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File No. 333-37200
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As filed with the Securities & Exchange Commission on May 17, 2000
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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AMENDMENT NO. 2 TO
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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CONSUMER MARKETING CORPORATION
(Name of small business issuer in its charter)
Nevada 6770 98-0204737
(State or jurisdiction of (Primary Standard Industrial (IRS Employer
incorporation or organization) Identification No.) Classification Code No.)
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Suite 104, 1456 St. Paul St., Kelowna,
British Columbia, Canada V1Y 2E6
(Address of principal place of business or intended principal place of business
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Devinder Randhawa
Consumer Marketing Corporation
Suite 104, 1456 St. Paul St., Kelowna
British Columbia, Canada V1Y 2E6
(250) 868-8177 tel.
(Name, address and telephone number of agent for service)
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Copies to
Antoine M. Devine, Esq.
Evers & Hendrickson, LLP
155 Montgomery Street, Suite 1200
San Francisco, CA 94104
(415) 772-8109
Approximate date of proposed sale to the public: As soon as practicable after this Registration Statement becomes
effective.
CALCULATION OF REGISTRATION FEE
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Title of each class of Amount to be Proposed maximum offering Proposed maximum Amount of
securities to be registered price per unit (1) aggregate offering price registration fee
registered
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Common Stock, par value 500,000 $.20 $100,000 $26.50
$0.0001
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(1) Estimated solely for the purpose of calculating the registration fee and pursuant to Rule 457.
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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 thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the
registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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PART I - INFORMATION REQUIRED IN PROSPECTUS
Cross Reference Sheet Showing the Location in Prospectus of Information Required by Items of Form SB-2
Item No. Required Item Location of Caption in Prospectus
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1. Forepart of the Registration Cover Page; Outside Front Page of
Statement and Outside Front Cover Prospectus
of Prospectus
2. Inside Front and Outside Back Cover Inside Front and Outside Back Cover Pages
Pages of Prospectus of Prospectus
3. Summary Information and Risk Factors Prospectus Summary; Risk Factors
4. Use of Proceeds Use of Proceeds
5. Determination of Offering Price Prospectus Summary - Determination of
Offering Price; Risk Factors; Plan of
Distribution
6. Dilution Dilution
7. Selling Security Holders Not Applicable
8. Plan of Distribution Plan of Distribution
9. Legal Proceedings Legal Proceedings
10. Director, Executive Officer, Management
management and Promoters and
Control Persons
11. Security Ownership of Certain Principal Shareholders
Beneficial owners and Management
12. Description of Securities Description of Securities
13. Interest of Named Experts and Not Applicable
Counsel
14. Disclosure of Commission Position Indemnification of Officers and Directors
on Indemnification for Securities
Act Liabilities
15. Organization within Last Five Years Management, Certain Transactions
16. Description of Business Business
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17. Analysis or Plan of Operation
18. Description of Property Description of Property
19. Certain Relationships and Related Certain Transactions
Transactions
20. Market for Common Equity and Prospectus Summary, Market for Our
Related Stockholder Matters Common Stock; Shares Eligible for Future
Sale
21. Executive Compensation Executive Compensation
22. Financial Statements Financial Statements
23. Changes in and Disagreements with Changes in and Disagreements with
Accountants on Accounting and Accountants on Accounting and Financial
Financial Disclosure Disclosures
PART II
24. Indemnification of Directors and Indemnification of Directors and
Officers Officers
25. Other Expenses of Issuance and Other Expenses of Issuance and
Distribution Distribution
26. Recent Sales of Unregistered Recent Sales of Unregistered
Securities Securities
27. Exhibits Exhibits
28. Undertakings Undertakings
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Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any state in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such state.
Subject to Completion, DatedAugust 25, 2000
PUBLIC OFFERING
PROSPECTUS
CONSUMER MARKETING CORPORATION
500,000 SHARES OF COMMON STOCK
$.20 PER SHARE
Consumer Marketing Corporation is a startup company organized in the
State of Nevada to as a "blank check" company, whose sole purpose at this time
is to locate and consummate a merger or acquisition with a private entity.
The 500,000 shares of common stock offered by this Prospectus are being
sold by the selling shareholders. We will not receive any of the proceeds from
the sale of shares by the selling shareholders. We will not pay commissions on
stock sales.
No public market currently exists for our shares. 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 shares only
if you can afford a complete loss. See "Risk Factors" beginning on page 9.
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Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
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Offering Information
Per share Total
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Public offering price $ .20 $ 100,000.00
Underwriting discounts/commissions $ .00 $ .00
Estimated offering expenses $ .02 $ 9,556.00
Net offering proceeds to Consumer Marketing
Corporation $ .20 $ 100,000.00
Estimated offering expenses do not include offering costs, including filing,
printing, legal, accounting, transfer agent and escrow agent fees estimated at
$9,526.50. Management will pay these expenses.
The date of this Prospectus is August 25, 2000
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TABLE OF CONTENTS
Page
PROSPECTUS SUMMARY.............................................................3
SUMMARY FINANCIAL INFORMATION..................................................4
RISK FACTORS...................................................................6
YOUR RIGHTS AND SUBSTANTIVE PROTECTION UNDER RULE 419 DEPOSIT OF
OFFERING PROCEEDS AND SECURITIES...............................................8
USE OF PROCEEDS...............................................................10
CAPITALIZATION................................................................10
DESCRIPTION OF BUSINESS.......................................................11
PLAN OF OPERATION.............................................................12
DESCRIPTION OF PROPERTY.......................................................17
PRINCIPAL AND SELLING SHAREHOLDERS............................................18
MANAGEMENT....................................................................19
EXECUTIVE COMPENSATION........................................................22
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS................................22
LEGAL PROCEEDINGS.............................................................22
MARKET FOR OUR COMMON STOCK...................................................23
DESCRIPTION OF SECURITIES.....................................................25
SHARES ELIGIBLE FOR FUTURE RESALE.............................................25
WHERE CAN YOU FIND MORE INFORMATION?..........................................26
REPORTS TO STOCKHOLDERS.......................................................26
PLAN OF DISTRIBUTION..........................................................26
LEGAL MATTERS.................................................................28
EXPERTS.......................................................................28
INDEMNIFICATION OF OFFICERS AND DIRECTORS.....................................28
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE..........................................................28
FINANCIAL STATEMENTS.........................................................F-1
SIGNATURES..................................................................II-3
Until 90 days after the date when the funds and securities are released
from the escrow account, all dealers effecting transactions in the shares,
whether or not participating in this distribution, may be required to deliver a
prospectus. This is in addition to the obligation of dealers to deliver a
prospectus when acting as underwriters to their unsold allotments or
subscriptions.
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PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in this prospectus.
Because this is a summary, it may not contain all of the information that you
should consider before receiving a distribution of our common stock. You should
read this entire prospectus carefully.
Consumer Marketing Corporation
We are a blank check company subject to Rule 419. We were organized as a vehicle
to acquire or merge with another business or company. We have no present plans,
proposals, agreements, arrangements or understandings to acquire or merge with
any specific business or company nor have we identified any specific business or
company for investigation and evaluation for a merger with us. Since our
organization, our activities have been limited to the sale of initial shares for
our organization and our preparation in producing a registration statement and
prospectus for this public offering. We will not engage in any substantive
commercial business following the offering. We maintain our office at Suite 104,
1456 St. Paul St., Kelowna, British Columbia, Canada V1Y 2E6. Our phone number
is (250) 868-8445.
The Offering
Securities offered 500,000 shares of common stock, $0.0001 par
value, being offered at $.20 per share.
Selling Shareholders:
Devinder Randhawa 348,000 shares
Bob Hemmerling 152,000 shares
Common stock outstanding
prior to the offering 500,000 shares
Common stock to be 500,000 shares
outstanding after the offering
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SUMMARY FINANCIAL INFORMATION
The table below contains certain summary historical financial data. The
historical financial data for the fiscal year ended June 30, 2000 has been
derived from our audited financial statements which are contained in this
Prospectus. The information should be read in conjunction with those financial
statements, notes, and other financial information included in this Prospectus.
INCOME STATEMENT:
Fiscal Year Ended
June 30
(Audited)
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2000 1999
---- ----
Revenue $0 $0
Expenses $18,366 $1,973
Net Income (loss) ($18,366) ($1,973)
Basic Earnings (loss) per share $0.04 $0
Basic Number of Common Shares
Outstanding 500,000 500,000
BALANCE SHEET (at end of period):
Total Assets $0 $0
Total Liabilities $2,785 $1,923
Total Shareholders Equity ($2,785) ($1,923)
(Deficit) (Net Assets)
Net Income per share on a fully $0.04 $0
dilated basis
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Determination of Offering Price
The offering price of $.20 per share for the shares has been
arbitrarily determined by us. This price bears no relation to our assets, book
value, or any other customary investment criteria, including our prior operating
history. Among factors considered by us in determining the offering price were:
Estimates of our business potential
Our limited financial resources
The amount of equity desired to be retained by present shareholders
The amount of dilution to the public
The general condition of the securities markets
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RISK FACTORS
Our business is subject to numerous risk factors, including the
following:
We Have Had No Recent Operating History Nor any Revenues or Earnings
from Operations Since Our Inception. We have no significant assets or financial
resources. We will, in all likelihood, sustain operating expenses without
corresponding revenues, at least until the consummation of a business
combination. This may result in our incurring a net operating loss that will
increase continuously until we can consummate a business combination with a
profitable business opportunity. We cannot assure you that we can identify a
suitable business opportunity and consummate a business combination.
We Have Extremely Limited Capital. As of June 30, 2000, there were $0
assets and $2,785 in liabilities. There was $0 available in our treasury as of
June 30, 2000. It is unlikely that we will need additional funds, but we may if
an acquisition candidate insists we obtain additional capital. We may require
additional financing in the future in order to close a business combination.
This financing may consist of the issuance of debt or equity securities. These
funds might not be available, if needed, or might not be available on terms
acceptable to us.
Investors Will Take the Risk of the Experience of the New Management
and the Chosen Industry. The success of our plan of operation will depend to a
great extent on the operations, financial condition and management of the
identified business opportunity. While management intends to seek business
combination(s) with entities having established operating histories, we cannot
assure you that we will be successful in locating candidates meeting that
criteria. In the event we complete a business combination, the success of our
operations may be dependent upon management of the successor firm or venture
partner firm and numerous other factors beyond our control.
