File No. *
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As filed with the Securities & Exchange Commission on ___________ ,2000
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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EASTERN MANAGEMENT CORP.
(formerly Inforetech Inc.)
(Name of small business issuer in its charter)
Nevada
(State or jurisdiction of Incorporation or organization)
6770
(Primary Standard Industrial Identification No.)
98-0204682
(I.R.S. Employer Classification No.)
Suite 1500, 885 West Georgia Street
Vancouver, B.C.
V6C 3E8 Canada
(Address of principal place of business or intended principal place of business)
Jason John
Eastern Management Corp.
Suite 1500, 885 West Georgia Street
Vancouver, B.C.
V6C 3E8 Canada
(604)687-0717
(Name, address and telephone number of agent for service)
Copies to:
Gerald R. Tuskey, Personal Law Corporation
Suite 1000, 409 Granville Street
Vancouver, B.C.
V6C 1T2 Canada
(604)681-9588
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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 PROPOSED PROPOSED AMOUNT OF
SECURITIES TO AMOUNT TO BE MAXIMUM OFFERING MAXIMUM AGGREGATE REGISTRATION
BE REGISTERED REGISTERED PRICE PER UNIT (1) OFFERING PRICE FEE
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Common Stock, 100,000 $1.00 $100,000 $26.40
Par value
$0.0001
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(1) Estimated solely for the purpose of calculating the registration fee and
pursuant to Rule 457.
The registrant will amend this registration statement on such dates as are
necessary to delay its effective date until the registrant files a further
amendment which specifically states that this registration statement will become
effective under Section 8(a) of the Securities Act of 1933 or until the
registration statement becomes effective on a date the Commission determines.
<PAGE>
PART I - INFORMATION REQUIRED IN PROSPECTUS
Cross Reference Sheet Showing the Location in Prospectus of Information Required
by Items of Form SB-2:
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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 Inside Front and Outside Back Cover
Cover Pages of Prospectus Pages of Prospectus
3. Summary Information and Risk Prospectus Summary; Risk Factors
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 Selling Security Holders
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
on Indemnification for Securities Directors
Act Liabilities
15. Organization within Last Five Years Management, Certain Transactions
16. Description of Business Business
17. Management's Discussion and Plan of Operation
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 Disclosure Financial Disclosure
</TABLE>
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PART II
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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 Not Applicable
</TABLE>
<PAGE>
Subject To Completion, Dated ___________, 2000
INITIAL PUBLIC OFFERING
PROSPECTUS
EASTERN MANAGEMENT CORP.
100,000 SHARES OF COMMON STOCK
$1.00 PER SHARE
Eastern Management Corp. 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.
We are offering these shares through our president, Mr. Jason John, without the
use of a professional underwriter. We will not pay commissions on stock sales.
This is our initial public offering, and 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 7.
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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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Initial public offering price $1.00 $100,000
Underwriting discounts/commissions (1) $Nil $Nil
Estimated offering expenses (1) $Nil $Nil
Net offering proceeds to Eastern $1.00 $100,000 (1)
Management Corp.
(1) Does not include offering costs, including filing, printing, legal,
accounting, transfer agent and escrow agent fees estimated at $15,000.
We will pay these expenses.
In addition to the 100,000 shares offered for sale by the Company, the persons
named in this Prospectus under the caption "Selling Stockholders" are offering a
total of 500,000 shares of our common stock for sale to the public.
We will receive no part of the proceeds of any sales by the Selling
Stockholders. All selling and other expenses incurred by the Selling
Stockholders will be paid by the Selling Stockholders.
The date of this Prospectus is , 2000.
