UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 2 TO
FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
THE ARIELLE CORP.
(Name of small business
issuer
in its charter)
Delaware 6770 [ ]
(State
or jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or Classification Code Number) Identification
organization) No.)
26 Aerie Court, North Hills, NY 11030, (516) 621-8286
(Address and telephone number of principal executive offices)
26 Aerie Court, North Hills, NY 11030, (516) 621-8286
(Address of Principal place of business or
intended principal place of business)
Schonfeld&Weinstein, LLP, 63 Wall Street, Suite 1810, New York, NY 10005
(212)
344-1600
(Name, address, and telephone number of agent for service)
Approximate date of proposed sale to the public as soon as practicable after
the effective date of this Registration Statement and Prospectus.
Schonfeld & Weinstein, L.L.P.
63 Wall Street, Suite 1801
New York, NY 10005
(212) 344-1600
The registrant hereby amends this registration statement on such
date or dates as may be necessary to delay its effective date until the
registrant shall file a further amendment which specifically states that this
registration statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the registration
statement shall become effective on such date as the Commission, acting
pursuant to said Section 8(a), may determine.
<PAGE>
CALCULATION OF REGISTRATION FEE
Title of Each Class of Amount Proposed Proposed Amount of
Securities Being (1) Being Maximum Maximum Registration
Registered Registered Offering Aggregate Fee
Price Per Offering
Share (2) Price(2)
Shares of Common Stock 100,000 $0.35 $35,000 $100.00
TOTAL 100,000 $35,000 $100.00
(1) Excludes 400,000 shares sold at $.05 per share to four (4) persons
between October 13, 1997 and March 30, 1998.
(2) Estimated for purposes of computing the registration fee pursuant to
Rule 457.
<PAGE>
Cross Reference Sheet
Showing the Location In Prospectus of
Information Required by Items of Form SB-2
Part I. Information Required in Prospectus
Item
No. Required Item Location or Caption
1. Front of Registration Statement Front of Registration
and Outside Front Cover of Statement and
outside
Prospectus front cover of Prospectus
2. Inside Front and Outside Back Inside Front Cover Page
Cover Pages of Prospectus of Prospectus and Outside
Front cover Page of
Prospectus
3. Summary Information and Risk Prospectus Summary;
Factors High Risk Factors
4. Use of Proceeds Use of Proceeds
5. Determination of Offering Prospectus Summary -
Price Determination of
Offering Price; High Risk
Factors
6. Dilution Dilution
7. Selling Security Holders Not Applicable
8. Plan of Distribution Plan of Distribution
9. Legal Proceedings Litigation
10. Directors, Executive Officers, Management
Promoters and Control Persons
11. Security Ownership of Certain Principal Stockholders
Beneficial Owners and Management of Common Stock
<PAGE>
<PAGE>
(continued)
Part I Information Required in Prospectus Caption in Prospectus
12. Description of Securities Description of Securities
13. Interest of Named Experts and Legal Opinions; Experts
Counsel
14. Disclosure of Commission Position Statement as to
on Indemnification for
Securities
Indemnification Act Liabilities
15. Organization Within Last Management, Certain
Five Years Transactions
16. Description of Business Proposed
Business,
Remuneration
17. Management's Discussion and Proposed Business -
and Analysis or Plan of Plan of
Operation
Operation
18. Description of Property Proposed Business
19. Certain Relationships and Related Certain Transactions
Transactions
20. Market for Common Stock and Prospectus Summary,
Related Stockholder Matters Market for Registrant's
Common Stock and Related
Stockholders Matters;
Shares Eligible for Future
Sale.
21. Executive Compensation Remuneration
22. Financial Statements Financial Statements
23. Changes in and Disagreements Not Applicable
with Accountants on Accounting
and Financial Disclosure
PAGE
<PAGE>
PROSPECTUS
THE ARIELLE CORP.
(A Delaware Corporation)
100,000 Shares of Common Stock Offered at $0.35 per Share
The Arielle Corp. (the "Company") hereby offers for sale 100,000 shares
of common stock, $.0001 par value per share (the "Shares) (Common Stock") at
a purchase price of $0.35 per Share (the "Offering"). The Shares shall be
sold exclusively by the Company on a "best-efforts, all or none basis" for a
period of ninety (90) days (which may be extended an additional ninety (90)
days). This offering shall be conducted directly by the Company without the
use of a professional underwriter or securities dealer. The Company's
offering is being made in compliance with Rule 419 of Regulation C, pursuant
to which the offering proceeds and the securities to be issued to purchasers
will be placed in an escrow account (the "Escrow Account") until the offering
has been reconfirmed by the Company's shareholders and a Business Combination
(as hereinafter defined) consummated in accordance with the provisions of
such
Rule. Pursuant to Rule 3a51-1(d) under the Securities Exchange Act, the
securities being offered hereto constitute "penny stock," and as such,
certain sales restrictions apply to these securities. (See "Risk Factors").
This offering is being made on a best efforts, all or none basis on behalf of
the Company by the Company. (See "Description of Securities"). Up to 20%
of
the Offering may be purchased by officers, directors, current shareholders of
the Company, and any of their affiliates or associates.
Price to Proceeds to
the Public the Company(2)
Per Share $ 0.35 $ 0.35
TOTAL (1) $35,000.00 $35,000.00
(1) These Shares are offered by the Company on a "best-efforts, all or none
basis".
Pursuant to the terms of an escrow agreement (the "Escrow Agreement"),
upon receipt by the Company, investors' funds will immediately be deposited
in the Escrow Account which will be maintained by Citibank, N.A., 120
Broadway, New York, New York (the "Escrow Agent"). All investors' checks or
money orders must be made payable to "The Arielle Corp. and Citibank, as
Escrow Agent." Unless all 100,000 Shares have been sold, and $35,000 in
payment therefor has been received in the Escrow Account within 90 days from
the date hereof (the "Offering Period"), or within an additional 90 days if
the Offering Period is extended by the Company (the "Extended Offering
Period"), all funds held in the Escrow Account will be returned to investors
in full, without interest thereon or deduction therefrom.
Upon the sale of all 100,000 Shares within the Offering Period (or the
Extended Offering Period), other terms of the Escrow Agreement which have
been included therein to comply with Rule 419 (the "Rule 419 Escrow
Provisions") will govern the treatment of the Shares purchased by investors
and the investors' funds tendered in payment thereof. Pursuant to the Rule
419 Escrow Provisions, the Common Stock certificates evidencing the Shares are
to be issued in the respective names of the investors and promptly deposited
into the Escrow Account upon issuance. The investors' funds will remain as
deposited in the Escrow Account except for up to 10% of the amount on deposit
after such payments which may be released to the Company under Rule 419 (the
"Deposited Funds.")
Rule 419 permits 10% of the proceeds to be disbursed to the Company from
the Rule 419 Escrow Account prior to the consummation of a Business
Combination. The Company is entitled to 10% of the Deposited Funds of this
offering, and the Company's current management intends to request release of
these funds from the Escrow Account. The Company will receive the remainder
of the Deposited Funds in the event a Business Combination is consummated
pursuant to the provisions of Rule 419.
(2) Before deducting offering expenses which include: Blue Sky fees, legal
fees, accounting fees, printing fees, filing fees, estimated at $22,000.
THE COMPANY IS CONDUCTING A BLANK CHECK OFFERING SUBJECT TO THE
COMMISSION'S RULE 419 OF REGULATION C. THE OFFERING PROCEEDS, WHICH WILL BE
$35,000.00, AND THE SECURITIES PURCHASED BY INVESTORS MUST BE DEPOSITED INTO
AN ESCROW ACCOUNT (THE "DEPOSITED FUNDS" AND "DEPOSITED SECURITIES,"
RESPECTIVELY). WHILE HELD IN THE ESCROW ACCOUNT, THE DEPOSITED SECURITIES
MAY NOT BE TRADED OR TRANSFERRED. EXCEPT FOR AN AMOUNT UP TO 10% OF THE
DEPOSITED FUNDS, $3,500, OTHERWISE RELEASABLE UNDER THE RULE, THE DEPOSITED
FUNDS AND THE DEPOSITED SECURITIES MAY NOT BE RELEASED UNTIL AN ACQUISITION IS
MADE WHICH MEETS THE CRITERIA SPECIFIED IN RULE 419, AND A SUFFICIENT NUMBER
OF INVESTORS RECONFIRM THEIR INVESTMENT IN ACCORDANCE WITH RULE 419's
PROCEDURES. PURSUANT TO THESE PROCEDURES, A NEW PROSPECTUS, WHICH DESCRIBES
AN ACQUISITION CANDIDATE AND ITS BUSINESS AND INCLUDES AUDITED FINANCIAL
STATEMENTS, WILL BE DELIVERED TO ALL INVESTORS. THE COMPANY MUST RETURN THE
PRO RATA PORTION OF THE DEPOSITED FUNDS TO ANY INVESTOR WHO DOES NOT ELECT TO
REMAIN AN INVESTOR. UNLESS A SUFFICIENT NUMBER OF INVESTORS ELECT TO REMAIN
SO, ALL INVESTORS WILL BE ENTITLED TO THE RETURN OF THEIR PRO RATA PORTION OF
THE DEPOSITED FUNDS AND NONE OF THE DEPOSITED SECURITIES WILL BE ISSUED TO
INVESTORS. IN THE EVENT AN ACQUISITION IS NOT CONSUMMATED WITHIN 18 MONTHS
OF THE EFFECTIVE DATE, THE DEPOSITED FUNDS WILL BE RETURNED ON A PRO RATA
BASIS TO ALL INVESTORS. (SEE "INVESTORS' RIGHTS AND SUBSTANTIVE PROTECTIONS
UNDER RULE 419.")
AS INDICATED ABOVE, THE COMPANY'S OFFERING IS SUBJECT TO THE PROVISIONS
OF RULE 419. WHILE HELD IN THE ESCROW ACCOUNT, RULE 15g-8 UNDER THE
SECURITIES EXCHANGE ACT OF 1934 MAKES IT UNLAWFUL FOR ANY PERSON TO SELL OR
OFFER TO SELL THE DEPOSITED SECURITIES (OR ANY INTEREST IN OR RELATED TO THE
DEPOSITED SECURITIES). THUS, INVESTORS ARE PROHIBITED FROM MAKING ANY
ARRANGEMENTS TO SELL THE DEPOSITED SECURITIES UNTIL THEY ARE RELEASED FROM
THE ESCROW ACCOUNT (SEE "HIGH RISK FACTORS" AND "PROHIBITIONS AGAINST SALE OF
SECURITIES BEFORE RELEASE FROM ESCROW.")
THE ARIELLE CORP.
26 Aerie Court
North Hills, New York 11030
The date of this Prospectus is .<PAGE> <PAGE>
THESE SECURITIES ARE HIGHLY SPECULATIVE, INVOLVE A HIGH DEGREE OF RISK,
AND SHOULD BE PURCHASED ONLY BY PERSONS WHO CAN AFFORD TO LOSE THEIR ENTIRE
INVESTMENT. SEE "HIGH RISK FACTORS" FOR SPECIAL RISKS CONCERNING THE COMPANY
AND "DILUTION" FOR INFORMATION CONCERNING DILUTION OF THE BOOK VALUE OF THE
INVESTORS' SHARES FROM THE PUBLIC OFFERING PRICE.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THE SHARES HAVE BEEN REGISTERED ONLY IN THE STATE OF NEW YORK, AND MAY
ONLY BE TRADED IN SUCH STATE AND THE DISTRICT OF COLUMBIA. PURCHASERS OF
SUCH SECURITIES EITHER IN THIS OFFERING OR IN ANY SUBSEQUENT TRADING MARKET
WHICH MAY DEVELOP MUST BE RESIDENTS OF NEW YORK OR THE DISTRICT OF COLUMBIA.
THE COMPANY WILL AMEND THIS PROSPECTUS FOR THE PURPOSE OF DISCLOSING
ADDITIONAL STATES, IF ANY, IN WHICH THE COMPANY'S SECURITIES ARE REGISTERED.
(SEE "HIGH RISK FACTORS - STATE LAW VIOLATIONS.")
PRIOR TO THIS OFFERING THERE HAS BEEN NO PUBLIC MARKET FOR THE COMMON
STOCK OF THE COMPANY. THERE IS NO ASSURANCE THAT ANY TRADING MARKET IN THESE
SECURITIES WILL EVER DEVELOP.
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement (the "Registration Statement") on Form
SB-2 under the Securities Act of 1933 with respect to the Shares offered
hereby. This prospectus does not contain all of the information set forth in
the Registration Statement, certain parts of which are omitted in accordance
with the rules and regulations of the Commission. The Company will be
subject to the reporting requirements of the Securities Exchange Act of 1934
(the "Exchange Act"), but is currently not a reporting company. The Company
will file periodic reports voluntarily in the event that its obligation to
file such reports is suspended under Section 15(d) of the Exchange Act. The
reports and other information filed by the Company may be inspected and
copied at the public reference facilities of the Commission in Washington,
D.C. Copies of such material can be obtained from the Public Reference
Section of the Commission, Washington, D.C., 20549, at prescribed rates.
Descriptions contained in this prospectus as to the contents of any contract
or other document filed as an exhibit to the Registration Statement are not
necessarily complete and each such description is qualified by reference to
such contract or document.
The Company intends to furnish to its stockholders, after the close of
each fiscal year, an annual report relating to the operations of the Company
and containing audited financial statements examined and reported upon by an
independent certified public accountants. In addition, the Company may
furnish to stockholders such other reports as may be authorized, from time to
time, by the Board of Directors. The Company's year end is December 31.
NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS, AND IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF ANY OFFER TO BUY
ANY
SECURITIES IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION WOULD BE
UNLAWFUL. THE DELIVERY OF THIS PROSPECTUS SHALL NOT UNDER ANY CIRCUMSTANCES
CREATE ANY IMPLICATION THAT THERE HAS NOT BEEN ANY CHANGE IN THE AFFAIRS OF
THE COMPANY SINCE THE DATE HEREOF; HOWEVER, ANY CHANGES THAT MAY HAVE
OCCURRED ARE NOT MATERIAL TO AN INVESTMENT DECISION. IN THE EVENT THERE HAS
BEEN ANY MATERIAL CHANGES IN THE AFFAIRS OF THE COMPANY, A POST-EFFECTIVE
AMENDMENT WILL BE FILED. THE COMPANY RESERVES THE RIGHT TO REJECT ANY ORDER,
IN WHOLE OR IN PART, FOR THE PURCHASE OF ANY OF THE SHARES OFFERED HEREBY.
Until 90 days after the date when the Deposited Funds and Deposited
Securities
are released from the Escrow Account, all dealers effecting transactions in
the Common Stock, whether or not participating in this distribution, may be
required to deliver a prospectus. This is in addition to the obligation of
dealers to deliver a prospectus when acting as underwriters with respect to
their unsold allotments or subscriptions.