We are in a Highly Competitive Market for Small Number of Business
Opportunities. The Company is and will continue to be an insignificant
participant in the business of seeking mergers with, joint ventures with and
acquisitions of small private and public entities. A large number of established
and well-financed entities, including venture capital firms, are active in
mergers and acquisitions of companies that may be desirable target candidates
for us. Nearly all these entities have significantly greater financial
resources, technical expertise and managerial capabilities than we do and,
consequently, we will be at a competitive disadvantage in identifying possible
business opportunities and successfully completing a business combination.
Moreover, we will also compete in seeking merger or acquisition candidates with
numerous other small public companies.
We Have No Existing Agreement for a Business Combination or Other
Transaction. We have no arrangement, agreement or understanding with respect to
engaging in a merger with, joint venture with or acquisition of, a private or
public entity. No assurances can be given that we will successfully identify and
evaluate suitable business opportunities or that we will conclude a business
combination. Management has not identified any particular industry or specific
business within an industry for evaluation. We cannot guarantee that we will be
able to negotiate a business combination on favorable terms.
We May Not Acquire An Established or Profitable Company. We have not
established a specific length of operating history or a specified level of
earnings, assets, net worth or other criteria that we will require a target
business opportunity to have achieved. Accordingly, we may enter into a business
combination with a business opportunity having no significant operating history,
losses, limited or no potential for earnings, limited assets, negative net worth
or other characteristics that are indicative of development stage companies.
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Management Only Devotes a Limited Amount of Time to Seeking a Target
Company. While seeking a business combination, management anticipates devoting
no more than five hours per month. None of our officers have entered into a
written employment agreements with us and none is expected to do so in the
foreseeable future. We have not obtained key man life insurance on any of its
officers or directors.
We are Dependent on Current Management to Develop our Business.
Notwithstanding the combined limited experience and time commitment of
management, loss of the services of any of these individuals would adversely
affect development of our business and its likelihood of continuing operations.
Conflicts of Interest May Adversely Affect Investors. Additional
conflicts of interest and non-arms length transactions may also arise in the
event our officers or directors are involved in the management of any firm with
which we transact business. Management has adopted a policy that we will not
seek a merger with, or acquisition of, any entity in which management serves as
officers, directors or partners, or in which they or their family members own or
hold any direct or indirect ownership interest.
Our Officers and Directors Are Engaged in Outside Business Activities.
In the event that management identifies a candidate for a business combination,
and the candidate expresses no preference for a particular company, management
intends to enter into a business combination with a previously formed blank
check company. As a result, there may not be sufficient business opportunities
to consummate a business combination.
Target Companies That Fail to Comply With SEC Reporting Requirements
May Delay or Preclude Acquisition. Sections 13 and 15(d) of the `34 Act require
reporting companies to provide certain information about significant
acquisitions, including certified financial statements for the company acquired,
covering one, two, or three years, depending on the relative size of the
acquisition. The time and additional costs that may be incurred by some target
entities to prepare these statements may significantly delay or essentially
preclude consummation of an acquisition. Acquisition prospects that do not have
or are unable to obtain the required audited statements may be inappropriate for
acquisition so long as the reporting requirements of the `34 Act are applicable.
We Have Not Conducted Market Research and Have Not Engaged a Marketing
Organization. We have neither conducted, nor have others made available to us,
results of market research indicating that market demand exists for the
transactions we contemplate. Moreover, we do not have, and do not plan to
establish, a marketing organization. Even if demand is identified for a merger
or acquisition, we cannot assure you that we will be successful in completing a
business combination.
Because of Our Management's Business Relationships in Canada, it is
Possible that the Target Company Will Be a Foreign Entity. If we enter into a
business combination with foreign concern, we will be subject to risks inherent
in business operations outside of the United States. These risks include, for
example, currency fluctuations, regulatory problems, punitive tariffs, unstable
local tax policies, trade embargoes, risks related to shipment of raw materials
and finished goods across national borders and cultural and language
differences. Foreign economies may differ favorably or unfavorably from the
United States economy in growth of gross national product, rate of inflation,
market development, rate of savings and capital investment, resource
self-sufficiency and balance of payments positions, and in other respects.
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The Requirement of Audited Financial Statements May Disqualify
Potential Business Opportunities. Management believes that any potential
business opportunity must provide audited financial statements for review for
the protection of all parties to the business combination. One or more
attractive business opportunities may choose to forego the possibility of a
business combination with us, rather than incur the expenses associated with
preparing audited financial statements.
YOUR RIGHTS AND SUBSTANTIVE PROTECTION UNDER RULE 419
DEPOSIT OF OFFERING PROCEEDS AND SECURITIES
Rule 419 requires that offering proceeds, after deduction for
underwriting commissions, underwriting expenses and dealer allowances, if any,
and the securities purchased by you and other investors in this offering, be
deposited into an escrow or trust account governed by an agreement that contains
certain terms and provisions specified by Rule 419. Under Rule 419, the funds
will be released to us and the securities will be released to you only after we
have met the following three basic conditions:
First, we must execute an agreement for an acquisition of a business or
asset that will constitute our business and for which the fair value of the
business or net assets to be acquired represents at least 80% of the maximum
offering proceeds, but excluding underwriting commissions, underwriting expenses
and dealer allowances, if any.
Second, we must file a post-effective amendment to the registration
statement that includes the results of this offering including, but not limited
to, the gross offering proceeds raised to date, the amounts paid for
underwriting commissions, underwriting expenses and dealer allowances, if any,
amounts dispersed to us and amounts remaining in the escrow account. In
addition, we must disclose the specific amount, use and appropriation of funds
disbursed to us to date, including, payments to officers, directors, controlling
shareholders or affiliates, specifying the amounts and purposes of these
payments, and the terms of a reconfirmation offer that must contain conditions
prescribed by the rules. The post-effective amendment must also contain
information regarding the acquisition candidate and business, including audited
financial statements.
Third, we will mail to each investor within five business days of a
post-effective amendment, a copy of the prospectus contained therein. The
Reconfirmation Offering shall be made as described under "Prospectus Summary;
Reconfirmation Offering." After we submit a signed representation to the escrow
agent that the requirements of Rule 419 have been met and after the acquisition
is closed, the escrow agent can release the funds and securities.
Accordingly, we have entered into an escrow agreement with City
National Bank, N.A. San Francisco, California, which provides that:
The proceeds are to be deposited into the escrow account maintained by
the escrow agent promptly upon receipt. While Rule 419 permits 10% of
the funds to be released to us prior to the reconfirmation offering, we
do not intend to release these funds. The funds and any dividends or
interest thereon, if any, are to be held for the sole benefit of the
investor and can only be invested in bank deposit, in money market
mutual funds, federal government securities or securities for which the
principal or interest is guaranteed by the federal government.
All securities issued for the offering and any other securities issued,
including stock splits, stock dividends or similar rights are to be
deposited directly into the escrow account promptly upon issuance. Your
name must be included on the stock certificates or other documents
evidencing the securities. The securities held in the escrow account
are to remain as issued, and are to be held for your sole benefit. You
retain the voting rights, if any, to the securities held in your name.
The securities held in the escrow account may neither be transferred or
disposed of nor any interest
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created in them other than by will or the laws of descent and
distribution, or under a qualified domestic relations order as defined
by the Internal Revenue Code of 1986 or Table 1 of the Employee
Retirement Income Security Act.
Warrants, convertible securities or other derivative securities
relating to securities held in the escrow account may be exercised or
converted in accordance with their terms, provided that, however, the
securities received upon exercise or conversion, together with any cash
or other consideration paid for the exercise or conversion, are to be
promptly deposited into the escrow account.
The funds will be released to the selling shareholders, and the
securities will be released to you, only after:
The escrow agent has received a signed representation from us
and any other evidence acceptable by the escrow agent that:
We have executed an agreement for the acquisition of
an acquisition candidate whose fair market value
represents at least 80% of the maximum offering
proceeds and has filed the required post-effective
amendment.
The post-effective amendment has been declared
effective.
We have satisfied all of the prescribed conditions of
the reconfirmation offer.
The closing of the acquisition of the business with a
fair value of at least 80% of the maximum proceeds.
This offering will expire 18 months from the date of this prospectus.
There is no minimum number of securities that must be sold in the offering. The
offering may be extended for an additional 90 days at our sole election.
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USE OF PROCEEDS
We will not receive any of the proceeds of the offering. This offering
is not contingent on a minimum member of shares to be sold and will be sold on a
first come, first served basis. If subscriptions exceed the amount being
offered, these excess subscriptions will be promptly refunded without deductions
for commissions or expenses. Accordingly, the selling shareholders will receive
these funds in the event a business combination is closed in accordance with
Rule 419.
We have not incurred and do not intend to incur in the future any debt
from anyone other than management for our organizational activities. Debt to
management will not be repaid. Management is not aware of any circumstances that
would change this policy. These accrued liabilities will be borne by the
acquisition candidate as a condition of the merger. It is anticipated that
management will pay the expenses of the offering, estimated to be $9526.50.
Management believes that this is in our best interest, because it reduces the
amount of liabilities an acquisition candidate must assume in the merger, and
thus, may facilitate an acquisition transaction.
Under Rule 419, after the reconfirmation offering and the closing of
the business combination, and assuming the sale of all the shares in this
offering, $100,000, plus any dividends received, but less any amount returned to
investors who did not reconfirm their investment under Rule 419, will be
released to the selling shareholders.
The proceeds received in this offering will be put into the escrow
account pending closing of a business combination and reconfirmation. These
funds will be in an insured financial institution in either a certificate of
deposit, interest bearing savings account or in short term federal government
securities as placed by City National Bank, N.A.
CAPITALIZATION
The following table sets forth our capitalization as of June 30, 2000.
Stockholders' equity:
common stock, $.001 par value;
authorized 50,000,000 shares,
issued and outstanding
500,000 shares $ 50
Additional paid-in capital 17,554
Deficit accumulated during the
development period ( 20,389 )
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Total stockholders equity ( 2,785 )
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Total Capitalization ( 2,785 )
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DESCRIPTION OF BUSINESS
Consumer Marketing Corporation was incorporated on January 30, 1997
under the laws of the State of Nevada to engage in any lawful corporate purpose.
