AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON ______________, 2001
REGISTRATION STATEMENT NO. 333-93383
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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AMENDMENT NO. 3 TO
FORM SB-2
FORM SB-2 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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ADRIATIC HOLDINGS LIMITED
(NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)
NEVADA 3644 91-1918326
(STATE OR JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION IDENTIFICATION NUMBER)
CODE NUMBER)
114 W. MAGNOLIA STREET, SUITE 446
BELLINGHAM, WASHINGTON 98225
(360) 715-3396
(ADDRESS AND TELEPHONE NUMBER OF PRINCIPAL EXECUTIVE OFFICES)
ROBERT W. KNIGHT
ADRIATIC HOLDINGS LIMITED
114 W. MAGNOLIA STREET, SUITE 446
BELLINGHAM, WASHINGTON 98225
(360) 715-3396
(NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE)
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COPIES TO:
STEVEN SANDERS, ESQ.
BECKMAN, MILLMAN & SANDERS LLP
116 JOHN STREET, SUITE 1313
NEW YORK, NEW YORK 10038
(212) 406-4700
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: [ ]
<PAGE>
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Proposed Proposed Proposed
Title of Each Class Max. offering Aggregate Max. Amount of
of Securities Amount to be Price for offering Registration
to be registered registered (1) Security Price (1) Fee
---------------- -------------- -------- --------- ---
<S> <C> <C> <C> <C>
Common Stock, $0.001 par value 5,000,000 $0.10 $500,000 $132
</TABLE>
----------
(1) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457 under the Securities Act of 1933, as amended.
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, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any State.
SUBJECT TO COMPLETION, DATED ___________________
PRELIMINARY PROSPECTUS
5,000,000 Shares
ADRIATIC HOLDINGS LIMITED
Common Stock
This is a public offering of 5,000,000 shares of common stock of Adriatic
Holdings Limited.
There is currently no public market for the common stock. We will list the
common stock on the OTC Bulletin Board under the proposed symbol "____".
THIS OFFERING INVOLVES A HIGH DEGREE OF RISK. SEE "RISK FACTORS" BEGINNING
ON PAGE 5 TO READ ABOUT FACTORS YOU SHOULD CONSIDER BEFORE BUYING SHARES OF THE
COMMON STOCK.
----------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER REGULATORY
BODY HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATIONS MADE TO
THE CONTRARY IS A CRIMINAL OFFENSE
<PAGE>
Per Share Total
--------- -----
Public offering price ........................... $0.10 $500,000
Total Proceeds, before expenses, to us .......... $0.10 $500,000
THE DATE OF THIS PROSPECTUS IS __________________, 2001
THE COMPANY
Adriatic Holdings Limited was incorporated in the State of Nevada on July
9, 1998. The business of Adriatic is to become a provider of electrical junction
boxes and other quality electrical products for use in both the public and
private sector. Junction boxes are used for housing underground wiring
connections. They are commonly installed at street intersections, in sidewalks,
and anywhere else electrical connections are required.
Pursuant to a licensing agreement dated August 15, 1998, we acquired the
rights from J.A. Industries (Canada) Inc. to manufacture and distribute J.A.
Canada's patented underground electrical junction box. Under the terms of the
Licensing Agreement, we agreed to pay to J.A. Canada $5.00 per J.A. Junction Box
sold by Adriatic with a minimum fee of $2,000 in 1998 and a minimum fee of
$10,000 per annum for the life of the license. The fees of $2,000 for 1998 and
$10,000 for 1999 have been paid. Adriatic has not yet undertaken the sale of any
J.A. Junction Boxes or any other product since entering into the licensing
agreement in August of 1998.
Our offices are located at 114 W. Magnolia Street, Suite 446, Bellingham,
Washington 98225. Our telephone number is (360) 715-3396.
1
<PAGE>
THE OFFERING
Common stock offered by the Company ......... 5,000,000 shares
Price per share of common stock.............. $0.10
Common stock to be outstanding
after the offering(1) .................... 7,090,000 shares
Use of proceeds ............................. Adriatic intends to use its
portion of the proceeds for
license fee payments, marketing,
general and administrative
expenditures, development of the
business, working capital and
other general corporate
purposes. See "Use of Proceeds."
Proposed OTC Bulletin Board symbol .......... _______
Risk factors For a discussion of the risks,
you should consider before
investing in the common stock of
Adriatic, see "Risk Factors."
Termination.................................. We plan to close the offering on
June 30, 2001
Plan of Offering............................. There is no underwriter for this
offering. Our officers or our
agents will offer the shares for
sale on a "best efforts",
no-minimum basis. Proceeds can
be used as received.
----------
(1) See "Dilution."
2
<PAGE>
SUMMARY SELECTED FINANCIAL DATA
The following selected financial information concerning Adriatic has been
derived from the financial statements included elsewhere in this prospectus and
should be read in conjunction with such financial statements and the related
notes. The financial information as of December 31, 1999 has been derived from
the audited financial statements of Adriatic prepared by Spicer, Jeffries & Co.
and the financial information as of December 31, 2000 has been prepared by
management.
<TABLE>
<CAPTION>
Period from
inception
(July 9,1998)
Year Ended Year Ended Year Ended through
December 31, 2000 December 31, 1999 December 31, 1998 December 31, 2000
----------------- ----------------- ----------------- -----------------
(audited) (audited) (audited) (unaudited)
Balance Sheet Data:
<S> <C> <C> <C> <C>
Total assets ................ $ 18,135 $ 18,003 46 18,135
Current liabilities ......... 17,921 26,024 0 46,231
Long-term debt .............. 0 0 0 0
Total stockholders' deficit . (28,096) (8,021) 46 (28,096)
Statement of Operations Data:
Revenue ..................... 0 0 0 0
Expenses:
Total Expenses .............. 20,975 11,875 12,303 45,153
Income from Operations ...... 0 0 0 0
Loss before income taxes ... (20,975) (11,875) (12,303) (45,153)
Provision for income taxes .. 0 0 0 0
Net loss .................... (20,975) (11,875) (12,303) (45,153)
Net loss per share .......... (.01) (.01) (.01) (.02)
</TABLE>
3
<PAGE>
FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements within the meaning of
the United States federal securities laws that involve risks and uncertainties.
When included in this prospectus, the words "expects," "intends," "anticipates,"
"plans," "projects" and "estimates," and analogous or similar expressions are
intended to identify forward-looking statements. A potential investor in the
common stock offered hereby should use caution before relying on forward-looking
statements because actual results could differ materially from those anticipated
by such forward-looking statements in this prospectus. Factors which could cause
actual results to differ from those anticipated by forward-looking statements
can be found in "Risk Factors," "Management's Discussion and Analysis of
Financial Condition or Results of Operations" and "Business." Any
forward-looking statements contained in this prospectus speak only as of the
date of this prospectus. The Company expressly disclaims any obligation or
undertaking to publicly release any updates or revisions to any forward-looking
statement contained herein.
4
<PAGE>
RISK FACTORS
ADRIATIC HAS A LIMITED OPERATING HISTORY
Adriatic was incorporated in July 1998 and thus has a limited operating
history. Adriatic is subject to all the general risks, problems, expenses,
difficulties, complications and delays frequently encountered in connection with
establishing any new business and operations.
ADRIATIC IS DEPENDENT ON KEY PERSONNEL
Our business plans are significantly dependent upon the abilities and
continued participation of Mr. Knight. Mr. Knight has not entered into an
employment agreement with us and there can be no assurance that he will continue
to provide services to us. Mr. Knight will devote only a portion of his time to
Adriatic activities. As Adriatic's sole officer and director, decisions are made
at his discretion and not as a result of compromise or vote by members of a
board. The loss by or unavailability to the Company of Mr. Knight's services
would have an adverse effect on our business, operations and prospects. There
can be no assurance that Adriatic would be able to locate or employ qualified
personnel to replace Mr. Knight, should his services be discontinued.
ADRIATIC REQUIRES ADDITIONAL FINANCING IN ORDER TO STAY IN BUSINESS
We believe that raising 20% of the proceeds of this offering will enable us
to maintain our operations and working capital requirements approximately for
the next 12 months, without taking into account any internally generated funds
from operations. Thereafter, we will require additional funds to maintain and
expand our operations. Adequate funds for this purpose on terms favorable to
Adriatic, whether through equity financing, debt financing, or other sources,
may not be available when needed.
ADRIATIC MAY CONTINUE TO BE UNPROFITABLE
We have had no revenue since our incorporation in July 1998. We have yet to
undertake the sale of any J.A. Junction Boxes or any other products. Even after
we commence selling the J.A. Junction Box, which is anticipated to begin in the
second quarter of 2001, there is no guarantee that we will become profitable.
The junction box industry is highly competitive and there is no guarantee that
we will be able to secure the business of our target buyers.
GOING CONCERN ISSUES IN AUDITOR'S REPORT
As a result of losses since inception, our deficiency in working capital at
March 31, 2000 and other factors, our auditors have included a paragraph in
their report regarding substantial doubt about our ability to continue as a
going concern. Our plans in this regard are described in Note 6 to the Financial
Statements.
5
<PAGE>
SHAREHOLDERS' LACK OF EQUITY
As of December 31, 2000, the lack of equity for shareholders was $(45,153).
Further, we anticipate continuing losses for the foreseeable future.
AN UNFAVORABLE RESOLUTION OF CURRENT LITIGATION AGAINST J.A. CANADA COULD HAVE
AN ADVERSE EFFECT ON ADRIATIC'S BUSINESS
J.A. Canada is currently the defendant in a lawsuit concerning the J.A.
Junction Box, Canadian patent #2,030,251. The Plaintiffs allege among other
things, that the Canadian patent issued on the J.A. Junction Box is invalid.
J.A. Canada feels that the suit lacks merit. Although J.A. Canada does not have
the necessary funds to adequately defend itself in this action, it has entered a
statement of defense. A judgment in favor of the plaintiffs would make us unable
to prevent other competitors from using the technology and concept behind the
patented J.A. Junction Box for profit.See "Business - Legal Matters."
THERE ARE UNCERTAINTIES REGARDING MARKETING OF ADRIATIC'S PRODUCT
We intend to market the J.A. Junction Box within the United States.
However, our product has had only limited use in the field and is not approved
for use in the United States. Furthermore, our product has had limited marketing
success in the past due to the lack of funds on the part of J.A. Canada to
promote and develop the product. Even if the J.A. Junction Box is accepted by
end users, there is no assurance that the United States market will provide
sufficient revenue and earnings to permit on-going operations. In the event that
we are not able to successfully market our products, we may seek to develop
other new opportunities, although no assurances can be made.
FAILURE TO ATTAIN APPROVAL FOR THE USE OF THE J.A. JUNCTION BOX IN THE UNITED
STATES WOULD ADVERSELY AFFECT THE BUSINESS OF ADRIATIC
We intend to market the J.A. Junction Box within the United States.