- -This space is intentionally left blank-
<PAGE>
<PAGE> TABLE OF CONTENTS
Page
PROSPECTUS SUMMARY
The Company
The Offering
Offering in Compliance with Rule 419
High Risk Factors
Determination of Offering Price
Use of Proceeds
SUMMARY FINANCIAL INFORMATION
INVESTORS' RIGHTS AND SUBSTANTIVE PROTECTION
UNDER RULE 419
Deposit of Offering Proceeds and Securities
Prescribed Acquisition Criteria
Post-Effective Amendment
Reconfirmation Offering
Release of Deposited Securities and
Deposited Funds
HIGH RISK FACTORS
DILUTION
USE OF PROCEEDS
CAPITALIZATION
PROPOSED BUSINESS
History and Organization
Plan of Operation
Evaluation of Business Combination
Business Combination
Regulation
Employees Facilities
MANAGEMENT
Biography
Other Blank Check Companies
Conflicts of Interest
Remuneration
Management Involvement
Management Control
STATEMENT AS TO INDEMNIFICATION
MARKET FOR THE COMPANY'S COMMON STOCK
CERTAIN TRANSACTIONS
PRINCIPAL STOCKHOLDERS
DESCRIPTION OF SECURITIES
Common Stock
Future Financing
Reports to Stockholders
Dividends
Transfer Agent
PLAN OF DISTRIBUTION
EXPIRATION DATE
LITIGATION
LEGAL OPINIONS
EXPERTS
FURTHER INFORMATION
FINANCIAL STATEMENTS <PAGE>
PROSPECTUS SUMMARY
The following is a summary of certain information contained in this
prospectus and is qualified in its entirety by the more detailed information
and financial statements (including notes thereto) appearing elsewhere in the
prospectus and in the Registration Statement. Investors should carefully
consider the information set forth in this prospectus under the heading "High
Risk Factors".
The Company
The Arielle Corp. (the "Company"), was organized under the laws of the
State of Delaware on October 6, 1997. The Company was organized as a vehicle
to acquire or merge with a business or company, (the "Target Business") (a
"Business Combination"). Management believes that the Company's
characteristics as an enterprise with liquid assets, nominal liabilities, and
flexibility in structuring will make the Company an attractive combination
candidate. None of the Company's officers, directors, promoters, their
affiliates or associates have had any preliminary contact or discussions and
there are no present plans, proposals, arrangements or understandings with
any representative of the owners of any business regarding the possibility of
an acquisition or merger transaction. The Company does not intend to engage
in the business of investing, reinvesting or trading in securities as its
primary business or pursue any business which would render the Company an
"investment company" pursuant to the Investment Company Act of 1940.
Since organization of the Company, its activities have been limited to
the sale of initial shares in connection with its organization and its
preparation in producing a registration statement and prospectus for its
initial public offering. The Company will not engage in any substantive
commercial business following the offering. (See "Proposed Business.")
The Company maintains its office at 26 Aerie Court, North Hills, New
York. The Company's phone number is 516-621-8286.
The Offering
Securities offered................................................. 100,000
Shares of Common Stock, $.0001
par value, being offered at $0.35
per Share. (See
"Description Securities".)
Common Stock outstanding
prior to the offering.............................................. 400,000
shares.
Common Stock to be
outstanding after the offering..................................... 500,000
shares.
Offering Conducted in Compliance with Rule 419
The Company is a blank check company and consequently this offering is
being conducted in compliance with the Commission's Rule 419. Investors have
certain rights and will receive the substantive protection provided by the
rule. To that end, the securities purchased by investors and the funds
received in the offering will be deposited and held in the Escrow Account
until an acquisition meeting specific criteria is completed (hereinafter the
"Deposited Funds" and "Deposited Securities".) Before the acquisition can be
completed and before the Deposited Funds and Deposited Securities can be
released to the Company and the investors, respectively, the Company is
required to update the Registration Statement with a post-effective
amendment, and within the five days after the effective date thereof, the
Company is required to furnish investors with the prospectus produced thereby
containing the terms of a reconfirmation offer and information regarding the
proposed acquisition candidate and its business, including audited financial
statements. According to Rule 419, investors must have no fewer than 20 and
no more than 45 business days from the effective date of the post-effective
amendment to decide to reconfirm their investment and remain an investor or
alternately, require the return of their investment, minus certain
deductions. Any investor not making any decision within said 45 day period
will automatically have his investment funds returned. The rule further
provides that if the Company does not complete an acquisition meeting the
specified criteria within 18 months of the Effective Date, all of the
Deposited Funds in the Escrow Account must be returned to investors. If the
offering period is extended to its limit (6 months), the Company will have
only 12 months in which to consummate a merger or acquisition. (See
"Investors' Rights and Substantive Protection Under Rule 419 - Reconfirmation
Offering.")
High Risk Factors
Investments in the securities of the Company are highly speculative,
involve a high degree of risk, and should be purchased only by persons who
can afford to lose their entire investment. See "High Risk Factors" for
special risks concerning the Company and "Dilution" for information
concerning
dilution of the book value of the investors shares from the public offering.
(See "High Risk Factors" and "Dilution.")
Determination of Offering Price
The offering price of $0.35 per Share for the Shares offered hereby has
been arbitrarily determined by the Company. This price bears no relation to
the Company's assets, book value, or any other customary investment criteria,
including the Company's prior operating history. Among factors considered by
the Company in determining the offering price were estimates of the Company's
business potential, the limited financial resources of the Company, the
amount of equity and control desired to be retained by the present
shareholders, the amount of dilution to public investors and the general
condition of the securities markets. (See "Determination of Offering Price"
and "High Risk Factors.")
Use of Proceeds
Of the $35,000 offering proceeds deposited into the Escrow Account (the
"Deposited Funds"), 10% ($3,500) may be released to the Company prior to a
reconfirmation offering whereby investors reconfirm their investment in
accordance with procedures proscribed by Rule 419. (See "Investors' Rights
and Substantive Protection Under Rule 419 - Reconfirmation Offering.") The
Company is entitled to such funds, and the Company's current management
intends to request release of these funds from the Escrow Account. The
Company will receive the remainder of the Deposited Funds in the event a
Business Combination is consummated pursuant to the provisions of Rule 419.
The Deposited Funds will remain in the non-interest-bearing Escrow Account
maintained by Citibank, N.A., which bank is to act as Escrow Agent
pursuant to Rule 419 of Regulation C. No portion of the Deposited Funds will
be expended to acquire a Target Business. The Deposited Funds will be
transferred to the Target Company when a Business Combination is effected.
To the extent that the Common Stock is used as consideration to effect a
Business Combination, the balance of the Deposited Funds expended will be
used to finance the operation of the Target Business. The Company has not
incurred and does not intend to incur in the future, any debt in connection
with its organizational activities. Management is not aware of any
circumstances under which this policy, through their own initiative, may be
changed.
Accordingly, no portion of the proceeds are being used to repay debt. Based
on a written agreement amongst members of management, management may not
accrue compensation prior to the consummation of a Business Combination.
Management is not aware of any circumstances under which such policy through
their own initiative may be changed. Since the role of present management
after a Business Combination is uncertain, the Company has no ability to
determine what remuneration, if any, will be paid to such persons after such
Business Combination. (See "Use of Proceeds.")
<PAGE>
<PAGE>
SUMMARY FINANCIAL INFORMATION
The following is a summary of the Company's
financial
information and is qualified in its entirety by the audited financial
statements appearing herein.
7 Months
Ended April 30, 1998
Statement of Income Data:
Net Sales $ -0-
Net Loss $ (2,142)
Net Loss Per Share $ (0.0054)
Shares Outstanding at 4/30/98 400,000
Pro-Forma
As of After
April 30, 1998 Offering (1)
Balance Sheet Data
Working Capital $ 2,542 $ 2,542
Total Assets $17,958 $37,958
Long Term Debt $ -0- $ -0-
Total Liabilities $ 100 $ 100
Shareholders' Equity $17,858 $37,858
(1) $31,500 of this amount will be restricted pursuant to Rule 419. Upon the
sale of all the Shares in this offering, the Company will receive Deposited
Funds of approximately $35,000, all of which must be deposited in the Escrow
Account. $3,500 may be used by the Company as capital in order to seek a
Business Combination. The Company's management intends to request release of
these funds from escrow.
<PAGE>
<PAGE>
INVESTORS' RIGHTS AND SUBSTANTIVE PROTECTION UNDER RULE 419
Deposit of Offering Proceeds and Securities
Rule 419 requires that offering proceeds after deduction for
underwriting commissions, underwriting expenses and dealer allowances, if
any, and the securities purchased by investors in this offering, be deposited
into an escrow or trust account (the "Deposited Funds" and "Deposited
Securities," respectively) governed by an agreement which contains certain
terms and provisions specified by the Rule. Under Rule 419, the Deposited
Funds and Deposited Securities will be released to the Company and to the
investors, respectively, only after the Company has met the following three
basic conditions. First, the Company must execute an agreement(s) for an
acquisition(s) meeting certain prescribed criteria. Second, the Company must
file a post-effective amendment to the Registration Statement which includes
the terms of a reconfirmation offer that must contain conditions prescribed
by the rules. The post-effective amendment must also contain information
regarding the acquisition candidate(s) and its business(es), including
audited financial statements. Third, the Company must conduct the
reconfirmation offer and satisfy all of the prescribed conditions, including
the condition that a certain minimum number of investors must elect to
remain investors. After the Company submits a signed representation to the
escrow agent that the requirements of Rule 419 have been met and after the
acquisition(s) is consummated, the escrow agent can release the Deposited
Funds and Deposited Securities.
Accordingly, the Company has entered into an escrow agreement with
Citibank, N.A., 120 Broadway, New York, New York (the "Escrow Agent")
which provides that:
(1) The proceeds are to be deposited into the Escrow Account maintained
by the Escrow Agent promptly upon receipt. Rule 419 permits 10% of the
Deposited Funds to be released to the Company prior to the reconfirmation
offering. The Deposited Funds and any dividends or interest thereon, if any,
are to be held for the sole benefit of the investors and can only be invested
in bank deposits, in money market mutual funds or federal government
securities or securities for which the principal or interest is guaranteed by
the federal government.
(2) All securities issued in connection with the offering and any other
securities issued with respect to such securities, including securities
issued with respect to stock splits, stock dividends or similar rights are to
be deposited directly into the Escrow Account promptly upon issuance. The
identity of the investors are to be included on the stock certificates or
other documents evidencing the Deposited Securities. The Deposited
Securities held in the Escrow Account are to remain as issued, and are to be
held for the sole benefit of the investors who retain the voting rights, if
any, with respect to the Deposited Securities held in their names. The
Deposited Securities held in the Escrow Account may not be transferred,
disposed of nor any interest created therein other than by will or the laws
of descent and distribution, or pursuant to a qualified domestic relations
order as defined by the Internal Revenue Code of 1986 or Table 1 of the
Employee Retirement Income Security Act.
(3) Warrants, convertible securities or other derivative securities
relating to Deposited Securities held in the Escrow Account may be exercised
or converted in accordance with their terms; provided that, however, the
securities received upon exercise or conversion together with any cash or
other consideration paid in connection with the exercise or conversion are to
be promptly deposited into the Escrow Account.
Prescribed Acquisition Criteria
Rule 419 requires that before the Deposited Funds and the Deposited
Securities can be released, the Company must first execute an agreement to
acquire an acquisition candidate(s) meeting certain specified criteria. The
agreement(s) must provide for the acquisition(s) of a business(es) or assets
for which the fair value of the business represents at least 80% of the
maximum offering proceeds. The Agreement(s) must include, as a condition
precedent to their consummation, a requirement that the number of investors
representing 80% of the maximum offering proceeds must elect to reconfirm
their investment. For purposes of the offering, the fair value of the
business(es) or assets to be acquired must be at least $28,000 (80% of
$35,000).
Post-Effective Amendment
Once the agreement(s) governing the acquisition(s) of a business(es)
meeting the above criteria has been executed, Rule 419 requires the Company
to update the registration statement with a post-effective amendment. The
post-effective amendment must contain information about the proposed
acquisition candidate(s) and its business(es), including audited financial
statements, the results of this offering and the use of the funds disbursed
from the Escrow Account. The post-effective amendment must also include the
terms of the reconfirmation offer mandated by Rule 419. The reconfirmation
offer must include certain prescribed conditions which must be satisfied
before the Deposited Funds and Deposited Securities can be released from
escrow.<PAGE>
<PAGE>
Reconfirmation Offering
The reconfirmation offer must commence after the effective date of the
post-effective amendment. Pursuant to Rule 419, the terms of the
reconfirmation offer must include the following conditions:
(1) The prospectus contained in the post-effective amendment will be
sent to each investor whose securities are held in the Escrow Account within
5
business days after the effective date of the post-effective amendment.
(2) Each investor will have no fewer than 20 and no more than 45
business days from the effective date of the post-effective amendment to
notify the Company in writing that the investor elects to remain an investor.
(3) If the Company does not receive written notification from any
investor within 45 business days following the Effective Date, the pro rata
portion of the Deposited Funds (and any related interest or dividends) held
in the Escrow Account on such investor's behalf will be returned to the
investor within 5 business days by first class mail or other equally prompt
means.
(4) The acquisition(s) will be consummated only if a minimum number of
investors representing 80% of the maximum offering proceeds equaling $28,000
elect to reconfirm their investment.
(5) If a consummated acquisition (s) has not occurred
by (18 months from the date of this prospectus),
the Deposited Funds held in the Escrow Account shall be returned to all
investors on a pro rata basis within 5 business days by first class mail or
other equally prompt means.
Release of Deposited Securities and Deposited Funds
The Deposited Funds and Deposited Securities may be released to the
Company and the investors, respectively, after:
(1) The Escrow Agent has received a signed representation from the
Company and any other evidence acceptable by the Escrow Agent that:
(a) The Company has executed an agreement for the acquisition(s)
of a Target Business(es) for which the fair market value of the business
represents at least 80% of the maximum offering proceeds and has filed the
required post-effective amendment;
(b) The post-effective amendment has been declared effective, that
the mandated reconfirmation offer having the conditions prescribed by Rule
419 has been completed and that the Company has satisfied all of the
prescribed
conditions of the reconfirmation offer.
(2) The acquisition(s) of the business(es) with the fair value of at
least 80% of the maximum proceeds.
- -This space is intentionally left blank-<PAGE>
<PAGE> HIGH RISK FACTORS
THE SECURITIES OFFERED HEREBY ARE HIGHLY SPECULATIVE IN NATURE AND INVOLVE AN
EXTREMELY HIGH DEGREE OF RISK AND SHOULD BE PURCHASED ONLY BY PERSONS WHO CAN
AFFORD TO LOSE THEIR ENTIRE INVESTMENT. SEE "DILUTION" FOR INFORMATION
CONCERNING DILUTION OF THE BOOK VALUE OF THE INVESTORS' SHARES FROM THE
PUBLIC OFFERING.
1. Anticipated Change in Control and Management. If the initial public
offering is completely sold, management and current shareholders, including
counsel for the Company, will own 80% of the Common Stock of the Company.
Therefore, management and current shareholders would continue to control the
Company and be able to elect all the directors to the board. Upon the
successful completion of a Business Combination, the Company anticipates that
it will have to issue to the Target Company authorized but unissued Common
Stock in the Company which when issued will comprise a majority of the then
issued and outstanding shares of Common Stock of the Company. Therefore, the
Company anticipates that upon the consummation of a Business Combination
there will be a change of control in the Company which will most likely result
in the resignation or removal of the Company's present officers and
directors.
If there is a change in management, no assurance can be given as to the
experience or qualification of such persons either in the operation of the
Company's activities or in the operation of the business, assets or property
being acquired. (See "Proposed Business.")
