<PAGE>
Registration No.
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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
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FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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UNIFUND AMERICA, INC.
(Name of small business issuer in its charter)
New York 6799 13-401-4698
(Primary Standard (IRS Employer
(State or other Industrial Identification No.)
jurisdiction of Classification Code
incorporation or Number)
organization)
575 Madison Avenue, Suite 1006, New York, New York 10022; (888) 212-FUND/3863
(Address and telephone number of principal executive offices)
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575 Madison Avenue, Suite 1006, New York, New York 10022; (888) 212-FUND/3863
(Address of principal place of business or intended principal place of
business)
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R. Scott Barter, President
575 Madison Avenue, Suite 1006, New York, New York 10022; (888) 212-FUND/3863
(Name, address, and telephone number of agent for service)
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Approximate date of commencement of proposed sale to public: As soon as
practicable after the effective date of this registration statement.
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of earlier effective
registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to the Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
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With copies to:
Adam S. Gottbetter, Esq.
Kaplan Gottbetter & Levenson, LLP
630 Third Avenue, 5th Floor
New York, NY 10017-6705
(212) 983-0532
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CALCULATION OF REGISTRATION FEE
<TABLE>
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<CAPTION>
Proposed Proposed
Amount Maximum Maximum Amount of
Title of each Class of Securities Being to be Offering Price Aggregate Registration
Registered Registered(2) Per Security(1) Offering Price(1) Fee
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<S> <C> <C> <C> <C>
Common Stock............................ 2,518,769 $ .40 $ 972,418 $ 280.09
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Class A Warrants........................ 1,000,000 $ .10 $ 100,000 $ 27.80
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Class B Warrants........................ 1,000,000 $ .10 $ 100,000 $ 27.80
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Common Stock Underlying Class A
Warrants............................... 1,000,000 $2.50 $2,500,000 $ 695.00
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Common Stock Underlying Class B
Warrants............................... 1,000,000 $5.00 $5,000,000 $1,390.00
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TOTAL................................................................ $8,707,508 $2,420.69
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</TABLE>
(1)Estimated solely for purposes of calculating the registration fee in the
case of shares being sold by selling stockholders,
(2) Pursuant to Rule 416 there are also registered hereby such additional, in
determining number of shares as may become issuable by reason of the anti-
dilution provisions of the Class A Warrants and Class B Warrants.
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The Registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall become effective in accordance with Section 8(a) of the
Securities Act of 1933, as amended, or until the Registration Statement shall
become effective on such date as the Commission, acting pursuant to Section
8(a), may determine.
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<PAGE>
UNIFUND AMERICA, INC.
Cross Reference Sheet
Showing Location in Prospectus of Information
Required by Items 1 through 23, Part I, of Form SB-2
<TABLE>
<CAPTION>
Item in Form SB-2 Prospectus Caption
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<S> <C>
1. Front of Registration Statement and Outside Facing Page of Registration Statement;
Front Cover of Prospectus................... Outside Front Cover Page of Prospectus
2. Inside Front and Outside Back Cover Pages Inside Front Cover Page of Prospectus;
of Prospectus............................... Outside Back Cover Page of Prospectus
3. Summary Information and Risk Factors....... Prospectus Summary; Risk Factors
4. Use of Proceeds............................ Use of Proceeds
5. Determination of Offering Price............ Outside Front Cover Page of Prospectus;
Risk Factors
6. Dilution................................... Dilution
7. Selling Security Holders................... Principal and Selling Stockholders
8. Plan of Distribution....................... Outside Front Cover Page of Prospectus;
Plan of Distribution
9. Legal Proceedings.......................... Business
10. Directors, Executive Officers, Promoters
and Control Persons......................... Management
11. Security Ownership of Certain Beneficial
Owners and Management....................... Principal and Selling Stockholders
12. Description of Securities.................. Description of Securities
13. Interest of Named Experts and Counsel...... Experts; Legal Matters
14. Disclosure of Commission Position on
Indemnification For Securities Act
Liabilities................................. Certain Charter and By Law Provisions
15. Organization Within Last Five Years........ Business; Certain Transactions
16. Description of Business.................... Business; Risk Factors
17. Plan of Operations......................... Plan of Operations
18. Description of Property.................... Business
19. Certain Relationships and related
Transactions................................ Certain Transactions
20. Market For Common Equity................... Outside Front Cover Page of Prospectus;
Prospectus Summary; Risk Factors;
Market for Common Equity and Related
Stockholder Matters
21. Executive Compensation..................... Executive Compensation
22. Financial Statement........................ Financial Statements
23. Changes in and Disagreements With
Accountants on Accounting and Financial
Disclosure.................................. Experts
</TABLE>
ii
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++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this prospectus is not complete and may be changed. We may +
+not sell these securities until the registration statement filed with the +
+Securities and Exchange Commission is effective. This prospectus is not an +
+offer to sell these securities and it is not soliciting an offer to buy these +
+securities in any state where the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
Initial Public Offering
Prospectus
[LOGO]
2,518,769 Shares Common Stock
1,000,000 Class A Redeemable Warrants
1,000,000 Class B Redeemable Warrants
UNIFUND AMERICA, INC.
575 Madison Avenue, Suite 1006
New York, New York 10022
The Offering
<TABLE>
<CAPTION>
Public
Price Total
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<S> <C> <C>
Common Stock................................................. $.40 $ 400,000
Class A Warrants............................................. .10 100,000
Class B Warrants............................................. .10 100,000
Common Stock Underlying Class A Warrants..................... 2.50 2,500,000
Common Stock Underlying Class B Warrants..................... 5.00 5,000,000
Proceeds to Company.......................................... $8,100,000
==========
Common Stock offered by Selling Shareholders................. $.40 $ 607,508
==========
</TABLE>
We are a merchant banking firm whose targeted client base is the emerging
growth and small capitalization company--a company with an enterprise value of
from $1 million to $4 million. This is our initial public offering. We have
not had any significant operations to date.
In this offering the Company is selling Common Stock (the "Shares"), Class A
Common Stock Warrants and Class B Common Stock Warrants. Each Class A Warrant
entitles the warrant holder to buy one share of Common Stock at $2.50 per share.
Each Class B Warrant entitles the warrant holder to buy one share of Common
Stock at $5.00 per share. Both classes of Warrants have terms of 5 years. We may
redeem either class of warrants at a price of $0.01 per warrant at any time
after the warrants become exercisable, upon not less than 30 days written notice
if the last sale price of the Common Stock has been at least 150% of the then
the effective exercise price of the warrant on each of the 20 consecutive
trading days ending on the third day before the notice of redemption is given.
See "Description of Securities--Warrants." Until the Company has sold at least
the minimum number of Shares and held an initial closing on those sales,
Warrants of either class may only be purchased together with Common Stock on the
basis of one share of Common Stock and one Warrant of either class. After the
Company has held an initial closing, Shares and Warrants may be purchased
separately or in any combination.
We have four stockholders ("Selling Stockholders"), and are registering all of
the shares they own, as well as shares that may be issued upon exercise of a
Class A Warrant held by one of them, so they may also sell Common Stock of the
company from time to time over the next two years. This prospectus also covers
the Common Stock they may sell. They have agreed not to sell any of their shares
until we have sold all the Shares we are selling in this offering.
The offering price may not reflect the market price of our shares after the
offering.
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This investment involves a high degree of risk. You should purchase these
securities only if you can afford a complete loss. See "Risk Factors"
beginning on Page 7.
Neither the Securities and Exchange Commission nor any State securities
commission has approved or disapproved these securities, or determined if this
Prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
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May , 1999
<PAGE>
PROSPECTUS SUMMARY
THIS IS A BRIEF SUMMARY OF THE INFORMATION IN THIS PROSPECTUS. WE ENCOURAGE YOU
TO READ THE ENTIRE PROSPECTUS BEFORE YOU DECIDE WHETHER AND HOW MUCH TO INVEST
IN THESE SECURITIES.
THE COMPANY
We are a merchant banking firm whose targeted client base is the emerging
growth and small capitalization company--a company with an enterprise value of
from $1 million to $4 million. The term "enterprise value" in this context
means the value we place on the client company on a post-transaction basis in
determining the price of securities to be sold and the percentage of the client
company represented by those securities in a proposed transaction. Although the
principals of our company have, over the last several years, carried out
several transactions similar to our proposed business, those transactions were
not carried out through the Company. Accordingly, we are a development stage
company.
Merchant banks are essentially in the business of finding opportunities and
sources of funding and, with investors' money and their own capital, financing
growth and facilitating transactions for their clients. The distinguishing
characteristics of a merchant bank are that it commits its own capital, or the
capital of its principals, to a transaction, either in the form of debt (such
as short-term bridge financing) or equity, and that it generally receives an
equity position in the client company as part or all of the compensation for
its services.
We were incorporated in New York in 1991. Our offices are at 575 Madison
Avenue, Suite 1006, New York, New York 10022, telephone (888) 212-FUND.
THE OFFERING
Securities Offered:
<TABLE>
<S> <C>
Common Stock Offered by the Company 1,000,000 shares
Common Stock Offered by Selling Stockholders 1,518,769 shares
Class A Warrants Offered by the Company 1,000,000 warrants
Class B Warrants Offered by the Company 1,000,000 warrants
Common Stock Underlying Class A Warrants 1,000,000 shares
Common Stock Underlying Class B Warrants 1,000,000 shares
Shares to be outstanding after the Offering 4,518,769 shares
</TABLE>
The Company is offering the securities it is selling directly to investors
without any participation by an underwriter. The offering is on a "best-
efforts" basis, but if a minimum of 250,000 shares are not sold by the Company
in the offering, the offering will not close and the Company will refund
payments made by the investors. The selling stockholders may offer their shares
directly to investors or, if a market develops in our Common Stock, they may
sell their shares through a broker. If we do not sell at least 250,000 of the
shares we are offering, the selling shareholders will not sell any of their
shares.
Use of Proceeds
We expect to use the proceeds of the securities we are offering to invest in
venture capital transactions, including but not limited to bridge loans,
warrants, common stock or other securities we expect to buy in our merchant
banking transactions.
2
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RISK FACTORS
Some of the information in this Prospectus may contain forward-looking
statements. Those statements can be identified by the use of forward-looking
terminology such as "may," "will," "expect," "anticipate," "continue," or other
similar words. Forward-looking statements discuss future expectations, contain
projections of results of operations or of financial condition or state other
"forward-looking" information. When considering forward-looking statements in
this Prospectus, you should keep in mind the risk factors and other cautionary
statements included in this Prospectus. The risk factors noted in the "Risk
Factors" section and the other factors noted throughout this Prospectus,
including certain risks and uncertainties, could cause our actual results to
differ materially from those contained in any forward-looking statement.
AN INVESTMENT IN THE SECURITIES WE ARE OFFERING INVOLVES A HIGH DEGREE OF RISK
AND SHOULD ONLY BE MADE BY THOSE WHO CAN AFFORD TO LOSE UP TO THEIR ENTIRE
INVESTMENT. BEFORE PURCHASING THESE SECURITIES, YOU SHOULD CONSIDER CAREFULLY
THE FOLLOWING RISK FACTORS, IN ADDITION TO THE OTHER INFORMATION IN THIS
PROSPECTUS.
Risks Inherent in the Company
Development Stage Company; New Business Enterprise. The Company is at an
early stage of development in its business strategy and is subject to all of
the risks of a new business enterprise. The company will have to, among other
things, establish the feasibility of its services and products and respond to
competitive developments. In deciding to start a merchant bank we assumed that
there is a certain demand from smaller companies for the type of merchant
banking services available to large companies. We cannot give any assurance
that our assumption will be correct or that we will be able to successfully
compete in the merchant banking business against larger, more well established
and well known companies. If our assumption about the need for these services
is not accurate, or if we are not able to compete as a merchant banker, our
business, operating results and financial condition will be materially and
adversely affected.
Our only significant assets are certain marketable securities we own.
Price of Securities. We have arbitrarily determined the price of the Common
Stock, the Class A Warrants, the Class B Warrants and the exercise price of the
Class A Warrants and the Class B Warrants. Those prices do not bear any
relationship to the assets, earnings or the book value of the outstanding
common shares prior to the offering. Those who buy Shares will experience
immediate and substantial dilution in the net tangible book value of their
Shares. (See "DILUTION.")
Uncertain Impact of Recent SEC Initiatives. The Securities and Exchange
Commission has recently adopted a number of changes to its rules and forms
which are designed to deter various fraudulent activities in the "micro-cap"
market. The targeted market for our services is precisely the size of company
at which these initiatives are directed. If the effect of these initiatives is
to effectively shut out the small issuer from a public market, those issuers
may turn to other methods of raising capital that do not require our services.
Absence of Relationship with Investment Bankers. Our ability to compete in
our targeted market will depend to a large degree on our being able to bring
the customers in which we invest to the public securities markets. Since we do
not intend to underwrite securities issuances ourselves, we will need to
develop relationships with one or more investment bankers who can act as
underwriters of public offerings by these customers. Neither we nor any of our
principals currently have any relationship with established investment banking
firms. If we are unable to develop and maintain such relationships, we may find
it difficult to get and retain customers in our targeted market.
3
<PAGE>
Dependence on Key Personnel; Conflicts of Interest. The Company is dependent
for its success on the talent, expertise and experience of its current
management team. Losing the services of any member of the management team could
have a material adverse effect on our operations and prospects. Our success
will depend to a large degree on the principals of the company and other key
management people. Messrs. Barter's and Harrison-Mills's continued involvement
is particularly critical to us. We do not have an employment agreement with
either Mr. Barter or Mr. Harrison-Mills, though we may in the future. We do not
currently have any "key man" life insurance on any of our employees; however,
we expect to get such insurance for certain of our key employees. Neither Mr.
Barter nor Mr. Harrison-Mills will be devoting his full time to our business.
Both are officers and directors of other companies, and each of them has
outside business interests as well. We cannot give any assurance that the
conflicting demands for their time will be resolved in our favor.
Absence of Non-competition Agreements. Our business is heavily dependent on
its ability to maintain ongoing relationships with both its merchant banking
clients and outside investors who may participate in transactions we arrange.
None of our principals is bound by any non-competition agreements. As a result,
it is possible that one or more of these principals could leave the company and
go into competition with us either independently or as a principal or employee
of another company. Although various legal remedies might be available to
prevent the use of our proprietary information to compete with us, we would
probably not have any effective legal way to prevent these principals from
taking advantage of the relationships they have developed while working for us.
Lack of Market for Securities. There is no market for the shares or warrants
we are offering. Although we plan to try to develop such a market, we cannot
give investors any assurance that such a market will develop. Even if a market
does develop, we cannot give any assurance that there will be a market for the
Company's shares, or Class A Warrants or Class B Warrants at any given time in
the future, or that even if the shares and warrants can be sold in compliance
with applicable securities statutes, the market price at the time of sale would
be high enough to allow investors to recoup the value of their investments in
the Company. Consequently, the securities we are offering may be an illiquid
long-term investment.
