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UNITES STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10SB/2A GENERAL FORM FOR REGISTRATION OF SECURITIES OF SMALL
BUSINESS ISSUERS PURSUANT TO SECTION 12(b) or (g) OF THE SECURITIES AND
EXCHANGE ACT OF 1933
COMBINED PROFESSIONAL SERVICES, INC.
(Exact name of registrant as specified in its charter)
Nevada 88-0346441
(State of organization) (I.R.S. Employer Identification No.)
1004 Coral Isle, Las Vegas, NV 89108
(Address of principal executive offices)
Registrant's telephone number, including area code (702) 217-1921
Registrant's Counsel: David H. Jarvis, Esq., 31555 West Fourteen Mile Road,
Suite 212, Farmington Hills, Michigan, 48334, (248) 865-6000
Securities to be registered pursuant to Section 12(b) of the Act: None
Securities to be registered pursuant to Section 12(g) of the Act: Common Stock,
par value $0.001 per share
ITEM 1. DESCRIPTION OF BUSINESS
BACKGROUND
Combined Professional Services, Inc. (the "Company" or the "Registrant") is a
Nevada corporation formed on October 11, 1995. Its principal place of business
is located at 1004 Coral Isle, Las Vegas, NV 89108. The Company was organized to
engage in any lawful corporate business, including but not limited to,
participating in mergers with and acquisitions of other companies. The Company
has been in the developmental stage for virtually its entire existence, and has
had only a limited operating history.
The Company was incorporated by Cathy Souers. Founders' shares were issued to
Cathy Souers and Diana Hewitt, both of whom constituted the original board of
directors of the
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Company. Ms. Souers was issued 20,000 shares of common stock for $100, and Diana
Hewitt received 10,000 shares of common stock for $50, both in October, 1995.
(These shares are accounted for on a pre-split basis, with the appropriate
adjustment described hereinafter.) Such shares were issued in reliance on
section 4(2) of the Securities Act of 1933, as amended (the "Securities Act").
The Company issued 19,000 shares of common stock (pre-split), pursuant to
section 4(2) of the Securities Act to 19 purchasers in October 1995. In July,
1998, the Company repurchased a total of 29,000 of the shares (pre-split) owned
by the two founders (19,500 from Ms. Souers and 9,500 from Ms. Hewitt) for a
total of $145. On July 17, 1998, the Company authorized a 100:1 forward split of
its common stock. Subsequently, Ms. Souers then transferred a total of 7,200 of
her shares (post-split) to 8 family members and business acquaintances. After
the split, Gehrig Ironite, Inc., a company controlled by Ms. Souers, purchased a
total of 200,000 shares of common stock for $10,000, in reliance upon the
exemption provided by section 4(2) of the Securities Act.
Incorrectly stated in the First Amended Registration Statement, and as
correctly reflected in this Amendment, the Private Purchasers purchased their
interest in the Company via an exemption afforded by Section 4(2) of the
Securities Act (not Rule 504). In sum total, 19 persons purchased 19,000 shares
in the 4(2) transactions. At such time, the Private Purchased owned 19,000 of
49,000 issued shares. This easily equates to 38.77% of the Company's issued and
outstanding shares. Conversely, Ms. Souers and Hewitt owned the balance, or
61.23%.
As aforesaid, the Company repurchased some founders from Ms. Souers and
Hewitt. Ms. Souers sold to the Company 19,500 shares for the sum of $97.50. Ms.
Hewitt sold to the Company 9,500 shares for the sum of $47.50. Thereafter, each
retained 500 shares. At this time, Ms. Souers retained an ownership interest in
500 of 20,000 issued and outstanding shares. Such amount equating 2.5%. Further,
Ms. Hewitt retained an ownership interest in 500 of 20,000 issued and
outstanding shares. Such amount equating 2.5%. Ms. Souer's interest was diluted
by 58.73%, while Ms. Hewitt's interest was diluted by 36.27%.
As aforesaid, thereafter, the Company's stock was subject to a forward
split of 100 to 1. Immediately subsequent, Gehrig Ironite purchased 200,000
Company shares for $10,000. At this juncture, Ms. Souers owned 250,000 of
2,200,000 issued and outstanding shares, or 11.36%. Ms. Hewitt's interest was
moderately diluted to 2.3%. The rationale for this transaction and the
additional dilution of Ms. Hewitt's interest is simple. The Company was in need
of operating capital. Ms. Souers, through Gehrig Ironite, was able to make a
capital contribution to the Company. Ms. Hewitt, at this time, was unable to
make an additional contribution, and as such, consented to the additional
moderate dilution of her interest. Both Ms. Souers and Ms. Hewitt recognized
that any additional capital contribution, absent the forgoing, would have had a
dramatic dilutive effect on the Private Purchasers. Accordingly, to foster the
best interest of the Company and attempt to increase the potential and/or actual
shareholder value of the Private Purchasers, Ms. Souers and Hewitt agreed to:
(a) have the Company repurchase all but 500 of their founders' shares; (b)
resolve a 100 to 1 forward split; and (c) allow the investment of necessary
capital by Gehrig Ironite. Such agreement is reflected in the Minutes of a
Special Meeting of Stockholders of the Company dated July 27, 1998.
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The ultimate source of the $10,000 invested by Gehrig Ironite was Cathy Souers,
Gehrig's sole shareholder, officer and director. Ms. Souers is also a founder,
the President and a Director of the Company.
The Company was originally developed to provide secretarial services to other
companies. The Company was unable to secure financing to complete this endeavor,
and its original business plan was abandoned. The primary activity of the
Company currently involves seeking a company or companies that it can acquire or
with whom it can merge. The Company has not selected any company as an
acquisition target or merger partner and does not intend to limit potential
candidates to any particular field or industry, but does retain the right to
limit candidates, if it so chooses, to a particular field or industry. The
Company's plans are in the conceptual stage only.
The Board of Directors has elected to begin implementing the Company's principal
business purpose, described below under "Item 2, Plan of Operation". As such,
the Company can be defined as a "shell" company, whose sole purpose at this time
is to locate and consummate a merger or acquisition with a private entity.
The proposed business activities described herein classify the Company as a
"blank check" company. Many states have enacted statutes, rules, and regulations
limiting the sale of securities of "blank check" companies in their respective
jurisdictions. Management does not intend to undertake any efforts to cause a
market to develop in the Company's securities until such time as the Company has
successfully implemented its business plan.
The Company is filing this registration statement on a voluntary basis, pursuant
to section 12(g) of the Securities Exchange Act of 1934 (the "Exchange Act"), in
order to ensure that public information is readily accessible to all
shareholders and potential investors, and to increase the Company's access to
financial markets. In the event the Company's obligation to file periodic
reports is suspended pursuant to the Exchange Act, the Company anticipates that
it will continue to voluntarily file such reports.
RISK FACTORS
The Company's business is subject to numerous risk factors, including the
following:
NO OPERATING HISTORY OR REVENUE AND MINIMAL ASSETS. The Company has had no
operating history and has received no revenues or earnings from operations. The
Company has no significant assets or financial resources. The Company will, in
all likelihood, sustain operating expenses without corresponding revenues, at
least until it completes a business combination. This may result in the Company
incurring a net operating loss which will increase continuously until the
Company completes a business combination with a profitable business opportunity.
There is no assurance that the Company will identify a business opportunity or
complete a business combination.
SPECULATIVE NATURE OF COMPANY'S PROPOSED OPERATIONS. The success of the
Company's proposed plan of operation will depend to a great extent on the
operations, financial condition, and management of the identified business
opportunity. While management intends to
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seek business combinations with entities having established operating histories,
it cannot assure that the Company will successfully locate candidates meeting
such criteria. In the event the Company completes a business combination, the
success of the Company's operations may be dependent upon management of the
successor firm or venture partner firm together with numerous other factors
beyond the Company's control.
SCARCITY OF AND COMPETITION FOR BUSINESS OPPORTUNITIES AND COMBINATIONS. The
Company is, and will continue to be, an insignificant participant in the
business of seeking mergers and joint ventures with, and acquisitions of small
private entities. A large number of established and well-financed entities,
including venture capital firms, are active in mergers and acquisitions of
companies which may also be desirable target candidates for the Company. Nearly
all such entities have significantly greater financial resources, technical
expertise, and managerial capabilities than the Company. The Company is,
consequently, at a competitive disadvantage in identifying possible business
opportunities and successfully completing a business combination. Moreover, the
Company will also compete with numerous other small public companies in seeking
merger or acquisition candidates.
