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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-SB/A
AMENDMENT # 1
GENERAL FORM FOR REGISTRATION OF SECURITIES OF
SMALL BUSINESS ISSUERS
UNDER SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
REGAL ACQUISITIONS, INC.
(Name of Small Business Issuer in its charter)
DELAWARE 13-4031421
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
317 MADISON AVENUE, SUITE 2310 10017
NEW YORK, NEW YORK (Zip Code)
(Address of principal executive offices)
Issuer's telephone number: (212) 949-9696
Securities to be registered pursuant to Section 12(b) of the Act:
NONE
Securities to be registered pursuant to Section 12(g) of the Act:
COMMON STOCK, $0.001 PAR VALUE
(Title of class)
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PART I
ITEM 1. DESCRIPTION OF BUSINESS.
THE BUSINESS
Regal Acquisitions, Inc. (the "Company") was incorporated in Delaware in
October 1998 and was formed by Mr. James A. Prestiano, a stockholder, officer,
and director of the Company. The Company's principal executive offices are
located at 317 Madison Avenue, Suite 2310, New York, NY 10017. The Company has
been in the developmental stage since inception and has no operating history
other than organizational matters.
The Company has no operating business. The Company does not intend to
develop its own operating business but instead will seek to effect a merger (a
"Merger") with a corporation which owns an operating business and wishes to
undertake a Merger for its own corporate purposes (a "Merger Target"), generally
related to achieving liquidity for its stockholders. The primary activity of
the Company currently involves seeking a Merger Target. The Company has not yet
selected or entered into any substantive discussions with any potential Merger
Target and does not intend to limit potential candidates to any particular field
or industry, but does retain the right to limit candidates, if it so chooses, to
a particular field or industry. The Company may effect a Merger with a Merger
Target which may be financially unstable or in its early stages of development
or growth.
The Board of Directors has elected to begin implementing the Company's
principal business purpose, described below under "Item 2, Plan of Operation."
As such, the Company can be defined as a "shell" company, whose sole purpose at
this time is to locate a Merger Target and consummate a Merger.
In addition, Mr. Prestiano serves as the sole director and officer of nine
other companies (identified in Part I, Item 7 below) that contemplate the same
business activities as the Company and thus compete directly with the Company.
As a result, there may be a conflict of interest with respect to prospective
Merger Targets and presenting the corporate opportunity to the Company. In
general, officers and directors of a corporation incorporated under the laws of
the State of Delaware are required to present certain business opportunities to
such corporation. As a result of Mr. Prestiano's business associations with
multiple companies he will have conflicting interests. Therefore, the Company
has agreed that with respect to conflicts of interest amongst these companies
related to the allocation of opportunities to negotiate and Merge with Merger
Targets, the Company will waive any conflict or claim related to Mr. Prestiano's
fiduciary duty. Mr. Prestiano and the Company have no formal plan relating to
the allocation of business or Merger opportunities between the Company and the
nine other companies, and thus there can be no assurance that any Merger
opportunity shall be presented to the Company, as opposed to the nine other
Companies.
The proposed business activities described herein classify the Company as a
"blank check" or "blind pool" entity. Many states have enacted statutes, rules,
and regulations limiting the sale of securities of "blank check" companies in
their respective jurisdictions. Management does not currently anticipate that
any market for its Common Stock will develop until such time, if any, as the
Company has successfully implemented its business plan and completed a Merger.
THERE CAN BE NO ASSURANCES GIVEN THAT THE COMPANY WILL BE ABLE TO
SUCCESSFULLY LOCATE A MERGER TARGET OR CONSUMMATE A MERGER. STATUTES,
REGULATIONS, RULES AND THE POSITIONS OF REGULATORY AUTHORITIES HAVE BEEN
BECOMING MORE ADVERSE AND RESTRICTIVE TOWARD SUCH MERGERS AND TOWARD "BLIND
POOL" ENTITIES SUCH AS THE COMPANY.
RISK FACTORS
THE COMPANY HAS NO OPERATING HISTORY OR BASIS FOR EVALUATING PROSPECTS
The Company was incorporated in October 1998 and has no operating
business or plans to develop one and has not, as of the date hereof,
identified any Merger Targets. Accordingly, there is only a limited basis
upon which to evaluate the Company's prospects for achieving its intended
business objectives. To date, the Company's efforts have been limited to
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organizational activities and an offering of its common stock pursuant to
Regulation D promulgated under the Securities Act of 1933, as amended (the
"Securities Act") (the "Private Placement"; see Part II, Item 4-- Recent
Sales of Unregistered Securities).
THE COMPANY HAS LIMITED RESOURCES AND NO PRESENT SOURCE OF REVENUES
The Company has limited resources and has had no revenues to date. In
addition, the Company will not achieve any revenues (other than insignificant
investment income) until, at the earliest, the consummation of a Merger.
Moreover, there can be no assurance that any Merger Target, at the time of the
Company's consummation of a Merger, or at any time thereafter, will derive any
material revenues from its operations or operate on a profitable basis.
Further, in order to avoid status as an "Investment Company" under the
Investment Company Act of 1940, the Company will only invest its funds prior to
a Merger in limited investments which do not trigger Investment Company status.
There can be no assurance that determinations ultimately made by the Company
will permit the Company to achieve its business objectives.
THE COMPANY MAY NEED ADDITIONAL FINANCING IN ORDER TO EXECUTE ITS BUSINESS PLAN
The Company has had no revenues to date and will be entirely dependent upon
its limited available financial resources (consisting primarily of the proceeds
of the Private Placement) to implement its business objectives. The Company
cannot ascertain with any degree of certainty the capital requirements for the
execution of its business plan. In the event that the Company's limited
financial resources prove to be insufficient to implement the Company's business
plan (because of the size of the Merger or other reasons), the Company may be
required to seek additional financing. In addition, in the event of the
consummation of a Merger, the Company may require additional financing to fund
the operations or growth of the Merger Target.
ADDITIONAL FINANCING MAY NOT BE AVAILABLE TO THE COMPANY IF NEEDED
There can be no assurance that additional financing, if needed, will be
available on acceptable terms, or at all. To the extent that additional
financing proves to be unavailable when needed, the Company would, in all
likelihood, be compelled to abandon plans of a Merger, and would have minimal
capital remaining to pursue other Merger Targets. The failure by the Company
to secure additional financing, if needed, could also have a material adverse
effect on the continued development or growth of the Merger Target. The Company
has no arrangements with any bank or financial institution to secure additional
financing and there can be no assurance that any such arrangement, if required
or otherwise sought, would be available on terms deemed to be commercially
acceptable and in the best interests of the Company.
THE COMPANY MAY NOT BE ABLE TO BORROW FUNDS IF NEEDED
There currently are no limitations on the Company's ability to borrow funds
to increase the amount of capital available to the Company to effect a Merger.
However, the limited resources of the Company and lack of operating history will
make it difficult to borrow funds. The amount and nature of any borrowings by
the Company will depend on numerous considerations, including the Company's
capital requirements, the Company's perceived ability to meet debt service on
any such borrowings and the then prevailing conditions in the financial markets,
as well as general economic conditions. There can be no assurance that debt
financing, if required or sought, would be available on terms deemed to be
commercially acceptable by and in the best interests of the Company. The
inability of the Company to borrow funds required to effect or facilitate a
Merger, or to provide funds for an additional infusion of capital into a Merger
Target, may have a material adverse effect on the Company's financial condition
and future prospects. Additionally, to the extent that debt financing
ultimately proves to be available, any borrowings may subject the Company to
various risks traditionally associated with indebtedness, including the risks of
interest rate fluctuations and insufficiency of cash flow to pay principal and
interest. Furthermore, a Merger Target may have already incurred borrowings
and, therefore, all the risks inherent thereto.
THE COMPANY IS UNABLE TO ASCERTAIN RISKS RELATING TO THE INDUSTRY AND NATURE OF
UNIDENTIFIED MERGER TARGETS
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The Company has not selected any particular industry or Merger Target in
which to concentrate its Merger efforts. The director and executive officer of
the Company has had no contact or discussions with any entity or representatives
of any entity regarding a consummation of a Merger. Accordingly, there is no
basis to evaluate the possible merits or risks of the Merger Target or the
particular industry in which the Company may ultimately operate, and therefore
risks of a currently unascertainable nature may arise when a specific Merger
Target and industry is chosen. For example, to the extent that the Company
effects a Merger with a financially unstable company or an entity in its early
stage of development or growth (including entities without established records
of revenues or income), the Company will become subject to numerous risks
inherent in the business and operations of financially unstable and early stage
or potential emerging growth companies. In addition, to the extent that the
Company effects a Merger with an entity in an industry characterized by a high
level of risk, the Company will become subject to the currently unascertainable
risks of that industry. An extremely high level of risk frequently
characterizes certain industries which experience rapid growth. Although
management will endeavor to evaluate the risks inherent in a particular Merger
Target or industry, there can be no assurance that the Company will properly
ascertain or assess all such risks.
SCARCITY OF AND COMPETITION FOR MERGER OPPORTUNITIES MAY HINDER THE
IDENTIFICATION OF A MERGER TARGET AND THE CONSUMMATION OF A MERGER
The Company expects to encounter intense competition from other entities
having business objectives similar to those of the Company. Many of these
entities, including venture capital partnerships and corporations, other blind
pool companies, large industrial and financial institutions, small business
investment companies and wealthy individuals, are well-established and have
extensive experience in connection with identifying and effecting Mergers
directly or through affiliates. Many of these competitors possess greater
financial, technical, human and other resources than the Company and there can
be no assurance that the Company will have the ability to compete successfully.
