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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20459
FORM 10-KSB
( X ) Annual Report Pursuant to Section 13 or 15(d) of the Securities and
Exchange Act of 1934.
For the Year Ended December 31, 1999
( ) Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934.
For the transition period from __________ to __________.
Commission File Number:
FIFTH BUSINESS SERVICE GROUP, INC.
(Exact name of Registrant as specified in its Charter)
Florida Pending
(State of or other jurisdiction of (IRS Employer I.D. No.)
incorporation or organization)
2503 W. Gardner Ct., Tampa, FL 33611
Address of Principle Executive Offices:
(813) 831-9348
Registrant's telephone number, including area code:
Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to Section 12(g) of the Act:
1,000,000 Common Shares
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by 7 Section 13 or 15(d) of the Securities Exchange act of 1934
during the preceding 12 months (or for such other shorter period that the
registrant was required to file such reports), and (20 has been subject to such
filing requirements for the past 90 days. ___ Yes _X_No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-B is not contained herein and will not be contained, to the best
of registrant's knowledge, in definitive proxy or information statements
incorporated by referencing Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. _X__
Issuer's revenues for the most recent fiscal year: NONE
The aggregate market value of the voting stock held by non-affiliates of the
registrant at December 31, 1999 was $0. Shares of common stock held by each
officer and director and by each person who owns more that 5% of the outstanding
common stock have been excluded in that such persons may be deemed to be
affiliates. This determination of affiliate status is not necessarily a
conclusive determination for other purposes.
Indicate the number of shares outstanding of each of the issuer's classes of
stock, as of April 28, 2000.
1,000,000 Common Shares
Documents Incorporated By Reference - NONE
Transitional small business disclosure format. ___ Yes _X_No
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Fifth Business Service Group, Inc.
FORM 10 - KSB
Table of Contents
PART I.
ITEM 1. Description of Business 3
ITEM 2. Properties 10
ITEM 3. Legal Proceedings 10
ITEM 4. Submission of Matters to a Vote of 10
Security Holders
PART II
ITEM 5. Market for the Common Deficit and
Related Stockholder Matters 10
ITEM 6. Plan of Operation 10
ITEM 7. Financial Statements 13
ITEM 8. Changes In and Disagreements With
Accountants on Accounting and
Financial Disclosures 21
PART III
ITEM 9 Directors, Executive Officers,
Promoters and Control Persons;
Compliance with Section 16(a) of the
Exchange Act 21
ITEM 10 Executive Compensation 23
ITEM 11 Security Ownership of Certain
Beneficial Owners and Management 24
ITEM 12 Certain Relationships and Related
Transactions 25
ITEM 13 Exhibits, Financial Statement
Schedules and Reports on Form 8-K 28
Signatures 29
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PART I.
ITEM 1 - DESCRIPTION OF BUSINESS
We were organized under the laws of the State of Florida in March 1999. Since
inception, our primary activity has been directed to organizational efforts. We
were formed as a vehicle to acquire or be acquired by a private company desiring
to become an SEC reporting company in order thereafter to secure a listing on
the over the counter bulletin board. This type of acquisition is sometimes
referred to as a reverse merger. Companies such as ours are called blank check
companies, meaning a company that:
o 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, or other entity
or person
o Is issuing "penny stock," as defined in Rule 3a51-1 under the Securities
Exchange Act of 1934
We were organized for the purposes of creating a corporate vehicle to seek,
investigate and, if such investigation warrants, engage in business combinations
presented to us by persons or firms who or which desire to become an SEC
reporting company. We will not restrict our search to any specific business or
industry, but will limit ourselves to acquisitions located by our president.
We do not currently engage in any business activities that provide any cash
flow. The costs of identifying, investigating and analyzing business
combinations will be paid with funds contributed as a capital contribution by
our president. Management has placed no cap on the amount of funds they will
lend. This is based on a written agreement between our president and us. This
capital contribution will not be returned either by us or by the company we
acquire either before or after the merger. In addition, we have no preliminary
agreements or understandings with any other person or entity concerning loans or
capital contributions.
Risk Factors
Our business is subject to numerous risk factors, including the following:
WE HAVE NEITHER OPERATING HISTORY NOR REVENUE AND MINIMAL ASSETS. We have
had no operating history nor any revenues or earnings from operations. We have
no significant assets or financial resources. We have operated at a loss to date
and will, in all likelihood, continue to sustain operating expenses without
corresponding revenues, at least until the consummation of a business
combination. Our management has agreed to pay, without repayment by us, all
expenses incurred by us until a business combination occurs.
WE HAVE ONLY ONE DIRECTOR AND ONE OFFICER. Our president and sole officer
is Michael T. Williams who is also our sole director and our sole shareholder.
Because management consists of only one person, we do not benefit from multiple
judgements that a greater number of directors or officers would provide and we
will rely completely on the judgement of our sole officer and director when
selecting a target company. The decision to enter into a business combination
will likely be made without detailed feasibility studies, independent analysis,
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market surveys or similar information which, if we had more funds available to
us, would be desirable. Mr. Williams anticipates devoting only a limited amount
of time per month to the business. Mr. Williams has not entered into a written
employment agreement with us and he is not expected to do so. We have not
obtained key man life insurance on Mr. Williams. The loss of the services of Mr.
Williams would adversely affect the development of our business and our
likelihood of continuing operations.