However, our product has had only limited use in the field and is not approved
for use in the United States. Failure to attain approval of the J.A. Junction
Box for use in the United States would have a material adverse effect on our
financial condition, results of operations and cash flows. In order to sell the
J.A. Junction Box in a particular state, we must first obtain approval from such
state. Each state has its own requirements for approving use of junction boxes
and typically require that applicants submit blueprints of the junction box and
other documentation demonstrating how the junction box complies with the state's
specifications. States also typically require that the junction boxes be tested
in several test locations. Adriatic intends to submit the junction box for
testing in the State of Washington as soon as practicable.
6
<PAGE>
FUTURE REGULATION OF THE USE OR SALE OF POLYURETHANE MAY HAVE A NEGATIVE EFFECT
ON OUR BUSINESS
We will use a product called polyurethane in the production of the J.A.
Junction Box. Polyurethane is a synthetic, oil-based substance, widely varying
in flexibility. Although we do not foresee any adverse effect on our operations
as a result of any environmental laws in the United States which may regulate
the use and manufacture of polyurethane, there can be no assurance that some
future law would not have an adverse effect on our business.
7
<PAGE>
WE MAY NOT BE ABLE TO COMPETE SUCCESSFULLY IN OUR INDUSTRY
There are a number of companies that compete directly and indirectly with
the J.A. Junction Box. Many of these companies have financial, technical,
marketing, sales, manufacturing, distribution, and other resources that are
significantly greater than those of Adriatic. In addition, some of these
companies have name recognition, established positions in the market, and
long-standing relationships with customers who purchase electrical junction
boxes. Accordingly, there is no assurance that we will be able to compete
successfully or that our competitors or future competitors will not develop
junction boxes that render our junction boxes less marketable.
THERE IS NO PUBLIC MARKET FOR THE COMMON EQUITY OF ADRIATIC
As of the date of this prospectus, there is no public market for Adriatic's
common stock. Although we plan to apply for listing our common stock on the OTC
Bulletin Board, there can be no assurance that our attempts to do so will be
successful. Furthermore, if we do become listed with respect to our common stock
on the OTC Bulletin Board or elsewhere, there can be no assurance that a market
will develop for the common stock or that a market in the common stock will be
maintained. As a result of the foregoing, investors may be unable to liquidate
their investment for any reason. For a discussion of Adriatic's common stock,
see "Description of Securities."
THE PROCEEDS DERIVED FROM THIS OFFERING MAY BE LIMITED
This offering is being conducted on a "best efforts only" basis. This means
that we are under no obligation, for purposes of this offering, to sell a
specified minimum amount of shares of our common stock. Furthermore, whatever
net proceeds we have realized, as a result of this offering, will not be
returned to any subscriber and such proceeds will be utilized by our management
to meet our proposed objectives as set forth in this prospectus. Under these
circumstances, if we only sell a small amount of shares of common stock, the
proceeds earned from the sale may not be adequate to meet all of our proposed
objectives.
PURCHASERS OF COMMON STOCK IN THIS OFFERING WILL INCUR SUBSTANTIAL DILUTION OF
THEIR SHARES
Purchasers of the common stock in this offering will incur immediate
substantial dilution in the net tangible book value of approximately $0.04 per
share if all the shares offered are sold. See "Dilution."
FUTURE SALES OF OUR COMMON STOCK MAY NEGATIVELY AFFECT OUR STOCK PRICE
The future sale of shares by our existing stockholders may adversely affect
our stock price. After completion of this offering, our existing stockholders
will own an aggregate of 7,090,000 shares of common stock. All the shares of
common stock will be available for sale in the public market, subject in some
cases to compliance with the holding period and volume and manner of sale
limitations contained in Rule 144 under the Securities Act of 1933, as amended
(the "Securities Act"). See the information set forth under the caption "Shares
Eligible for Future Sale" for a more detailed description of the restrictions on
selling shares after this offering.
8
<PAGE>
ADRIATIC STOCK COULD CONTINUE TO BE A "PENNY STOCK" WHICH WOULD MAKE IT MORE
DIFFICULT TO TRADE.
The Securities and Exchange Commission (the "Commission") has adopted rules
that regulate broker-dealer practices in connection with transactions in "penny
stocks." 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 to
the prospective purchaser 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. 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 prospective purchaser and receive
the purchaser's written agreement to the transaction. Furthermore, subsequent to
a transaction in a penny stock, the broker-dealer will be required to deliver
monthly or quarterly statements containing specific information about the penny
stock. It is anticipated that Adriatic's common stock will be traded on the OTC
Bulletin Board at a price of less than $5.00. In this event, broker-dealers
would be required to comply with the disclosure requirements mandated by the
penny stock rules. These disclosure requirements will likely make it more
difficult for investors in this offering to sell their common stock in the
secondary market.
9
<PAGE>
USE OF PROCEEDS
The net proceeds to Adriatic from the sale of 100%, 50% and 20% of the
common stock offered in this offering are listed below after deducting estimated
offering expenses of $40,000 and assuming that no commissions are to be paid for
any of the shares to be sold. These proceeds are intended to be utilized
substantially as follows:
Application of Proceeds Approximate Approximate Approximate
Amount Amount Amount
$500,000 $250,000 $100,000
----------------------- ----------- ----------- -----------
Equipment purchase 150,000 75,000 25,000
Facility setup 50,000 25,000 7,500
Raw materials 100,000 50,000 10,000
Marketing 50,000 25,000 2,500
Working capital 110,000 35,000 15,000
Total $460,000 $210,000 $ 60,000
The amounts apportioned above are only estimates. As of the date of this
prospectus, Management anticipates expending the above total of $460,000 within
12 months of its receipt by Adriatic. See "Risk Factors." The actual amount
expended to finance any category of expenses may be increased or decreased by
our Board of Directors, in its discretion, if required by the operating expense
of Adriatic or if a reapportionment or redirection of funds, including
acquisitions consistent with the business strategy of Adriatic, is deemed to be
in the best interest of Adriatic. However, as of the date of this prospectus, we
have no specific plans, arrangements, understandings or commitments with respect
to any such acquisition. See "Risk Factors," "Business" and "Management's
discussion and analysis of financial condition or Plan of Operation."
In addition, pending the use of the proceeds from this offering as set
forth above, we may invest all or a portion of such proceeds in United States
Government securities, money market investments and short-term, interest-bearing
deposits in major banks.
10
<PAGE>
DILUTION
The net negative tangible book value (total assets less total liabilities
and intangible assets) of Adriatic's common stock as of December 31, 2000 was
approximately $(28,096) or a nominal amount per share of common stock. Net
tangible book value per share represents the amount by which the liabilities
exceed the amount of total tangible assets, divided by 2,090,000 shares of
common stock currently outstanding.
Net tangible book value dilution per share represents the difference
between the amount per share paid by purchasers of the 5,000,000 shares of
common stock in this offering and the pro forma net tangible book value per
share of common stock immediately after this offering. After giving effect to
the sale by Adriatic of 5,000,000 shares of common stock offered hereby at an
assumed offering price of $0.10 per share, the pro forma net tangible book value
of Adriatic as of December 31, 2000 would have been approximately $431,904 or
$0.06 per share. This represents an immediate increase in pro forma net tangible
book value of $0.06 per share to existing stockholders and an immediate dilution
in pro forma net tangible book value of $0.04 per share to purchasers of common
stock in this offering.
Offering price per share of common stock offered hereby ............. $0.10
Net tangible book value per share before offering ................... $0.00
Increase per share attributable to new investors .................... $0.06
Pro forma net tangible book value per share after offering .......... $0.06
Net tangible book value dilution per share to new investors ......... $0.04
=====
The following table summarizes the relative investments of investors
pursuant to this offering and the current stockholders of Adriatic.
<TABLE>
<CAPTION>
Investors
Pursuant
Current to this
Stockholders Offering Total
------------ -------- -----
<S> <C> <C> <C>
Number of Shares of Common Stock Purchased 2,090,000 5,000,000 7,090,000
Percentage of Outstanding Common Stock After
Offering 29.5% 70.5% 100%
Gross Consideration Paid, Less Offering Costs $13,050 $460,000 $473,050
Percentage of Consideration Paid 2.7% 97.3% 100%
Average Consideration Per Share of Common Stock $0.006 $0.09 $0.07
</TABLE>
11
<PAGE>
DIVIDEND POLICY
Adriatic has never declared or paid any cash dividends. Adriatic currently
does not intend to pay cash dividends in the foreseeable future on the shares of
common stock. Management intends to reinvest any earnings in the development and
expansion of Adriatic business. Any cash dividends in the future to common
stockholders will be payable when, as and if declared by the Board of Directors
of Adriatic, based upon the Board's assessment of:
o the financial conditions of Adriatic;
o earnings;
o need for funds;
o capital requirements;
o prior claims of preferred stock to the extent issued and outstanding;
and
o other factors, including any applicable laws.
Therefore, there can be no assurance that any dividends on the common stock will
ever be paid.
12
<PAGE>
CAPITALIZATION
The following table sets forth the actual cash and capitalization of
Adriatic as of December 31, 2000. It is conceivable that no shares of Common
Stock will be sold in this offering. This table should be read in conjunction
with the financial statements and related notes included elsewhere in this
prospectus.
<TABLE>
<CAPTION>
December 31, 2000
-----------------
(unaudited)
Actual
--------
<S> <C>
Cash and equivalents $ 214
Short-term debt 46,231
Long-term debt 0
Common stk. $.001 p.v
25,000,000 authorized
2,090,000 shs.(actual) 2,090
Additional Paid in capital 14,967
Accumulated Deficit (45,153)
Tot. Stockholders Equity (Deficit) (28,096)
Total Capitalization (28,096)
</TABLE>
13
<PAGE>
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14
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
OR PLAN OF OPERATION
The information contained below includes statements of Adriatic management's
beliefs, expectations, hopes, goals and plans that are forward-looking
statements subject to certain risks and uncertainties that could cause actual
results to differ materially form those anticipated in the forward-looking
statements. For a description of such risks and uncertainties, see the
information set forth under the caption "Forward-Looking Statements," which
information is incorporated herein by reference.
The following discussion and analysis should be read in conjunction with the
information set forth under the caption "Selected Financial Data" and the
financial statements and notes thereto included elsewhere in this prospectus.
Plan of Operation
Since our inception on July 9, 1998, we have not been engaged in any significant
operations nor have we had any revenues, as we are in the development stage. Our
only recent activities through December 31, 2000 include organization of the
Company and the raising of equity capital.
Until an infusion of capital from this offering, we will not be able to commence
operations. We currently have insufficient capital to commence operations and
are dependent on the proceeds of this offering to begin such operations. We have
suffered recurring losses from operations and have a working capital deficiency
of $28,096 which raise substantial concern regarding our ability to continue as
a going concern. We believe that the maximum proceeds of this offering will
enable us to maintain our operations and working capital requirements
approximately for the next 12 months, without taking into account any internally
generated funds from operations. We will need to raise $500,000 to continue
operations for the next 12 months based on our capital expenditure requirements.
Capital will be raised pursuant to this filing.