NO AGREEMENT FOR BUSINESS COMBINATION OR OTHER TRANSACTION - NO STANDARDS FOR
BUSINESS COMBINATION. The Company has no arrangement, agreement, or
understanding with respect to engaging in a business combination with any
private entity. There can be no assurance the Company will successfully identify
and evaluate suitable business opportunities or conclude a business combination.
Management has not identified any particular industry or specific business
within an industry for evaluations. The Company has been in the developmental
stage since inception and has no operations to date. Other than issuing shares
to its original shareholders, the Company never commenced any operational
activities. There is no assurance the Company will be able to negotiate a
business combination on terms favorable to the Company. The Company has not
established a specific length of operating history or a specified level of
earnings, assets, net worth or other criteria which it will require a target
business opportunity to have achieved, and without which the Company would not
consider a business combination in any form with such business opportunity.
Accordingly, the Company may enter into a business combination with a business
opportunity having no significant operating history, losses, limited or no
potential for earnings, limited assets, negative net worth, or other negative
characteristics.
CONTINUED MANAGEMENT CONTROL, LIMITED TIME AVAILABILITY. While seeking a
business combination, management anticipates devoting up to twenty hours per
month to the business of the Company. The Company's officers have not entered
into written employment agreements with the Company and are not expected to do
so in the foreseeable future. The Company has not obtained key man life
insurance on its officers or directors. Notwithstanding the combined limited
experience and time commitment of management, loss of the services of any of
these individuals would adversely affect development of the Company's business
and its likelihood of continuing operations. See Item 5.
CONFLICTS OF INTEREST - GENERAL. The Company's officers and directors
participate in other business ventures which compete directly with the Company.
Additional conflicts of interest
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and non "arms-length" transactions may also arise in the event the Company's
officers or directors are involved in the management of any firm with which the
Company transacts business. The Company's Board of Directors has adopted a
resolution which prohibits the Company from completing a combination with any
entity in which management serve as officers, directors or partners, or in which
they or their family members own or hold any ownership interest. Management is
not aware of any circumstances under which this policy could be changed while
current management is in control of the Company. See "ITEM 5. DIRECTORS,
EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS - CONFLICTS OF INTEREST."
REPORTING REQUIREMENTS MAY DELAY OR PRECLUDE ACQUISITION. Companies subject to
Section 13 of the Securities Exchange Act of 1934 (the "Exchange Act") must
provide certain information about significant acquisitions, including certified
financial statements for the company acquired, covering one or two years,
depending on the relative size of the acquisition. The time and additional costs
that may be incurred by some target entities to prepare such statements may
significantly delay or even preclude the Company from completing an otherwise
desirable acquisition. 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 1934 Act are applicable.
LACK OF MARKET RESEARCH OR MARKETING ORGANIZATION. The Company has not conducted
or received results of market research indicating that market demand exists for
the transactions contemplated by the Company. Moreover, the Company does not
have, and does not plan to establish, a marketing organization. If there is
demand for a business combination as contemplated by the Company, there is no
assurance the Company will successfully complete such transaction.
LACK OF DIVERSIFICATION. In all likelihood, the Company's proposed operations,
even if successful, will result in a business combination with only one entity.
Consequently, the resulting activities will be limited to that entity's
business. The Company's inability to diversify its activities into a number of
areas may subject the Company to economic fluctuations within a particular
business or industry, thereby increasing the risks associated with the Company's
operations.
REGULATION. Although the Company will be subject to regulation under the
Securities Exchange Act of 1934, management believes the Company will not be
subject to regulation under the Investment Company Act of 1940, insofar as the
Company will not be engaged in the business of investing in or trading
securities, of any variety, issued by any domestic or foreign company. The
Company does not anticipate being a passive investor in any entities, ventures,
or perceived opportunities.
PROBABLE CHANGE IN CONTROL AND MANAGEMENT. A business combination involving the
issuance of the Company's common stock will, in all likelihood, result in
shareholders of a private company obtaining a controlling interest in the
Company. Any such business combination may require management of the Company to
sell or transfer all or a portion of the Company's common stock held by them, or
resign as members of the Board of Directors
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of the Company. The resulting change in control of the Company could result in
removal of one or more present officers and directors of the Company and a
corresponding reduction in or elimination of their participation in the future
affairs of the Company.
REDUCTION OF PERCENTAGE SHARE OWNERSHIP FOLLOWING BUSINESS COMBINATION. The
Company's primary plan of operation is based upon a business combination with a
private concern which, in all likelihood, would result in the Company issuing
securities to shareholders of such private company. Issuing previously
authorized and unissued common stock of the Company will reduce the percentage
of shares owned by present and prospective shareholders, and a change in the
Company's control and/or management.
DISADVANTAGES OF BLANK CHECK COMPANY. The Company may enter into a business
combination with an entity that desires to establish a public trading market for
its shares. A target company may attempt to avoid what it deems to be adverse
consequences of undertaking its own public offering by seeking a business
combination with the Company. The perceived adverse consequences may include,
but are not limited to, time delays of the registration process, significant
expenses to be incurred in such an offering, loss of voting control to public
shareholders, and the inability or unwillingness to comply with various federal
and state securities laws enacted for the protection of investors. These
securities laws primarily relate to registering securities and full disclosure
of the Company's business, management, and financial statements.
TAXATION. Federal and state tax consequences will, in all likelihood, be major
considerations in any business combination the Company may undertake. Typically,
these transactions may be structured to result in tax-free treatment to both
companies, pursuant to various federal and state tax provisions. The Company
intends to structure any business combination so as to minimize the federal and
state tax consequences to both the Company and the target entity. Management
cannot assure that a business combination will meet the statutory requirements
for a tax-free 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 an adverse effect on both parties to the transaction.
REQUIREMENT OF AUDITED FINANCIAL STATEMENTS MAY DISQUALIFY BUSINESS
OPPORTUNITIES. Management believes that any potential target company must
provide audited financial statements for review, and for the protection of all
parties to the business combination. One or more attractive business
opportunities may forego a business combination with the Company, rather than
incur the expenses associated with preparing audited financial statements.
BLUE SKY CONSIDERATIONS. Because the securities registered hereunder have not
been registered for resale under the blue sky laws of any state, and the Company
has no current plans to register or qualify its shares in any state, holders of
these shares and persons who desire to purchase them in any trading market that
might develop in the future, should be aware that there may be significant state
blue sky restrictions upon the ability of new investors to purchase the
securities. These restrictions could reduce the size of any potential market. As
a result of recent changes in federal law, non-issuer trading or resale of the
Company's securities is exempt from state registration or qualification
requirements in most states. However, some states may continue
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to restrict the trading or resale of blind-pool or "blank-check" securities.
Accordingly, investors should consider any potential secondary market for the
Company's securities to be a limited one.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
NOTE REGARDING PROJECTIONS AND FORWARD LOOKING STATEMENTS
This statement includes projections of future results and "forward-looking
statements" as that term is defined in Section 27A of the Securities Act of 1933
as amended (the "Securities Act"), and Section 21E of the Securities Exchange
Act of 1934 as amended (the "Exchange Act"). All statements that are included in
this Registration Statement, other than statements of historical fact, are
forward-looking statements. Although Management believes that the expectations
reflected in these forward-looking statements are reasonable, it can give no
assurance that such expectations will prove to have been correct. Important
factors that could cause actual results to differ materially from the
expectations are disclosed in this Statement, including, without limitation, in
conjunction with those forward-looking statements contained in this Statement.