Other than issuing shares to its shareholders, we never commenced any other
operational activities. We can be defined as a "blank check" company, whose sole
purpose at this time is to locate and consummate a merger or acquisition with a
private entity. The Board of Directors has elected to commence implementation of
our principal business purpose, described below under "Plan of Operation."
The proposed business activities classify us as a "blank check"
company. The Securities and Exchange Commission defines these companies as "any
development stage company that is issuing a penny stock and that has no specific
business plan or purpose, or has indicated that its business plan is to merge
with an unidentified company or companies." Many states have enacted statutes,
rules and regulations limiting the sale of securities of "blank check" companies
in their respective jurisdictions. Management does not intend to undertake any
efforts to cause a market to develop in our securities, either debt or equity,
until we have successfully implemented our business plan. We intend to comply
with the periodic reporting requirements of the Securities Exchange Act of 1934
for so long as it is subject to those requirements.
Lock-up Agreement
Each of our shareholders has executed and delivered a "lock-up" letter
agreement, affirming that they shall not sell their respective shares of common
stock until we have successfully consummated a merger or acquisition and we are
no longer classified as a "blank check" company. In order to provide further
assurances that no trading will occur in our securities until a merger or
acquisition has been consummated, each shareholder has agreed to place their
respective stock certificate with our legal counsel, Foley & Lardner, who will
not release these respective certificates until they have confirmed that a
merger or acquisition was successfully consummated. However, while management
believes that the procedures established to preclude any sale of our securities
prior to closing of a merger or acquisition will be sufficient, we cannot assure
you that the procedures established will unequivocally limit any shareholder's
ability to sell their respective securities before a closing.
Investment Company Act of 1940
Although we will be subject to SEC regulation, management believes we
will not be subject to regulation as an investment company, since we will not be
engaged in the business of investing or trading in securities. In the event we
engage in business combinations that result in our holding passive investment
interests in a number of entities, we could be subject to regulation as an
investment company. If that occurs, we would be required to register as an
investment company and could be expected to incur significant registration and
compliance costs. We have obtained no formal determination from the Securities
and Exchange Commission as to our status as an investment company and,
consequently, a violation of the Act could subject us to material adverse
consequences.
Investment Advisors Act of 1940
An `investment adviser' is a person who, for compensation, engages in
the business of advising others, either directly or through publications or
writings, as to the value of securities or as to the advisability of investing
in, purchasing, or selling securities, or who, for compensation and as part of a
regular business, issues or promulgates analyses or reports concerning
securities. We seek to locate a suitable merger of acquisition candidate, and we
do not intend to engage in the business of advising others in investment matters
for a fee or other type of consideration.
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Forward Looking Statements
We caution readers regarding forward looking statements found in the
following discussion and elsewhere in this registration statement and in any
other statement made by, or on our behalf, whether or not in future filings with
the Securities and Exchange Commission. Forward looking statements are
statements not based on historical information and that relate to future
operations, strategies, financial results or other developments. Forward looking
statements are necessarily based upon estimates and assumptions that are
inherently subject to significant business, economic and competitive
uncertainties and contingencies, many of which are beyond our control and many
of which, with respect to future business decisions, are subject to change.
These uncertainties and contingencies can affect actual results and could cause
actual results to differ materially from those expressed in any forward looking
statements made by or on our behalf. We disclaim any obligation to update
forward looking statements. Readers should also understand that under Section
27A(b)(2)(D) of the `33 Act, and Section 21E(b)(2)(D) of the `34 Act, the "safe
harbor" provisions of the PSLRA do not apply to statements made in connection
with our offering.
PLAN OF OPERATION
We intend to seek to acquire assets or shares of an entity actively
engaged in a business that generates revenues, in exchange for its securities.
We have not identified a particular acquisition target and have not entered into
any negotiations regarding an acquisition. As soon as this registration
statement becomes effective, we intend to contact investment bankers, corporate
financial analysts, attorneys and other investment industry professionals
through various media. None of our officers, directors, promoters or affiliates
have engaged in any preliminary contact or discussions with any representative
of any other company regarding the possibility of an acquisition or merger with
us as of the date of this registration statement.
Depending upon the nature of the relevant business opportunity and the
applicable state statutes governing how the transaction is structured, our Board
of Directors expects that it will provide our shareholders with complete
disclosure documentation concerning a potential business opportunity and the
structure of the proposed business combination prior to consummation. Disclosure
is expected to be in the form of a proxy or information statement, in addition
to the post-effective amendment.
While any disclosure must include audited financial statements of the
target entity, we cannot assure you that such audited financial statements will
be available. If audited financial statements are not available at closing, the
proposed transaction will be voidable at management's discretion. As part of the
negotiation process, the Board of Directors does intend to obtain certain
assurances of value, including statements of assets and liabilities, material
contracts, accounts receivable statements, or other indicia of the target
entity's condition prior to consummating a transaction, with further assurances
that an audited statement would be provided prior to execution of a merger or
acquisition agreement. Closing documents will include representations that the
value of the assets transferred will not materially differ from the
representations included in the closing documents, or the transaction will be
voidable.
Due to our intent to remain a shell corporation until a merger or
acquisition candidate is identified, it is anticipated that its cash
requirements shall be minimal, and that all necessary capital, to the extent
required, will be provided by the directors or officers. We do not anticipate
that we will have to raise capital in the next twelve months. We also do not
expect to acquire any plant or significant equipment.
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We have no full time employees. Our President and Secretary have agreed
to allocate a portion of their time to our activities, without compensation.
These officers anticipate that our business plan can be implemented by their
devoting approximately five (5) hours each per month to our business affairs
and, consequently, conflicts of interest may arise with respect to their limited
time commitment. We do not expect any significant changes in the number of
employees.
Our officers and directors may become involved with other companies who
have a business purpose similar to ours. As a result, potential conflicts of
interest may arise in the future. If a conflict does arise and an officer or
director is presented with business opportunities under circumstances where
there may be a doubt as to whether the opportunity should belong to us or
another "blank check" company they are affiliated with, they will disclose the
opportunity to all the companies. If a situation arises where more than one
company desires to merge with or acquire that target company and the principals
of the proposed target company have no preference as to which company will merge
with or acquire the target company, the company that first filed a registration
statement with the Securities and Exchange Commission will be entitled to
proceed with the proposed transaction.
General Business Plan
Our purpose is to seek, investigate and, if investigation warrants,
acquire an interest in business opportunities presented to it by persons or
firms that desire to seek the perceived advantages of an Exchange Act registered
corporation. We will not restrict our search to any specific business, industry,
or geographical location and we may participate in a business venture of
virtually any kind or nature. This discussion of the proposed business is
purposefully general and is not meant to restrict our discretion to search for
and enter into potential business opportunities. Management anticipates that it
may be able to participate in only one potential business venture because we
have nominal assets and limited financial resources. This lack of
diversification should be considered a substantial risk to our shareholders
because it will not permit us to offset potential losses from one venture
against gains from another.
We may seek a business opportunity with entities that have recently
commenced operations, or that wish to utilize the public marketplace in order to
raise additional capital in order to expand into new products or markets, to
develop a new product or service, or for other corporate purposes. We may
acquire assets and establish wholly owned subsidiaries in various businesses or
acquire existing businesses as subsidiaries.
We anticipate that the selection of a business opportunity will be
complex and extremely risky. Due to general economic conditions, rapid
technological advances being made in some industries and shortages of available
capital, management believes that there are numerous firms seeking the perceived
benefits of a publicly registered corporation. The perceived benefits may
include facilitating or improving the terms for additional equity financing that
may be sought, providing liquidity for incentive stock options or similar
benefits to key employees, providing liquidity (subject to restrictions of
applicable statutes) for all shareholders and other factors. Potentially,
available business opportunities may occur in many different industries and at
various stages of development, all of which will make the task of comparative
investigation and analysis of these business opportunities extremely difficult
and complex.
We have, and will continue to have, no capital to provide the owners of
business opportunities with any significant cash or other assets. However,
management believes we will be able to offer owners of acquisition candidates
the opportunity to acquire a controlling ownership interest in a publicly
registered company without incurring the cost and time required to conduct an
public offering. The owners of the business opportunities will, however, incur
significant legal and accounting costs in connection with acquisition of a
business opportunity, including the costs of preparing Form 8-K's, 10-K's or
10-KSBs, 10-Q's or 10-QSBs, agreements and related reports and documents. The
`34 Act specifically requires that any merger or acquisition candidate comply
with all applicable reporting
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requirements, which include providing audited financial statements to be
included within the numerous filings relevant to complying with the `34 Act.
Nevertheless, our officers and directors of the Company have not conducted
market research and are not aware of statistical data that would support the
perceived benefits of a merger or acquisition transaction for the owners of a
business opportunity.
The analysis of new business opportunities will be undertaken by our
officers and directors, none of whom is a professional business analyst.
Management intends to concentrate on identifying preliminary prospective
business opportunities that may be brought to our attention through present
associations of our officers and directors, or by our shareholders. In analyzing
prospective business opportunities, management will consider:
o the available technical, financial and managerial resources;
o working capital and other financial requirements;
o history of operations, if any;
o prospects for the future;
o nature of present and expected competition;
o the quality and experience of management services that may be available
and the depth of that management;
o the potential for further research, development, or exploration;
o specific risk f actors not now foreseeable but could be anticipated to
impact our proposed activities;
o the potential for growth or expansion;
o the potential for profit;
o the perceived public recognition of acceptance of products, services,
or trades;
o name identification; and
o other relevant factors.
Our officers and directors expect to meet personally with management
and key personnel of the business opportunity as part of their "due diligence"
investigation. To the extent possible, we intend to utilize written reports and
personal investigations to evaluate the above factors. We will not acquire or
merge with any company that cannot provide audited financial statements within a
reasonable period of time after closing of the proposed transaction.
Our management, while probably not especially experienced in matters
relating to our prospective new business, shall rely upon their own efforts and,
to a much lesser extent, the efforts of our shareholders, in accomplishing our
business purposes. We do not anticipate that any outside consultants or
advisors, except for our legal counsel and accountants, will be utilized by us
to accomplish our business purposes. However, if we do retain an outside
consultant or advisor, any cash fee will be paid by the prospective
merger/acquisition candidate, as we have no cash assets. We have no contracts or
agreements with any outside consultants and none are contemplated.