MANAGEMENT IS SUBJECT TO CONFLICTS OF INTEREST. Mr. Williams, our
president, participates in other business ventures that may compete directly
with us. Additional conflicts of interest and non-arms length transactions may
also arise in the future. We have adopted a policy that we will not enter into a
business combination with any entity, which is in any way wholly owned or
partially beneficially owned by any officer, director, promoter, affiliate or
associate of us. The terms of business combination will likely include the
resignation of our present officer and director. The terms of a business
combination may provide for a payment by cash or otherwise to Mr. Williams for
the purchase or retirement of all or part of his common stock of the Company by
a target company or for services rendered incident to or following a business
combination. Mr. Williams would directly benefit from such payment. Such
benefits may influence Mr. Williams's choice of a target company. Our Articles
of Incorporation provide that we may indemnify our officers and/or directors for
liabilities, which can include liabilities arising under the securities laws.
Therefore, our assets of could be used or attached to satisfy any liabilities
subject to such indemnification.
OUR PROPOSED OPERATIONS ARE SPECULATIVE. The success of our proposed plan
of operation will depend to a great extent on the operations, financial
condition and management of the identified target company. While business
combinations with entities having established operating histories are preferred,
there can be no assurance that we will be successful in locating candidates
meeting such criteria. In the event we complete a business combination the
success of our operations will be dependent upon management of the target
company and numerous other factors beyond our control. There is no assurance
that we will identify a target company and consummate a business combination.
PURCHASE OF PENNY STOCKS CAN BE RISKY. In the event that a public market
develops for our securities following a business combination, such securities
may be classified as a penny stock depending upon their market price and the
manner in which they are traded. The Securities and Exchange Commission has
adopted Rule 15g-9 which establishes the definition of a "penny stock," for
purposes relevant to us, as 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
whose securities are admitted to quotation but do not trade on the Nasdaq
SmallCap Market or on a national securities exchange. For any transaction
involving a penny stock, unless exempt, the rules require delivery of a document
to investors stating the risks, special suitability inquiry, regular reporting
and other requirements. Prices for penny stocks are often not available and
investors are often unable to sell such stock. Thus an investor may lose his
investment in a penny stock and consequently should be cautious of any purchase
of penny stocks.
THERE IS A SCARCITY OF AND COMPETITION FOR BUSINESS OPPORTUNITIES AND
COMBINATIONS. We are 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
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firms, are active in mergers and acquisitions of companies which may be merger
or acquisition target candidates for us. Nearly all such entities have
significantly greater financial resources, technical expertise and managerial
capabilities than we do and, consequently, we will be at a competitive
disadvantage in identifying possible business opportunities and successfully
completing a business combination. Moreover, we will also compete with numerous
other small public companies in seeking merger or acquisition candidates.
THERE IS NO AGREEMENT FOR A BUSINESS COMBINATION AND NO MINIMUM
REQUIREMENTS FOR BUSINESS COMBINATION. We have no current arrangement, agreement
or understanding with respect to engaging in a business combination with a
specific entity. We have held preliminary discussions with various entities,
none of which was willing to proceed until we were current in our SEC reporting
requirements. There can be no assurance that we will be successful in
identifying and evaluating suitable business opportunities or in concluding a
business combination. No particular industry or specific business within an
industry has been selected for a target company. We have not established a
specific length of operating history or a specified level of earnings, assets,
net worth or other criteria which we will require a target company to have
achieved, or without which we would not consider a business combination with
such business entity. Accordingly, we may enter into a business combination with
a business entity having no significant operating history, losses, limited or no
potential for immediate earnings, limited assets, negative net worth or other
negative characteristics. There is no assurance that we will be able to
negotiate a business combination on terms favorable to us.
REPORTING REQUIREMENTS MAY DELAY OR PRECLUDE ACQUISITION. Pursuant to the
requirements of Section 13 of the Securities Exchange Act of 1934, we are
required to provide certain information about significant acquisitions including
audited financial statements of the acquired company. These audited financial
statements must be furnished within 75 days following the effective date of a
business combination. Obtaining audited financial statements are the economic
responsibility of the target company. The additional time and costs that may be
incurred by some potential target companies to prepare such financial statements
may significantly delay or essentially preclude consummation of an otherwise
desirable acquisition by us. 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. Notwithstanding a target company's agreement to obtain audited
financial statements within the required time frame, such audited financials may
not be available to us at the time of effecting a business combination. In cases
where audited financials are unavailable, we will have to rely upon unaudited
information that has not been verified by outside auditors in making its
decision to engage in a transaction with the business entity. This risk
increases the prospect that a business combination with such a business entity
might prove to be an unfavorable one for us.
LACK OF MARKET RESEARCH OR MARKETING ORGANIZATION. We have neither
conducted, nor have others made available to us, market research indicating that
demand exists for the transactions contemplated by us. Even in the event demand
exists for a transaction of the type contemplated by us; there is no assurance
we will be successful in completing any such business combination.
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REGULATION UNDER INVESTMENT COMPANY ACT. In the event we engage in
business combinations which result in us holding passive investment interests in
a number of entities, we could be subject to regulation under the Investment
Company Act of 1940. In such event, we would be required to register as an
investment company and could be expected to incur significant registration and
compliance costs. We have obtained no formal determination from the Securities
and Exchange Commission as to our status under the Investment Company Act of
1940 and, consequently, any violation of such Act could subject us to material
adverse consequences.
PROBABLE CHANGE IN CONTROL AND MANAGEMENT. A business combination
involving the issuance of our common stock will, in all likelihood, result in
shareholders of a target company obtaining a controlling interest in the
Company. As a condition of the business combination agreement, Mr. Williams, our
sole shareholder, may agree to sell or transfer all or a portion of his common
stock in order to provide the target company with all or majority control. The
resulting change in control of the Company will likely result in removal of our
present officer and director and a corresponding reduction in or elimination of
his participation in our future affairs.