The Company's financial resources will be limited in comparison to those of many
of its competitors. This inherent competitive limitation may compel the Company
to select certain less attractive Merger prospects. There can be no assurance
that such prospects will permit the Company to achieve its stated business
objectives.
THE COMPANY HAS NO CURRENT AGREEMENT WITH ANY POSSIBLE MERGER TARGET AND NO
STANDARDS FOR A MERGER, WHICH MAY IMPAIR THE IDENTIFICATION, EVALUATION AND
CONSUMMATION OF SUITABLE MERGER OPPORTUNITIES
The Company has no arrangement, agreement, or understanding with respect to
engaging in a Merger with any private entity. There can be no assurance that
the Company will successfully identify and evaluate suitable Merger
opportunities or conclude a Merger. Management has not identified any
particular industry or specific business within an industry for evaluations.
Other than issuing shares to its original stockholder and conducting the Private
Placement, the Company has never commenced any operational activities. There is
no assurance that the Company will be able to negotiate a merger on terms
favorable to the Company. The Company has not established a specific length of
operating history or a specified level of earnings, assets, net worth or other
criteria which it will require a Merger Target to have achieved. Accordingly,
the Company may enter into a Merger with a Merger Target having no significant
operating history, losses, limited or no potential for earnings, limited assets,
negative net worth, or other negative characteristics.
SUCCESS OF THE COMPANY'S BUSINESS PLAN DEPENDS IN LARGE PART UPON THE
CONSUMMATION OF A MERGER
The success of the Company's proposed plan of operation will depend to a
great extent on locating and consummating a Merger with a Merger Target.
Subsequent to any Merger, the Company's success will depend greatly on the
operations, financial condition, and management of the identified Merger
Target. While management intends to seek a Merger with a company that has an
established operating history, it cannot assure that the Company will
successfully locate candidates meeting such criteria. In the event the Company
completes a Merger, the success of the Company's operations may be dependent
upon management of the successor entity together with numerous other factors
beyond the Company's control.
THE COMPANY MAY BE SUBJECT TO UNCERTAINTY IN THE COMPETITIVE ENVIRONMENT OF A
MERGER TARGET
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In the event that the Company succeeds in effecting a Merger, the Company
will, in all likelihood, become subject to intense competition from competitors
of the Merger Target. In particular, certain industries which experience rapid
growth frequently attract an increasingly larger number of competitors,
including competitors with greater financial, marketing, technical, human and
other resources than the initial competitors in the industry. The degree of
competition characterizing the industry of any prospective Merger Target cannot
presently be ascertained. There can be no assurance that, subsequent to a
consummation of a Merger, the Company will have the resources to compete
effectively in the industry of the Merger Target, especially to the extent that
the Merger Target is in a high-growth industry.
PROBABLE LACK OF BUSINESS DIVERSIFICATION DUE TO LIMITED RESOURCES LIMITS THE
PROSPECTS FOR THE COMPANY'S SUCCESS
As a result of the limited resources of the Company, the Company, in all
likelihood, will have the ability to effect only a single Merger. Accordingly,
the prospects for the Company's success will be entirely dependent upon the
future performance of a single business. Unlike certain entities which have the
resources to consummate several Mergers or entities operating in multiple
industries or multiple segments of a single industry, it is highly likely that
the Company will not have the resources to diversify its operations or benefit
from the possible spreading of risks or offsetting of losses. The Company's
probable lack of diversification may subject the Company to numerous economic,
competitive and regulatory developments, any or all of which may have a material
adverse impact upon the particular industry in which the Company may operate
subsequent to the consummation of a Merger. The prospects for the Company's
success may become dependent upon the development or market acceptance of a
single or limited number of products, processes or services. Accordingly,
notwithstanding the possibility of capital investment in and management
assistance to the Merger Target by the Company, there can be no assurance that
the Merger Target will prove to be commercially viable.
THERE EXIST CONFLICTS OF INTEREST RELATING TO MR. PRESTIANO'S INTER-COMPANY
CONFLICTS
Mr. Prestiano serves as the sole director and officer other companies
(identified in Item I, Part 7 below) that contemplate the same business
activities as the Company and thus compete directly with the Company. As a
result, Mr. Prestiano will have a conflict of interest with respect to
prospective Merger Targets and presenting the corporate opportunity to the
Company. In general, officers and directors of a corporation incorporated under
the laws of the State of Delaware are required to present certain business
opportunities to such corporation. As a result of Mr. Prestiano's business
associations with multiple companies he will have conflicting interests.
Therefore, the Company has agreed that with respect to conflicts of interest
amongst these companies related to the allocation of opportunities to negotiate
and Merge with Merger Targets, the Company will waive any conflict or claim
related to Mr. Prestiano's fiduciary duty. However, the conflict should be
mitigated by the fact that Mr. Prestiano has the same ownership interest in each
other company as he does in the Company, and each company (including the
Company) has identical stockholders, at least initially. The conflict will be
more significant should, at a later date, these facts change.
THERE EXIST CONFLICTS OF INTEREST RELATING TO MR. PRESTIANO'S TIME COMMITMENT TO
THE COMPANY
Mr. Prestiano is not required to commit his full time to the affairs of the
Company and it is likely that he will not devote a substantial amount of time to
the affairs of the Company. Mr. Prestiano will have conflicts of interest in
allocating management time among various business activities. As a result, the
consummation of a Merger may require a greater period of time than if the
Company's management devoted their full time to the Company's affairs. However,
Mr. Prestiano will devote such time as he deems reasonably necessary to carry
out the business and affairs of the Company, including the evaluation of
potential Merger Targets and the negotiation and consummation of a Merger and,
as a result, the amount of time devoted to the business and affairs of the
Company may vary significantly depending upon, among other things, whether the
Company has identified a Merger Target or is engaged in active negotiation and
consummation of a Merger. Mr. Prestiano is affiliated with nine other companies
engaged in business activities similar to those to be conducted by the Company,
and may in the future become affiliated with more, and therefore may have
conflicts of interest in determining to which entity a particular business
opportunity should be presented. In general, officers and directors of a
corporation incorporated under the laws of the State of Delaware are required to
present certain business opportunities to such corporation. Accordingly, as a
result of multiple business affiliations, Mr. Prestiano may have similar legal
obligations to present certain business opportunities to multiple entities.
There can be no assurance that any of the foregoing conflicts will be resolved
in favor of the Company.
THERE EXIST CONFLICTS OF INTEREST RELATING TO THE COMPENSATION AND REIMBURSEMENT
OF MR. PRESTIANO AND AFFILIATES
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Although Mr. Prestiano will receive no compensation for his services as the
sole director and/or president of the Company, he and his affiliates will,
however, be reimbursed, at-cost, for any expenses incurred in respect of
reasonable business expenses of the Company, including in relation to the
formation of the Company, the Private Placement, the Registration of the Company
and effecting any Merger. This will include reimbursement for the cost of the
personnel of Mr. Prestiano or his affiliates (other than Mr. Prestiano himself)
to be inclusive of all documented costs of their employment on a reasonable
hourly or daily allocation while engaged in activities on behalf of the Company.
THE COMPANY MAY PURSUE A MERGER WITH A MERGER TARGET OPERATING OUTSIDE THE
UNITED STATES: SPECIAL ADDITIONAL RISKS RELATING TO DOING BUSINESS IN A FOREIGN
COUNTRY
The Company may effectuate a Merger with a Merger Target whose business
operations or even headquarters, place of formation or primary place of
business are located outside the United States. In such event, the Company may
face the significant additional risks associated with doing business in that
country. In addition to the language barriers, different presentations of
financial information, different business practices, and other cultural
differences and barriers that may make it difficult to evaluate such a Merger
Target, ongoing business risks result from the internal political situation,
uncertain legal systems and applications of law, prejudice against foreigners,
corrupt practices, uncertain economic policies and potential political and
economic instability that may be exacerbated in various foreign countries.
THE COMPANY DEPENDS UPON A SINGLE EXECUTIVE OFFICER AND DIRECTOR
The ability of the Company to successfully effect a Merger will be
dependent upon the efforts of its executive officer and sole director, Mr. James
Prestiano. Notwithstanding the significance of Mr. Prestiano, the Company has
not entered into employment agreements or other understandings with Mr.
Prestiano concerning compensation or obtained any "key man" life insurance on
his life. The loss of the services of Mr. Prestiano could have a material
adverse effect on the Company's ability to successfully achieve its business
objectives. Mr. Prestiano is not required to commit a substantial amount of his
time to the affairs of the Company and, accordingly, may have conflicts of
interests in allocating management time among various business activities. The
Company will rely upon the expertise of Mr. Prestiano and does not anticipate
that it will hire additional personnel. However, if additional personnel are
required, there can be no assurance that the Company will be able to retain such
necessary additional personnel
THE COMPANY'S SOLE EXECUTIVE OFFICER AND DIRECTOR HAS LIMITED EXPERIENCE
Although Mr. Prestiano has experience in buying and selling businesses, he
has no prior experience in "blind pool" or "blank check" companies such as the
Company, nor has he been a director or officer of any public company..
MR. PRESTIANO HAS CENTRALIZED CONTROL OF THE COMPANY'S AFFAIRS
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Mr. Prestiano owns 2,000,000 shares of Common Stock of the Company,
representing approximately 92% of the issued and outstanding shares of Common
Stock and approximately 92% of the voting power of the issued and outstanding
shares of Common Stock of the Company. In the election of directors,
stockholders are not entitled to cumulate their votes for nominees.
Accordingly, as a practical matter, management may be able to elect all of the
Company's directors and otherwise direct the affairs of the Company.