PLAN OF OPERATION - GENERAL
The Company's plan is to seek, investigate, and if such investigation warrants,
acquire an interest in one or more business opportunities presented to it by
persons or firms desiring the perceived advantages of a publicly held
corporation. At this time, the Company has no plan, proposal, agreement,
understanding, or arrangement to acquire or merge with any specific business or
company, and the Company has not identified any specific business or company for
investigation and evaluation. No member of Management or any promoter of the
Company, or an affiliate of either, has had any material discussions with any
other company with respect to any acquisition of that company. The Company will
not restrict its search to any specific business, industry, or geographical
location, and may participate in business ventures of virtually any kind or
nature. Discussion of the proposed business under this caption and throughout
this Registration Statement is purposefully general and is not meant to restrict
the Company's virtually unlimited discretion to search for and enter into a
business combination.
The Company may seek a combination with a firm which only recently commenced
operations, or a developing company in need of additional funds to expand into
new products or markets or seeking to develop a new product or service, or an
established business which may be experiencing financial or operating
difficulties and needs additional capital which is perceived to be easier to
raise by a public company. In some instances, a business opportunity may involve
acquiring or merging with a corporation which does not need substantial
additional cash but which desires to establish a public trading market for its
common stock. The Company may purchase assets and establish wholly-owned
subsidiaries in various businesses or purchase existing businesses as
subsidiaries.
Selecting a business opportunity 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 the benefits of
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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 statues) for all shareholders, and other items. Potentially available
business opportunities may occur in many different industries and at various
stages of development, all of which will make the task of comparative
investigation and analysis of such business opportunities extremely difficult
and complex.
Management believes that the Company may be able to benefit from the use of
"leverage" to acquire a target company. Leveraging a transaction involves
acquiring a business while incurring significant indebtedness for a large
percentage of the purchase price of that business. Through leveraged
transactions, the Company would be required to use less of its available funds
to acquire a target company and, therefore, could commit those funds to the
operations of the business, to combinations with other target companies, or to
other activities. The borrowing involved in a leveraged transaction will
ordinarily be secured by the assets of the acquired business. If that business
is not able to generate sufficient revenues to make payments on the debt
incurred by the Company to acquire that business, the lender would be able to
exercise the remedies provided by law or by contract. These leveraging
techniques, while reducing the amount of funds that the Company must commit to
acquire a business, may correspondingly increase the risk of loss to the
Company. No assurance can be given as to the terms or availability of financing
for any acquisition by the Company. During periods when interest rates are
relatively high, the benefits of leveraging are not as great as during periods
of lower interest rates, because the investment in the business held on a
leveraged basis will only be profitable if it generates sufficient revenues to
cover the related debt and other costs of the financing. Lenders from which the
Company may obtain funds for purposes of a leveraged buy-out may impose
restrictions on the future borrowing, distribution, and operating policies of
the Company. It is not possible at this time to predict the restrictions, if
any, which lenders may impose, or the impact thereof on the Company.
The Company has insufficient capital with which to provide the owners of
businesses significant cash or other assets. Management believes the Company
will offer owners of businesses the opportunity to acquire a controlling
ownership interest in a public company at substantially less cost than is
required to conduct an initial public offering. The owners of the businesses
will, however, incur significant post-merger or acquisition registration costs
in the event they wish to register a portion of their shares for subsequent
sale. The Company will also incur significant legal and accounting costs in
connection with the acquisition of a business opportunity, including the costs
of preparing post-effective amendments, Forms 8-K, agreements, and related
reports and documents. Nevertheless, the officers and directors of the Company
have not conducted market research and are not aware of statistical data which
would support the perceived benefits of a merger or acquisition transaction for
the owners of a businesses. The Company does not intend to make any loans to any
prospective merger or acquisition candidates or to unaffiliated third parties.
The Company will not restrict its search for any specific kind of firms, but may
acquire a venture which is in its preliminary or development stage, which is
already in operation, or in essentially
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any stage of its corporate life. It is impossible to predict at this time the
status of any business in which the Company may become engaged, in that such
business may need to seek additional capital, may desire to have its shares
publicly traded, or may seek other perceived advantages which the Company may
offer. However, the Company does not intend to obtain funds in one or more
private placements to finance the operation of any acquired business opportunity
until such time as the Company has successfully consummated such a merger or
acquisition. The Company also has no plans to conduct any offerings under
Regulation S.
SOURCES OF OPPORTUNITIES
The Company will seek a potential business opportunity from all known sources,
but will rely principally on personal contacts of its officers and directors as
well as indirect associations between them and other business and professional
people. From time to time, the Company may engage the services of consultants
and or other outside professionals for their assistance in locating and
evaluating appropriate business opportunities. In this regard, a Board of
Directors meeting was held on August 10, 1998, wherein it was resolved that the
Company engage the services of Richard A. May as a consultant to provide and
formulate development criteria for proposed acquisitions by or of companies with
viable operating businesses that have been profitable for, at least, such
companies prior 24 months of operation. It was also approved that Mr. May travel
to Guatemala to engage in a review of certain candidates within such Country.
The Company provided Mr. May with a lump sum payment of $5,000.00 to be utilized
in this regard.
Richard A. May is not related to management and is not a stockholder in the
Company.
Management, while not especially experienced in matters relating to the new
business of the Company, will rely upon their own efforts and, to a much lesser
extent, the efforts of the Company's shareholders, in accomplishing the business
purposes of the Company. Other than Mr. May, it is not anticipated that any
outside consultants or advisors will be utilized by the Company to effectuate
its business purposes described herein. However, if the Company does retain such
an outside consultant or advisor, any cash fee earned by such party will need to
be paid by the prospective merger/acquisition candidate, as the Company has no
cash assets with which to pay such obligation. There have been no discussions,
understandings, contracts or agreements with any outside consultants and none
are anticipated in the future. In the past, the Company's management has never
used outside consultants or advisors in connection with a merger or acquisition.
As is customary in the industry, the Company may pay a finder's fee for locating
an acquisition prospect. If any such fee is paid, it will be approved by the
Company's Board of Directors and will be in accordance with the industry
standards. Such fees are customarily between 1% and 5% of the size of the
transaction, based upon a sliding scale of the amount involved. Such fees are
typically in the range of 5% on a $1,000,000 transaction ratably down to 1% in a
$4,000,000 transaction. Management has adopted a policy that such a finder's fee
or real estate brokerage fee could, in certain circumstances, be paid to any
employee, officer, director or 5% shareholder of the Company, if such person
plays a material role in bringing a transaction to the Company.
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The Company will not have sufficient funds to undertake any significant
development, marketing, and manufacturing of any products which may be acquired.
Accordingly, if it acquires the rights to a product, rather than entering into a
merger or acquisition, it most likely would need to seek debt or equity
financing or obtain funding from third parties, in exchange for which the
Company would probably be required to give up a substantial portion of its
interest in any acquired product. There is no assurance that the Company will be
able either to obtain additional financing or to interest third parties in
providing funding for the further development, marketing and manufacturing of
any products acquired.
EVALUATION OF OPPORTUNITIES
The analysis of new business opportunities will be undertaken by or under the
supervision of the officers and directors of the Company (see Item 5).
Management intends to concentrate on identifying prospective business
opportunities which may be brought to its attention through present associations
with management. In analyzing prospective business opportunities, management
will consider, among other factors, such matters as;
1. the available technical, financial and managerial resources
2. working capital and other financial requirements
3. history of operation, if any
4. prospects for the future
5. present and expected competition
6. the quality and experience of management services which may be available
and the depth of that management
7. the potential for further research, development or exploration
8. specific risk factors not now foreseeable but which then may be
anticipated to impact the proposed activities of the Company
9. the potential for growth or expansion
10. the potential for profit
11. the perceived public recognition or acceptance of products, services or
trades
12. name identification
Management 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. The Company will not acquire or
merge with any company for which audited financial statements cannot be
obtained.
Opportunities in which the Company participates will present certain risks, many
of which cannot be identified adequately prior to selecting a specific
opportunity. The Company's shareholders
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must, therefore, depend on Management to identify and evaluate such risks.
Promoters of some opportunities may have been unable to develop a going concern
or may present a business in its development stage (in that it has not generated
significant revenues from its principal business activities prior to the
Company's participation.) Even after the Company's participation, there is a
risk that the combined enterprise may not become a going concern or advance
beyond the development stage. Other opportunities 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.
