File No.: 0-25591
First Amendment
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-SB
General Form for Registration of Securities
of Small Business Issuers
Under Section 12(b) or (g) of
the Securities Exchange Act of 1934
STATESIDE FUNDINGS, INC.
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(Name of Small Business Issuer)
Delaware 11-3462369
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(State or Other I.R.S. Employer
Jurisdiction of Identification
Incorporation or Number
Organization)
1040 East 22nd Street, Brooklyn, New York 11210
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(Address of Principal Executive Offices including Zip Code)
(718) 692-2743
--------------------------
(Issuer's Telephone Number)
Securities to be Registered Under Section 12(b) of the Act: None
Securities to be Registered Under
Section 12(g) of the Act: Common Stock, $.0001 Par Value
(Title of Class)
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PART I
The following Business section contains forward-looking statements
which involve risks and uncertainties. The Company's actual results could differ
materially from those anticipated in these forward-looking statements as a
result of certain factors, including those set forth under "Risk Factors" and
elsewhere in this registration statement.
ITEM 1. BUSINESS.
Stateside Fundings, Inc. (the "Company"), was incorporated on December 19,
1997 under the laws of the State of Delaware to engage in any lawful corporate
undertaking, including, but not limited to, selected mergers and acquisitions.
The Company has been in the development stage since inception and has no
operations to date. Other than issuing shares to its original shareholders, the
Company has not commenced any operational activities.
The Company will attempt to locate and negotiate with a business entity for
the merger of that target company into the Company. In certain instances, a
target company may wish to become a subsidiary of the Company or may wish to
contribute assets to the Company rather than merge. No assurances can be given
that the Company will be successful in locating or negotiating with any target
company.
The Company has been formed to provide a method for a foreign or domestic
private company to become a reporting ("public") company whose securities are
qualified for trading in the United States secondary market.
There are certain perceived benefits to being a reporting company with a
class of publicly-traded securities qualified for trading in the United States
secondary market. These are commonly thought to include the following:
* the ability to register and use registered securities to acquire
assets or businesses;
* increased visibility;
* the facilitation of borrowing from financial institutions;
* improved trading efficiency;
* shareholder liquidity;
* greater ease in subsequently raising capital; * compensation of key
employees through stock options; * enhanced corporate image; * a
presence in the United States capital markets.
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A business entity, if any, which may be interested in a business
combination with the Company may include the following:
* a company for whom a primary purpose of becoming public is the use of
its securities for the acquisition of assets or businesses;
* a company which is unable to find an underwriter of its securities or
is unable to find an underwriter of securities on terms acceptable to
it;
* a company which wishes to become public with less dilution of its
common stock than would occur upon an underwriting;
* a company which believes that it will be able obtain investment
capital on more favorable terms after it has become public;
* a foreign company which may wish an initial entry into the United
States securities market;
* a special situation company, such as a company seeking a public market
to satisfy redemption requirements under a qualified Employee Stock
Option Plan;
* a company seeking one or more of the other perceived benefits of
becoming a public company.
A business combination with a target company will normally involve the
transfer to the target company of the majority of the issued and outstanding
common stock of the Company, and the substitution by the target business of its
own management and board of directors.
No assurances can be given that the Company will be able to enter into a
business combination, as to the terms of a business combination, or as to the
nature of the target company.
The proposed business activities described herein classify the Company as a
"blank check" company. See "GLOSSARY". The Securities and Exchange Commission
and many states have enacted statutes, rules and regulations limiting the sale
of securities of blank check companies. Management does not intend to undertake
any efforts to cause a market to develop in the Company's securities until such
time as the Company has successfully implemented its business plan described
herein.
The Company is voluntarily filing this Registration Statement with the
Securities and Exchange Commission and is under no obligation to do so under the
Securities Exchange Act of 1934.
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The Company's business is subject to numerous risk factors, including the
following:
NO OPERATING HISTORY OR REVENUE AND MINIMAL ASSETS. The Company has had no
operating history nor any revenues or earnings from operations. The Company has
no significant assets or financial resources. The Company will, in all
likelihood, sustain operating expenses without corresponding revenues, at least
until the consummation of a business combination. This may result in the Company
incurring a net operating loss which will increase continuously until the
Company can consummate a business combination with a target company. There is no
assurance that the Company can identify such a target company and consummate
such a business combination.
SPECULATIVE NATURE OF THE COMPANY'S PROPOSED OPERATIONS. The success of the
Company's proposed plan of operation will depend to a great extent on the
operations, financial condition and management of the target company. While
management intends to seek business combinations with entities having
established operating histories, there can be no assurance that the Company will
be successful in locating candidates meeting such criteria. In the event the
Company completes a business combination, of which there can be no assurance,
the success of the Company's operations, most likely, will be dependent upon
management of the target company and numerous other factors beyond the Company's
control.
SCARCITY OF AND COMPETITION FOR BUSINESS OPPORTUNITIES AND COMBINATIONS.
The Company is and will continue to be an insignificant participant in the
business of seeking mergers with and acquisitions of business entities. A large
number of established and well-financed entities, including venture capital
firms, are active in mergers and acquisitions of companies which may be merger
or acquisition target candidates for the Company. Nearly all such entities have
significantly greater financial resources, technical expertise and managerial
capabilities than the Company and, consequently, the Company will be at a
competitive disadvantage in identifying possible business opportunities and
successfully completing a business combination. Moreover, the Company will also
compete with numerous other small public companies in seeking merger or
acquisition candidates.
NO AGREEMENT FOR BUSINESS COMBINATION OR OTHER TRANSACTION-NO STANDARDS FOR
BUSINESS COMBINATION. The Company has no arrangement, agreement or understanding
with respect to engaging in a merger with or acquisition of a business entity.
There can be no assurance the Company will be successful in identifying and
evaluating suitable business opportunities or in concluding a business
combination. Management has not identified any particular industry or specific
business within an industry for evaluation by the Company. There is no assurance
the Company will be able to negotiate a business combination on terms favorable
to the Company.
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The Company has not established a specific length of operating history or a
specified level of earnings, assets, net worth or other criteria which it will
require a target business opportunity to have achieved, or without which the
Company would not consider a business combination with such business entity.
Accordingly, the Company may enter into a business combination with a business
entity having no significant operating history, losses, limited or no potential
for earnings, limited assets, negative net worth or other negative
characteristics.
CONTINUED MANAGEMENT CONTROL, LIMITED TIME AVAILABILITY. While seeking a
business combination, management anticipates devoting up to ten hours per month
to the business of the Company. The Company's sole officer and director has not
entered into a written employment agreement with the Company and he is not
expected to do so in the foreseeable future. The Company has not obtained key
man life insurance on its sole officer and director. Notwithstanding the
combined limited experience and limited time commitment of management, loss of
the services of this individual would adversely affect development of the
Company's business and its likelihood of continuing operations. See
"MANAGEMENT."