Dilution. Purchasers of the Common Stock we are offering will experience an
immediate and substantial dilution of 41.7% or $.17 per share, if the maximum
number of shares is sold, and up to $.29 per share if the minimum number of
shares is sold. (See "DILUTION.")
Limited Assets/Need for Additional Capital. The Company has limited assets
of marketable securities. Although we are not dependent upon the proceeds of
this offering to conduct our business and implement our business plans, we may
need additional financing after this offering is completed. We have no
commitments for additional cash funding beyond the proceeds expected to be
received from this offering. If we need additional financing, we may have to
seek it from commercial lenders or from other sources, including additional
sales of equity, for which we presently have no commitments or arrangements.
There are currently no limitations on our ability to borrow funds to
implement our business plan. The amount and nature of any borrowings by us will
depend on a number of things, including our capital requirements, our perceived
ability to meet debt service on such borrowings and the prevailing conditions
in the financial markets, as well as general economic conditions. We cannot
give investors any assurance that if we seek debt financing, it would be
available on terms we think are commercially acceptable and in our best
interests. The Company's executive officers or directors or their respective
affiliates do not expect to provide any loans to us over and above what they
have already lent us. If we are not able to borrow funds, or otherwise get an
additional infusion of capital into our business, the lack of capital may have
a material adverse effect on our financial condition and future prospects. To
the extent that debt financing ultimately proves to be available, any
borrowings may subject us to the risks traditionally associated with borrowing,
including interest rate fluctuations and too little cash flow to pay principal
and interest.
4
<PAGE>
No Dividends. We do not expect to pay cash dividends on our Common Stock at
any time in the foreseeable future. We intend to follow a policy of retaining
any earnings to develop and extend our business. Under the Business
Corporation Law of the State of New York ("BCL"), we may only pay dividends out
of capital and surplus, or out of certain retained earnings, as those terms are
defined in the BCL. If the required capital, surplus or retained earnings are
not available, we will not be able to legally pay dividends. Accordingly, we
may not be able to pay dividends even if we should decide to do so.
Limited Management. We will be substantially dependent on our current
management team (See "Management"). Other key personnel are functioning as
independent contractors. Our stability would be significantly compromised if we
were to lose any of our present management personnel or our independent
contractors. The loss of the services of any of the current management team
members could have a material adverse impact upon the Company.
Conflicting Time Demands. Some members of the management team have other
interests which could conflict with the amount of time devoted to the Company.
These conflicts may not be resolved in our favor.
Possible Payment of Finder's Fees to Management or Affiliates. Management
does not currently intend to pay any finder's fees from our revenues or other
funds. If a person or entity assists us by introducing us to a prospective
business product opportunity which we ultimately take up, the person or entity
responsible for the introduction may be entitled to receive, upon Board of
Directors approval, a finder's fee payable in cash and/or securities as
compensation for the introduction. The Company is not presently obligated to
pay any finder's fees. The executive officers, directors or affiliates of the
Company may be entitled to receive a finder's fee if they originate a
prospective business product or opportunity.
Year 2000 Risks. The Year 2000 issue involves the potential for system and
processing failures of date-related data because computer-controlled systems
use two digits rather than four to define the applicable year. For example,
computer programs that contain time-sensitive software may recognize a date
using two digits of "00" as the year 1900 rather than the year 2000. This could
cause system failure or miscalculations leading to disruptions of operations,
including, among other things, a temporary inability to process transactions,
send invoices or engage in similar ordinary business activities.
The Company believes that its internal software and hardware systems will
function properly with respect to dates in the year 2000 and thereafter and it
has completed its internal IT and non-IT assessment. The Company does not
expect to incur significant costs in the future for Year 2000 problems.
Nonetheless, there is no assurance in this regard until such systems are
operational in the Year 2000. The company is in the process of contacting all
of its significant suppliers to determine the extent to which its systems are
vulnerable to those third parties' failures to make their own systems Year 2000
compliant. Management expects to have completed this review by June 1, 1999. If
any of the Company's suppliers or vendors prove not to be Year 2000 compliant,
the Company believes that it could find a replacement vendor or supplier which
is Year 2000 compliant without significant delay or expense; however, if
substantially all of the Company's suppliers and vendors prove not to be Year
2000 compliant and if the Company experiences difficulties in finding
replacement vendors, the Company's business could be materially adversely
affected. Because of the general uncertainty of the Year 2000 readiness of
third-party suppliers and vendors, the Company cannot determine whether the
consequences of Year 2000 failures will have a material impact on its results
of operations, liquidity or financial condition.
Risks Related to the Nature of the Proposed Business
Uncertain Market Acceptance. Our proposed business plan is based on
providing traditional merchant banking services to companies whose size and
capital structure prevent them from getting these services from larger, more
established investment banking firms. We cannot give any assurances that our
products and services will find acceptance. Our business will be subject to all
the risks associated with marketing services to business and the financial
sector.
5
<PAGE>
High-risk Targeted Market. Many of our transactions will be high-risk
investments. We expect that a major portion of our business will be providing
venture capital in the form of bridge loans, convertible debt and equity
investments in newly formed companies that need money to develop a specific
technology or advance an unproven business plan. These companies experience a
high rate of failure. There is no history that would allow us to judge the
likelihood that the company will prove successful, and we cannot provide any
assurances that these companies will be viable or profitable businesses. These
companies are unable to predict how long their start-up periods will be and
there is the risk that the companies will have inadequate working capital to
pay all of their expenses during the start-up period. These companies often
need substantial additional funding; any additional financing may result in
substantial dilution to the investors in the initial stage. In addition, it is
not uncommon for the underwriter of the initial public offering to insist that
investors in the initial stage, like us, withhold their stock from the market
for a significant period after the offering.
Competition from Securities Firms, Banks and Other Financial Services
Providers. We will encounter intense competition in all aspects of our business
and will compete directly with many full service securities firms, investment
banking firms, financial consulting firms and venture capital firms, a
significant number of which offer their customers a broader range of financial
services including many of the services traditionally performed by merchant
banks. Most of these firms have substantially greater resources than we have
and may have greater operating efficiencies. In addition, a number of firms
offer investment advisory services which are incidental to their other services
and do not charge any commission for this type of service.
The Investment Advisers Act. In reliance upon Section 203(b)(3) of the
Investment Advisers Act of 1940, as amended (the "Advisers Act"), management
believes that the Company will not be classified as an investment adviser, and
accordingly, should not be required to register as such under the Adviser Act.
The rules and interpretation of the SEC and the courts relating to this issue
are highly complex and uncertain in many ways. As a result, we cannot give any
assurance that we will not be deemed an "investment adviser" under the Advisers
Act and required to register under that Act. If we have improperly failed to
register under that Act, we could be subject to legal actions by regulatory
authorities and others and could be forced to terminate our business. The cost
of defending any such action could have a material adverse effect on our
business.
The Investment Company Act. In reliance upon the definition of an
"investment company" under Section 3(a)(1) of the Investment Company Act as
amended, management believes the Company will not be classified as an
"investment company" and, accordingly, should not be required to register as
such under that Act.
Registration as a Broker-Dealer under the Securities Exchange Act of 1934. A
broker-dealer is a person who is engaged in the business of effecting
transactions in securities for its own or other's account. Based on our
expected activities, we believe we will not be required to register as a broker
or dealer under the federal securities laws.
Personnel. Most aspects of our business will depend on highly skilled and
experienced individuals. We will devote considerable efforts to recruiting and
compensating those individuals, and to providing incentives to encourage them
to remain with us. Individuals associated with us may in the future leave at
any time to pursue other opportunities. If we are unable to treat certain
personnel as independent contractors rather than employees it would be
disadvantageous to these individuals and we might find it difficult to attract
and retain those people (See "Management").
Pending or Threatened Litigation. There is no pending or threatened
litigation against the Company. However, many aspects of the Company's business
will involve substantial risks of liability, including exposure to substantial
liability under federal and state securities laws in connection with the
suitability of the advice given to clients and the risk of liability arising
out of the activities of its employees. The Company may not be able to maintain
an errors and omissions insurance policy insuring it against these risks. In
recent years, there has been an increasing incidence of litigation involving
the securities industry, including class actions which generally seek
rescission and substantial damages.
6
<PAGE>
General Economic Situation. The Company provides products and services that
are not essential to the support of life. In the event of significant economic
downturns in the United States or the World caused by any or all of a number of
potential causes, the demand for the company's services may be significantly
reduced.
Risks Related to the Offering
Best Efforts Offering/No Firm Commitment. The Company is offering the
securities on a "best efforts basis" with no underwriter assistance or firm
commitment from any investor or
dealer. No assurance can be given that any or all of the securities will be
sold.
Benefits to Present Stockholders; Continued Control. The 1,401,802 presently
outstanding shares of the Company's Common Stock were purchased by the founders
of the company and a corporation controlled by them for a total aggregate
consideration of $125,770. Immediately after completion of this Offering,
assuming the full 1 million Shares are sold, the current stockholders will own
58.7% of the then outstanding Common Stock, for which they will have paid an
average $.09 per share; and Investors in this Offering will own the remaining
44.3%, for which they will have paid $.40 per share. Thus, investors in this
offering will contribute to capital of the Company a disproportionately greater
percentage than the current stockholders. (See "DILUTION.")
Broad Discretion to Use Offering Proceeds. Management will have wide
discretion as to the priority and timing of the allocation and
spending of funds raised from this offering. The uses of the proceeds of the
offering may vary significantly from those outlined in this Prospectus
depending on numerous factors, including the success that the Company has in
attracting new clients and building its client base. Investors purchasing the
securities will be entrusting their funds to the Company's management, upon
whose judgment the Investors must depend. (See "Use of Proceeds" and
"Management.")
Arbitrary Determination of Offering Price. The public offering price of the
securities we are offering was arbitrarily determined by the Company without the
advice of an underwriter. The price bears no relationship to the Company's
assets, book value, net worth or other recognized criterion of value. In no
event should the public offering price be regarded as an indicator of any
future market price of the Shares, or the Class A or Class B Warrants.
There is not currently any trading market for the Shares we are offering.
The Company does not currently meet the numerical requirements (such as income,
stockholders' equity and number of public shares outstanding) to have its
shares listed on a stock exchange in the United States or quoted on the NASDAQ
over-the-counter market, and it will not meet these requirements even after the
offering. We intend to seek to have a broker/dealer make a market in our Common
Stock on the NASD OTC Bulletin Board. We cannot give any assurance that we will
be successful in these efforts. Even if we obtain a market maker there may be
only a limited trading market for the Shares we are offering. Shares which are
"thinly" traded on the Bulletin Board often experience a significant spread
between the market maker's bid and asked prices. As a result, an investment in
the Shares may be illiquid. The price of the Shares, after the completion of
this offering, can vary due to general economic conditions and forecasts, the
Company's general business condition, the release of the Company's financial
reports and sales of shares which were outstanding prior to this offering. See
"Shares Eligible For Future Resale."
State Blue Sky Registration; Restricted Resales of the Securities. The
Company will make application to register the securities in certain states. The
Company may also seek to obtain an exemption from registration to offer the
securities in various state jurisdictions. Purchasers of securities in this
offering must be residents of jurisdictions which either provide an applicable
exemption or in which the securities are registered. In order to prevent resale
transactions in violations of state securities laws, public stockholders may
only engage in resale transactions in the securities in jurisdictions where an
applicable exemption is available or a blue sky application has been filed and
accepted. As a matter of notice to the holders of our securities, the
certificates representing these securities will contain information with
respect to their resale. The Company will also advise
7
<PAGE>
its transfer agent and market makers, if any, of such restriction on resale.
These state restrictions on resales may limit the ability of investors to
resell the securities purchased in this offering.
The states may permit secondary market sales of the securities:
(1) once certain financial and other information with respect to the
Company is published in a recognized securities manual, such as
Standard & Poor's Corporation Records;
(2) after a certain period has elapsed from the date we issue the
securities;
(3) under exemptions that may apply to certain investors; or
(4) when the Company is a reporting company under the Securities Exchange
Act of 1934.
Some Shares Owned By Management Could Be Sold After the Company Sells the
Shares it is Offering, Affecting The Resale Price. We intend to keep the
registration statement that includes this Prospectus effective for an extended
period of time after we sell the shares we are offering. As a result, members
of management and their affiliates owning 1,518,769 shares of the company's
Common Stock will be able to sell these shares at any time assuming a public
market exists at the time of sale. Whenever any shares of the Company's Common
Stock are sold, it could cause the share price to go down and might keep it
from rising. (See "Shares Eligible for Future Resale.")
Future Sales of Common Stock or Senior Securities. Additional capital stock
may be issued by the Company in connection with future financings. If a trading
market for the Company's Common Stock were to develop, sales of substantial
amounts of such shares of Common Stock or the availability of substantial
amounts of such shares for sale could adversely affect prevailing stock market
prices. (See "Risk Factors--Limited Assets/Need for Additional Capital.")
In addition, under the Company's Certificate of Incorporation, we could
issue other series or classes of preferred stock having rights, preferences and
powers senior to those of the Common Stock, including the right to receive
dividends and/or preferences upon liquidation, dissolution or winding-up of the
company in excess of, or prior to, the rights of the holders of the Common
Stock. This could materially impair the rights of the holders of the securities
to receive such dividends or preferential payments and/or of reducing, or
eliminating, the amounts that would otherwise have been available for payment
to holders of the securities.
The "Penny Stock" Rules Could Make Selling Shares More Difficult. The
Company's Common Stock will be a "penny stock," under Rule 3a51-1 under the
Securities and Exchange Act, unless and until the shares reach a price of at
least $5.00 per share, the Company meets certain financial size and volume
levels, or the shares are registered on a national securities exchange or
quoted on the NASDAQ system. The shares are likely to remain penny stocks for a
considerable period of time after we sell the shares we are offering. A "penny
stock" is subject to Rules 15g-1 through 15g-10 of the Securities and Exchange
Commission. Those rules require securities broker-dealers, before effecting
transactions in any "penny stock," to (1) deliver to the customer, and obtain a
written receipt for a disclosure document set forth in Rule 15g-10. (Rule 15g-
2); to disclose certain price information about the stock (Rule 15g-3); to
disclose the amount of compensation received by the broker-dealer (Rule 15g-4)
or any "associated person" of the broker-dealer (Rule 15g-5); and to send
monthly statements to customers with market and price information about the
"penny stock" (Rule 15g-6). The Company's Common Stock will also be subject to
Rule 15g-9, which requires the broker-dealer, in some circumstances, to approve
the "penny stock" purchaser's account under certain standards, and deliver
written statements to the customer with information specified in the rules
(Rule 15g-9). These additional requirements could prevent broker-dealers from
effecting transactions and limit the ability of purchasers in this offering to
sell their shares into any secondary market for the Company's Common Stock.