The investigation of specific business opportunities and the negotiation,
drafting, and execution of relevant agreements, disclosure documents, and other
instruments will require substantial management time and attention as well as
substantial costs for accountants, attorneys, and others. If a decision is made
not to participate in a specific business opportunity the costs incurred in the
related investigation would not be recoverable. Furthermore, even if an
agreement is reached for the participation in a specific business opportunity,
the failure to consummate that transaction may result in the loss by the Company
of the related costs incurred.
There is the additional risk that the Company will not find a suitable target.
Management does not believe the Company will generate revenue without finding
and completing a transaction with a suitable target company. If no such target
is found, therefore, no return on an investment in the Company will be realized,
and there will not, most likely, be a market for the Company's stock.
ACQUISITION OF OPPORTUNITIES
In implementing a structure for a particular business acquisition, the Company
may become a party to a merger, consolidation, reorganization, joint venture,
franchise, or licensing agreement with another corporation or entity. It may
also purchase stock or assets of an existing business. Once a transaction is
complete, it is possible that the present management and shareholders of the
Company will not be in control of the Company. In addition, a majority or all of
the Company's officers and directors may, as part of the terms of the
transaction, resign and be replaced by new officers and directors without a vote
of the Company's shareholders.
It is anticipated that 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 time 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.
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 1986, as amended (the
"Code"). In order to obtain tax free treatment under the Code, it may be
necessary for the
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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 could result in significant
dilution in the equity of such shareholders.
As part of the Company's investigation, officers and directors of the Company
will meet personally with management and key personnel, may visit and inspect
material facilities, obtain independent analysis or verification of certain
information provided, check references of management and key personnel, and take
other reasonable investigative measures, to the extent of the Company's limited
financial resources and management expertise.
The manner in which the Company participates in an opportunity with a target
company will depend on the nature of the opportunity, the respective needs and
desires of the Company and other parties, the management of the opportunity, and
the relative negotiating strength of the Company and such other management.
With respect to any mergers or acquisitions, negotiations with target company
management will be expected to focus on the percentage of the Company which the
target company's shareholders would acquire in exchange for their shares in the
target company. Depending upon, among other things, the target company's assets
and liabilities, the Company's shareholders will, in all likelihood, hold a
lesser percentage ownership interest in the Company following any merger or
acquisition. The percentage ownership may be subject to significant reduction in
the event the Company acquires a target company with substantial assets. 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.
Management has advanced, and will continue to advance, funds which shall be used
by the Company in identifying and pursuing agreements with target companies.
Management anticipates that these funds will be repaid from the proceeds of any
agreement with the target company, and that any such agreement may, in fact, be
contingent upon the repayment of those funds.
From inception through September 29, 1999, the Company received $1,100.00 from
its officers and directors. On September 30, 1999, Ms. Souers provided the
Company with an additional $2,730.00 capital infusion. Subsequent to inception,
$950.00 was raised by the Company in accordance with an offering pursuant to and
in accordance Section 4(2) of the Securities Act. This $950.00 was raised from
19 non-accredited investors. On July 17, 1998, Gehrig Ironite, Inc., purchased
200,000 (post-split) shares of the Company's common stock in a private
transaction for $10,000.00. Ms. Souers is the President of Gehrig Ironite, Inc.
(SEE ITEM 7)
On or about September 10, 1999, the Company received $3,273.20 in accordance
with the terms and provisions of a Promissory Note between the Company and
Mojave Southern, Inc., dated August 14, 1998, whereby the Company loaned Mojave
Southern, Inc., $3,000.00 with an effective interest rate of 8% per annum. The
terms and provisions of the Promissory Note, Exhibit 99 hereto, are incorporated
by reference. There are no inter-relationships, including no interlocking
officers and no interlocking directors, between the Company and Mojave Southern,
<PAGE> 13
Inc. The President of Mojave Southern, Inc., Vivian Nehls (f/k/a Vivian Hermann)
is, however, a minority shareholder of the Company as she participated in the
Company's Section 4(2) offering.
COMPETITION
The Company is an insignificant participant among firms which engage in business
combinations with, or financing of, development-stage enterprises. There are
many established management and financial consulting companies and venture
capital firms which have significantly greater financial and personal resources,
technical expertise and experience than the Company. In view of the Company's
limited financial resources and management availability, the Company will
continue to be at significant competitive disadvantage vis-a-vis the Company's
competitors.
YEAR 2000 COMPLIANCE
The Company is aware of the issues associated with the programming code in
existing computer systems as the year 2000 approaches. The Company has assessed
these issues as they relate to the Company, and since the Company currently has
no operating business and does not use any computers, and since it has no
customers, suppliers or other constituents, it does not believe that there are
any material year 2000 issues to disclose in this Form 10-SB.
REGULATION AND TAXATION
The Investment Company Act of 1940 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 securities. The Company does not intend to
engage in, and will not engage in, activities that would render the Company
subject to the Investment Company Act of 1940.
The Company intends to structure a merger or acquisition in such manner as to
minimize Federal and State tax consequences to the Company and to any target
company.
EMPLOYEES
The Company's only employees at the present time are its officers and directors,
who will devote as much time as the Board of Directors determine is necessary to
carry out the affairs of the Company. (See Item 5).
ITEM 3. DESCRIPTION OF PROPERTY.
The Company neither owns nor leases any real property at this time. The Company
does have the use of a limited amount of office space provided by Ms. Souers, a
director and officer, at no cost to the Company, and Management expects this
arrangement to continue. The Company pays its own charges for long distance
telephone calls and other miscellaneous secretarial, photocopying, and similar
expenses. This is a verbal agreement between Ms. Souers, a director and officer,
and the Board of Directors.
<PAGE> 14
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth each person known to the Company, as of August
31, 1998, to be a beneficial owner of five percent (5%) or more of the Company's
common stock, by the Company's directors individually, and by all of the
Company's directors and executive officers as a group. Except as noted, each
person has sole voting and investment power with respect to the shares shown.
Note that Cathy Souers is the beneficial owner of 200,000 shares issued to
Gehrig Ironite, Inc., a company in which she is the president and sole
shareholder, and another 5,000 shares that are owned by Mandy Souers, her
daughter.
Beneficial Owners of Five Percent of More
<TABLE>
<CAPTION>
Title of Class Name/Address Shares Percentage
of Owner Beneficially Owned Ownership
<S> <C> <C> <C>
Common Jose F. and Vilma Garcia 160,000 7.27%
3655 Campbell
Las Vegas, NV 89129
Common Ray and Netta Girard 184,400 8.38%
3153 Bel Air Dr.
Las Vegas, NV 89109
Common Cathy Souers 247,800 11.26%
1004 Coral Isle Way
Las Vegas, NV 89108
Common Diana C. Hewitt 50,000 2.27%
530 Delfern Lane
Las Vegas, NV 89108
Common Total owned by officers and 297,800 13.54%
directors (2 individuals)
</TABLE>
Beneficial Ownership by Management
<TABLE>
<CAPTION>
Title of Class Name/Address Shares Percentage
of Owner Beneficially Owned Ownership
<S> <C> <C> <C>
Common Cathy Souers 247,800 11.26%
1004 Coral Isle Way
Las Vegas, NV 89108
Common Diana C. Hewitt 50,000 2.27%
</TABLE>
<PAGE> 15
<TABLE>
<S> <C> <C> <C>
530 Delfern Lane
Las Vegas, NV 89108
</TABLE>
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, AND CONTROL PERSONS
The members of the Board of Directors of the Company serve until the next annual
meeting of the stockholders, or until their successors have been elected. The
officers serve at the pleasure of the Board of Directors.
There are no agreements for any officer or director to resign at the request of
any other person, and none of the officers or directors named below are acting
on behalf of, or at the direction of, any other person.
The Company's officers and directors will devote their time to the business on
an "as-needed" basis, which is expected to require 5-10 hours per month.
Information as to the directors and executive officers of the Company is as
follows:
<TABLE>
<CAPTION>
Name/Address Age Position
<S> <C> <C>
Cathy Souers 47 President
1004 Coral Isle
Las Vegas, NV 89109
Diana C. Hewitt 54 Secretary
1004 Coral Isle
Las Vegas, NV 89109
</TABLE>
Cathy Souers; President/Treasurer/Director
Cathy Souers has been with the company since inception. She has A B. S. degree
in Education and a B.A. degree in Accounting. She taught in public and private
schools for many years, operated her own small business and is currently
President of Gehrig Ironite, Inc., a business consulting services company that
offers the following services: Articles of Incorporation, Resident Agent
Services and Secretarial Services.