We have the authority to issue 25,000,000 shares of common stock, $0.001 par
value. Prior to this filing, we have raised all funds through private
placements. In July 1998, we issued 1,000,000 shares of common stock to one of
our founders for $1,000 and 50,000 shares of common stock to another founder for
$50. In September 1998, we issued 1,000,000 shares of common stock in connection
with an additional private offering for $10,000. In February 1999, we issued
40,000 shares of common stock in connection with an additional private placement
offering for $2,000.
After this current offering, we will require additional funds to maintain and
expand our operations. These funds may be raised through equity financing, debt
financing, or other sources, which may result in further dilution in the equity
ownership of the shares being offered in this prospectus. There is still no
assurance that, even with the funds from this offering, we will be able to
maintain operations at a level sufficient for an investor to obtain a return on
his investment in our common stock. Further, we may continue to be unprofitable.
At the current time, we have not begun manufacturing any junction boxes, but
expect to do so when the additional funds have been made available. Currently we
have $41,231 in liabilities. Our financial statements report a loss of $12,303
for the fiscal period ended December 31, 1998. For this period, we paid $4,444
in office expenses and $1,050 in management fees to the original founding
shareholders. For the period ended December 31, 1999, we report a loss of
$24,178. We paid $4,620 in office expenses and $10,103 in license fees. For the
period ended December 31, 2000 we report a loss of $20,975. After we raise
additional funds through this current offering, we anticipate an increase in the
number of employees to five.
Management believes that the J.A. Junction Box has a competitive advantage over
the traditional steel and concrete junction boxes. The J.A. Junction Box is
manufactured with high impact polyurethane. Polyurethane is an oil-bases product
which is readily available in the market place. Its price and supply are stable
now, and is expected, in management's opinion, to remain so in the foreseeable
future, although there can be no assurance. The design of the Junction box is
cylindrical so that the lid, which provides access to the wiring connections,
cannot fall into the box while installation or repairs are being made.
Polyurethane construction allows for a much lighter product in comparison with
steel or concrete, allowing for easier production, installation and
transportation of the junction boxes. Further, the polyurethane J.A. Junction
Box is earthquake proof, impact resistant, and does not corrode or deteriorate.
The equipment needed to manufacture J.A. Junction
15
<PAGE>
Boxes include RIM cell machinery, presses and molds. The RIM cell machinery is
used to compress certain materials into polyurethane. The polyurethane is then
poured into moulds where it solidifies into the shape of the junction box.
Upon receipt of the funds from this offering, we plan to use $150,000 to
purchase the mentioned plant equipment. It is evident that the production
process will use an above normal amount of electricity and will require facility
upgrades and improvements to electrical sources. We anticipate spending a
further $50,000 on such facility upgrades in the first year of production. There
is a patent on the junction box and we do not anticipate any further need for
Research and Development at this time. The Company entered into a licensing
agreement with J.A. Canada, the terms require the Company to pay a monthly
royalty fee of $1,000 CDN for use of the license. The Company anticipates first
year production costs to be $200,000 for supplies and $60,000 for labor.
It is our goal to penetrate the junction box market in the first year of
operation with an estimated goal to capture 10% of the Pacific Northwest market
in underground junction boxes. Also, we plan to expand into the Eastern Canadian
and United States market, which management believes, and according to
International Municipal Signal Association publications, is a $350 million per
annum market.
The Company has the right to manufacture and distribute and underground
electrical junction box patented by J.A. Canada. J.A. Canada is currently the
defendant in a lawsuit with regards to its product. The statement of claims,
among other things, alleges that the Canadian patent issued on the electrical
box is invalid. If the plaintiffs are successful in this action, the patent
would be declared invalid and would not provide the Company with protection from
competition. If the patent is declared invalid, then the design of the J.A.
Canada junction box will revert to the public domain and no further patents
would be able to be issued on such a design. If the patent is declared invalid,
the Company has the option to cancel the licensing agreement without affecting
the manufacturing of the product.
Currently, the plaintiff in the lawsuit is manufacturing a similar box to the
J.A. Canada box and is selling the box successfully in Canada. J.A. Canada,
through its lawyers, threatened litigation with the plaintiffs if they did not
cease and desist producing a copy of the J.A. Canada junction box. The
plaintiffs took the position that the box did not infringe on the J.A. Canada
junction box and initiated the lawsuit to invalidate the patent held by J.A.
Canada. It is J.A. Canada's position that in the event the J.A. Canada patent on
the junction box is successfully invalidated by the plaintiffs in the lawsuit,
then the design of the junction box belongs in the public domain and therefore
no patent could be issued to anyone on this specific design. Furthermore, the
current plaintiffs would be able to continue to manufacture their junction box
whose design would also belong in the public domain.
If the patent is declared invalid by the courts, the Company will (a) not assert
any exclusive rights to the patent and (b) be in a position to cancel its
licensing agreement with J.A. Canada. The Company will also be able to
manufacture the junction box using the J.A. Canada design without any recourse
from or payments to J.A. Canada. As the design will belong to the public domain
and no patent will be available on the J.A. Canada junction box design, the
Company may have to compete directly with other manufacturers of the J.A. Canada
junction box design.
The Company has suffered recurring losses from operations and has a working
capital deficiency of (28,096) that raise substantial doubt about its ability to
continue as a going concern. The continuation of the Company as a going concern
is dependent upon the Company attaining and maintaining profitable operations
and raising additional capital. Management's plans in this regard is to raise
additional capital through an equity offering. The financial statements do not
include any adjustment relating to the recovery and classification of recorded
asset amounts or the amount and classification of liabilities that might be
necessary should the Company discontinue operations.
Our functional currency is the United States Dollar and our consolidated
financial statements are reported in United States Dollars unless otherwise
stated.
Year 2000 Compliance
The Year 2000 issue arises as the result of computer programs having been
written, and systems having been designed, using two digits rather than four to
define the applicable year ("Year 2000"). Consequently, such software has the
potential to recognize a date using "00" as the year 1900 rather than the year
2000. This could result in a system failure or miscalculation causing
disruptions of operations, including, among other things, a temporary inability
to process transactions, send invoices, or engage in similar normal business
activities.
The Company has not been affected by Year 2000 as it does not rely on
date-sensitive software or affected hardware. The Company's current accounting
and other systems were purchased "off-the-shelf". The Company intends to timely
update its accounting and other systems which are determined to be affected by
Year 2000 by purchasing Year 2000 compliant software and hardware available from
retail vendors at reasonable cost.
16
<PAGE>
BUSINESS
General
Adriatic was incorporated in the State of Nevada on July 9, 1998. Our
business is to become a provider of quality electrical products to users in both
the public and private sectors. Pursuant to the Licensing Agreement dated August
15, 1998, we acquired the rights from J.A. Canada to manufacture and distribute
J.A. Canada's patented J.A. Junction Box. This patent expires in 2021.
Underground electrical junction boxes are used for housing underground wiring
connections for electrical companies at street intersections, in sidewalks, on
highways and anywhere else electrical connections are required. The J.A.
Junction Box has the United States patent number 5,142,102, filed on August 25,
1992. Under the terms of the Licensing Agreement, we agreed to pay to J.A.
Canada $5.00 per J.A. Junction Box sold with a minimum fee of $2,000 in 1998 and
a minimum fee of $10,000 per annum for the life of the license. The fees of
$2,000 for 1998 and $10,000 for 1999 have been paid. The Licensing Agreement,
assuming Adriatic maintains it in good standing, expires when the patent
expires. Sales for the J.A. Junction Box by J.A. Canada were approximately $CD
500,000 (approximately $US 350,000) in 1993 and $CD 500,000 (approximately $US
350,000) in 1994. J.A. Canada completed no sales since 1994. We have not yet
undertaken the sale of any J.A. Junction Boxes or any other product.
Historically, junction boxes have been constructed out of steel and
concrete weighing between 100 and 200 pounds. Manufacturers of concrete junction
boxes are typically located in concrete manufacturing regions that are often
located long distances from the area of final installation. Thus, transportation
costs of these concrete boxes are often prohibitively expensive, causing most
concrete companies to produce only enough concrete junction boxes to service
their local markets.
Unlike conventional junction boxes, the J.A. Junction Box is manufactured
with a lightweight and high-impact polyurethane. As a result, the J.A. Junction
Box is light and durable. Because the J.A. Junction Box only weighs
approximately 15 pounds, it can be easily installed by one person. Management
believes that our products will be able to successfully compete with standard
concrete junction boxes which are heavier and cannot be installed without the
use of heavy machinery. In addition, unlike conventional junction boxes, the
design of the Junction box is cylindrical so that the lid, which provides access
to the wiring connections, cannot fall into the box while installation or
repairs are being made.
While different in design and material, the J.A. Junction Box retains all
the advantages of concrete junction boxes. It is resistant to high impacts,
including those generated by earthquakes. Similarly, the J.A. Junction Box does
not corrode or deteriorate when put into contact with gasoline, diesel fuel and
other corrosive elements.
We have not incurred any expenses for research and development of our
product in the past two years.
Plans for Expansion
It is our goal to capture 10% of the Pacific Northwest market in
underground junction boxes over the next two years, although no assurances can
be made. In addition, we plan to expand into the Eastern Canadian and United
States market, which is estimated by Management, based on reports in
International Municipal Signal Association publications, to be a $350 million
per annum market.
17
<PAGE>
There would be some risk of currency fluctuation, when selling the product
in Canada for Canadian Dollars and paying United States suppliers in United
States Dollars. Our target customers in Canada would be municipalities,
provincial highways, Transport Canada (airports), armed forces, and real estate
developers. In the United States, our target customers would be the Federal
Transport (military), states, counties and cities.
With the proceeds of this offering, we plan to lease a manufacturing
facility in Bellingham, Washington. Once a property is secured, management
estimates that it will cost approximately $50,000 to make the plant operational.
The cost would be funded from the proposed financing contemplated by this
filing. Our Management estimates that if the plant achieves certain production
and distribution goals, it will be able to supply the Pacific Northwest and
western Canada with J.A. Junction Boxes. We anticipate that similar plants will
be established in the eastern United States and Canada after the existing
markets in the Pacific Northwest and Western Canada are penetrated.
Possible Joint Venture Opportunities
We are aware of the existence of certain companies who are in the business
of developing and conducting joint venture enterprises with other corporate
entities. Although we will conduct our business as planned and scheduled, we may
explore the prospect of engaging in a joint venture if such a venture would
increase stockholder value. See "Risk Factors."
Marketing and Distribution
We plan to market our product using manufacturers' representatives.
Typically, these representatives work strictly on a commission basis whereby we
would negotiate a percentage payable as commission to the representatives for
all sales they generate. It is anticipated that for every customer the
representative brings to Adriatic, the representative would be entitled to a 10%
commission on all future sales to the customer. Additionally, we plan to attend
trade shows in target market areas to market our products. Either our management
or the manufacturers' representatives in that area would attend the shows. We
plan to print brochures on our product and mail them to major electrical
companies and wholesale distributors.
The product will be distributed directly by Adriatic. We plan to have
inventory on hand. This way, when orders are received from the manufacturers'
representatives or directly from customers, the orders will be packaged for
shipping and sent via trucking companies. We will sell our product Free On Board
("FOB") with the customer being charged for the freight costs.