Two Major Stockholders Will Have Substantial Control Over The Company. R.
Scott Barter and Douglas Harrison-Mills now beneficially own, in the aggregate,
100% of the outstanding Common Stock of the company, and if none of the
Warrants are exercised will beneficially own, in the aggregate, 52.4% of the
total
8
<PAGE>
outstanding shares even if this Offering is fully sold (prior to exercise of
any Warrants). With that percentage of ownership, Mr. Barter and Mr. Harrison-
Mills will be able to cause the election of all of the Board of Directors,
cause or prevent approval of an acquisition of the Company or otherwise
exercise control of the company.
Officers' And Directors' Liabilities Are Limited. The Company's certificate
of incorporation provides that the Company will indemnify any officer, director
or former officer or director, to the full extent permitted by law. This could
include indemnification for liabilities under securities laws enacted for
stockholder protection; although, in the opinion of the federal Securities and
Exchange Commission, that indemnification is against public policy.
No Commitment to Purchase Securities. No commitment presently exists by
anyone to purchase any of the securities. Consequently, no assurance can be
given that any securities will be sold.
BUSINESS OF THE COMPANY
We are a merchant banking firm whose targeted client base is the emerging
growth and small capitalization company--a company with an enterprise value of
from $1 million to $4 million. Although the principals of the Company have,
over the last several years, carried out several transactions similar to our
proposed business, those transactions were not carried out through the Company.
Accordingly, we are a development stage company. Our executive and
administrative offices are located at 575 Madison Avenue, Suite 1006, New York,
NY 10022. Our primary phone number is (888) 212-FUND/3863 and our fax number is
(888) 215-FUND/3863.
Merchant Banking
Merchant banking is the process of acting as principal and agent in a
financing, merger or acquisition, or of merely acting as principal in one of
these transactions. Merchant banks are financial intermediaries. They are like
banks in that they commit their own capital for the medium to long term. But
unlike banks, they do not take deposits from the general public. They perform
many of the same services performed by investment banks, but generally do not
underwrite securities and distribute them to the public. Merchant banks are
essentially in the business of finding opportunities and sources of funding
and, with investors' money and their own capital, financing growth or
facilitating transactions for their clients. The distinguishing characteristics
of a merchant bank are that it commits its own capital, or the capital of its
principals, to a transaction, either in the form of debt (such as short-term
bridge financing) or equity, and that it generally receives an equity position
in the client company as part or all of the compensation for its services. A
merchant bank also often acts as agent by putting in place the permanent debt
or equity financing provided by others.
Targeted Market
The targeted market for our services is the emerging growth and small
capitalization company with an enterprise value of from $1 million to $4
million. Management believes that this business sector is under-served by
traditional investment banking firms, because either the sizes of the
transactions are too small to interest traditional investment banking firms or
the companies involved are not mature enough for an initial public offering. At
the same time the size of these businesses is such that their in-house
financial planning capabilities are limited and can more efficiently be out-
sourced. Our plan is to develop a specialized high-quality financial services
firm to serve this market niche. In 1996, 655 companies made initial public
offerings (IPOs) on the NASDAQ Stock Market alone, raising $24.1 billion. In
addition, there were 428 secondary public offerings raising $27.7 billion on
the NASDAQ Stock Market in the same year. (Source: 1997 Fact Book: Overview(C)
NASDAQ Stock Market, Inc.) We believe that the current trend toward offerings
for Internet and technology related start-ups means that a significant portion
of such activity will be in the micro-cap or "emerging cap" market that is our
focus. Such companies typically have an enterprise value of between $1 million
and $4 million.
9
<PAGE>
Financing activities
We expect that the primary thrust of our activities will be assembling and
providing financing for our clients in the short to medium term and arranging
equity financing for the longer term. In the typical transaction we will assist
the client in preparing its financial plan, recommend the type and terms of the
financial instruments to be sold to raise the proposed financing, assist in
preparing a business plan, offering memorandum or other disclosure document for
investors, identify potential investors (generally including primarily those
with which we have an ongoing relationship) and generally manage completion of
the financing. While our equity investment in a client may extend for several
years, we do not expect to remain permanent investors in the client.
Investments will be structured with a view toward an exit strategy both for us
and for other investors we bring to the transaction. In some cases we expect to
make bridge loans of a year or less in order to facilitate permanent financing
through a public offering or merger or acquisition.
Related services
In addition to direct investment in the Company's clients, we intend to
provide clients on an as needed basis with
. advice in structuring capital-raising proposals to make them attractive
to outside investors
. identification of possible merger, acquisition or joint venture
candidates
. assistance in financial planning and cash flow analysis
. introductions to underwriters for public offerings and placement agents
for private offerings that go beyond the company's financial capacity
. investor relations services, including introductions to potential market
makers for the client's securities
. assistance in identifying and filling gaps in the client's management
structure
. rendering opinions as to the fairness of transactions were there may be
an actual or potential conflict of interest among parties to a
transaction or their managements
Sources of revenue
Traditionally, merchant bankers have been compensated for their efforts
through equity participation in the client company, and we intend generally to
follow that model. Such equity participation may include a direct stock
interest, warrants to purchase additional shares (in addition to those taken by
outside investors) stock options or other similar derivative instruments. Where
appropriate, we may also receive a cash fee for services such as valuations,
fairness opinions or studies requested by the client. We may also receive
recurring consulting fees. Because our compensation will generally come through
appreciation in the equity that we receive, it is possible that we may
experience negative cash flow for an extended period of time after this
offering is completed. In addition, because of our limited size, and because
the time our compensation is converted to cash is largely within the control of
our clients, we expect that our income and cash flow will fluctuate
substantially from year to year and will be hard to predict.
Importance of Relationships
Merchant banking generally, and our proposed business in particular, depend
heavily on maintaining ongoing relationships with one or more institutional or
other investors who invest with the merchant banker in financing transactions
structured by it. In our case, the principals of the Company are also
principals of Unifund Financial Group, Inc. We expect that Unifund Financial
Group, Inc. will be a significant investor in most of the transactions
structured by us for our clients. Historically, several other institutional
investors and a number of high net worth individuals have participated in
transactions structured by our principals, and we expect that
10
<PAGE>
they will also participate in future transactions by the Company. However,
neither Unifund Financial Group, Inc. nor any of these other investors has made
any commitment to participate in transactions by the Company, and their
willingness to do so will depend almost entirely on their continued confidence
in our ability to select candidates for financing that will generate attractive
returns to them in the future.
Ongoing relationships with the Company's merchant banking clients will also
be important to our plan of operations. Virtually all equity-oriented non-
public financing transactions require some form of "exit strategy" for the
investor. Although the exit strategy will often be an offering of securities to
the general public, it may also take the form of an acquisition of the investee
company or a similar transaction. Accordingly, it is important to maintain a
close relationship with other businesses which may have an interest in
transactions that could furnish the investor with an exit from his investment.
As a result, merchant banking clients will tend to be concentrated in a limited
number of industries or market segments.
It is our intention, wherever possible, to follow the industry model and
maintain, at our option, at least one director on the board of each of our
clients as well as assuming an active role in recruiting key executives for the
client.
Finally, since we do not expect to underwrite public offerings ourselves, we
will need to establish continuing relationships with investment banking firms
who are active in that business. The principals of the Company do not have any
pre-existing relationship with any investment banking firms and none of these
firms has any commitment to underwrite proposed public offerings the Company
may bring them in the future. Their willingness to do so will depend largely on
the Company's ability to develop a track record of having brought attractive
IPO candidates to them.
Geographic and Industry Focus
Information, like relationships, is an important element of the merchant
banking business. The merchant banker must know who the key players are in the
industries where it invests and provides services, both to identify potential
clients and assess the risk of investing in them, and to identify opportunities
for these clients including potential merger or joint venture partners. For the
smaller merchant banker, this means he must, as a practical matter, concentrate
geographically, by industry group or both. Historically, the company's
principals have concentrated their research efforts in the Northeast area of
the U.S. We expect that this focus will continue immediately after the
offering, but that if and when we expand our operation the industry and
geographic scope of our operations will also expand.
New Austin Office
We have recently opened an office in Austin, Texas, where the corporate
headquarters of Dell Computers and a number of other technology-oriented firms
are located. Historically, the presence of a number of such firms has led to
the establishment of a variety of "spin-off" firms in the same geographic area,
often established by former employees and executives of the larger firms. We
anticipate that this pattern will be repeated in Austin, leading to an
increasing concentration of newly established companies falling within our
targeted market. We believe that having a physical presence in that area will
help us in reaching this market. However, we cannot give any assurance that any
increase in our potential market in the Austin area will occur, or that if it
does occur we will be successful in penetrating that market.
Transaction Size
If we succeed in raising the maximum amount of this offering, we expect that
working together with Unifund Financial Group, Inc. we will be able to provide
financing of up to $500,000 without any participation from other outside
funding sources. However we expect that transactions of this type will be rare,
and will occur in cases where the client needs short-term funds to complete
another transaction and where time is not available to solicit participation by
other investors. In most cases the company, together with Unifund Financial
Group, Inc., are expected to act as the lead investors with the balance of each
transaction being syndicated to a limited number of high net worth individuals
and financial institutions.
11
<PAGE>
Unifund Financial Group, Inc.
We expect that Unifund Financial Group, Inc. will act as one of the lead
investors in most of the transactions we structure. Messrs. Barter and
Harrison-Mills are also principals in that company. Unifund Financial Group,
Inc. has indicated that it expects to make available up to approximately
$500,000 for investment in transactions structured by the company. Unifund
Financial Group, Inc.'s participation in most transactions is likely to be on
the order of 10% of the total transaction, though its participation is likely
to vary significantly from transaction to transaction.
Conflicts from the Merchant Banking Relationship
The merchant banking relationship creates certain conflicts that cannot be
avoided. Since the merchant banker is advising its clients in structuring
financing transactions and will be investing its own funds and those of its
principals in those same transactions, it will often be "on both sides of the
table." In addition, since investment transactions are likely to concentrate in
a limited number of industries, overlapping board representation creates a
recurring potential for the misuse of information acquired from one client for
the benefit of another. In order to minimize such conflicts, we intend to
regularly review the composition of our client boards and request prompt
information updates as to additional companies that board members may be
directing or advising. We intend to seek advice regularly from unrelated third
parties regarding structuring transactions in which we will be taking a
substantial interest .
Conflicts from Other Activities of the Principals
Neither of the principal executive officers of the Company will be devoting
100% of his time to the Company's business. Both Mr. Barter and Mr. Harrison-
Mills will continue to act as executive officers of Unifund Financial Group,
Inc. In addition, they will be investing their own funds in many of the
Company's transactions and will have business interests outside both the
Company and Unifund Financial Group, Inc. The Company has not developed any
rules or guidelines as to how a particular investment opportunity will be
allocated among the Company, its principals, Unifund Financial Group, Inc. and
any outside business ventures in which principals of the Company may be
engaged.
Uncertain Impact of Recent SEC Initiatives.
The Securities and Exchange Commission has recently adopted a number of
changes to its rules and forms which are designed to the deter various
fraudulent activities in the "micro-cap" market. The targeted market for our
services is precisely the size of company at which these initiatives are
directed. These initiatives would, among other things, prevent a company from
issuing "free-trading" shares of its Common Stock in small offerings that are
not registered with the SEC unless certain conditions are met. A company will
be permitted to issue free-trading shares in nonregistered transactions of
under $1 million only if it registers the securities in at least one state
which requires delivery of a disclosure document to investors, and delivers
that disclosure document to investors in all states in which the securities are
sold. State registration involves significant increases in the costs of
completing a small offering and also in the time to complete the offering,
since the state registration procedure requires the company to wait for review
and comments by the state securities examiner and clearance of the document
before the transaction can proceed. While it seems clear that these initiatives
will increase the costs of small issuers in raising capital, we cannot predict
what impact they will have on our proposed business. If the effect of higher
capital-raising costs is to effectively shut out the small issuer from a public
market, those issuers may turn to other methods of raising capital that do not
require our services.
Trademarks
In view of the company's limited operating history, trademarks are not
significant to its business. We intend to use the "Bell" logo below, and the
slogan "Founded on Performance" in our future operations, and have registered
both the logo and the first of these slogans as service marks with the United
States Patent and Trademark Office.
12
<PAGE>
[Bell Logo here] ["Founded on Performance" tag line]
Regulation
Although our management believes that Unifund America is not required to
register under federal securities law as an investment adviser, an investment
company or a broker-dealer, our business, and the securities industry
generally, are subject to extensive regulation at both the federal and state
levels. Failure to comply with any of these laws, rules or regulations could
result in fines, suspension or expulsion, which could have a material and
adverse effect upon our business.
Competition
We expect to face competition from several sources. Our proposed services
overlap with many of the services provided by investment banks (such as RCM
Financial Group LLC and The FinanceHub), by venture capitalists and to a lesser
degree by commercial banks. We expect to face strong competition from each of
the sources. Although we believe the small capitalization company that is our
target market is under-served by traditional investment banking firms, there are
many companies within that size range which will also be targeted by investment
banks. We believe this will primarily be the case in industries that are
especially popular with investors at a particular time, as Internet stocks have
been recently. Virtually all of the traditional investment banks, venture
capital firms and commercial banks that will be competing with us have far
greater capital than we have and many or most of them are able to offer existing
and potential clients broader research capabilities, access to international
markets and other products and services that we do not offer. We believe that
competition will be based primarily on responsiveness to the client's timing and
other requirements.
In addition to traditional sources of capital and capital-raising services,
there appear to be an increasing number of smaller independent financial
consultants, investor relations consultants, finders and others who may perform
services similar to those we will be offering to our clients, and these other
businesses will also compete with us, though to a lesser degree than the
providers of traditional sources of capital.
We also face competition from a rapidly increasing number of firms offering
on-line investment banking services, such as underwriters who attempt to effect
public offerings for emerging growth companies through the Internet. In
addition, as some corporate issuers try to sell their securities directly to
purchasers--including sales using the Internet--disintermediation (i.e.,
removal of the middleman in a transaction, including investment banking
transactions) may occur. As more and more corporate issuers and purchasers of
securities transact business without financial intermediaries like investment
bankers, our operating results could be adversely affected.
We also expect to face direct competition from a group of specialty
securities firms and smaller investment banking boutiques that specialize in
providing services to emerging growth companies. This kind of competition could
adversely affect our operating results, as well as our ability to attract and
retain highly skilled individuals.
Telephone & Fax Numbers
We intend to have an easily-memorizable Client and Investor "Hot Lines."