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TABLE OF CONTENTS
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PROSPECTUS SUMMARY.............................................................................3
LIMITED STATE REGISTRATION.....................................................................3
SUMMARY FINANCIAL INFORMATION..................................................................3
RISK FACTORS...................................................................................6
No Operating History or Revenue and Minimal Assets..........................................6
No access to your funds while held in escrow................................................6
Failure of sufficient number of investors to reconfirm investment...........................6
Extremely limited capitalization............................................................6
No transfer of escrowed securities..........................................................6
Speculative Nature of Company's Operations..................................................7
Scarcity of and Competition for Business Opportunities and Combinations.....................7
No Agreement for Business Combination or Other Transaction..................................7
No Standards for Business Combination.......................................................7
Continued Management Control, Limited Time Availability.....................................7
Conflicts of Interest - General.............................................................7
Affiliation With Other "Blank Check" Companies..............................................8
Reporting Requirements May Delay or Preclude Acquisition....................................8
Lack of Market Research or Marketing Organization...........................................8
Lack of Diversification.....................................................................8
International Business Risk.................................................................8
Probable Change in Control and Management...................................................8
Reduction of Percentage Share Ownership Following a Business Combination....................9
Disadvantages of Blank Check Offering.......................................................9
Absence of Trading Market...................................................................9
Limitations on share resale.................................................................9
No Underwriter..............................................................................9
"Penny" Stock Regulation of Broker-Dealer Sales of Company Securities.......................9
Taxation...................................................................................10
Requirement of Audited Financial Statements May Disqualify Business Opportunities..........10
YOUR RIGHTS AND SUBSTANTIVE PROTECTION UNDER RULE 419.........................................10
DILUTION......................................................................................11
USE OF PROCEEDS...............................................................................12
CAPITALIZATION................................................................................13
DESCRIPTION OF BUSINESS.......................................................................14
PLAN OF OPERATION.............................................................................16
DESCRIPTION OF PROPERTY.......................................................................20
PRINCIPAL SHAREHOLDERS........................................................................21
MANAGEMENT....................................................................................21
EXECUTIVE COMPENSATION........................................................................22
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS................................................23
LEGAL PROCEEDINGS.............................................................................23
MARKET FOR OUR COMMON STOCK...................................................................23
DESCRIPTION OF SECURITIES.....................................................................25
SHARES ELIGIBLE FOR FUTURE RESALE.............................................................26
WHERE CAN YOU FIND MORE INFORMATION?..........................................................26
REPORTS TO STOCKHOLDERS.......................................................................27
PLAN OF DISTRIBUTION..........................................................................27
LEGAL MATTERS.................................................................................29
EXPERTS.......................................................................................29
INDEMNIFICATION OF OFFICERS AND DIRECTORS.....................................................30
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE....................................................................................30
FINANCIAL STATEMENTS.........................................................................F-1
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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.
Eastern Management Corp.
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 prospectus for our initial
public offering. We will not engage in any substantive commercial business
following the offering. We maintain our office at Suite 1500, 885 West Georgia
Street, Vancouver, British Columbia, V6C 3E8. Our phone number is (604)687-0717.
The Offering
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Securities offered by the 100,000 shares of common stock, $0.0001 par value, being
Company offered at $1.00 per share. (See "Description of Capital
Stock.")
Common stock outstanding 500,000 shares
prior to the offering
Common stock to be 600,000 shares
outstanding after the offering
Shares Offered by Selling The 500,000 shares offered by the Selling Stockholders have already
Stockholders: been issued by us.
Use of proceeds from sales by We will not receive any of the proceeds from the sale of shares by
Selling Stockholders: Selling Stockholders.
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LIMITED STATE REGISTRATION
Initially, our securities may be sold in __________________________ only
(although we are considering registering the shares in other states) pursuant to
an exemption from registration provisions contained in Section _____, ________
Codes. See "Risk Factors" for a discussion of the resale limitations that result
from this limited state registration.
SUMMARY FINANCIAL INFORMATION
The table below contains certain summary historical financial data. The
historical financial data for the fiscal year ended March 31, 2000 has been
derived from our audited financial statements which are contained in this
Prospectus.
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March 31, 2000
INCOME STATEMENT:
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Fiscal Year Ended
March 31, 2000,
(Audited)
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2000 1999
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Revenue $Nil $Nil
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Expenses $8,052 $Nil
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Net Income (loss) $(8,052) $Nil
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Basic Earnings (loss) per share $(0.01) $Nil
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Basic Number of Common Shares Outstanding 500,000 500,000
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BALANCE SHEET (at end of period):
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Total Assets $Nil $Nil
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Total Liabilities $Nil $Nil
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Total Shareholders Equity (Net Assets) $Nil $Nil
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Net Income per share on a fully diluted basis $(0.01) $Nil
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Expiration Date
This offering will expire 12 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 in our discretion.
Prescribed Acquisition Criteria
Rule 419 requires that, before cash and shares can be released, we must sign an
agreement to acquire a business meeting certain specified criteria. The
agreement must provide for the acquisition of a business or assets for which the
fair value of the business represents at least 80% of the maximum offering
proceeds. The agreement must include a requirement that the number of investors
representing 80% of the maximum offering proceeds must elect to reconfirm their
investment. For purposes of the offering, the fair value of the business or
assets to be acquired must be at least $80,000 (80% of $100,000).