POSSIBLE DILUTION OF VALUE OF SHARES UPON BUSINESS COMBINATION. A business
combination normally will involve the issuance of a significant number of
additional shares. Depending upon the value of the assets acquired in such
business combination, the per share value of our common stock may increase or
decrease, perhaps significantly.
TAXATION. Federal and state tax consequences will, in all likelihood, be
major considerations in any business combination we 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. We intend
to structure any business combination so as to minimize the federal and state
tax consequences to both us 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.
History and Organization
We were organized under the laws of the State of Florida in March, 1999. Since
inception, our primary activity has been directed to organizational efforts. We
were formed as a vehicle to acquire or be acquired by a private company desiring
to become an SEC reporting company in order thereafter to secure a listing on
the over the counter bulletin board. This type of acquisition is sometimes
referred to as a reverse merger. Companies such as ours are called blank check
companies, meaning a company that:
o 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, or other entity
or person
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o Is issuing "penny stock," as defined in Rule 3a51-1 under the Securities
Exchange Act of 1934
We have elected to file this Form 10 on a voluntary basis because we believe
that a private company desiring to become an SEC reporting company in order
thereafter to secure a listing on the over the counter bulletin board will be
more receptive to an acquisition by an SEC reporting company. We will
voluntarily file periodic reports in the event our obligation to file such
reports is suspended under the Exchange Act.
Operations
We were organized for the purposes of creating a corporate vehicle to seek,
investigate and, if such investigation warrants, engage in business combinations
presented to us by persons or firms who or which desire to become an SEC
reporting company. We will not restrict our search to any specific business or
industry, but will limit ourselves to acquisitions located by our president.
We do not currently engage in any business activities that provide any cash
flow. The costs of identifying, investigating, and analyzing business
combinations will be paid with funds contributed as a capital contribution by
our president. Management has placed no cap on the amount of funds they will
lend. This is based on a written agreement between our president and us. This
capital contribution will not be returned either by us or by the company we
acquire either before or after the merger. In addition, we have no preliminary
agreements or understandings with any other person or entity concerning loans or
capital contributions.
We may seek a business combination in the form of firms which:
o Have recently commenced operations
o Are developing companies
o Are seeking to develop a new product or service
o Are established businesses
A business combination will most likely involve the acquisition of, or merger
with, one of these kind of companies which does not need substantial additional
capital but which desires to establish a public trading market for our shares,
while avoiding what they may deem to be adverse consequences of undertaking a
public offering itself, such as:
o Time delays
o Significant expense
o Loss of voting control
o Compliance with various federal and state securities laws
Based upon the probable desire on the part of the owners of acquisition
candidates to assume voting control over us in order to avoid tax consequences
or to have complete authority to manage the business, we will combine with just
one acquisition candidate.
Upon closing of a business combination, there will be a change in control which
will result in the resignation of our present officer and director.
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There are no financial requirements for an acquisition candidate, except to have
qualified audited financial statements and the funds to make payments to us
required in an acquisition agreement. Accordingly, any acquisition candidate
that is selected may be a financially unstable company or an entity in our early
stage of development or growth, including entities without established records
of sales or earnings. Accordingly, we may become subjected to numerous risks
inherent in the business and operations of financially unstable and early stage
or potential emerging growth companies. In addition, we may effect a business
combination with an entity in an industry characterized by a high level of risk.
We anticipate that the selection of a business combination will be complex and
extremely risky. Management believes that there are numerous firms seeking the
benefit of a publicly traded corporation because of:
o General economic conditions
o Rapid technological advances being made in some industries
o Shortages of available capital
Such perceived benefit of a publicly traded corporation may include:
o Facilitating or improving the terms on which additional equity financing
may be sought
o Providing liquidity for the principals of a business
o Creating a means for providing incentive stock options or similar benefit
to key employees
o Providing liquidity, subject to restrictions of applicable statutes, for
all
o shareholders
Potentially available business combinations may occur in many different
industries and at various stages of development, all of which will make the task
of comparative investigation and analysis of such business opportunities
extremely difficult and complex.
Evaluation of Business Combinations
The analysis of business combinations will be undertaken by or under the
supervision of our officer and director who is not a professional business
analyst. Management intends to concentrate on identifying preliminary
prospective business combinations which may be brought to our attention through
present associations. There are only two characteristics necessary for a
prospective business combination:
o Have the ability to obtain qualified audited financial statements within
the time period required under relevant SEC regulations
o Have the funds to make payments to us required in an acquisition
agreement, if mutually agreed by us and the acquisition candidate
Because we will be subject to Section 13 or 15(d) of the Securities Exchange Act
of 1934, we will be required to furnish certain information about significant
acquisitions, including audited financial statements for the business acquired,
covering one, two or three years depending upon the relative size of the
acquisition. Consequently, acquisition prospects that do not have or are unable
to obtain the required audited statements within the required time period will
not be appropriate for acquisition.
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Any business combination will present certain risks. Many of these risks cannot
be adequately identified prior to selection. In the case of some of the
potential combinations available to us, it is possible that the promoters of an
acquisition candidate have been unable to develop a going concern or that such
business is in our development stage in that it has not generated significant
revenues from its principal business activity prior to our merger or
acquisition. There is a risk, even after the closing of a business combination
and the related expenditure of our funds, that the combined enterprises will
still be unable to become a going concern or advance beyond the development
stage. The combination may involve new and untested products, processes, or
market strategies which may not succeed. Such risks will be assumed by us and,
therefore, our shareholders.