CONFLICTS OF INTEREST-GENERAL. The Company's sole officer and director
participates in other ventures which may compete directly with the Company.
Additional conflicts of interest and non-arms length transactions may also arise
in the future. Management has adopted a policy that the Company will not seek a
merger with, or acquisition of, any entity in which the Company's sole officer
and director serves as officer, director or partner, or in which he or his
family members own or hold any ownership interest. See "ITEM 5. DIRECTORS,
EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS - CONFLICTS OF INTEREST."
REPORTING REQUIREMENTS MAY DELAY OR PRECLUDE ACQUISITION. Section 13 of the
Securities Exchange Act of 1934 (the "Exchange Act") requires companies subject
thereto to provide certain information about significant acquisitions including
certified financial statements for the company acquired covering one or two
years, depending on the relative size of the acquisition. The time and
additional costs that may be incurred by some target companies to prepare such
statements may significantly delay or essentially preclude consummation of an
otherwise desirable acquisition by the Company. Acquisition prospects that do
not have or are unable to obtain the required audited statements may not be
appropriate for acquisition so long as the reporting requirements of the
Exchange Act are applicable.
LACK OF DIVERSIFICATION. The Company's proposed operations, even if
successful, will in all likelihood result in the Company engaging in a business
combination with only one business opportunity. Consequently, the Company's
activities will be limited to those engaged in by the business which the Company
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merges with or acquires. The Company's inability to diversify its activities
into a number of areas may subject the Company to economic fluctuations within a
particular business or industry and therefore increase the risks associated with
the Company's operations.
REGULATION. Although the Company will be subject to regulation under the
Exchange Act, management believes the Company will not be subject to regulation
under the Investment Company Act of 1940, insofar as the Company does not intend
to be engaged in the business of investing or trading in securities. However, if
as a result of acquisitions, the Company does hold passive investment interests
in a number of entities, the Company could be subject to regulation under the
Investment Company Act of 1940. (See "Acquisition Restrictions") (deleted)
PROBABLE CHANGE IN CONTROL AND MANAGEMENT. A business combination involving
the issuance of the Company's common stock will, in all likelihood, result in
shareholders of a target company obtaining a controlling interest in the
Company. Any such business combination may require the Company's sole officer
and director to sell or transfer all or a portion of the Company's common stock
held by him, and to resign as a member of the Board of Directors and an officer
of the Company. The resulting change in control of the Company will likely
result in removal of the present sole officer and director of the Company and a
corresponding reduction in or elimination of his participation in the future
affairs of the Company.
REDUCTION OF PERCENTAGE SHARE OWNERSHIP FOLLOWING BUSINESS COMBINATION. The
Company's primary plan of operation is based upon a business combination with a
business entity which, in all likelihood, will result in the Company issuing
securities to shareholders of such business entity. The issuance of previously
authorized and unissued common stock of the Company would result in reduction in
the percentage of shares owned by the present shareholders of the Company and
would most likely result in a change in control or management of the Company.
ASPECTS OF BLANK CHECK COMPANIES. The Company may enter into a business
combination with a business entity that desires to establish a public trading
market for its shares if the Company has shares that are trading publicly. A
target company may attempt to avoid what it deems to be adverse consequences of
undertaking its own public offering by seeking a business combination with the
Company. Such consequences may include, but are not limited to, time delays of
the registration process, significant expenses to be incurred in such an
offering, loss of voting control to public shareholders or the inability to
obtain an underwriter or to obtain an underwriter on terms satisfactory to the
Company. There is no assurance that a trading market will ever develop in the
Company's securities.
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DELAWARE ANTI-TAKEOVER STATUTES. The Board of Directors has elected to opt
out of the Delaware Anti-Takover Statutes as reflected in the Delaware Code
Annotated and specifically in Sections 203 and 228 of such Code. This would make
it easier for parties presently unaffiliated with the Company to obtain control
of the Company without approval of the shareholders.
TAXATION. Federal and state tax consequences will, in all likelihood, be
major considerations in any business combination the Company may undertake.
Currently, such transactions may be structured so as to result in tax-free
treatment to both companies, pursuant to various federal and state tax
provisions. The Company intends to structure any business combination so as to
minimize the federal and state tax consequences to both the Company and the
target company; however, there can be no assurance that such business
combination will meet the statutory requirements of 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.
YEAR 2000. The Year 2000 problem is the result of computer programs being
written using two digits (rather than four) to define the applicable year. Any
programs that have date-sensitive software or equipment that has time-sensitive
embedded components may recognize a date using "00" as the year 1900 rather than
the Year 2000. This could result in a major system failure or miscalculations.
The Company has not computers and will not face any Year 2000 related problems.
The Company will not enter into an acquisition transaction with any business
that has an unresolved Year 2000 problem.
REQUIREMENT OF AUDITED FINANCIAL STATEMENTS MAY DISQUALIFY BUSINESS
OPPORTUNITIES. Management of the Company will request that any potential
business opportunity provide audited financial statements. One or more
attractive business opportunities may choose to forego the possibility of a
business combination with the Company rather than incur the expenses associated
with preparing audited financial statements. Such audited financial statements
may not be available. In such case, the Company intends to obtain certain
assurances as to the target company's assets, liabilities, revenues and expenses
prior to consummating a business combination, with further assurances that an
audited financial statement would be provided after closing of such a
transaction. Closing documents relative thereto may include representations that
the audited financial statements will not materially differ from the
representations included in such closing documents.
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ITEM 2. PLAN OF OPERATION
The Company intends to merge with or acquire a business entity in exchange
for the Company's securities. The Company has no particular acquisitions in mind
and has not entered into any negotiations regarding any acquisition. The
Company's sole officer and director has not engaged in any negotiations with any
representative of any company regarding the possibility of an acquisition or
merger between the Company and any other company.
The Company anticipates seeking out a target business through solicitation.
Such solicitation may include newspaper or magazine advertisements, mailings and
other distributions to law firms, accounting firms, investment bankers,
financial advisors and similar persons, the use of one or more World Wide Web
sites and similar methods. No estimate can be made as to the number of persons
who will be contacted or solicited.
The Company has no full time employees. The Company's sole officer and
director has agreed to allocate a portion of his time to the activities of the
Company, without compensation. He anticipates that the business plan of the
Company can be implemented by his devoting approximately 10 hours per month to
the business affairs of the Company. Consequently, conflicts of interest may
arise with respect to the limited time commitment by him. See "ITEM 5.