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We will not restrict our search for any specific kind of firms, and may
acquire a venture that is in its preliminary or development stage or is already
operating. We cannot predict at this time the status of any business in which we
may become engaged, because the business may need to seek additional capital,
may desire to have its shares publicly traded, or may seek other perceived
advantages that we may offer. Furthermore, we do not intend to seek additional
capital to finance the operation of any acquired business opportunity until we
have successfully consummated a merger or acquisition.
We anticipate that we will incur nominal expenses in the implementation
of our business plan. Because we has no capital to pay these anticipated
expenses, present management will pay these charges with their personal funds,
as interest free loans, for a minimum of twelve months from the date of this
registration statement. If additional funding is necessary, management and or
shareholders will continue to provide capital or arrange for additional outside
funding. However, the only opportunity that management has to have these loans
repaid will be from a prospective merger or acquisition candidate. Management
has no agreements with us that would impede or prevent consummation of a
proposed transaction. We cannot assure, however, that management will continue
to provide capital indefinitely if a merger candidate cannot be found. If a
merger candidate cannot be found in a reasonable period of time, management may
be required reconsider its business strategy, which could result in our
dissolution.
A business combination involving the issuance of our common stock will,
in all likelihood, result in shareholders of a private company obtaining a
controlling interest in the Company. If that occurs, management may be required
to sell or transfer all or a portion of the Company's common stock held by them,
or resign as members of the Board of Directors of the Company. The resulting
change in control could result in removal of one or more present officers and
directors and a corresponding reduction in or elimination of their participation
in our future affairs.
Acquisition of Opportunities
In implementing a structure for a particular business acquisition, we
may become a party to a merger, consolidation, reorganization, joint venture, or
licensing agreement with another corporation or entity. It may also acquire
stock or assets of an existing business. On the consummation of a transaction,
it is probable that our present management and shareholders will no longer be in
control. In addition, our directors may, as part of the terms of the acquisition
transaction, resign and be replaced by new directors without a vote of our
shareholders. Furthermore, management may negotiate or consent to the purchase
of all or a portion of our stock. Any terms of sale of the shares presently held
by officers and/or directors will be also afforded to all other shareholders on
similar terms and conditions. Any such sale would require an amendment to this
registration statement.
While the actual terms of a transaction that management may not be a
party to cannot be predicted, it may be expected that the parties to the
business transaction will find it desirable to avoid the creation of a taxable
event and thereby structure the acquisition in a so-called "tax-free"
reorganization under Sections 368(a)(1) or 351 of the Internal Revenue Code. In
order to obtain tax-free treatment under the Code, it may be necessary for the
owners of the acquired business to own 80% or more of the voting stock of the
surviving entity. In that event, our shareholders would retain 20% or less of
the issued and outstanding shares of the surviving entity, which would result in
significant dilution in the equity of the shareholders.
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As part of the "due diligence" investigation, our officers and
directors will meet personally with management and key personnel, may visit and
inspect material facilities, obtain independent analysis of verification of
certain information provided, check references of management and key personnel,
and take other reasonable investigative measures to the extent of our limited
financial resources and management expertise. How we will participate in an
opportunity will depend on the nature of the opportunity, the respective needs
and desires of the parties, the management of the target company and our
relative negotiation strength.
With respect to any merger or acquisition, negotiations with target
company management are expected to focus on the percentage of our Company that
the target company shareholders would acquire in exchange for all of their
shareholdings in the target company. Depending upon, among other things, the
target company's assets and liabilities, our shareholders will probably hold a
substantially lesser percentage ownership interest following any merger or
acquisition. The percentage ownership may be subject to significant reduction in
the event we acquire a company with substantial assets. Any merger or
acquisition effected by us can be expected to have a significant dilutive effect
on the percentage of shares held by our then shareholders.
We will participate in a business opportunity only after the
negotiation and execution of appropriate written agreements. Although we cannot
predict the terms of the agreements, generally the agreements will require some
specific representations and warranties by all of the parties, will specify
certain events of default, will detail the terms of closing and the conditions
that must be satisfied by each of the parties prior to and after the closing,
will outline the manner of bearing costs, including costs associated with our
attorneys and accountants, will set forth remedies on default and will include
miscellaneous other terms.
As stated previously, we will not acquire or merge with any entity that
cannot provide independent audited financial statements concurrent with the
closing of the proposed transaction. We are subject to the reporting
requirements of the `34 Act. Included in these requirements is our affirmative
duty to file independent audited financial statements as part of its Form 8-K to
be filed with the Securities and Exchange Commission upon consummation of a
merger or acquisition, as well as our audited financial statements included in
our annual report on Form 10-KSB and quarterly reports on Form 10-QSB. If the
audited financial statements are not available at closing, or if the audited
financial statements provided do not conform to the representations made by the
candidate to be acquired in the closing documents, the closing documents will
provide that the proposed transaction will be voidable at the discretion of our
present management. If the transaction is voided, the agreement will also
contain a provision providing for the acquisition entity to reimburse us for all
costs associated with the proposed transaction.
Competition
We will remain an insignificant participant among the firms that engage
in the acquisition of business opportunities. There are many established venture
capital and financial concerns that have significantly greater financial and
personnel resources and technical expertise than we do. In view of our combined
extremely limited financial resources and limited management availability, we
will continue to be at a significant competitive disadvantage compared to our
competitors.
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DESCRIPTION OF PROPERTY
We have no properties and at this time have no agreements to acquire
any properties.
We operate from our offices at Suite 104, 1456 St. Paul St., Kelowna,
British Columbia, Canada. Space is provided to us on a rent free basis by Mr.
Randhawa, an officer and director, and it is anticipated that this arrangement
will remain until we successfully consummate a merger or acquisition. Management
believes that this space will meet our needs for the foreseeable future.
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PRINCIPAL AND SELLING SHAREHOLDERS
The table below lists the beneficial ownership of our voting securities
by each person known by us to be the beneficial owner of more than 5% of our
securities, as well as the securities beneficially owned by all our directors
and officers. Unless specifically indicated, the shareholders listed possess
sole voting and investment power with respect to the shares shown.
Name and Amount and
Address of Nature of
Beneficial Beneficial Percent of
Title of Class Owner Owner Class
-------------- ----- ----- -----
Common Devinder Randhawa 348,000 69.6%
Suite 104
1456 St. Paul St.
Kelowna, B.C.,
Canada V1Y 2E6
Common Bob Hemmerling 152,000 30.4%
Suite 104
1456 St. Paul St.
Kelowna, B.C.
Canada V1Y 2E6
Common All Officers and 500,000 100%
Directors as a
Group (2 persons)
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MANAGEMENT
Our directors and officers are as follows:
Name Age Position
---- --- --------
Devinder Randhawa 40 President, Chairman
Bob Hemmerling 41 Secretary, Treasurer, Director
The above listed officers and directors will serve until the next
annual meeting of the shareholders or until their death, resignation,
retirement, removal, or disqualification, or until their successors have been
duly elected and qualified. Vacancies in the existing Board of Directors are
filled by majority vote of the remaining Directors. Our officers serve at the
will of the Board of Directors. There are no family relationships between any
executive officer and director.
Resumes
Devinder Randhawa, President and chairman, was appointed to his
positions on January 30, 1997. Upon completing his MBA in 1985, Mr. Randhawa has
been in the venture capital/corporate finance (sub-investment banking). Mr.
Randhawa was either a registered representative or an analyst for 8 years before
founding RD Capital Inc. RD Capital, Inc. is a privately held consulting firm
assisting emerging companies in the resource and non-resource sectors. Mr.
Randhawa was the founder of startups such as First Smart Sensor and Strathmore
Resources Ltd. Mr. Randhawa received a Bachelors Degree in Business
Administration with Honors from Trinity Western College of Langley, British
Columbia in 1983 and received his MBA from the University of British Columbia in
1985. He devotes a nominal part of his time to our business.
Robert Hemmerling, Secretary, Treasurer and a director, was appointed
to his positions on January 30, 1997. In addition to his positions with us,
since September 1996, Mr. Hemmerling has been employed with Strathmore
Resources, Ltd., Kelowna, British Columbia in the investor relations department.
Strathmore Resources is engaged in the business of acquiring and developing
uranium properties. Prior, from January 1996 through August 1996, Mr. Hemmerling
was unemployed. From January 1992 through December 1995, Mr. Hemmerling was an
electrician with Concord Electric, Kelowna, British Columbia. He devotes a
nominal part of his time to our business.
Prior "Blank Check" Experience
Bob Hemmerling has also served as President and chairman of the
following companies since inception: Express Investments Associates, Inc.,
Eye-Catching Marketing, Inc. and Quiksilver International Holdings, Inc.
Mr. Hemmerling has also served as Secretary and Treasurer of the
following companies since inception: Above Average Investments, Inc., Amiable
Investment Holdings, Ltd., Asset Dissolution Services, Ltd., Big Cat Investment
Services, Inc., Blank Resources, Ltd., Blue Moon Investments, Caddo Enterprises,
Inc., Century Plus Investments Corp., Crash Course Holdings, Ltd., Cutting Edge
Corner Corporation, Delightful Holdings Corporation, Eastern Management Corp.,
Emerald Coast Enterprises, Inc., Later Life Resources, Inc., LEK International,
Modern Day Investments, Inc., Moonwalk Enterprises, Multiple Assets &
Investment, Inc., Profit Based Investments, Inc., Solid Management Corp., Sunny
Skies Investments, Total Serenity Company, Inc., Tripacific Development Corp.,
Triwest Management Resources Corp., and United Management, Inc.
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Mr. Hemmerling is President of Express Investments Associates, Inc.,
which has filed a Form SB-2 in order to raise $200,000. He is also a director of
Above Average Investments, Inc. and Solid Management, Inc., which have also
filed a Form SB-2 to raise $200,000 each. Acquisition partners have not been
found as of the date of this Prospectus.
The SEC reporting blank check companies that Bob Hemmerling served or
is serving as President and director are listed on the following table:
Incorporation Name File Form Number Date of Filing
Express Investments Associates, Inc. 10-SB 000-27543 10-04-1999
Eye-Catching Marketing, Inc. 10-SB 000-28237 11-22-1999
Quiksilver International Holdings, Inc. 10-SB 000-28235 11-22-1999
According to a Form 8-K filed on April 7, 2000 by Eastern Management
Corp., seven corporate and four individual shareholders reported on a Schedule
13D that they had acquired 100% of Eastern's outstanding Common Stock on
September 11, 1999. To the best of management's knowledge, Eastern continues to
file reports with the SEC.