Post-Effective Amendment
Once the agreement governing the acquisition of a business meeting the required
criteria has been signed, Rule 419 requires us to update the registration
statement with a post-effective amendment. The post-effective amendment must
contain information about the business to be purchased including audited
financial statements, the results of this offering and the use of the money
disbursed from the escrow account. The post-effective amendment must also
include the terms of the reconfirmation offer mandated by Rule 419. The
reconfirmation offer must include certain prescribed conditions that must be
satisfied before the cash and shares can be released from escrow.
Reconfirmation Offering
The reconfirmation offer must start after the effective date of the
post-effective amendment. Under Rule 419, the terms of the reconfirmation offer
must include the following conditions:
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The prospectus contained in the post-effective amendment will be sent
to each investor whose shares are held in the escrow account within 5
business days after the effective date of the post-effective amendment.
Each investor will have no fewer than 20 and no more than 45 business
days from the effective date of the post-effective amendment to notify
us in writing that the investor elects to remain an investor.
If we do not receive written notification from any investor within 45
business days following the effective date, the proportionate portion
of the funds and any related interest or dividends held in the escrow
account on the investor's behalf will be returned to the investor
within 5 business days by first class mail or other equally prompt
means.
The acquisition will be closed only if a minimum number of investors
representing 80% of the maximum offering proceeds equalling $80,000
elect to reconfirm their investment.
If a closed acquisition has not occurred by ______________ (18 months
from the date of this prospectus), the funds held in the escrow account
will be returned to all investors on a proportionate basis within 5
business days by first class mail or other equally prompt means.
Release Of Securities And Funds
The cash will be released to us, and the shares 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 signed an agreement for the acquisition of a business 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.
Determination of Offering Price
The offering price of $1.00 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:
No Operating History or Revenue and Minimal Assets.
We have had no recent operating history nor any revenues or earnings from
operations since our incorporation. We have no significant assets or financial
resources. We will sustain operating expenses without revenues, at least until
we complete a business acquisition. This may result in our incurring a net
operating loss that will increase continuously until we can complete a business
combination with a profitable business. We cannot assure you that we can
identify a suitable business opportunity and complete a business combination.
No access to your funds while held in escrow.
If we are unable to locate an acquisition candidate meeting the acquisition
criteria, you will have to wait 18 months from the date of this prospectus
before a proportionate portion of your funds are returned, without interest. You
will be offered return of your proportionate portion of the funds held in escrow
only upon the reconfirmation offering required to be conducted upon signing of
an agreement to acquire an acquisition candidate that represents 80% of the
maximum offering proceeds.
Failure of sufficient number of investors to reconfirm investment.
A business combination with an acquisition candidate cannot be closed unless,
after the reconfirmation offering required by Rule 419, investors representing
80% of the maximum offering proceeds elect to reconfirm their investment. If,
after completion of the reconfirmation offering, a sufficient number of
investors do not reconfirm their investment, the business combination will not
be closed. If so, none of the shares held in escrow will be issued and the cash
will be returned to you on a proportionate basis without interest.
Extremely limited capitalization.
As of March 31, 2000, there were $Nil assets and $Nil in liabilities. There was
$Nil available in our treasury as of March 31, 2000. Assuming the sale of all
the shares in this offering, we will receive proceeds of approximately $100,000,
all of which must be deposited in the escrow account. 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.
No transfer of escrowed securities.
No transfer or other disposition of the escrowed securities is permitted 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 as
amended, or Title 7 of the Employee Retirement Income Security Act, or the
related rules. Under Rule 15g-8, it is unlawful for any person to sell or offer
to sell the securities or any interest in the securities held in the Rule 419
escrow account other than under a qualified domestic relations order in divorce
proceedings. Any and all contracts for sale to be satisfied by delivery of the
securities and sales of derivative securities to be settled by delivery of the
securities are prohibited. You are further prohibited from selling any interest
in the securities or any derivative securities whether or not physical delivery
is required.
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Speculative Nature of Company's Operations.
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.
Scarcity of and Competition for Business Opportunities and Combinations.
The Company is and will continue to be an insignificant participant in the
business of seeking mergers with, 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. We will also compete in seeking
merger or acquisition candidates with numerous other small public companies.
No Agreement for Business Combination or Other Transaction.
We have no arrangement, agreement or understanding to engage in a merger, joint
venture 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.
No Standards for Business Combination.
We have not established an operating history or 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.
Continued Management Control, Limited Time Availability.
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. We have not obtained key man life insurance on
any of our officers or directors. The loss of the services of any of these
individuals would adversely affect development of our business and its
likelihood of continuing operations. See "Management."
Conflicts of Interest - General.