2. New Business Development Stage. The Company was incorporated in
the State of Delaware on October 6, 1997 , and has had no operations
to date. The Company was formed to serve as a vehicle to effect a Business
Combination. There is no assurance the Company's intended acquisition or
merger activities will be successful or result in revenue or profit to the
Company. Since the Company has not yet attempted to seek a Business
Combination, and due to the Company's lack of experience, there is only a
limited basis upon which to evaluate the Company's prospectus for achieving
its intended business objectives. The Company faces all risks which are
associated with any new business. Any investment in this Company should be
considered an extremely high risk investment. As of the date of this
prospectus, the Company has not entered into or negotiated any arrangements
for a Business Combination with a Target Business. (See "Proposed Business.")
3. Use of Proceeds. 90% of the net proceeds of this offering,
pursuant to Rule 419, must be held in escrow pending the consummation of a
Business Combination which transaction must occur within eighteen (18) months
of the Effective Date herein. The funds from this offering may not be
sufficient in order for the Company to find a Business Combination. Rule 419
permits 10% of the net proceeds to be disbursed to the Company from the Rule
419 Escrow Account prior to the consummation of a Business Combination. The
Company intends to request release of this money. If the Company does not
request release of these funds, the Company will receive these funds in the
event a business combination is consummated in accordance with Rule 419.
(See "Use of Proceeds", "Business" and "Investors' Rights and Substantive
Protection under Rule 419.")
4. No Access to Investors' Funds While Held In Escrow . The Company is
offering for sale 100,000 Shares, at $0.35 per Share. The maximum offering
period is six months.
There is no commitment by any other person to purchase all or any portion
of the Shares offered hereby, and consequently there is no assurance that all
100,000 Shares will be sold during the Offering Period. Investors have no
right to the return or the use of their funds and cannot earn interest
thereon until conclusion of the offering which may continue for a period of up
to six months after the Effective Date. Even upon the sale of the 100,000
Shares, the investors funds (reduced to reflect payments for expense amounts,
if any, otherwise released as permitted by Rule 419) may remain in the Escrow
Account, which is non-interest bearing, and the investors will have no right
to the return of or the use of their funds for a period of 18 months from the
Effective Date.
Investors will be offered return of their pro rata portion of the funds
held in escrow only in connection with the reconfirmation offering required
to be conducted upon execution of an agreement to acquire a target business
which represents 80% of the maximum offering proceeds. If the Company is
unable to locate a Target Business meeting the above acquisition criteria,
investors will have to wait 18 months from the Effective Date before a pro
rata portion of their funds is returned without interest thereon.
5. Failure of Sufficient Number of Investors to Reconfirm Investment.
A Business Combination with a Target Business cannot be consummated unless,
in
connection with the reconfirmation offering required by Rule 419, the Company
can successfully convince a sufficient number of investors representing 80%
of the maximum offering proceeds to elect to reconfirm their investments.
If, after completion of the reconfirmation offering, a sufficient number of
investors do not reconfirm their investment, the business combination will
not be consummated. In such event, none of the Deposited Securities held in
escrow will be issued and the Deposited Funds will be returned to investors
on a pro rata basis.
Up to 20% of the Shares may be purchased by officers, directors, current
shareholders of the Company and any of their affiliates or associates.
Shares purchased by such insiders will be included in determining whether
investors representing 80% of the maximum offering proceeds elect to
reconfirm their investment. The substantive benefit of an objective 80%
reconfirmation by investors may be reduced, as it is likely that such
insiders will elect to reconfirm a proposed Business Combination.
6. Extremely Limited Capitalization. As of April 30, 1998, the
Company had assets of $17,958 and $100 of liabilities. As of January 31,
1999, there were $17,477 of assets and $720 of liabilities. There was
$2,642 available in the Company's treasury as of April 30, 1998, and
$1,942 as of January 31, 1999. Upon the sale of
all the Shares in this offering, the Company will receive net proceeds of
approximately $35,000, all of which must be deposited in the Escrow Account.
$3,500 may be used by the Company as capital in order to seek a Business
Combination. The Company's management intends to request release of these
funds from escrow. If the Company does not request release of these funds,
the Company will receive the funds in the event a Business Combination is
consummated in accordance with Rule 419. The costs of conducting the
Company's business activities will be paid by the money in the Company's
treasury. Assuming suitable prospects are identified, if ever, the Company
may be unable to complete an acquisition or merger due to a lack of
sufficient funds. Therefore, the Company may require additional financing
in the future in order to consummate a Business Combination. Such financing
may consist of the issuance of debt or equity securities. The Company can
not give any assurances that such funds will be available, if needed, or
whether they will be available on terms acceptable to the Company. It is
unlikely that the Company will need additional funds, but it may occur if a
Target Company insists the Company obtain additional capital. Such financing
will not occur without shareholder approval. The Company will not borrow
funds from its officers, directors or current shareholders. If the Company
does not consummate an acquisition or purchase within 18 months of the
Effective Date, the Company must return all the funds, minus certain
deductions, back to the investors. (See "Use of Proceeds," "Proposed
Business," and "Investors' Rights and Substantive Protection Under Rule 419.")
7. No Transfer of Escrowed Securities. No transfer or other
disposition of the Deposited Securities shall be permitted other than by will
or the laws of descent and distribution, or pursuant to a qualified domestic
relations order as defined by the Internal Revenue Code of 1986 as amended,
or Title 7 of the Employee Retirement Income Security Act, or the rules
thereunder. Pursuant to Rule 15g-8, it is unlawful for any person to sell or
offer to sell the securities (or any interest in or related to the securities)
held in the Rule 419 Escrow Account other than pursuant to a qualified
domestic relations order (i.e., divorce proceedings). Therefore, any and all
contracts for sale to be satisfied by delivery of the Deposited Securities
(e.g. contracts for sale on a when as, and if issued basis) and sales of
derivative securities to be settled by delivery of the securities are
prohibited. It is further prohibited to sell any interest in the Deposited
Securities (or any derivative securities) whether or not physical delivery
is required. (See "Investors' Rights and Substantive Protection Under Rule
419.")
8. No Assurances of a Public Market. Pursuant to Rule 419, all
securities purchased in an offering by a blank check company, as well as
securities issued in connection with an offering to underwriters, promoters
or others as compensation or otherwise, must be placed in the Rule 419 Escrow
Account. These securities will not be released from escrow until the
consummation of a merger or acquisition as provided for in Rule 419. There
is no present market for the Common Stock of the Company and there is no
likelihood of any active and liquid public trading market developing
following the release of securities from the Rule 419 account. Thus,
shareholders may find it difficult to sell their shares. To date, neither
the Company nor anyone acting on its behalf has taken any affirmative steps
to request or encourage any broker dealer to act as a market maker for the
Company's Common Stock. Further, there have been no discussions or
understandings, preliminary or otherwise, between the Company or anyone
acting on its behalf and any market maker regarding the participation of any
such market maker in the future trading market, if any, for the Company's
Common Stock. Present management of the Company has no intention of seeking
a market maker for the Company's Common Stock at any time prior to the
reconfirmation offer to be conducted prior to the consummation of a Business
Combination. The officers of the Company after the consummation of a
Business Combination may employ consultants or advisors to obtain such market
makers. Management expects that discussions in this area will ultimately be
initiated by the management of the Company in control of the entity after a
Business Combination is reconfirmed by the stockholders. There is no
likelihood of any active and liquid trading market for the Company's Common
Stock developing. (See "Market for the Company's Common Stock" and
"Investors' Rights and Substantive Protection Under Rule 419.")
9. Unspecified Industry and Acquired Business; Unascertained Risks. To
date, the Company has not selected any particular industry in which to
concentrate its Business Combination efforts. In relation to its
competitors, the Company is and will continue to be an insignificant
participant in the business of seeking Business Combinations. A large number
of established and well-financed entities, including venture capital firms,
have recently increased their merger and acquisition activities. Nearly all
such entities have significantly greater financial resources, technical
expertise and managerial capabilities than the Company and, consequently, the
Company will be at a competitive disadvantage in identifying suitable merger
or
acquisition candidates and successfully consummating a proposed merger or
acquisition. Also, the Company will be competing with a large number of
other small, blank check companies. (See "Conflicts of Interest -
Management's Fiduciary Duty" and "Business.")
10. Conflict of Interest - Management's Fiduciary Duties. A conflict
of interest may arise between management's personal pecuniary benefits and
management's fiduciary duty to the shareholders of the Company. Investors
should note that the present shareholders of the Company, which include
counsels' interest, will own 80% of the Company after the offering is
completed and would therefore have continuing control of the Company.
Schonfeld & Weinstein, L.L.P., counsel to the Company, owns 95,000 shares of
the Company's common stock. Schonfeld & Weinstein, L.L.P.'s, shares
comprise 23.8% of the outstanding shares before the offering, and 19.0% after
the offering, respectively. In addition, David Kass, President of the
Company and David S. Jacobs, Secretary of the Company, each own 95,000 shares
comprising 23.8% of the outstanding shares before the offering and 19.0%
after the
offering. Thus, Management of the Company beneficially owns 190,000 shares,
which comprise 47.5% of the Company before the offering and 38.0% after the
offering. Further, management's interest in their own pecuniary benefits may
at some point compromise their fiduciary duty to the Company's
shareholders. No proceeds from this offering will be used to purchase
directly or indirectly any shares of the Common Stock owned by management or
any present shareholder, director or promoter. (See "Management.")
11. Conflicts of Interest. The Company's directors and officers are or
may become, in their individual capacities, officers, directors, controlling
shareholders and/or partners of other entities engaged in a variety of
businesses. Each officer and director of the Company is engaged in business
activities outside of the Company, and the amount of time they will devote to
the Company's business will only be about five (5) to twenty (20) hours each
per month. There exists potential conflicts of interest including, among
other things, time, effort and Business Combinations with such other business
entities. Conflicts with other blank check companies with which members of
Management may become affiliated in the future may arise in the pursuit of
Business Combinations. To aid the resolution of such conflicts, the Company
will adopt a procedure whereby a special meeting of the Company's
shareholders will be called to vote upon a Business Combination with an
affiliated entity, and shareholders who also hold securities of such
affiliated entity will be required to vote their shares of the Company's
stock in the same proportion as the Company's publicly held shares are voted.
Such procedure shall be in the form of an oral agreement between Management
and the Company.
The Company's officers and directors are not currently involved in other
blank check companies. The Company's officers and directors may be involved
as
officers and directors of other blank check companies in the future. A
potential conflict of interest may result if and when any officer of the
Company becomes an officer or director of another Company, especially another
blank check company. There is presently no requirement contained in the
Company's Articles of Incorporation, Bylaws or minutes which requires that
officers and directors of the Company disclose to the Company Target
Businesses which come to their attention. The officers and directors do,
however, have a fiduciary duty of loyalty to the Company to disclose to the
Company any Target Businesses which come to their attention in their capacity
as an officer and/or director of the Company or otherwise. Included in this
duty would be Target Businesses which the person learns about through his
involvement as an officer and director of another Company. The Company will
not purchase the assets of any Company which is beneficially owned by any
officer, director, promoter or affiliate or associate of this Company.
Management plans on examining a Target Business's financial statements
(including balance sheets, statements of cash flow, stockholders' equity,
etc.) its assets and liabilities and its projections for future growth. This
information will also be considered by the shareholders who, based on this
information, will determine, as part of the Rule 419 reconfirmation offering,
whether a merger with such a Target Business is "beneficial" to the Company.
(See "Management.")
12. Potential Related Party Business Combination. The Company may
acquire a business in which the Company's promoters, management or their
affiliates own a beneficial interest. In such event, such transaction may be
considered a related party transaction not at arms-length. No related party
transaction is presently contemplated. If in the event a related party
transaction is contemplated sometime in the future, the Company intends to
seek shareholder approval through a vote of shareholders. However,
shareholders objecting to any such related party transaction will be able
only to request the return of the pro-rata portion of their invested funds
held in escrow in connection with the reconfirmation offering to be conducted
in accordance with Rule 419 upon execution of the acquisition agreement.
13. Possible Disadvantages of Blank Check Offering. The Company's
business may involve the acquisition of or merger with a company which does
not need substantial additional capital but which desires to establish a
public trading market for its shares. A company which seeks the Company's
participation in attempting to consolidate its operations through a merger,
reorganization, asset acquisition, or some other form of combination may
desire to do so to avoid what they may deem to be adverse consequences of
themselves undertaking a public offering. Factors considered may include
time delays, significant expense, loss of voting control and the inability or
unwillingness to comply with various federal and state laws enacted for the
protection of investors. In making an investment in the Company, investors
should recognize that they may be doing so under terms which may ultimately
be less favorable than making an investment directly in a company with a
specificbusiness. Investors herein may not be afforded an opportunity to
specifically approve or consent to any particular stock buy-out
transaction.
(See "Proposed Business.")
14. Lack of Market Research or Identification of Acquisition or Merger
Candidate. The Company has neither conducted nor have others made available
to it results of market research concerning the feasibility of a Business
Combination with a Target Business. Therefore, management has no assurances
that market demand exists for an acquisition or merger as contemplated by the
Company. Management has not identified any particular industry or specific
business within an industry for evaluation by the Company. There is no
assurance the Company will be able to form a Business Combination with a
Target Business on terms favorable to the Company. (See "Proposed Business.")
15. Success Dependent on Management. The Company's officers and
director have only limited experience in the business activities in which the
Company intends to engage. Management believes it has sufficient experience
to implement the Company's plan, although there is no assurance that
additional
managerial assistance will not be required. Success of the Company depends
on the active participation of its officers. These officers have not entered
into employment agreements with the Company and they are not expected to do
so in the foreseeable future. The Company has not obtained key man life
insurance on any of its officers or directors. (See "Proposed Business",
"Management" and "Use Of Proceeds.")
16. No Current Contemplated Business Combinations. As of the date of
this prospectus, none of the Company's officers, directors, promoters, their
affiliates or associates have had any preliminary contact or discussions and
there are no present plans, proposals, arrangements or understandings with
any representatives of the owners of any business (Target Business) regarding
the possibility of a Business Combination.
17. Lack of Diversification. In the event the Company is successful in
identifying and evaluating a suitable Business Combination, the Company will
in all likelihood, be required to issue its Common Stock in an acquisition or
merger transaction. Inasmuch as the Company's capitalization is limited and
the issuance of additional Common Stock will result in a dilution of interest
for present and prospective shareholders, it is unlikely the Company will be
capable of negotiating more than one acquisition or merger. Consequently,
the Company's lack of diversification may subject the Company to economic
fluctuation within a particular industry in which a Target Company conducts
business. (See "Proposed Business.")
18. Regulation. Although the Company will be subject to regulation
under the Securities Act of 1933 and the Securities Exchange Act of 1934,
management believes the Company will not be subject to regulation under the
Investment Company Act of 1940. The regulatory scope of the Investment
Company Act of 1940, as amended (the "Investment Company Act"), was enacted
principally for the purpose of regulatory vehicles for pooled investments in
securities, extends generally to Companies primarily in the business of
investing, reinvesting, owning, holding or trading securities. The
Investment Company Act may, however, also be deemed to be applicable to a
Company which does not intend to be characterized as an Investment Company
but which, nevertheless, engages in activities which may be deemed to be
within the definition of the scope of certain provisions of the Investment
Company Act. The Company believes that its principle activities will not
subject it to regulation under the Investment Company Act. Nevertheless,
there can be no assurances that the Company will not be deemed to be an
Investment Company. The funds may be invested primarily in certificates of
deposit, interest bearing savings accounts or government securities. In the
event the Company is deemed to be an Investment Company, the Company may be
subject to certain restrictions relating to the Company's activities,
including restrictions on the nature of its investments and the issuance of
securities. The Company has obtained no formal determination from the
Securities and Exchange Commission as to the status of the Company under the
Investment Company Act of 1940.