According to a Schedule SC 14F1 filed on December 16, 1999, LEK
International acquired 100% of the outstanding Common Stock of San Joaquin Oil &
Gas Ltd. under an Agreement and Plan of Reorganization. David Ward and Bob
Hemmerling, formerly President and Secretary of LEK, respectively, continue to
hold a minority interest in the company. To the best of management's knowledge,
LEK continues to file reports with the SEC.
According to a Schedule 13D filed on October 19, 1999 by Tripacific
Development Company, seven corporate and four individual shareholders reported
on a Schedule 13D that they had acquired 100% of Tripacific's outstanding Common
Stock on October 4, 1999. To the best of management's knowledge, Tripacific
continues to file reports with the SEC.
Devinder Randhawa has served as President and chairman of the following
companies since inception: Above Average Investments, Inc., Amiable Investment
Holdings, Ltd., Asset Dissolution Services, Ltd., Big Cat Investment Services,
Inc., Blank Resources, Ltd., Blue Moon Investments, Caddo Enterprises, Inc.,
Century Plus Investments Corp., Crash Course Holdings, Ltd., Cutting Edge Corner
Corporation, Delightful Holdings Corporation, Eastern Management Corp., Emerald
Coast Enterprises, Inc., Later Life Resources, Inc., LEK International, Modern
Day Investments, Inc., Moonwalk Enterprises, Multiple Assets & Investment, Inc.,
Nevada Communications, Inc., Profit Based Investments, Inc., Solid Management
Corp., Sunny Skies Investments, Total Serenity Company, Inc., Tripacific
Development Corp., Triwest Management Resources Corp., and United Management,
Inc.
Mr. Randhawa has also served as Secretary and Treasurer of the
following companies since inception: Express Investments Associates, Inc.,
Eye-Catching Marketing, Inc., and Quiksilver International Holdings, Inc.
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The SEC reporting blank check companies that Devinder Randhawa served
or is serving as President and director are listed on the following table:
Incorporation Name File Form Number Date of Filing
Above Average Investments, Inc. 10-SB 000-27545 10-4-1999
Eastern Management Corp 10-SB 000-26517 6-28-1999
LEK International 10-SB 000-26321 6-09-1999
Solid Management Corp 10-SB 000-26931 8-04-1999
Tripacific Development Corp 10-SB 000-26683 8-02-1999
Triwest Management Corp 10-SB 000-27103 8-20-1999
United Management, Inc. 10-SB 000-27233 9-03-1999
Blue Moon Investments 10-SB 000-29021 1-19-2000
Caddo Enterprises, Inc. 10-SB 000-29023 1-19-2000
The following companies have completed acquisitions:
Company File Form Number Date of Filing
Eastern Management Corp., Inc. 8-K 000-26517 04/07/2000
LEK International, Inc. SC14F-1 05-57283 12/16/1999
TriPacific Development Corp. SC13D 05-57019 10/19/1999
Conflicts of Interest
Members of our management are associated with other firms involved in a
range of business activities. Consequently, there are potential inherent
conflicts of interest in their acting as officers and directors of the Company.
Because the officers and directors are engaged in other business activities,
management anticipates it will devote only a minor amount of time to our
affairs.
Our officers and directors are now and may in the future become
shareholders, officers or directors of other companies that may be formed for
the purpose of engaging in business activities similar to those conducted by us.
Accordingly, additional direct conflicts of interest may arise in the future
with respect to individuals acting on our behalf or other entities. Moreover,
additional conflicts of interest may arise with respect to opportunities that
come to the attention of these individuals in the performance of their duties.
We do not currently have a right of first refusal pertaining to opportunities
that come to management's attention where the opportunity may relate to our
proposed business operations.
The officers and directors are, so long as they remain officers or
directors, subject to the restriction that all opportunities contemplated by our
plan of operation that come to their attention, either in the performance of
their duties or in any other manner, will be considered opportunities of, and be
made available to us and the other companies that they are affiliated with on an
equal basis. A breach of this requirement will be a breach of the fiduciary
duties of the officer or director. If we or the companies that the officers and
directors are affiliated with both desire to take advantage of an opportunity,
then those officers and directors would abstain from negotiating and voting upon
the opportunity. However, all directors may still individually take advantage of
opportunities if we should decline to do so. Except as set forth above, we have
not adopted any other conflict of interest policy with respect to those
transactions.
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EXECUTIVE COMPENSATION
None of our officers and/or directors have received any compensation
for their respective services rendered unto us. They all have agreed to act
without compensation until authorized by the Board of Directors, which is not
expected to occur until we have generated revenues from operations after
consummation of a merger or acquisition. As of the date of this registration
statement, we have no funds available to pay directors. Further, none of the
directors are accruing any compensation pursuant to any agreement with us.
It is possible that, after we successfully consummate a merger or
acquisition with an unaffiliated entity, that entity may desire to employ or
retain one or a number of members of our management for the purposes of
providing services to the surviving entity. However, we have adopted a policy
whereby the offer of any post-transaction employment to members of management
will not be a consideration in our decision to undertake any proposed
transaction. Each member of management has agreed to disclose to the Board of
Directors any discussions concerning possible employment by any entity that
proposes to undertake a transaction with us and further, to abstain from voting
on the transaction. Therefore, as a practical matter, if each member of the
Board of Directors is offered employment in any form from any prospective merger
or acquisition candidate, the proposed transaction will not be approved by the
Board of Directors as a result of the inability of the Board to affirmatively
approve the transaction. The transaction would then be presented to our
shareholders for approval.
It is possible that persons associated with management may refer a
prospective merger or acquisition candidate to us. In the event we consummate a
transaction with any entity referred by associates of management, it is possible
that the associate will be compensated for their referral in the form of a
finder's fee. It is anticipated that this fee will be either in the form of
restricted common stock issued by us as part of the terms of the proposed
transaction, or will be in the form of cash consideration. However, if
compensation is in the form of cash, payment will be tendered by the acquisition
or merger candidate, because we have insufficient cash available. The amount of
any finder's fee cannot be determined as of the date of this registration
statement, but is expected to be comparable to consideration normally paid in
like transactions, which range up to ten (10%) percent of the transaction price.
No member of management will receive any finders fee, either directly or
indirectly, as a result of their respective efforts to implement our business
plan.
No retirement, pension, profit sharing, stock option or insurance
programs or other similar programs have been adopted for the benefit of its
employees.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
There have been no related party transactions, or any other
transactions or relationships required to be disclosed pursuant to Item 404 of
Regulation S-B.
LEGAL PROCEEDINGS
There is no litigation pending or threatened by or against us.
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MARKET FOR OUR COMMON STOCK
There is no trading market for our common stock at present and there
has been no trading market to date. Management has not undertaken any
discussions with any prospective market maker concerning the participation in
the aftermarket for our securities and management does not intend to initiate
any discussions until we have consummated a merger or acquisition. We cannot
guarantee that a trading market will ever develop or if a market does develop,
that it will continue.
Market Price
Our common stock is not quoted at the present time. The Securities and
Exchange Commission has adopted a Rule that established the definition of a
"penny stock," for purposes relevant to us, as any equity security that has a
market price of less than $5.00 per share or with an exercise price of less than
$5.00 per share, subject to certain exceptions. For any transaction involving a
penny stock, unless exempt, the rules require:
o that a broker or dealer approve a person's account for transactions in
penny stocks; and
o the broker or dealer receive from the investor a written agreement to
the transaction, setting forth the identity and quantity of the penny
stock to be purchased. In order to approve a person's account for
transactions in penny stocks, the broker or dealer must
o obtain financial information and investment experience and objectives
of the person; and
o make a reasonable determination that the transactions in penny stocks
are suitable for that person and that person has sufficient knowledge
and experience in financial matters to be capable of evaluating the
risks of transactions in penny stocks. The broker or dealer must also
deliver, prior to any transaction in a penny stock, a disclosure
schedule prepared by the Commission relating to the penny stock market,
which, in highlight form,
o sets forth the basis on which the broker or dealer made the suitability
determination; and
o that the broker or dealer received a signed, written agreement from the
investor prior to the transaction. Disclosure also has to be made about
the risks of investing in penny stock in both public offering and in
secondary trading, and about commissions payable to both the
broker-dealer and the registered representative, current quotations for
the securities and the rights and remedies available to an investor in
cases of fraud in penny stock transactions. Finally, monthly statements
have to be sent disclosing recent price information for the penny stock
held in the account and information on the limited market in penny
stocks.
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Management intends to strongly consider undertaking a transaction with
any merger or acquisition candidate that will allow our securities to be traded
without the aforesaid limitations. However, we cannot predict whether, upon a
successful merger or acquisition, we will qualify our securities for listing on
Nasdaq or some other national exchange, or be able to maintain the maintenance
criteria necessary to insure continued listing. Failure to qualify our
securities or to meet the relevant maintenance criteria after qualification in
the future may result in the discontinuance of the inclusion of our securities
on a national exchange. However, trading, if any, in our securities may then
continue in the non-Nasdaq over-the-counter market. As a result, a shareholder
may find it more difficult to dispose of, or to obtain accurate quotations as to
the market value of, our securities.
Penny Stock Regulation
For transactions covered by Rule 15g-9 under the `34 Act, a
broker-dealer must furnish to all investors in penny stocks, a risk disclosure
document required by the rule, make a special suitability determination of the
purchaser and have received the purchaser's written agreement to the transaction
prior to the sale. In order to approve a person's account for transactions in
penny stock, the broker or dealer must (i) obtain information concerning the
person's financial situation, investment experience and investment objectives;
(ii) reasonably determine, based on the information required by paragraph (i)
that transactions in penny stock are suitable for the person and that the person
has sufficient knowledge and experience in financial matters that the person
reasonably may be expected to be capable of evaluating the rights of
transactions in penny stock; and (iii) deliver to the person a written statement
setting forth the basis on which the broker or dealer made the determination
required by paragraph (ii) in this section, stating in a highlighted format that
it is unlawful for the broker or dealer to effect a transaction in a designated
security subject to the provisions of paragraph (ii) of this section unless the
broker or dealer has received, prior to the transaction, a written agreement to
the transaction from the person; and stating in a highlighted format immediately
preceding the customer signature line that the broker or dealer is required to
provide the person with the written statement and the person should not sign and
return the written statement to the broker or dealer if it does not accurately
reflect the person's financial situation, investment experience and investment
objectives and obtain from the person a manually signed and dated copy of the
written statement.