WORK EXPERIENCE
3-95 to present
President of Gehrig Ironite, Inc.
Las Vegas, NV 89108
Gehrig Ironite, Inc. is a professional resident agent and incorporation service
in the State of Nevada.
Nevada Cooperative Extension
<PAGE> 16
Las Vegas, Nevada
5-92 to 2-95
Vocational Education Instructor. Taught independent living skills to foster
youth ages 15 1/2 and up. Volunteer coordinator for Foster Mentor Program.
Recruit, train, screen, monitor and match volunteers from the community with
adolescent foster youth to help with independent living skills.
Hebrew Academy
Las Vegas, Nevada
8-91 to 5-92
Spanish Teacher (K-8).
Clark County School District
Las Vegas, Nevada
8-90 to 8-91
Substitute school teacher.
Gadsden Independent School District
Gadsden, New Mexico
8-89 to 8-90
Teacher, 9th grade language arts for under-achievers (Title II program).
Assistant baseball coach.
Charter Hospital
Santa Teresa, New Mexico
6-88 to 8-89
Teacher. Secondary math with emotionally disturbed and/or chemically-dependent
adolescents.
Clinton Independent School District
Clinton, Texas
8-85 to 5-88
Teacher, 6th and 7th grade English.
Upper Valley Package Store
El Paso, Texas
1978 to 7-85
Owner/operator.
<PAGE> 17
Diana C. Hewitt; Secretary/Director
Diana C. Hewitt has also been with the company since inception. From 1996 to
1998, she was the manager of the pit clerical department that deals with gaming
audit and cash compliance at the Mirage Hotel & casino. In 1998, she transferred
to the newly opened Bellagio Hotel & Casino as the manager of the pit clerical
department.
INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS
Jose F. Garcia, individually, is the owner and holder of 60,000 shares, or 2.73%
of the Company's common stock. Vilma Garcia, the wife of Jose F. Garcia, is the
owner and holder of 100,000 shares, or 4.55% of the Company's common stock.
Together, Mr. and Mrs. Garcia possess 160,000 shares, or 7.27% of the Company's
common stock.
On or about June 9, 1998, the United States Securities and Exchange Commission
filed an enforcement proceeding in San Diego California against Global Timber
Corporation, Stephen J. Sand, Jose F. Garcia, Jonathon Bentley-Stevens, David A.
Kirk, and Pamela J. Vega. The Commission alleged that, from at least November
1995 through December 1996, Global Timber Corporation and certain officers and
directors misrepresented to the public that Global Timber had the right to
harvest certain timber located in the Philippines. By this misrepresentation,
Global Timber grossly overstated its financial condition.
The Commission asked the Federal Court to permanently enjoin the Defendants from
future violations of Section 10(b) of the Securities Exchange Act of 1934 and
Commission Rule 10b-5, and impose a civil penalty against Sand, Garcia, Stevens,
Kirk and Vega.
Mr. Jose F. Garcia consented, without admitting or denying the allegations in
the complaint, to the entry of a judgment of permanent injunction enjoining him
from future violations of Section 10(b) of the Exchange Act and Rule 10b-5
thereunder and imposing a civil penalty of $25,000.00.
BLANK CHECK EXPERIENCE
Neither of the officers or directors have any experience with blank check
companies. There is no family relationship between any of the officers and
directors of the Company. The Company's Board of Directors has not established
any committees.
MR. JOSE F. GARCIA
Mr. Jose F. Garcia, a minority shareholder, has been involved as an officer
,director, resident agent and/or shareholder with five other blank check
companies which have completed some form of corporate reorganization. Such
companies are Tee-Rifik, Inc., Jo-Lee Corporation, Nevada Commercial Management,
Inc., Abercrombie, Inc., and Essential Technologies, Inc.
Tee-Rifik, Inc. Mr. Garcia acted as Resident Agent and was a minority
shareholder of 120,000 shares (less than 5% of the issued and outstanding
shares). The company became public through
<PAGE> 18
Rule 144(k). In 1998, the company completed a reverse merger with Shop TV, Inc.,
a television and Internet shopping company based in Boca Raton, Florida. The
combined company, upon information and belief, currently trades on the OTC
Bulletin Board.
Jo-Lee Corporation. Mr. Garcia acted as Secretary and a Director who, at one
time, held 1,135,000 shares or 12.1% of the then issued and outstanding common
shares. The company became public through Rule 144(k). In 1995, the company
acquired certain lumber assets. At that time, the name of the company was
changed to Global Timber Corporation. Mr. Garcia resigned from the company in
1997. Upon information and belief, shares of Global Timber Corporation are no
longer traded.
Nevada Commercial Management, Inc. Mr. Garcia acted as Resident Agent for Nevada
Commercial Management, Inc. In 1998, the company completed a reverse merger with
Aviation Industries, Inc. Upon information and belief, shares of Aviation
Industries, Inc., are currently traded on the OTC Bulletin Board.
Abercrombie, Inc. Mr. Garcia held 100,000 or 4.5% of the issued and outstanding
common shares of Abercrombie, Inc. The company became public through Rule
144(k). In 1995, the company completed a reverse merger with Spectre Motor Cars,
a company based in the United Kingdom. Upon information and belief, shares of
the company are currently traded on the OTC Bulletin Board.
Essential Technologies, Inc. Mr. Garcia held 270,000 or 1.4% of the issued and
outstanding shares of Essential Technologies, Inc. The company underwent a
reverse merger and changed its name to Forbidden City, Inc. Later, another name
change occurred and the surviving entity became known as Quill Industries, Inc.
The common shares of Quill Industries, Inc., upon information and belief, are
currently traded on the OTC Bulletin Board.
Additional information with respect to the above entities is not readily
available to Mr. Garcia, as Mr. Garcia is no longer affiliated, in any way, with
such entities and does not have access to their books and records. Further, Mr.
Garcia has had additional experience with other public companies, that were not
blank check companies, that were involved in mergers and/or acquisitions.
MR. RAYMOND M. GIRARD
Mr. Raymond M. Girard, a minority shareholder, has been involved as an officer,
director, resident agent and/or shareholder with four other blank check
companies which have completed some form of corporate reorganization. Such
companies are Jo-Lee Corporation, Sedgewicke Business Alliance, Inc.,
Abercrombie, Inc., and Essential Technologies, Inc.
Jo-Lee Corporation. Mr. Girard acted as Resident Agent and at one time held
236,250 or 2.5% of the then issued and outstanding common shares. Jo-Lee
Corporation became public through Rule 144(k). In 1995, the company acquired
certain lumber assets. At that time, the name of the company was changed to
Global Timber Corporation. Upon information and belief, shares of Global Timber
Corporation are no longer traded.
Sedgewicke Business Alliance, Inc. Mr. Girard acted as Resident Agent,
President, and as a Director
<PAGE> 19
of the company. At one time, Mr. Girard owned 100,000 or 5% of the then issued
and outstanding common shares. The company become public through Rule 144(k). In
1995, the company completed a reverse merger with American Casinos
International, Inc. At that time, Mr. Girard resigned as an Officer and Director
of the company. The company has since changed its name to Enterprise Solutions,
Inc. Upon information and belief, the company is currently traded on the OTC
Bulletin Board.
Abercrombie, Inc. Mr. Girard held 100,000 or 4.5% of the issued and outstanding
common shares of Abercrombie, Inc. The company became public through Rule
144(k). In 1995, the company completed a reverse merger with Spectre Motor Cars,
a company based in the United Kingdom. Upon information and belief, shares of
the company are currently traded on the OTC Bulletin Board.
Essential Technologies, Inc. Mr. Girard was the Resident Agent, Secretary and a
Director of the company. At one time, Mr. Girard owned 408,331 or 2% of the then
issued and outstanding common shares. The company become public through Rule
144(k). Essential Technologies, Inc., underwent a reverse merger and changed its
name to Forbidden City, Inc. At that time, Mr. Girard resigned as an Officer and
Director. Later, Forbidden City, Inc., changed its name to Life Industries.