Upon successful completion of this Offering, our telephone and fax numbers will
be:
<TABLE>
<S> <C>
[_]New York local telephone number: (212) 421-4400
[_]New York toll-free telephone
number: (888) 212-FUND/3863
[_]Toll-free facsimile number: (888) 215-FUND/3863
[_]Austin, Texas, local telephone
number: (512) 261-5200
[_]Austin, Texas, toll-free telephone
number: (888) 500-FUND/3863
</TABLE>
13
<PAGE>
Employees
As of December 31, 1998, we had 4 full-time and 12 part-time employees. Our
employees are not represented by any labor union, and we consider our
relationship with our employees to be good.
During the next 12 months we intend to recruit 2 additional investment
bankers and 1 research analyst. To assist in recruiting new executives, and
retention of our current professionals, we plan to implement a new incentive
compensation structure that relies on stock options and cash compensation, to
bring total compensation for employees to a competitive level. Our management
believes that providing equity-based compensation, as a significant component
of income, in addition to a percentage of the fees paid by clients, will be
important in attracting future employees and affiliated professionals, as well
as retaining present staff.
Attracting and keeping highly experienced investment banking and other
professionals, with a long-term commitment to the Company and its clients, is
an important part of our long-term growth strategy. After the offering is
completed, we plan to adopt various employee incentive plans for our existing
and future employees to help retain these employees. We expect to make
approximately 15% of the Company's fully diluted Common Stock available for
option and restricted stock programs.
Facilities
Our principal offices are located in 850 square feet of leased office space
at 575 Madison Avenue, Suite 1006, New York NY. This office space is leased by,
and shared with, Unifund Financial Group, Inc. under a lease that expires
December 31,1999. We have not been paying any rent for this office space.
However, after completion of our part of the offering, we expect to enter into
an arrangement with Unifund Financial Group, Inc. under which we will reimburse
it for some portion of the current monthly rent. The portion we would bear has
not yet been determined.
The Company also maintains a 350 square foot office in Austin, Texas, the
location of a number of technology-oriented companies including Dell Computer.
This space is leased at an annual rent of $15,000 under a lease that expires
June 30, 2000.
We believe our present facilities will be adequate for our needs for the
foreseeable future.
USE OF PROCEEDS
We estimate that if all of the shares of Common Stock and Class A Warrants
are sold the net proceeds will be approximately $465,000. Of this amount, we
expect to retain approximately $100,000 as working capital and as a reserve to
take advantage of opportunities as they arise, and that the remaining $365,000
will be invested in loans or securities. We are unable to predict the time
period over which this investment is likely to occur. There is no assurance
that all of the securities we are offering will be sold. If only the minimum
amount is sold, we intend to reduce proportionately the amounts for working
capital and expected investments.
<TABLE>
<S> <C>
Offering Expenses............................................... $ 50,000
Expected investments............................................ $350,000
Working Capital................................................. $100,000
--------
Total......................................................... $500,000
</TABLE>
Estimated offering expenses include legal counsel fees and costs, accounting
fees and costs, printing costs, mailing and travel expenses, and related costs.
Management believes that no broker dealer assistance will be required.
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<PAGE>
Working Capital is the amount of the Company's current assets, such as cash,
receivables and inventory, in excess of its current liabilities, such as
accounts payable. If the minimum is sold, proceeds will be added to our cash
bank balances as they are received, increasing working capital.
There are no limits or other restrictions on the amount or circumstances
under which funds may be invested except that none of our officers, directors
or their affiliate is to receive any personal financial gain from the
proceeds of this offering, except for reimbursement for out-of-pocket offering
expenses.
DILUTION
The following table shows as of December 31, 1998, the difference between
the amounts paid for their shares by existing stockholders and new investors
purchasing securities in this offering, assuming that only the minimum number
of Shares are sold.
<TABLE>
<CAPTION>
Total
Shares Purchased Consideration
------------------ -----------------
Percent Percent Average Price Per
Number of Total Amount of Total Share
--------- -------- -------- -------- -------------------
<S> <C> <C> <C> <C> <C>
Present stockholders.. 1,401,802 84.9% $125,770 55.7% $.09
New stockholders...... 250,000 14.9% 100,000 44.3% $.40
--------- ----- -------- -----
Total............... 1,651,802 100% $225,770 100%
</TABLE>
If the maximum number of Shares is sold, the corresponding amounts would be
as follows.
<TABLE>
<CAPTION>
Shares Purchased Total Consideration
----------------- -------------------
Percent Percent Average Price
Number of Total Amount of Total Per Share
--------- -------- -------- -------- -------------------
<S> <C> <C> <C> <C> <C>
Present stockholders.. 1,401,802 58.4% $125,770 23.9% $.09
New stockholders...... 1,000,000 41.6% 400,000 76.1% $.40
--------- ----- -------- -----
Total............... 2,401,802 100% $525,770 100%
</TABLE>
After giving effect to the purchase by our officers and directors
of 584,835 shares of Common Stock on April 30, 1999 and the purchase by Unifund
Financial Group, Inc. on the effective date of 116,967 shares of Common Stock
and 116,967 warrants, the Company would have had a tangible net book value as of
December 31, 1998 of $110,362 or $.08 per share (based on 1,401,802 shares
outstanding). The net tangible book value per share is equal to the company's
total tangible assets, less its total liabilities and divided by its total
number of shares of Common Stock outstanding. If the maximum number of shares
and Class A Warrants had been sold on December 31, 1998 at the public offering
price of $0.40 per share and $0.10 per warrant, the net tangible book value of
the company, as of December 31, 1998, would have been $560,362, or $.23 per
share. This represents an immediate increase in net tangible book value of $.15
per share to existing stockholders, and an immediate dilution of $.17 per share
to new investors buying shares in this Offering. The following table illustrates
the per share dilution in net tangible book value per share to new investors.
The second column shows dilution if the maximum number of shares and Class A
Warrants are sold.
<TABLE>
<CAPTION>
Minimum Maximum
Offering Offering
-------- --------
<S> <C> <C>
Public offering price per Share........................ $.40 $.40
Net tangible book value per share as of December 31,
1998.................................................. .08 .08
Increase per share attributed to investors in this
offering.............................................. .03 .15
Net tangible book value per share as of December 31,
1998, after this offering............................. .11 .23
Net tangible book value dilution per share to new
investors............................................. .29 .17
</TABLE>
15
<PAGE>
CAPITALIZATION
The following table sets forth our capitalization as of March 31, 1999: (i)
on a pro forma basis to give effect to application of the loans payable to
affiliates to purchase Common Stock on April 30, 1999 and upon the effectiveness
of the registration statement (ii) on a pro forma as adjusted basis to give
effect to our sale of the maximum of 1,000,000 shares of Common Stock at a price
of $.40 per share, and 1,000,000 Class A Warrants at a price of $.10 per
warrant, and (iii) on a pro forma as adjusted basis to give effect to our sale
of the minimum of 250,000 shares of Common Stock at a price of $.40 per share
and 250,000 Class A Warrants a price of $.10 per warrant. This table assumes
that each purchaser of Common Stock will buy only one Class A Warrant for each
share of Common Stock he buys, and does not assume the exercise of any of the
Warrants we are offering. This table should be reviewed in conjunction with our
December 31, 1997 and 1998 audited financial statements, and the notes to those
financial statements, included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
December 31, 1998
------------------------------
Pro
Pro Forma Forma
Maximum Minimum
Pro Forma as Adjusted Adjusted
--------- ----------- --------
<S> <C> <C> <C>
Cash and cash equivalents....................... $119,440 $569,440 $194,440
Stockholders equity:
Preferred Stock, $.001 par value, 5,000,000
shares authorized; none issued and
outstanding.................................. -- -- --
Common Stock, $.001 par value, 25,000,000
shares authorized; 1,401,802 shares issued
and outstanding pro forma; 2,401,802 shares
issued and outstanding on a pro forma maximum
as adjusted basis; 1,651,802 shares issued
and outstanding on a pro forma minimum as
adjusted basis............................... 1,402 2,402 1,652
Earnings accumulated during development
stage........................................ 12,895 12,895 12,895
Total stockholders' equity.................. 150,362 581,362 205,612
-------- -------- --------
Total capitalization...................... $150,362 $581,362 $205,612
======== ======== ========
</TABLE>
DIVIDEND POLICY
The Company has not paid any cash dividends to date, and we do expect to pay
dividends in the foreseeable future. We intend, in the short term at least, to
use all available funds to develop our business.
PLAN OF DISTRIBUTION
No Broker-Dealer or Selling Agent Now Planned
We are offering a minimum of 250,000 shares and a maximum of 1,000,000 shares
of the Company's Common Stock and the same numbers of Class A Warrants. Until a
closing has been held for sale of at least the minimum number of shares and
warrants, purchasers must purchase one (1) Class A Warrant for each share of
Common Stock they purchase. After that initial closing has been held, the
shares and warrants may be purchased separately or in any combination. If we
have not sold the minimum numbers of shares and Class A Warrants by the end of
the sixth month after the date of this Prospectus, the offering will terminate
and all amounts paid by investors will be refunded without interest. We are
also offering 1,000,000 Class B Warrants. The minimum does not apply to the
Class B Warrants, but if we do not sell the minimum number of shares of Common
Stock and Class A Warrants, we will not sell any Class B Warrants and amounts
paid by investors for these Warrants will be refunded. An escrow agent will
hold investor money until 100,000 shares have been sold. These securities are
being sold through the Company's officers and directors on a "best-efforts"
basis at a purchase price of $.40 per Share and $.10 per Class A Warrant or
Class B Warrant. We plan to manage the offering without any underwriter, and
without any underwriting discounts or sales commissions. Our officers
16
<PAGE>
and directors will not receive any sales commissions or other compensation,
except for reimbursement of expenses actually incurred on behalf of the Company
for these activities. The Company's officers and directors will rely on the
"safe harbor" provisions of Rule 3a4-1 of the Securities and Exchange Act of
1934 (the "1934 Act"). Generally speaking, Rule 3a4-1 exempts associated
persons of an issuer from the broker/dealer registration requirements of the
1934 Act. No one has made any commitment to buy any or all of the securities.
The officers and directors will use their best efforts to find purchasers for
the securities. The Company cannot state how many Shares, Class A Warrants or
Class B Warrants will be sold.
We expect to sell the Shares and Warrants to people who we believe may be
interested, or who have contacted us with interest, in purchasing the
securities. We may sell the securities to people if they reside in a state in
which the securities legally may be sold and in which we are permitted to sell
the securities. We are not obligated to sell shares to any of these people.
Determination Of Offering Price
Prior to this Offering there has been no market for the Common Stock or the
Warrants we are offering, and we have had essentially no business operations to
date. The public offering price has been determined arbitrarily by the
Company's Board of Directors.
We will have the right to reject all or any part of any subscription and to
terminate the offering at any time.
No one has been authorized to give any information or to make any
representations in connection with this offering other than those contained in
this Prospectus and, if given or made, we have not authorized that information
or representation and you should not rely on it. This Prospectus is not an
offer to sell or a solicitation of an offer to buy any of the securities it
offers to any person in any jurisdiction where that offer or solicitation is
unlawful. Neither the delivery of this Prospectus nor any sale hereunder shall,
under any circumstances, imply that the information in this Prospectus is
correct as of any date later than the date of this Prospectus.
The securities may only be offered, sold or traded in the states where the
Company has registered the offering or where there is an exemption from
registration.
Purchasers of securities either in this offering or in any subsequent
trading market which may develop, must be residents of states where the
securities are registered or exempt from registration. Some of the exemptions
are self-executing, that is, there are no notice or filing requirements, and
compliance with the conditions of the exemption make the exemption applicable.
(See "Risk Factors--State Blue Sky Registration; Restricted Resales of the
Securities.")
Legal Proceedings
The Company is not subject to any pending legal proceeding.
MANAGEMENT
The table below shows certain information about each of our officers and
directors.
<TABLE>
<CAPTION>
Name Age Position
---- --- -----------------------------------------------
<S> <C> <C>
R. Scott Barter......... 52 Chairman, Chief Executive Officer and Director
Douglas Harrison-Mills.. 48 Secretary, Treasurer and Director
William Bradford Smith,
II,.................... 50 Director
</TABLE>
17
<PAGE>
The directors have been elected by the present stockholders and will serve
for a term of one year or until their successors are elected. Officers are
appointed by, and serve at the pleasure of, the Board of Directors.
R. Scott Barter, Chairman, Chief Executive Officer and Director. Mr. Barter
has been the Chairman, Chief Executive Officer and a Director of the Company
since inception. Mr. Barter has been the President, Chief Executive Officer, and
a Director of Unifund Financial Group since December 1991.
Mr. Barter has been engaged in the securities industry in the United States
and abroad since August, 1975. He has been licensed with the National
Association of Securities Dealers and as a member of the National Futures
Association. He has been registered as a representative with the United Kingdom
National Association of Securities Dealers and Investment Managers (now
FIMBRA), and has held a Representative's license to deal in securities from the
United Kingdom Department of Trade and Industry. From 1978 to the present, Mr.
Barter served as a senior officer/director of various brokerage firms and acted
as advisor to and consultant to a variety of both publicly traded and privately
held companies in the United States and United Kingdom.
Douglas Harrison-Mills, Director, Secretary and Treasurer. Mr. Harrison-
Mills, age 48, has been a Director of the Company since October 1995 and has
served as Secretary of the Company since September 1997. Mr. Harrison-Mills has
been the Secretary and a Director of Unifund Financial Group since August 1994.
Mr. Harrison-Mills is also a Director of Haversham Consulting Ltd., a UK-
based consulting firm. Prior to founding Haversham, he was Marketing Manager of
Elders Investment Management Ltd. (A European subsidiary of the investment
banking arm of the international conglomerate, formerly known as Elders IXL)
and was responsible for the marketing of EIM's products and services throughout
the UK, Europe and North America. From 1985 to 1990, he was registered as a
Representative with the UK National Association of Security Dealers and
Investment Managers (now the FSA); he held both a Principal's and a
Representative's license to deal in securities from the UK Department of Trade
and Industry, and was registered with IMRO (the Investment Managers Regulatory
Organization). Mr. Harrison-Mills won a "Clio" for TV advertising in 1978 and
has received eight Clio Certificates of Excellence), a Federation of Commercial
Television Stations Award and a National Retail Merchants Association Award.
William Bradford Smith, II, Director. Mr. Smith, age 50, has been a director
of the company since December 1998. Since July 1991, Mr. Smith has been a
Director and President of WBS&A Ltd., a management consulting firm.
Mr. Smith founded the Small Corporate Offering Registration Task Force, has
served as an advisor to the Texas Delegation to the 1995 White House Conference
on Small Business, and attended and has made recommendations to the 15th, 16th,
and 17th Annual U.S. Securities and Exchange Commission's Government-Business
Forums on Small Business Capitalization, the Small Business Capital Foundation
committee at the 1997 North American Securities Administrators Association
annual conference and the University of Southern California's SEC and Financial
Reporting Institutes Forum on Selected Issues of Small Business Capital
Formation.