Competition
There are a number of companies that compete directly and indirectly with
our product, including both domestic and international companies. Many of these
companies have financial, technical, marketing, sales, manufacturing,
distribution, and other resources, which are significantly greater than those of
Adriatic. In addition, some of these companies have name recognition,
established positions in the market, and long-standing relationships with
customers who purchase electrical junction boxes. Some of our competitors
include Brooks Box, Inc., Westcoast Engineering, Ltd., Fogtite Inc. and Quazite
Corp. Such competitors may be developing junction boxes of which we are unaware,
which may be similar to our junction boxes. Accordingly, there is no assurance
that we will be able to compete successfully or that our competitors or future
competitors will not develop junction boxes that render our junction boxes less
marketable.
18
<PAGE>
Intellectual Property Rights
We do not own the intellectual property rights to the J.A. Junction Box.
However, under the Licensing Agreement, we acquired the right from J.A. Canada
to manufacture and distribute its patented underground electrical J.A. Junction
Box. Under the terms of the Licensing Agreement, we are to pay J.A. Canada $5.00
for each J.A. Junction Box sold by us with a minimum fee of $2,000 in 1998 and a
minimum fee of $10,000 per annum for the life of the license. Sales for the
products by J.A. Canada were approximately $CD 500,000 (approximately $US
350,000) in 1993 and $CD 500,000 (approximately $US 350,000) in 1994. In the
event the patent for the J. A. Junction Box is ruled invalid, we have the right
to terminate our license agreement without penalty.
Employees
We currently have one employee. There is no specified time period for
employment. However, with the anticipated manufacturing of the J.A. Junction
Box, we plan to hire five individuals to fill positions in operations; one
individual to perform clerical functions and two to serve in executive,
financial and/or administrative positions. Our sole employee is not represented
by a labor union. We will pay our current employee and any future employee/s a
salary on a bi-monthly basis. Furthermore, Management plans to implement an
employee incentive program in fiscal year 2000. See "Management - Board of
Directors and Executive Officers."
Seasonality
Our management does not believe that the change in season will have a
material affect on our financial condition or our operations with respect to the
manufacture and sale of the J.A. Junction Box.
Legal Matters
We are not currently involved in any material litigation or proceeding and
we are not aware of any material litigation or proceeding threatened against us.
There have been no suits involving Adriatic, its officer or director. However,
J.A. Canada is currently the defendant in a lawsuit involving the J.A. Junction
Box, Canadian patent #2,030,251. The Plaintiff, Westcoast Engineering Ltd. and
Nonad Plastic Ltd., both British Columbia companies, allege, among other things,
that the Canadian patent issued on the J.A. Junction Box is invalid. J.A. Canada
believes that the suit lacks merit. Although J.A. Canada does not have the
necessary funds to adequately defend itself, it has entered a statement of
defense. A judgment in favor of the plaintiffs would render the patent on the
J.A. Junction Box invalid. As a result, we would not be able to prevent other
competitors from utilizing this technology. If the patent is declared invalid,
we have the option to cancel the Licensing Agreement with J.A. Canada. However,
in this event, even if we do cancel the Licensing Agreement, we would still be
entitled to manufacture the product without paying any fees to J.A. Canada since
J.A Canada would no longer hold an absolute interest in the J.A. Junction Box.
We believe that the lawsuit will be resolved within the next 24 months, although
no assurance can be given. See "Risk Factors."
Facilities
Adriatic currently operates out of office space located at 114 W. Magnolia
Street, Suite 446, Bellingham Washington 98225. The President of Adriatic
provides this space free of charge. The office space aggregates approximately
1,000 square feet. We have not leased any manufacturing space at this time. Upon
completion of the proposed financing, we will move our operations to a
manufacturing facility once such a facility has been located and leased. The
President of Adriatic carries $2,000,000 in liability insurance on the current
office space.
Management has been actively searching for a site to build a manufacturing
facility in Bellingham, Washington, the present location of Adriatic's corporate
headquarters. It is expected that the facility will aggregate approximately
5,000 square feet of warehouse and manufacturing space and 1,200 square feet of
office space. Approximately 10,000 square feet of open yard space adjacent to
the facility should be utilized for outside storage of the junction boxes. At
this time, we have not determined the location or specifications of the
manufacturing facility.
To date, we have no investment or interest in any real estate, nor do any
of our principal officers.
19
<PAGE>
MANAGEMENT
Directors and Executive Officers
Robert Knight, age 43, is the Director, President, Secretary and Treasurer
of Adriatic.
Robert Knight has served as the Company's President, Secretary, Treasurer
and Director since July 9, 1998. Since September 1, 1998, Mr. Knight served as
President and Director of Coretech Industries, Inc., a development stage
company, formed to consolidate the yacht brokerage industry (no revenues);
Centaur BioResearch Inc., which specializes in licensing its genetic research
services and databases to pharmaceutical and biotechnology companies by the
Internet (no revenues); and Torik Corporation, a technology consulting firm
specializing in Y2K impact analysis (no revenues). Since November 1997, Mr.
Knight served as President and Director of Peregrine Mineral Resources Group,
Inc., a mineral exploration company (no revenues). From June 24, 1997 to
February 1, 1999, Mr. Knight served as President and Director of ANM Holdings
Corporation who merged with International Menu Solutions Corp., whose shares are
publicly traded OTC BB. Mr. Knight is no longer involved with the company who
recorded sales of $21,000,000 for its most recent 9 month reporting period. From
March 24, 1997 to July 1, 1998, Mr. Knight served as President and Director of
AFD Capital Group, Inc. a development stage company formed to develop quality
electrical products (no revenues). From November 12, 1996 to February 1, 1999,
Mr. Knight served as President and Director of Biologictics, Inc., a development
stage company formed to engage in the business of clinical consulting, contract
packaging and labeling services for clinical studies. The company subsequently
merged with Skintek Labs, Inc. (OTC BB)which continues as an operating company.
From November 1995 to September 1996, Mr. Knight served as President and
Director of BioQuest, Inc., a development stage company formed to develop
therapeutics and vaccines for the effective treatment of the Human
Immunodeficiency Virus (HIV), formerly Victoria Enterprises, Inc. (after the
merger between Victoria Enterprises, Inc. and BioQuest, Inc. became effective,
Mr. Knight resigned as President, Secretary and Treasurer but remained a
director until May 1998). Shares of BioQuest are quoted in the "pink sheets".
From December 1992 to June 1995, Mr. Knight served as President and Director of
J.A. Industries (Canada) Inc., a private British Columbia corporation formed to
become a provider of quality electrical products to the commercial and
industrial electrical industry. Mr. Knight has had no relationship with J.A.
(Canada) Inc. since it was acquired in 1996. From June 1994 to August 1996, Mr.
Knight served as a Director of Everest Security Systems Corporation, a
development stage company formed to become a home alarm service and installation
company. The company subsequently merged with Everest Security Systems
Corporation (OTC BB)who had sales of $13,000,000 for its monst recent 9 month
reporting period. From 1991 to September 1996, Mr. Knight served as an
independent financial consultant involved in the administration of public
companies. Mr. Knight has 15 years of experience in corporate management and
finance. Mr. Knight will devote more time to the operations of Adriatic than any
of the companies with which he is associated, or approximately 50% per cent of
his business time.
Board of Directors and Executive Officers
To date, Mr. Knight is the only executive officer and director of Adriatic.
Directors of Adriatic serve until the annual meetings of stockholders and until
their respective successors are duly elected and qualified. The executive
officers of the Company are elected annually by the Board of Directors and serve
terms of one year or until their death, resignation or removal by the Board of
Directors. See "Business - Employees."
Board Committees
In August 1998, the Board of Directors established an Audit Committee. To
date, Mr. Knight serves as the only member of the Audit Committee. The function
of the Audit Committee is to select and engage, on behalf of the Company,
independent public accountants to audit Adriatic's annual financial statements
and to review and approve the planned scope of the annual audit.
20
<PAGE>
Board of Advisors
To date, a formal Board of Advisors has not been selected; however, certain
persons have been solicited to serve on such board. Advisory board members will
provide the Company with general consulting services on matters that may or may
not be outside the scope of their specific industry expertise. Members will
serve at will and may resign at any time. At the time of selection of specific
individuals to serve as members on such board, the members will not be required
to investigate Adriatic or to verify its business plan, nor will they be
requested to do so. A member's agreement to serve on the Board of Advisors will
not constitute a recommendation or endorsement of them by Adriatic. Adriatic
plans to issue stock options to members of the Board of Advisors as
compensation.
Compensation of Directors
To date, Mr. Knight has not collected any compensation for his services as
Director of Adriatic.
Executive Compensation
The following summary sets forth the cash and other compensation paid or
accrued by Adriatic from July 9, 1998, the date of the Company's inception,
until December 31, 2000 with respect to services performed by Robert Knight for
services as Chief Executive Officer and President. To date, Mr. Knight has not
received compensation in salary and bonus in excess of $100,000.
<TABLE>
<CAPTION>
Long-term Compensation
-------------------------
Annual Compensation Awards Payouts
------------------- ------ -------
Name and Other Annual Restricted Securities LTIP All
Principal Salary Bonus Compensation Stock Underlying Payouts Other
Position Year ($) ($) ($) Awards ($) Options (#) ($) Compensation
-------- ---- --- --- --- ---------- ----------- --- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Robert Knight 1998 1,050 0 0 0 0 0 0
President/CEO 1999 0 0 0 0 0 0 0
2000 0 0 0 0 0 0 0
</TABLE>
Employment and Consulting Agreements
To date, Adriatic has not entered into any employment or consulting
agreements with its employee or with any other entity.
Stock Option Plan
Although we have not implemented a Stock Option Plan, we intend to
implement such a plan in 2000. As of present date, we have decided to make the
plan eligible to our officers.
Limitation of Liability and Indemnification
Adriatic's Certificate of Incorporation and By-laws contain provisions
which reduce the potential personal liability of directors for certain monetary
damages and provide for indemnity of directors and other persons. We are unaware
of any pending or threatened litigation against Adriatic or its directors that
would result in any liability for which such director would seek indemnification
or similar protection.
21
<PAGE>
The Nevada General Corporation Law and the Company's Articles of
Incorporation and By-laws authorize indemnification of a director, officer,
employee or agent of the Company against expenses incurred by him or her in
connection with any action, suit, or proceeding to which such person is named a
party by reason of having acted or served in such capacity. Negligent
performance or misconduct would not be covered by indemnification unless a court
of competent jurisdiction decided otherwise. In so far as indemnification for
liabilities arising under the Securities Act may be permitted to directors,
officers, or persons controlling the Company pursuant to the foregoing
provisions, the Company has been informed that in the opinion of the Securities
and Exchange Commission, such indemnification is against public policy as
expressed in the Securities Act and is therefore unenforceable.