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS."
The Company's sole officer and director expects in the future to become
involved with other companies which have a business purpose similar to that of
the Company. A conflict may arise in the event that another blank check company
with which management is affiliated is formed and actively seeks a target
business. Management anticipates that target businesses will be located for the
Company and other blank check companies in chronological order of the date of
formation of such blank check companies or the order in which such companies
commence seeking acquisitions. However, other blank check companies that may be
formed may differ from the Company in certain respects such as place of
incorporation, number of shares and shareholders, working capital, types of
authorized securities, or other items. It may be that a target business may be
more suitable for or may prefer a certain blank check company formed after the
Company. In such case, a business combination might be negotiated on behalf of
the more suitable or preferred blank check company regardless of date of
formation or commencement of operations. See "ITEM 5, DIRECTORS, EXECUTIVE
OFFICERS, PROMOTERS AND CONTROL PERSONS--Current Blank Check Companies"
The Certificate of Incorporation of the Company provides that the Company
may indemnify officers and/or directors of the Company for liabilities, which
can include liabilities arising
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under the securities laws. Therefore, assets of the Company could be used or
attached to satisfy any liabilities subject to such indemnification.
GENERAL BUSINESS PLAN
The Company's purpose is to seek, investigate and, if such investigation
warrants, acquire an interest in a business entity presented to it by persons or
firms who or which desire to seek the perceived advantages of a corporation
which has a class of securities registered under the Exchange Act. The Company
will not restrict its search to any specific business, industry, or geographical
location and the Company may participate in a business venture of virtually any
kind or nature. This discussion of the proposed business is not meant to be
restrictive of the Company's virtually unlimited discretion to search for and
enter into potential business opportunities. The Company's sole officer and
director anticipates that it will be able to participate in only one business
venture because the Company has nominal assets and limited financial resources.
See PART F/S, "FINANCIAL STATEMENTS." This lack of diversification should be
considered a substantial risk to the shareholders of the Company because it will
not permit the Company to offset potential losses from one venture against gains
from another.
The Company may seek a business opportunity with entities which have
recently commenced operations, or which wish to utilize the public marketplace
in order to raise additional capital in order to expand into new products or
markets, to develop a new product or service, or for other corporate purposes.
The Company may acquire assets and establish wholly-owned subsidiaries in
various businesses or acquire existing businesses as subsidiaries.
The Company anticipates that the selection of a business opportunity in
which to participate will be complex and extremely risky. Due to general
economic conditions, rapid technological advances being made in some industries
and shortages of available capital, management believes that there are numerous
firms seeking the perceived benefits of a publicly registered corporation. Such
perceived benefits may include facilitating or improving the terms on which
additional equity financing may be sought, providing liquidity for incentive
stock options or similar benefits to key employees, and providing liquidity for
shareholders and other factors. Business opportunities may be available in many
different industries and at various stages of development, all of which will
make the task of comparative investigation and analysis of such business
opportunities difficult and complex.
The Company has, and will continue to have, no capital with which to
provide the owners of business opportunities. However, management believes the
Company will be able to offer owners of acquisition candidates the opportunity
to acquire a
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controlling ownership interest in a publicly registered company without
incurring the cost and time required to conduct an initial public offering. The
officer and director of the Company has not conducted market research and is not
aware of statistical data to support the perceived benefits of a merger or
acquisition transaction for the owners of a business opportunity.
The analysis of new business opportunities will be undertaken by, or under
the supervision of, the sole officer and director of the Company, who is not a
professional business analyst. In analyzing prospective business opportunities,
management will consider such matters as the available technical, financial and
managerial resources; working capital and other financial requirements; history
of operations, if any; prospects for the future; nature of present and expected
competition; the quality and experience of management services which may be
available; the potential for further research, development, or exploration;
specific risk factors not now foreseeable but which then may be anticipated to
impact the proposed activities of the Company; the potential for growth or
expansion; the potential for profit; the perceived public recognition or
acceptance of products, services, or trades; name identification; and other
relevant factors. To the extent possible, the Company intends to utilize written
reports and personal investigation to evaluate the above factors. The Exchange
Act requires that any merger or acquisition candidate comply with certain
reporting requirements, which include providing audited financial statements to
be included in the reports to be filed under the Exchange Act. The Company will
not acquire or merge with any company for which audited financial statements
cannot be obtained at or within a reasonable period of time after closing of the
proposed transaction.
The sole officer and director of the Company, which in all likelihood will
not be experienced in matters relating to the business of a target company, will
rely upon his own efforts in accomplishing the business purposes of the Company.
It is anticipated that outside consultants or advisors may be utilized by the
Company to assist in the search for qualified target companies. If the Company
does retain such an outside consultant or advisor, any cash fee earned by such
party will need to be paid by the prospective merger/acquisition candidate, as
the Company has limited cash assets with which to pay such obligation. The
Company may pay all or some of such consultant's or advisor's fee with
previously authorized but unissued shares.
The Company will not restrict its search for any specific type of firms,
but may acquire a venture which is in its preliminary or development stage,
which is already in operation, or in any stage of its business 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
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other perceived advantages which the Company may offer. However, the Company
does not intend to obtain funds to finance the operation of any acquired
business opportunity until such time as the Company has successfully consummated
such a merger or acquisition.
ACQUISITION OF OPPORTUNITIES
In implementing a structure for a particular business acquisition, the
Company may become a party to a merger, consolidation, reorganization, joint
venture, or licensing agreement with another corporation or entity. It may also
acquire stock or assets of an existing business. On the consummation of a
transaction, it is probable that the present Management and shareholders of the
Company will no longer be in control of the Company. In addition, the Company's
sole officer and director may, as part of the terms of the acquisition
transaction resign and be replaced by one or more new directors without a vote
of the Company's shareholders or may sell his stock in the Company.
It is anticipated that any securities issued in any such reorganization
would be issued in reliance upon exemption from registration under applicable
federal and state securities laws. In some circumstances, however, as a
negotiated element of its transaction, the Company may agree to register all or
a part of such securities immediately after the transaction is consummated or at
specified times thereafter. If such registration occurs, of which there can be
no assurance, it may be undertaken by the surviving entity after the Company has
entered into an agreement for a business combination or has consummated a
business combination and the Company is no longer considered a blank check
company. The issuance of substantial additional securities and their potential
sale into any trading market which may develop in the Company's securities may
have a depressive effect on the market value of the Company's securities in the
future if such a market develops, of which there is no assurance.