Subsequently, Life Industries changed its name to Quill Industries. Upon
information and belief, shares of Quill Industries are currently traded on the
OTC Bulletin Board.
Additional information with respect to the above entities is not readily
available to Mr. Girard, as Mr. Girard is no longer affiliated, in any way, with
such entities and does not have access to their books and records. Further, Mr.
Girard has had additional experience with other public companies, that were not
blank check companies, that were involved in mergers and/or acquisitions.
CONFLICTS OF INTEREST
Insofar as the officers and directors are engaged in other business activities,
management anticipates it will devote only a minor amount of time to the
Company's affairs. The officers and directors of the Company may in the future
become shareholders, officers or directors of other companies which may be
formed for the purpose of engaging in business activities similar to those
conducted by the Company. The Company does not currently have a right of first
refusal pertaining to opportunities that come to management's attention insofar
as such opportunities may relate to the Company's proposed business operations.
The officers and directors are, so long as they are officers or directors of the
Company, subject to the restriction that all opportunities contemplated by the
Company's plan of operation which come to their attention, either in the
performance of their duties or in any other manner, will be considered
opportunities of, and be made available to the Company and the companies that
they are affiliated with on an equal basis. A breach of this requirement will be
a breach of the fiduciary duties of the officer or director. Subject to the next
paragraph, if a situation arises in which more than one company desires to merge
with or acquire that target company and the principals of the proposed target
company have no preference as to which company will merge or acquire such target
company, the company of which the President first became an officer and director
will be entitled to proceed with the transaction. Except as set forth above, the
Company has not adopted
<PAGE> 20
any other conflict of interest policy with respect to such transactions.
INVESTMENT COMPANY ACT OF 1940
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
insofar as the Company will not be engaged in the business of investing or
trading in securities.
ITEM 6. EXECUTIVE COMPENSATION
None of the Company's officers and/or directors receive any compensation for
their respective services rendered to the Company, nor have they received such
compensation in the past. They have agreed to act without compensation until
authorized by the Board of Directors, which is not expected to occur until the
Registrant has generated revenues from operations after consummation of a merger
or acquisition. As of the date of this registration statement, the Company has
no funds available to pay directors. Further, none of the directors are accruing
any compensation pursuant to any agreement with the Company.
It is possible that, after the Company successfully consummates a merger or
acquisition with an unaffiliated entity, that entity may desire to employ or
retain one or more members of the Company's management for the purposes of
providing services to the surviving entity, or otherwise provide other
compensation to such persons. However, the Company has adopted a policy whereby
the offer of any post-transaction remuneration to members of management will not
be a consideration in the Company's decision to undertake any proposed
transaction. Each member of management has agreed to disclose to the Company's
Board of Directors any discussions concerning possible compensation to be paid
to them by any entity which proposes to undertake a transaction with the Company
and further, to abstain from voting on such transaction. Therefore, as a
practical matter, if each member of the Company's Board of Directors is offered
compensation in any form from any prospective merger or acquisition candidate,
the proposed transaction will not be approved by the Company's Board of
Directors as a result of the inability of the Board to affirmatively approve
such a transaction.
It is possible that persons associated with management may refer a prospective
merger or acquisition candidate to the Company. In the event the Company
consummates a transaction with any entity referred by associates of management,
it is possible that such an associate will be compensated for their referral in
the form of a finder's fee. It is anticipated that this fee will be either in
the form of restricted common stock issued by the Company as part of the terms
of the proposed transaction, or will be in the form of cash consideration.
However, if such compensation is in the form of cash, such payment will be
tendered by the acquisition or merger candidate, because the Company has
insufficient cash available. The amount of such finder's fee cannot be
determined as of the date of this registration statement, but is expected to be
comparable to consideration normally paid in like transactions. No member of
management of the Company will receive any finders fee, either directly or
indirectly, as a result of their respective efforts to implement the Company's
business plan outlined herein. Persons "associated" with management is meant to
refer to persons with whom management may have had other business dealings, but
<PAGE> 21
who are not affiliated with or relatives of management.
No retirement, pension, profit sharing, stock option or insurance programs or
other similar programs have been adopted by the Registrant for the benefit of
its employees.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Board of Directors has passed a resolution which contains a policy that the
Company will not seek an acquisition or merger with any entity in which any of
the Company's Officers, Directors, principal shareholders or their affiliates or
associates serve as officer or director or hold any ownership interest.
Management is not aware of any circumstances under which this policy may be
changed through their own initiative.
The proposed business activities described herein classify the Company as a
"blank check" company. Many states have enacted statutes, rules and regulations
limiting the sale of securities of "blank check" companies in their respective
jurisdictions. Management does not intend to undertake any efforts to cause a
market to develop in the Company's securities until such time as the Company has
successfully implemented its business plan described herein.
As is customary in the industry, the Company may pay a finder's fee for locating
an acquisition prospect. If any such fee is paid, it will be approved by the
Company's Board of Directors and will be in accordance with the industry
standards. Such fees are customarily between 1% and 5% of the size of the
transaction, based upon a sliding scale of the amount involved. Such fees are
typically in the range of 5% on a $1,000,000 transaction ratably down to 1% in a
$4,000,000 transaction. Management has adopted a policy that such a finder's fee
or real estate brokerage fee could, in certain circumstances, be paid to any
employee, officer, director or 5% shareholder of the Company, if such person
plays a material role in bringing a transaction to the Company. (SEE ITEM 2)
On July 13, 1998, the Company purchased 19,500 shares from Cathy Souers and
9,500 shares from Diana Hewitt. The such 29,000 shares were purchased for a
total of $145.
On July 17, 1998, Gehrig Ironite, Inc., purchased 200,000 shares of common stock
from the Company for $10,000.00 Ms. Souers is the President of Gehrig Ironite,
Inc., and an officer and director of the Company.
Rule 405 of Regulation C defines a promoter as follows:
Any person who, acting alone or in conjunction with one or more
other persons, directly or indirectly, takes initiative in
founding and organizing the business or enterprise of an issuer;
or
Any person who, in connection with the founding and organizing of
the business or enterprise of an issuer, directly or indirectly
receives in consideration of services or property, or both
services or property, 10 percent or more of any class of
securities
<PAGE> 22
of the issuer or 10 percent or more of the proceeds from the sale
of any class of such securities. However, a person who receives
such securities or proceeds either solely as underwriting
commissions or solely in consideration of property shall not be
deemed a promoter within the meaning of this paragraph if such
person does not otherwise take part in founding and organizing
the enterprise.
Further, Item 404(d) of Regulation S-B provides as follows:
Transactions with promoters: Issuers organized within the past five
years shall:
1. State the names of the promoters, the nature and amount of
anything of value (including money, property, contracts, options
or rights of any kind) received or to be received by each
promoter, directly or indirectly, from the issuer and the nature
and amount of any assets, services or other consideration
therefore received or to be received by the registrant; and
2. As to any assets acquired or to be acquired from a promoter,
state the amount at which the assets were acquired or are to be
acquired and the principle followed or to be followed in
determining such amount and identify the persons making the
determination and their relationship, if any, with the registrant
or any promoter. If the assets were acquired by the promoter
within two years prior to their transfer to the issuer, also
state the cost thereof to the promoter.
The instructions to item 404 provide further, in pertinent part, that:
A person does not have a material indirect interest in a
transaction within the meaning of this item where the interest
arises only:
From such person's position as a director of another corporation
or organization which is a party to the transaction and/or
From the total ownership (direct or indirect) by all specified
persons of less than a 10% equity interest in another person
which is a party to the transaction ...
Via a subscription agreement executed on October 26, 1995, Mr. Raymond
M. Girard purchased 1000 common shares of the Company for $50.00. At such time,
Mr. Girard's interest amounted to 2.04%.
Via a subscription agreement executed on October 19, 1995, Netta Girard
(the spouse of Mr. Raymond M. Girard) purchased 1000 common shares of the
Company for $50.00. At such time, Mrs. Girard's interest amounted to 2.04%.
At this time, Mr. And Mrs. Raymond M. Girard possessed a combined
interest in the amount of 4.08%.
<PAGE> 23
Via a subscription agreement executed on October 19, 1995, Mr. Jose F.