Additionally, stockholders will only be permitted to vote on a Merger if a
stockholder vote is required under Delaware General Corporation Law, and, even
if allowed to vote, Mr. Prestiano controls a majority of the stock of the
Company, thus effectively giving him control.
THERE EXISTS THE LIKELIHOOD OF A CHANGE IN CONTROL AND MANAGEMENT UPON THE
CONSUMMATION OF A MERGER
It is likely that any Merger will result in control by the Merger Target
stockholders and that the stockholders of the Company would retain only a
relatively small minority position. Any such Merger may require management of
the Company to sell, transfer or cancel all or a portion of the Company's stock
held by management, or cause Mr. Prestiano to resign or be removed as executive
officer and/or sole director and a corresponding reduction in or elimination of
his participation in the future affairs of the Company.
THERE IS LIMITED LIKELIHOOD OF A REGULAR TRADING MARKET FOR THE COMMON STOCK
A public market for the Common Stock does not exist and there can be no
assurance that one will ever develop or if developed will continue. Creation of
a public market for the Common Stock depends on (i) acceptance of the Company on
an exchange or interdealer quotation system, (ii) filing of a Form 15-c2-11 with
NASDAQ for trading on the bulletin board or (iii) registration of the shares
through a Registration Statement filed under the Securities Act of 1933, as
amended (the "Securities Act"). Such actions may be costly and difficult and
could potentially fail. If so, it would substantially hinder the liquidity of
the Common Stock. If no market develops, it may be difficult or impossible for
the holders of the Common Stock to sell their securities if they should desire
to do so. In addition, there are substantial restrictions on the sale or
transfer of Common Stock imposed by federal and state security laws, if the
shares of Common Stock of the Company are not registered through a Registration
Statement. If the shares are registered, there are no assurances that a regular
trading market will develop for any of the Common Stock and that if developed
any such market will be sustained. It is unlikely any market would develop
without a Merger.
THERE EXIST RISKS TO STOCKHOLDERS RELATING TO DILUTION: AUTHORIZATION OF
ADDITIONAL SECURITIES AND REDUCTION OF PERCENTAGE SHARE OWNERSHIP FOLLOWING
MERGER
The Company's Certificate of Incorporation authorizes the issuance of
40,000,000 shares of Common Stock. There are currently 37,830,000 authorized
but unissued shares of Common Stock available for issuance. Although the
Company has no commitments as of this date to issue any of these 37,830,000
shares of Common Stock, the Company will, in all likelihood, issue a substantial
number of additional shares in connection with or following a Merger. To the
extent that additional shares of Common Stock are issued, the Company's
stockholders would experience dilution of their respective ownership interests
in the Company. Additionally, if the Company issues a substantial number of
shares of Common Stock in connection with or following a Merger, a change in
control of the Company may occur which may affect, among other things, the
Company's ability to utilize net operating loss carry forwards, if any.
Furthermore, the issuance of a substantial number of shares of Common Stock may
adversely affect prevailing market prices, if any, for the Common Stock and
could impair the Company's ability to raise additional capital through the sale
of its equity securities. The Company may use consultants and other third
parties providing goods and services, including assistance in the identification
and evaluation of potential Merger Targets. These consultants or third parties
may be paid in cash, stock, options or other securities of the Company, and the
consultants or third parties may be Placement Agents or their affiliates. Mr.
Prestiano has the sole discretion to engage consultants and other assistance and
to pay partially or in whole with stock or options for stock of the Companies
and to raise additional funds by selling securities of the Company which may
involve substantial additional dilution to the investors.
REGULATORY AND STATUTORY OBSTACLES MAY HINDER THE COMPANY'S ATTRACTIVENESS TO
MERGER CANDIDATES
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Merger Targets are often companies which wish to become public companies to
provide liquidity to their shareholders and possibly enhance their future
ability to access the capital markets, without the risk and expense of an
initial public offering. While the Merger does not immediately provide
significant capital, it does, if the Merger is executed as intended, create a
surviving Company which is public, which owns the assets and business of the
Merger Target (usually in a subsidiary) and the Merger Targets shareholders end
up with stock in the public Company. Management believes that the Company will
generally be attractive to Merger Targets if the Company has its Common Stock
being quoted by dealers and registered under the Exchange Act. Regulatory and
rulemaking authorities have, however, taken steps to make it difficult to enable
shell corporations (with no current business other than one similar to the
Company's) to have dealer quotations for the securities of such corporations.
In order to have dealers quote a bid and ask for the common stock of the
Company, in addition to other requirements, the dealer must file a form pursuant
to Rule 15c-2(11) promulgated pursuant to the Exchange Act. Regulatory
authorities may scrutinize and possibly take action to block quotation by a
dealer of stock in a shell company such as the Company. In addition, the
regulatory authorities generally will block a dealer from quoting on stock of a
company without some significant amount of free trading shares available for
trading, often referred to as the "float." All the currently outstanding stock
of the Company is held by a small number of shareholders and currently there are
no free-trading shares. As a result, there is no assurance that the regulatory
authorities will not block the attempt to obtain dealer quotations for the
Company's Common Stock.
THE COMPANY'S OUTSTANDING SHARES OF COMMON STOCK ARE NOT IMMEDIATELY ELIGIBLE
FOR FUTURE SALE
None of the 2,170,000 shares of Common Stock outstanding of the Company as
of the date of the Registration Statement are eligible for sale under Rule 144
("Rule 144") promulgated under the Securities Act. In general, under Rule 144,
as currently in effect, subject to the satisfaction of certain other conditions,
a person, including an affiliate of the Company (or persons whose shares are
aggregated), who has owned restricted shares of Common Stock beneficially for at
least one year is entitled to sell, within any three-month period, a number of
shares that does not exceed the greater of 1% of the total number of outstanding
shares of the same class or, if the Common Stock is quoted on an exchange or
NASDAQ, the average weekly trading volume during the four calendar weeks
preceding the sale. A person who has not been an affiliate of the Company for
at least three months immediately preceding the sale and who has beneficially
owned the shares of Common Stock to be sold for at least two years is entitled
to sell such shares under Rule 144 without regard to any of the limitations
described above. No prediction can be made as to the effect, if any, that sales
of such shares of Common Stock or the availability of such shares for sale will
have on the market prices, if any, for shares of Common Stock prevailing from
time to time. Nevertheless, the sale of substantial amounts of Common Stock in
the public market would likely adversely affect prevailing market prices for the
Common Stock and could impair the Company's ability to raise capital through the
sale of its equity securities.
The Uncertain Structure of a Merger May Result in Risks Relating to the Market
for the Company's Common Stock
The Company may form one or more subsidiary entities to effect a Merger and
may, under certain circumstances, distribute the securities of subsidiaries to
the stockholders of the Company. There cannot be any assurance that a market
would develop for the securities of any subsidiary distributed to stockholders
or, if it did, any assurance as to the prices at which such securities might
trade.
TAXATION CONSIDERATIONS MAY IMPACT THE STRUCTURE OF A MERGER AND POST-MERGER
LIABILITIES
Federal and state tax consequences will, in all likelihood, be major
considerations in any Merger the Company may undertake. The structure of a
Merger or the distribution of securities to stockholders may result in taxation
of the Company, the Merger Target or stockholders. Typically, these transactions
may be structured to result in tax-free treatment to both companies, pursuant to
various federal and state tax provisions. The Company intends to structure any
Merger so as to minimize the federal and state tax consequences to both the
Company and the Merger Target. Management cannot assure that Merger will meet
the statutory requirements for a tax-free reorganization, or that the parties
will obtain the intended
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tax-free treatment upon a transfer of stock or assets. A non-qualifying
reorganization could result in the imposition of both federal and state
taxes, which may have an adverse effect on both parties to the transaction.
THE COMPANY MAY BE DEEMED AN INVESTMENT COMPANY AND SUBJECTED TO RELATED
RESTRICTIONS
The regulatory scope of the Investment Company Act of 1940, as amended (the
"Investment Company Act"), which was enacted principally for the purpose of
regulating vehicles for pooled investments in securities, extends generally to
companies engaged primarily in the business of investing, reinvesting, owning,
holding or trading in securities. The Investment Company Act may, however, also
be deemed to be applicable to a company which does not intend to be
characterized as an investment company but which, nevertheless, engages in
activities which may be deemed to be within the definitional scope of certain
provisions of the Investment Company Act. The Company believes that its
anticipated principal activities, which will involve acquiring control of an
operating company, will not subject the Company to regulation under the
Investment Company Act. Nevertheless, there can be no assurance that the
Company will not be deemed to be an investment company, particularly during the
period prior to consummation of a Merger. If the Company is deemed to be an
investment company, the Company may become subject to certain restrictions
relating to the Company's activities, including restrictions on the nature of
its investments and the issuance of securities. In addition, the Investment
Company Act imposes certain requirements on companies deemed to be within its
regulatory scope, including registration as an investment company, adoption of a
specific form of corporate structure and compliance with certain burdensome
reporting, record keeping, voting, proxy, disclosure and other rules and
regulations. In the event of the characterization of the Company as an
investment company, the failure by the Company to satisfy such regulatory
requirements, whether on a timely basis or at all, would, under certain
circumstances, have a material adverse effect on the Company.
THE COMPANY EXPECTS TO PAY NO CASH DIVIDENDS
The Company does not expect to pay dividends prior to the consummation of a
Merger. The payment of dividends after consummating any such Merger, if any,
will be contingent upon the Company's revenues and earnings, if any, capital
requirements, and general financial condition subsequent to consummation of a
Merger. The payment of any dividends subsequent to a Merger will be within the
discretion of the Company's then Board of Directors. The Company presently
intends to retain all earnings, if any, for use in the Company's business
operations and accordingly, the Board does not anticipate declaring any
dividends in the foreseeable future.