Mr. Smith serves as Chairman of the Board of the non-profit Investors
Research Institute ("IRI") and has worked with IRI projects for small publicly
traded companies to be followed by securities analysts and to develop
information disclosure standards and best practices.
Mr. Smith was president of a division of Johnstown/Consolidated Capital from
1979 to 1981, President of Bradford Investment Company from 1981 to 1988,
Executive Vice President of Valley Federal Savings and Loan from March to
September of 1988, and Executive Vice President of Relco Industries Management
Co., from 1988 to 1991.
Mr. Smith is author of Guide to Strategic Thinking. He holds an MBA from
Pepperdine University and a BBA from the University of Oklahoma.
18
<PAGE>
Consultant and Advisor
In addition to the officers and directors identified above, we expect that
Professor Harold G. Halcrow, an advisor, and Harris Schiff, a consultant, will
be important to our operations.
Harold G. Halcrow, Ph.D., Advisor. Professor Halcrow is Professor Emeritus
of Agricultural Economics at the University of Illinois, Champaign-Urbana.
Earlier, he served on the faculties of Montana State University and the
University of Connecticut. He has also served as a visiting professor at
Stanford University and the University of California, Berkeley. He is the
author or co-author of eight books, numerous research publications, journal
articles and extensive reports, and the editor of two books, all in the field
of Agricultural Economics. He is a Fellow of the American Agricultural
Economics Association (AAEA) and has served as the AAEA representative on the
Board of Directors of the National Bureau of Economic Research, New York.
Professor Halcrow has acted as a consultant to the U.S. Department of Commerce,
the U.S. Department of Agriculture and the State of Illinois Economic Technical
Advisory Committee.
Harris Schiff, Consultant. Mr. Schiff, age 54, is Vice President in charge
of Management Information Systems and Internet Applications for Unifund
Financial Group, Inc. Prior to joining Unifund, he was employed by Kramer Levin
Natalis & Frankel, LLP, a large New York City law firm with a substantial
corporate practice. Mr. Schiff's responsibilities at Kramer Levin included
management of the firm's EDGAR (electronic financial) filings on behalf of its
corporate clients. EDGAR is the SEC's program and interface for computerized
reporting of, and access to, SEC filing information.
Employment Agreements
The Company does not have any employment or consulting agreements, though it
may enter into employment agreements with R. Scott Barter and Douglas Harrison-
Mills.
Relationships Among Management
There are no family relationships among management of the Company.
PRINCIPAL AND SELLING STOCKHOLDERS AND SELLING STOCKHOLDERS
The following table shows the numbers of shares and percentage of Common
Stock held by the officers and directors of the Company and holders of five
percent (5%) or more of the Company's Common Stock prior to the offering, after
sale of the minimum number of shares we are selling in the offering (which
would result in 1,651,802 shares outstanding) and after sale of the maximum
number of shares we are selling in the offering (which would result in the
2,401,802 shares outstanding). Unless otherwise indicated, the beneficial
owners of the Common Stock listed below have sole investment and voting power
over these shares, subject to community property laws where applicable.
<TABLE>
<CAPTION>
Percentage of Common Stock
--------------------------
Number Prior to Minimum Maximum
Name of Owners of Shares Offering Amount Amount
- -------------- --------- -------- ------------- -------------
<S> <C> <C> <C> <C>
Unifund Financial Group,
Inc.(1)................ 233,934 15.4% 13.2% 9.3%
R. Scott Barter(2)...... 1,318,769 86.8% 74.6% 52.4%
Douglas Harrison-Mills(3) 383,934 25.3% 21.0% 15.2%
Brad Smith ............. 50,000 3.6% 3.0% 2.1%
(All officers and
directors as a group--3
persons)............... 1,518,769(4) 100% 85.9% 60.3%
</TABLE>
- --------
(1) Includes 116,967 shares of Common Stock and 116,967 Class A Warrants.
(2) Includes 1,084,835 shares owned by Mr. Barter and 116,967 shares and
116,967 Class A Warrants owned by Unifund Financial Group, Inc. of which
Mr. Barter is an officer, director and majority stockholder.
19
<PAGE>
(2) Includes 150,000 shares owned by Mr. Harrison-Mills and 116,967 shares and
116,967 Class A warrants owned by Unifund Financial Group, Inc. of which
Mr. Harrison-Mills is an officer and director.
(3) See Notes (2) and (3) above.
We are registering all of the shares held by our officers, directors and
principal shareholders in the registration statement of which this Prospectus
is a part. These officers, directors and shareholders have agreed that they
will not sell any of their shares until we have sold all of the shares we are
selling in the Offering. After we have sold shares we will be selling, they
may sell their shares from time to time in broker's transactions or otherwise.
We will supplement this Prospectus when and if we have sold all the shares we
intend to sell in the offering. Because the Selling Stockholders may sell all,
some or none of the shares held, and because this offering is not being
underwritten, we cannot estimate the number of shares that will be held by the
Selling Stockholders when the offering is completed. For purposes of the above
table, we have assumed that none of the shares offered by the Selling
Stockholders will be sold. (See "Plan of Distribution.")
We will not receive any of the proceeds from the sales of Common Stock by
the Selling Stockholders.
DESCRIPTION OF SECURITIES
Common Stock
The Company is authorized to issue up to 25,000,000 shares of Common Stock,
par value $.001 per share ("Common Stock"). 1,401,802 shares of Common Stock
are outstanding on the date of this Prospectus. Holders of Common Stock are
entitled to one vote for each share held of record on each matter submitted to
a vote of stockholders. There is no cumulative voting for election of
directors. Subject to the prior rights of any series of preferred stock which
may from time to time be outstanding, if any, holders of Common Stock are
entitled to receive ratably, dividends when, as, and if declared by the Board
of Directors out of funds legally available for dividends. Upon the
liquidation, dissolution, or winding up of the Company, holders of Common
Stock are entitled to share ratably in all assets remaining after payment of
liabilities and payment of accrued dividends and liquidation preferences on
the preferred stock, if any. Holders of Common Stock have no preemptive rights
and have no rights to convert their Common Stock into any other securities.
The outstanding Common Stock is validly authorized and issued, fully paid, and
nonassessable. We intend to try to have the Common Stock traded on the NASD's
Bulletin Board under the symbol "UNAR."
Common Stock Purchase Warrants
The Warrants will be issued in registered form under an agreement dated the
date of this Prospectus between the Company and American Stock Transfer (the
"Warrant Agent"). The following discussion of certain terms and provisions of
the Warrants is only a summary. We have filed the Warrants and the Warrant
Agreement, as exhibits to the registration statement of which this Prospectus
forms a part. The Warrant Agreement can be obtained and/or inspected by the
public (See "Additional Information"). Investors should refer to the complete
documents for the detailed terms of these instruments.
The Class A Warrants entitle the registered holder to buy one share of
Common Stock at an exercise price of $2.50 per share, subject to adjustment
(the "Purchase Price"). The Class B Warrants entitle the registered holder to
buy one share of Common Stock at an exercise price of $5.00 per share, subject
to adjustment. Both classes of Warrants have five year terms. The Purchase
Price and the number of shares of Common Stock and/or other securities to
be delivered if the warrants are exercised will be adjusted in the event of
certain stock dividends, stock splits, reclassifications, reorganizations,
consolidations or mergers.
Holders may exercise the Warrants by delivering a notice of exercise to the
Warrant Agent at any time after issuance, until the close of business on
, the end of the fifth year after the effective date of the
registration statement (the "Expiration Date"). After the Expiration Date, the
Warrants become void and of no value.
20
<PAGE>
We may redeem either class of Warrants at a price of $0.01 per Warrant at
any time after the Warrants become exercisable, by sending the warrant holder
not less than 30 days written notice. However, we may exercise this right only
if the last sale price of the Common Stock has been at least 150% of the then
effective exercise price of the Warrant on each of the 20 consecutive trading
days ending on the third day before we give the notice of redemption.
A holder of the Warrants will not be entitled to vote or to receive
dividends or be treated as the holder of shares of Common Stock for any
purpose whatsoever until he has duly exercised the Warrant and paid the
Purchase Price in full.
If required, the Company will file a post-effective amendment to the
registration statement with the Commission with respect to the Common Stock
underlying the Warrants before the exercise of the Warrants and deliver a
prospectus covering the sale of that Common Stock to all Warrant holders as
required by Section 10(a)(3) of the Securities Act of 1933.
Preferred Stock
The Company is authorized to issue up to 5,000,000 shares of "blank check"
preferred stock, par value $.001 per share ("Preferred Stock"). No Preferred
Stock is outstanding on the date of this Prospectus, and the Board of Directors
has not established the rights and preferences of any class or series of
Preferred Stock .
Transfer and Warrants Agent
American Stock Transfer will act as the transfer and warrant agent for our
Common Stock and Warrants.
EXPERTS
Alvin M. Rosen, independent certified public accountant, audited our
Financial Statements as of December 31, 1998 and for the period from Sept. 2,
1992 (Date Operations Commenced) to December 31, 1998. In including those
financial statements in this Prospectus, we have relied on Mr. Rosen's
authority as an expert in accounting and auditing.
LEGAL MATTERS
Kaplan Gottbetter & Levenson, LLP, counsel to the Company, will render an
opinion that the Common Stock, when issued and sold in the offering or upon
exercise of the warrants, will be legally issued, fully paid and nonassessable.
Kaplan Gottbetter & Levenson, LLP. owns shares of our Common Stock .
CERTAIN CHARTER AND BY LAW PROVISIONS
The company's Amended Certificate of Incorporation and By-laws eliminate
the personal liability of a director to the Company and its stockholders for
certain breaches of his or her fiduciary duty of care as a director. These
documents do not, however, eliminate or limit the personal liability of a
director (i) for any breach of such director's duty of loyalty to the company
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 New
York statutory provisions making directors personally liable, under a
negligence standard, for unlawful dividends or unlawful stock repurchases or
redemptions, or (iv) for any transaction from which the director derived an
improper personal benefit. The provisions eliminating personal liability give
people who serve on the Board of Directors of the Company protection against
awards of monetary damages resulting from breaches of their duty of care
(except as indicated above), including grossly negligent business decisions
made in connection with takeover proposals for the Company. As a result of
these provisions, the Company or a stockholder may be
21
<PAGE>
unable to successfully prosecute an action against a director for a breach of
his duty of care. These provisions do not affect the availability of equitable
remedies such as an injunction or rescission based upon a director's breach of
his duty of care. The SEC has taken the position that these provisions will
have no effect on claims arising under the federal securities laws.
The Amended Certificate and By-Laws also provide mandatory indemnification
rights, subject to limited exceptions, to any person who was or is party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding because that person is or was a director or officer of the
Company, or is or was serving at the request of the Company as a director or
officer of another corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise. The indemnification rights include
reimbursement for expenses incurred by the indemnified person before the final
disposition of the proceeding in accordance with the applicable provisions of
the New York Business Corporation Law.
PLAN OF OPERATIONS
The Company's primary short-term needs for capital, which are subject to
change, are for operating expenses, consisting primarily of office rent and
services, and to exploit new investment opportunities. We are unable to predict
the rate at which we will be making these investments, but we expect that
approximately 70% of the net proceeds of the offering will be invested during
the next 18 months, and that approximately 30% of the net proceeds will be held
in reserve both to take advantage of unforeseen opportunities and to cover
operating costs should the time between investment and realization of returns
be longer than expected.
Our principal cash requirements at present are for operating expenses,
consisting primarily of office rent and services. Since our management's
compensation consists entirely of returns on transactions in which they co-
invest with us, and on incentive bonuses, rather than salaries, our current
overhead--apart from the cost of this offering--is minimal (i.e., $2,000 per
month or $25,000 per year).
CERTAIN TRANSACTIONS
Between the Company's inception and April 30, 1999, Unifund Financial Group,
Inc. and R. Scott Barter each lent the Company $58,484 to cover legal fees,
organizational expenses and other expenses incurred in connection with our
operations. On April 30, 1999 Mr. Barter applied the amount of this debt to the
purchase of 584,835 shares of Common Stock at a price of $.10 per share.
Immediately prior to the effectiveness of the registration statement that
includes this Prospectus, Unifund Financial Group, Inc. applied the $58,484 owed
to it to purchase 116,967 shares of Common Stock at $.40 per share and 116,967
Class A warrants at $.10 per warrant. Also on April 30, 1999 Douglas Harrison-
Mills purchased 150,000 shares of Common Stock and William Bradford Smith, II
purchased 50,000 shares of Common Stock, all at the price of $.10 per share.
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Shares Eligible for Future Sale
If all of the securities we are offering are sold, the Company will have
outstanding 2,401,802 shares of Common Stock prior to exercise of any of the
Warrants we are offering. The shares of Common Stock sold in this offering will
be freely tradable without restriction or further registration under the
Securities Act, except for any shares purchased by an "affiliate" of the
Company (i.e. a person controlling, controlled by or under common control with
the Company), which may be sold only while this registration statement or
another registration statement covering sales by those affiliates is effective,
or in accordance with Rule 144. No shares are subject to any "lock-up"
agreement or similar arrangement.
In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated) who has beneficially owned shares for at least one
year, including "affiliates" as that term is defined under the
22
<PAGE>
Securities Act, is entitled to sell, within any three-month period, a number of
shares that does not exceed the greater of (i) one percent (1%) of the then
outstanding shares of the Common Stock or (ii) the average weekly trading
volume in the Common Stock during the four calendar weeks immediately preceding
the date on which the notice of sale is filed with the Commission.
The Company's Common Stock is not listed or quoted on any stock exchange or
other trading market, and we have not applied for a listing or quotation. The
Company does not currently meet the numerical requirements to have its shares
listed on a stock exchange or quoted on NASDAQ. Following completion of the
Offering our shares may be quoted on the NASDAQ bulletin board. A trading
market may not develop or be sustained. The post-offering fair value of the
company's Common Stock, whether or not any secondary trading market develops,
is variable and may be affected by our business and financial condition, as
well as factors beyond our control. Sales of substantial amounts of shares in
any public market could cause lower market prices and even make it difficult
for the company to raise capital through a future offering of its equity
securities. In that connection, investors should note that we are registering
all shares held by our officers, and directors and principal shareholders for
sale after we complete the sale of all the shares we intend to sell. This
market overhang may seriously affect the price at which our shares are quoted,
whether or not any of these officers, directors or shareholders sell any of
their shares.
EXECUTIVE COMPENSATION
Our officers do not currently receive salaries from the Company, and we do
not expect to pay them salaries for the foreseeable future. Instead, their
compensation is expected to be earned as a return on investments which they
make as co-investors with us in our merchant banking transactions, and in some
cases as incentive payments or bonuses. However, upon additional financing, the
board of directors may approve fixed compensation arrangements for both
officers and members of the board.