Garcia purchased 1000 common shares of the Company for $50.00. At such time, Mr.
Garcia's interest amounted to 2.04%.
Via a subscription agreement executed on October 19, 1995, Vilma Garcia
(the spouse of Mr. Jose F. Garcia) purchased 1000 common shares of the Company
for $50.00. At such time, Vilma Garcia's interest amounted to 2.04%.
At this time, Mr. and Mrs. Jose F. Garcia possessed a combined interest
in the amount of 4.08%.
In July 1998, the Company repurchased some founders from Ms. Souers and
Hewitt. Ms. Souers sold to the Company 19,500 shares for the sum of $97.50. Ms.
Hewitt sold to the Company 9,500 shares for the sum of $47.50. Thereafter, each
retained 500 shares. At this time, Ms. Souers retained an ownership interest in
500 of 20,000 issued and outstanding shares. Such amount equating 2.5%. Further,
Ms. Hewitt retained an ownership interest in 500 of 20,000 issued and
outstanding shares. Such amount equating 2.5%.
Concomitant with the share repurchase, the Company authorized a 100 to 1
forward stock split. Then, as part of a series of transactions authorized and
executed on the same day, Gehrig Ironite, an entity controlled by Ms. Souers
(Ms. Souers is the sole shareholder, officer and director of Gehrig Ironite),
purchased 200,000 common shares of the Company for $10,000.
The rationale for this series of transactions is simplistic. The Company
was in need of operating capital. Ms. Souers, through Gehrig Ironite, was able
to make a capital contribution to the Company. Ms. Hewitt, at this time, was
unable to make an additional contribution, and as such, consented to the
additional moderate dilution of her interest. Both Ms. Souers and Ms. Hewitt
recognized that any additional capital contribution, absent the forgoing, would
have had a dramatic dilutive effect on the Private Purchasers. Accordingly, to
foster the best interest of the Company and the not deprive the Private
Purchasers of any potential or actual shareholder value, Ms. Souers and Hewitt
agreed to: (a) have the Company repurchase all but 500 of their founders'
shares; (b) resolve a 100 to 1 forward split; and (c) allow the investment of
necessary capital by Gehrig Ironite. Such agreement is reflected in the Minutes
of a Special Meeting of Stockholders of the Company dated July 27, 1998.
Subsequent to the share repurchase, forward split and capital infusion,
the interests of the Girards (individually and jointly) and the Garcias
(individually and jointly) were impacted as follows:
<TABLE>
<CAPTION>
Pre-Events Post-Events*
---------- ------------
<S> <C> <C>
Raymond M. Girard 2.04% 3.8%
Netta Girard 2.04% 4.5%
Joint Interest 4.08% 8.3%
</TABLE>
<PAGE> 24
<TABLE>
<S> <C> <C>
Jose F. Garcia 2.04% 2.7%
Vilma Garcia 2.04% 4.5%
Joint Interest 4.08% 7.2%
</TABLE>
*On July 23, 1998, Raymond M. Girard gifted a total of 15,600 shares to
five (5) individuals. On July 28, 1998, Jose F. Garcia gifted a total of 40,000
shares to four (4) individuals.
Via various subscription agreements, all other Private Purchasers
purchased 1000 common shares of the Company for $50.00. Subsequent to the share
repurchase, forward split and capital infusion, the interests of all other
Private Purchasers were impacted as follows:
<TABLE>
<CAPTION>
Pre-Events Post-Events*
---------- ------------
<S> <C>
2.04% 4.5%
</TABLE>
The increased percentages of the Girard and Garcia interests were
identical to the increased interest percentage of all Private Purchasers.
ITEM 8. LEGAL PROCEEDINGS
The Company is not a party to any material pending legal proceedings and, to the
best of its knowledge, no such action by or against the Company has been
threatened.
ITEM 9. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The Company's common stock is not quoted on the over-the-counter market in the
United States. Management has not undertaken any discussions, preliminary or
otherwise, with any prospective market maker concerning the participation of
such market maker in the after-market for the Company's securities and
management does not intend to initiate any such discussions until such time as
the Company has consummated a merger or acquisition. There is no assurance that
a trading market will ever develop or, if such a market does develop, that it
will continue.
After a merger or acquisition has been completed, any of the Company's officers
and directors will most likely be the persons to contact prospective market
makers. It is also possible that persons associated with the entity that merges
with or is acquired by the Company will contact prospective market makers. The
Company does not intend to use consultants to contact market makers.
MARKET PRICE
The Registrant's Common Stock is not quoted at the present time.
Effective August 11, 1993, the Securities and Exchange Commission adopted Rule
15g-9, which established the definition of a "penny stock," for purposes
relevant to the Company, as any equity
<PAGE> 25
security that has a market price of less than $5.00 per share or with an
exercise price of less than $5.00 per share, subject to certain exceptions. For
any transaction involving a penny stock, unless exempt, the rules require: (I)
that a broker or dealer approve a person's account for transactions in penny
stocks; and (ii) the broker or dealer receive from the investor a written
agreement to the transaction, setting forth the identity and quantity of the
penny stock to be purchased. In order to approve a person's account for
transactions in penny stocks, the broker or dealer must (I) obtain financial
information and investment experience and objectives of the person; and (ii)
make a reasonable determination that the transactions in penny stocks are
suitable for that person and that person has sufficient knowledge and experience
in financial matters to be capable of evaluating the risks of transactions in
penny stocks. The broker or dealer must also deliver, prior to any transaction
in a penny stock, a disclosure schedule prepared by the Commission relating to
the penny stock market, which, in highlight form, (I) sets forth the basis on
which the broker or dealer made the suitability determination; and (ii) that the
broker or dealer received a signed, written agreement from the investor prior to
the transaction. Disclosure also has to be made about the risks of investing in
penny stocks in both public offerings and in secondary trading, and about
commissions payable to both the broker-dealer and the registered representative,
current quotations for the securities and the rights and remedies available to
an investor in cases of fraud in penny stock transactions. Finally, monthly
statements have to be sent disclosing recent price information for the penny
stock held in the account and information on the limited market in penny stocks.
The National Association of Securities Dealers, Inc. (the "NASD"), which
administers NASDAQ, has recently made changes in the criteria for initial
listing on the NASDAQ Small Cap market and for continued listing. For initial
listing, a company must have net tangible assets of $4 million, market
capitalization of $50 million or net income of $750,000 in the most recently
completed fiscal year or in two of the last three fiscal years. For initial
listing, the common stock must also have a minimum bid price of $4 per share. In
order to continue to be included on NASDAQ, a company must maintain $2,000,000
in net tangible assets and a $1,000,000 market value of its publicly-traded
securities. In addition, continued inclusion requires two market-makers and a
minimum bid price of $1.00 per share.
Management intends to strongly consider undertaking a transaction with any
merger or acquisition candidate which will allow the Company's securities to be
traded without the aforesaid limitations. However, there can be no assurances
that, upon a successful merger or acquisition, the Company will qualify its
securities for listing on NASDAQ or some other national exchange, or be able to
maintain the maintenance criteria necessary to insure continued listing. The
failure of the Company to qualify its securities or to meet the relevant
maintenance criteria after such qualification in the future may result in the
discontinuance of the inclusion of the Company's securities on a national
exchange. In such events, trading, if any, in the Company's securities may then
continue in the non-NASDAQ over-the-counter market. As a result, a shareholder
may find it more difficult to dispose of, or to obtain accurate quotations as to
the market value of, the Company's securities.
HOLDERS
<PAGE> 26
As of August 31, 1998, there were 39 holders of the Company's Common Stock. All
of the issued and outstanding shares of the Company's Common Stock were issued
in accordance with the exemption from registration afforded by Section 4(2) of
the Securities Act of 1933. The Company issued 19,000 shares of common stock,
pursuant to Section 4(2) in October 1995, and sold 200,000 shares in July 1998
to a company controlled by Ms. Souers.
DIVIDENDS
The Registrant has not paid any dividends to date, and has no plans to do so in
the immediate future.
ITEM 10. RECENT SALES OF UNREGISTERED SECURITIES.