While the actual terms of a transaction to which the Company may be a party
cannot be predicted, it may be expected that the parties to the business
transaction will find it desirable to avoid the creation of a taxable event and
thereby structure the acquisition in a "tax-free" reorganization under Sections
351 or 368 of the Internal Revenue Code of 1986, as amended (the "Code").
With respect to any merger or acquisition, negotiations with target company
management is expected to focus on the percentage of the Company which target
company shareholders would acquire in exchange for all of their shareholdings in
the target company. Depending upon, among other things, the target company's
assets and liabilities, the Company's shareholders will in all likelihood hold a
substantially lesser percentage ownership interest in the Company following any
merger or acquisition. The
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percentage ownership may be subject to significant reduction in the event the
Company acquires a target company with substantial assets. Any merger or
acquisition effected by the Company can be expected to have a significant
dilutive effect on the percentage of shares held by the Company's shareholders
at such time.
The Company will participate in a business opportunity only after the
negotiation and execution of appropriate agreements. Although the terms of such
agreements cannot be predicted, generally such agreements will require certain
representations and warranties of the parties, will specify certain events of
default, will detail the terms of closing and the conditions which must be
satisfied by the parties prior to and after such closing, will outline the
manner of bearing costs, including costs associated with the Company's attorneys
and accountants, and will include other terms.
The Company will not acquire or merge with any entity which cannot provide
audited financial statements at a closing of the proposed transaction or
represent that it will provide audited financial statements within a reasonable
period of time after closing of the proposed transaction. The Company is subject
to all of the reporting requirements included in the Exchange Act. Included in
these requirements is the duty of the Company to file audited financial
statements as part of its Form 8-K to be filed with the Securities and Exchange
Commission upon consummation of a merger or acquisition, as well as a
requirement to file audited financial statements in its annual report on Form
10-K (or 10-KSB, as applicable). If such audited financial statements are not
available at closing, or within time parameters necessary to insure the
Company's compliance with the requirements of the Exchange Act, or if the
audited financial statements provided do not conform to the representations made
by the target company, the closing documents may provide that the proposed
transaction will be voidable at the discretion of the present management of the
Company.
The Company's sole officer and director has agreed that he may advance to
the Company additional funds which the Company may need for operating capital
and for costs in connection with searching for or completing an acquisition or
merger. Such advances will be made without expectation of repayment unless the
owners of the business which the Company acquires or merges with agree to repay
all or a portion of such advances. There is no minimum or maximum amount such
shareholder will advance to the Company. The Company will not borrow any funds
for the purpose of repaying advances made by such shareholder, and the Company
will not borrow any funds to make any payments to the Company's promoters,
management or their affiliates or associates.
The Board of Directors has passed a resolution which contains a policy that
the Company will not seek an acquisition or
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merger with any entity in which the Company's sole officer and director or any
affiliate or associate serves as an officer or director or holds any ownership
interest.
ACQUISITION RESTRICTIONS
The Company may acquire a company or business by purchasing, trading or
selling the securities of such company or business. However, the Company does
not intend to engage primarily in such activities. Specifically, the Company
intends to conduct its activities so as to avoid being classified as an
"investment company" under the Investment Company Act of 1940, and therefore
avoid application of the costly and restrictive registration and other
provisions of the Investment Company Act of 1940 and the regulations promulgated
thereunder.
Section 3(a) of the Penny Stock Reform Act expects from the definition of
an "investment company" an entity which does not engage primarily in the
business of investing, reinvesting or trading in securities, or which does not
engage in the business of investing, owning, holding or trading "investment
securities" (defined as "all securities other than government securities or
securities of majority-owned subsidiaries") the value of which exceed 40% of the
value of its total assets (excluding government securities, cash or cash items).
The Company intends to implement its business plan in a manner which will result
in the availability of this exception from the definition of "investment
company." Consequently, the Company's acquisition of a company or business
through the purchase and sale of investment securities will be limited. Although
the Company intends to act to avoid classification as an investment company, the
provisions of the Investment Company Act of 1940 are extremely complex and it is
possible that it may be classified as an inadvertent investment company. The
Company intends to vigorously resist classification as an investment company,
and to take advantage of any exemptions or exceptions from applications of the
Investment Company Act of 1940, which allows an entity a one time option during
any three-year period to claim an exemption as a "transient" investment company.
The necessity of asserting any such resistance, or making any claim of
exemption, could be time consuming and costly, or even prohibitive, given the
Company's limited resources.
The Company's plan of business may involve changes in its capital
structure, management, control and business, especially if it consummates a
reorganization as discussed above. Each of these areas is regulated by the
Investment Company Act of 1940, which regulation has the purpose of protecting
purchasers of investment company securities. Since the Company does not intend
to register as an investment company, the investors in the Company's securities
will not be afforded these protections.
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COMPETITION
The Company will remain an insignificant participant among the firms which
engage in the acquisition of business opportunities. There are many established
venture capital and financial concerns which have significantly greater
financial and personnel resources and technical expertise than the Company. In
view of the Company's extremely limited financial resources and limited
management availability, the Company will continue to be at a significant
competitive disadvantage compared to the Company's competitors.
ITEM 3. DESCRIPTION OF PROPERTY
The Company has no properties and at this time has no agreements to acquire
any properties. The Company currently uses the offices of its sole officer and
director at no cost to the Company. The sole officer and director has agreed to
continue this arrangement until the Company completes an acquisition or merger.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth, as of December 1, 1998, each person known
by the Company to be the beneficial owner of five percent or more of the
Company's Common Stock, all directors individually and all directors and
officers of the Company as a group. Each person has sole voting and investment
power with respect to the shares shown.
Name and Address Amount of Beneficial Percentage
of Beneficial Owner Ownership of Class
- ------------------ ------------ ----------
Nachum Blumenfrucht 4,100,000 82%
1040 East 22nd Street
Brooklyn, New York 11210
Amy Lau 450,000 9%
18 Monroe Street
New York, New York 10002
Barbara R. Mittman 450,000 9%
277 Broadway, Suite 801
New York, New York 10007
All Executive Officers
and Directors as a
Group (1 Person) 4,100,000 82%
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ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS.
The Company has one Director and Officer as follows:
Name Age Positions and Offices Held
- ---- --- --------------------------
Nachum Blumenfrucht 42 President, Secretary,
Treasurer and Director
There are no agreements or understandings for the officer of director to
resign at the request of another person and the above-named officer and director
is not acting on behalf of nor will he act at the direction of any other person.