Business Combination
In implementing a structure for a particular business acquisition, we may become
a party to a merger, consolidation, reorganization, joint venture, or licensing
agreement with another corporation or entity. We may also purchase stock or
assets of an existing business. The manner of the business combination will
depend on:
o The nature of the acquisition candidate
o The respective needs and desires of us and other parties
o The management of the acquisition candidate opportunity
o The relative negotiating strength of us and such other management
On the closing of a business combination, the acquisition candidate will have
significantly more assets than us; therefore, management plans to offer a
controlling interest in us to the acquisition candidate. Although the actual
terms of a transaction to which we may be a party cannot be predicted, we may be
expected that the parties to the business transaction will find we desirable to
avoid the creation of a taxable event and thereby structure the acquisition in a
so-called tax-free reorganization under Sections 368(a)(1) or 351 of the
Internal Revenue Code of 1954. In order to obtain tax-free treatment under the
code, it may be necessary for the owners of the acquired business to own 80% or
more of the voting stock of the surviving entity. In such event, our
shareholders would retain less than 20% of the issued and outstanding shares of
the surviving entity, which would be likely to result in significant dilution in
the equity of such shareholders. In addition, our director and officer will, as
part of the terms of the acquisition transaction, resign as director and
officer.
Prior to any business combination, we will effect a reverse split of our stock
such that management and our non-management principal shareholder retain the
number of shares as provided in the merger agreement upon the closing of the
merger. We will not, however, sell or issue any additional shares prior to the
location of an acquisition candidate. All necessary funding will be provided as
a non-refundable capital contribution by management.
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Consistent with the position of the SEC staff in recent letters to the NASD
concerning blank check companies, no trading will begin unless all required Form
10 information and audited financial statements has been filed with the SEC and
the SEC has advised us they have no further comments on the filing. Unless
otherwise requested by the acquisition candidate, all securities issued in the
acquisition transaction will be registered under the 1933 Act. If this happens,
no request will be made to the NASD to grant final approval for listing until
the registration statement is declared effective. If such securities are not
registered under the 1933 Act, a Form 8-K containing this information will be
filed, and no request will be made to the NASD to grant final approval for
listing until the SEC staff advises us that they have no further comments on our
Form 8-K filing under the 1934 Act. We may also agree to register additional
securities for resale thereafter. The issuance of substantial additional
securities and their potential sale into any trading market which may develop in
our common stock may have a depressive effect on such market.
If at any time we enter negotiations with a possible merger candidate and such a
transaction becomes probable, then we will file all required information on
either Form 8-K, 10-Q or 10-K, as appropriate. As of the date of this filing, no
potential acquisition candidate has entered into any oral or written agreement
to be acquired by us. We are engaged in preliminary acquisition discussions with
potential acquisition candidates. However, no such candidate is willing to
proceed with further discussions until, among other things, we are current in
our reporting requirements.
We have adopted certain acquisition policies. Management is unaware of any
circumstances under which such policy through their own initiative may be
changed. The following policies are based on a written agreement with
management, and we are aware of no circumstances under which these policies may
be changed.
o o We may not borrow funds and use the loan proceeds to make payments to
any officer, director, promoter or affiliate or associate of us.
o o We will not enter into a business combination with any company which is
in any way wholly or partially beneficially owned by any officer,
director, promoter or affiliate or associate of us.
o o We have adopted a policy that we will not pay a finder's fee to any
member of management for locating a merger or acquisition candidate. No
member of management intends to or may seek and negotiate for the payment
of finder's fees.
o We will not sell any securities prior to the location of an acquisition or
merger candidate.
o o Other fees may be paid to our management if and only if it is agreed by
the acquisition candidate in the merger agreement. Any such fee will be
funded by a fee the acquisition candidate agrees to pay as part of the
merger agreement. There is no minimum or maximum amount of fee that can be
paid. The amount will be determined in arms'-length negotiations in the
merger agreement.
o o The only other pecuniary benefit to be received by management is the
retention of a to-be-agreed percent of stock after the acquisition closes.
There is no minimum or maximum amount of stock which can be retained. The
amount will be determined in arms'-length negotiations in the merger
agreement.
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Although we believe these procedures eliminate the potential for a claim that
management has breached or compromised its fiduciary duties, there is always a
potential that such claim could be made. If made, any remedy available under
state corporate law will most likely be prohibitively expensive and time
consuming.
A potential target company may have an agreement with a consultant or advisor
providing that services of the consultant or advisor be continued after any
business combination. Additionally, a target company may be presented to us only
on the condition that the services of a consultant or advisor be continued after
a merger or acquisition. Such preexisting agreements of target companies for the
continuation of the services of attorneys, accountants, advisors or consultants
could be a factor in the selection of a target company. We will not receive any
payment or benefit from any of these attorneys, accountants, advisors or
consultants.
We will remain an insignificant player among the firms that engage in business
combinations. There are many established venture capital and financial concerns
which have significantly greater financial and personnel resources and technical
expertise than us. In view of our combined limited financial resources and
limited management availability, we will continue to be at a significant
competitive disadvantage compared to our competitors. Also, we will be competing
with a large number of other similar small public companies located throughout
the United States, including those organized and to be organized by our
principal shareholder for himself and others.
We do not intend to advertise or promote ourselves. Instead, our management will
actively search for potential acquisition candidates. In the event management
decides to advertise in the form of an ad in a publication to attract an
acquisition candidate, the cost of such advertising will be assumed by
management.
ITEM 2 - PROPERTIES
We have no properties and at this time has no agreements to acquire any
properties. We currently use the offices of management at no cost to us.