In the event that a claim for indemnification against such liabilities
(other than payment by the company of expenses incurred or paid by a director,
officer, or controlling person of the company in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the company will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy, as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
To date, we have not entered into any indemnification agreements with our
officer and director. Indemnification agreements may require a company, among
other things, to indemnify its officers and directors against certain
liabilities (other than liabilities arising from willful misconduct of a
culpable nature) that may arise by reason of their status or service as
directors or officers. Such agreements may require a company to advance the
expenses of its directors or officers incurred as a result of any proceeding
against them as to which they could be indemnified. In addition, such agreements
may require a company to obtain directors' and officers' insurance if available
on reasonable terms. We reserve the right to enter into indemnification
agreements in the future with our directors and officers
22
<PAGE>
CERTAIN TRANSACTIONS
During the past two years, we have not entered into a transaction with a
value in excess of $60,000 with a director, officer or beneficial owner of 5% or
more of the Company's capital stock.
PRINCIPAL STOCKHOLDERS
The following table sets forth the beneficial ownership of the shares of
voting stock of Adriatic, as of December 31, 2000 by: (i) each person who is
known by Adriatic to beneficially own more than 5% of common stock; (ii)
Adriatic's Chief Executive Officer, (iii) each director, and (iv) all directors
and executive officers of Adriatic as a group.
<TABLE>
<CAPTION>
Shares Beneficially Shares to be Beneficially
Name and Owned Prior to Offering Owned After Offering
Address of ----------------------------- ----------------------------
Beneficial Owner(s) Number Percent(1) Number Percent(2)
------------------- ------ ------- ------ -------
<S> <C> <C> <C> <C>
5% Stockholder:
G.M. Capital Partners, Ltd.(3) 1,000,000 47.8% 1,000,000 14.1%
Finneran Investments, Ltd.(4) 175,000 8.4% 175,000 2.5%
Noble Holdings Corporation(5) 175,000 8.4% 175,000 2.5%
Tiger-Eye Investments (Cayman) Ltd.(6) 175,000 8.4% 175,000 2.5%
Huda Limited(7) 175,000 8.4% 175,000 2.5%
Tamarin Investment Group, Inc.(8) 175,000 8.4% 175,000 2.5%
Kallur Enterprises Limited(9) 125,000 6.0% 125,000 1.8%
Executive Officers and Directors:
Robert Knight(10) 50,000 2.4% 50,000 <1%
Director/President/Secretary
All executive officers and
directors as a group 50,000 2.4% 50,000 <1%
</TABLE>
----------
(1) These percentage calculations are based on 2,090,000 shares, which are
outstanding prior to this offering (including shares that have been paid
for in full, but not issued) as of June 30, 2000.
(2) These percentage calculations are based on 7,090,000 shares outstanding
after this offering as of June 30, 2000.
(3) The address for G.M. Capital Partners, Ltd. is Place de St.-Gervaise 1,
Geneva 1 Switzerland CH 1211 (Mark Hartman and Martin Stuiki, shareholders;
J.A. Michie, North American managing director and Mark Angst, director,
have the right to vote and sell shares).
(4) The address for Finneran Investments Ltd. is Columbus Centre Building,
First Floor, Road Town, Tortola, BVI (Ian Fleming, managing director and
shareholder).
(5) The address for Noble Holdings Corporation is P.O. Box 268, Bank of Nova
Scotia Building, George Town, Grand Cayman, Cayman Islands BWI (Bill
Meadows,managing director and shareholder).
(6) The address for Tiger-Eye Investments (Cayman) Ltd. is P.O. Box 884, Bank
of Nova Scotia Building, George Town, Grand Cayman, Cayman Islands, BWI
(Simon Stephens, officer, Keith Baldwin, director/shareholder).
(7) The address for Huda Limited is Herald House, 22 Hill Street, St. Helier,
Jersey JE4 9XB Channel Islands (Shiraz Ali Huda, managing
director/shareholder).
(8) The address for Tamarin Investments Group, Inc. is 22 Hill Street, St.
Helier Jersey, JE4 9XB Channel Islands (Mark Siegel, managing director/
shareholder).
(9) The address for Kallur Enterprises Limited is Austrasse 39, FL-9490 Vaduz,
Principality of Liechtenstein (Klaus Boehler, managing
director/shareholder).
(10) The shares issued to Mr. Knight are registered in the name of Knight
Financial Ltd., a private Delaware corporation controlled by Mr. Knight.
The address for Mr. Robert Knight is 114 W. Magnolia Street, Suite 446,
Bellingham, WA 98225.
23
<PAGE>
DESCRIPTION OF SECURITIES.
Common Stock
General. Adriatic's authorized capital stock consists of 25,000,000 shares
of common stock, $.001 par value per share. As of December 31, 2000, there were
2,090,000 shares issued and outstanding held by 46 holders of record. All shares
of common stock currently outstanding are validly issued, fully paid and
non-assessable. Furthermore, all shares which are the subject of this
prospectus, when issued and paid for pursuant to this offering, will be validly
issued, fully paid and non-assessable. At the completion of this offering, the
present stockholders of Adriatic as of December 31, 2000 will own beneficially
29.4% of shares outstanding if all of the shares offered in this respect are
sold.
Voting Rights. Each share of common stock entitles the holder thereof to
one non-cumulative vote, either in person or by proxy, at meetings of
stockholders. Since holders of common stock do not have cumulative voting
rights, holders of more than fifty percent (50%) of the issued and outstanding
shares of common stock can elect all of the directors of Adriatic.
Dividend Policy. All shares of common stock are entitled to participate
ratably in dividends when and as declared by Adriatic's Board of Directors out
of the funds legally available therefor. Any such dividends may be paid in cash,
property or additional shares of common stock. Adriatic has not paid any
dividends since its inception and presently anticipates that all earnings, if
any, will be retained for development of Adriatic's business and that no
dividends on the shares of common stock will be declared in the foreseeable
future. Payment of future dividends will be subject to the discretion of the
Company's Board of Directors and will depend upon, among other things, future
earnings, the operating and financial condition of the Company, its capital
requirements, general business conditions and other pertinent facts. Therefore,
there can be no assurance that any dividends on the common stock will be paid in
the future. See "Dividend Policy."
Miscellaneous Rights and Provisions. Stockholders of common stock have no
preemptive or other subscription rights, conversion rights, redemption or
sinking fund provisions. In the event of liquidation or dissolution of Adriatic,
whether voluntary or involuntary, each share of common stock is entitled to
share ratably in any assets available for distribution to holders of the equity
of the Company after satisfaction of all liabilities, subject to the rights of
holders of preferred stock, if any such preferred stockholders should exist at
the time of such liquidation or dissolution.
Private Placement. In September 1998, Adriatic offered 1,000,000 shares of
common stock, $0.001 par value, at $0.05 per share. This offering expired
without the sale of any shares. In February of 1999, the Company sold a total of
40,000 shares of common stock, $0.001 par value, at $0.05 per share pursuant to
Rule 504 of Regulation D of the Securities Act, to 40 investors for a total
consideration of $2,000.
In September 1998, Adriatic sold 1,000,000 shares of common stock, $0.001
par value, at $0.01 per share pursuant to Rule 504 of Regulation D of the
Securities Act, to 6 investors for a total consideration of $10,000.
In July 1998, Adriatic sold 1,000,000 restricted shares of common stock,
$0.001 par value, at $0.001 per share to one investor pursuant to Rule 144 of
the Securities Act, for a total consideration of $1,000.
24
<PAGE>
In July 1998, Adriatic sold 50,000 restricted shares of common stock,
$0.001 par value, at $0.001 per share to one investor pursuant to Rule 144 of
the Securities Act, for a total consideration of $50.
Transfer Agent and Registrar
The transfer agent and registrar for Adriatic's common stock is Liberty
Transfer Co., 191 New York Avenue, Huntington, NY 11743-2711.
Plan of Distribution
This offering is a best-efforts, no-minimum offering, and will not be
underwritten nor will any underwriter be engaged for the marketing, distribution
or sale of any shares registered in this prospectus. We plan to close the
offering on December 31, 2000. However, we reserve the right to terminate the
Offering without notice ant any time piror to the sale of all shares of Common
Stock offered in the prospectus. We may sell shares from time to time in one or
more transactions at a price of $.10 per share. Sales may be made to purchasers
directly by us or, alternatively, we may offer the shares through dealers,
brokers or agents, who may receive compensation in the form of concessions or
commissions. Any dealers, brokers or agents that participate in the distribution
os shares may be deemed to be underwriters, and any profits on the sale of the
shares by them and any discounts or commissions received by any such dealers,
brokers for agents may be deemed to be underwriting discounts and commissions
under the Securities Act.
The shares will be offered by our executive officers (currently Mr. Knight
is the only officer) to prospective investors. Pursuant to Rule 3a-4-1 of the
Exchange Act of 1934, Mr. Knight will not be deemed a "broker" as defined in the
Exchange Act of 1934 by his participation in the offering.
To comply with the securities laws of certain jurisdictions, as applicable,
the common stock may be offered and sold only through registered or licensed
brokers or dealers. In addition, the common stock may not be offered or sold in
certain jurisdictions unless they are registered or otherwise comply with the
applicable securities laws of such jurisdictions by exemption, qualification or
otherwise.
25
<PAGE>
MARKET FOR COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
To date, there is no public market for Adriatic's common stock and no
assurance can be given that a market for the shares will develop, or if a market
does develop, that it will be sustained following the completion of this
offering. Therefore, investors of the Company may be unable to liquidate their
investment for any reason. See "Risk Factors." If such a market did develop,
sales of substantial amounts of the common stock in the public market, or the
perception that such sales may occur, could adversely affect the market price of
the common stock from time to time in the public market and could impair our
ability to raise additional capital through the sale of equity securities in the
future. As of the date of this prospectus we have 46 shareholders of record.
SHARES ELIGIBLE FOR FUTURE SALE
To date, Adriatic has 2,090,000 shares of common stock outstanding. Upon
completion of this offering, Adriatic will have an additional 5,000,000 shares
of common stock outstanding for a total of 7,090,000 shares of common stock
outstanding. The 5,000,000 shares of common stock offered hereunder will be
freely tradable without restriction or the need for further registration under
the Securities Act, unless such shares are held by "affiliates" of Adriatic, as
that term is defined in Rule 144 of the Securities Act. Of the 2,090,000 shares
of common stock currently outstanding, 1,040,000 shares are freely tradable
without restriction or the need for further registration under the Securities
Act. The remaining 1,050,000 shares are held by affiliates of Adriatic and are
"restricted securities," as that term is defined under Rule 144, promulgated
under the Securities Act and will continue to be restricted after this offering.
The restricted securities will become freely tradable if they are subsequently
registered under the Securities Act or to the extent permitted by Rule 144 or
some other exemption from registration under the Securities Act. However, other
than the shares being registered hereunder, we have not granted any registration
rights with regard to any additional shares of common stock. Furthermore, none
of the restricted shares are currently eligible for resale under Rule 144
without regard to volume limitations. Nonetheless, all 1,050,000 restricted
shares will become eligible for sale pursuant to Rule 144 (subject to volume
limitations) upon the expiration of the two-year holding period beginning July
10, 1998, for such restricted shares held by Adriatic's affiliates.