Set forth below is the name of the sole director and officer of the
Company, all positions and offices with the Company held, the period during
which he has served as such, and his business experience during at least the
last five years:
Nachum Blumenfrucht, CPA, MBA (age 42), received a Bachelor of Science in
Accounting from Brooklyn College in 1978, and a Masters in Business
Administration from Bernard Baruch College in 1981. From 1984 to the present,
Mr. Blumenfrucht has been self-employed as a New York State certified public
accountant. Mr. Blumenfrucht has been a member of the New York State Society of
CPA's since 1981.
BLANK CHECK COMPANIES
Mr. Blumenfrucht has not nor is he currently an officer, director, or
control person of a blank check company.
CONFLICTS OF INTEREST
The Company's sole officer and director expects to organize other companies
of a similar nature and with a similar purpose as the Company. Consequently,
there are potential inherent conflicts of interest in acting as an officer and
director of the Company. Insofar as the officer and director is engaged in other
business activities, Management anticipates that it will devote only a minor
amount of time to the Company's affairs. The Company does not have a right of
first refusal pertaining to opportunities that come to Management's attention
insofar as such opportunities may relate to the Company's proposed business
operations.
A conflict may arise in the event that another blank check company with
which Management is affiliated is formed and actively seeks a target business.
It is anticipated that target businesses will be located for the Company and
other blank check companies in chronological order of the date of formation of
such
15
<PAGE>
blank check companies or the order in which such companies commence seeking
acquisitions. However, any blank check companies that may be formed may or may
not differ from the Company in certain respects such as place of incorporation,
number of shares and shareholders, working capital, types of authorized
securities, or other items. It may be that a target business may be more
suitable for or may prefer a particular blank check company. In such case, a
business combination might be negotiated on behalf of the more suitable or
preferred blank check company regardless of date of formation or commencement of
operations.
Mr. Blumenfrucht is a certified public accountant and sole practitioner. As
such, demands may be placed on his time which will detract from the amount of
time he is able to devote to the Company. Mr. Blumenfrucht intends to devote as
much time to the activities of the Company as required. However, should a
conflict arise, there is no assurance that Mr. Blumenfrucht would not attend to
other matters prior to those of the Company. Mr. Blumenfrucht projects that
initially approximately ten hours per month of his time may be spent locating a
target business which amount of time would increase when the analysis of, and
negotiations and consummation with, a target business are conducted.
The terms of a business combination may provide for payment by cash or
otherwise to the current shareholders of the Company for the purchase of their
common stock of the Company by a target business. The current shareholders would
directly benefit from such payment. Such benefits may influence Management's
choice of a target business.
The Company's sole officer and director owns 82% of the outstanding shares
of common stock of the Company. The Company does not expect to issue other
securities or rights to securities of the Company to the sole officer and
director or promoters, or their affiliates or associates, prior to the
completion of a business combination. At the time of a business combination,
management expects that some of the common stock owned by the sole officer and
director will be purchased by the target business. The amount of common stock
sold or continued to be owned by the sole officer and director cannot be
determined at this time.
Management may agree to pay finder's fees, as appropriate and allowed, to
unaffiliated persons who may bring a target business to the Company where that
referral results in a business combination. The amount of any finder's will be
subject to negotiation, and cannot be estimated at this time. No finder's fee of
any kind will be paid to the management or promoters of the Company or to their
associates or affiliates. No loans of any type have, or will be, made to
management or promoters of the Company or to any of their associates or
affiliates.
16
<PAGE>
The Company's sole officer and director has not had any negotiations with
and there are no present arrangements or understandings with any representatives
of the owners of any business or company regarding the possibility of a business
combination.
The Company will not enter into a business combination, or acquire any
assets of any kind for its securities, in which management of the Company or any
affiliates or associates have any interest, direct or indirect.
The Company's sole officer and director anticipates that it will actively
negotiate the purchase of a portion of his 4,100,000 shares of Common Stock by a
target business, and anticipates that a target business will purchase a part of
the sole officer's and director's common stock of the Company.
Management has adopted certain policies involving possible conflicts of
interest, including prohibiting any of the following transactions involving
management or promoters or their affiliates or associates:
(i) Any lending by the Company to such persons;
(ii) The issuance of any additional securities to such persons prior to a
business combination;
(iii) The entering into any business combination or acquisition of assets
in which such persons have any interest, direct or indirect; or
(iv) The payment of any finder's fees to such persons.
These policies have been adopted by the Board of Directors of the Company,
and any changes in these provisions would require the approval of the Board of
Directors. Management does not intend to propose any such action and does not
anticipate that any such action will occur.
There are no binding guidelines or procedures for resolving potential
conflicts of interest. Failure by management to resolve conflicts of interest in
favor of the Company could result in liability of management to the Company.
However, any attempt by shareholders to enforce a liability of management to the
Company would most likely be prohibitively expensive and time consuming.
INVESTMENT COMPANY ACT OF 1940
Although the Company will be subject to regulation under the Exchange Act,
management believes the Company will not be subject to regulation under the
Investment Company Act of 1940,
17
<PAGE>
insofar as the Company does not intend to be engaged in the business of
investing or trading in securities. However, if as a result of acquisitions, the
Company does hold passive investment interests in a number of entities, the
Company could be subject to regulation under the Investment Company Act of 1940.
(See "Acquisition Restrictions") (deleted)
ITEM 6. EXECUTIVE COMPENSATION.
The Company's sole officer and director does not receive any compensation
for his services rendered to the Company, nor has he received such compensation
in the past. As of the date of this registration statement, the Company has no
funds available to pay the sole officer and director. Further, the sole officer
and director is not accruing any compensation pursuant to any agreement with the
Company.
The sole officer and director of the Company will not receive any finders
fee, either directly or indirectly, as a result of his efforts to implement the
Company's business plan.
No retirement, pension, profit sharing, stock option or insurance programs
or other similar programs have been adopted by the Company for the benefit of
its employees.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
On December 1, 1997, the Company issued a total of 5,000,000 shares of
Common Stock to the following persons for a total of $1,500.00 in cash ($.0003
per share):
NAME NUMBER OF TOTAL SHARES CONSIDERATION
- ---- ---------------------- -------------
Nachum Blumenfrucht (1) 4,100,000 $1,230.00
Amy Lau 450,000 135.00
Barbara R. Mittman 450,000 135.00
(1) Nachum Blumenfrucht may be deemed a "parent" and "promoter" of the
Company as those terms are defined under the Securities Act. There are no other
"parents" or "promoters" of the Company.
The proposed business activities described herein classify the Company as a
"blank check" company. See "GLOSSARY". The Securities and Exchange Commission
and many states have enacted statutes, rules and regulations limiting the sale
of securities of blank check companies. Management does not intend to undertake
any efforts to cause a market to develop in the Company's securities until such
time as the Company has successfully implemented its business plan described
herein.