Our officers and directors may participate in business ventures that could
compete directly with us. Additional conflicts of interest and non-arms length
transactions may also arise in the event
7
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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.
Affiliation With Other "Blank Check" Companies.
Our officers and directors may be affiliated with other "blank check" companies.
In the event that management identifies a candidate for a business combination,
and the candidate expresses no preference for a particular company, management
may enter into a business combination with another blank check company.
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 prevent consummation of an acquisition.
Acquisition prospects that are unable to obtain the required audited statements
may be inappropriate for acquisition.
Lack of Market Research or Marketing Organization.
We have not conducted market research indicating that market demand exists for
the transactions we contemplate. 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.
Lack of Diversification.
Our inability to diversify our activities into a number of areas may subject us
to economic fluctuations within a particular business or industry and therefore
increase the risks associated with our operations.
International Business Risk.
If we enter into a business combination with foreign business, 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, capital investment and
in other respects.
Probable Change in Control and Management.
A business combination involving the issuance of our common stock may 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 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.
8
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Reduction of Percentage Share Ownership Following a Business Combination.
Our primary plan of operation is based upon a business combination with a
private business that may result in the issuance of our securities to the
shareholders of the private company. The issuance of previously authorized and
unissued common stock would result in reduction in percentage of shares owned by
shareholders of the Company and may result in a change in control or management.
Disadvantages of Blank Check Offering.
We may enter into a business combination with a company that desires to
establish a public trading market for its shares. A business opportunity may
attempt to avoid what it deems to be adverse consequences of undertaking its own
public offering by seeking a business combination with us. The consequences may
include time delays of the registration process, significant expenses to be
incurred in the offering, loss of voting control to public shareholders and the
inability or unwillingness to comply with various federal and state laws enacted
for the protection of investors.
Absence of Trading Market.
There currently is no trading market for our stock and a trading market may not
develop.
Limitations on share resale.
Initially, our securities may be sold in the State of _______ only (although we
are considering registering the shares in other states), and may be resold by
you in ____________________ only until a resale exemption is available in other
states.
No Underwriter.
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.
"Penny" Stock Regulation of Broker-Dealer Sales of Company Securities.
For transactions covered by Rule 15g-9 under the '34 Act, a broker-dealer must
furnish all investors in penny stocks with 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 before 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 describing 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, before 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.
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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.
The rule may affect the ability of broker-dealers to sell the Company's
securities.
Taxation.
Federal and state tax consequences may be major considerations in any business
combination we undertake. Currently, a transaction may be structured to result
in tax-free treatment to both companies, as prescribed by various federal and
state tax provisions. We intend to structure any business combination to
minimize the federal and state tax consequences to both the Company and the
target entity; however, we cannot guarantee that the business combination will
meet the statutory requirements of a tax-free reorganization or that the parties
will obtain the intended tax-free treatment upon a transfer of stock or assets.
A non-qualifying reorganization could result in the imposition of both federal
and state taxes that may have an adverse effect on both parties to the
transaction.
Requirement of Audited Financial Statements May Disqualify 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 sign 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
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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. 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 cash and shares.
Accordingly, we have entered into an escrow agreement with the
_______________________ 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, Canadian government or federal government securities or
securities for which the principal or interest is guaranteed by the
Canadian government or 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 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 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.
DILUTION
The difference between the initial public offering price per share of common
stock and the net tangible book value per share after this offering constitutes
the dilution to investors in this offering. Net tangible book value per share of
common stock is determined by dividing our net tangible book value (total
tangible assets less total liabilities) by the number of shares of common stock
outstanding.
11
<PAGE>
As of March 31, 2000, our net tangible book value was $Nil or $Nil per share of
common stock. Net tangible book value represents the amount of our total assets,
less any intangible assets and total liabilities. After giving effect to the
sale of the 100,000 shares of common stock offered through this prospectus (at
an initial public offering price of $1.00 per share), and after deducting
estimated expenses of the offering of $15,000), our adjusted pro forma net
tangible book value as of March 31, 2000, would have been $85,000 or $0.14 per
share. This represents an immediate increase in net tangible book value of $0.14
per share to existing shareholders and an immediate dilution of $0.86 per share
to investors in this offering. The following table illustrates this per share
dilution:
Public offering price per share $1.00
Net tangible book value per share before offering $Nil
Increase per share attributable to new investors $0.14
-----
Dilution per share to new investors $0.86
=====
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------
NUMBER OF SHARES BEFORE MONEY RECEIVED FOR SHARES NET TANGIBLE BOOK VALUE PER
OFFERING BEFORE OFFERING SHARE BEFORE OFFERING
-------------------------------------------------------------------------------------------------------------
<S> <C> <C>
500,000 $Nil Nil
-------------------------------------------------------------------------------------------------------------
<CAPTION>
-------------------------------------------------------------------------------------------------------------
NUMBER OF SHARES AFTER TOTAL AMOUNT OF MONEY PRO-FORMA NET TANGIBLE BOOK
OFFERING RECEIVED FOR SHARES VALUE PER SHARE AFTER OFFERING
-------------------------------------------------------------------------------------------------------------
<S> <C> <C>
600,000 $100,000.00 $0.14
-------------------------------------------------------------------------------------------------------------
</TABLE>
As of the date of this prospectus, the following table sets forth the percentage
of equity to be purchased by investors in this offering compared to the
percentage of equity to be owned by the present stockholders, and the
comparative amounts paid for the shares by the investors in this offering as
compared to the total consideration paid by our present stockholders.