A penny stock means any equity security other than a security (i)
registered, or approved for registration upon notice of issuance on a national
securities exchange that makes transaction reports available pursuant to 17 CFR
11Aa3-1 (ii) authorized or approved for authorization upon notice of issuance,
for quotation on the Nasdaq NMS ; (iii) that has a price of five dollars or more
or . . . . (iv) whose issuer has net tangible assets in excess of $2,000,000
demonstrated by financial statements dated less than fifteen months previously
that the broker or dealer has reviewed and has a reasonable basis to believe are
true and complete in relation to the date of the transaction with the person.
Consequently, the rule may affect the ability of broker-dealers to sell the
Company's securities.
Holders
There are two (2) holders of our common stock. In July 1997, we issued
500,000 of common stock for services in formation and organization valued at
$.0001 per share ($50.00). All of our issued and outstanding shares of common
stock were issued in accordance with the exemption from registration afforded by
Section 4(2) of the Securities Act of 1933.
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As of the date of this report, all of our common stock are eligible for
sale under Rule 144 promulgated under the `33 Act, as amended, subject to
certain limitations included in said Rule. In general, under Rule 144, a person
(or persons whose shares are aggregated), who has satisfied a one year holding
period, under certain circumstances, may sell within any three-month period a
number of shares that does not exceed the greater of one percent of the then
outstanding common stock or the average weekly trading volume during the four
calendar weeks prior to the sale. Rule 144 also permits, under certain
circumstances, the sale of shares without any quantity limitation by a person
who has satisfied a two-year holding period and who is not, and has not been for
the preceding three months, an affiliate.
Dividends
We have not paid any dividends to date, and have no plans to do so in
the immediate future.
Transfer Agent
We do not have a transfer agent at this time.
DESCRIPTION OF SECURITIES
Our authorized capital stock consists of 100,000,000 shares, of common
stock, par value $.0001 per share. There are 500,000 shares of common stock
issued and outstanding as of the date of this filing.
Common Stock
All shares of common stock have equal voting rights and, when validly
issued and outstanding, are entitled to one vote per share in all matters to be
voted upon by shareholders. The shares of common stock have no preemptive,
subscription, conversion or redemption rights and may be issued only as fully
paid and nonassessable shares. Cumulative voting in the election of directors is
not permitted, which means that the holders of a majority of the issued and
outstanding shares of common stock represented at any meeting where a quorum is
present will be able to elect the entire Board of Directors if they so choose.
In that event, the holders of the remaining shares of common stock will not be
able to elect any directors. In the event of liquidation, each shareholder is
entitled to receive a proportionate share of our assets available for
distribution to shareholders after the payment of liabilities and after
distribution in full of preferential amounts, if any. All shares of our common
stock issued and outstanding are fully paid and nonassessable. Holders of stock
are entitled to share pro rata in dividends and distributions with respect to
the common stock, as may be declared by the Board of Directors out of funds
legally available therefor. We have no intention to issue additional shares of
stock.
There are no outstanding options or warrants to purchase, or securities
convertible into, our common equity. The 500,000 shares of our common stock
currently outstanding are restricted securities as that term is defined in the
Securities Act. Under Rule 144 of the Securities Act, if any of the shares being
offered by the selling shareholders are unsold, the holders of the restricted
securities may each sell a portion of their shares during any three (3) month
period after January 29, 1999.
SHARES ELIGIBLE FOR FUTURE RESALE
There has been no public market for our common stock and we cannot
assure you that a significant public market for our common stock will be
developed or be sustained after this offering. Sales of substantial amounts of
common stock in the public market after this offering, or the possibility of
substantial sales occurring, could adversely affect prevailing market prices for
the common stock or our future ability to raise capital through an offering of
equity securities.
-25-
<PAGE>
Upon completion of this offering, we will have 500,000 shares
outstanding. The 500,000 shares proposed to be sold in this offering will be
freely tradeable without restriction or further registration under the
Securities Act unless purchased by "affiliates" of Consumer Marketing
Corporation, as that term is defined in Rule 144 under the Securities Act
described below. Sales of outstanding shares to residents of certain states or
jurisdictions may only be effected pursuant to a registration in or applicable
exemption from the registration provisions of the securities laws of those
states or jurisdictions.
In general, under Rule 144 as in effect at the closing of this
offering, beginning 90 days after the date of this prospectus, a person (or
persons whose shares are aggregated) who has beneficially owned Restricted
Shares for at least one year (including the holding period of any prior owner
who is not an affiliate of Consumer Marketing Corporation) would be entitled to
sell within any three-month period a number of shares that does not exceed the
greater of one percent of the then outstanding shares of common stock (5,000
shares immediately after this offering) or the average weekly trading volume of
the common stock during the four calendar weeks preceding the filing of a Form
144 with respect to the sale. Sales under Rule 144 are also subject to certain
manner of sale and notice requirements and to the availability of current public
information about us. Under Rule 144(k), a person who is not deemed to have been
an affiliate of Consumer Marketing Corporation at any time during the 90 days
preceding a sale and who has beneficially owned the shares proposed to be sold
for at least two years (including the holding period of any prior owner who is
not an affiliate) is entitled to sell their shares without complying with the
manner of sale, public information, volume limitation or notice provisions of
Rule 144.
WHERE CAN YOU FIND MORE INFORMATION?
We are a reporting company, and are subject to the reporting
requirements of the Exchange Act. We voluntarily filed a Form 10-SB on September
3, 1999. We have filed a registration statement with the SEC on form SB-2 to
register the offer and sale of the shares. This prospectus is part of that
registration statement, and, as permitted by the SEC's rules, does not contain
all of the information in the registration statement. For further information
about us and the shares offered under this prospectus, you may refer to the
registration statement and to the exhibits and schedules filed as a part of the
registration statement. You can review the registration statement and its
exhibits and schedules at the public reference facility maintained by the SEC at
Judiciary Plaza, Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549 and
at the regional offices of the SEC at 7 World Trade Center, Suite 1300, New
York, New York 10048 and Citicorp Center, Suite 1400, 500 West Madison Street,
Chicago, Illinois 60661. Please call the SEC at 1-800-SEC-0330 for further
information on the public reference room. The registration statement is also
available electronically on the World Wide Web at http://www.sec.gov.
You can also call or write us at any time with any questions you may
have. We'd be pleased to speak with you about any aspect of our business and
this offering.
REPORTS TO STOCKHOLDERS
We intend to furnish our stockholders with annual reports containing
audited financial statements as soon as practicable at the end of each fiscal
year. Our fiscal year ends on June 30th.
PLAN OF DISTRIBUTION
We offer the right to purchase for 500,000 shares at $.20 per share. We
propose to offer the shares directly on a best efforts, no minimum basis, and no
compensation is to be paid to any person for the offer and sale of the shares.
-26-
<PAGE>
We are selling the shares through our president, without the use of a
professional securities underwriting firm. Consequently, there may be less due
diligence performed in conjunction with this offering than would be performed in
an underwritten offering. Although he is an associated person of us as that term
is defined in Rule 3a4-1 under the Exchange Act, he is deemed not to be a broker
for the following reasons:
He is not subject to a statutory disqualification under the Exchange
Act at the time of his participation in the sale of our securities.
He will not be compensated for his participation in the sale of our
securities by the payment of commission or other remuneration based
either directly or indirectly on transactions in securities.
He is not an associated person of a broker or dealers at the time of
his participation in the sale of our securities.
He will restrict his participation to the following activities:
A. Preparing any written communication or delivering any
communication through the mails or other means that does not
involve oral solicitation by him of a potential purchaser;
B. Responding to inquiries of potential purchasers in a
communication initiated by the potential purchasers, provided
however, that the content of responses are limited to
information contained in a registration statement filed under
the Securities Act or other offering document;
C. Performing ministerial and clerical work involved in effecting
any transaction.
As of the date of this Prospectus, no broker has been retained by us
for the sale of securities being offered. In the event a broker who may be
deemed an underwriter is retained by us, an amendment to our registration
statement will be filed.
Arbitrary Determination of Offering Price
The offering price of $.20 per share has been arbitrarily determined by
us, and bears no relationship whatsoever to our assets, earnings, book value or
any other objective standard of value. Among the factors considered by us were:
A. The lack of operating history;
B. The proceeds to be raised by the offering;
C. The amount of capital to be contributed by the public in
proportion to the amount of stock to be retained by present
stockholders;
D. The current market conditions in the over-the-counter market
Method of Purchasing
Persons may purchase shares by filling in and signing the share
purchase agreement and delivering it, prior to the expiration date, to us. The
purchase price of $.20 per share must be paid in cash or by check, bank draft or
postal express money order payable in United States dollars to our order. You
may not pay in cash.
-27-
<PAGE>
LEGAL MATTERS
The validity of the shares offered under this prospectus is being
passed upon for us by Evers & Hendrickson, LLP of San Francisco, California.
EXPERTS
Our financial statements as of the period ended June 30, 2000, included
in this prospectus and in the registration statement, have been so included in
reliance upon the reports of Cordovano & Harvey, P.C., independent certified
public accountants, included in this prospectus, and upon the authority of said
firm as experts in accounting and auditing.
INDEMNIFICATION OF OFFICERS AND DIRECTORS
Article XII of the Articles of Incorporation and Article VI of our
Bylaws, as amended, set forth certain indemnification rights. Our Bylaws provide
that we will possess and may exercise all powers of indemnification of officers,
directors, employees, agents and other persons and all incidental powers and
authority. Our Board of Directors is authorized and empowered to exercise all of
our powers of indemnification, without shareholder action. Our assets could be
used or attached to satisfy any liabilities subject to indemnification. See
Exhibit 3.1 hereto.
Disclosure of Commission Position on Indemnification for
Securities Act Liabilities
The Nevada Revised Statutes, as amended, authorize us to indemnify any
director or officer under certain prescribed circumstances and subject to
certain limitations against certain costs and expenses, including attorneys'
fees actually and reasonably incurred in connection with any action, suit or
proceedings, whether civil, criminal, administrative or investigative, to which
the person is a party by reason of being a director or officer if it is
determined that the person acted in accordance with the applicable standard of
conduct set forth in the statutory provisions. Our Articles of Incorporation
provides for the indemnification of directors and officers to the full extent
permitted by Nevada law.