18
<PAGE>
ITEM 8. DESCRIPTION OF SECURITIES.
The authorized capital stock of the Company consists of 50,000,000 shares
of Common Stock, par value $.0001 per share, and 10,000,000 shares of Preferred
Stock, par value $.0001 per share. The following statements relating to the
capital stock are summaries and do not purport to be complete. Reference is made
to the more detailed provisions of, and such statements are qualified in their
entirety by reference to, the Certificate of Incorporation and the By-laws,
copies of which are filed as exhibits to this registration statement.
COMMON STOCK
Holders of shares of common stock are entitled to one vote for each share
on all matters to be voted on by the stockholders. Holders of common stock do
not have cumulative voting rights. Holders of common stock are entitled to share
ratably in dividends, if any, as may be declared from time to time by the Board
of Directors in its discretion from funds legally available therefor. In the
event of a liquidation, dissolution or winding up of the Company, the holders of
common stock are entitled to share pro rata all assets remaining after payment
in full of all liabilities. All of the outstanding shares of common stock are,
fully paid and non-assessable.
Holders of common stock have no preemptive rights to purchase the Company's
common stock. There are no conversion or redemption rights or sinking fund
provisions with respect to the common stock.
PREFERRED STOCK
The Company's Certificate of Incorporation authorizes the issuance of
10,000,000 shares of preferred stock, $.0001 par value per share, of which no
shares have been issued. The Board of Directors is authorized to provide for the
issuance of shares of preferred stock in series and, by filing a certificate
pursuant to the applicable law of Delaware, to establish from time to time the
number of shares to be included in each such series, and to fix the designation,
powers, preferences and rights of the shares of each such series and the
qualifications, limitations or restrictions thereof without any further vote or
action by the shareholder. Any shares of preferred stock so issued would have
priority over the common stock with respect to dividend or liquidation rights.
Any future issuance of preferred stock may have the effect of delaying,
deferring or preventing a change in control of the Company without further
action by the shareholder and may adversely affect the voting and other rights
of the holders of common stock. At present, the Company has no plans to issue
any preferred stock nor adopt any series, preferences or other classification of
preferred stock.
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The issuance of shares of Preferred Stock, or the issuance of rights to
purchase such shares, could be used to discourage an unsolicited acquisition
proposal. For instance, the issuance of a series of Preferred Stock might impede
a business combination by including class voting rights that would enable the
holder to block such a transaction, or facilitate a business combination by
including voting rights that would provide a required percentage vote of the
stockholders. In addition, under certain circumstances, the issuance of
Preferred Stock could adversely affect the voting power of the holders of the
Common Stock. Although the Board of Directors is required to make any
determination to issue such stock based on its judgment as to the best interests
of the stockholders of the Company, the Board of Directors could act in a manner
that would discourage an acquisition attempt or other transaction that some, or
a majority, of the stockholders might believe to be in their best interests or
in which stockholders might receive a premium for their stock over the then
market price of such stock. The Board of Directors does not at present intend to
seek stockholder approval prior to any issuance of currently authorized stock,
unless otherwise required by law or stock exchange rules. The Board of Directors
has also elected to opt out of the Delaware Anti-Takeover Statutes. This would
make it easier for parties presently not associated with the Company to obtain
control of the Company without approval of the shareholders. The Company has no
present plans to issue any Preferred Stock.
DIVIDENDS
The Company does not expect to pay dividends. Dividends, if any, will be
contingent upon the Company's revenues and earnings, if any, capital
requirements and financial conditions. The payment of dividends, if any, will be
within the discretion of the Company's Board of Directors. The Company presently
intends to retain all earnings, if any, for use in its business operations and
accordingly, the Board of Directors does not anticipate declaring any dividends
in the foreseeable future.
20
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GLOSSARY
"Blank Check" Company As defined in Section 7(b)(3) of the Securities
Act, a "blank check" is a development stage
company that has no specific business plan or
purpose or has indicated that its business plan is
to engage in a merger or acquisition with an
unidentified company or companies and is issuing
"penny stock" securities as defined in Rule 3a51-1
of the Exchange Act.
The Company Stateside Fundings, Inc., the company whose common
stock is the subject of this registration
statement.
Exchange Act The Securities Exchange Act of 1934, as amended.
"Penny Stock" Security As defined in Rule 3a51-1 of the Exchange Act, a
"penny stock" security is any equity security
other than a security (i) that is a reported
security (ii) that is issued by an investment
company (iii) that is a put or call issued by the
Option Clearing Corporation; (iv) that has a price
of $5.00 or more (except for purposes of Rule 419
of the Securities Act); (v) that is registered on
a national securities exchange; (vi) that is
authorized for quotation on the Nasdaq Stock
Market, unless other provisions of Rule 3a51-1 are
not satisfied; or (vii) that is issued by an
issuer with (a) net tangible assets in excess of
$2,000,000, if in continuous operation for more
than three years or $5,000,000 if in operation for
less than three years or (b) average revenue of at
least $6,000,000 for the last three years.
Securities Act The Securities Act of 1933, as amended.
21
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Small Business Issuer As defined in Rule 12b-2 of the Exchange Act, a
"Small Business Issuer" is an entity (i) which has
revenues of less than $25,000,000 (ii) whose
public float (the outstanding securities not held
by affiliates) has a value of less than
$25,000,000 (iii) which is a United States or
Canadian issuer (iv) which is not an Investment
Company and (v) if a majority-owned subsidiary,
whose parent corporation is also a small business
issuer.
22
<PAGE>
PART II
ITEM 1. MARKET PRICE FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
There is no trading market for the Company's Common Stock at present and
there has been no trading market to date. There is no assurance that a trading
market will ever develop or, if such a market does develop, that it will
continue.
(a) Market Price. The Company's Common Stock is not quoted at the present
time.
The Securities and Exchange Commission has adopted Rule 15g-9 which
established the definition of a "penny stock." For purposes relevant to the
Company, a penny stock is any equity security that has a market price of less
than $5.00 per share or with an exercise price of less than $5.00 per share,
subject to certain exceptions. For any transaction involving a penny stock,
unless exempt, the rules require: (i) that a broker or dealer approve a person's
account for transactions in penny stocks and (ii) the broker or dealer receive
from the investor a written agreement to the transaction, setting forth the
identity and quantity of the penny stock to be purchased. In order to approve a
person's account for transactions in penny stocks, the broker or dealer must (i)
obtain financial information and investment experience and objectives of the
person; and (ii) make a reasonable determination that the transactions in penny
stocks are suitable for that person and that person has sufficient knowledge and
experience in financial matters to be capable of evaluating the risks of
transactions in penny stocks. The broker or dealer must also deliver, prior to
any transaction in a penny stock, a disclosure schedule prepared by the
Commission relating to the penny stock market, which, in highlight form, (i)
sets forth the basis on which the broker or dealer made the suitability
determination and (ii) that the broker or dealer received a signed, written
agreement from the investor prior to the transaction. Disclosure also has to be
made about the risks of investing in penny stocks in both public offerings and
in secondary trading, and about commissions payable to both the broker-dealer
and the registered representative, current quotations for the securities and the
rights and remedies available to an investor in cases of fraud in penny stock
transactions. Finally, monthly statements have to be sent disclosing recent
price information for the penny stock held in the account and information on the
limited market in penny stocks.