Management has agreed to continue this arrangement until we complete an
acquisition or merger.
ITEM 3 - LEGAL PROCEEDINGS
NONE
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
NONE
PART II.
IETM 5 - MARKET FOR THE COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
NONE
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ITEM 6 - MANAGEMENT'S DISSCUSSION AND ANALYSIS OR PLAN OF OPERATION
Our purpose is to seek, investigate and, if such investigation warrants, acquire
an interest in a business entity which desires to seek the perceived advantages
of a corporation which has a class of securities registered under the Exchange
Act. We will not restrict our search to any specific business, industry, or
geographical location and we may participate in a business venture of virtually
any kind or nature. Management anticipates that it will be able to participate
in only one potential business venture because we have nominal assets and
limited financial resources. See ITEM 7, "FINANCIAL STATEMENTS." This lack of
diversification should be considered a substantial risk to our shareholders
because it will not permit us to offset potential losses from one venture
against gains from another.
We are a development stage entity, and have neither engaged in any operations
nor generated any revenues to date. We have no assets. Our expenses through
December 31, 1999, all funded by a capital contribution from management, are
$79.
Substantially all of our expenses that must be funded by management will be from
our efforts to identify a suitable acquisition candidate and close the
acquisition. Management has agreed in writing to fund our cash requirements
until an acquisition is closed. So long as management does so, we will have
sufficient funds to satisfy our cash requirements. This is primarily because we
anticipate incurring no significant expenditures. Before the conclusion of an
acquisition, we anticipate our expenses to be limited to accounting fees, legal
fees, telephone, mailing, filing fees, occupational license fees, and transfer
agent fees.
We do not intend to seek additional financing. At this time we believe that the
funds to be provided by management will be sufficient for funding our operations
until we find an acquisition and therefore do not expect to issue any additional
securities before the closing of a business combination.
ITEM 7 - FINANCIAL STATEMENTS
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FIFTH BUSINESS SERVICE GROUP, INC.
(A Development Stage Enterprise)
TABLE OF CONTENTS
- ------------------------------------------------------------------------------
Independent Auditors' Report F-2
Financial Statements as of and for the period March 15, 1999
(date of incorporation) to December 31, 1999
Balance Sheet F-3
Statement of Operations F-4
Statement of Stockholder's Deficit F-5
Statement of Cash Flows F-6
Notes to Financial Statements F-7
- --------------------------------------------------------------------------------
F-1
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[Letterhead of Kingery, Crouse & Hohl P.A.]
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of Fifth Business Service Group, Inc.:
We have audited the accompanying balance sheet of Fifth Business Service Group,
Inc. (the "Company"), a development stage enterprise, as of December 31, 1999
and the related statements of operations, stockholder's deficit and cash flows
for the period March 15, 1999 (date of incorporation) to December 31, 1999.
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 the disclosures in the financial statements. An audit also
includes assessing the accounting principles used and the significant estimates
made by management, as well as the overall financial statement presentation. We
believe 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 the Company as of December 31,
1999 and the results of its operations and its cash flows for the period March
15, 1999 (date of incorporation) to December 31, 1999 in conformity with
generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Notes A and B to the
financial statements, the Company is in the development stage and will require a
significant amount of capital to commence its planned principal operations and
proceed with its business plan. As of the date of these financial statements, an
insignificant amount of capital has been raised, and as such there is no
assurance that the Company will be successful in its efforts to raise the
necessary capital to commence its planned principal operations and/or implement
its business plan. These factors raise substantial doubt about the Company's
ability to continue as a going concern. Management's plans in regard to this
matter are described in Note B. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
Kingery, Crouse & Hohl P.A.
May 3, 2000
Tampa, FL
14
<PAGE>
Fifth Business Service Group, Inc.
(A Development Stage Enterprise)
BALANCE SHEET AS OF DECEMBER 31, 1999
- --------------------------------------------------------------------------
ASSETS
TOTAL ASSETS $ -
============
LIABILITIES AND STOCKHOLDER'S DEFICIT
TOTAL LIABILITIES - Accrued expenses $ 1,000
------------
STOCKHOLDER'S DEFICIT:
Preferred stock - no par value: 20,000,000 shares
authorized; zero shares issued and outstanding -
Common stock - no par value: 50,000,000 shares
authorized; 1,000,000 shares issued and outstanding 79
Additional paid-in capital 4,000
------------
Deficit accumulated during the development stage (5,079)
------------
Total stockholder's deficit (1,000)
------------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ -
============
- --------------------------------------------------------------------------------
See notes to financial statements
F-3
15
<PAGE>
Fifth Business Service Group, Inc.
(A Development Stage Enterprise)
STATEMENT OF OPERATIONS FOR THE PERIOD MARCH 15, 1999 (DATE OF INCORPORATION) TO
DECEMBER 31, 1999
- -------------------------------------------------------------------------------
EXPENSES:
Professional fees and expenses $ 5,000
Organization costs 79
-----------
NET LOSS $ 5,079
===========
BASIC AND DILUTED NET LOSS PER SHARE $ 0.00
===========
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 1,000,000
===========
- -------------------------------------------------------------------------------
See notes to financial statements
F-4
16
<PAGE>
Fifth Business Service Group, Inc.