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE PRICE
-------------------------------------------------------------------------------------------------------------
NUMBER PERCENT AMOUNT PERCENT PAID PER
SHARE
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
New Investors 100,000 20% $100,000.00 98% $1.00
-------------------------------------------------------------------------------------------------------------
Existing Shareholders 500,000 80% $50.00 2% $0.0001
-------------------------------------------------------------------------------------------------------------
</TABLE>
USE OF PROCEEDS
The gross proceeds of this offering will be $100,000. While Rule 419 permits 10%
of the funds ($10,000) to be released from escrow to us, we do not intend to
request release of these funds. This offering is not contingent on a minimum
member of shares to be sold and will be sold on a
12
<PAGE>
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, we 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. Accordingly, no portion of the proceeds are being used
to repay debt. It is anticipated that management will pay the expenses of the
offering, estimated to be $15,000.
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 us.
ASSUMING MAXIMUM OFFERING
-------------------------
AMOUNT PERCENT
------ -------
Offering Expenses (1) $15,000 15%
Working Capital $85,000 85%
Total (3) $100,000 100%
(1) Offering costs include filing, printing, legal, accounting, transfer agent
and escrow agent fees.
If less than the maximum proceeds are raised, a greater portion of this accrued
liability will have to be borne by the acquisition candidate as a condition of
the merger. 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.
(3) All offering proceeds will be held in escrow pending a business combination.
We will not request a release of 10% of these funds under Rule 419.
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 bank account in either a certificate of deposit, interest
bearing savings account or in short term Canadian or federal government
securities as placed by The Nevada Agency and Trust Company.
We will not receive any of the proceeds from the sale of the common stock being
offered by the Selling Stockholders.
CAPITALIZATION
The following table sets forth our capitalization as of March 31, 2000, and
pro-forma as adjusted to give close to the sale of 100,000 shares offered by us.
13
<PAGE>
ACTUAL AS ADJUSTED
------ -----------
Stockholders' Equity:
Common stock, $0.0001 par value;
Authorized 100,000,000 shares,
Issued and outstanding
500,000 shares and 600,000 shares, pro- $50.00 $60.00
forma as adjusted
Additional paid-in capital $8,052.00 $108,042.00
Deficit accumulated during the development $(8,102.00) $(8,102.00)
period
Total stockholders equity $Nil $100,000.00
Total Capitalization $Nil $100,000.00
DESCRIPTION OF BUSINESS
Eastern Management Corp. (referred to as "us," "we" or "our"), was incorporated
on July 23, 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 classifies 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 (within the meaning of section 3
(a)(51) of the Securities Exchange Act of 1934) 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.
Lock-up Agreement
Each of our shareholders has executed and delivered a "lock-up" letter
agreement, affirming that they shall not sell their shares of common stock until
we have successfully consummated a merger or acquisition and we are no longer
classified as a "blank check" company. While management believes that the
procedures established to preclude any sale of our securities before 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 securities before a closing.
14
<PAGE>
Investment Company Act of 1940
Although we will be subject to regulation under the Securities Act of 1933, as
amended (the "'33 Act"), and the Securities Exchange Act of 1934, as amended
(the "'34 Act"), management believes we will not be subject to regulation under
the Investment Company Act of 1940, as amended (the "'40 Act"), 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
under the '40 Act. 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 under the '40 Act and, consequently, a
violation of the Act could subject us to material adverse consequences.
Investment Advisors Act of 1940
Under Section 202(a)(11) of the Investment Advisors Act of 1940, as amended, an
"investment adviser" means any 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 analyses or reports concerning securities. We seek to
locate a suitable business 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.