The National Association of Securities Dealers, Inc. (the "NASD"), which
administers the Nasdaq Stock Market, has established certain criteria for
initial and continued eligibility for listing on the Nasdaq Stock Market. In
order to qualify for listing on the Nasdaq SmallCap Market, a company must have
at least
23
<PAGE>
(i) net tangible assets of $4,000,000 or market capitalization of $50,000,000 or
net income for two of the last three years of $750,000; (ii) public float of
1,000,000 shares with a market value of $5,000,000; (iii) a bid price of $4.00;
(iv) three market makers; (v) 300 shareholders and (vi) an operating history of
one year or, if less than one year, $50,000,000 in market capitalization. For
continued listing on the Nasdaq SmallCap Market, a company must have at least
(i) net tangible assets of $2,000,000 or market capitalization of $35,000,000 or
net income for two of the last three years of $500,000; (ii) a public float of
500,000 shares with a market value of $1,000,000; (iii) a bid price of $1.00;
(iv) two market makers; and (v) 300 shareholders.
There can be no assurances that, upon a successful merger or acquisition,
the Company will qualify its securities for listing on the Nasdaq SmallCap
Market or a national or regional exchange, or be able to maintain the
maintenance criteria necessary to insure continued listing. The failure of the
Company to qualify its securities or to meet the relevant maintenance criteria
after such qualification may result in the discontinuance of the inclusion of
the Company's securities. In such events, trading, if any, in the Company's
securities may then continue in the over-the-counter market. In such case, a
shareholder may find it more difficult to dispose of, or to obtain accurate
quotations as to the market value of, the Company's securities.
(b) Holders. There are three holders of the Company's Common Stock. On
December 1, 1997, the Company issued a total of 5,000,000 of its Common Shares
to three individuals for cash at $.0003 per share for a total price of
$1,500.00. All of the issued and outstanding shares of the Company's Common
Stock were issued in accordance with the exemption from registration afforded by
Section 4(2) of the Securities Act of 1933 and Rule 506 promulgated thereunder.
(c) Dividends. The Company has not paid any dividends to date, and has no
plans to do so in the immediate future.
ITEM 2. LEGAL PROCEEDINGS.
There is no litigation pending or threatened by or against the Company.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
The Company has not changed accountants since its formation and there are
no disagreements with the findings of said accountants.
24
<PAGE>
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES.
During the past three years, the Company has sold securities which were not
registered as follows:
DATE NAME NUMBER OF CONSIDERATION
SHARES
Nachum Blumenfrucht (1) 4,100,000 $1,230.00
Amy Lau 450,000 $ 135.00
Barbara R. Mittman 450,000 $ 135.00
(1) Mr. Blumenfrucht is the sole officer and director of the Company and
the beneficial owner of such shares.
With respect to the sales made, the Company relied on Section 4(2) of the
Securities Act of 1933, as amended and Rule 506 promulgated thereunder. Each of
the investors in the Company's securities had access to all information
available on the Company. Each investor purchased the securities for his own
account and risk and has not acted as a nominee for others, and has purchased
the securities for investment and not with a view to the distribution of the
securities. Based on the work experience, business sophistication and investment
history of the investors, they were able to evaluate the investment made in the
Company's securities.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the General Corporation Law of the State of Delaware
provides that a Delaware corporation has the power, under specified
circumstances, to indemnify its directors, officers, employees and agents,
against expenses incurred in any action, suit or proceeding. The Certificate of
Incorporation and the by-laws of the Company provide for indemnification of
directors and officers to the fullest extent permitted by the General
Corporation Law of the State of Delaware.
The General Corporation Law of the State of Delaware provides that a
certificate of incorporation may contain a provision eliminating the personal
liability of a director to the corporation or its stockholders for monetary
damages for breach of fiduciary duty as a director provided that such provision
shall not eliminate or limit the liability of a director (i) for any breach of
the director's duty of loyalty to the corporation or its stockholders, (ii) for
acts or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 (relating to liability for
unauthorized acquisitions or redemptions of, or dividends on, capital stock) of
the General Corporation Law of the State of Delaware, or (iv) for any
transaction from which the director derived an improper personal benefit. The
Company's Certificate of Incorporation contains such a provision.
25
<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.
STATESIDE FUNDINGS, INC.
By: /s/ Nachum Blumenfrucht
Nachum Blumenfrucht
June 15, 1999
26
<PAGE>
PART III
ITEM 1. INDEX TO EXHIBITS.
EXHIBIT NUMBER DESCRIPTION
(2) Articles of Incorporation and By-laws:
2.1 Articles of Incorporation
(10)(a) Consents - Experts:
10.1 Consent of Accountants
1
Exhibit 2.1
ARTICLES OF INCORPORATION
OF
STATESIDE FUNDINGS, INC.
2
<PAGE>
State of Delaware
Office of the Secretary of State
--------------------------------
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF
INCORPORATION OF "STATESIDE FUNDINGS, INC.", FILED IN THIS OFFICE ON THE
NINETEENTH DAY OF DECEMBER, A.D. 1997, AT 9 O'CLOCK A.M.
/s/ Edward J. Freel
[SEAL] ---------------------------------------
Edward J. Freel, Secretary of State
2835106 8100 AUTHENTICATION: 8843557
971440241 DATE: 12-31-97
<PAGE>
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 09:00 AM 12/19/1997
971440241 - 2835106
CERTIFICATE OF INCORPORATION
OF
STATESIDE FUNDINGS, INC.
The undersigned, being of legal age, in order to form a corporation under
and pursuant to the laws of the State of Delaware, does hereby set forth as
follows:
FIRST: The name of the corporation is:
STATESIDE FUNDINGS, INC.
SECOND: The address of the initial registered and principal office of
this corporation in this state is c/o United Corporate Services, Inc., 15
East North Street, in the City of Dover, County of Kent, State of Delaware
19901 and the name of the registered agent at said address is United
Corporate Services, Inc.