19. Taxation. In the course of any acquisition or merger the Company
may undertake, a substantial amount of attention will be focused upon federal
and state tax consequences to both the Company and the "target" company.
Presently, under the provisions of federal and various state tax laws, a
qualified reorganization between business entities will generally result in
tax-free treatment to the parties to the reorganization. While the Company
expects to undertake any merger or acquisition so as to minimize federal and
state tax consequences to both the Company and the "target" company, there is
no assurance that such Business Combination will meet the statutory
requirements of a reorganization or that the parties will obtain the intended
tax-free treatment upon a transfer of stock or assets. A non-qualifying
reorganization could result in the imposition of both federal and state taxes
which may have a substantial adverse effect on the Company. (See
"Business-Regulation and Taxation.")
20. No Dividends. The Company was only recently organized, has no
earnings, and has paid no dividends to date. Since the Company was formed as
a blank check company with its only intended business being the search for an
appropriate Business Combination, the Company does not anticipate having any
earnings until such time that a Business Combination is effected. However,
there are no assurances that upon the consummation of a Business Combination,
the Company will have earnings or issue dividends. Therefore, it is not
expected that cash dividends will be paid, if at all, to stockholders until
after a Business Combination is effected. (See "Dividends.")
21. Restricted Resale of the Securities. The 400,000 shares of the
Company's Common Stock presently issued and outstanding as of the date hereof
are "restricted securities" as that term is defined under the Securities Act
of 1933 (the "Securities Act"), as amended, and in the future may be sold in
compliance with Rule 144 of the Securities Act, or pursuant to a Registration
Statement filed under the Securities Act. Rule 144 provides, in essence,
that a person holding restricted securities for a period of one (1) year may
sell those securities in unsolicited brokerage transactions or in
transactions
with a market maker, in an amount equal to one (1%) percent of the Company's
outstanding Common Stock every three (3) months. Sales of unrestricted
shares by affiliates of the Company are also subject to the same limitation
upon the number of shares that may be sold in any three (3) month period.
If all the Shares offered herein are sold, the holders of the restricted
shares may each sell 4,000 shares during any three (3) month period after
March 30, 1999. Additionally, Rule 144 requires that an issuer of
securities make available adequate current public information with respect to
the issuer. Such information is deemed available if the issuer satisfies the
reporting requirements of sections 13 or 15(d) of the Securities and Exchange
Act of 1934 and of Rule 15c2-11 thereunder. Rule 144(k) also permits the
termination of certain restrictions on sales of restricted securities by
persons who were not affiliates of the Company at the time of the sale and
have not been affiliates in the preceding three (3) months. Such persons
must satisfy a two (2) year holding period. There is no limitation on such
sales and there is no requirement regarding adequate current public
information. Investors should be aware that sales under Rule 144 or 144(k),
or pursuant to a Registration Statement filed under the Act, may have a
depressive effect on the market price of the Company's securities in any
market which may develop for such shares.
22. Arbitrary Determination of Offering Price. The initial offering
price of $0.35 per Share has been arbitrarily determined by the Company, and
bears no relationship whatsoever to the Company's assets, earnings, book
value or any other objective standard of value. Among the factors considered
by the Company were the lack of operating history of the Company, the proceeds
to be raised by the offering, the amount of capital to be contributed by the
public in proportion to the amount of stock to be retained by present
stockholders, the relative requirements of the Company, and the current
market conditions in the over-the-counter market.
23. Control by Present Management and Shareholders. Investors should
note that the present shareholders of the Company, will own 80% of the
Company after the offering is completed and would therefore have continuing
control of the Company. In addition, David Kass and David S. Jacobs,
President and Secretary of the Company, respectively, each owns 95,000
shares, comprising 23.8% before the offering and 19.0% after the offering.
Thus, Management of the Company beneficially owns 190,000 shares, which
comprise 47.5% of the Company before the offering and 38.0% after the
offering.
Assuming the sale of all the Shares offered, the Shares of Common Stock
purchased by the public will represent 20% of the Company's outstanding
Common Stock after the completion of this offering. Therefore, the present
stockholders for the Company and its management, will own an 80% interest in
the corporation and will continue to be able to elect all of the Company's
directors, appoint its officers, and control the Company's affairs and
operations. The Company's Articles of Incorporation do not provide for
cumulative voting. There are no arrangements, agreements or understandings
between non-management shareholders and management under which non-management
shareholders may directly or indirectly participate in or influence the
management of the Company's affairs or to exercise their voting rights to
continue to elect the current directors. Non-management shareholders will
exercise their voting rights to continue to elect the current directors to
the Company's board. (See "Principal Stockholders", "Dilution" and
"Description of Securities").
24. Immediate Substantial Dilution. As of April 30, 1998, the net
tangible book value of the Company's Common Stock was approximately $0.006
per share, substantially less than the $0.35 per share to be paid by the
public investors. In the event all the Shares are sold, public investors
will
sustain an immediate dilution of approximately $0.275 per share in the book
value of public investors' holdings. (See "Dilution.")
25. Purchase of Shares. The Company's officers, directors, current
shareholders and any of their affiliates or associates may purchase a portion
of the Shares offered in this offering. The aggregate number of Shares which
may be purchased by such persons shall not exceed 20% of the number of Shares
sold in this offering. Such purchases may be made in order to close the "all
or nothing" offering. Shares purchased by the Company's officers, directors
and principal shareholders will be acquired for investment purposes and not
with a view towards distribution.
26. State Law Violations. The Company will use its best efforts to
ensure that sales of Shares will only occur in those states in which such
sales would not be a violation of any of said states laws. The Company will
notify the Transfer Agent to aid in such compliance. The Company's
securities may be sold in New York State and the District of Columbia only,
and may be resold by investors in New York and the District of Columbia only.
27. Business Combination Through A Leveraged Transaction. The Company
is not prohibited from consummating a Business Combination through a
leveraged transaction. However, investors should be aware that such a
transaction could result in the Company's assets being mortgaged and possibly
foreclosed. The use of leverage to consummate a Business Combination may
reduce
the ability of the Company to incur additional debt, make other acquisitions
or declare dividends. Such leverage may also subject the Company's
operations to strict financial controls and significant interest expense.
28. Penny Stock Regulation. Broker-dealer practices in connection with
transactions in "penny stocks" are regulated by certain penny stock rules
adopted by the Securities and Exchange Commission. Penny stocks generally
are equity securities with a price of less than $5.00 (other than securities
registered on certain national securities exchanges or quoted on the NASDAQ
system, provided that current price and volume information with respect to
transactions in such securities is provided by the exchange or system). The
penny stock rules require a broker-dealer, prior to a transaction in a penny
stock not otherwise exempt from the rules, to deliver a standardized risk
disclosure document prepared by the Commission that provides information
about penny stocks and the nature and level of risks in the penny stock
market. The broker-dealer also must provide the customer with current bid and
offer quotations for the penny stock, the compensation of the broker-dealer
and its salesperson in the transaction, and monthly account statements showing
the market value of each penny stock held in the customer's account. In
addition, the penny stock rules require that prior to a transaction in a penny
stock not otherwise exempt from such rules the broker-dealer must make a
special written determination that the penny stock is a suitable investment
for the purchaser and receive the purchaser's written agreement to the
transaction. These disclosure requirements may have the effect of reducing
the level of trading activity in the secondary market for a stock that becomes
subject to the penny stock rules. If the Company's Common Stock becomes
subject to the Penny Stock rules, investors in this offering may find it more
difficult to sell their shares.<PAGE>
<PAGE> DILUTION
The net tangible book value of the Company as of January 31, 1999 was
$2,542, with the net tangible book value per share being $0.006. Net tangible
book value is the net tangible assets of the Company (total assets less total
liabilities and intangible assets). (See "Financial Statements.") The public
offering price per share is $0.35. The pro-forma net tangible book value
after the offering will be $37,542, with the pro-forma net tangible book
value per share after the offering being $0.075. The shares purchased by
investors in this offering will be diluted $0.275 or 78.6%. As of January
31, 1999 , there were still 400,000 shares of the Company's
Common Stock outstanding, the same number as was outstanding at April 30,
1999 (See "Certain Transactions").
Dilution represents the difference between the public offering price and the
net pro-forma tangible book value per share immediately after the completion
of the public offering. The following table illustrates this dilution to be
experienced by investors in the offering:
Public offering price per share $ 0.35
Net tangible book value per share before offering $ 0.006
Pro-forma net tangible book value per share after offering $ 0.075
Pro-forma increase per share attributable to shares
offered hereby $ 0.069
Pro-forma dilution to public investors $ 0.275
Money Net tangible
received for book value per
# shares shares before share before
before offering offering offering
400,000 $ 20,000 $ 0.006
- ------------------------------------------------------------------------------
Pro-forma
Total Net tangible
Total Amount of Book Value
# of Shares Money Received Per Share
After Offering For Shares After Offering
500,000 $ 55,000 $ 0.075
<PAGE>
- ------------------------------------------------------------------------------
Pro-forma Pro-forma Increase
Net Tangible Net tangible Per Share
Book Value Per Book Value Attributed
Share After Shares Before To Shares
Offering Offering Offered Hereby
$0.075 $ 0.006 $ 0.069
- ------------------------------------------------------------------------------
Pro-forma
Net tangible
Book Value Per Pro-forma
Public Offering Share After Dilution to
Price Per Share Offering Public Investors
$ 0.35 $0.075 $ 0.275
As of the date of this prospectus, the following table sets forth the
percentage of equity to be purchased by public investors in this offering
compared to the percentage of equity to be owned by the present stockholders,
and the comparative amounts paid for the shares by the public investors as
compared to the total consideration paid by the present stockholders of the
Company. (See "Certain Transactions" and footnotes to "Financial
Statements.")
Approx. %
Total Shares Approx. %
Public Shares Outstanding Total Total
Stockholder Purchased Consideration Consideration
New Investors 100,000 20.0% $35,000 63.6%
Existing
Shareholders 400,000 80.0% $20,000 36.4%
(1) 400,000 Shares of Common Stock were sold prior to this offering at $.05
per Share. These Shares are not being registered. (See "Certain
Transactions")<PAGE>
<PAGE>
USE OF PROCEEDS
The gross proceeds of this offering will be $35,000. Pursuant to Rule
15c2-4 under the Securities Exchange Act of 1934 (the "Exchange Act"), all of
these proceeds must be held in escrow until all of the Shares are sold.
Pursuant to Rule 419 under the Securities Act, after all of the Shares are
sold, 10% of the Deposited Funds ($3,500) may be released from escrow to the
Company. The Company intends to request release of this 10%. In the event
that the Company does not request release of these funds, the Company will
receive these funds in the event a Business Combination is consummated in
accordance with Rule 419. While management intends to request release of
10% of the offering proceeds, the remaining $31,500 has not been allocated for
any specific purpose. The Company is a "blank check" company, and the purpose
of this offering is to raise funds to enable the Company to merge with or
acquire an operating company. >/R>
Upon the consummation of a Business Combination and the reconfirmation
thereof, which reconfirmation offering must precede such consummation,
pursuant to Rule 419, $35,000 (plus any dividends received, but less any
portion disbursed to the Company pursuant to Rule 419(b)(2)(C)(vi) and any
amount returned to investors who did not reconfirm their investment pursuant
to Rule 419) will be released the Company.
Approximate
Approximate Percentage
Amount Total
Escrowed funds pending
Business Combination (1)(2)
$31,500 90%
(1) Does not include the estimated $20,000 of offering expenses. The
expenses of the offering will be paid by money in the Company's treasury.
(2) The Company expects to request release of 10% of the Deposited Funds
($3,500) pursuant to Rule 419.
While the Company presently anticipates that it will be able to locate
and consummate a Business Combination, which adheres to the criteria
discussed under "Investors' Rights and Substantive Protection Under Rule 419",
if the Company determines that a Business Combination requires additional
funds, it may seek such additional financing through loans, issuance of
additional securities or through other financing arrangements. No such
financial arrangements presently exist, and no assurances can be given that
such additional financing will be available or, if available, whether such
additional financing will be on terms acceptable to the Company. Persons
purchasing Shares in this offering will not, unless required by law,
participate in the determination of whether to obtain additional financing or
as to the terms of such financing. Because of the Company's limited
resources, it is likely that the Company will become involved in only one
Business Combination.
The Company does not intend to advertise or promote the Company.
Instead, the Company's management will actively search for potential Target
Businesses. In the event management decides to advertise (in the form of an
ad in a legal publication) to attract a Target Business, the cost of such
advertising will be assumed by management.
Upon the consummation of a Business Combination, the Company anticipates
that there will be a change in the Company's management, which management may
decide to change the policies as to the use of proceeds as stated herein.
The Company's present management anticipates that the Deposited Funds will be
used by the post-merger management at its sole discretion. No compensation
will be paid or due or owing to any officer or director until after a
Business Combination is consummated. Such policy is based upon a written
agreement
among management. Management is unaware of any circumstances under which
such policy through their own initiative may be changed. The Company is not
presently considering any outside individual for a consulting position;
however, the Company cannot rule out the need for outside consultants in the
future. No decisions have been made as to payment of these consultants.
Present management of the Company will not make any loans of the $3,500
available from the Deposited Funds of this offering, nor will present
management borrow funds and use either the Company's working capital or
Deposited Funds as security for such. This policy is based upon a written
agreement among management. Management is unaware of any circumstances under
which such policy through their own initiative may be changed. Once the
Deposited Funds are released from escrow the then existing management may
loan the proceeds or borrow funds and use the proceeds as security for such
loan, on terms it deems appropriate.
The proceeds received in this offering will be put into the Escrow
Account pending consummation of a Business Combination and reconfirmation by
investors. Such Deposited Funds will be in an insured depository institution
account in either a certificate of deposit, interest bearing savings account
or in short term government securities as placed by
Citibank, N.A. .
<PAGE>
<PAGE> CAPITALIZATION
The following table sets forth the capitalization of the Company as of April
30, 1998, and Pro-forma as adjusted to give effect to the sale of 100,000
Shares offered by the Company.
April 30, 1998
____________________________
Pro-forma
Actual As Adjusted
Long-term debt $ 0 $ 0
Stockholders' equity:
Common stock, $.0001 par value;
authorized 20,000,000 shares,
issued and outstanding
400,000 shares and 500,000
shares, pro-forma as adjusted $ 40 $ 50
Additional paid-in capital $19,960 $39,950
Deficit accumulated during
the development period $(2,142) $(2,142)
Total stockholders' equity $17,858 $37,858
Total capitalization $17,858 $37,858
<PAGE> PROPOSED BUSINESS
History and Organization
The Company was organized under the laws of the State of Delaware on
October 6, 1997. Since inception, the primary activity of the Company has
been directed to organizational efforts and obtaining initial financing. The
Company was formed as a vehicle to pursue a Business Combination. The
Company has not engaged in any preliminary efforts intended to identify
possible Business Combination and has neither conducted negotiations
concerning, nor entered into a letter of intent concerning any such Target
Business.