THE COMPANY IS AUTHORIZED TO ISSUE PREFERRED STOCK
The Company's Certificate of Incorporation authorizes the issuance of
5,000,000 shares of preferred stock (the "Preferred Stock"), with such
designations, powers, preferences, rights, qualifications, limitations and
restrictions of such series as the Board of Directors, subject to the laws of
the State of Delaware, may determine from time to time. Accordingly, the Board
of Directors is empowered, without stockholder approval, to issue Preferred
Stock with dividend, liquidation, conversion, voting or other rights which could
adversely affect the voting power or other rights of the holders of Common
Stock. In addition, the Preferred Stock could be utilized, under certain
circumstances, as a method of discouraging, delaying or preventing a change in
control of the Company. Although the Company does not currently intend to issue
any shares of Preferred Stock, there can be no assurance that the Company will
not do so in the future. As of this date, the Company has no outstanding shares
of Preferred Stock..
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
THIS REGISTRATION STATEMENT INCLUDES PROJECTIONS OF FUTURE RESULTS AND
FORWARD-LOOKING STATEMENTS. ALL STATEMENTS THAT ARE INCLUDED IN THIS
REGISTRATION STATEMENT, OTHER THAN STATEMENTS OF HISTORICAL FACT, ARE
FORWARD-LOOKING STATEMENTS. SUCH STATEMENTS REFLECT THE CURRENT VIEWS OF THE
COMPANY WITH RESPECT TO THE FUTURE EVENTS AND ARE SUBJECT TO CERTAIN RISKS,
UNCERTAINTIES AND ASSUMPTIONS, INCLUDING THE RISK FACTORS DESCRIBED IN ITEM
1. SHOULD ONE OR MORE OF THESE RISKS OR UNCERTAINTIES MATERIALIZE, OR SHOULD
UNDERLYING ASSUMPTIONS PROVE INCORRECT, ACTUAL RESULTS MAY VARY MATERIALLY
FROM THOSE DESCRIBED HEREIN AS ANTICIPATED, BELIEVED, ESTIMATED OR EXPECTED.
THERE CAN BE NO ASSURANCE THAT THE PROJECTED RESULTS WILL OCCUR, AND THAT
THESE JUDGMENTS OR ASSUMPTIONS WILL PROVE CORRECT, THAT UNFORESEEN
DEVELOPMENTS WILL NOT OCCUR OR THAT THE COMPANY'S ASSUMPTIONS CONCERNING
FUTURE DEVELOPMENTS WILL NOT CHANGE.
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PLAN OF OPERATION
GENERAL
The Company's plan is to seek, investigate, and if such investigation
warrants, consummate a Merger with one or more Merger Targets desiring the
perceived advantages of a publicly held corporation. At this time, the Company
has no plan, proposal, agreement, understanding, or arrangement to merge with
any specific business or company, and the Company has not identified any
specific business or company for investigation and evaluation. No member of
Management or any promoter of the Company, or an affiliate of either, has had
any material discussions with any other company with respect to any Merger. The
Company will not restrict its search to any specific business, industry, or
geographical location, and may participate in business ventures of virtually any
kind or nature. Discussion of proposed plan of operation and Mergers under this
caption and throughout this Registration Statement is purposefully general and
is not meant to restrict the Company's virtually unlimited discretion to search
for and enter into potential business opportunities.
The Company may seek a Merger with an entity which only recently commenced
operations, or a developing company in need of additional funds to expand into
new products or markets or seeking to develop a new product or service, or an
established business which may be experiencing financial or operating
difficulties and needs additional capital which is perceived to be easier to
raise by a public company. In some instances, a Merger may involve merging with
a corporation which does not need substantial additional cash but which desires
to establish a public trading market for its common stock. The Company may
purchase assets and establish wholly-owned subsidiaries in various businesses or
purchase existing businesses as subsidiaries.
The Company is filing this Form 10-SB on a voluntary basis because the
primary attraction with the Company as a merger partner or acquisition vehicle
will be its status as an SEC reporting company. Any merger or other combination
will most likely result in the Company issuing significant number of common
shares, which would create a substantial dilution to the existing stockholders.
Selecting a Merger Target will be complex and extremely risky. Because of
general economic conditions, rapid technological advances being made in some
industries, and shortages of available capital, management believes that there
are numerous entities seeking the benefits of a publicly-traded corporation.
Such perceived benefits of a publicly traded corporation may include
facilitating or improving the terms on which additional equity financing may be
sought, providing liquidity for the principals of a business, creating a means
for providing incentive stock options or similar benefits to key employees,
providing liquidity (subject to restrictions of applicable statues) for all
stockholders, and other items. Potential Merger Targets may exist in many
different industries and at various stages of development, all of which will
make the task of comparative investigation and analysis of such Merger Targets
extremely difficult and complex.
The Company has insufficient capital with which to provide the owners of
Merger Targets significant cash or other assets. Management believes the
Company will offer owners of Merger Targets the opportunity to acquire a
controlling ownership interest in a public company at substantially less cost
than is required to conduct an initial public offering. Nevertheless, the
Company has not conducted market research and is not aware of statistical data
which would support the perceived benefits of a Merger or acquisition
transaction for the owners of a Merger Target.
The Company will not restrict its search for any specific kind of Merger
Target, and may merge with an entity which is in its preliminary or development
stage, which is already in operation, or in essentially any stage of its
corporate life. It is impossible to predict at this time the status of any
business in which the Company may become engaged, in that such business may need
to seek additional capital, may desire to have its shares publicly traded, or
may seek other perceived advantages which the Company may offer. However, the
Company does not intend to obtain funds in one or more private placements to
finance the operation of any acquired business opportunity until such time as
the Company has successfully consummated such a Merger.
SELECTION AND EVALUATION OF MERGER TARGETS
Management of the Company will have complete discretion and flexibility in
identifying and selecting a prospective Merger Target. In connection with its
evaluation of a prospective Merger Target, management anticipates that it will
conduct
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<PAGE>
a due diligence review which will encompass, among other things, meeting with
incumbent management and inspection of facilities, as well as a review of
financial, legal and other information which will be made available to the
Company.
Under the Federal securities laws, public companies must furnish
stockholders certain information about significant acquisitions, which
information may require audited financial statements for an acquired company
with respect to one or more fiscal years, depending upon the relative size of
the acquisition. Consequently, each Company will only be able to effect a
Merger with a prospective Merger Target that has available audited financial
statements or has financial statements which can be audited
The time and costs required to select and evaluate a Merger Target
(including conducting a due diligence review) and to structure and consummate
the Merger (including negotiating relevant agreements and preparing requisite
documents for filing pursuant to applicable securities laws and corporation
laws) cannot presently be ascertained with any degree of certainty. The
Company's current executive officer and director intends to devote only a small
portion of his time to the affairs of the Company and, accordingly, consummation
of a Merger may require a greater period of time than if the Company's
management devoted his full time to the Company's affairs. While no current
steps have been taken nor agreements reached, the Company may engage consultants
and other third parties providing goods and services, including assistance in
the identification and evaluation of potential Merger Targets. These
consultants or third parties may be paid in cash, stock, options or other
securities of the Company, and the consultants or third parties may be placement
agents or their affiliates.
The Company will seek potential Merger Targets from all known sources
and anticipates that various prospective Merger Targets will be brought to
its attention from various non-affiliated sources, including securities
broker-dealers, investment bankers, venture capitalists, bankers, other
members of the financial community and affiliated sources, including,
possibly, the Company's executive officer, director and his affiliates.
While the Company has not yet ascertained how, if at all, it will advertise
and promote itself, the Company may elect to publish advertisements in
financial or trade publications seeking potential business acquisitions.
While the Company does not presently anticipate engaging the services of
professional firms that specialize in finding business acquisitions on any
formal basis, the Company may engage such firms in the future, in which event
the Company may pay a finder's fee or other compensation. In no event,
however, will the Company pay a finder's fee or commission to the officer and
director of the Company or any entity with which he is affiliated for such
service. Moreover, in no event shall the Company issue any of its securities
to any officer, director or promoter of the Company, or any of their
respective affiliates or associates, in connection with activities designed
to locate a Merger Target.
In analyzing prospective Merger Targets, management may consider, among
other factors, such matters as;
1) the available technical, financial and managerial resources
2) working capital and other financial requirements
3) history of operation, if any
4) prospects for the future
5) present and expected competition
6) the quality and experience of management services which may be
available and the depth of that management
7) the potential for further research, development or exploration
8) specific risk factors not now foreseeable but which then may be
anticipated to impact the proposed activities of the Company
9) the potential for growth or expansion
10) the potential for profit
11) the perceived public recognition or acceptance of products, services
or trades
12) name identification
Merger opportunities in which the Company may participate will present
certain risks, many of which cannot be adequately identified prior to selecting
a specific opportunity. The Company's stockholders must, therefore, depend on
Management to identify and evaluate such risks. The investigation of specific
Merger opportunities and the negotiation, drafting and execution of relevant
agreements, disclosure documents and other instruments will require substantial
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<PAGE>
management time and attention and substantial costs for accountants, attorneys
and others. If a decision is made not to participate in a specific Merger
opportunity the cost therefore incurred in the related investigation would not
be recoverable. Furthermore, even if an agreement is reached for the
participation in a specific Merger opportunity, the failure to consummate that
transaction may result in the loss of the Company of the related costs incurred.
There can be no assurance that the Company will find a suitable Merger
Target. If no such Merger Target is found, therefore, no return on an
investment in the Company will be realized, and there will not, most likely, be
a market for the Company's stock.