FINANCIAL STATEMENTS
Our Financial Statements as of December 31, 1998 and for the period from
(Date Operations Commenced) to December 31, 1998, and the independent auditors'
report of Alvin M. Rosen, independent certified public accountant, on those
financial statements, appear on pages F-1 to F-8 of the Registration Statement
of which this Prospectus is a part.
Where You Can Find Additional Information
We have filed a Registration Statement on Form SB-2 with the Securities and
Exchange Commission covering sale of the shares we are offering. The
Registration Statement and the exhibits and schedules to the Registration
Statement include additional information not contained in this Prospectus.
Statements in this Prospectus about the contents of any contract or other
document referred to are not necessarily complete and in each instance the
appropriate exhibit containing the contract or document should be consulted for
complete information. The Registration Statement, exhibits and schedules also
contain further information about us and the shares we are offering. Anyone may
inspect a copy of the Registration Statement without charge at the Commission's
principal office located at 450 Fifth Street, N.W., Washington, D.C. 20549, the
Northeast Regional Office located at 7 World Trade Center, 13th Floor, New
York, New York, 10048, and the Midwest Regional Office located at Northwest
Atrium Center, 500 Madison Street, Chicago, Illinois 60661-2511, and copies of
all or any part of the Registration Statement may be obtained from the Public
Reference Branch of the Commission by paying the fees prescribed by the
Commission. The Commission also maintains a site on the World Wide Web at
http://www.sec.gov that contains information about companies that file
electronically with the Commission.
23
<PAGE>
UNIFUND AMERICA, INC.
(A Development Stage Enterprise)
Financial Statements As Of December 31, 1998
Together With
Report of Independent Certified Public
Accountant
F-1
<PAGE>
Alvin M. Rosen
Certified Public Accountant
515 Madison Avenue, 20th Floor
New York, New York 10022
Tel: (212) 838-1339
Fax: (212) 838-1376
INDEPENDENT AUDITOR'S REPORT
We have audited the accompanying balance sheet of Unifund America, Inc. (a
Development Stage Enterprise) as of December 31, 1998, and related statements
of operations, stockholders' equity and cash flows from September 2, 1992
(Inception) to December 31, 1998. These financial statements are the
responsibility of the company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above fairly present,
in all material aspects, the financial position of Unifund America, Inc. as of
December 31, 1998 and the results of its operations from September 2, 1992
(Inception) to December 31, 1998 in conformity with generally accepted
accounting principles.
/s/ Alvin M. Rosen
-----------------------------
New York, New York
March 2, 1999
F-2
<PAGE>
UNIFUND AMERICA, INC.
(A Development Stage Enterprise)
Balance Sheet
December 31, 1998
ASSETS
<TABLE>
<CAPTION>
<S> <C>
Current Assets
Cash in bank $ 244
Marketable securities, at market 119,196
-------
Total Current Assets $ 119,440
Other Assets:
Prepaid organization expenses 20,000
-------
Total Assets $ 139,440
=======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Due on stock brokerage account $ 9,578
Loans payable affiliates 116,967
-------
Total Liabilities $ 126,545
Shareholders' Equity:
Common Stock, .0001 par value;
25,000,000 shares authorized,
shares issued and outstanding
500,000 shares 500
Preferred Stock, .001 par value;
5,000,000 shares authorized, shares issued
Earnings accumulated during the
development stage 12,395
-------
Total Stockholder's Equity 12,406
-------
Total Liabilities And Stockholder's Equity $ 139,440
=======
</TABLE>
The accompanying notes to financial statements
are an integral part of this statement.
F-3
<PAGE>
UNIFUND AMERICA, INC.
(A Development Stage Enterprise)
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
Inception
For the 12 Months September 2, 1992
Ended December 31, to
1998 1997 December 31, 1998
---------- --------- -----------------
<S> <C> <C> <C>
Revenue............................... $ 0 $ 0 $ 0
Costs and expenses.................... 589 105 4,266
---------- -------- -------
Net Operating Loss.................. (589) (105) $(4,266)
Unrealized gain on marketable
Securities........................... 16,661 0 16,661
---------- -------- -------
Net Income (Loss)..................... $ 16,072 $ (105) $12,395
========== ======== =======
</TABLE>
The accompanying notes to financial statements are an integral part of this
statement.
F-4
<PAGE>
UNIFUND AMERICA, INC.
(A Development Stage Enterprise)
STATEMENT OF CHANGES IN STOCKHOLDER'S EQUITY
Inception (September 2, 1992) to December 31, 1998
<TABLE>
<CAPTION>
Common Stock
----------------
Earnings
(Deficit)
Accumulated
In the
Number Development
of Shares Amount Stage Total
--------- ------ ----------- -------
<S> <C> <C> <C> <C>
Inception--September 2, 1992............ $ 0 $ 0 $ 0 $ 0
Issuance of common stock to founder for
cash................................... 100 11 0 11
Net Income (Loss)....................... -- 0 0 0
--- --- ------- -------
Balance--December 31, 1992.............. 100 11 0 11
Net Income (Loss)....................... -- 0 0 0
--- --- ------- -------
Balance--December 31, 1993.............. 100 11 0 11
Net Income (Loss)....................... -- 0 0 0
--- --- ------- -------
Balance--December 31, 1994.............. 100 11 0 11
Net Income (Loss)....................... -- 0 0 0
--- --- ------- -------
Balance--December 31, 1995.............. 100 11 0 11
Net Income (Loss)....................... -- 0 (3,572) (3,572)
--- --- ------- -------
Balance--December 31, 1996.............. 100 11 (3,572) (3,561)
Net Income (Loss)....................... -- 0 (105) (105)
--- --- ------- -------
Balance--December 31, 1997.............. 100 11 (3,677) (3,666)
Net Income (Loss)....................... -- 0 16,072 16,072
--- --- ------- -------
Balance--December 31, 1998.............. 100 $11 $12,395 $12,406
=== === ======= =======
</TABLE>
The accompanying notes to financial statements are an integral part of this
statement.
F-5
<PAGE>
UNIFUND AMERICA, INC.
(A Development Stage Enterprise)
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
For the 12 Months Inception
Ended December 31, (September 2, 1992)
---------------------- to
1998 1997 December 31, 1998
----------- ----------------------------
<S> <C> <C> <C>
Cash Flows From Operating Activities:
Net Income (Loss).................. $ 16,072 $ (105) $ 12,395
-------
Less: Unrealized gain on marketable
securities........................ (16,661) 0 (16,661)
----------- ------- --------
Funds Used in Operating Activities... (589) (105) (4,266)
Cash Flow From Investing Activities:
Purchase Of Marketable Securities.... (102,535) 0 (102,535)
----------- ------- --------
Funds Used In Operating Activities... (102,535) 0 (102,535)
----------- ------- --------
Cash Flows From Financing Activities:
Proceeds from sale of common
stock............................. 0 0 500
Proceeds from loans from
affiliates........................ 113,828 0 116,967
Proceeds of brokers loan........... 9,578 0 9,578
Payment of organization expenses... (20,000) 0 (20,000)
----------- ------- --------
Cash Provided By Financing
Activities........................ 103,406 0 107,045
----------- ------- --------
Net Increase (decrease) in Cash.... 282 (105) 244
Cash, Beginning Of Period.......... (38) 67 0
----------- ------- --------
Cash, End Of Period................ 244 (38) 244
=========== ======= ========
</TABLE>
The accompanying notes to financial statements are an integral part of this
statement.
F-6
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
We have not authorized any dealer, salesman or other person to give any
information or to make any representation not contained in this Prospectus in
connection with the offer made by this Prospectus. If anyone makes or gives
such information or representation you should not rely on it as authorized by
us. This Prospectus does not constitute an offer of any securities other than
the securities to which it relates or an offer to any person in any
jurisdiction in which such an offer would be unlawful. The delivery of this
Prospectus or any sale made under this Prospectus under no circumstances
implies that the information in the Prospectus is correct as of any time after
the Prospectus's date.
---------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary......................................................... 2
The Company................................................................ 2
The Offering............................................................... 2
Risk Factors............................................................... 3
Business of the Company.................................................... 9
Use of Proceeds............................................................ 14
Dilution................................................................... 15
Capitalization............................................................. 16
Dividend Policy............................................................ 16
Plan of Distribution....................................................... 16
Management................................................................. 17
Principal and Selling Stockholders......................................... 19
Description of Securities.................................................. 20
Experts.................................................................... 21
Legal Matters.............................................................. 21
Certain Charter and by Law Provisions...................................... 21
Plan of Operations......................................................... 22
Certain Transactions....................................................... 22
Market for Common Equity and Related Stockholder Matters................... 22
Executive Compensation..................................................... 23
Financial Statements....................................................... 23
</TABLE>
---------------
Until , 1999 (25 days from the date of this Prospectus), all
effecting transactions in the registered securities, whether or not
participating in this distribution, may be required to deliver a Prospectus.
This is in addition to the obligation of to deliver a Prospectus when
acting as underwriter and with respect to their unsold allotments or
subscriptions.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
UNIFUND AMERICA, INC.
2,518,769 Shares Common Stock
1,000,000 Class A Redeemable Warrants
1,000,000 Class B Redeemable Warrants
---------------
PROSPECTUS
---------------
, 1999
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
UNIFUND AMERICA, INC.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of Directors and Officers
The Company's Certificate of Incorporation contains provisions to (i)
eliminate the personal liability of its directors for monetary damages
resulting from breaches of their fiduciary duty (other than breaches of the
duty of loyalty, acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, violations under Section
719 of the BCL or for any transaction from which the director derived an
improper personal benefit) and (ii) indemnify its directors and officers to the
fullest extent permitted by Section 721 of the BCL, including circumstances in
which indemnification is otherwise discretionary. The Company believes that
these provisions are necessary to attract and retain qualified persons as
directors and officers. As a result of this provision, the ability of the
Company or a stockholder thereof to successfully prosecute an action against a
director for a breach of his duty of care has been limited. However, the
provision does not affect the availability of equitable remedies such as an
injunction or recision based upon a director's breach of his duty of care. The
Securities and Exchange Commission (the "Commission") has taken the position
that the provision will have no effect on claims arising under the federal
securities laws.
In addition, the Amended Certificate and By-Laws provide mandatory
indemnification rights, subject to limited exceptions, to any person who was or
is party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding by reason of the fact that such person is
or was a director or officer of the Company, or is or was serving at the
request of the Company as a director or officer of another corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise.
Such indemnification rights include reimbursement for expenses incurred by such
person in advance of the final disposition of such proceeding in accordance
with the applicable provisions of the New York Business Corporation Law.
Other Expenses of Issuance and Distribution
The estimated expenses of this Offering are:
<TABLE>
<S> <C>
Registration Fees................................................ $
Blue Sky Filing Fees.............................................
Attorney's Fees..................................................
Accountant's Fees................................................
Printing and Copying.............................................
Miscellaneous....................................................
-------
Total.......................................................... $50,000
</TABLE>
Item 26. Recent Sales of Unregistered Securities
On April 30, 1999 the Company sold 584,835 shares, 150,000 shares and 50,000
shares of its Common Stock to R. Scott Barter, Douglas Harrison-Mills and
William Bradford Smith, II, respectively at a price of $.10 per share in
reliance on the exemption of Section 4(2) of the Act. Immediately prior to the
effectiveness of this registration statement, the Company is selling 116,967
shares of its Common Stock and 116,967 Class A Warrants to Unifund Financial
Group, Inc. in reliance on the exemption of Section 4 (2) of the Act.
II-1
<PAGE>
Item 27. Exhibits
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<C> <S>
3.1.1 Certificate of Incorporation of Registrant
Certificate of Amendment of Certificate of Incorporation dated
3.1.2 January 27, 1999
3.2 By-laws of Registrant
4.4* Form of Warrant Certificate
5* Opinion of Kaplan Gottbetter & Levenson, LLP dated
23.1* Consent of Alvin M. Rosen, independent certified public accounts
Consent of Kaplan Gottbetter & Levenson, LLP, counsel to
23.2* registrant
</TABLE>
- --------
*To be filed by amendment
Item 28. Undertaking
The Company hereby undertakes that it will:
(1) File, during any period in which it offers or sells securities, a post-
effective amendment to this registration statement to:
(i) Include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) Reflect in the prospectus any facts or events which, individually
or together, represent a fundamental change in the information in the
registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than a 20 percent change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee" table in
the effective registration statement; and
(iii) Include any additional or change material information on the plan
of distribution.
(2) For determining liability under the Securities Act, treat each post-
effective amendment as a new registration statement of the securities offered,
and the offering of the securities at that time to be the initial bona fide
offering.
(3) File a post-effective amendment to remove from registration any of the
securities that remain unsold at the end of the offering.
(4) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
small business issuer pursuant to the foregoing provisions, or otherwise, the
small business issuer has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable.
II-2
<PAGE>
SIGNATURES
In accordance with the Securities Act of 1933, the registrant certifies
that it has reasonable grounds to believe that its meets all of the
requirements for filing on Form SB-2 and authorized this registration
statement to be signed on its behalf by the undersigned, in the city of New
York, state of New York on May , 1999.
UNIFUND AMERICA, INC.
(Registrant)
By
--------------------------------
R. Scott Barter
President and Director
(Chief Executive Officer)
In accordance with the requirements of the Securities Act of 1933, this
registration statement was signed by the following persons in the capacities
and on the dates stated.
- ------------------------------------- ------------------------- -----------
Douglas Harrison-Mills
(Title)
(Date)
- ------------------------------------- ------------------------- -----------
William Bradford Smith, II
(Title)
(Date)
II-3
<PAGE>
CERTIFICATE OF INCORPORATION
OF
UNIFUND AMERICA, INC.
Filed by:
Alan Scott, Esq.
300 East 42nd Street
New York, NY 10017
<PAGE>
CERTIFICATE OF INCORPORATION
UNIFUND AMERICA, INC.
Under Section 402 of the Business Corporation Law.
The undersigned, for the purpose of forming a corporation pursuant to
Section 402 of the Business Corporation Law of the State of New York, does
hereby certify and set forth:
FIRST: The name of the corporation is Unifund America, Inc.
------
SECOND: The purposes for which the corporation is formed are:
-------
To engage in any lawful act or activity for which corporations may be
organized under the business corporation law, provided that the corporation is
not formed to engage in any act or activity which requires the act or approval
of any state official, department, board, agency or other body without such
approval or consent first being obtained.
To engage in the business of buying, selling and otherwise dealing in or
with, in any manner whatsoever, as broker, agent or principal, and on commission
or otherwise, options and all other manner of contracts respecting the purchase,
sale or other disposition of shares, bonds, notes, mortgages, debentures and
other securities or any interest therein.