(A Development Stage Enterprise)
STATEMENT OF STOCKHOLDER'S DEFICIT FOR THE PERIOD MARCH 15, 1999
(DATE OF INCORPORATION) TO DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Deficit
Accumulated
During the
Common Stock Additional Development
Shares Par Value Paid-in Stage Total
Capital
-------- --------- ------------ ------------ ----------
<S> <C> <C> <C> <C> <C>
Balances, March 15, 1999
(date of incorporation) - $ - $ - $ - $ -
Issuance of common 1,000,000 79 - - 79
stock
Capital Contribution of
services - - 4,000 - 4,000
Net loss for the period,
March 15, 1999 (date of
incorporation)
to December 31, 1999 - - - (5,079) (5,079)
-------- ---------- ------------ ----------- -----------
Balances, December 31,
1999 1,000,000 $ 79 $ 4,000 $ (5,079) $(1,000)
======== ========== ============ =========== ===========
</TABLE>
- ------------------------------------------------------------------------------
See notes to financial statements
F-5
17
<PAGE>
Fifth Business Service Group, Inc.
(A Development Stage Enterprise)
STATEMENT OF CASH FLOWS FOR THE PERIOD MARCH 15, 1999 (DATE OF INCORPORATION) TO
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITES:
Net loss $ (5,079)
Adjustments to reconcile net loss to cash used in
operating activities:
Increase in accrued expenses 1,000
Contributed services and expenses 4,000
----------
NET CASH USED IN OPERATING ACTIVITIES (79)
----------
CASH FLOWS FROM FINANCING ACTIVITIES -
Proceeds from issuance of common stock 79
----------
CASH PROVIDED BY FINANCING ACTIVITIES 79
----------
NET INCREASE IN CASH AND CASH EQUIVALENTS -
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD -
----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ -
==========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
TAXES PAID $ -
==========
INTEREST PAID $ -
==========
- -------------------------------------------------------------------------------
See notes to financial statements
F-6
18
<PAGE>
Fifth Business Service Group, Inc.
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE A - FORMATION AND OPERATIONS OF THE COMPANY
First Business Service Group, Inc. ("we, us, our") was incorporated under the
laws of the state of Florida on March 15, 1999. We are considered to be in the
development stage as defined in Financial Accounting Standards Board Statement
No 7, and intend to seek, investigate and, if such investigation warrants,
engage in business combinations presented to us by persons or firms who or which
desire to become a Securities and Exchange Commission (the "SEC") reporting
company. Our planned principal operations have not commenced, therefore
accounting policies and procedures have not yet been established. Our fiscal
year end is December 31.
NOTE B - GOING CONCERN
The accompanying financial statements have been prepared on a going concern
basis, which contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business. The Company will require a
significant amount of capital to commence its planned principal operations and
proceed with its business plan. Accordingly, the Company's ability to continue
as a going concern is dependent upon its ability to secure an adequate amount of
capital to finance its planned principal operations and/or implement its
business plan. The Company's plans include borrowings from management and
negotiating fees with an acquisition candidate, however there is no assurance
that they will be successful in their efforts to raise capital. This factor,
among others, may indicate that the Company will be unable to continue as a
going concern for a reasonable period of time.
NOTE C - INCOME TAXES
During the period March 15, 1999 (date of incorporation) to December 31, 1999,
we recognized losses for both financial and tax reporting purposes. Accordingly,
no deferred taxes have been provided for in the accompanying statement of
operations.
F-7
19
<PAGE>
NOTE D - RELATED PARTY TRANSACTIONS
The value of services provided by our stockholder during the period March 15,
1999 (date of incorporation) to December 31, 1999 was $4,000 and is included as
professional fees and expenses in the accompanying statement of operations. In
addition, the stockholder has agreed to pay corporate, organizational and other
costs incurred by us and provide the following services at no cost to us until a
business combination is effected:
1. Preparation and filings of required documents with the Securities and
Exchange Commission.
2. Location and review of potential target companies.
NOTE E - LOSS PER SHARE
We compute net loss per share in accordance with SFAS No. 128 "Earnings per
Share" ("SFAS No. 128") and SEC Staff Accounting Bulletin No. 98 ("SAB 98").
Under the provisions of SFAS No. 128 and SAB 98, basic net loss per share is
computed by dividing the net loss available to common stockholders for the
period by the weighted average number of common shares outstanding during the
period. Diluted net loss per share is computed by dividing the net loss for the
period by the number of common and common equivalent shares outstanding during
the period. There were no common equivalent shares outstanding as of December
31, 1999.
- -------------------------------------------------------------------------------
F-8
20
<PAGE>
ITEM 8 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES
NONE
ITEM 9 - DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS.
Directors and Executive Officers.
The following table and subsequent discussion sets forth information about our
director and executive officer, who will resign upon the closing of the
acquisition transaction. Our director and executive officer was elected to his
position in March, 1999.
Name Age Title
Michael T. Williams 51 President, Treasurer and Director
Michael T. Williams responsibilities will include management of our operations
as well as our administrative and financial activities. Since 1975 Mr. Williams
has been in the practice of law, initially with the U.S. Securities and
Exchange Commission until 1980, and since then in private practice. He was also
chief executive officer of Florida Community Cancer Centers, Dunedin, FL from
1991-1995. He received a BA from the University of Kansas and a JD from the
University of Pennsylvania.
ITEM 10 - EXECUTIVE COMPENSATION.
The following table sets forth all compensation awarded to, earned by, or paid
for services rendered to us in all capacities during the year ended December 31,
1999, by our president; however, as we have no our other executive officers
whose salary and bonus for the year ended December 31, 1999 exceeded $100,000,
information is only furnished for Mr. Williams.