No prediction can be made as to the effect, if any, that sales of shares in
the public market of Adriatic's common stock, or even the availability of such
shares for sale, may have on the market prices of the common stock prevailing at
any point in time in the future. Sales of shares of common stock by existing
stockholders in the public market, or the availability of such shares for sale,
could adversely affect the market price of the common stock. Such an adverse
effect on the common stock could impair the Company's ability to raise capital
through the sale of its equity securities. See "Risk Factors."
LEGAL MATTERS
The validity of the issuance of the common stock offered hereby will be
passed upon for Adriatic by the law firm of Beckman, Millman & Sanders, LLP, 116
John Street, Suite 1313, New York, New York 10038.
26
<PAGE>
EXPERTS
Spicer, Jeffries & Co., independent certified public accountants, have
audited our financial statements from July 9, 1998 (inception) to December 31,
1999, as set forth in their report, included in this prospectus and registration
statement. Our financial statements are included in this prospectus and
registration statement in reliance on their report, given on their authority as
experts in accounting and auditing.
AVAILABLE INFORMATION
Prior to filing this prospectus, we have not been required to deliver
annual reports. However, once we become a reporting company, we shall deliver
annual reports to securities holders as required by the Securities Exchange Act
of 1934, as amended (the "Exchange Act"). Also, we shall deliver annual reports
to securities holders as required by the rules or regulations of any exchange
upon which our shares may be traded. If we are not required to deliver annual
reports, it is not likely that we will go to the expense of producing and
delivering such reports. If we are required to deliver annual reports, such
reports will contain audited financial statements as required.
Prior to the filing of this prospectus, we have not filed reports with the
Commission. Once we become a reporting company, management anticipates that
Forms 3, 4, 5, 10-KSB, 10-QSB, 8-K and Schedules 13D along with appropriate
proxy materials will have to be filed as they come due. If we issue additional
shares, then we may file additional registration statements for those shares.
The public may read and copy any materials Adriatic files with the
Commission at the Commission's Public Reference Room at 450 Fifth Street, N.W.,
Washington, D.C. 20549. The public may obtain information on the operation of
the Public Reference Room by calling the Commission at 1-800-SEC-0330. The
Commission maintains an Internet site that contains reports, proxy and
information statements, and other information regarding issuers that file
electronically with the Commission. The Internet address of the Commission's Web
site is http://www.sec.gov.
27
<PAGE>
ADRIATIC HOLDINGS LIMITED
(A Company in the Development Stage)
FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1999 AND
THE PERIOD FROM INCEPTION
(JULY 9, 1998) THROUGH
DECEMBER 31, 1998
<PAGE>
ADRIATIC HOLDINGS LIMITED
(A Company in the Development Stage)
TABLE OF CONTENTS
Page
Independent Auditors' Report 1
Balance Sheets 2
Statement of Operations 3
Statement of Changes in Shareholders' Deficit 4
Statement of Cash Flows 5
Notes to Financial Statements 6-10
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Shareholders
Adriatic Holdings Limited
(A Company in the Development Stage)
We have audited the accompanying balance sheets of Adriatic Holdings Limited (a
Company in the Development Stage) as of December 31, 1999 and 1998, and the
related statements of operations, changes in shareholders' deficit, and cash
flows for the year ended December 31, 1999 and the period from inception (July
9, 1998) through December 31, 1998. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based upon our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining on a test basis evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion the financial statements referred to above present fairly, in all
material respects, the financial position of Adriatic Holdings Limited (a
Company in the Development Stage) as of December 31, 1999 and 1998, and the
results of its operations and its cash flows for the year ended December 31,
1999 and the period from inception (July 9, 1998) through December 31, 1998, in
conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 6 to the
financial statements, the Company has suffered losses from operations and has a
working capital deficiency that raise substantial doubt about its ability to
continue as a going concern. Management's plans in regard to these matters are
described in Note 5. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
Denver, Colorado SPICER, JEFFRIES & CO.
March 10, 2000
<PAGE>
ADRIATIC HOLDINGS LIMITED
(A Company in the Development Stage)
BALANCE SHEETS
DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
ASSETS 1999 1998
---------- ----------
<S> <C> <C>
CURRENT ASSET - Cash $ 82 $ 46
DEFERRED OFFERING COSTS (Note 1) 17,921 --
---------- ----------
$ 18,003 $ 46
========== ==========
LIABILITIES & SHAREHOLDERS' DEFICIT
CURRENT LIABILITIES
Accounts payable $ 17,921 $ --
Due to shareholder 8,103 --
---------- ----------
Total current liabilities 26,024 --
---------- ----------
COMMITMENTS AND CONTINGENCIES (Notes 4 and 6)
SHAREHOLDERS' DEFICIT (Note 2):
Common stock, $.001 par value, 25,000,000 shares
authorized; 2,090,000 and 2,050,000 shares issued and
outstanding, respectively 2,090 2,050
Additional paid-in capital 14,067 10,299
Deficit accumulated during the development stage (24,178) (12,303)
---------- ----------
Total Shareholders' Deficit (8,021) 46
---------- ----------
$ 18,003 $ 46
========== ==========
</TABLE>
The accompanying notes are an integral part of these statements. -2-
<PAGE>
ADRIATIC HOLDINGS LIMITED
(A Company in the Development Stage)
STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1999 AND THE PERIOD FROM INCEPTION
(JULY 9, 1998) THROUGH DECEMBER 31, 1998
Period from
inception
(July 9, 1998)
through
December 31,
1999 1998 1999
----------- ----------- -----------
REVENUE $ -- $ -- --
EXPENSES: (Note 3)
General and Administrative 176 4,444 4,620
License fee 8,103 2,000 10,103
Professional fees 1,500 2,550 4,050
Management fees -- 1,050 1,050
Rent expense 2,096 2,259 4,355
----------- ----------- -----------
Total expenses 11,875 12,303 24,178
----------- ----------- -----------
NET LOSS $ (11,875) $ (12,303) $ (24,178)
=========== =========== ===========
BASIC AND FULLY DILUTED LOSS PER
COMMON SHARE $ (.01) $ (.01) $ (.02)
=========== =========== ===========
WEIGHTED-AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 2,083,333 1,623,429 1,934,277
=========== =========== ===========
The accompanying notes are an integral part of these statements. -3-
<PAGE>
ADRIATIC HOLDINGS LIMITED
(A Company in the Development Stage)
STATEMENTS OF CHANGES IN SHAREHOLDERS' DEFICIT
YEAR ENDED DECEMBER 31, 1999 AND THE PERIOD FROM INCEPTION (JULY 9, 1998)
THROUGH DECEMBER 31, 1998
<TABLE>
<CAPTION>
Deficit
Accumulated
Additional during the Total
Common Stock Paid - in Development Shareholders'
Shares Amount Capital Stage Deficit
--------- --------- ---------- ----------- -------------
<S> <C> <C> <C> <C> <C>
INCEPTION, July 9, 1998 -- $ -- $ -- $ -- $ --
Issuance of common stock,
July 22, 1998 50,000 50 -- -- 50
Issuance of common stock,
July 22, 1998 1,000,000 1,000 -- -- 1,000
Issuance of common stock,
September 8, 1998 1,000,000 1,000 9,000 -- 10,000
Contribution of capital (Note 3) -- -- 1,299 -- 1,299
Net loss -- -- -- (12,303) (12,303)
--------- --------- --------- --------- ---------
BALANCES,
December 31, 1998 2,050,000 2,050 10,299 (12,303) 46
Issuance of common stock
February 1, 1999 40,000 40 1,960 -- 2,000
Contribution of capital (Note 3) -- -- 1,808 -- 1,808
Net loss -- -- -- (11,875) (11,875)
--------- --------- --------- --------- ---------
BALANCES,
December 31, 1999 2,090,000 $ 2,090 $ 14,067 $ (24,178) $ (8,021)
========= ========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these statements. -4-
<PAGE>
ADRIATIC HOLDINGS LIMITED
(A Company in the Development Stage)
STATEMENTS OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1999 AND THE PERIOD FROM INCEPTION
(JULY 9, 1998) THROUGH DECEMBER 31, 1998
<TABLE>
<CAPTION>
Period from
Inception
(July 9, 1998)
through
December 31,
1999 1998 1999
-------- -------- ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(11,875) $(12,303) $(24,178)
Adjustment to reconcile net loss to net cash provided by
(used in) operating activities:
Rental expense contributed by shareholder 1,808 1,299 3,107
Increase in current liabilities 17,921 -- 17,921
-------- -------- --------
Net cash provided by (used in) operating activities 7,854 (11,004) (3,150)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock 2,000 11,050 13,050
Increase in due to shareholder 8,103 -- 8,103
Increase in deferred offering costs (17,921) -- (17,921)
-------- -------- --------
Net cash provided by (used in) financing activities (7,818) 11,050 3,232
-------- -------- --------
NET INCREASE IN CASH 36 46 82
CASH, at beginning of period 46 -- --
-------- -------- --------
CASH, at end of period $ 82 $ 46 $ 82
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these statements. -5-
<PAGE>
ADRIATIC HOLDINGS LIMITED
(A Company in the Development Stage)
NOTES TO FINANCIAL STATEMENTS
NOTE-1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and business
Adriatic Holdings Limited (the "Company") was incorporated in the state of
Nevada on July 9, 1998 and is in the development stage. Activities through
December 31, 1999 include organization of the Company, raising equity capital
and acquiring a license agreement as discussed below. The Company plans to
become a provider of quality electrical products to the commercial and
industrial electrical industry in the United States and Canada.
Cash flows
For purposes of reporting cash flows, cash includes those investments which are
short-term in nature (three months or less to original maturity), are readily
convertible to cash, and represent insignificant risk of changes in value.
Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenue and expenses during the reporting period. Actual
results could differ from those estimates.
Deferred offering costs
Offering costs represent costs incurred to December 31, 1999 in connection with
the proposed public offering (see Note 5). In the event that such offering is
successful, costs incurred as of December 31, 1999 and additional costs incurred
subsequent to that date will be charged against the proceeds of the offering. If
the offering is not successful, the costs will be charged to operations.
Fair value of financial instruments
The carrying amount of cash and accounts payable approximates fair value.
Net loss per share of common stock
Net loss per share of common stock is based on the weighted average number of
shares of common stock outstanding during the period.
-6-
<PAGE>
ADRIATIC HOLDINGS LIMITED
(A Company in the Development Stage)
NOTES TO FINANCIAL STATEMENTS
NOTE-2 SHAREHOLDERS' EQUITY
The Company has the authority to issue 25,000,000 shares of common stock $0.001
par value. The Company issued 1,000,000 shares of common stock to one of its
founders for $1,000 and 50,000 shares of common stock to another of its founders
for services rendered valued at $50 in July, 1998. The Company issued 1,000,000
shares of common stock in connection with a private offering for $10,000 in
September, 1998.
NOTE-3 RELATED PARTY TRANSACTIONS
For the period ended December 31, 1998, the Company paid $4,950 in office
expenses and $1,050 in management fees to its original founding shareholders. In
addition, a shareholder of the Company contributed office facilities valued at
$1,808 and $1,299 for the year ended December 31, 1999 and the period from
inception (July 9, 1998) through December 31, 1998, respectively.