STRUCTURING AND FINANCING OF A MERGER
As a general rule, Federal and state tax laws and regulations have a
significant impact upon the structuring of Mergers. The Company will evaluate
the possible tax consequences of any prospective Merger and will endeavor to
structure a Merger so as to achieve the most favorable tax treatment to the
Company, the Merger Target and their respective stockholders. There can be no
assurance that the Internal Revenue Service or relevant state tax authorities
will ultimately assent to the Company's tax treatment of a particular
consummated Merger. To the extent the Internal Revenue Service or any relevant
state tax authorities ultimately prevail in recharacterizing the tax treatment
of a Merger, there may be adverse tax consequences to the Company, the Merger
Target and their respective stockholders. Tax considerations as well as other
relevant factors will be evaluated in determining the precise structure of a
particular Merger.
The Company may utilize available cash and equity securities in effecting a
Merger. Although the Company has no commitments as of this date to issue any
shares of Common Stock or options or warrants, other than those already issued
in the Private Placement, each Company will likely issue a substantial number
of additional shares in connection with the consummation of a Merger, probably
in most cases equal to nine or more times the amount held by the Company's
stockholders prior to the Merger. The Company may have to effect reverse stock
splits prior to any Merger. To the extent that such additional shares are
issued, dilution to the interests of a Company's stockholders will occur.
Additionally, a change in control of the Company may occur which may affect,
among other things, the Company's ability to utilize net operating loss
carryforwards, if any.
There currently are no limitations on each Company's ability to borrow
funds to effect a Merger. However, the Company's limited resources and lack of
operating history may make it difficult to borrow funds. The amount and nature
of any borrowings by the Company will depend on numerous considerations,
including the Company's capital requirements, potential lenders' evaluation of
the Company's ability to meet debt service on borrowings and the then prevailing
conditions in the financial markets, as well as general economic conditions.
The Company has no arrangements with any bank or financial institution to secure
additional financing and there can be no assurance that such arrangements if
required or otherwise sought, would be available on terms commercially
acceptable or otherwise in the best interests of the Company. The inability of
the Company to borrow funds required to effect or facilitate a Merger, or to
provide funds for an additional infusion of capital into a Merger Target, may
have a material adverse effect on the Company's financial condition and future
prospects, including the ability to effect a Merger. To the extent that debt
financing ultimately proves to be available, any borrowings may subject the
Company to various risks traditionally associated with indebtedness, including
the risks of interest rate fluctuations and insufficiency of cash flow to pay
principal and interest. Furthermore, a Merger Target may have already incurred
debt financing and, therefore, all the risks inherent thereto.
COMPETITION FOR MERGER OPPORTUNITIES
The Company is, and will continue to be, an insignificant participant in
the business of seeking a Merger with a Merger Target. The Company expects to
encounter intense competition from other entities having business objectives
similar to those of the Company. Many of these entities, including venture
capital partnerships and corporations, other blind pool companies, large
industrial and financial institutions, small business investment companies and
wealthy individuals, are well-established and have extensive experience in
connection with identifying and effecting Mergers directly or through
affiliates. Many of these competitors possess greater financial, technical,
human and other resources than the Company and there can be no assurance that
the Company will have the ability to compete successfully. The Company's
financial resources will be limited in comparison to those of many of its
competitors. This inherent competitive limitation may compel the Company to
select certain less attractive Merger prospects. There can be no assurance that
such prospects will permit the Company to achieve its stated business
objectives.
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<PAGE>
YEAR 2000 COMPLIANCE
The Company is aware of the issues associated with the programming code in
existing computer systems as the year 2000 approaches. The Company has assessed
these issues as they relate to the Company, and since the Company currently has
no operating business and does not use any computers, and since it has no
customers, suppliers or other constituents, it does not believe that there are
any material year 2000 issues to disclose in this Form 10-SB.
EQUIPMENT AND EMPLOYEES
The Company has no operating business and thus no equipment and no
employees, and the Company does not expect to acquire any equipment or
employees. The Company does not intend to develop its own operating business
but instead will seek to effect a Merger with a Merger Target.
ITEM 3. DESCRIPTION OF PROPERTY
The Company neither owns nor leases any real property at this time.
Pursuant to an oral agreement with The Law Offices of James A. Prestiano, Esq, a
firm controlled by James Prestiano, the Company's President, majority
stockholder and founder, the Company utilizes and will continue to utilize the
office space of such firm as its principal executive office. Such office is
located at 317 Madison Avenue, Suite 2310, New York, NY 10017, telephone: (212)
949-9696, facsimile: (212) 949-9241.
The Company has not invested in any real property at this time nor does the
Company intend to do so. The Company has no formal policy with respect to
investments in real estate or investments with persons primarily engaged in real
estate activities.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as of this date, with respect to
Common Stock of the Company owned by James A. Prestiano, the sole director and
officer of the Company, and the only individual who owns more than 5% of the
outstanding and voting Common Stock.
<TABLE>
<CAPTION>
SHARES PERCENT
BENEFICIALLY OF CLASS
NAME OWNED OUTSTANDING
- -------------------------------------- ------------- -----------
<S> <C> <C>
James A. Prestiano(1) 2,000,000(2) 92.17%
All Officers and Directors as a group 2,000,000 92.17%
(one person)
</TABLE>
- ------------------------
(1) The address for Mr. Prestiano is c/o the Company, 317 Madison Avenue, Suite
2310, New York, NY 10017, telephone: (212) 949-9696, facsimile:
(212) 949-9241.
(2) Mr. Prestiano has sole voting and investment power with respect to the
shares shown.
A Merger will, in all likelihood, result in stockholders of the Merger
Target obtaining a controlling interest in the Company. Any such Merger may
require management of the Company to sell, transfer or cancel all or a
portion of the Company's stock held by management, or cause Mr. Prestiano to
resign or be removed as executive officer and/or sole director and a
corresponding reduction in or elimination of his participation in the future
affairs of the Company
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<PAGE>
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
The following table sets forth information concerning the sole director,
executive officer of the Company:
<TABLE>
<CAPTION>
Name Age Title
- ---- --- ------
<S> <C> <C>
James A. Prestiano 35 President, Secretary, and Sole Director
</TABLE>
MR. JAMES A. PRESTIANO, age 35, is the sole director, president, and
secretary of the Company. Mr. Prestiano is the principal of the Law Offices of
James A. Prestiano. Mr. Prestiano practices law in New York, New York and
specializes in securities, corporate and business matters. Mr. Prestiano has
practiced law in New York since 1993. From 1990 to 1993, Mr. Prestiano was a
Staff Attorney at the Northeast Regional Office of the United States Securities
and Exchange Commission. Mr. Prestiano is a graduate of St. Johns University,
where he received a B.A. degree in 1987 and a law degree in 1990.
The Company currently has no employees.
Mr. Prestiano is not required to commit his full time to the affairs of the
Company and it is likely that he will not devote a substantial amount of time to
the affairs of the Company. Mr. Prestiano will have conflicts of interest in
allocating management time among various business activities. As a result, the
consummation of a Merger may require a greater period of time than if the
Company's management devoted their full time to the Company's affairs. However,
Mr. Prestiano will devote such time as he deems reasonably necessary to carry
out the business and affairs of the Company, including the evaluation of
potential Merger Targets and the negotiation and consummation of a Merger and,
as a result, the amount of time devoted to the business and affairs of the
Company may vary significantly depending upon, among other things, whether the
Company has identified a Merger Target or is engaged in active negotiation and
consummation of a Merger.
ITEM 6. EXECUTIVE COMPENSATION
James A. Prestiano is the sole officer and director of the Company. Mr.
Prestiano receives no compensation for his services as the sole director and/or
president and secretary of the Company. Mr. Prestiano and his affiliates will,
however, be reimbursed, at-cost, for any reasonable business expenses of the
Company, including those incurred in connection with the formation of the
Company, the Private Placement, the preparation and filing of this Registration
statement, and effecting any Merger. This will include reimbursement for the
cost of the personnel of Mr. Prestiano or his affiliates (other than Mr.
Prestiano himself) to be inclusive of all documented costs of their employment
on a reasonable hourly or daily allocation while engaged in activities on behalf
of the Company.
While the Company does not presently anticipate engaging the services of
professional firms that specialize in finding business acquisitions on any
formal basis, the Company may engage such firms in the future, in which event
the Company may pay a finder's fee or other compensation. In no event, however,
will the Company pay a finder's fee or commission to the officer and director of
the Company or any entity with which he is affiliated for such service.
Moreover, in no event shall the Company issue any of its securities to any
officer, director or promoter of the Company, or any of their respective
affiliates or associates, in connection with activities designed to locate a
Merger Target.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
To this date, the Company has had no operating business and engaged in no
transactions in which Mr. Prestiano has had any direct or indirect material
interest. Should the Company engage in any such transaction in the future, Mr.
Prestiano's interest therein would arise only from his ownership of Common Stock
of the Company and would receive no extra or special benefit that was not shared
equally (pro rata) by all holders of Common Stock of the Company.
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<PAGE>
In addition to the Company, Mr. Prestiano serves as the sole director and
officer of other companies that contemplate the same business activities as the
Company and thus compete directly with the Company. Including the Company, these
companies are: Algiers Resources, Inc.; Balstron Corporation; Daliprint,
Inc.; Hartscup Corporation; Mayall Partners, Inc.; PSLRA, Incorporated; Regal
Acquisitions, Inc.; Spacial Corporation; Voyer One, Inc.; and Voyer Two, Inc.
As a result, Mr. Prestiano will have a conflict of interest with respect to
prospective Merger Targets and presenting the corporate opportunity to the
Company. In general, officers and directors of a corporation incorporated under
the laws of the State of Delaware are required to present certain business
opportunities to such corporation, and the laws of the state of Delaware further
provide rights and remedies to shareholders in the event such duty is breached.