To acquire in any manner, purchase and invest in, for cash or on margin, or
otherwise, receive, hold, own, assign, transfer, sell or otherwise dispose of,
create liens upon or otherwise deal and trade in real estate, mortgages, shares,
bonds, notes, debentures and other securities, and other personal, real and
mixed property of any and all kinds, for itself or for others. To carry on any
transaction, operation, undertaking or business which may be undertaken or
carried on by stock brokers and agents other than fiscal or transfer agents, and
to develop, improve and extend the property and business interests of its
principles by any lawful means whatever.
To acquire by purchase, subscription, underwriting or otherwise, and to
own, hold for investment, or otherwise, and to use, sell, assign, transfer,
mortgage, pledge, exchange or otherwise dispose of real and personal property of
every sort and description and wheresoever situated, including shares of stock,
bonds, debentures, notes, scrip, securities, evidences of indebtedness,
contracts or obligations of any corporation or association, whether domestic or
foreign, or of any firm or individual or of the United States or any state,
territory or dependency of the United States or any foreign country, or any
municipality or local authority within or without the United States, and also to
issue in exchange therefor stocks, bonds or other securities or evidences of
indebtedness of this corporation and, while the owner or holder of such
property, to receive, collect and
<PAGE>
dispose of the interest, dividends and income on or from such property and to
possess and exercise in respect thereto all of the rights, powers and privileges
of ownership, including all voting powers thereon.
To construct, build, purchase, lease or otherwise acquire, equip, hold,
own, improve, develop, manage, maintain, control, operate, lease, mortgage,
create liens upon, sell, convey or otherwise dispose of and turn to account any
and all plants, machinery, works, implements and things or property, real and
personal, of every kind and description, incidental to, connected with or
suitable, necessary or convenient for any of the purposes enumerated herein,
including all or any part or part of the properties, assets, business and
goodwill of any persons, firms, associations or corporations.
The powers, rights and privileges provided in this certificate are not to
be deemed to be limitation of similar, other or additional powers, rights, and
privileges granted or permitted to a corporation by the Business Corporation
Law, it being intended that this corporation shall have all rights, powers and
privileges granted or permitted to a corporation by such statute.
THIRD: The office of the corporation is to be located in the County of New
------
York, State of New York.
FOURTH: The aggregate number of shares which the corporation shall have
-------
the authority to issue is Two Hundred (200), all of which shall be without par
value.
FIFTH: The Secretary of State is designated as the agent of the
------
corporation upon whom process against it may be served. The post office address
to which the Secretary of State shall mail a copy of any process against the
corporation served on him is:
c/o Alan Scott, Esq.
300 East 42nd Street
Ninth Floor
New York, New York 10017
SIXTH: The personal liability of directors to the corporation or its
------
shareholders for damages for any breach of duty in such capacity is hereby
eliminated except that such personal liability shall not be eliminated if a
judgment or other final adjudication adverse to such director establishes that
his acts or omissions were in bad faith or involved intentional misconduct or a
knowing violation of law or that he personally gained in fact a financial profit
or other advantage to which he was not legally entitled or that his acts
violated Section 719 of the Business Corporation Law
IN WITNESS WHEREOF, this certificate has been subscribed to this 1st day of
September, 1992 by the undersigned who affirms that the statements made herein
are true under the penalties of perjury.
<PAGE>
/s/ Gerald Weinberg
-------------------
GERALD WEINBERG
90 Street Street
Albany, New York
<PAGE>
CERTIFICATE OF AMENDMENT
OF THE CERTIFICATE OF INCORPORATION
OF
UNIFUND AMERICA, INC.
UNDER SECTION 805 OF THE BUSINESS CORPORATION LAW
THE UNDERSIGNED, being the President of UNIFUND AMERICA, INC. hereby
certify:
1. The name of the corporation is Unifund America, Inc. (the
"Corporation").
2. The certificate of incorporation of said Corporation was filed by the
Department of State on the 2nd day of September, 1992.
3. (a) The certificate of incorporation of the Corporation is
amended to increase and change 100 Common shares without par
value of the Corporation, all of which are issued, into 500,000
issued Common shares of a par value of $.001 each, the terms of
the change being at the rate of 5,000 issued Common shares of a
par value of $.001 each for 1 issued Common shares without par
value, and to change 100 authorized Common shares without par
value of the Corporation, none of which are issued, into
24,500,000 unissued Common shares of a par value of $.001 each
and into 5,000,000 unissued Preferred shares of a par value of
$.001 each, the terms of the change being at the rate of 245,000
unissued Common shares of a par value of $.001 each and 50,000
unissued Preferred shares of a par value of $.001 each for 1
unissued Common shares without par value.
(b) The certificate of incorporation of the Corporation is amended to
change the provisions relating to the personal liability of
directors authorized by the Business Corporation Law.
(c) The certificate of incorporation is amended to add provisions
relating to the indemnification of directors and other authorized
by the business Corporation Law.
(d) To accomplish the foregoing, Article FOURTH relating to the
authorized capital of the Corporation is amended to read as
follows:
"FOURTH: The total number of shares of stock which the
corporation shall have authority to issue is 30,000,000 of which
245,000,000 shares shall be designated as common stock, par value
$.001 per share and 5,000,000 shares shall be designated as
preferred stock, par value $.001 per share. The preferred stock
may be issued from time to time in one or more series or classes.
The Board of Directors is hereby expressly authorized to provide
by
<PAGE>
resolution or resolutions duly adopted prior to issuance, for
the creation of each such series and class and to fix the
designation and the powers, preferences, rights, qualifications,
limitations, and restrictions relating to the shares of each such
series. The authority of the Board of Directors with respect to
each series of preferred stock shall include, but not be limited
to, determining the following:
(a) the designation of such series, the number of shares to
constitute such series and the stated value thereof if different
from the par value thereof;
(b) whether the shares of such series shall have voting rights,
in addition to any voting rights provided by law, and, if so, the
term of such voting rights, which may be general or limited;
(c) the dividends, if any, payable on such series, whether any
such dividends shall be cumulative, and, if so, from what dates,
the conditions and dates upon which such dividends shall be
payable, and the preference or relation which such dividends
shall bear to the dividends payable on any shares of stock of any
other class or any other series of Preferred Stock;
(d) whether the shares of such series shall be subject to
redemption by the Corporation, and, if so, the times, prices and
other conditions of such redemption;
(e) the amount or amounts payable upon shares of such series
upon, and the rights of the holders of such series in, the
voluntary or involuntary liquidation, dissolution or winding up,
or upon any distribution of the assets, of the Corporation;
(f) whether the shares of such series shall be subject to the
operation of a retirement or sinking fund and, if so, the extent
to and manner in which any such retirement or sinking fund shall
be applied to the purchase or redemption of the shares of such
series for retirement or other Corporation purposes and the terms
and provisions relating to the operation thereof;
(g) whether the shares of such series shall be convertible into,
or exchangeable for, shares of stock of any other class or any
other series of Preferred Stock or any other securities and, if
so, the price or prices or the rate or rates of conversion or
exchange and the method, if any, of adjusting the same, and any
other terms and conditions of conversion or exchange;
<PAGE>
(h) the conditions or restrictions, if any, upon the creation of
indebtedness of the Corporation or upon the issue of any
additional stock, including additional shares of such series or
of any other series of Preferred Stock or of any other class; and
(i) any other powers, preferences and relative, participating,
options and other special rights, and any qualifications,
limitations and restrictions, thereof.
The powers, preferences and relative, participating optional and other
special rights of each series of Preferred Stock, and the qualifications,
limitations or restrictions thereof, if any, may differ from those of any and
all other series at any time outstanding. All shares of any one series of
Preferred Stock shall be identical in all respects with all other shares of such
series, except that shares of any one series issued at different times may
differ as to the dates from which dividends thereof shall be cumulative.
(c) To accomplish the foregoing, Article SIXTH relating to the
personal liability of directors is amended to read as
follows:
ASIXTH: The personal liability of the directors of the
corporation is eliminated to the fullest extent permitted by
the provisions of paragraph (b) of Section 402 of the
Business Corporation Law, as the same may be amended and
supplemented.@
(d) To accomplish the foregoing, the following new ARTICLE
SEVENTH, relating to the indemnification of directors and
others is added to the certificate of incorporation of the
Corporation:
"SEVENTH: The Corporation shall, to the fullest extent permitted
by Article 7 of the Business Corporation Law, as the same may be
amended and supplemented, indemnify any and all persons whom it
shall have power to indemnify under said Article from and against
any and all of the expenses, liabilities, or other matters
referred to in or covered by said Article, and the
indemnification provided for herein shall not be deemed exclusive
of any other rights to which any person may be entitled under any
By-Law, resolution or shareholders, resolution of directors,
agreement, or otherwise, as permitted by said Article, as to
action in any capacity in which he served at the request of the
Corporation."
4. The foregoing amendment was authorized by the unanimous written consent
of the Board of Directors of the Corporation, followed by the written consent of
the sole shareholder of the Corporation.
<PAGE>
IN WITNESS WHEREOF, I have signed this certificate on the 27th day of
January, 1999, and I affirm the statements contained therein as true under
penalties of perjury.
------------------------------------
R. Scott Barter
President
<PAGE>
Exhibit 3.2
BY-LAWS
of
UNIFUND AMERICA, INC.
ARTICLE I
OFFICES
The principal office of the corporation shall be in the City of New York
County of New York, State of New York. The corporation may also have offices at
such other places within or without the State of New York as the board may from
time to time determine or the business of the corporation may require.
ARTICLE II
SHAREHOLDERS
1. PLACE OF MEETINGS.
Meetings of shareholders shall be held at the principal office of the
corporation or at such place within or without the State of New York as the
board shall authorize.
2. ANNUAL MEETING.
The annual meeting of the shareholders shall be held on the 19th day of
April at 2:00 P. M. in each year if not a legal holiday, and, if a legal
holiday, then on the next business day following at the same hour, when the
shareholders shall elect a board and transact such other business as may
properly come before the meeting.
3. SPECIAL MEETINGS.
Special meetings of the shareholders may be called by the board or by the
president and shall be called by the president or the secretary at the request
in writing of a majority of the board or at the request in writing of
shareholders owning a majority in amount of the shares issued and outstanding.
Such request shall state the purpose or purposes of the proposed meeting.
Business transacted at a special meeting shall be confined to the purposes
stated in the notice.
4. FIXING RECORD DATE.
For the purpose of determining the shareholders entitled to notice of or to
vote at any meeting of shareholders or any adjournment thereof, or to express
consent to or dissent from any proposal without a meeting, or for the purpose of
determining shareholders entitled to receive payment of any dividend or the
allotment of any rights, or for the purpose of any other action, the board shall
fix, in advance, a date as the record date for any such determination of
shareholders. Such date shall not be more than sixty or less than ten days
before the date of such meeting, or more than sixty days prior to any other
action. If no record date is fixed it shall be determined in accordance with the
provisions of law.
5. NOTICE OF MEETINGS OF SHAREHOLDERS.
Written notice of each meeting of shareholders shall state the purpose or
purposes for which the meeting is called, the place, date and hour of the
meeting and unless it is the annual meeting, shall indicate that it is being
issued by or at the direction of the person or persons calling the meeting.
Notice shall be given either personally or by mail to each shareholder entitled
to vote at such meeting, neither less than ten nor more than sixty days before
the date of the meeting. If action is proposed to be taken that might entitle
shareholders to payment for their shares, the notice shall include a statement
of that purpose and to that effect. If mailed, the notice
1
<PAGE>
is given when deposited in the United States mail, with postage thereon prepaid,
directed to the shareholder at his address as it appears on the record of
shareholders, or, if he shall have filed with the secretary a written request
that notices to him be mailed to some other address, then directed to him at
such other address.
6. WAIVERS.
Notice of meeting need not be given to any shareholder who signs a waiver
of notice, in person or by proxy, whether before or after the meeting. The
attendance of any shareholder at a meeting, in person or by proxy, without
protesting prior to the conclusion of the meeting the lack of notice of such
meeting, shall constitute a waiver of notice by him.
7. QUORUM OF SHAREHOLDERS.
Unless the certificate of incorporation provides otherwise, the holders of
a majority of the shares entitled to vote thereat shall constitute a quorum at a
meeting of shareholders for the transaction of any business, provided that when
a specified item of business is required to be voted on by a class or classes,
the holders of a majority of the shares of such class or classes shall
constitute a quorum for the transaction of such specified item of business.
When a quorum is once present to organize a meeting, it is not broken by
the subsequent withdrawal of any shareholders.
The shareholders present may adjourn the meeting despite the absence of a
quorum.
8. PROXIES.
A shareholder may execute a writing authorizing another person or persons
to act for him as proxy. Execution may be accomplished by the shareholder or the
shareholder's authorized officer, director, employee or agent signing such
writing or causing his signature to be affixed to such writing by any reasonable
means including, but not limited to, by facsimile signature. A shareholder may
authorize another person or persons to act for the shareholder as proxy by
transmitting or authorizing the transmission of a telegram, cablegram or other
means of electronic transmission to the person who will be the holder of the
proxy or to a proxy solicitation firm, proxy support service organization or
like agent duly authorized by the person who will be the holder of the proxy to
receive such transmission, provided that any such telegram, cablegram or other
means of electronic transmission must either set forth or be submitted with
information from which it can be reasonably determined that the telegram,
cablegramor other electronic transmission was authorized by the shareholder. If
it is determined that such telegrams, cablegrams or other electronic
transmissions are valid, the inspectors or, if there are no inspectors, such
other persons making that determination shall specify the nature of the
information upon which they relied. Any copy, facsimile telecommunication or
other reliable reproduction of the writing or transmission created pursuant to
this section may be substituted or used in lieu of the original writing or
transmission for any and all purposes for which the original writing or
transmission could be used, provided that such copy, facsimile telecommunication
or other reproduction shall be a complete reproduction of the entire original
writing or transmission. No proxy shall be valid after expiration of eleven
months from the date thereof unless otherwise provided in the proxy. Every proxy
shall be revocable at the pleasure of the shareholder executing it, except as
otherwise provided by law.
9. QUALIFICATION OF VOTERS.
2
<PAGE>
Every shareholder of record shall be entitled at every meeting of
shareholders to one vote for every share standing in his name on the record of
shareholders, unless otherwise provided in the certificate of incorporation.
10. VOTE OF SHAREHOLDERS.
Except as otherwise required by statute or by the certificate of
incorporation:
(a) directors shall be elected by a plurality of the votes cast at a
meeting of shareholders by the holders of shares entitled to vote in the
election; and
(b) all other corporate action shall be authorized by a majority of the
votes cast.