Summary Compensation Table
Long-Term Compensation Awards
Name and Principal Position Annual Compensation - 1998
Salary ($) Bonus ($) Number of Shares
Underlying Options (#)
Michael T. Williams, None None None
President
21
<PAGE>
Fees may be paid to our management if and only if it is agreed by the
acquisition candidate in the merger agreement. These fees would be for services
including, but are not limited to, the following:
o Formation of our company
o Preparation and filing of Form 10
o Securing an accounting firm and audited financial statements
o Locating potential acquisition candidates
o Qualifying the actual acquisition candidate
o Negotiating all aspects of the acquisition
o Preparation and filing of a Form 8-K
o Closing the merger transaction
Fees may also be paid to Williams Law Group, P.A., an affiliate of our
management, for rendering legal services. Any such fees will be funded by a fee
the acquisition candidate agrees to pay as part of the merger agreement. There
is no minimum or maximum amount of fees that can be paid. The amount will be
determined in arms'-length negotiations in the merger agreement.
Except as described above and any stock retained by management as mutually
agreed in the acquisition agreement, we will not pay any of the following types
of compensation or other financial benefit to our management:
o Consulting Fees
o Finders' Fees
o Any other methods of payments by which management or current shareholders
receive funds, stock, other assets or anything of value whether tangible
or intangible
These provisions are the subjects of a written agreement between management and
us. Management is not aware of any circumstances under which this policy,
through their own initiative, may be changed.
No retirement, pension, profit sharing, stock option or insurance programs or
other similar programs have been adopted by us for the benefit of our employees.
ITEM 11 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth information about our current shareholder. The
person named below has sole voting and investment power with respect to the
shares. The numbers in the table reflect shares of common stock held as of the
date of this Form 10:
22
<PAGE>
Shares Owned Percentage
Michael T.
Williams (1) 1,000,000 100%
2503 W. Gardner Ct.
Tampa FL 33611
All directors and
officers as a
group -
1 persons 1,000,000 100%
1. To be owned in a blind trust with the beneficiaries of Michael T. Williams
and his wife, Donna J. Williams, Tenants by the Entireties. Mr. Williams may be
deemed our founder and promoter, as the terms are defined under the Securities
Act of 1933.
Mr. Williams' trust will retain an amount of our issued and outstanding stock
after issuance of all shares in the merger and closing of the merger transaction
as is agreed in arms'-length negotiations with the acquisition candidate. Prior
to closing the merger, we will effect a reverse stock split so that share
ownership complies with the terms of the acquisition agreement.
ITEM 12 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
None of the related party transactions described below were the result of arm's
length negotiations. Accordingly, there is a potential that management's
fiduciary duties may be compromised as a result of any of these transactions.
Any remedy available under state corporate law, if management's fiduciary duties
are compromised, will most likely be prohibitively expensive and time consuming.
We have established the a policy that prohibits transactions with or payment of
anything of value to any present officers, director, promoter or affiliate or
associate or any company that is in any way or in any amount beneficially owned
by any of our officers, director, promoter or affiliate or associate, except as
follows:
o Fees may be paid to Williams Law Group, P.A., an affiliate of our
management, for rendering legal services.
o All compensation payable according to a written agreement between
management and us as described in Item 6. Management above.
Any such fees will be funded by a fee the acquisition candidate agrees to pay as
part of the merger agreement. There is no minimum or maximum amount of fees that
can be paid. The amount will be determined in arms'-length negotiations in the
merger agreement.
Our director and officer is or may become, in his individual capacity, an
officer, director, controlling shareholder and/or partner of other entities
engaged in a variety of businesses. Mr. Williams is engaged in business
activities outside of us, and the aggregate amount of time he will devote to our
business and the business of all other blank check companies with which is
associated will be limited, usually involving one hour or less per week
aggregate until an acquisition candidate has agreed to be acquired.
23
<PAGE>
There exists potential conflicts of interest including allocation of time
between us and such other business entities.
Our director and officer is or may become, in his individual capacity, an
officer, director, controlling shareholder and/or partner of other entities
engaged in a variety of businesses. Michael T. Williams is engaged in business
activities outside of us, and the aggregate amount of time he will devote to our
business and the business of all other blank check companies with which is
associated will only be between five (5) and twenty (20) hours per week until a
successful business opportunities have been acquired by all such companies.
There exists potential conflicts of interest including allocation of time
between us and such other business entities.
Conflicts with other blank check companies with which members of management are
currently and may become affiliated in the future will arise in the pursuit of
business combinations. These conflicts will involve only Michael T. Williams.
Mr. Williams has in the past formed other what would be deemed blank check
entities for himself. He intends to continue to do so in the future. Except for
4 Brandon - I, Inc., none of these entities has or will engage in any public
offering of its securities prior to entering into a business combination
agreement. None of such entities has entered into an agreement to acquire or be
acquired by any business or has acquired any business.
To aid the resolution of these conflicts, he and we have agreed to the following
procedure:
o None of the existing blank check entities except for 4 Brandon - I,
Inc. will file registration statements under the Securities Act to sell
their securities prior to entering into a business combination
agreement. No acquisition candidates will be presented to for 4 Brandon
- I, Inc. until it has sold any securities.
o Unless specifically requested by an acquisition candidate, no
acquisition candidates will be presented to the following existing
blank check companies with which Mr. Williams is associated until all
blank check companies which have not filed registration statements on
Form 10, existing or in the future, have entered into acquisition
agreements.
The following table sets forth acquisition companies, which have filed
registration statements on Form 10.