As a result of Mr. Prestiano's business associations with multiple companies he
will have conflicting interests. Therefore, the Company has agreed that with
respect to conflicts of interest amongst these companies related to the
allocation of opportunities to negotiate and Merge with Merger Targets, the
Company will waive any conflict or claim related to Mr. Prestiano's fiduciary
duty. However, the conflict should be mitigated by the fact that Mr. Prestiano
has the same ownership interest in each other company as he does in the Company,
and each company (including the Company) has identical stockholders, at least
initially. The conflict will be more significant should, at a later date, these
facts change.
Prior to his involvement with the Company, Mr. Prestiano has not been
involved in any "blind pool" or "blank check" offerings. Mr. Prestiano is
affiliated with nine other companies engaged in business activities similar to
those to be conducted by the Company, and may in the future become affiliated
with more, and therefore may have conflicts of interest in determining to which
entity a particular business opportunity should be presented. As described
above, officers and directors of a corporation incorporated under the laws of
the State of Delaware are required to present certain business opportunities to
such corporation. Accordingly, as a result of multiple business affiliations,
Mr. Prestiano may have similar legal obligations to present certain business
opportunities to multiple entities. There can be no assurance that any of the
foregoing conflicts will be resolved in favor of the Company.
Mr. Prestiano and the Company have no formal plan relating to the
allocation of business or Merger opportunities between the Company and the nine
other companies, and thus there can be no assurance that any Merger opportunity
shall be presented to the Company, as opposed to the nine other Companies.
ITEM 8. DESCRIPTION OF SECURITIES
Under the Company's Certificate of Incorporation, the authorized capital
stock of the Company consists of 45,000,000 shares, of which 40,000,000 shares
are Common Stock and 5,000,000 shares of Preferred Stock.
COMMON STOCK
The Company is authorized to issue 40,000,000 shares of Common Stock,
$0.001 par value per share, of which 2,170,000 shares were outstanding as of
June 15, 1999. The holders of outstanding Common Stock are entitled to receive
dividends out of assets legally available therefor at such times and in such
amounts as the Board of Directors may from time to time determine. The Company
has no present intention of paying dividends on its Common Stock. Upon
liquidation, dissolution or winding up of the Company, and subject to the
priority of any outstanding Preferred Stock, the assets legally available for
distribution to stockholders are distributable ratably among the holders of the
Common Stock at the time outstanding. No holder of shares of Common Stock has a
preemptive right to subscribe to future issuances of securities by the Company.
There are no conversion rights or redemption or sinking fund provisions with
respect to the Common Stock. Holders of Common Stock are entitled to cast one
vote for each share held of record on all matters presented to stockholders.
PREFERRED STOCK
Each Company is authorized to issue 5,000,000 shares of Preferred Stock, of
which no shares are currently outstanding. The Company's Board of Directors is
authorized to issue the Preferred Stock in one or more series and, with respect
to each series, to determine the preferences and rights and the qualifications,
limitations or restrictions thereof, including the dividends rights, conversion
rights, voting rights, redemption rights and terms, liquidation preferences,
sinking fund provisions, the number of shares constituting the series and the
designation of such series. The Board of Directors could, without stockholder
approval, issue Preferred Stock with voting and other rights that could
adversely affect the voting rights of the holders of Common Stock and could have
certain anti-takeover effects.
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<PAGE>
REGISTRATION RIGHTS AND LOCK-UP
The outstanding shares of Common Stock have certain registration rights
and are subject to certain lock-up restrictions described in Part II, Item 1. of
this Registration Statement.
ANTI-TAKEOVER PROVISIONS
The Company may become subject to the anti-takeover provisions of Section
203 of the Delaware General Corporation Law. In general, such statute prohibits
a publicly-held Delaware corporation from engaging in a "business combination"
with an "interested stockholder" for a period of three years after the date of
the transaction in which the person become an interested stockholder, unless
either (i) prior to the date at which the person becomes an interested
stockholder, the Board of Directors approves such transaction or business
combination, (ii) the stockholder acquires more than 85% of the outstanding
voting stock of the corporation (excluding shares held by directors who are
officers or held in certain employee stock plans) upon consummation of such
transaction, or (iii) the business combination is approved by the Board of
Directors and by two-thirds of the outstanding voting stock of the corporation
(excluding shares held by the interested stockholder) at a meeting of
stockholders (and not by written consent). A "business combination" includes a
merger, asset sale or other transaction resulting in a financial benefit to such
interested stockholder. For purposes of Section 203, an "interested
stockholder" is a person who, together with affiliates and associates, owns (or
within three years prior, did own) 15% or more of the corporation's voting
stock.
TRANSFER AGENT
The Company acts as its own transfer agent for its Common Stock.
PART II
ITEM 1. MARKET PRICE AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND OTHER
SHAREHOLDER MATTERS.
NO PUBLIC MARKET
The Company's Common Stock is currently not traded on any public trading
market. Management does not currently anticipate that any market for its Common
Stock will develop until such time, if any, as the Company has successfully
implemented its business plan and completed a Merger.
The authorized capital stock of the Company consists of 45,000,000 shares,
of which 40,000,000 shares have been designated Common Stock, $0.001 par value,
and 5,000,000 shares of Preferred Stock, $0.001 par value. At June 15, 1999,
there were 2,170,000 shares of Common Stock outstanding and held of record by
nine stockholders.
COMMON EQUITY SUBJECT TO OUTSTANDING OPTIONS OR WARRANTS
In connection with the Private Placement described in Part II, Item 4
below, each placement agent received a portion of its compensation in the form
of warrants to purchase the number of shares of Common Stock of the Company
equal to 30% of the Common Stock of the Company sold by such placement agent in
the Private Placement at an initial exercise price of $0.255 per share (subject
to anti-dilution adjustment in certain circumstances). Warrants (the "Placement
Agent Warrant") to purchase an aggregate of 51,000 shares of Common Stock
(subject to anti-dilution adjustment in certain circumstances) were issued in
connection with the Private Placement. The Private Placement Warrants are
exercisable for a period of seven years commencing April 19, 1999 and
terminating April 19, 2006. The Placement Agent Warrants have a provision for
net cashless exercise whereby the holder will be entitled to receive upon
exercise the number of shares of Common Stock otherwise issuable upon such
exercise, less the number of shares of Common Stock having an aggregate current
market value on the date of exercise equal to the exercise price per share
multiplied by the number of shares of Common Stock for which the Placement Agent
Warrants are being exercised. The shares of Common Stock issuable upon exercise
of the Placement Agent Warrants are subject to the terms of the lock-up
described below and have the same registration rights as purchasers of Shares in
the Private Placement.
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<PAGE>
DIVIDENDS
The Company does not expect to pay dividends prior to the consummation of a
Merger. The payment of dividends after consummating any such Merger, if any,
will be contingent upon the Company's revenues and earnings, if any, capital
requirements, and general financial condition subsequent to consummation of a
Merger. The payment of any dividends subsequent to a Merger will be within the
discretion of the Company's then Board of Directors and may be subject to
restrictions under the terms of any debt or other financing arrangements that
the Company may enter into in the future. The Company presently intends to
retain all earnings, if any, for use in the Company's business operations and
accordingly, the Board does not anticipate declaring any dividends in the
foreseeable future.
SHARES ELIGIBLE FOR FUTURE SALE; LOCK-UP
None of the 2,170,000 shares of Common Stock outstanding as of June 15,
1999 are eligible for sale under Rule 144 ("Rule 144") promulgated under the
Securities Act until one year from the date of issuance (October 1999). In
general, under Rule 144, as currently in effect, subject to the satisfaction
of certain other conditions, a person, including an affiliate of the Company
(or persons whose shares are aggregated), who has owned restricted shares of
Common Stock beneficially for at least one year is entitled to sell, within
any three-month period, a number of shares that does not exceed the greater
of 1% of the total number of outstanding shares of the same class or, if the
Common Stock is quoted on an exchange or NASDAQ, the average weekly trading
volume during the four calendar weeks preceding the sale. A person who has
not been an affiliate of the Company for at least three months immediately
preceding the sale and who has beneficially owned the shares of Common Stock
to be sold for at least two years is entitled to sell such shares under Rule
144 without regard to any of the limitations described above.
Management believes that potential Merger Targets will be sensitive to the
amount of Common Stock of a company which might become free trading at one time.
In order to address that problem the Common Stock that was sold in the Private
Placement is subject to the following restriction, with the understanding that
Management will seek to free the Common Stock from this specific restriction in
the shortest time and maximum amount possible consistent with achieving, if
possible, an attractive Merger. Prior to (i) the consummation of a Merger by
the Company and (ii) either the expiration of relevant holding periods under
Rule 144 promulgated pursuant to the Securities Act or registration of the
Common Stock, purchasers of the Common Stock sold in the Private Placement may
not sell, pledge, assign or otherwise transfer or hypothecate any Common Stock
of the Company. Further, pursuant to a lock-up agreement incorporated into the
subscription documents executed by investors in the Private Placement, after
such registration and Merger, if attained, fifty percent (50%) of all Common
Stock of the merged-Company purchased in the Private Placement by each holder
may not be sold, pledged, assigned or otherwise transferred or hypothecated for
a period of six (6) months from the closing of any Merger and the remaining
fifty percent (50%) of the Common Stock of the merged-Company purchased in the
Private Placement by such holder will be similarly restricted for a period of
twelve (12) months from the closing of any Merger (the "Lock-up").