We may also purchase and maintain insurance for the benefit of any
director or officer that may cover claims for situations where we could not
provide indemnification.
Although indemnification for liabilities arising under the `33 Act may
be permitted to officers, directors or persons controlling us under Nevada law,
we have been informed that in the opinion of the U.S. Securities and Exchange
Commission, this form of indemnification is against public policy as expressed
in the `33 Act, and is therefore unenforceable.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
In January, 2000, we appointed Cordovano & Harvey, P.C. to replace
Kish, Leake & Associates, P.C. as our principal accountants. The report of Kish,
Leake & Associates, P.C. on our financial statements did not contain an adverse
opinion or a disclaimer of opinion, and was not qualified or modified as to
uncertainty, audit scope or accounting principles. We had no disagreements with
them on any matter of accounting principles or practices, financial statement
disclosure or auditing scope or procedure. We did not consult with Cordovano &
Harvey, P.C. on any accounting or financial reporting matters in the periods
prior to their appointment. The change in accountants was approved by the Board
of Directors. We filed a Form 8-K with the Commission (File No. 000-27235) on
January 24, 2000.
-28-
<PAGE>
FINANCIAL STATEMENTS
The following financial statements are attached to this report and
filed as a part of this Registration Statement.
Table of Contents - June 30, 2000 Financial Statements.......................F-1
Independent Auditor's Report...............................................F-2-3
Balance Sheet as of June 30, 2000............................................F-4
Statement of Operations as of June 30,2000...................................F-5
Statement of Cash Flows as of June 30, 2000..................................F-6
Statement of Shareholders' Equity as of June 30, 2000........................F-7
Notes to Financial Statements as of June 30, 2000............................F-8
F-1
<PAGE>
To the Board of Directors and Shareholders
Consumer Marketing Corporation
Independent Auditors' Report
We have audited the balance sheet of Consumer Marketing Corporation (a
development stage company) as of June 30, 2000 and the related statements of
operations, shareholders' equity and cash flows for the year ended June 30,
2000. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Consumer Marketing Corporation
as of June 30, 2000, and the related statements of operations and cash flows for
the year ended June 30, 2000 in conformity with generally accepted accounting
principles.
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. As discussed in Note A to the financial
statements, the Company has a substantial dependence on the success of its
development stage activities, significant losses since inception, lack of
liquidity, and a working capital deficiency at June 30, 2000. These factors
raise substantial doubt about the Company's ability to continue as a going
concern. Management's plans regarding those matters are also described in Note
A. The financial statements do not include any adjustments that might result
from the outcome of this uncertainty.
Cordovano and Harvey, P.C
Denver, Colorado
July 17, 2000
<PAGE>
Independent Auditors' Report
We have audited the accompanying balance sheet of Consumer Marketing Corporation
(a development stage company) as of June 30, 1999 (not separately included
herein) and the related statements of income, shareholders' deficit, and cash
flows for the fiscal year ended June 30, 1999. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Consumer Marketing Corporation
at June 30, 1999, and the results of its operations and cash flows for the
fiscal year ended June 30, 1999 in conformity with generally accepted accounting
principles.
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. As discussed in Note 5 (not separately
included herein), the Company is in the development stage and has no operations
as of June 30, 1999. The deficiency in working capital as of June 30, 1999
raises substantial doubt about its ability to continue as a going concern.
Management's plans concerning these matters are described in Note 5 (not
separately included herein). The financial statements do not include any
adjustments that might result from the outcome of these uncertainties.
Kish, Leake, and Associates, P.C.
Certified Public Accountants
Englewood, Colorado
August 23, 1999
F-2
<PAGE>
CONSUMER MARKETING CORPORATION
(A Development Stage Company)
Notes to Financial Statements
Note A: Organization and summary of significant accounting policies
Organization
Consumer Marketing Corporation (the "Company") was incorporated under the laws
of Nevada on January 30, 1997 to engage in any lawful corporate undertaking,
including, but not limited to, selected mergers and acquisitions. The Company is
a development stage enterprise in accordance with Statement of Financial
Accounting Standard (SFAS) No. 7.
The Company has been in the development stage since inception and has no
operations to date.
The accompanying financial statements have been prepared on a going concern
basis, which contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business. As shown in the accompanying
financial statements, the Company is a development stage company with no revenue
as of June 30, 2000 and has incurred losses of $(18,366), $(1,973) and $(20,389)
for the years ended June 30, 2000 and 1999 and for the period January 30, 1997
(inception) through June 30, 2000, respectively. The Company has no operating
history or revenue, no assets, and continuing losses which the Company expects
will continue for the foreseeable future. These factors among others may
indicate that the Company will be unable to continue as a going concern for a
reasonable period of time. An affiliate of the Company plans to continue
advancing funds on an as needed basis and in the longer term, revenues from the
operations of a merger candidate, if found. The Company's continuation as a
going concern is dependent upon continuing capital advances from an affiliate
and commencing operations or locating and consummating a business combination
with an operating company. There is no assurance that the affiliate will
continue to provide capital to the Company or that the Company can commence
operations or identify such a target company and consummate such a business
combination. These factors, among others, raise substantial doubt about its
ability to continue as a going concern. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
Summary of significant accounting policies
Cash equivalents
The Company's financial instruments consist of accounts payable and accrued
liabilities. For financial accounting purposes and the statement of cash flows,
cash equivalents include all highly liquid debt instruments purchased with an
original maturity of three months or less.
F-8
<PAGE>
CONSUMER MARKETING CORPORATION
(A Development Stage Company)
Notes to Financial Statements
Note A: Organization and summary of significant accounting policies, continued
Use of estimates
The preparation of the financial statements in conformity with generally
accepted accounting principals requires management to make estimates and
assumptions that affect certain reported amounts of assets and liabilities;
disclosure of contingent assets and liabilities at the date of the financial
statements; and the reported amounts of revenues and expenses during the
reporting period. Accordingly, actual results could differ from those estimates.
Income Taxes
The Company reports income taxes in accordance with SFAS No. 109, "Accounting
for Income Taxes", which requires the liability method in accounting for income
taxes. Deferred tax assets and liabilities arise from the difference between the
tax basis of an asset or liability and its reported amount on the financial
statements. Deferred tax amounts are determined by using the tax rates expected
to be in effect when the taxes will actually be paid or refunds received, as
provided under currently enacted law. Valuation allowances are established when
necessary to reduce the deferred tax assets to the amounts expected to be
realized. Income tax expense or benefit is the tax payable or refundable,
respectively, for the period plus or minus the change during the period in the
deferred tax assets and liabilities.
Loss per common share
The Company has adopted Statement of Financial Accounting Standards No. 128
("SFAS 128") which requires the disclosure of basic and diluted earnings per
share. Basic earnings per share is calculated using income available to common
shareowners divided by the weighted average of common shares outstanding during
the year. Diluted earnings per share is similar to basic earnings per share
except that the weighted average of common shares outstanding is increased to
include the number of additional common shares that would have been outstanding
if the dilutive potential common shares, such as options, had been issued. The
Company has a simple capital structure and no outstanding options at June 30,
2000. Therefore, dilutive earnings per share are not applicable and accordingly
have not been presented
Fiscal year
The Company operates on a fiscal year ending on June 30.
F-9
<PAGE>
CONSUMER MARKETING CORPORATION
(A Development Stage Company)
Notes to Financial Statements
Note A: Organization and summary of significant accounting policies, continued
Stock based compensation
SFAS No. 123, "Accounting for Stock-Based Compensation" was issued in October
1995. This accounting standard permits the use of either a fair value based
method or the method defined in Accounting Principles Board Opinion 25,
"Accounting for Stock Issued to Employees" ("APB 25") to account for stock-based
compensation arrangements. Companies that elect to use the method provided in
APB 25 are required to disclose pro forma net income and earnings per share that
would have resulted from the use of the fair value based method. The Company has
elected to continue to determine the value of stock-based compensation
arrangements under the provisions of APB 25. For stock issued to officers the
fair value approximates the intrinsic value. Therefore, no pro forma disclosures
are presented.
Fair value of financial instruments
SFAS 107, "Disclosure About Fair Value of Financial Instruments," requires
certain disclosures regarding the fair value of financial instruments. The
Company has determined, based in available market information and appropriate
valuation methodologies, the fair value of its financial instruments
approximates carrying value. The carrying amounts of cash, accounts payable, and
other accrued liabilities approximate fair value due to the short-term maturity
of the instruments.
Recently issued accounting pronouncements
The Company has adopted the following new accounting pronouncements for the year
ended June 30, 2000. There was no effect on the financial statements presented
from the adoption of the new pronouncements.
Statement of Financial Accounting Standard ("SFAS") No. 130, "Reporting
Comprehensive Income," requires the reporting and display of total comprehensive
income and its components in a full set of general-purpose financial statements.
SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information," is based on the "management" approach for reporting segments. The
management approach designates the internal organization that is used by
management for making operating decisions and assessing performance as the
source of the Company's reportable segments. SFAS No. 131 also requires
disclosure about the Company's products, the geographic areas in which it earns
revenue and holds long-lived assets, and its major customers.
SFAS No. 132, "Employers' Disclosures about Pensions and Other Post-retirement
Benefits," which requires additional disclosures about pension and other
post-retirement benefit plans, but does not change the measurement or
recognition of those plans.
F-10
<PAGE>
CONSUMER MARKETING CORPORATION
(A Development Stage Company)
Notes to Financial Statements
Note A: Organization and summary of significant accounting policies, concluded
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133 establishes accounting and
reporting standards for derivative instruments, including derivative instruments
embedded in other contracts, and for hedging activities. SFAS No. 133 is
effective for all fiscal quarters of fiscal years beginning after June 15, 1999.
This statement is not expected to affect the Company as the Company currently
does not have any derivative instruments or hedging activities.
In June 1999, the FASB issued SFAS No. 137, which amended the implementation
date for SFAS No. 133 to be effective for all fiscal quarters of all fiscal
years beginning after June 15, 2000.
Statement of Position ("SOP") 98-1 "Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use." This SOP requires that
entities capitalize certain internal-use software costs once certain criteria
are met.