NOTE-4 LICENSING AGREEMENT
On August 15, 1998, the Company acquired the rights to manufacture and
distribute an underground electrical junction box for a period of 10 years. The
box patent is owned by J.A. Industries (Canada) Inc. ("J.A. Canada"). Pursuant
to the license agreement the Company must pay $5.00 per junction box sold or a
minimum fee of $10,000 per year for the life of the license. In connection with
the agreement, J.A. Canada agreed not to compete, directly or indirectly, with
the Company's marketing or distribution of the junction boxes for a period of
twenty-four months. The Company has not yet begun the manufacturing or selling
of the junction boxes.
NOTE-5 PROPOSED PUBLIC OFFERING
The Company intends to make a public offering of its common stock for the sale
of a maximum of 5,000,000 shares of common stock at $0.10 per share.
NOTE-6 CONTINGENCIES
As discussed in Note 4, the Company has the right to manufacture and distribute
an underground electrical junction box patented by J.A. Canada. J.A. Canada is
currently the defendant in a lawsuit with regards to its product. The statement
of claims, among other things, alleges that the Canadian patent issued on the
electrical box is invalid. If the plaintiffs are successful in this action, the
patent would be declared invalid and would not provide the Company with
protection from competition. If the patent is declared invalid, the Company has
the option to cancel the licensing agreement without affecting the manufacturing
of the product.
-7-
<PAGE>
ADRIATIC HOLDINGS LIMITED
(A Company in the Development Stage)
NOTES TO FINANCIAL STATEMENTS
NOTE-6 CONTINGENCIES (continued)
Currently, the plaintiff in the lawsuit is manufacturing a similar box to the
J.A. Canada box. J.A. Canada, through its lawyers, threatened litigation with
the plaintiffs if they did not cease and desist producing a copy of the J.A.
Canada junction box. The plaintiffs took the position that the box did not
infringe on the J.A Canada junction box and initiated the lawsuit to invalidate
the patent held by J.A. Canada. It is J.A. Canada's position that in the event
the J.A. Canada patent on the junction box is successfully invalidated by the
plaintiffs in the lawsuit, then the design of the junction box belongs in the
public domain and therefore no patent could be issued to anyone on this specific
design. Furthermore, the current plaintiffs would be able to continue to
manufacture their junction box whose design would also belong in the public
domain.
If the patent is declared invalid by the courts, the Company will not assert any
exclusive rights to the patent. The Company will be in a position to cancel its
licensing agreement with J.A. Canada and the Company will be able to manufacture
the junction box using the J.A. Canada design without any recourse from J.A.
Canada. As the design will belong to the public domain and no patent will be
available on the J.A. Canada junction box design, the Company will or may have
to compete directly with other manufacturers of the J.A. Canada junction box
design.
The Company has suffered recurring losses from operations and has a working
capital deficiency of $8,021 that raise substantial doubt about its ability to
continue as a going concern. The continuation of the Company as a going concern
is dependent upon the Company attaining and maintaining profitable operations
and raising additional capital. Management's plans in this regard is to raise
additional capital through an equity offering. The financial statements do not
include any adjustment relating to the recovery and classification of recorded
asset amounts or the amount and classification of liabilities that might be
necessary should the Company discontinue operations.
NOTE-7 INCOME TAX CARRYFORWARDS
The Company has net operating loss carryforwards for financial and income tax
reporting of approximately $24,000 of which approximately $12,000 expires in
2013 and the remainder in 2014.
The deferred tax assets that result from such operating loss carryforwards of
approximately $3,600 and $1,800 at December 31, 1999 and 1998, respectively,
have been fully reserved in the accompanying financial statements. During the
year ended December 31, 1999 and the period from inception (July 9, 1998)
through December 31, 1998, the valuation allowance established against the net
operating loss carryforwards increased by $1,800, respectively.
-8-
<PAGE>
ADRIATIC HOLDINGS LIMITED
(A Development Stage Company)
FINANCIAL STATEMENTS
For the Year Ended
December 31, 2000 and 1999 and
The Period from Inception
(July 9, 1998 Through
December 31, 2000
(unaudited)
<PAGE>
ADRIATIC HOLDINGS LIMITED
TABLE OF CONTENTS
Page
----
Financial Statements
Balance Sheet 1
Statement of Operations 2
Statement of Cash Flows 3
Statement of Shareholder's Equity 4
Notes to the Financial Statement 5
<PAGE>
ADRIATIC HOLDINGS LIMITED
(A Development Stage Company)
Balance Sheet (unaudited)
As at December 31, 1999 and December 31, 2000
Notes December 31/00 December 31/99
===== ==============================
ASSETS
Current Assets - Cash $ 214 82
Deferred Offering Costs 17,921 17,921
TOTAL ASSETS $ 18,135 18,003
=============================
LIABILITIES
Current Liabilities $ 29,037 17,921
Long Term Liabilities 17,194 8,103
TOTAL LIABILITIES $ 46,231 26,024
=============================
SHAREHOLDER'S EQUITY (DEFICIT) 1,2
Common Stock, $0.001 Par Value
Authorized 25,000,000 Shares
Issued and Outstanding
December 31, 1999-2,090,000 $ 2,090 2,090
December 31, 2000-2,090,000
Additional Paid in Capital 14,967 14,067
Retained Earnings (24,178) (12,303)
Current Earnings (20,975) (11,875)
TOTAL SHAREHOLDERS' EQUITY (DEFICIT) $ (28,096) (8,021)
-----------------------------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 18,135 18,003
=============================
The Accompanying Notes Are An Integral Part of These Financial Statements
Page 1
<PAGE>
ADRIATIC HOLDINGS LIMITED
(A Development Stage Company)
Statement of Operations (unaudited)
<TABLE>
<CAPTION>
From Period of
For The Year Ended Inception
December 31, (July 9, 1998)
-------------------------------- through
Notes 2000 1999 December 31, 2000
===============================================================
<S> <C> <C> <C>
Revenue -- --
=====================================================
General & Administrative
Expenses 20,975 11,875 45,153
=====================================================
Total Expenses 20,975 11,875 45,153
Net (Loss) (20,975) (11,875) (45,153)
=====================================================
Net (Loss) per Common
Share 1 (0.01) (0.01) (0.02)
=====================================================
Weighted Average
Number of Common
Shares Outstanding 2 2,090,000 2,083,333 1,975,297
=====================================================
</TABLE>
The Accompanying Notes Are An Integral Part of These Financial Statements.
Page 2
<PAGE>
ADRIATIC HOLDINGS LIMITED
(A Development Stage Company)
Cash Flow (unaudited)
<TABLE>
<CAPTION>
From Period
of Inception
(July 9, 1998)
For The Year Ended December 31, through
-------------------------------- December 31,
Notes 2000 1999 2000
======= =================================================
<S> <C> <C> <C>
Net (Loss) $ (20,975) (11,875) (45,153)
=================================================
Adjustment To Reconcile Net Loss To Net Cash --
Used In Operating Activities
Rental expense Contributed by Shareholder 900 1,808 4,007
Increase In Current Liabilities 11,116 17,921 29,037
=================================================
Net Cash Used In Operating Activities (8,959) 7,854 (12,109)
Cash Flows From Financing Activities
Issuance of Common Stock 2 -- 2,000 13,050
=================================================
Increase in due to Shareholder 9,091 8,103 17,194
=================================================
Increase in deffered offering costs (17,921) (17,921)
=================================================
Net Cash Provided by Financing Activities $ -- (7,818) 12,323
=================================================
Net Increase (Decrease) in Cash $ 132 36 214
Cash at Beginning of Period 82 46 0
Cash at End of Period $ 214 82 214
=================================================
</TABLE>
The Accompanying Notes Are An Integral Part of These Financial Statements.
Page 3
<PAGE>
ADRIATIC HOLDINGS LIMITED
(A Development Stage Company)
Shareholders' Equity (unaudited)
For the Year Ended December 31, 2000
<TABLE>
<CAPTION>
Number of Capital Paid
Shares Common In excess of Accumulated
Notes Common Stock Par Value Deficit Total
======= ==============================================================================
<S> <C> <C> <C> <C> <C> <C>
Balance at July 9, 1998 2 -- $ -- $ -- $ -- $ --
July 22, 1998 issue 1,000,000
shares of $0.001 par value
common stock for cash at $0.001
per share 1,000,000 $ 1,000 $ -- $ -- $ 1,000
July 22, 1998 issue 50,000
shares of $0.001 par value
common stock for services rendered
at $0.001 per share 50,000 $ 50 $ -- $ -- $ 50
September 8, 1998 issue 1,000,000
shares of $0.001 par value
common stock for cash at $0.01
per share 1,000,000 $ 1,000 $ 9,000 $ -- $ 10,000
Contribution of Capital $ 1,299 $ 1,299
Net (Loss) -- $ -- $ -- $(12,303) $(12,303)
==============================================================================
Balance at December 31, 1998 2,050,000 $ 2,050 $10,299 $(12,303) $ 46
==============================================================================
February 1, 1999 issue 40,000
shares of $0.001 par value
common stock for cash
at $0.05
per share 40,000 $ 40 $ 1,960 $ 2,000
Contributions of Capital $ 1,808 $ 1,808
Net (Loss) -- $ -- $ -- $(11,875) $(11,875)
==============================================================================
Balance at December 31, 1999 2,090,000 $ 2,090 $14,067 $(24,178) $ (8,021)
==============================================================================
Contribution of Capital $ 900 $ 900
Net (Loss) -- $ -- $ -- $(20,975) $(20,975)
==============================================================================
Balance at December 31, 2000 2,090,000 2,090 14,967 (45,153) $(28,096)
==============================================================================
</TABLE>
The Accompanying Notes Are An Integral Part of These Financial Statements
Page 4
<PAGE>
ADRIATIC HOLDINGS LIMITED
(A Development Stage Company)
Notes to Financial Statements
At December 31, 2000
(unaudited)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and business
Adriatic Holdings Limited (the "Company") was incorporated in the state of
Nevada on July 9, 1998 and is in the development stage. Activities through
December 31, 2000 include organization of the Company and the raising of equity
capital. The Company plans to become a provider of quality electrical products
to the commercial and industrial electrical industry.
In the opinion of management all adjustments (which include only normal
reccuring adjustments) necessary to present fairly the financial positon,
results of operations, cash flows and changes in shareholders' equity at
December 31, 2000 and for all periods presented have been made.
Cash flows
For purposes of reporting cash flows, cash includes those investments which are
short-term in nature (three months or less to original maturity), are readily
convertible to cash, and represent insignificant risk of changes in value.
Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenue and expenses during the reporting period. Actual
results could differ from those estimates.
Fair value of financial instruments
The carrying amounts of cash and current and long term liabilities approximates
fair value.
Net loss per share of common stock
Net loss per share of common stock is based on the weighted average number of
shares of common stock outstanding during the period.