In addition, Mr. Prestiano has agreed to restrict his 2,000,000 shares of
Common Stock in the Company pursuant to the same provisions as the Lock-up,
subject to release on the same percentage basis. All shares underlying the
Placement Agent Warrants are also subject to the Lock-up. In order to release
any stockholder from the terms of the Lock-up, all other stockholders must be
proportionately released
REGISTRATION RIGHTS
Each investor in the Private Placement was required to enter into certain
subscription documents (collectively, the "Subscription Documents"), including a
Subscription Agreement (and related Subscription Supplement, Lock-Up and
Registration Rights Agreement, to which each subscriber is bound by executing
the Subscription Agreement). The Subscription Documents granted investors
certain registration rights. In particular, the Subscription Documents required
that, subsequent to any Merger, the Company use its best efforts to file a
Registration Statement under the Securities Act to register the Common Stock of
the Company sold in the Private Placement, subject to certain Lock-up provisions
described in Part II of this Registration Statement.
ITEM 2. LEGAL PROCEEDINGS.
-17-
<PAGE>
The Company is not subject to any pending legal proceedings.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
Not applicable.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES
In October 1998, James A. Prestiano, the Company's founder, sole director
and officer, acquired 2,000,000 shares of Common Stock for aggregate
consideration of $100 in connection with the formation of the Company. The
shares were issued without registration in reliance upon the exemption provided
by Section 4(2) of the Securities Act.
Commencing November 1, 1998, and ending March 31, 1999, the Company
conducted an offering of its Common Stock (the "Private Placement"), in reliance
upon the exemption from registration set forth in Section 4(2) of the Securities
Act and Regulation D (Rule 506) promulgated under the Securities Act. The
Company offered on a "best efforts" basis directly and through a Placement
Agent, Tradeway Securities Group, Inc., a member of the National Association of
Securities Dealers, Inc., a maximum of 225,000 shares of Common Stock at an
offering price of $0.25 per share, to investors who were "accredited investors"
as defined in the Securities Act, and who met certain additional standards set
forth by the Company. An aggregate of 170,000 shares of Common Stock were sold
in the Private Placement to a total of eight accredited investors for gross
proceeds of $42,500. In addition, on April 19, 1999, the Company issued
Placement Agent Warrants to purchase 51,000 shares of Common Stock.
The Company is one of the following ten companies in which investors in the
Private Placement were required to make an equal investment: Algiers Resources,
Inc.; Balstron Corporation; Daliprint, Inc.; Hartscup Corporation; Mayall
Partners, Inc.; PSLRA, incorporated; Regal Acquisitions, Inc.; Spacial
Corporation; Voyer One, Inc.; and Voyer Two, Inc.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's Certificate of Incorporation (the "Certificate") and Bylaws
include provisions that eliminate the directors' personal liability for monetary
damages to the fullest extent possible under Delaware Law or other applicable
law (the "Director Liability Provision"). The Director Liability Provision
eliminates the liability of directors to the Company and its stockholders for
monetary damages arising out of any violation by a director of his fiduciary
duty of due care. Under Delaware Law, however, the Director Liability Provision
does not eliminate the personal liability of a director for (i) breach of the
director's duty of loyalty, (ii) acts or omissions not in good faith or
involving intentional misconduct or knowing violation of law, (iii) payment of
dividends or repurchases or redemptions of stock other than from lawfully
available funds, or any transaction from which the director derived an improper
benefit. Furthermore, pursuant to Delaware Law, the limitation on liability
afforded by the Director Liability Provision does not eliminate a director's
personal liability for breach of the director's duty of due care. Although the
directors would not be liable for monetary damages to the corporation or its
stockholders for negligent acts or omissions in exercising their duty of due
care, the directors remain subject to equitable remedies, such as actions for
injunction or rescission, although these remedies, whether as a result of
timeliness or otherwise, may not be effective in all situations. With regard to
directors who also are officers of the Company, these persons would be insulated
from liability only with respect to their conduct as directors and would not be
insulated from liability for acts or omissions in their capacity as officers.
Delaware Law provides a detailed statutory framework covering
indemnification of directors, officers, employees or agents of the Company
against liabilities and expenses arising out of legal proceedings brought
against them by reason of their status or service as directors, officers,
employees or agents. Section 145 of the Delaware General Corporation Law
("Section 145") provides that a director, officer, employee or agent of a
corporation (i) shall be indemnified by the corporation for expenses actually
and reasonably incurred in defense of any action or proceeding if such person is
sued by reason of his service to the corporation, to the extent that such
person has been successful in defense of such action or proceeding, or in
defense of any claim, issue or matter raised in such litigation, (ii) may, in
actions other than actions by or in the right of the corporation (such as
derivative actions), be indemnified for expenses actually and reasonably
incurred, judgments, fines and amounts paid in settlement of such litigation,
even if he is not successful on the merits, if he acted in
-18-
<PAGE>
good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation (and in a criminal proceeding, if he
did not have reasonable cause to believe his conduct was unlawful), and (iii)
may be indemnified by the corporation for expenses actually and reasonably
incurred (but not judgments or settlements) of any action by the corporation
or of a derivative action (such as a suit by a stockholder alleging a breach
by the director or officer of a duty owed to the corporation), even if he is
not successful, provided that he acted in good faith and in a manner
reasonably believed to be in or not opposed to the best interests of the
corporation, provided that no indemnification is permitted without court
approval if the director has been adjudged liable to the corporation.
Delaware Law also permits a corporation to elect to indemnify its officers,
directors, employees and agents under a broader range of circumstances than that
provided under Section 145. The Certificate contains a provision that takes full
advantage of the permissive Delaware indemnification laws (the "Indemnification
Provision") and provides that the Company is required to indemnify its officers,
directors, employees and agents to the fullest extent permitted by law,
including those circumstances in which indemnification would otherwise be
discretionary, provided, however, that prior to making such discretionary
indemnification, the Company must determine that the person acted in good faith
and in a manner he or she believed to be in the best interests of the Company
and, in the case of any criminal action or proceeding, the person had no reason
to believe his or her conduct was unlawful.
In furtherance of the objectives of the Indemnification Provision, the
Company may also enter into agreements to indemnify its directors and executive
officers, in addition to the indemnification provided for in the Company's
Certificate and Bylaws. Such indemnification agreements may be necessary to
attract and retain qualified directors and executive officers.
The inclusion of provisions limiting the liability of the Company's
officers and directors may have the effect of reducing the likelihood of
derivative litigation against the officers and directors in the future and may
discourage or deter stockholders or management from bringing a lawsuit against
the officers and directors for breach of their duty of care, even though such
action, if successful, might otherwise have benefited the Company and its
stockholders.
-19-
<PAGE>
PART F/S
The financial statements and supplemental data required by Item 310 of
Regulation S-B are attached hereto
-20-
<PAGE>
REGAL ACQUISITIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
FOR THE PERIOD FROM OCTOBER 6, 1998
(INCEPTION) TO DECEMBER 31, 1998 AND
THE THREE MONTHS ENDED
MARCH 31, 1999 (UNAUDITED)
<PAGE>
REGAL ACQUISITIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
CONTENTS
DECEMBER 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Page
<S> <C>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS 1
FINANCIAL STATEMENTS
Balance Sheets 2
Statements of Operations 3
Statements of Stockholder's Equity 4
Statements of Cash Flows 5
Notes to Financial Statements 6 - 8
</TABLE>
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors and Stockholders
Regal Acquisitions, Inc.
We have audited the accompanying balance sheet of Regals Acquisitions, Inc. (a
development stage company) as of December 31, 1998, and the related statements
of operations and accumulated deficit and cash flows for the period from October
6, 1998 (inception) to 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 on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Regal Acquisitions, Inc. as of
December 31, 1998, and the results of its operations and its cash flows for the
period from October 6, 1998 (inception) to December 31, 1998 in conformity with
generally accepted accounting principles.