Dissenter's Rights
The Nevada Revised Statutes ("NRS") ss. 78.3793, require that on the 10th day
following the acquisition of a controlling interest by an acquiring person, if
the control shares are accorded full voting rights pursuant to NRS ss.ss. 78.378
to 78.3793, inclusive, and the acquiring person has acquired a majority interest
of the voting shares, any stockholder of record, other than the acquiring
person, who has not voted in favor of authorizing voting rights for the control
shares is entitled to demand payment for the fair value of his shares by making
a written demand.
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 relate to future operations, strategies,
financial results or other developments. Forward looking statements are 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 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 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 do not
apply to statements made in connection with an initial public offering.
15
<PAGE>
PLAN OF OPERATION
We seek to acquire assets or shares of 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 under Section 12 of the
'34 Act, 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, the
Company's 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. 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.
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.
We will remain a shell corporation until a merger or acquisition candidate is
identified. It is anticipated that our cash requirements will 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.
We have not, and do not intend to enter into, any arrangement, agreement or
understanding with non-management shareholders allowing non-management
shareholders to directly or indirectly participate in or influence our
management of the Company. Management currently holds 60.8% of our stock. As a
result, management is in a position to elect a majority of the directors and to
control our affairs.
We have no full time employees. Our President and Secretary has agreed to
allocate a portion of his time to our activities, without compensation. This
officer anticipates that our business plan can be implemented by his 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.
See "Management."
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.
16
<PAGE>
General Business Plan
Our purpose is to acquire an interest in business opportunities presented by
persons or firms that 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 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. See the
financial statements at page F-1 of this prospectus. This lack of
diversification should be considered a substantial risk to our shareholders.
We may seek a business opportunity with companies 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. 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 to the owners of
business opportunities. 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 initial 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
requirements, which include providing audited financial statements to be
included within the numerous filings relevant to complying with the '34 Act.
Nevertheless, the 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
17
<PAGE>
present associations of our officers and directors, or by our shareholders. In
analyzing prospective business opportunities, management will consider:
* the available technical, financial and managerial resources;
* working capital and other financial requirements;
* history of operations, if any;
* prospects for the future;
* nature of present and expected competition;
* the quality and experience of management services that may be
available and the depth of that management;
* the potential for further research, development, or exploration;
* specific risk factors not now foreseeable but which could be
anticipated to impact our proposed activities;
* the potential for growth or expansion;
* the potential for profit;
* the perceived public recognition of acceptance of products,
services, or trades;
* name identification; and
* 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, the Company intends to utilize written
reports and personal investigations to evaluate businesses. 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 will 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.
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 the status of any business in which we may become
engaged, because the business may need to seek additional
18
<PAGE>
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
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 have 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.
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. We 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 and all sales will only be made in compliance
with the securities laws of the United States and any applicable state.
While the actual terms of a future transaction cannot be predicted, it is
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 (the "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, the
shareholders of the Company 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.
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 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.
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
19
<PAGE>
shareholdings in the target company. Depending upon the target company's assets
and liabilities, our shareholders will probably hold a substantially lesser
percentage ownership interest following any merger or acquisition. 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 remaining shareholders.
We will participate in a business opportunity only after the negotiation and
signing 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 before and after the closing.
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-K (or 10-KSB, as applicable) and quarterly reports on Form 10-Q (or
10-QSB, as applicable). 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 are 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 extremely
limited financial resources and limited management availability we will continue
to be at a significant competitive disadvantage compared to our competitors.
DESCRIPTION OF PROPERTY
We have no properties and at this time have no agreements to acquire any
properties. We intend to acquire assets or a business in exchange for our
securities.
We operate from our offices at Suite 1500, 885 West Georgia Street, Vancouver,
British Columbia, V6C 3E8, Canada. Space is provided to the Company on a rent
free basis by Mr. Jason John, a director of the Company, 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.
20
<PAGE>
PRINCIPAL 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
Suite 104 152,000 30.4%
1456 St. Paul Street,
Kelowna, B.C.
V1Y 2E6
Common Bob Hemmerling
1908 Horizon Drive 152,000 30.4%
Kelowna, B.C.
V1Z 3L3
The balance of our outstanding common stock is held by eight (8) persons.
MANAGEMENT
Our directors and officers are as follows:
NAME AGE POSITION
---- --- --------
Jason John 32 President, Secretary and Director
The above listed officer and director will serve until the next annual meeting
of the shareholders or until his death, resignation, retirement, removal, or
disqualification, or until his successors have been duly elected and qualified.