SOP 98-5, "Reporting on the Costs of Start-Up Activities." Sop 98-5 provides,
among other things, guidance on the reporting of start-up costs and organization
costs. It requires costs of start-up activities and organization costs to be
expensed as incurred.
The Company will continue to review these new accounting pronouncements over
time to determine if any additional disclosures are necessary based on evolving
circumstances.
Note B: Related party transactions
The Company maintains a mailing address at an affiliate's address. This address
is Suite 106, 1456 St. Paul Street, Kelowna, B.C., Canada, V1Y 2E6. At this time
the Company has no need for an office.
The Company has issued an officer 500,000 shares of common stock in exchange for
services related to management and organization costs. The officer will provide
administrative and marketing services as needed. The officer may, from time to
time, advance to the Company any additional funds that the Company needs for
costs in connection with searching for or completing an acquisition or merger.
The Company does not maintain a checking account and expenses incurred by the
Company have historically been paid by an affiliate. Since inception the Company
incurred $20,389 in expenses of which $17,554 were paid by an affiliate. The
affiliate does not expect to be repaid for the expenses it pays on behalf of the
Company. Accordingly, as the expenses are paid, they are classified as
additional-paid-in capital.
F-11
<PAGE>
CONSUMER MARKETING CORPORATION
(A Development Stage Company)
Notes to Financial Statements
Note C: Income taxes
<TABLE>
A reconciliation of U.S. statutory federal income tax rate to the effective rate
for the period from January 30, 1997 (inception) through June 30, 2000 is as
follows:
<CAPTION>
January 30, 1997
1997
(inception)
Year Ended Year Ended Through
June 30, June 30, March 31,
2000 1999 2000
----------------- ----------------- -------------------
<S> <C> <C> <C>
U.S. statutory federal rate.................... 15.00% 15.00% 15.00%
State income tax rate, net of federal benefit.. 4.04% 4.04% 4.04%
Offering costs, permanent difference........... 0.00% 0.00% 0.00%
Net operating loss (NOL) for which no tax benefit
is currently available..................... -19.04% -19.04% -19.04%
----------------- ----------------- -------------------
0.00% 0.00% 0.00%
================= ================= ===================
</TABLE>
The valuation allowance offsets the net deferred tax asset for which there is no
assurance of recovery. The change in the valuation allowance for the years ended
June 30, 2000 and 1999 was $3,120 and $366, respectively. The change in the
valuation allowance for the period from January 30, 1997 (inception) through
June 30, 2000 was $3,882. NOL carryforwards at June 30, 2000 will begin to
expire in 2012. The valuation allowance will be evaluated at the end of each
year, considering positive and negative evidence about whether the asset will be
realized. At that time, the allowance will either be increased or reduced;
reduction could result in the complete elimination of the allowance if positive
evidence indicates that the value of the deferred tax asset is no longer
impaired and the allowance is no longer required.
Should the Company undergo an ownership change, as defined in Section 382 of the
Internal Revenue Code, the Company's tax net operating loss carryforwards
generated prior to the ownership change will be subject to an annual limitation
which could reduce or defer the utilization of those losses.
Note D: Shareholders' equity
Common Stock
The Company initially authorized 25,000 shares of $1.00 par value common stock.
On January 30, 1997 the Board of Directors approved an increase in authorized
shares to 100,000,000 and changed the par value to $.0001. On January 30, 1997
the Company issued 500,000 shares of common stock for services valued at $.0001
per share. The shares were valued nominally at $50 as there was no market price
for the Company's common stock as of the date of issuance.
F-12
<PAGE>
CONSUMER MARKETING CORPORATION
(A Development Stage Company)
Notes to Financial Statements
Note D: Shareholders' equity, concluded
On June 25, 1999 the Company filed amended articles with the state of Nevada to
change the authorized shares of common stock originally approved by the Board of
Directors on January 30, 1997 from 25,000, no par value to 100,000,000, $.0001
par. Nevada Revised Statutes Section 78.385 (c) treats this amendment as if it
was filed on January 30, 1997, therefore, giving the Company enough shares for
the original issuance of 500,000 shares of common stock.
F-13
<PAGE>
<TABLE>
<CAPTION>
=========================================================== ==========================================================
<S> <C>
You should rely only on the information contained in this
prospectus. We have not authorized anyone to provide you 500,000 Shares
with information different from that contained in this common stock
prospectus. We are offering to sell, and seeking offers
to buy, shares of common stock only in jurisdictions
where offers and sales are permitted. The information
contained in this prospectus is accurate only as of the
date of this prospectus, regardless of the time of
delivery of this prospectus or of any sale of our common
stock.
TABLE OF CONTENTS
PROSPECTUS SUMMARY......................................3
SUMMARY FINANCIAL INFORMATION...........................4
RISK FACTORS............................................6 CONSUMER MARKETING
YOUR RIGHTS AND SUBSTANTIVE PROTECTION UNDER RULE 419..8 CORPORATION
USE OF PROCEEDS........................................10
CAPITALIZATION.........................................10
DESCRIPTION OF BUSINESS................................11
PLAN OF OPERATION......................................12
DESCRIPTION OF PROPERTY................................17
PRINCIPAL SHAREHOLDERS.................................18
MANAGEMENT.............................................19
EXECUTIVE COMPENSATION.................................22 ____________________
CERTAIN RELATIONSHIPS AND
RELATED TRANSACTIONS...................................22
LEGAL PROCEEDINGS......................................22 PROSPECTUS
MARKET FOR OUR COMMON STOCK............................23
DESCRIPTION OF SECURITIES..............................25
SHARES ELIGIBLE FOR FUTURE ____________________
RESALE ................................................25
WHERE CAN YOU FIND MORE INFORMATION....................26
REPORTS TO STOCKHOLDERS................................26 August 25, 2000
---------------
PLAN OF DISTRIBUTION...................................26
LEGAL MATTERS..........................................28
EXPERTS................................................28
INDEMNIFICATION OF OFFICERS
AND DIRECTORS..........................................28
CHANGES IN AND DISAGREEMENTS
WITH ACCOUNTANTS ON
ACCOUNTING AND
FINANCIAL DISCLOSURE...................................28
FINANCIAL STATEMENTS..................................F-1
=========================================================== ==========================================================
</TABLE>
<PAGE>
Part II. Information Not Required In Prospectus
Item 24. Indemnification of officers and directors
The information required by this Item is incorporated by reference to
"Indemnification of Officers and Directors" in the Prospectus.
Item 25 -- Other Expenses of Issuance and Distribution
Our estimated expenses in connection with the issuance and distribution
of the securities being registered are estimated to be as follows:
Securities and Exchange Commission filing fee $ 26.50
Blue Sky filing fees 500.00
Legal fees and expenses 6,000.00
Printing 1,500.00
Marketing expenses 1,000.00
Miscellaneous 500.00
---------
Total $ 9,526.50
========
Management will bear all expenses shown above.
Item 26 -- Recent Sales of Unregistered Securities
On January 30, 1997, the Company issued 500,000 shares of common stock
to Devinder Randhawa, for $50. The Company relied on exemption provided by
Section 4(2) of the Securities Act of 1933, as amended, for the issuance of
500,000 shares of common stock to Mr. Randhawa. All of the shares of common
stock of the Company previously issued have been issued for investment purposes
in a "private transaction" and are "restricted" shares as defined in Rule 144
under the `33 Act. These shares may not be offered for public sale except under
Rule 144, or otherwise, pursuant to the `33 Act.
On January 30, 1997, Mr. Randhawa gifted 152,000 shares of common stock
to Bob Hemmerling, President of the Company and 196,000 shares of common stock
to seven other shareholders for a total of 348,000 shares of common stock. The
shares were gifted to increase the number of shareholders. Mr. Randhawa relied
on exemption provided by Section 4(1) of the Securities Act of 1933, for the
transfer of the 348,000 shares. All of these shares are "restricted" shares as
defined in Rule 144 under the Securities Act of 1933, as amended (the "Act"). As
of April 24, 2000, certificates representing the 196,000 shares were returned to
Mr. Randhawa.
As of the date of this report, all of the issued and outstanding shares
of the Company's common stock are eligible for sale under Rule 144 promulgated
under the `33 Act, subject to certain limitations included in said Rule.
In general, under Rule 144, a person, or persons whose shares are
aggregated, who has satisfied a one year holding period, under certain
circumstances, may sell within any three-month period a number of shares that
does not exceed the greater of one percent of the then outstanding common stock
or the average weekly trading volume during the four calendar weeks prior to
such sale. Rule 144 also permits, under certain circumstances, the sale of
shares without any quantity limitation by a person who has satisfied a two-year
holding period and who is not, and has not been for the preceding three months,
an affiliate of the Company.
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Item 27-Exhibits
3.1* Articles of Incorporation
3.2* Amendment to Articles of Incorporation
3.3* Bylaws
4.1* Specimen Informational Statement
4.1.1 Share Purchase Agreement
5.1** Opinion of Evers & Hendrickson, LLP with respect
to the legality of the shares being registered
23.1.1 Consent of Kish, Leake & Associates, P.C.
23.1.2 Consent of Cordovano & Harvey, P.C.
23.2 Consent of Evers & Hendrickson, LLP (included in Exhibit 5.1)
24.1 Power of Attorney
27.1 Financial Data Schedule
99.1*** Escrow Agreement
* Incorporated by reference to Form 10-SB, file no. 000-27235, filed
September 3, 1997.
** Previously filed.
*** To be filed in an amendment.
Item 28 -- Undertakings
We undertake that we 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; and
(iii) Include any additional or changed 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 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.
We undertake to provide to the underwriters at the closing specified in
the underwriting agreement certificates in such denominations and registered in
such names as the underwriter requires to permit prompt delivery to each
purchaser.
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Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, we have 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.
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form SB-2 and authorized this registration
statement on Form SB-2 to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Kelowna, Province of British Columbia, Canada,
onAugust 25, 2000.
CONSUMER MARKETING CORPORATION
/s/ Bob Hemmerling
-------------------------------------
Bob Hemmerling, Director, by Power of
Attorney filed May 17, 2000
In accordance with the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates stated.
Signature Title Date
/s/ Bob Hemmerling Director August 25, 2000
---------------------------
Bob Hemmerling, by Power of
Attorney filed May 17, 2000
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