The Company's initial public offering will comprise 100,000 Shares of
Common Stock at a purchase price of $0.35 per Share.
The Company is filing this registration statement in order to effect a
public offering for its securities. (See "Description of Securities.")
Plan of Operation
The Company was organized for the purposes of creating a corporate
vehicle to seek, investigate and, if such investigation warrants, engaging in
Business Combinations presented to it by persons or firms who or which desire
to employ the Company's funds in their business or to seek the perceived
advantages of publicly-held corporation. The Company's principal business
objective will be to seek long-term growth potential in a Business
Combination venture rather than to seek immediate, short-term earnings. The
Company will not restrict its search to any specific business, industry or
geographical location, and the Company may engage in a Business
Combination.
The Company does not currently engage in any business activities which
provide any cash flow. The costs of identifying, investigating, and
analyzing Business Combinations will be paid with money in the Company's
treasury. Persons purchasing shares in this offering and other shareholders
will most likely not have the opportunity to participate in any of these
decisions. The Company's proposed business is sometimes referred to as a
"blank check" company because investors will entrust their investment monies
to the Company's management before they have a chance to analyze any ultimate
use to which their money may be put. Although substantially all of the
Deposited Funds of this offering are intended to be utilized generally to
effect a Business Combination, such proceeds are not otherwise being
designated for any specific purposes. Pursuant to Rule 419, prospective
investors who invest in the Company will have an opportunity to evaluate the
specific merits or risks of only the Business Combination management decides
to enter into. Cost overruns will be borne equally by all current
shareholders of the Company. Such cost overruns will not be charged to the
Company, but will be funded through current shareholders' voluntary
contribution of capital. This is based on an oral agreement between current
shareholders and the Company.
The Company may seek a Business Combination in the form of firms which
have recently commenced operations, are developing companies in need of
additional funds for expansion into new products or markets, are seeking to
develop a new product or service, or are established businesses which may be
experiencing financial or operating difficulties and are in need of
additional capital. A Business Combination may involve the acquisition of,
or merger with, a Company which does not need substantial additional capital
but which desires to establish a public trading market for its shares, while
avoiding what it may deem to be adverse consequences of undertaking a public
offering itself, such as time delays, significant expense, loss of voting
control and compliance with various Federal and State securities laws.
The Company will not acquire a Target Business unless the fair value of
the Target Business represents 80% of the maximum offering proceeds (the
"Fair Market Value Test.") To determine the fair market value of a Target
Business, the Company's management will examine the audited financial
statements (including balance sheets and statements of cash flow and
stockholders' equity) of any candidate, focusing attention on a potential
Target Business's assets, liabilities, sales and net worth. In addition,
management of the Company will participate in a personal inspection of any
potential Target Business. If the Company determines that the financial
statements of a proposed Target Business does not clearly indicate that the
Fair Market Value Test has been satisfied, the Company will obtain an opinion
from an investment banking firm (which is a member of National Association of
Securities Dealers, Inc., (the "NASD") with respect to the satisfaction of
such criteria. (See "Investors' Rights and Substantive Protection Under Rule
419.")
Based upon management's experience with and knowledge of blank check
companies, the probable desire on the part of the owners of target businesses
to assume voting control over the Company (to avoid tax consequences or to
have complete authority to manage the business) will almost assure that the
Company will combine with just one target business. Management also
anticipates that upon consummation of a Business Combination, there will be a
change in control in the Company which will most likely result in the
resignation or removal of the Company's present officers and directors.
None of the Company's officers or directors have had any preliminary
contact or discussions with any representative of any other entity regarding
a Business Combination. Accordingly, any Target Business that is selected
may
be a financially unstable Company or an entity in its early stage of
development or growth (including entities without established records of
sales or earnings), the Company will become subjected to numerous risks
inherent in the business and operations of financially unstable and early
stage
or potential emerging growth companies. In addition, the Company may affect
a
Business Combination with an entity in an industry characterized by a high
level of risk, and although management will endeavor to evaluate the risks
inherent in a particular industry or Target Business, there can be no
assurance that the Company will properly ascertain or assess all significant
risks. (See "High Risk Factors.")
Management anticipates that it may be able to effect only one potential
Business Combination, due primarily to the Company's limited financing, and
the dilution of interest for present and prospective shareholders of the
Company, which is likely to occur as a result of Management's plan to offer a
controlling interest in the Company to a Target Business in order to achieve
a
tax free reorganization. This lack of diversification should be considered a
substantial risk in investing in the Company because it will not permit the
Company to offset potential losses from one venture against gains from
another.
The Company anticipates that the selection of a Business Combination
will
be complex and extremely risky. Because of general economic conditions,
rapid
technological advances being made in some industries, and shortages of
available capital, management believes that there are numerous firms seeking
even the limited additional capital which the Company will have and/or the
benefits of a publicly traded corporation. Such perceived benefits of a
publicly traded corporation may include facilitating or improving the terms
on
which additional equity financing may be sought, providing liquidity for the
principals of a business, creating a means for providing incentive stock
options or similar benefits to key employees, providing liquidity (subject to
restrictions of applicable statutes) for all shareholders, and other
factors.
Potentially available Business Combinations 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.
Evaluation of Business Combinations
The analysis of Business Combinations will be undertaken by or under the
supervision of the officers and directors of the Company, none of whom is a
professional business analyst. (See "Management.") Management intends to
concentrate on identifying preliminary prospective Business Combinations
which
may be brought to its attention through present associations. In analyzing
prospective Business Combinations, management will consider such matters as
the available technical, financial, and managerial resources; working capital
and other financial requirements; history of operation, if any; prospects for
the future; nature of present and expected competition; the quality and
experience of management services which may be available and the depth of
that management; the potential for further research, development, or
exploration; specific risk factors not now foreseeable but which then may be
anticipated to impact the proposed activities of the Company; the potential
for growth or
expansion; the potential for profit; the perceived public recognition or
acceptance or products, services, or trades; name identification; and other
relevant factors. Officers and directors of the Company will meet personally
with management and key personnel of the firm sponsoring the business
opportunity as part of their investigation. To the extent possible, the
Company intends to utilize written reports and personal investigation to
evaluate the above factors.
Since the Company will be subject to Section 13 or 15 (d) of the
Securities Exchange Act of 1934, it will be required to furnish certain
information about significant acquisitions, including audited financial
statements for the Company(s) acquired, covering one, two or three years
depending upon the relative size of the acquisition. Consequently,
acquisition prospects that do not have or are unable to obtain the required
audited statements may not be appropriate for acquisition so long as the
reporting requirements of the Exchange Act are applicable. In the event the
Company's obligation to file periodic reports is suspended under Section
15(d), the Company intends on voluntarily filing such reports.
It may be anticipated that any Business Combination will present certain
risks. Many of these risks cannot be adequately identified prior to
selection, and investors herein must, therefore, depend on the ability of
management to identify and evaluate such risks. In the case of some of the
potential combinations available to the Company, it may be anticipated that
the promoters thereof have been unable to develop a going concern or that
such business is in its development stage in that it has not generated
significant revenues from its principal business activity prior to the
Company's merger or acquisition, and there is a risk, even after the
consummation of such Business Combinations and the related expenditure of the
Company's funds, that the combined enterprises will still be unable to become
a going concern or advance beyond the development stage. Many of the
Combinations may involve new and untested products, processes, or market
strategies which may not succeed. Such risks will be assumed by the Company
and, therefore, its shareholders.
Business Combinations
In implementing a structure for a particular business acquisition, the
Company may become a party to a merger, consolidation, reorganization, joint
venture, or licensing agreement with another corporation or entity. It may
also purchase stock or assets of an existing business.
Investors should note that any merger or acquisition effected by the
Company can be expected to have a significant dilutive effect on the
percentage of shares held by the Company's then-shareholders, including
purchasers in this offering. On the consummation of a Business Combination,
the Target Business will have significantly more assets than the Company;
therefore, management plans to offer a controlling interest in the Company to
the Target Business. While the actual terms of a transaction to which the
Company may be a party cannot be predicted, it may be expected that the
parties to the business transaction will find it desirable to avoid the
creation of a taxable event and thereby structure the acquisition in a
so-called "tax-free" reorganization under Sections 368(a)(1) or 351 of the
Internal Revenue Code of 1954, as amended (the "Code"). In order to obtain
tax-free treatment under the Code, it may be necessary for the owners of the
acquired business to own 80% or more of the voting stock of the surviving
entity. In such event, the shareholders of the Company, including investors
in this offering, would retain less than 20% of the issued and outstanding
shares of the surviving entity, which would be likely to result in
significant
dilution in the equity of such shareholders. Management of the Company may
choose to avail the Company of these provisions. In addition, a majority of
all of the Company's directors and officers may, as part of the terms of the
acquisition transaction, resign as directors and officers. (See "High Risk
Factors" and "Dilution.")
Management will not actively negotiate or otherwise consent to the
purchase of any portion of their Common Stock as a condition to or in
connection with a proposed Business Combination unless such a purchase is
requested by a Target Company as a condition to a merger or acquisition. The
officers and directors of the Company who own Common Stock have agreed to
comply with this provision which is based on a written agreement among
management. Management is unaware of any circumstances under which such
policy through their own initiative may be changed. (See "Management").
It is anticipated that any securities issued in any such reorganization
would be issued in reliance on exemptions from registration under applicable
federal and state securities laws. In some circumstances, however, as a
negotiated element of this transaction, the Company may agree to register
such securities either at the time the transaction is consummated, under
certain conditions, or at specified times thereafter. The issuance of
substantial additional securities and their potential sale into any trading
market which may develop in the Company's Common Stock may have a depressive
effect on such market.
As a part of the Company's investigation, officers and directors of the
Company will meet personally with management and key personnel, 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.
The manner of the Business Combination will depend on the nature of the
Target Business, the respective needs and desires of the Company and other
parties, the management of the Target Business opportunity, and the relative
negotiating strength of the Company and such other management.
If at any time prior to the completion of this offering the Company
enters negotiations with a possible merger candidate and such a transaction
becomes probable, then this offering will be suspended so that an amendment
can be filed which will include financial statements (including balance
sheets and statements of cash flow and stockholders' equity) of the proposed
target.
The Company will not purchase the assets of any company which is
beneficially owned by any officer, director, promoter or affiliate or
associate of the Company. Furthermore, the Company intends to adopt a
procedure whereby a special meeting of the Company's shareholders will be
called to vote upon a Business Combination with an affiliated entity, and
shareholders who also hold securities of such affiliated entity will be
required to vote their shares of the Company's stock in the same proportion
as the Company's publicly held shares are voted. The Company's officers and
directors have not approached and have not been approached by any person or
entity with regard to any proposed business ventures with respect to the
Company. The Company will evaluate all possible Business Combinations
brought to it. If at any time a Business Combination is brought to the
Company by any of the Company's promoters, management, or their affiliates or
associates, disclosure as to this fact will be included in the post-effective
amendment, thereby allowing the public investors the opportunity to fully
evaluate the Business Combination.
The Company has adopted a policy that it will not pay a finder's fee to
any member of management for locating a merger or acquisition candidate. No
member of management intends to or may seek and negotiate for the payment of
finder's fees. In the event there is a finder's fee, it will be paid at the
direction of the successor management after a change in management control
resulting from a Business Combination. The Company's policy regarding
finder's fees is based on a written agreement among management. Management
is unaware of any circumstances under which such policy through their own
initiative may be changed.
The Company will remain an insignificant player among the firms which
engage in Business Combinations. There are many established venture capital
and financial concerns which have significantly greater financial and
personnel resources and technical expertise than the Company. In view of the
Company's combined limited financial resources and limited management
availability, the Company will continue to be at a significant competitive
disadvantage compared to the Company's competitors. Also, the Company will
be competing with a large number of other small, blank check public companies
located throughout the United States.
The Company does not intend to advertise or promote the Company.
Instead, the Company's management will actively search for potential Target
Businesses. In the event management decides to advertise (in the form of an
ad in a legal publication) to attract a Target Business, the cost of such
advertising will be assumed by management.
Regulation
The Investment Company Act defines an "investment company" as an issuer
which is or holds itself out as being engaged primarily in the business of
investing, reinvesting or trading of securities. While the Company does not
intend to engage in such activities, the Company could become subject to
regulations under the Investment Company Act in the event the Company obtains
or continues to hold a minority interest in a number of enterprises. The
Company could be expected to incur significant registration and compliance
costs if required to register under the Investment Company Act. Accordingly,
management will continue to review the Company's activities from time to time
with a view toward reducing the likelihood the Company could be classified as
an "Investment Company."
Employees
The Company presently has no employees. Each officer and director of
the Company is engaged in business activities outside of the Company, and the
amount of time they will devote to the Company's business will only be
between five (5) and twenty (20) hours per person per week. Upon completion
of the public offering, it is anticipated that the President and the other
officers and directors of the Company will devote the time necessary each
month to the affairs of the Company until a successful business opportunity
has been acquired.
Facilities
The Company is presently using the office of David Kass, 26 Aerie Court,
North Hills, New York at no cost as its office. Such arrangement is expected
to continue after completion of this offering only until a Business
Combination is consummated, although there is currently no such agreement
between the Company and Mr. Kass. The Company at present owns no equipment,
and does not intend to own any upon completion of this offering.<PAGE>
Year 2000 Issues
Since the Company currently has no operations, it does not anticipate
incurring significant expense with regard to Year 2000 issues.
<PAGE>
MANAGEMENT
The officers and directors of the Company, and further information
concerning them are as follows:
Name Age Position
David Kass(1) 62 President, Director
26 Aerie Court
North Hills, New York 11030
David S. Jacobs(1) 53 Vice, President,
Secretary, Director
26 Court Street
Brooklyn, New York 11242
John E. Vidaver 50 Director
49 Poplar Avenue
Oradell, New Jersey 07469
____________________
(1) May be deemed "Promoters" of the Company, as that term is defined under
the Securities Act of 1933.
BIOGRAPHY
David Kass, President and a director of the Company, was Vice president and
owner of Mobile Phone Radio Systems from 1974 to 1982. Since 1982, Mr. Kass
has been active in several organizations such as Fellow Radio Club of North
America, MENSA and Explorers Club. Mr. Kass is a graduate of the State
University of New York at Buffalo. Mr. Kass has been President and a
director of the Company since October 1997.
David S. Jacobs, Vice President, Secretary and a director of the Company, has
been a partner in the law firm of Jacobs & Cohen, in Brooklyn, New York,
since 1994. Prior to that, he was a partner in the law firm of Jacobs, Katz
&
Lurie, Brooklyn, New York. Mr. Jacobs is a graduate of Brooklyn College and
Brooklyn Law School. He has been secretary and a director of the Company
since October 1997.
John E. Vidaver, Director, has been a free-lance radio announcer and
voice-over artist for commercials and films since 1990. He has worked for
such radio stations as WQXR Radio, New York, NY, and WQCD Radio, New York,
NY. Mr. Vidaver is a graduate of Rutgers College (Rutgers University) of New
Jersey. Mr. Vidaver has been a director of the Company since July 7,
1998.