On October 1, 1995, in accordance with an exemption from registration provided
by Section 4(2) of the Securities Act, the Company privately offered 19,000
shares of its common stock at $.05 per share. On October 27, 1995, the offering
was fully subscribed. The Company also relied on an exemption afforded by Nevada
Revised Statute 90.530(11).
Although the Company is currently classified as a "blank check" company, as of
the date of the offering memorandum, October 1, 1995, the Company was in the
business of providing temporary secretarial services. As such, at the time of
the private offering, the Company was not classified as a "blank check" company.
With respect to the transfers made by the founders, the Registrant relied on
Section 4(2) of the Securities Act of 1933, as amended. No advertising or
general solicitation was employed in offering the shares. The securities were
offered for investment only and not for the purpose of resale or distribution,
and the transfer thereof was appropriately restricted.
Even after the business plan is completed, the shares held by the Company's
officers and directors, and the shares transferred by Ms. Souers, totaling
300,000 shares, will be restricted from trading freely, other than in accordance
with Rule 144 enacted under the Securities Act. In general, under Rule 144, a
person (or persons whose shares are aggregated) who has satisfied a one year
holding period, under certain circumstances, may sell within any three-month
period a number of shares which does not exceed the greater of one percent of
the then outstanding Common Stock or the average weekly trading volume during
the four calendar weeks prior to such sale. Rule 144 also permits, under certain
circumstances, the sale of shares without any quantity limitation by a person
who has satisfied a two-year holding period and who is not, and has not been for
the preceding three months, an affiliate of the Company.
ITEM 11. DESCRIPTION OF SECURITIES.
COMMON STOCK
The Company's Articles of Incorporation authorizes the issuance of 50,000,000
shares of Common Stock, par value $0.001 per share, of which 2,200,000 are
issued and outstanding.
<PAGE> 27
The Company's original issuance to its officers and directors constituted 30,000
shares. Ms. Souers was issued 20,000 shares of common stock for $100, and Diana
Hewitt received 10,000 shares of common stock for $50, both in October, 1995.
(The original issuance shares are accounted for on a pre-split basis, with the
appropriate adjustment described hereinafter.) Such shares were issued in
reliance on section 4(2) of the Securities Act of 1933, as amended (the
"Securities Act"). The Company issued 19,000 shares of common stock (pre-split),
pursuant to Section 4(2), to 19 purchasers in October 1995. In July, 1998, the
Company repurchased a total of 29,000 of the shares (pre-split) owned by the two
founders (19,500 from Ms. Souers and 9,500 from Ms. Hewitt) for a total of $145.
On July 17, 1998, the Company authorized a 100:1 forward split of its common
stock. Subsequently, Ms. Souers then transferred a total of 7,200 of her shares
(post-split) to 8 family members and business acquaintances. After the split,
Gehrig Ironite, Inc., a company controlled by Ms. Souers, purchased a total of
200,000 shares of common stock for $10,000, in reliance upon the exemption
provided by section 4(2) of the Securities Act. The shares are non-assessable,
without pre-emptive rights, and do not carry cumulative voting rights. Holders
of common shares are entitled to one vote for each share on all matters to be
voted on by the stockholders. The shares are fully paid, non-assessable, without
pre-emptive rights, and do not carry cumulative voting rights. Holders of common
shares are entitled to share ratably in dividends, if any, as may be declared by
the Company from time-to-time, from funds legally available. In the event of a
liquidation, dissolution, or winding up of the Company, the holders of shares of
common stock are entitled to share on a pro-rata basis all assets remaining
after payment in full of all liabilities.
Management is not aware of any circumstances in which additional shares of any
class or series of the Company's stock would be issued to management or
promoters, or affiliates or associates of either.
ITEM 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company and its affiliates may not be liable to its shareholders for errors
in judgment or other acts or omissions not amounting to intentional misconduct,
fraud, or a knowing violation of the law, since provisions have been made in the
Articles of incorporation and By-laws limiting such liability. The Articles of
Incorporation and By-laws also provide for indemnification of the officers and
directors of the Company in most cases for any liability suffered by them or
arising from their activities as officers and directors of the Company if they
were not engaged in intentional misconduct, fraud, or a knowing violation of the
law. Therefore, purchasers of these securities may have a more limited right of
action than they would have except for this limitation in the Articles of
Incorporation and By-laws.
The officers and directors of the Company are accountable to the Company as
fiduciaries, which means such officers and directors are required to exercise
good faith and integrity in handling the Company's affairs. A shareholder may be
able to institute legal action on behalf of himself and all others similarly
stated shareholders to recover damages where the Company has failed or refused
to observe the law.
<PAGE> 28
Shareholders may, subject to applicable rules of civil procedure, be able to
bring a class action or derivative suit to enforce their rights, including
rights under certain federal and state securities laws and regulations.
Shareholders who have suffered losses in connection with the purchase or sale of
their interest in the Company in connection with such sale or purchase,
including the misapplication by any such officer or director of the proceeds
from the sale of these securities, may be able to recover such losses from the
Company.
ITEM 13. FINANCIAL STATEMENTS.
The financial statements and supplemental data required by this Item 13 follow
the index of financial statements appearing at Item 15 of this Form 10-SB.
ITEM 14. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
The Registrant has not changed accountants since its formation, and
Management has had no disagreements with the findings of its accountants.
ITEM 15. FINANCIAL STATEMENTS AND EXHIBITS.
FINANCIAL STATEMENTS
The United States Securities and Exchange Commission, and the Federal
Securities Laws, allow registrants to incorporate by reference certain
disclosures, information and exhibits that have been previously filed with the
United States Securities and Exchange Commission. Accordingly, certain financial
statements and exhibits that have been previously filed with the United States
Securities and Exchange Commission are denoted by an asterisk (*), and are,
accordingly, incorporated herein by reference.
Report of Independent Auditor, Kurt D. Saliger, dated October 29, 1999*
Form 10-Q filed with the United States Securities and Exchange Commission as of
June 17, 1999*
Report of Independent Auditor Kurt D. Saliger, dated March 12, 1999*
Balance Sheet as of December 31, 1997, and December 31, 1998*
Statement of Operation for the years ended December 31, 1997, and December 31,
1998*
Statement of Stockholders' Equity*
Statement of Cash Flows for the years ended December 31, 1997, and December 31,
1998*
Notes to Financial Statements*
Form 10Q-SB for Period Ending 9/30/99 - Filed Concurrently Herewith
<PAGE> 29
Form 10K-SB for Period Ending 12/31/99 - Filed Concurrently Herewith
EXHIBITS
3.1 Articles of Incorporation*
3.2 By-Laws*
23 Consents of Experts and Counsel
24 Opinion of Counsel
27 Financial Data Schedule
99 Promissory Note between Combined Professional Services, Inc., and Mojave
Southern, Inc.*
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act of
1934, the Registrant has duly caused this registration statement to be signed on
its behalf by the undersigned, thereunto duly authorized.
Combined Professional Services, Inc.
By: Cathy Souers, President
<PAGE> 1
EXHIBIT 24
DAVID H. JARVIS
ATTORNEY AND COUNSELOR
31555 West Fourteen Mile Road, Suite 212
Farmington Hills, Michigan 48334
================================================================================
Phone (248) 865-6000
Fax (248) 865-9749
E-Mail [email protected]
February 22, 2000
U.S. Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Combined Professional Services, Inc.
Dear Sir/Madam:
I have acted as counsel to Combined Professional Services, Inc., a
Nevada corporation (the "Company"), in connection with its Registration
Statement Filed as Form 10-SB/2A and submitted contemporaneously herewith as
Form 10-SB/2A.
In my representation I have examined such documents, corporate records,
and other instruments as we have deemed necessary and/or appropriate for the
purpose of rendering this opinion, including, but not limited to, the Articles
of Incorporation and Bylaws of the Company. In addition, we have also examined
the prior opinions of Shawn F. Hackman, P.C., and Patrick C. Clary, Chartered,
former counsel to the Company.
Based upon the foregoing, it is my opinion that the Company is duly
organized and validly exists as a corporation under the laws of the State of
Nevada. I hereby consent to the use of this opinion as an exhibit to the
Registration Statement filed herewith.
Sincerely,
/s/ DAVID H. JARVIS, ESQ.
--------------------------------
David H. Jarvis, Esq.
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