NOTE 2 - SHAREHOLDERS' EQUITY
The Company has the authority to issue 25,000,000 shares of common stock $0.001
par value. The Company issued 1,000,000 shares of common stock to one of its
founders for $1,000 and 50,000 shares of common stock to another of its founders
for $50 in July, 1998. The Company issued 1,000,000 shares of common stock in
connection with an additional private offering for $10,000 in September, 1998.
In February 1999 the Company issued 40,000 shares of common stock in connection
with an additional private placement offering for $2,000.
NOTE 3 - LICENSING AGREEMENT
On August 15, 1998, the Company acquired the right to manufacture and distribute
an underground electrical junction box. The box patent is owned by J.A.
Industries (Canada) Inc.("J.A. Canada). Pursuant to the licensie agreement the
Company must pay $5.00 per junction box sold or a minimum fee of $10,000 per
year for the life of the license. In connection with the agreement, J.A. Canada
agreed not to compete, directly or indirectly, with the Company's marketing or
distribution of the junction boxes for a period of twenty-four months. the
Company has not yet begun the manufacturing or selling of the junction boxes.
Page 5
<PAGE>
ADRIATIC HOLDINGS LIMITED
(A Development Stage Company)
Notes to Financial Statements
At December 31, 2000
(unaudited)
NOTE 4 - CONTINGENCIES
As discussed in Note 3, the Company has the right to manufacture and distribute
an underground electrical junction box patented by J.A. Canada. J.A. Canada is
currently the defendant in a lawsuit with regards to its product. The statement
of claims, among other things, alleges that the Canadian patent issued on the
electrical box is invalid. If the plaintiffs are successful in this action, the
patent would be declared invalid and would not provide the Company with
protection from competition. If the patent is declared invalid, the Company has
the option to cancel the licensing agreement without affecting the manufacturing
of the product.
Currently, the plaintiff in the lawsuit is manufaturing a similar box to the
J.A. Canada box. J.A. Canada, through its laywers, threatened litigation with
the plaintiffs if they did not cease and desist producing a copy of the J.A.
Canada junction box. The plaintiffs took the position that the box did not
infringe on the J.A. Canada junction box and initiated the lawsuit to invalidate
the patent held by J.A. Canada. It is J.A. Canada's position that in the event
the J.A. Canada patent on the junction box is successfully invalidated by the
plaintiffs in the lawsuit, then the design of the junction box belongs in the
public domain and therefore no patent could be issued to anyone on this specific
design. Furthermore, the current plaintiffs would be able to coontinue to
manufacture their junction box, whose design would also belong in the public
domain.
If the patent is declared invalid by the courts, the Company will not assert any
exclusive rights to the patent. The Company will be in a position to cancel its
licensing agreement with J.A. Canada and will be able to manufacture the
junction box using the J.A. Canada design without any recourse from J.A. Canada.
As the design will belong to the public domain and no patent will be available
on the J.A. junction box design, the Company will or may have to compete
directly with other manufacturers of the J.A. Canada junction box design.
The Company has suffered recurring losses from operations and has a working
capital deficiency of $28,096 that raise substantial doubt about its ability to
continue as a going concern. The continuation of the Company as a going concern
is dependent upon the Company attaining and maintaining profitable operations
and raising additional capital. Management's plans in this regard is to raise
additional capital through an equity offering. The financial statements do not
include any adjustment relating to the recovery and classification of recorded
asset amounts or the amount and classification of liabilities that might be
necessary should the Company discontinue operations.
Page 6
<PAGE>
TABLE OF CONTENTS
Page
----
Prospectus Summary .................................................... 1
Risk Factors .......................................................... 5
Use of Proceeds ....................................................... 10
Dilution .............................................................. 11
Dividend Policy ....................................................... 12
Capitalization ........................................................ 13
Selected Financial Data ............................................... 14
Management's Discussion and Analysis of Financial Condition
or Plan of Operation ............................................... 15
Business .............................................................. 17
Management ............................................................ 20
Certain Transactions .................................................. 23
Principal Stockholders ................................................ 23
Description of Securities ............................................. 24
Market for Common Equity and Related
Stockholder Matters ................................................ 26
Shares Eligible for Future Sale
Legal Matters ......................................................... 26
Experts ............................................................... 27
Available Information ................................................. 27
Index to Financial Statements ......................................... 28
5,000,000 Shares
ADRIATIC HOLDINGS LIMITED
Common Stock
-----------------
PROSPECTUS
-----------------
DATED _________, 2000
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item. 24 Indemnification of Directors and Officers
See "Management - Limitation of Liability and Indemnification."
Item 25. Other Expenses of Issuance and Distribution
The estimated expenses in connection with the distribution of the shares
registered hereby, are set forth in the following table:
SEC registration fee ................................. $ 132
Legal fees and expenses .............................. $5,000
Accounting fees and expenses ......................... $1,500
Blue Sky fees and expenses ........................... $ 500
Transfer agent fees and expenses ..................... $ 400
Total ........................................... $7,532
Item 26. Recent Sales of Unregistered Securities
In September 1998, Adriatic offered 1,000,000 shares of common stock,
$0.001 par value, at $0.05 per share. This offering expired without the sale of
any shares. In February of 1999, the Company sold a total of 40,000 shares of
common stock, $0.001 par value, at $0.05 per share pursuant to Rule 504 of
Regulation D of the Securities Act, to 40 investors for a total consideration of
$2,000 net of commission and offering costs. The shares were issued as follows:
PURCHASER DATE NUMBER OF
COMMON SHARES
Melanie Lewis 2/1/99 1,000
Frank Perrozzo 2/1/99 1,000
Sherrye Sailes 2/1/99 1,000
Sheyne Almond 2/1/99 1,000
Sheyanne Almond 2/1/99 1,000
Rheece Metcalfe 2/1/99 1,000
Raelyn Metcalfe 2/1/99 1,000
Cathryn Newman 2/1/99 1,000
Gary Newman 2/1/99 1,000
Mitchell Newman 2/1/99 1,000
Nicholas Newman 2/1/99 1,000
Alexander J. Michie 2/1/99 1,000
Nichole P. Michie 2/1/99 1,000
Mathew R.K. Michie 2/1/99 1,000
Carey Linde 2/1/99 1,000
Hans Drunkenmolle 2/1/99 1,000
Pat Michie 2/1/99 1,000
Sandy Michie 2/1/99 1,000
Dene Knight 2/1/99 1,000
Lorraine Knight 2/1/99 1,000
Doug Knight 2/1/99 1,000
Kathy Knight 2/1/99 1,000
Darcy Knight 2/1/99 1,000
Tyler Knight 2/1/99 1,000
Barb McKnight 2/1/99 1,000
Kara McKnight 2/1/99 1,000
Lauren McKnight 2/1/99 1,000
Mike McKnight 2/1/99 1,000
Li Dong 2/1/99 1,000
Sean Dickenson 2/1/99 1,000
Kirsten DeWolfe 2/1/99 1,000
Paul Stark 2/1/99 1,000
Bridgitte Longshore 2/1/99 1,000
Knight Family Trust 2/1/99 3,000
Michael Steele 2/1/99 1,000
Laura Steele 2/1/99 1,000
Jennifer Steele 2/1/99 1,000
Amanda Steele 2/1/99 1,000
<PAGE>
In September 1998, Adriatic sold 1,000,000 shares of common stock, $0.001
par value, at $0.01 per share pursuant to Rule 504 of Regulation D of the
Securities Act, to 6 investors for a total consideration of $10,000 net of
commission and offering costs. The shares were issued as follows:
PURCHASER DATE NUMBER OF
COMMON SHARES
Finneran Investments, Ltd. 9/8/98 175,000
Noble Holdings Corporation 9/8/98 175,000
Tiger-Eye Investments(Cayman) Ltd. 9/8/98 175,000
Huda Limited 9/8/98 175,000
Tamarin Investment Group, Inc. 9/8/98 175,000
Kallur Enterprises Limited 9/8/98 125,000
In July 1998, Adriatic sold 1,000,000 restricted shares of common stock,
$0.001 par value, at $0.001 per share to one investor pursuant to Rule 144 of
the Securities Act, for a total consideration of $1,000 net of commission and
offering costs. The shares were issued as follows:
PURCHASER DATE NUMBER OF
COMMON SHARES
G.M. Capital Partners Ltd. 7/22/98 1,000,000
In July 1998, Adriatic sold 50,000 restricted shares of common stock,
$0.001 par value, at $0.001 per share to one investor pursuant to Rule 144 of
the Securities Act, for a total consideration of $50 net of commission and
offering costs. The shares were issued as follows:
PURCHASER DATE NUMBER OF
COMMON SHARES
Knight Financial Ltd. 7/22/98 50,000
<PAGE>
INDEX TO EXHIBITS
Item 27. Exhibits
Exhibit
Number Description of Exhibit
------ ----------------------
3.1 Articles of Incorporation
3.2 By-laws
5.1 Opinion of Beckman, Millman & Sanders, L.L.P.**
10.0 Licensing Agreement between Adriatic and J.A. Canada, dated August 15,
1998
21.1 Subsidiaries of the Company (Adriatic has no subsidiaries)
23.1 Consent of Spicer, Jeffries & Co.
24.1 Consent of Beckman, Millman & Sanders, L.L.P. (Included in Exhibit
5.1)**
27.1 Financial Data Schedule for the nine months ended September 30, 1999
27.2 Financial Data Schedule for the period from inception (July 9, 1998)
to March 31, 2000
99.1 United States Registration of trademark for J.A. Junction Box
99.2 Canada Registration of trademark for J.A. Junction Box
----------
** Previously filed.
<PAGE>
Item 28. Undertakings
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the small
business issuer pursuant to the foregoing provisions or otherwise, the small
business issuer has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the small business issuer of
expenses incurred or paid by a director, officer or controlling person of the
small business issuer 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 small business issuer will,
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
The undersigned small business issuer hereby undertakes that it will:
(1) File, during any period in which it offers or sells securities, a
post-effective amendment to this registration statement to (i) include
any prospectus required by Section 10(a)(3) of the Securities Act;
(ii) reflect in the prospectus any facts or events which, individually
or together, represent a fundamental change in the information in the
registration statement; and (iii) include any additional or changed
material information on the plan of distribution.
(2) For determining any liability under the Securities Act, treat
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the small business issuer under Rule
424(b)(1) or (4) or Rule 497(h) under the Securities Act as part of
this registration statement as of the time the Commission declared it
effective.
(3) For determining any liability under the Securities Act, treat each
post-effective amendment that contains a form of prospectus as a new
registration statement for the securities offered in the registration
statement; and that offering of the securities at that time as the
initial bona fide offering of those securities.
<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 Amendment No. 3
to the Registration Statement to be signed on its behalf by the undersigned, in
the City of Bellingham, State of Washington on January 19, 2001.
ADRIATIC HOLDINGS LIMITED
By: /s/ ROBERT W. KNIGHT
---------------------------
Robert W. Knight, 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.
(Signature) /s/ ROBERT W. KNIGHT
-------------------------------
(Title) President, Secretary and Treasurer
(Date) January 19, 2001