<PAGE>
<PAGE>
Other Blank Check Companies
Competing searches for combination candidates among blank check
affiliates may present conflicts of interest. Management intends to present
each Business Combination candidate to the shareholders for their approval.
There are currently no other blank check affiliates seeking combination
candidates. The Company's offering and other contemplated offerings (if any)
by other blank check companies do not constitute a single plan of financing.
The Company may not acquire, be acquired by or merged with any
affiliated blank check companies or join with such companies in acquiring a
business.
Conflicts of Interest
No member of management is currently affiliated or associated with any
blank check company. Management does not currently intend to promote blank
check entities other than the Company. However, management may become
involved with the promotion of other blank check companies in the future. A
potential conflict of interest may occur in the event of such involvement.
(See "HIGH RISK FACTORS - Conflicts of Interest.") Management intends to
present each Business Combination candidate to the shareholders for their
approval.
While no members of management have been involved with any blank
check companies in the past, certain principal stockholders of the Company
have been involved with other blank check companies. See "PRINCIPAL
STOCKHOLDERS - Prior Blank Check Companies."
Remuneration
No officer or director of the Company has received any cash remuneration
since the Company's inception, and none is to receive or accrue any
remuneration or reimbursements of expenses from the Company upon completion
of this offering. No remuneration of any nature has been paid for or on
account of services rendered by a director in such capacity. None of the
officers and directors intends to devote more than 20 hours a month of his
time in the Company's affairs.
The legal fee to be paid to Schonfeld & Weinstein, L.L.P., counsel for
the corporation, is fifteen thousand dollars ($15,000), all of which has been
paid to Schonfeld & Weinstein, L.L.P. prior to this offering.
Management Involvement
All of management has been involved in the Company's affairs. The
Company has conducted no business as of yet, and aside from the search for
shareholders associated with the Company's formation, management has done no
work with or for the Company. All of management will speak to business
associates and acquaintances and will search the New York Times, the Wall
Street Journal and other business publications for Target Businesses. After
the closing of this offering, all of management intends to search for,
consider and negotiate with a Target Business. Management has not divided
these duties among its members. No member of management has any distinct
influence over the others in connection with their participation in the
Company's affairs.
Management Control
Management may not divest themselves of ownership and control of the
Company prior to the consummation of an acquisition or merger transaction.
This policy is based on an unwritten agreement among management. Management
is not aware of any circumstances under which such policy through their own
initiative, may be changed.
STATEMENT AS TO INDEMNIFICATION
Section 145 of the Delaware General Corporation Law provides for
indemnification of the officers, directors, employees and agents of
registrants by the Company. Complete disclosure of this statute is provided
in Part II hereof. This information can be examined as described in "Further
Information", herein.
Under Article XI of the Company's bylaws, the Company will indemnify and
hold harmless to the fullest extent authorized by the Delaware General
Corporation Law, any director, officer, agent or employee of the Company,
against all expense, liability and loss reasonably incurred or suffering by
such person in connection with the Company.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers or persons controlling the
registrant pursuant to the foregoing provisions, the registrant has been
informed that in the opinion of the Securities and Exchange Commission such
indemnification is against the public policy as expressed in the Securities
Act and is therefore, unenforceable.
MARKET FOR THE COMPANY'S COMMON STOCK
Prior to the date hereof, there has been no trading market for the
Company's Common Stock. Pursuant to the requirements of Rule 15g-8 of the
Exchange Act, a trading market will not develop prior to or after the
effectiveness of this prospectus or while the Common Stock under this
offering is maintained in escrow. The Common Stock under this offering will
remain in escrow until the Company's consummation of a Business Combination
pursuant to the requirements of Rule 419. There are currently five (5)
holders of the Company's outstanding Common Stock. The outstanding Common
Stock was sold in reliance upon an exemption from registration contained in
Section 4(2) of the Securities Act of 1933, as amended. All purchasers were
sophisticated investors. Current shareholders will own 80% of the
outstanding shares upon completion of the offering and, as a result, there is
no likelihood of an active public trading market, as that term is commonly
understood, developing for the shares. There can be no assurance that a
trading market will develop upon the consummation of a Business Combination
and the subsequent release of the Common Stock and other escrowed shares from
escrow. To date, neither the Company nor anyone acting on its behalf has
taken any affirmative steps to retain or encourage any broker dealer to act as
a market maker for the Company's Common Stock. Further, there have been no
discussions or understandings, preliminary or otherwise, between the Company
or anyone acting on its behalf and any market maker regarding the
participation of any such market maker in the future trading market, if any,
for the Company's Common Stock. (See "HIGH RISK FACTORS - No Assurance of a
Public Market" and "HIGH RISK FACTORS - Control by Present Management and
Shareholders.")
Present management does not anticipate that any such negotiations,
discussions or understandings shall take place prior to the execution of an
acquisition agreement. Management expects that discussions in this area will
ultimately be initiated by the party or parties controlling the entity or
assets which the Company may acquire. Such party or parties may employ
consultants or advisors to obtain such market maker but present management of
the Company has no intention of doing so at the present time.
There are no outstanding options or warrants to purchase, or securities
convertible into, common equity of the Company. The 400,000 shares of the
Company's Common Stock currently outstanding are "restricted securities" as
that term is defined in the Securities Act of 1933. Pursuant to Rule 144 of
the Securities Act, if all the Shares being offered hereto are sold, the
holders of the restricted securities may each sell 4,000 shares during any
three (3) month period after March 30 1998. The Company is offering 100,000
shares of its Common Stock at $0.35 per Share. Dilution to the public
investors after the public offering shall be approximately $0.275 per share
(see "DILUTION.")
Schonfeld & Weinstein, L.L.P.'s legal fees will total $15,000, all of
which has been paid by the Company for legal services rendered. The $15,000
paid to Schonfeld & Weinstein, L.L.P. from the Company's treasury was part of
the $20,000 in proceeds raised in the sale of common stock in the October
1997 private placement.
CERTAIN TRANSACTIONS
The Company was incorporated in the State of Delaware on October 6,
1997 . Between October 13, 1997 and March 30, 1998 the Company issued
400,000 shares to four (4) shareholders at $.05 per share, for a total of
$20,000. On April 15, 1998, each shareholder gifted 5,000 shares to
Allen S. Frenkel, who, as a result of such transfers, holds 20,000 shares of
the Company's common stock. These shareholder relied upon Section 4(1) of
the Securities Act when gifting such shares. Mr. Frenkel works for an
exchange specialist firm, in which he evaluates prospect companies for
possible listing on the American Stock Exchange. The shareholders of the
Company believe that he will be a valuable addition in helping to evaluate
potential merger candidates.
The current breakdown of share ownership by shareholder may be found in the
section on Principal Stockholders.
<PAGE>
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of the date of this prospectus,
and as adjusted to reflect the sale of the shares offered hereby, by (i) each
person who is known by the Company to own beneficially more than 5% of the
Company's outstanding Common Stock; (ii) each of the Company's officers and
directors; and (iii) all directors and officers of the Company as a group.
Name/Address Shares of Percent of Percent of
Beneficial Common Stock Class Owned Class Owned
Owner Beneficially Owned Before Offering After
Offering
David Kass (1)(2) 95,000 23.8% 19.0%
26 Aerie Court
North Hills, NY 11030
David S. Jacobs (1)(2) 95,000 23.8% 19.0%
26 Court Street
Brooklyn, NY 11242
John E. Vidaver(2) 0 0% 0%
49 Poplar Avenue
Oradell, NJ 07469
B. Alicia Campos 95,000 23.8% 19.0%
3325 Dempster Street
Skokie, IL 60076
Schonfeld & Weinstein,
L.L.P. (3) 95,000 23.8% 19.0%
63 Wall Street
Suite 1801
New York, NY
Allen S. Frenkel 20,000 5.0% 4.0%
19 Rector Street
New York, NY
Total Officers
and Directors (3 Persons) 190,000 47.5% 38.0%
Total 400,000 100% 80.0%
__________________________
(1) May be deemed "Promoters" of the Company, as that term is defined
under the Securities Act of 1933.
(2) Mr. Kass is President and a director of the Company. Mr. Jacobs is
Vice President, Secretary and a director of the Company. Mr. Vidaver is a
director of the Company.
(3) Mr. Schonfeld and Ms. Weinstein are the principals of Schonfeld &
Weinstein, L.L.P., special counsel to the Company.
None of the current shareholders have received or will receive any extra or
special benefits that were not shared equally (pro-rata) by all holders of
shares of the Company's stock.
Prior Blank Check Companies
Certain of the Company's principal stockholders have been involved with
other blank check companies in the past. Schonfeld & Weinstein, L.L.P., the
two principals of which are Joel Schonfeld and Andrea Weinstein, is a
shareholder of First Sunrise, Inc., a blank check company whose initial public
offering was declared effective by the Securities and Exchange Commission on
June 9, 1998. Pursuant to First Sunrise, Inc.'s offering, 100,000 shares of
common stock were offered at $.50 per share. Pursuant to Rule 419, these
shares, and the offering proceeds, are currently held in escrow pending a
merger or acquisition.
Both Joel Schonfeld and Andrea Weinstein were shareholders of
Transpacific International Group Corp., a blank check company, whose initial
public offering was declared effective by the Securities and Exchange
Commission on August 12, 1996. Pursuant to that initial public offering, the
company offered 3,000 shares of common stock at $6.00 per share. On February
12, 1998, Transpacific International Group Corp. merged with Coffee Holding
Co., Inc., a coffee wholesaler, distributer and roaster. Pursuant to the
merger with Coffee Holding Co., Inc., shares of Transpacific International
Group Corp. were split ten for one (10:1), after which Transpacific issued
3,000,000 shares to Coffee Holding Co., Inc. in exchange for all of the issued
and outstanding shares of Coffee Holding Co., Inc. Management of Transpacific
International Group Corp. resigned immediately upon effectiveness of the
merger.
Joel Schonfeld and Andrea Weinstein were shareholders of The Brian H.
Corp., a blank check company. In its initial public offering, declared
effective by the Securities and Exchange Commission on October 23, 1995, The
Brian H. Corp. offered 12,500 shares of common stock at $4.00 per share. The
shares and offering proceeds were held in escrow while the company searched
for business combinations. The eighteen month period proscribed by Rule 419,
expired without The Brian H. Corp. finding a business combination. As a
result, all offering proceeds (less 10%) were returned to investors, and the
shares were returned to the company.
Joel Schonfeld and Andrea Weinstein were shareholders of Joshua J.,
Ltd., a blank check company. In its initial public offering, declared
effective by the Securities and Exchange Commission on January 12, 1995,
Joshua J., Ltd. offered 10,000 shares of common stock at $5.00 per share. The
shares and offering proceeds were held in escrow while the company searched
for business combinations. The eighteen month period proscribed by Rule 419,
expired without Joshua J., Ltd. finding a business combination. As a result,
all offering proceeds (less 10%) were returned to investors, and the shares
were returned to the company.
Joel Schonfeld was a shareholder of Metamorphic Corporation, a blank
check company. In its initial public offering, declared effective by the
Securities and Exchange Commission on October 12, 1994, Metamorphic
Corporation offered 10,000 units at $7.00 per unit. The units and offering
proceeds were held in escrow while the company searched for business
combinations. The eighteen month period proscribed by Rule 419, expired
without Metamorphic Corporation finding a business combination. As a result,
all offering proceeds (less 10%) were returned to investors, and the shares
were returned to the company.
Joel Schonfeld and Andrea Weinstein are shareholders of Greystone
International Limited (formerly Zeron International Limited), a blank check
company. Greystone International Limited has not yet been declared effective
by the Securities and Exchange Commission.
Mr. Schonfeld and Ms. Weinstein were shareholders of Jackson Holding
Co., a blank check company, which merged into China Energy Resources
Corporation on June 19, 1996. Jackson Holding Corp.'s initial public offering
was declared effective by the Securities and Exchange Commission on December
21, 1994. In its initial public offering, Jackson Holding Corp. offered for
sale 10,000 shares of common stock at $5.00 per share. All shares offered
were sold; $50,000 was raised. Pursuant to the merger with China Energy
Resources Corporation, all of the issued and outstanding shares of Jackson
Holding Corp. common stock were exchanged for a total of 110,000 shares of
China Energy Resources Corporation common stock. China Energy Resources
Corporation is currently an operating company, with publicly trading shares.
Neither Mr. Schonfeld nor Ms. Weinstein have had any subsequent involvement
with that company.
Mr. Schonfeld was a shareholder of Mandi of Essex, Ltd., a blank check
company. The initial public offering of Mandi of Essex, Ltd. was declared
effective by the S.E.C. on July 25, 1991. 5,000 units were offered at $5.00
per unit, each unit consisting of one share of common stock and twenty (20)
class A redeemable common stock purchase warrants. Each class A warrant could
be redeemed for one (1) share of common stock and one class B redeemable
common stock purchase warrant. Each class B warrants entitled the holder to
purchase one (1) share of common stock. $25,000 was raised in the initial
public offering. On April 27, 1994, Mandi of Essex, Ltd. acquired CityScape
Financial Corp., pursuant to which, all of the outstanding common stock of
CityScape was acquired by Mandi in exchange for 4,140,000 shares of Mandi
common stock. CityScape Financial Corp. is currently an operating company,
with publicly trading shares. Mr. Schonfeld has not been involved with Mandi
of Essex/CityScape Financial Corp. since the acquisition.
Each of the aforementioned companies was formed to raise money for
potential business combinations.
DESCRIPTION OF SECURITIES
Common Stock
The Company is authorized to issue twenty million (20,000,000) shares of
Common Stock, $.0001 par value per share, of which 400,000 shares were issued
and outstanding as of the date of this prospectus. Each outstanding share of
Common Stock is entitled to one vote, either in person or by proxy, on all
matters that may be voted upon by the owners thereof at meetings of the
stockholders.
The holders of Common Stock (i) have equal ratable rights to dividends
from funds legally available therefor, when, as and if declared by the Board
of Directors of the Company; (ii) are entitled to share ratably in all of the
assets of the Company available for distribution to holders of Common Stock
upon liquidation, dissolution or winding up of the affairs of the Company;
(iii) do not have preemptive, subscription or conversion rights, or
redemption
or sinking fund provisions applicable thereto; and (iv) are entitled to one
non-cumulative vote per share on all matters on which stockholders may vote
at all meetings of stockholders.
All shares of Common Stock which are the subject of this offering, when
issued, will be fully paid for and non-assessable, with no personal liability
attaching to the ownership thereof. The holders of shares of Common Stock of
the Company do not have cumulative voting rights, which means that the
holders of more than 50% of such outstanding shares voting for the election
of
directors can elect all of the directors of the Company if they so choose
and, in such event, the holders of the remaining shares will not be able to
elect any of the Company's directors. At the completion of this offering,
the present officers and directors and present shareholders will beneficially
own 80% of the then outstanding shares. Accordingly, after completion of
this
offering, the present shareholders of the Company will be in a position to
control all of the affairs of the Company.