11. WRITTEN CONSENT OF SHAREHOLDERS.
Any action that may be taken by vote may be taken without a meeting on
written consent, setting forth the action so taken, signed by the holders of all
the outstanding shares entitled to vote thereon or signed by such lesser number
of holders as may be provided for in the certificate of incorporation.
12. ADDITIONAL PROVISIONS WHERE SHARES ARE PUBLICLY HELD
The following additional provisions shall be applicable only if at the time
of a meeting of shareholders the corporation has a class of voting stock that is
listed on national securities exchange or authorized for quotation on an
interdealer quotation system of a registered national securities association.
(a) The Board of Directors shall appoint one or more inspectors to act
at the meeting or any adjourned thereof and make a written report thereof. The
Board of Directors may designate one or more persons as alternate inspectors to
replace any inspector who fails to act. If no inspector or alternate has been
appointed, or if such persons are unable to act at any meeting of shareholders,
the person presiding at the meeting shall appoint one or more inspectors to act
at the meeting. Each inspector, before entering upon the discharge of his
duties, shall take an oath faithfully to execute the duties of inspector at such
meeting with strict impartiality and according to the best of his ability.
(b) The inspectors shall determine the number of shares outstanding and
the voting power of each, the shares represented at the meeting, the existence
of a quorum, the validity and effect of proxies, and shall receive votes,
ballots or consents, hear and determine all challenges and questions arising in
connection with the right to vote, count and tabulate all votes, ballots or
consents, determine the results, and do such acts as are proper to conduct the
election or vote with fairness to all shareholders. On request of the person
presiding at the meeting or any shareholder entitled to vote thereat, the
inspectors shall make a report in writing of any challenge, question or matter
determined by them and execute a certificate of any fact found by them.
(c) In determining the validity and counting of proxies, ballots and
consents, the inspectors shall be limited to an examination of the proxies, any
envelope submitted with those proxies and consents, any information provided in
accordance with Section 8 of ARTICLE II, ballots and the regular books and
records of the corporation, except that the inspectors may consider other
reliable information for the limited purpose of reconciling proxies, ballots and
consents submitted by or on behalf of banks, brokers, their nominees or similar
persons which represent more votes than the holder of a proxy is authorized by
the record owner to cast or more
3
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votes than the shareholder holds of record. If the inspectors consider other
reliable information for the limited purpose permitted herein, the inspectors at
the time they make their certification shall specify the precise information
considered by them including the person or persons from whom they obtain the
information, when the information was obtained, the means by which the
information was obtained and the basis for the inspectors' belief that such
information is reliable.
(d) The date and time (which need not be a particular time of day) of
the opening and the closing of the polls for each matter upon which the
shareholders will vote at a meeting shall be announced by the person presiding
at the meeting at the beginning of the meeting and, if no date and time is so
announced, the polls shall close at the end of the meeting, including any
adjournment thereof. No ballots, proxies or consents, nor any revocation thereof
or changes thereto, shall be accepted by the inspectors after the closing of
polls unless the Supreme Court of the State of New York at a special term held
within the judicial district where the office of the corporation is located,
upon application by a shareholder, shall determine otherwise..
ARTICLE III
DIRECTORS
1. BOARD OF DIRECTORS.
Subject to any provision in the certificate of incorporation the business
of the corporation shall be managed by its board of directors, each of whom
shall be at least 18 years of age and need not be a shareholder.
2. NUMBER OF DIRECTORS.
The number of directors shall be fixed by the board of directors from time
to time. If not otherwise fixed under this paragraph, the number shall be three.
3. ELECTION AND TERM OF DIRECTORS.
At each annual meeting of shareholders, the shareholders shall elect
directors to hold office until the next annual meeting. Each director shall hold
office until the expiration of the term for which he is elected and until his
successor has been elected and qualified, or until his prior resignation or
removal.
4. NEWLY CREATED DIRECTORSHIPS AND VACANCIES.
Newly created directorships resulting from an increase in the number of
directors and vacancies occurring in the board for any reason except the removal
of directors without cause may be filled by a vote of a majority of the
directors then in office, although less than a quorum exists, unless otherwise
provided in the certificate of incorporation. Vacancies occurring by reason of
the removal of directors without cause shall be filled by vote of the
shareholders unless otherwise provided in the certificate of incorporation. A
director elected to fill a vacancy caused by resignation, death or removal shall
be elected to hold office for the unexpired term of his predecessor.
5. REMOVAL OF DIRECTORS.
Any or all of the directors may be removed for cause by vote of the
shareholders or by action of the board. Directors may be removed without cause
only by vote of the shareholders.
6. RESIGNATION.
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A director may resign at any time by giving written notice to the board,
the president or the secretary of the corporation. Unless otherwise specified in
the notice, the resignation shall take effect upon receipt thereof by the board
or such officer, and the acceptance of the resignation shall not be necessary to
make it effective.
7. QUORUM OF DIRECTORS.
Unless otherwise provided in the certificate of incorporation, a majority
of the entire board shall constitute a quorum for the transaction of business or
of any specified item of business.
8. ACTION OF THE BOARD.
Unless otherwise required by law, the vote of a majority of the directors
present at the time of the vote, if a quorum is present at such time, shall be
the act of the board. Each director present shall have one vote regardless of
the number of shares, if any, which he may hold.
9. PLACE AND TIME OF BOARD MEETINGS.
The board may hold its meetings at the office of the corporation or at such
other places, either within or without the State of New York, as it may from
time to time determine.
10. REGULAR ANNUAL MEETING.
A regular annual meeting of the board shall be held immediately following
the annual meeting of shareholders at the place of such annual meeting of
shareholders.
11. NOTICE OF MEETINGS OF THE BOARD, ADJOURNMENT.
(a) Regular meetings of the board may be held without notice at such
time and place as it shall from time to time determine. Special meetings of the
board shall be held upon notice to the directors and may be called by the
president upon three days notice to each director either personally or by mail
or by wire; special meetings shall be called by the president or by the
secretary in a like manner on written request of two directors. Notice of a
meeting need not be given to any director who submits a waiver of notice whether
before or after the meeting or who attends the meeting without protesting prior
thereto or at its commencement, the lack of notice to him.
(b) A majority of the directors present, whether or not a quorum is
present, may adjourn any meeting to another time and place. Notice of the
adjournment shall be given all directors who were absent at the time of the
adjournment and, unless such time and place are announced at the meeting, to the
other directors.
12. CHAIRMAN.
At all meetings of the board the president, or in his absence, a chairman
chosen by the board shall preside.
13. EXECUTIVE AND OTHER COMMITTEES.
The board, by resolution adopted by a majority of the entire board, may
designate from among its members an executive committee and other committees,
each consisting of one or more directors. Each such committee shall serve at the
pleasure of the board.
14. COMPENSATION.
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No compensation shall be paid to directors, as such, for their services,
but by resolution of the board a fixed sum and expenses for actual attendance,
at each regular or special meeting of the board may be authorized, Nothing
herein contained shall be construed to preclude any director from serving the
corporation in any other capacity and receiving compensation therefor.
ARTICLE IV
OFFICERS
1. OFFICES, ELECTION, TERM.
(a) Unless otherwise provided for in the certificate of incorporation,
the board may elect or appoint a president, one or more vice-presidents, a
secretary and a treasurer, and such other officers as it may determine, who
shall have such duties, powers and functions as hereinafter provided.
(b) All officers shall be elected or appointed to hold office until the
meeting of the board following the annual meeting of shareholders.
(c) Each officer shall hold office for the term for which he is elected
or appointed and until his successor has been elected or appointed and
qualified.
2. REMOVAL, RESIGNATION, SALARY, ETC,
(a) Any officer elected or appointed by the board may be removed by the
board with or without cause.
(b) In the event of the death, resignation or removal of an officer,
the board in its discretion may elect or appoint a successor to fill the
unexpired term.
(c) Any two or more offices may be held by the same person, and such
person may hold all or any combination of offices.
(d) The salaries of all officers shall be fixed by the board.
(e) The directors may require any officer to give security for the
faithful performance of his duties.
3. PRESIDENT.
The president shall be the chief executive officer of the corporation; he
shall preside at all meetings of the shareholders and of the board; he shall
have oversight over the management of the business of the corporation and shall
see that all orders and resolutions of the board are carried into effect.
4. VICE-PRESIDENTS.
During the absence or disability of the president, the vice-president, or
if there is more than one, the executive vice-president, shall have all the
powers and functions of the president. Each vice-president shall perform such
other duties as the board shall prescribe.
5. SECRETARY.
The secretary shall:
(a) attend all meetings of the board and of the shareholders;
(b) record all votes and minutes of all proceedings in a book to be kept
for that purpose;
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(c) give or cause to be given notice of all meetings of shareholders and of
special meetings of the board;
(d) keep in safe custody the seal of the corporation and affix it to any
instrument when authorized by the board;
(e) when required, prepare or cause to be prepared and available at each
meeting of shareholders a certified list in alphabetical order of the names
of shareholders entitled to vote thereat, indicating the number of shares
of each respective class held by each;
(f) keep all the documents and records of the corporation as required by
law or otherwise in a proper and safe manner.
(g) perform such other duties as may be prescribed by the board.
6. ASSISTANT SECRETARIES.
During the absence or disability of the secretary, the assistant secretary,
or if there is more than one, the one so designated by the secretary or by the
board, shall have all the powers and functions of the secretary.
7. TREASURER.
The treasurer shall:
(a) have the custody of the corporate funds and securities;
(b) keep full and accurate accounts of receipts and disbursements in the
corporate books;
(c) deposit all money and other valuables in the name and to the credit of
the corporation in such depositories as may be designated by the board;
(d) disburse the funds of the corporation as may be ordered or authorized
by the board and preserve proper vouchers for such disbursements;
(e) render to the president and board at the regular meetings of the
board, or whenever they require it, an account of all his transactions as
treasurer and of the financial condition of the corporation;
(f) render a full financial report at the annual meeting of the
shareholders if so requested;
(g) be furnished by all corporate officers and agents at his request, with
such reports and statements as he may require as to all financial transactions
of the corporation;
(h) perform such other duties as are given to him by these by-laws or as
from time to time are assigned to him by the board or the president.
8. ASSISTANT TREASURER.
During the absence or disability of the treasurer, the assistant treasurer,
or if there is more than one, the one so designated by the secretary or by the
board, shall have all the powers and functions of the treasurer.
9. SURETIES AND BONDS.
In case the board shall so require, any officer or agent of the corporation
shall execute to the corporation a bond in such sum and with such surety or
sureties as the board may direct, conditioned upon the faithful performance of
his duties to the corporation and including
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responsibility for negligence and for the accounting for all property, funds or
securities of the corporation which may come into his hands.
ARTICLE V
CERTIFICATES FOR SHARES
1. CERTIFICATES.
The shares of the corporation shall be represented by certificates. They
shall be numbered and entered in the books of the corporation as they are
issued. They shall exhibit the holder's name and the number of shares and shall
be signed by the president or a vice-president and the treasurer or the
secretary and shall bear the corporate seal.
2. LOST OR DESTROYED CERTIFICATES.
The board may direct a new certificate or certificates to be issued in
place of any certificate or certificates theretofore issued by the corporation,
alleged to have been lost or destroyed, upon the making of an affidavit of that
fact by the person claiming the certificate to be lost or destroyed. When
authorizing such issue of a new certificate or certificates, the board may, in
its discretion and as a condition precedent to the issuance thereof, require the
owner of such lost or destroyed certificate or certificates, or his legal
representative, to advertise the same in such manner as it shall require and/or
give the corporation a bond in such sum and with such surety or sureties as it
may direct as indemnity against any claim that may be made against the
corporation with respect to the certificate alleged to have been lost or
destroyed.
3. TRANSFERS OF SHARES.
(a) Upon surrender to the corporation or the transfer agent of the
corporation of a certificate for shares duly endorsed or accompanied by proper
evidence of succession, assignment or authority to transfer, it shall be the
duty of the corporation to issue a new certificate to the person entitled
thereto, and cancel the old certificate; every such transfer shall be entered on
the transfer book of the corporation which shall be kept at its principal
office. No transfer shall be made within ten days next preceding the annual
meeting of shareholders.
(b) The corporation shall be entitled to treat the holder of record of
any share as the holder in fact thereof and, accordingly, shall not be bound to
recognize any equitable or other claim to or interest in such share on the part
of any other person whether or not it shall have express or other notice
thereof, except as expressly provided by the laws of New York.
4. CLOSING TRANSFER BOOKS.
The board shall have the power to close the share transfer books of the
corporation for a period of not more than ten days during the thirty day period
immediately preceding (1) any shareholders meeting, or (2) any date upon which
shareholders shall be called upon to or have a right to take action without a
meeting, or (3) any date fixed for the payment of a dividend or any other form
of distribution, and only those shareholders of record at the time the transfer
books are closed, shall be recognized as such for the purpose of (1) receiving
notice of or voting at such meeting, or (2) allowing them to take appropriate
action, or (3) entitling them to receive any dividend or other form of
distribution.
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ARTICLE VI
DIVIDENDS
Subject to the provisions of the certificate of incorporation and to
applicable law, dividends on the outstanding shares of the corporation may be
declared in such amounts and at such time or times as the board may determine.
ARTICLE VII
CORPORATE SEAL
The seal of the corporation shall be circular in form and bear the name of
the corporation, the year of its organization and the words "Corporate Seal, New
York." The seal may be used by causing it to be impressed directly on the
instrument or writing to be sealed, or upon adhesive substance affixed thereto.
The seal on the certificates for shares or on any corporate obligation for the
payment of money may be a facsimile, engraved or printed.
ARTICLE VIII
EXECUTION OF INSTRUMENTS
All corporate instruments and documents shall be signed or countersigned,
executed, verified or acknowledged by such officer or officers or other person
or persons as the board may from time to time designate.
ARTICLE IX
FISCAL YEAR
The fiscal year shall be as determined by the accountant for the
corporation
ARTICLE X
REFERENCES TO CERTIFICATE OF INCORPORATION
Reference to the certificate of incorporation in these by-laws shall
include all amendments thereto or changes thereof unless specifically excepted.
ARTICLE XI
BY-LAW CHANGES AMENDMENT, REPEAL, ADOPTION, ELECTION OF DIRECTORS.
1. Except as otherwise provided in the certificate of incorporation, the by-
laws may be amended, repealed or adopted by vote of the holders of the shares at
the time entitled to vote in the election of any directors. By-laws may also be
amended, repealed or adopted by the board but any by-law adopted by the board
may be amended by the shareholders entitled to vote thereon as hereinabove
provided.
2. No amendment of the bylaws pertaining to the election of directors or the
procedures for the calling and conduct of a meeting of shareholders shall affect
the election of directors or the procedure for the calling or conduct in respect
of any meeting of shareholders unless adequate notice thereof is given to the
shareholders in a manner reasonably calculated to provide shareholders with
sufficient time to respond thereto prior to such meeting.
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