Vacancies in the existing Board of Directors are filled by majority vote of the
remaining Directors. Our officer serves at the will of the Board of Directors.
There are no family relationships between any executive officer and director.
Resumes
Mr. Jason John was appointed to his positions on September 17, 1999. He devotes
his time as necessary to our business, which time is expected to be nominal.
Prior to joining the Company, Mr. John was employed by the Shaftsbury Brewing
Company where he was involved in product promotion and marketing. Prior to
working with the Shaftsbury Brewing Company Mr. John was employed at Gray
Beverage as an account manager and merchandiser. While employed by Gray Beverage
Mr. John was responsible for implementing many new operational systems which
resulted in an increase in the company's efficiency in many areas. Currently,
Mr. John is employed at Ensign Drilling. Ensign Drilling is a leading company in
oil and gas exploration in Canada.
21
<PAGE>
Prior "Blank Check" Experience
Mr. John has no prior experience as an officer or director of a blank check
company, and has no prior direct experience in identifying emerging companies
for investment and/or business combinations.
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.
Our officers and directors are now and may in the future become shareholders,
officers or directors of 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 behalf of the Company or other entities. Conflicts of
interest may arise with respect to opportunities that come to the attention of
these individuals in the performance of their duties. The Company does not have
a right of first refusal to opportunities that come to management's attention.
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 stated above, we have not
adopted any other conflict of interest policy with respect to transactions.
EXECUTIVE COMPENSATION
None of our officers and/or directors have received any compensation. 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. 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 complete a merger or acquisition,
that company may employ or retain one or more members of our management for the
purposes of providing services to the surviving entity. 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
22
<PAGE>
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 complete 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. 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 efforts to
implement our business plan.
No retirement, pension, profit sharing, stock option or insurance programs have
been adopted by the Company 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.
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 the
Company's 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: (i) that a broker or dealer approve a
person's account for transactions in penny stocks; and (ii) the broker or dealer
receive from the investor a written agreement to the transaction, setting forth
the identity and quantity of the penny stock to be purchased. In order to
approve a person's account for transactions in penny stocks, the broker
23
<PAGE>
or dealer must (i) obtain financial information and investment experience and
objectives of the person; and (ii) make a reasonable determination that the
transactions in penny stocks are suitable for that person and that person has
sufficient knowledge and experience in financial matters to be capable of
evaluating the risks of transactions in penny stocks. The broker or dealer must
also deliver, prior to any transaction in a penny stock, a disclosure schedule
prepared by the Commission relating to the penny stock market, which, in
highlight form, (i) sets forth the basis on which the broker or dealer made the
suitability determination; and (ii) that the broker or dealer received a signed,
written agreement from the investor prior to the transaction. Disclosure also
has to be made about the risks of investing in penny 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.
Management would prefer to undertake a transaction with a merger or acquisition
candidate which will allow our securities to be traded without penny stock
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.
Escrow
The common stock under this offering will remain in escrow until our closing of
a business combination under the requirements of Rule 419. There are currently
ten (10) holders of our outstanding common stock. The outstanding common stock
was sold in reliance upon an exemption from registration contained in Section
4(2) of the Securities Act. Assuming our officer, director, current shareholders
and any of their affiliates or associates purchase 80% of the shares in this
offering, although this is not their current intention, current shareholders
will own 96.67% of the outstanding shares upon completion of the offering.
Holders
There are ten (10) holders of our common stock. In July, 1997, we issued 500,000
of common stock for services in formation and organization valued at $0.0001 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.
As of the date of this statement, all of our common stock is eligible for sale
under Rule 144 promulgated under the '33 Act, as amended, subject to certain
limitations included in Rule 144. 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 before 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 an
affiliate for the preceding three months.
24
<PAGE>
The following table shows the number of shares of our common stock which may be
offered for sale from time to time by the Selling Stockholders. The shares
offered for sale constitute all of the shares known to us to be beneficially
owned by the Selling Stockholders. None of the Selling Stockholders has held any
position or office with the Company, except as specified in the following table.
Other than the relationships described below, none of the Selling Stockholders
had or have any material relationship with the Company.