Future Financing
In the event the proceeds of this offering are not sufficient to enable
the Company to successfully find a Business Combination the Company may seek
additional financing. At this time the Company believes that the proceeds of
this offering will be sufficient for such purpose and therefore does not
expect to issue any additional securities before the consummation of a
Business Combination. However, the Company may issue additional securities,
incur debt or procure other types of financing if needed. The Company has
not entered into any agreements, plans or proposals for such financing and as
of present has no plans to do so. The Company will not use the Deposited
Funds
as collateral or security for any loan or debt incurred. Further, the
Deposited Funds will not be used to pay back any loan or debts incurred by
the Company. If the Company does require additional financing, there is no
guarantee that such financing will be available to it or if available that
such financing will be on terms acceptable to the Company. (See "Use of
Proceeds.")
Reports to Stockholders
The Company intends to furnish its stockholders with annual reports
containing audited financial statements as soon as practicable at the end of
each fiscal year. The Company's fiscal year ends on December 31st.
Dividends
The Company was only recently organized, has no earnings, and has paid
no dividends to date. Since the Company was formed as a blank check company
with its only intended business being the search for an appropriate Business
Combination, the Company does not anticipate having any earnings until such
time that a Business Combination is reconfirmed by the stockholders.
However, there are no assurances that upon the consummation of a Business
Combination, the Company will have earnings or issue dividends. Therefore,
it is not expected that cash dividends will be paid to stockholders until after
a Business Combination is reconfirmed.
Transfer Agent
The Company has appointed Manhattan Transfer, Inc. as the Transfer Agent
for the Company.
PLAN OF DISTRIBUTION
The Company hereby offers the right to subscribe for 100,000 Shares at $0.35
per Share.
The Company proposes to offer the Shares directly on a "best efforts, all or
none basis", and no compensation is to be paid to any person in connection
with the offer and sale of the Shares.
Two of the Company's officers and directors, David Kass and David S. Jacobs,
shall distribute prospectuses related to this Offering. The Company
estimates approximately 100 to 200 prospectuses shall be distributed in such
a
manner. Mr. Kass and Mr. Jacobs intend to distribute prospectus to
acquaintances, friends and business associates.
The Offering shall be conducted by David Kass and David Jacobs. Although Mr.
Kass and Mr. Jacobs are "associated persons" of the Company as that term is
defined in Rule 3a4-1 under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), they are deemed not to be brokers for the following
reasons: (1) the officers and directors are not subject to a statutory
disqualifications as that terms is defined in Section 3(a)(39) of the
Exchange Act at the time of his/her participation in the sale of the
Company's
securities; (2) they will not be compensated in connection with their
participation in the sale of the Company's securities by the payment of
commission or other remuneration based either directly or indirectly on
transactions in securities; (3) none of them are an associated person of a
broker or dealers at the time of his/her participation in the sale of the
Company's securities; and (4) each associated person shall restrict his/her
participation to the following activities:
(a) preparing any written communication or delivering such
communication through the mails or other means that does not involve oral
solicitation by the associated person of a potential purchaser;
(b) responding to inquiries of a potential purchasers in a
communication initiated by the potential purchasers, provided however, that
the content of such responses are limited to information contained in a
registration statement filed under the Securities Act of 1933 or other
offering document; or
(c) performing ministerial and clerical work involved in effecting
any transaction.
As of the date of this Prospectus, no broker has been retained by the Company
in connection with the sale of securities being offered hereby. In the event
a broker who may be deemed an Underwriter is retained by the Company, an
amendment to the Company's Registration Statement will be filed with the
Securities and Exchange Commission.
Neither the Company nor anyone acting on its behalf including the Company's
shareholders, officers, directors, promoters, affiliates or associates will
approach a market maker or take any steps to request or encourage a market in
these securities either prior or subsequent to an acquisition of any business
opportunity. There have been no preliminary discussions or understandings
between the Company (or anyone acting on its behalf) and any market maker
regarding the participation of any such market maker in the future trading
market (if any) for the Company's securities, nor does the Company have any
plans to engage in such discussions. The Company does not intend to use
consultants to obtain market makes. No member of management, promoter or
anyone acting at their direction will recommend, encourage or advise
investors to open brokerage accounts with any broker-dealer that is obtained
to
make a market in the Shares subsequent to the acquisition of any business
opportunity. The Company's investors shall make their own decisions
regarding whether to hold or sell their Shares. The Company shall not
exercise
any influence over investors' decisions.
Method of Subscribing
Persons may subscribe by filling in and signing the subscription agreement
and delivering it, prior to the expiration date (as defined below), to the
Company. The subscription price of $0.35 per Share must be paid in cash or
by check, bank draft or postal express money order payable in United States
dollars to the order of the Company. This offering is being made on a "best
efforts, all or none basis." Thus, unless all 100,000 shares are sold, none
will be sold.
The Company's officers, directors, current shareholders and any of their
affiliates or associates may purchase a portion of the Shares offered in this
offering. The aggregate number of Shares which may be purchased by such
persons shall not exceed 20% of the number of Shares sold in this offering.
Such purchases may be made in order to close the "all or nothing" offering.
Shares purchased by the Company's officers, directors and principal
shareholders will be acquired for investment purposes and not with a view
towards distribution.
EXPIRATION DATE
This offering will expire 90 days from the date of this prospectus (or
180 days from the date of this prospectus if extended by the Company).
LITIGATION
The Company is not presently a party to any litigation, nor to the
knowledge of management is any litigation threatened against the Company
which may materially affect the Company.
LEGAL OPINIONS
Schonfeld & Weinstein, L.L.P., 63 Wall Street, Suite 1801, New York, New
York 10005, special counsel to the Company, has rendered an opinion that the
Shares are validly issued.
EXPERTS
The balance sheet of the Company as of April 30, 1998, and the related
statements of operations, changes in stockholders' equity and cash flows for
the initial period from October 6, 1997 (date of incorporation) through April
30, 1998 included in this Prospectus and incorporated by reference in the
Registration Statement, have been audited by Ahearn, Jasco + Company, C.P.A.,
independent auditors, as stated in their report appearing herein and
incorporated by reference in the Registration Statement, and are included and
incorporated by reference in reliance upon the reports of such firm given
upon their authority as experts in accounting and auditing.
FURTHER INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission"), a Registration Statement on Form SB-2 with respect to this the
securities offered by this prospectus. This prospectus omits certain
information contained in the Registration Statement as permitted by the Rules
and Regulations of the Commission. Reports and other information filed by
the Company may be inspected and copied at the public reference facilities of
the Commission in Washington, D.C. Copies of such material can be obtained
from the Public Reference Section of the Commission, Washington, D.C. 20549
at prescribed rate, or at the Commission's web site at www.sec.gov.
Statements
contained in this prospectus as to the contents of any contract or other
document referred to are not complete and where such contract or other
document is an exhibit to the Registration Statement, each such statement is
deemed qualified and amplified in all respects by the provisions of the
exhibit.
<PAGE>
THE ARIELLE CORP.
(A development stage company)
INDEX TO FINANCIAL STATEMENTS
REPORT OF INDEPENDENT AUDITORS
FINANCIAL STATEMENTS
Balance Sheet
Statement of Operations
Statement of Changes in Stockholders' Equity
Statement of Cash Flows
NOTES TO FINANCIAL STATEMENTS
<PAGE>
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Stockholders of
The Arielle Corp.
We have audited the accompanying balance sheet of The Arielle Corp. (the
"Company"), a development stage company, as of April 30, 1998, and the
related statements of operations, changes in stockholders' equity, and cash
flows for the period October 6, 1997 (date of incorporation) through April 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 The Arielle Corp. as of
April 30, 1998, and the results of its operations and its cash flows for the
period October 6, 1997 (date of incorporation) through April 30, 1998 in
conformity with generally accepted accounting principles.
AHEARN, JASCO + COMPANY, P.A.
__________________________________________
AHEARN, JASCO + COMPANY, P.A.
Certified Public Accountants
Pompano Beach, Florida
May 18, 1998
PAGE
<PAGE>
THE ARIELLE CORP.
(A development stage company)
BALANCE SHEETS
January 31, 1999 AND April 30, 1998
1/31/99 4/30/98
(Unaudited)
ASSETS
CURRENT ASSET - Cash and cash equivalents $ 1,942 $ 2,642
ORGANIZATION COSTS, Net - 316
DEFERRED OFFERING COSTS 15,535 15,000
TOTAL $ 17,477 $ 17,958
LIABILITIES AND STOCKHOLDERS' EQUITY
ACCRUED EXPENSES $ 720 $ 100
STOCKHOLDERS' EQUITY:
Common stock, $.0001 par value;
20,000,000 shares authorized;
400,000 shares issued and outstanding $ 40 $ 40
Additional paid-in capital 19,960 19,960
Deficit accumulated during the
development stage ( 3,243) ( 2,142)
STOCKHOLDERS' EQUITY, NET 16,757 17,858
TOTAL $ 17,477 $ 17,958
See notes to financial statements.
<PAGE>
<PAGE>
THE ARIELLE CORP.
(A development stage company)
STATEMENT OF OPERATIONS
FOR THE PERIOD FROM MAY 1, 1998 THROUGH JANUARY 31, 1999 AND
THE PERIOD FROM OCTOBER 6, 1997 (date of incorporation) THROUGH APRIL 30,
1998
5/1/98 10/6/97
through through
1/31/99 4/30/98
(Unaudited)
REVENUE $ - $ -
GENERAL AND ADMINISTRATIVE EXPENSES 1,101 2,142
LOSS BEFORE INCOME TAX PROVISION (1,101) (2,142)
PROVISION FOR INCOME TAXES - -
NET LOSS $ (1,101) $(2,142)
PER SHARE AMOUNTS:
Net loss per common share outstanding $(0.0028) $(0.0054)
COMMON SHARES OUTSTANDING AT
JANUARY 31, 1999 AND APRIL 30, 1998 400,000 400,000
See notes to financial statements.
<PAGE>
<PAGE>
THE ARIELLE CORP.
(A development stage company)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM MAY 1, 1998 THROUGH JANUARY 31, 19999 AND
THE PERIOD FROM OCTOBER 6, 1997 (date of incorporation) THROUGH APRIL 30,
1998
Deficit
Accumulated
Additional during the
Common Paid-in Development
Stock Capital Stage Total
STOCKHOLDERS' EQUITY,
October 6, 1997 $ - $ - $ - $ -
Sale of 400,000 shares of
Common stock 40 19,960 - 20,000
Net loss for the initial
period ended April 30, 1998 - - (2,142) (2,142)
STOCKHOLDERS' EQUITY,
April 30, 1998 40 19,960 (2,142) 17,858
Net loss for the period
May 1, 1998 through
January 31, 1999
(unaudited) - - (1,101) (1,101)
STOCKHOLDERS' EQUITY,
January 31, 1999
(unaudited) 40 $ 19,960 $ (3,243) $16,757
See notes to financial statements
<PAGE>
<PAGE>
THE ARIELLE CORP.
(A development stage company)
STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM MAY 1, 1998 THROUGH JANUARY 31, 1999 AND
THE PERIOD FROM OCTOBER 6, 1997 (date of incorporation) THROUGH APRIL 30,
1998
5/1/98 10/6/97
through through
1/31/99 4/30/98
(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(1,101) $ (2,142)
Item not affecting cash flow from operations:
Amortization 316 42
Accrued expenses 620 100
NET CASH USED IN OPERATING ACTIVITIES (165) (2,000)
CASH FLOWS FROM INVESTING ACTIVITY:
Deferred offering costs incurred (535) (15,000)
Organization costs incurred - (358)
CASH USED IN INVESTING ACTIVITIES (535) (15,358)
CASH FLOWS FROM FINANCING ACTIVITY:
Sales of common stock - 20,000
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (700) 2,642
CASH AND CASH EQUIVALENTS, beginning of period 2,642 -
CASH AND CASH EQUIVALENTS, end of period $ 1,942 $ 2,642
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest $ - $ -
Cash paid for income taxes $ - $ -
See notes to financial statements.
PAGE
<PAGE> THE ARIELLE CORP.
(A development stage company)
NOTES TO FINANCIAL STATEMENTS
FOR THE PERIOD MAY 1, 1998 THROUGH JANUARY 31, 1999 AND
THE PERIOD OCTOBER 6, 1997 (date of incorporation) THROUGH APRIL 30, 1998
NOTE 1 - ORGANIZATION AND BASIS OF PRESENTATION
The Arielle Corp., a development stage company, was organized in
Delaware
on October 6, 1997 as a "blank check" company which plans to look for a
suitable business to merge with or acquire. Operations since incorporation
have consisted primarily of obtaining the first capital contribution by the
insiders and coordination activities regarding the SEC registration of the
company.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Deferred Offering Costs
Deferred offering costs, which are being incurred in anticipation of the
Company filing a Rule 419 registration statement, are being deferred until
the registration is complete.
Organization Costs, Net
Organization costs are being amortized over a period of 60 months.
Accumulated amortization as of April 30, 1998 was $42.
In accordance with SOP 98-5 as issued by the AICPA, the balance of
organization costs were expensed in October 1998. The cumulative effect of a
change in accounting method disclosure is not presented as it is not material.
Income Taxes
The Company accounts for income taxes in accordance with the Statement
of Financial Accounting Standards No. 109, "Accounting for Income Taxes," which
requires the recognition of deferred tax liabilities and assets at currently
enacted tax rates for the expected future tax consequences of events that
have been included in the financial statements or tax returns. A valuation
allowance is recognized to reduce the net deferred tax asset to an amount
that is more likely than not to be realized. The tax provision shown on the
accompanying statement of operations is zero since the deferred tax asset
generated from the net operating loss is offset in its entirety by a
valuation allowance. State minimum taxes are expensed as incurred.
Cash and Cash Equivalents
Cash and cash equivalents, if any, include all highly liquid debt
instruments with an original maturity of three months or less at the date of
purchase.
Fair Value of Financial Instruments
Cash, accounts payable and other current liabilities are recorded in the
financial statements at cost, which approximates fair market value because of
the short-term maturity of those instruments.
NOTE 3 - STOCKHOLDER'S EQUITY
The company was duly organized under the laws of the State of Delaware.
The company has authorized 20,000,000 shares of common stock at $.0001 par
value. Through April 30, 1998, the company has raised $20,000 through a
subscription agreement.
NOTE 4 - RULE 419 REQUIREMENTS
Rule 419 requires that offering proceeds after deduction for
underwriting
commissions, underwriting expenses and deal allowances issued be deposited
into an escrow or trust account (the "Deposited Funds" and "Deposited
Securities", respectively) governed by an agreement which contains certain
terms and provisions specified by the Rule. Under Rule 419, the Deposited
Funds and Deposited Securities will be released to the company and to the
investors, respectively, only after the company has met the following three
basic conditions. First, the company must execute an agreement(s) for an
acquisition(s) meeting certain prescribed criteria. Second, the company must
file a post-effective amendment to the registration statement which includes
the terms of a reconfirmation offer that must contain conditions prescribed
by the rules. The post-effective amendment must also contain information
regarding the acquisition candidate(s) and its business(es), including
audited financial statements. The agreement(s) must include, as a condition
precedent to their consummation, a requirement that the number of investors
representing 80% of the maximum proceeds must elect to reconfirm their
investments. Third, the company must conduct the reconfirmation offer and
satisfy all of the prescribed conditions, including the condition that
investors representing 80% of the Deposited Funds must elect to remain
investors. The post-effective amendment must also include the terms of the
reconfirmation offer mandated by Rule 419. The reconfirmation offer must
include certain prescribed conditions which must be satisfied before the
Deposited Funds and Deposited Securities can be released from escrow. After
the company submits a signed representation to the escrow agent that the
requirements of Rule 419 have been
met and after the acquisition(s) is consummated, the escrow agent can release
the Deposited Funds and Deposited Securities. Investors who do not reconfirm
their investments will receive the return of a pro-rata portion thereof; and
in the event investors representing less than 80% of the Deposited Funds
reconfirm their investments, the Deposited Funds will be returned to the
investors on a pro-rata basis.
