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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
BALSTRON CORPORATION
(Name of Small Business Issuer in its charter)
DELAWARE 13-4031361
(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
Balstron Corporation (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
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evaluate the Company's prospects for achieving its intended business
objectives. To date, the Company's efforts have been limited to
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.
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THE COMPANY IS UNABLE TO ASCERTAIN RISKS RELATING TO THE INDUSTRY AND NATURE
OF UNIDENTIFIED MERGER TARGETS
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.
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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
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
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
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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
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
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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 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
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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.
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
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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 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
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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 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.
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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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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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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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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
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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.
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
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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.
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
-17-
<PAGE>
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.
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
-18-
<PAGE>
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 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>
BALSTRON CORP.
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
FOR THE PERIOD FROM OCTOBER 6, 1998
(INCEPTION) TO DECEMBER 31, 1998 AND
FOR THE THREE MONTHS ENDED
MARCH 31, 1999 (UNAUDITED)
<PAGE>
<TABLE>
<CAPTION>
BALSTRON CORP.
(A DEVELOPMENT STAGE COMPANY)
CONTENTS
DECEMBER 31, 1998
- --------------------------------------------------------------------------------
Page
<S> <C>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS 1
FINANCIAL STATEMENTS
Balance Sheets 2
Statements of Operations 3
Statements of Stockholders' 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
Balstron Corp.
We have audited the accompanying balance sheet of Balstron Corp. (a
development stage company) as of December 31, 1998, and the related
statements of operations, stockholders' equity, 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 Balstron Corp. 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>
<TABLE>
<CAPTION>
BALSTRON CORP.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
DECEMBER 31, 1998 AND MARCH 31, 1999 (UNAUDITED)
- --------------------------------------------------------------------------------------------------------------------------
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
=============== ================
The accompanying notes are an integral part of these financial statements.
2
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
BALSTRON CORP.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS 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)
- --------------------------------------------------------------------------------------------------------------------------
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>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
<TABLE>
<CAPTION> BALSTRON CORP.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM OCTOBER 6, 1998 (INCEPTION) TO DECEMBER 31, 1998,
FOR THE THREE MONTHS ENDED MARCH 31, 1999 (UNAUDITED)
- -----------------------------------------------------------------------------------------------------------------------------------
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 $ 36,180 $ (2,250) $ (4,850) $ 31,250
============ =========== =========== =========== ========== =========
The accompanying notes are an integral part of these financial statements.
4
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
BALSTRON CORP.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS 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)
- --------------------------------------------------------------------------------------------------------------------------
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
-------------- ------------- --------------
<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
============== ============= ==============
The accompanying notes are an integral part of these financial statements.
5
</TABLE>
<PAGE>
BALSTRON CORP.
(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
Balstron Corp. (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 SHARE
During the period from October 6, 1998 (inception) to December 31,
1998, the Company adopted 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.
6
<PAGE>
BALSTRON CORP.
(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 (CONTINUED)
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
The 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.
The 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.
7
<PAGE>
BALSTRON CORP.
(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, less cash paid.
8
<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
*3.2 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
- --------------
* Previously filed with Commission.
</TABLE>
-21-
<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.
BALSTRON CORPORATION
By: \s\ James A. Prestiano
------------------------------------------
James A. Prestiano, President and Director
Dated: September 20, 1999