THIRD: The purpose of the corporation is to engage in any lawful act
or activity for which corporations may be organized under the corporation
laws of the State of Delaware.
FOURTH: The corporation shall be authorized to issue the following
shares:
Class Number of Shares Par Value
----- ---------------- ---------
COMMON 50,000,000 $.0001
PREFERRED 10,000,000 $.0001
FIFTH: The name and address of the incorporator are as follows:
NAME ADDRESS
---- -------
Michael A. Barr 10 Bank Street
White Plains, New York 10606
<PAGE>
SIXTH: The following provisions are inserted for the management of the
business and for the conduct of the affairs of the corporation, and for further
definition, limitation and regulation of the powers of the corporation and of
its directors and stockholders:
(1) The number of directors of the corporation shall be such as from
time to time shall be fixed by, or in the manner provided in the by-laws.
Election of directors need not be by ballot unless the By-Laws so provide.
(2) The Board of Directors shall have power without the assent or vote
of the stockholders:
(a) To make, alter, amend, change, add to or repeal the By-Laws
of the corporation; to fix and vary the amount to be reserved for any
proper purpose; to authorize and cause to be executed mortgages and
liens upon all or any part of the property of the corporation; to
determine the use and disposition of any surplus or net profits; and
to fix the times for the declaration and payment of dividends.
(b) To determine from time to time whether, and to what times and
places, and under what conditions the accounts and books of the
corporation (other than the stock ledger) or any of them, shall be
open to the inspection of the stockholders.
(3) The directors in their discretion may submit any contract or act
for approval or ratification at any annual meeting of the stockholders, at
any meeting of the stockholders called for the purpose of considering any
such act or contract, or through a written consent in lieu of a meeting in
accordance with the requirements of the General Corporation Law of Delaware
as amended from time to time, and any contract or act that shall be so
approved or be so ratified by the vote of the holders of a majority of the
stock of the corporation which is represented in person or by proxy at such
meeting, (or by written consent whether received directly or through a
proxy) and entitled to vote theron (provided that a lawful quorum of
stockholders be there represented in person or by proxy) shall be as valid
and as binding upon the corporation and upon all the stockholders as though
it had been approved, ratified, or consented to by every stockholder of the
corporation, whether or not the contract or act would otherwise be open to
legal attack because of directors' interest, or for any other reason.
(4) In addition to the powers and authorities hereinbefore or by
statute expressly conferred upon them, the directors are hereby empowered
to exercise all such powers and do all such acts and things as may be
exercised or done by the corporation; subject, nevertheless, to the
provisions of the statutes of Delaware, of this certificate, and to any
by-laws from time to time made by the stockholders; provided, however, that
no by-laws so made shall invalidate any prior act of the directors which
would have been valid if such by-law had not been made.
<PAGE>
SEVENTH: No director shall be liable to the corporation or any of its
stockholders for monetary damages for breach of fiduciary duty as a director,
except with respect to (1) a breach of the director's duty of loyalty to the
corporation or its stockholders, (2) acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (3)
liability under Section 174 of the Delaware General Corporation Law or (4) a
transaction from which the director derived an improper personal benefit, it
being the intention of the foregoing provision to eliminate the liability of the
corporation's directors to the corporation or its stockholders to the fullest
extent permitted by Section 102(b)(7) of the Delaware General Corporation Law,
as amended from time to time. The corporation shall indemnify to the fullest
extent permitted by Section 102(b)(7) and 145 of the Delaware General
Corporation Law, as amended from time to time, each person that such Sections
grant the corporation the power to indemnify.
EIGHTH: Whenever a compromise or arrangement is proposed between this
corporation and its creditors or any class of them and/or between this
corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this corporation or of any creditor or stockholder therof or on the
application of any receiver or receivers appointed for this corporation under
the provisions of Section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers appointed
for this corporation under the provisions of Section 279 Title B of the Delaware
Code order a meeting of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of this corporation, as the case may be,
to be summoned in such a manner as the said court directs. If a majority in
number representing three-fourths (3/4) in value of the creditors or class of
creditors, and/or of the stockholders or class of stockholders of this
corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of this corporation as consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been made,
be binding on all the creditors or class of
<PAGE>
creditors, and/or on all the stockholders or class of stockholders, or this
corporation, as the case may be, and also on this corporation.
NINTH: The corporation reserves the right to amend, alter, change or repeal
any provision contained in this certificate of incorporation in the manner now
or hereafter prescribed by law, and all rights and powers conferred herein on
stockholders, directors and officers are subject to this reserved power.
TENTH: The Company has elected to opt out of the Delaware anti-takeover
statutes as those statutes are reflected in the Delaware Code Annotated and
specifically in Sections 203 and 228 of that Code.
IN WITNESS WHEREOF, the undersigned hereby executes this document and
affirms that the facts set forth herein are true under the penalties of perjury
this eighteenth day of December, 1997.
/s/ MICHAEL A. BARR
----------------------------------
Michael A. Barr, Incorporator
<PAGE>
STATEMENT OF ORGANIZATION
BY THE SOLE INCORPORATOR
OF
STATESIDE FUNDINGS, INC.
I, the undersigned, as sole incorporator of STATESIDE FUNDINGS, INC., do
hereby make the following statements to organize the corporation:
"That the name of the corporation is:
STATESIDE FUNDINGS, INC.
"That the Certificate of Incorporation was duly filed in the office of the
Secretary of State of Delaware on the ninteenth day of December, 1997 and a
certified copy thereof was forwarded for recordation with the Recorder of Deeds
of the county in which the registered office of the corporation is located.
"That the By-Laws which are annexed hereto are hereby adopted as the
By-Laws of the corporation for the regulation of its affairs.
"That following named person(s) shall constitute the first Board of
Directors, who shall hold office until the first annual shareholders' meeting or
until successors are elected and qualify:
Nachum Blumenfrucht
I hereby execute the Statements as sole incorporator this 19th day of
December, 1997.
/s/ Michael A. Barr
----------------------------------
Michael A. Barr, Sole Incorporator
Exhibit 10.1
DON FUCHS
Certified Public Accountant
370 Brook Avenue
Passaic, New Jersey 07055
(973) 777-9895
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANT
The Board of Directors
Stateside Fundings, Inc.
I consent to the use in the Registration Statement on Form 10- SB of my
report dated March 15, 1999, relating to the audited financial statements of
Stateside Fundings, Inc. and any reference to my firm under the caption
"Experts" in the Registration Statement.
DON FUCHS
CERTIFIED PUBLIC ACCOUNTANT
June 15, 1999
3
