable, indemnification shall
be limited to reasonable expenses incurred in connection with the
proceeding and reasonable expenses incurred to obtain court-ordered
indemnification.
Section 6. Advance of Expenses. Reasonable expenses (including
attorneys' fees) incurred in defending an action, suit or proceeding as
described in Section 1 may be paid by the corporation to any Proper
Person in advance of the final disposition of such action, suit or
proceeding upon receipt of (i) a written affirmation of such Proper
Person's good faith belief that he has met the standards of conduct
prescribed by Section 1 of this Article VI, (ii) a written undertaking,
executed personally or on the Proper Person's behalf, to repay such
advances if it is ultimately determined that he did not meet the
prescribed standards of conduct (the undertaking shall be an unlimited
general obligation of the Proper Person but need not be secured and may
be accepted without reference to financial ability to make repayment),
and (iii) a determination is made by the proper group (as described in
Section 4 of this Article VI) that the facts as then known to the group
would not preclude indemnification. Determination and authorization of
payments shall be made in the same manner specified in Section 4 of this
Article VI.
Section 7. Additional Indemnification to Certain Persons Other Than
Directors. In addition to the indemnification provided to officers,
employees, fiduciaries or agents because of their status as Proper
Persons under this Article, the corporation may also indemnify and
advance expenses to them if they are not directors of the corporation to
a greater extent than is provided in these bylaws, if not inconsistent with
public policy, and if provided for by general or specific action of its
board of directors or shareholders or by contract.
Section 8. Witness Expenses. The sections of this Article VI do not
limit the corporation's authority to pay or reimburse expenses incurred
by a director in connection with an appearance as a witness in a
proceeding at a time when he has not been made a named as a defendant
or respondent in the proceeding.
Section 9. Report to Shareholders. Any indemnification of or
advance of expenses to a director in accordance with this Article VI, if
arising out of a proceeding by or on behalf of the corporation, shall be
reported in writing to the shareholders with or before the notice of the
next shareholders' meeting. If the next shareholder action is taken
without a meeting at the instigation of the board of directors, such notice
shall be given to the shareholders at or before the time the first
shareholder signs a writing consenting to such action.
ARTICLE VII
Provision of Insurance
Section 1. Provision of Insurance. By action of the board of
directors, notwithstanding any interest of the directors in the action, the
corporation may purchase and maintain insurance, in such scope and
amounts as the board of directors deems appropriate, on behalf of any
person who is or was a director, officer, employee, fiduciary or agent
of the corporation, or who, while a director, officer, employee, fiduciary
or agent of the corporation, is or was serving at the request of the
corporation as a director, officer, partner, trustee, employee, fiduciary
or agent of any other foreign or domestic profit or nonprofit corporation
or of any partnership, joint venture, trust, profit or nonprofit
unincorporated association, limited liability company, other enterprise or
employee benefit plan, against any liability asserted against, or incurred
by, him in that capacity or arising out of his status as such, whether or
not the corporation would have the power to indemnify him against such
liability under the provisions of Article VI or applicable law. Any such
insurance may be procured from any insurance company designated by
the board of directors of the corporation, whether such insurance
company is formed under the laws of Colorado or any other jurisdiction
of the United States or elsewhere, including any insurance company in
which the corporation has an equity interest or any other interest,
through stock ownership or otherwise.
ARTICLE VIII
Miscellaneous
Section 1. Seal. The board of directors may adopt a corporate seal,
which shall be circular in form and shall contain the name of the
corporation and the words, "Seal, Colorado."
Section 2. Fiscal Year. The fiscal year of the corporation shall be as
established by the board of directors.
Section 3. Amendments. The board of directors shall have power,
to the maximum extent permitted by the Colorado Business Corporation
Act, to make, amend and repeal the bylaws of the corporation at any
regular or special meeting of the board unless the shareholders, in
making, amending or repealing a particular bylaw, expressly provide that
the directors may not amend or repeal such bylaw. The shareholders also
shall have the power to make, amend or repeal the bylaws of the
corporation at any annual meeting or at any special meeting called for
that purpose.
Section 4. Receipt of Notices by the Corporation. Notices,
shareholder writings consenting to action, and other documents or
writings shall be deemed to have been received by the corporation when
they are actually received: (1) at the registered office of the corporation
in Colorado; (2) at the principal office of the corporation (as that office
is designated in the most recent document filed by the corporation with
the secretary of state for Colorado designating a principal office)
addressed to the attention of the secretary of the corporation; (3) by the
secretary of the corporation wherever the secretary may be found; or (4)
by any other person authorized from time to time by the board of
directors or the president to receive such writings, wherever such person
is found.
Section 5. Gender. The masculine gender is used in these bylaws as
a matter of convenience only and shall be interpreted to include the
feminine and neuter genders as the circumstances indicate.
Section 6. Conflicts. In the event of any irreconcilable conflict
between these bylaws and either the corporation's articles of
incorporation or applicable law, the latter shall control.
Section 7. Definitions. Except as otherwise specifically provided in
these bylaws, all terms used in these bylaws shall have the same
definition as in the Colorado Business Corporation Act.
THE FOREGOING BYLAWS, consisting of 22 pages, including
this page, constitute the Bylaws of Sunburst Acquisitions VII, Inc.,
adopted by the Board of Directors of the corporation as of June 30,
1998.
/s/Jay Lutsky
Secretary<PAGE>
EXHIBIT 3.1 -
SPECIMEN STOCK CERTIFICATE
CONTENTS:
State of Incorporation
Name of Company
Number of authorized shares of common stock
Name of Individual Shareholder
Number of shares owned by individual shareholder
Fully paid and non-assessable shares
Date of issuance of certificate
Signature of President
Restrictive transfer legend<PAGE>
EXHIBIT 3.2 - SPECIMEN SERIES A CONVERTIBLE PREFERRED
STOCK CERTIFICATE
CONTENTS:
State of Incorporation
Name of Company
Description of series of preferred stock issued
Name of Individual Shareholder
Number of shares and description owned by individual shareholder
Fully paid and non-assessable shares
Date of issuance of certificate
Signature of Secretary and President
Statement regarding rights and preferences
Restrictive transfer legend
<PAGE>
EXHIBIT 27 - FINANCIAL DATA SCHEDULE
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-END> JUN-30-1998
<CASH> 10,000
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 10,000
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 10,000
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
10,000
<COMMON> 1,935
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 10,000
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> (1,935)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,935)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,935)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