Name Date of Filing of Form 10 with SEC
First Business Service Group, Inc. March 25, 1999
Second Business Service Group, Inc. March 25, 1999
Third Business Service Group, Inc. March 25, 1999
Fourth Business Service Group, Inc. March 25, 1999
Fifth Business Service Group, Inc. March 25, 1999
Sixth Business Service Group, Inc. March 25, 1999
24
<PAGE>
Seventh Business Service Group, Inc. March 25, 1999
Eighth Business Service Group, Inc. March 25, 1999
Ninth Business Service Group, Inc. March 25, 1999
Tenth Business Service Group, Inc. March 25, 1999
Only Sixth Business Service Group, Inc. has entered into an acquisition
agreement with Telesource, Inc. A registration statement has been filed and
refiled, comments have been received and Amendment No. 2 is anticipated to be
filed in the near future. First, Second and Third Business Service Group are
engaged in preliminary acquisition discussions with potential acquisition
candidates. However, no such candidate is willing to proceed with further
discussions until, among other things, we are current in our reporting
requirements.
The following table sets forth acquisition companies that have not filed and do
not intend to file registration statements on Form 10.
Name Acquisition Agreement SEC Filing Status
Status
First Enterprise Service Merger Agreement with Registration
Group, Inc. Space Systems Statement filed.
International, Inc. Awaiting Comments.
Second Enterprise Service
Group, Inc.
Third Enterprise Service Merger Agreement with Registration
Group, Inc. Competitive Companies, Statement filed.
Inc. Awaiting financials
to refile.
Fourth Enterprise Service Proposal being
Group, Inc. considered by
candidate.
Fifth Enterprise Service Proposal being
Group, Inc. considered by
candidate.
Sixth Enterprise Service Initial Merger
Group, Inc. Agreement with
Africainternet.com,
Inc. terminated. New
candidate considering
proposal.
Seventh Enterprise Service Merger Agreement with Registration
Group, Inc. Legacy Communications, Statement being
Inc. drafted.
Eighth Enterprise Service Merger Agreement with Registration
Group, Inc. Impulse Statement being
Communications, Inc. drafted.
Ninth Enterprise Service Merger Agreement with Registration
Group, Inc. Wiremedia.com, Inc., Statement being
Inc. drafted.
Tenth Enterprise Service Merger Agreement with Registration
Group, Inc. Emailshots.com, Inc. Statement being
drafted.
Brilliant Sun Industry Co. Merger Agreement with Registration
Yi Wan Group, Inc. Statement filed.
Awaiting financials
to refile.
25
<PAGE>
First Emily, Inc. Merger Agreement with Registration
Talentspot.com, Inc. Statement being
drafted.
First Hilary, Inc. Merger Agreement with Registration
Net Sales Solutions, Statement being
Inc. drafted.
First Zachery, Inc. Proposal being
considered by
candidate.
First Michelle, Inc. Proposal being
considered by
candidate.
First James, Inc. Proposal being
considered by
candidate.
First Mark, Inc. Proposal being
considered by
candidate.
First Matt, Inc. Proposal being
considered by
candidate.
First Brandon, Inc. Merger Agreement with Registration
Net2speak, Inc. Statement being
drafted.
First Brad, Inc. Proposal being
considered by
candidate.
First Dunmore, Inc.
ITEM 13-EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORMS 8-K
Exhibits -
10.1 Agreement with Management
Financial Statement Schedules - None.
Reports on Form 8-K - None.
26
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
FIFTH BUSINESS SERVICE GROUP, INC.
By: /s/ Michael T. Williams
President
Dated: May 18, 2000
In accordance with Exchange Act, this report has been signed below by the
following persons on behalf of the Registrant and in the capacities and on the
dated indicated.
SIGNATURE TITLE DATE
/s/ Michael T. Williams Director May 18, 2000
- ----------------------------
27
<PAGE>
EXHIBIT 10.1
Agreement with Management
28
<PAGE>
AGREEMENT
We, Fifth Business Service Group, Inc., a Florida corporation, do agree with
you, our president, director and management, Michael T. Williams, as of May 1,
1999, as follows.
o We will not sell any securities prior to the location of an acquisition or
merger candidate.
o The costs of identifying, investigating, and analyzing business
combinations not obtained from the merger fee paid to us by the
acquisition candidate will be paid with funds contributed as a capital
contribution by our president. Management will fund our cash requirements
until an acquisition is closed. Management has placed no cap on the amount
of funds they will lend.
o We may not borrow funds and use the loan proceeds to make payments to any
officer, director, promoter or affiliate or associate of us.
o We will not enter into a business combination with any company which is in
any way wholly or partially beneficially owned by any officer, director,
promoter or affiliate or associate of us.
o We will not pay a finder's fee to any member of management for locating a
merger or acquisition candidate.
o No member of management intends to or may seek and negotiate for the
payment of finder's fees.
o Other fees may be paid to our management if and only if it is agreed by
the acquisition candidate in the merger agreement. Any such fee will be
funded by a fee the acquisition candidate agrees to pay as part of the
merger agreement. There is no minimum or maximum amount of fee that can be
paid. The amount will be determined in arms'-length negotiations in the
merger agreement.
o The only other pecuniary benefit to be received by management is the
retention of a to-be-agreed percent of stock after the acquisition closes.
There is no minimum or maximum amount of stock which can be retained. The
amount will be determined in arms'-length negotiations in the merger
agreement.
o Except as described above, we will not utilize any other methods of
payments by which management or current shareholders receive funds, stock,
other assets or anything of value whether tangible or intangible
Ffth Business Service Group, Inc.,
a Florida corporation
By: /s/ Michael T. Williams ______________________
Michael T. Williams; president, director and management
/s/ Michael T. Williams
Michael T. Williams
29
<PAGE>