NOTE 5 - LOSS PER COMMON SHARE
Net loss per common share outstanding, as shown on the statement of
operations, is based on the number of common shares outstanding at each
balance sheet date. Weighted average shares outstanding was not computed since
it would not be meaningful in the circumstances, as all shares issued during
the period from incorporation through April 30, 1998 were for initial capital
and were issued to just four individuals. Therefore, the total shares
outstanding at the end of each period was deemed to be the most relevant
number of shares to use for purposes of this disclosure.
For future periods, the Company will utilize the treasury stock method
for computing earnings per share, and will compute a weighted average number
of shares outstanding once additional shares of stock are issued to new
shareholders. Under the treasury stock method, the dilutive effect of
outstanding stock options and other convertible securities for determining
primary earnings per share is computed using the average market price during
the fiscal period, whereas the dilutive effect of outstanding stock options
and convertible securities for determining fully diluted earnings per share
is computed using the market price as of the end of the fiscal period, if
greater than the average market price.
NOTE 6 - RELATED PARTY TRANSACTIONS
Transactions with Shareholders
During 1998, the company advanced $15,000 to the law firm of Schonfeld &
Weinstein, LLP, who is also a shareholder of the company, for legal fees to
complete its SEC registration. These fees were recorded as deferred offering
costs (see Note 2).
Office Facilities
Office space is provided by an officer of the Company at no charge.
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of Directors and Officers
The Delaware General Corporation Law, as amended, provides for the
indemnification of the Company's officers, directors and corporate employees
and agents under certain circumstances as follows:
INDEMNIFICATION OF OFFICERS, DIRECTORS, EMPLOYEES AND AGENTS;
INSURANCE. - (a) A corporation may indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation) by
reason of the fact that he is or was a director, officer, employee or agent
of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by him in connection with such action, suit or proceeding
if he acted in good faith and in a manner he reasonably believed to be in or
not opposed to the best interests of the corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his conduct
was unlawful. The termination of any action, suit or proceeding by judgment,
order, settlement, conviction, or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that the person did not
act in good faith and in a manner which he reasonably believed to be in or not
opposed to the best interests of the corporation, and, with respect to any
criminal action or proceeding, had reasonable cause to believe that his
conduct was unlawful.
(b) A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action
or suit by or in the right of the corporation to procure a judgment in its
favor by reason of the fact that he is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted
in good faith and in a manner he reasonably believed to be in or not opposed
to the best interests of the corporation and except that no indemnification
shall be made in respect of any claim, issue or matter as to which such person
shall have been adjudged to be liable to the corporation unless and only to
the extent that the Court of Chancery or the court in which such action or
suit was brought shall determine upon application that, despite the
adjudication of liability but in view of all the circumstance of the case,
such person is fairly and reasonably entitled to indemnity for such expenses
which the Court of Chancery or such court shall deem proper.
(c) To the extent that a director, officer, employee or agent of a
corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in subsections (a) and (b) of this
section, or in defense of any claim, issue or matter therein, he shall be
indemnified against expenses (including attorney's fees) actually and
reasonably incurred by him in connection therewith.
(d) Any indemnification under subsections (a) and (b) of this section
(unless ordered by a court) shall be made by the corporation only as
authorized in the specific case upon a determination that indemnification of
the director, officer, employee or agent is proper in the circumstances
because he has met the applicable standard of conduct set forth in subsections
(a) and (b) of this section. Such determination shall be made (1) by the
board of directors by a majority vote of a quorum consisting of directors who
were not parties to such action, suit or proceeding, or (2) if such a quorum
is not obtainable, or, even if obtainable a quorum of disinterested directors
so directs, by independent legal counsel in a written opinion, or (3) by the
stockholders.
(e) Expenses incurred by an officer or director in defending any civil,
criminal, administrative or investigative action, suit or proceeding may be
paid by the corporation in advance of the final disposition of such action,
suit or proceeding upon receipt of an undertaking by or on behalf of such
director to repay such amount if it shall ultimately be determined that he is
not entitled to be indemnified by the corporation as authorized in this
section. Such expenses including attorneys' fees incurred by other employees
and agents may be so paid upon such terms and conditions, if any, as the board
of directors deems appropriate.
(f) The indemnification and advancement expenses provided by, or granted
pursuant to, the other subsections of this section shall not be deemed
exclusive of any other rights to which those seeking indemnification or
advancement expenses may be entitled under any bylaw, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in his
official capacity and as to action in another capacity while holding such
office.
(g) A corporation shall have power to purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against any liability asserted
against him and incurred by him in any such capacity or arising out of his
status as such, whether or not the corporation would have the power to
indemnify him against such liability under this section.
(h) For purposes of this Section, references to "the corporation" shall
include, in addition to the resulting corporation, any constituent corporation
including absorbed in a consolidation of merger which, if its separate
existence had continued, would have had power and authority to indemnify its
directors, officers and employees or agents so that any person who is or was a
director, officer, employee or agent of such constituent corporation, or is or
was serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, shall stand in the same position under this section
with respect to the resulting or surviving corporation as he would have with
respect to such constituent corporation as he would have with respect to such
constituent corporation if its separate existence had continued.
(i) For purposes of this section, references to "other enterprises"
shall include employee benefit plans; references to "fines" shall include any
excise taxes assessed on a person with respect to an employee benefit plan;
and references to "serving at the request of the corporation" shall include
any service as a director, officer, employee or agent of the corporation which
imposes duties on, or involves services by, such director, officer, employee,
or agent with respect to an employee benefit plan, its participants, or
beneficiaries; and a person who acted in good faith and in a manner he
reasonably believed to be in the interest of the participants and
beneficiaries of an employee benefit plan shall be deemed to have acted in a
manner "not opposed to the best interests of the corporation" as referred to
in this section.
(j) The indemnification and advancement of expenses provided by, or
granted pursuant to, this section shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of the
heirs, executors, and administrators of such person.
Article XI of the Company's By-laws provides for the indemnification of the
company's officers, directors, and corporate employees and agents under
certain circumstances as follows:
Article XI provides that the Company will hold harmless and will indemnify all
officers, directors, employees and agents of the Company against all expense,
liability and loss reasonably incurred or suffered by such person in its
connection as such with the Company. The Company shall indemnify any such
person seeking indemnification in connection with a proceeding initiated by
such person (except against the Company) only if such proceeding was
authorized by the Company's Board of Directors.
If a claim under the above paragraph is not paid in full by the Company within
30 days after a written claim has been received by the Company, the claimant
may at anytime thereafter bring suit against the Company to recover the unpaid
amount of the claim. If the claimant is successful, it is entitled to be paid
the expense of prosecuting such claim, as well.
Notwithstanding any limitations in other sections of the By-laws, the Company
will, to the fullest extend permitted by Section 145 of the General
Corporation Law of Delaware, indemnify any and all persons whom it has the
power to indemnify against any and all of the expense, liabilities and loss,
and this indemnification shall not be deemed exclusive of any other rights to
which the indemnities may be entitled under any By-law, agreement, or
otherwise, both as to action in his/her official capacity and as to action in
another capacity while holding such office, and shall continue as to a person
who has ceased to be a director, officer, employee or agent and shall inure to
the benefit of the heirs, executors and administrators of such persons.
The Company may, at its own expense, maintain insurance to protect itself and
any director, officer, employee or agent of the Company against any such
expense, liability or loss, whether or not the Company would have the power to
indemnify such person against such expense, liability or loss under the
Delaware General Corporation Law.
<PAGE>
Item 25. Expenses of Issuance and Distribution
The other expenses payable by the Registrant in connection with the
issuance and distribution of the securities being registered are estimated as
follows:
Escrow Fee $ 1,000.00
Securities and Exchange Commission Registration Fee $ 100.00
Legal Fees $15,000.00
Accounting Fees $ 2,000.00
Printing and Engraving $ 500.00
Blue Sky Qualification Fees and Expenses $ 750.00
Miscellaneous $ 1,650.00
Transfer Agent Fee $ 1,000.00
TOTAL $22,000.00
<PAGE> Item 26. Recent Sales of Unregistered Securities
The Company issued 400,000 shares between October 13, 1997 and March 30,
1998 to its initial stockholders for $20,000.
Name/Address
Consideration Shares
Beneficial of Common Price
Owner Stock Purchased(2) Paid
David Kass (1)(3) 100,000 $ 5,000
26 Aerie Court
North Hills, NY 11030
David S. Jacobs (1)(3) 100,000 $ 5,000
26 Court Street
Brooklyn, NY
B. Alicia Campos 100,000 $ 5,000
3325 Dempster Street
Skokie, IL 60076
Schonfeld & Weinstein,
L.L.P.(4) 100,000 $ 5,000
63 Wall Street
Suite 1801
New York, NY
___________
(1) May be deemed "Promoters" of the Company, as that term is defined
under the Securities Act of 1933.
(2) These Shares were sold under the exemption of Section 4(2) of the
Securities Act of 1933.
(3) Mr. Kass is President and a director of the Company. Mr. Jacobs
is Vice President, Secretary and a director of the Company.
(4) Mr. Schonfeld and Ms. Weinstein are the principals of Schonfeld &
Weinstein, L.L.P., special counsel to the Company.
Neither the Company nor any person acting on its behalf offered or sold the
securities by means of any form of general solicitation or general
advertising.
Each purchaser represented in writing that he/she acquired the securities for
his own account. A legend was placed on the certificates stating that the
securities have not been registered under the Act and setting forth the
restrictions on their transferability and sale. Each purchaser signed a
written agreement that the securities will not be sold without registration
under the Act or exemption therefrom.
On April 15, 1998, each shareholder transferred 5,000 shares to Allen S.
Frenkel (See "Certain Transactions"). As a result of such transaction, David
Kass, David S. Jacobs, B. Alicia Campos and Schonfeld & Weinstein, L.L.P. each
currently hold 95,000 shares, and Allen S. Frenkel holds 20,000 shares.
<PAGE>
EXHIBITS
Item 27.
3.1 Certificate of Incorporation.*
3.2 By-Laws.*
4.1 Specimen Certificate of Common Stock.*
4.6 Form of Escrow Agreement.*
5.0 Opinion of Counsel.
24.0 Accountant's Consent to Use Opinion.
24.1 Counsel's Consent to Use Opinion.
99.0 Agreement Among Management*
* Filed with original SB-2 registration statement.<PAGE>
<PAGE> Item 28.
UNDERTAKINGS
The registrant undertakes:
(1) To file, during any period in which offers or sales are being made,
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10 (a) (3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
Effective Date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement, including
(but not limited to) any addition or deletion of managing underwriter;
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be treated as a new
registration statement of the securities offered, and the offering of the
securities at that time to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of
the offering.
(4) To deposit into the Escrow Account at the closing, certificates in such
denominations and registered in such names as required by the Company to
permit prompt delivery to each purchaser upon release of such securities from
the Escrow Account in accordance with Rule 419 of Regulation C under the
Securities Act. Pursuant to Rule 419, these certificates shall be deposited
into an escrow account, not to be released until a business combination is
consummated.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of
the
registrant pursuant to any provisions contained in its Certificate of
Incorporation, or by-laws, or otherwise, the registrant has been advised that
in the opinion of the Securities and Exchange Commission such indemnification
is against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred or
paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities
being registered, the registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether indemnification by it is
against public policy as expressed in the Act and will be governed by the
final adjudication of such issue.
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements of filing on Form SB-2 and authorized this
registration statement to be signed on its behalf by the undersigned, in the
City of New York, State of New York, on February 10, 1999 .
The Arielle Corp.
BY: David Kass
David Kass, President
In accordance with the requirements of the Securities Act of 1933, this
registration statement was signed by the following persons in the capacities
and on the dates stated.
David Kass
Dated February 19, 1999
David Kass
President, Director
David S. Jacobs
Dated February 10, 1999
David S. Jacobs
Vice President, Secretary, Director
Dated
John E. Vidaver
Director
<PAGE>
February 9, 1999
Securities and Exchange Commission
Washington, D.C.
Re: The Arielle Corp.
To Whom It May Concern:
The Arielle Corp.(the "Company") is a corporation duly incorporated and
validly existing and in good standing under the laws of the state of
Delaware. The Company has full corporate powers to own its property and
conduct its business, as such business is described in the prospectus. The
Company is qualified to do business as a foreign corporation in good standing
in every jurisdiction in which the ownership of property and the conduct of
business requires such qualification.
This opinion is given in connection with the registration with the Securities
and Exchange Commission of one hundred thousand (100,000) Shares of Common
Stock at a price of $0.35 per Share, for sale in the Company's proposed
public offering.
We have acted as counsel to the company in connection with the preparation of
the Registration Statement on Form SB-2, pursuant to which such Shares are
being registered and, in so acting, we have examined the originals and copies
of the corporate instruments, certificates and other documents of the Company
and interviewed representatives of the Company to the extent we deemed it
necessary in order to form the basis for the opinion hereafter set forth. In
such examination we have assumed the genuineness of all signatures and
authenticity of all documents submitted to me as certified or <PAGE>
<PAGE>
Securities and Exchange Commission
Page Two
photostatic copies. As to all questions of fact material to this opinion
which have not been independently established, we have relied upon statements
or certificates of officers or representatives of the Company.
All of the 100,000 Shares being registered are now authorized but unissued
shares.
Based upon the foregoing, we are of the opinion that the 100,000 Shares of
Common Stock of the Company being registered for sale by the Company, when
issued and sold pursuant to this Registration Statement will be legally
issued, fully paid and non-assessable and there will be no personal liability
to the owners thereof.
The undersigned hereby consents to the use of this opinion in connection with
such Registration Statement and its inclusion as an exhibit accompanying such
Registration Statement.
Very truly yours,
SCHONFELD & WEINSTEIN, L.L.P.
SCHONFELD & WEINSTEIN, L.L.P.
<PAGE>
We consent to the use in this Amendment No. 2 to the Registration
Statement of The Arielle Corp. on Form SB-2 (File No. 333-61629) of our Report
of Independent Auditors dated May 18, 1998 appearing in the Prospectus, which
is part of this Registration Statement.
We also consent to the reference to us under the heading "Experts" in such
Prospectus.
AHEARN, JASCO + COMPANY, P.A.
AHEARN, JASCO + COMPANY, P.A.
Certified Public Accountants
Pompano Beach, Florida
February 11, 1999
<PAGE>
To The Board of Directors of
The Arielle Corp.
Re: The Arielle Corp.
SCHONFELD & WEINSTEIN, L.L.P. does hereby consent to the use of our opinion
dated February 9, 1999 , to The Arielle Corp. to be used and filed in
connection with the SB-2 Registration Statement and Prospectus, as filed with
the Securities and Exchange Commission.
Schonfeld & Weinstein, L.L.P.
SCHONFELD & WEINSTEIN, L.L.P.
Dated: February 9, 1999