SINGER LEWAK GREENBAUM & GOLDSTEIN LLP
Los Angeles, California
March 17, 1999
<PAGE>
REGAL ACQUISITIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
DECEMBER 31, 1998 AND MARCH 31, 1999 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ASSETS
December 31, March 31,
1998 1999
--------------- ----------------
(unaudited)
<S> <C> <C>
ASSETS
Cash $ 100 $ 35,118
Common stock subscription receivable 4,500 -
Prepaid expenses 1,888 1,413
--------------- ----------------
TOTAL ASSETS $ 6,488 $ 36,531
=============== ================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Due to stockholder $ 3,076 $ 3,281
Accrued expenses 50 2,000
--------------- ----------------
Total current liabilities 3,126 5,281
--------------- ----------------
STOCKHOLDERS' EQUITY
Preferred stock, $0.001 par value
5,000,000 shares authorized
no shares issued and outstanding - -
Common stock, $0.001 par value
40,000,000 shares authorized
2,020,000 and 2,170,000 shares issued and outstanding 2,020 2,170
Additional paid-in capital 2,580 36,180
Common stock subscription receivable - (2,250)
Deficit accumulated during the development stage (1,238) (4,850)
--------------- ----------------
Total stockholders' equity 3,362 31,250
--------------- ----------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 6,488 $ 36,531
=============== ================
</TABLE>
<PAGE>
REGAL ACQUISITIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF OPERATIONS
FOR THE PERIOD FROM OCTOBER 6, 1998 (INCEPTION) TO DECEMBER 31, 1998,
FOR THE THREE MONTHS ENDED MARCH 31, 1999 (UNAUDITED), AND
FOR THE PERIOD FROM OCTOBER 6, 1998 (INCEPTION) TO MARCH 31, 1999 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the For the
Period from Period from
October 6, For the October 6,
1998 Three Months 1998
(Inception) to Ended (Inception) to
December 31, March 31, March 31,
1998 1999 1999
---------------- --------------- ----------------
(unaudited) (unaudited)
<S> <C> <C> <C>
OPERATING EXPENSES $ 1,238 $ 3,612 $ 4,850
---------------- --------------- ----------------
NET LOSS (1,238) (3,612) (4,850)
================ =============== ================
BASIC AND DILUTED
LOSS PER COMMON SHARE $ (0.001) $ (0.002) $ (0.002)
================ =============== ================
WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING 2,013,953 2,112,360 2,063,750
================ =============== ================
</TABLE>
<PAGE>
REGAL ACQUISITIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM OCTOBER 6, 1998 (INCEPTION) TO DECEMBER 31, 1998,
FOR THE THREE MONTHS ENDED MARCH 31, 1999 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Deficit
Accumulated
Common Stock Additional Stock During the
--------------------- Paid-in Subscription Development
Shares Amount Capital Receivable Stage Total
---------- --------- ------------- -------------- --------------- -----------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, OCTOBER 6, 1998 (INCEPTION) - $ - $ - $ - $ - $ -
SALE OF COMMON STOCK 2,020,000 2,020 2,580 4,600
NET LOSS (1,238) (1,238)
---------- --------- ------------- -------------- --------------- -----------
BALANCE, DECEMBER 31, 1998 2,020,000 2,020 2,580 - (1,238) 3,362
SALE OF COMMON STOCK (UNAUDITED) 150,000 150 33,600 (2,250) 31,500
NET LOSS (UNAUDITED) (3,612) (3,612)
---------- --------- ------------- -------------- --------------- -----------
BALANCE, MARCH 31, 1999 (UNAUDITED) 2,170,000 $ 2,170 $ 36,160 $ (2,250) $ (4,840) $ 31,250
========== ========= ============= ============== ============== ===========
</TABLE>
<PAGE>
REGAL ACQUISITIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM OCTOBER 6, 1998 (INCEPTION) TO DECEMBER 31, 1998,
FOR THE THREE MONTHS ENDED MARCH 31, 1999 (UNAUDITED), AND
FOR THE PERIOD FROM OCTOBER 6, 1998 (INCEPTION) TO MARCH 31, 1999 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the For the
Period from Period from
October 6, For the October 6,
1998 Three Months 1998
(Inception) to Ended (Inception) to
December 31, March 31, March 31,
1998 1999 1999
---------------- --------------- ----------------
(unaudited) (unaudited)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (1,238) $ (3,612) $ (4,850)
Change in
Prepaid expenses (1,888) 475 (1,413)
Accrued expenses 50 1,950 2,000
---------------- --------------- ----------------
Net cash used in operating activities (3,076) (1,187) (4,263)
---------------- --------------- ----------------
CASH FLOWS FROM FINANCING ACTIVITIES
Cash received for common stock 100 36,000 36,100
Due to stockholder 3,076 205 3,281
---------------- --------------- ----------------
Net cash provided by financing activities 3,176 36,205 39,381
---------------- --------------- ----------------
Net increase in cash 100 35,018 35,118
CASH, BEGINNING OF PERIOD - 100 -
---------------- --------------- ----------------
CASH, END OF PERIOD $ 100 $ 35,118 $ 35,118
================ =============== ================
</TABLE>
<PAGE>
REGAL ACQUISITIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
FOR THE PERIOD FROM OCTOBER 6, 1998 (INCEPTION) TO DECEMBER 31, 1998,
FOR THE THREE MONTHS ENDED MARCH 31, 1999 (UNAUDITED), AND
FOR THE PERIOD FROM OCTOBER 6, 1998 (INCEPTION) TO DECEMBER 31, 1999
(THE INFORMATION WITH RESPECT TO THE
THREE MONTHS ENDED MARCH 31, 1999 AND 1998 IS UNAUDITED.)
- --------------------------------------------------------------------------------
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND LINE OF BUSINESS
Regal Acquisitions, Inc. (the "Company") was incorporated on October 6,
1998 in the State of Delaware. The Company is in the development stage,
and its intent is to operate as a capital market access corporation and
to acquire one or more existing businesses through merger or
acquisition. The Company has had no significant business activity to
date.
In the opinion of management, the interim financial statements
include all adjustments, consisting of only normal, recurring
adjustments, necessary for a fair presentation of the Company's
financial position, results of operations, and cash flows.
START-UP COSTS
Start-up costs include legal and professional fees. In accordance with
Statement of Position 98-5, "Costs of Start-Up Activities," these costs
have been expensed as incurred.
ESTIMATES
The preparation of the Company's financial statements in conformity
with generally accepted accounting principles requires the Company's
management to make estimates and assumptions that affect the amounts
reported in these financial statements and accompanying notes. Actual
results could differ from those estimates.
LOSS PER SHARES
During the period from October 6, 1998 (inception) to December 31,
1998, the Company adapted SFAS No. 128, "Earnings per Share." Basic
loss per share is computed by dividing the loss available to common
stockholders by the weighted-average number of common shares
outstanding. Diluted loss per share is computed similar to basic loss
per share except that the denominator is increased to include the
number of additional common shares that would have been outstanding
if the potential common shares had been issued and if the additional
common shares were dilutive. Because the Company has incurred net
losses, basic and diluted loss per share are the same.
<PAGE>
REGAL ACQUISITIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
FOR THE PERIOD FROM OCTOBER 6, 1998 (INCEPTION) TO DECEMBER 31, 1998,
FOR THE THREE MONTHS ENDED MARCH 31, 1999 (UNAUDITED), AND
FOR THE PERIOD FROM OCTOBER 6, 1998 (INCEPTION) TO DECEMBER 31, 1999
(THE INFORMATION WITH RESPECT TO THE
THREE MONTHS ENDED MARCH 31, 1999 AND 1998 IS UNAUDITED.)
- --------------------------------------------------------------------------------
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
INCOME TAXES
The Company uses the asset and liability method of accounting for
income taxes. The asset and liability method accounts for deferred
income taxes by applying enacted statutory rates in effect for periods
in which the difference between the book value and the tax bases of
assets and liabilities are scheduled to reverse. The resulting deferred
tax asset or liability is adjusted to reflect changes in tax laws or
rates. Because the Company is in the development stage and has incurred
a loss from operations, no benefit is realized for the tax effect of
the net operating loss carryforward due to the uncertainty of its
realization.
NOTE 2 - STOCKHOLDERS' EQUITY
Subscription receivable of $4,500 at December 31, 1998 was collected in
January 1999. At March 31, 1999, the Company had unpaid subscriptions
of $2,250 (unaudited) to purchase its common stock.
Subscription receivable represents amounts received in a master bank
account for which the President/Director of the Company is the sole
signatory. This account serves as an escrow account. Funds are
transferred from this bank account to the Company's bank account, net
of placement agent's fees for common stock subscribed and any amount
paid on behalf of the Company.
NOTE 3 - RELATED PARTY TRANSACTIONS
The Company owed $3,076 and $3,281 (unaudited) at December 31, 1998 and
March 31, 1999, respectively, to the President/Director of the Company.
During 1998, the Company's President/Director paid a $3,000 retainer to
the Company's attorney, Jeffer, Mangels, Butler, & Marmaro LLP.
The Company issued 2,000,000 shares of common stock to the
President/Director for $100.
<PAGE>
REGAL ACQUISITIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
FOR THE PERIOD FROM OCTOBER 6, 1998 (INCEPTION) TO DECEMBER 31, 1998,
FOR THE THREE MONTHS ENDED MARCH 31, 1999 (UNAUDITED), AND
FOR THE PERIOD FROM OCTOBER 6, 1998 (INCEPTION) TO DECEMBER 31, 1999
(THE INFORMATION WITH RESPECT TO THE
THREE MONTHS ENDED MARCH 31, 1999 AND 1998 IS UNAUDITED.)
- --------------------------------------------------------------------------------
NOTE 4 - YEAR 2000 ISSUE
The Company is conducting a comprehensive review of its computer
systems to identify the systems that could be affected by the Year 2000
Issue and is developing an implementation plan to resolve the Issue.
The Issue is whether computer systems will properly recognize
date-sensitive information when the year changes to 2000. Systems that
do not properly recognize such information could generate erroneous
data or cause a system to fail. The Company is dependent on computer
processing in the conduct of its business activities.
Based on the review of the computer systems, management does not
believe the cost of implementation will be material to the Company's
financial position and results of operations.
NOTE 5 - SUBSEQUENT EVENT (UNAUDITED)
On April 19, 1999, warrants to purchase 51,000 shares of the
Company's common stock, par value $0.001, were issued to the placement
agent at an exercise price of $0.255 per share. The shares vest
immediately and can be exercised within seven years from the date of
issuance of the warrants. The fair value of the warrants at the date
of issuance was approximately $2,813 based on the fair value of the
placement agent's services, fees cash paid.
<PAGE>
PART III
ITEM 1. INDEX TO EXHIBITS.
<TABLE>
<CAPTION>
Exhibit Number Description Pages
- -------------- ----------- -----
<S> <C> <C>
*2.1 Certificate of Incorporation
*2.2 Bylaws
*3.1 Form of Private Placement Warrant
*3.1 Form of Subscription Supplement, Lock-Up and Registration
Rights Agreement executed by investors in the Private
Placement
*3.3 Form of Subscription Agreement executed by investors in the
Private Placement
*6.1 Placement Agent Agreement
*27 Financial Data Schedule
</TABLE>
* Previously filed with Commission
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
Registrant caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized.
REGAL ACQUISITIONS, INC.
By: \s\ James A. Prestiano
--------------------------------------
James A. Prestiano, President and Director
Dated: September 20, 1999
