U. S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-SB/A
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 VIII, INC.
(Name of Small Business Issuer in its charter)
Colorado 84-1466588
(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 VIII, 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/A 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 imposed by Rule 144. In such circumstances,
the shareholders other than the principal shareholders may be unable
to sell their shares in any public market which exists at that time
because of the restrictions imposed by Rule 144. It is also possible
that they would be unable to sell their shares in a private transaction
at that time because prospective purchasers are not interested in
purchasing restricted shares which represent a minority interest.
In the Company's judgment, none of its officers and directors
would become an "underwriter" within the meaning of Section 2(11)
of the Securities Act of 1933, as amended, as a result of the
transactions described herein. In order for the officers and directors
of the Company to be statutory underwriters, either their initial
purchase of securities from the Company, or their subsequent offer or
sale of those securities in conjunction with a merger or acquisition
transaction, must be part of (or be deemed to be part of) a distribution
or public offering. Since the securities owned by the officers and
directors constitute "restricted securities" and will also be "restricted
securities" in the hands of any purchaser following a private
transaction of the type described herein, it is not likely that such
securities would become part of a chain of purchase and sale
transactions which might be deemed to be in the nature of a public
offering or public distribution.
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 Secretary. 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,
and Sunburst Acquisitions III, Inc, and 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 previously voluntarily elected to file registration
statements on Form 10-SB under the Securities 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 VI, Inc., was formed in April, 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/A 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
Secretary. 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
Michael R. Quinn 73 President and Director
Jay Lutsky 54 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 Secretary 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.,
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 President and Director of the
Company since its inception. He has been involved with several
development stage companies , including Global Net Corporation, Tai
Feng Corporation and City Link Services, Inc., of Santa Fe,
California and Taiwan, and Sensotron, Inc., of Huntington Beach,
California. 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 , the shares of
which are currently publicly traded. 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 as an officer and
director 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.,
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., and Sunburst Acquisitions VI, 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 is 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 April 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>
Michael R. Quinn 6/30/98 825,000 825<F1> 0..001
Jay Lutsky 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 6/30/98 750 750 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 VIII, 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 VIII, Inc.
We have audited the accompanying balance sheet of Sunburst
Acquisitions VIII, 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 VIII, 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 VIII, 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 VIII, 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 VIII, 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 VIII, 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 VIII, 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 VIII, Inc.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
June 30, 1998
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Development stage company.
SUNBURST ACQUISITIONS VIII, 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, Michael R. Quinn and Jay Lutsky
will own 1,685,000 shares constituting approximately 79% of the
Company's issued and outstanding shares.
The Company's Secretary 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.
<TABLE>
<CAPTION>
Exhibit
No. Document
<S> <C>
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
</TABLE>
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 VIII, Inc.
By: /s/
Michael R. Quinn
President and Director
(Principal Executive Officer)
Date: October 30, 1998
By: /s/
Jay Lutsky
Secretary, Treasurer and Director
(Principal Financial Officer)
Date: October 30, 1998<PAGE>
U. S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-SB/A
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 VIII, INC.
(Name of Small Business Issuer in its charter)
Colorado 84-1466588
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
No. Document
2.1 Articles of Incorporation (incorporated by reference to Form
10-SB filed with the Securities and Exchange Commission on behalf
of the Company on July 28, 1998)
2.2 Bylaws (incorporated by reference to Form 10-SB filed with
the Securities and Exchange Commission on behalf of the Company
on July 28, 1998)
3.1 Specimen Common Stock Certificate (incorporated by
reference to Form 10-SB filed with the Securities and Exchange
Commission on behalf of the Company on July 28, 1998)
3.2 Specimen Series A Convertible Preferred Stock Certificate
(incorporated by reference to Form 10-SB filed with the Securities and
Exchange Commission on behalf of the Company on July 28, 1998)
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>