---------------------------------------------------------------
NUMBER
NUMBER NAME AND ADDRESS OF SHARES
---------------------------------------------------------------
1 Devinder Randhawa 152,000
(Past President and Director)
---------------------------------------------------------------
2 Bob Hemmerling 152,000
(Past Secretary and Director)
---------------------------------------------------------------
3 David Ward 24,500
---------------------------------------------------------------
4 Scott Mundell 24,500
---------------------------------------------------------------
5 Richard Newbury 24,500
---------------------------------------------------------------
6 Phil Morehouse 24,500
---------------------------------------------------------------
7 Ron Schlitt 24,500
---------------------------------------------------------------
8 Gurbakash Randhawa 24,500
---------------------------------------------------------------
9 Kate Himsworth 24,500
---------------------------------------------------------------
10 Phil Mudge 24,500
---------------------------------------------------------------
Dividends
We have not paid any dividends to date, and have no plans to do so in the
immediate future.
Transfer Agent
The Company's registrar and transfer agent is The Nevada Agency and Trust
Company Suite 880, Bank of America Plaza, 50 West Liberty Street, Reno, Nevada,
89501.
DESCRIPTION OF SECURITIES
Our authorized capital stock consists of 100,000,000 shares, of common stock,
par value $0.0001 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
non-assessable 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
25
<PAGE>
preferential amounts, if any. All shares of our common stock issued and
outstanding are fully paid and non-assessable. 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 for
that purpose. We have no intention to issue additional shares other than under
this Registration Statement.
There are no outstanding options or warrants to acquire 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 all the shares being offered hereto are sold, the holders of
the restricted securities may each sell a portion of their shares during any
three (3) month period after __________, 2000. We are offering 100,000 shares of
our common stock at $1.00 per share. Dilution to the investors in this offering
shall be approximately $0.86 per share.
SHARES ELIGIBLE FOR FUTURE RESALE
There has been no public market for our common stock and we cannot assure you
that a 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.
Upon completion of this offering, we will have 600,000 shares outstanding. The
100,000 shares sold in this offering by the Company and the 500,000 shares that
may be sold by the Selling Stockholders will be freely tradeable without
restriction or further registration under the Securities Act unless purchased by
"affiliates" of Eastern Management Corp., as that term is defined in Rule 144
under the Securities Act ("Rule 144") described below. Sales of outstanding
shares to residents of certain states or jurisdictions may only be effected by
registration in or applicable exemption from the registration provisions of the
securities laws of those states or jurisdictions.
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 June 28, 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.
26
<PAGE>
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 March 31.
PLAN OF DISTRIBUTION
We offer the right to subscribe for 100,000 shares at $1.00 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.
The offering shall be conducted by our president. 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 as that term is
defined in Section 3(a)(39) of 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.
The Selling Stockholders may, from time to time, sell all or a portion of their
common stock in the over-the-counter market, or on any other national securities
exchange on which our common stock is or becomes listed or traded, in negotiated
transactions or otherwise, at prices then
27
<PAGE>
prevailing or related to the then current market price or at negotiated prices.
The shares will not be sold in an underwritten public offering. Their common
stock may be sold directly or through brokers or dealers. The methods by which
the common stock may be sold include (a) a block trade (which may involve
crosses) in which the broker or dealer will attempt to sell the common stock as
agent but may buy and resell a portion of the block as principal to facilitate
the transaction; (b) purchases by a broker or dealer as principal and resale by
such broker or dealer for its account pursuant to this Prospectus; (c) ordinary
brokerage transactions and transactions in which the broker solicits purchasers;
and (d) privately negotiated transactions. Brokers and dealers engaged by
Selling Stockholders may arrange for other brokers or dealers to participate.
Brokers or dealers may receive commissions or discounts from Selling
Stockholders (or, if any such broker-dealer acts as agent for the purchaser of
such shares, from such purchaser) in amounts to be negotiated. Broker-dealers
may agree with the Selling Stockholders to sell a specified number of shares at
a stipulated price per share, and, to the extent such broker-dealer is unable to
do so acting as agent for a Selling Stockholder, to purchase as principal any
unsold shares at the price required to fulfill the broker-dealer commitment to
the Selling Stockholder. Broker-dealers who acquire shares as principal may
thereafter resell the shares from time to time in transactions (which may
involve crosses and block transactions and sales to and through other
broker-dealers, including transactions of the nature described above) in the
over-the-counter market or otherwise at prices and on terms then prevailing at
the time of sale, at prices then related to the then-current market price or in
negotiated transactions and, in connection with such resales, may pay to or
receive commissions from the purchasers.
In connection with the distribution of their stock, the Selling Stockholders may
enter into hedging transactions with broker-dealers. In connection with such
transactions, broker-dealers may engage in short sales of our common stock. The
Selling Stockholders (except for officers and directors of the Company) may also
sell their common stock and redeliver their common stock to close out their
short positions. The Selling Stockholders may also enter into option or other
transactions with broker-dealers which require the delivery to the broker-dealer
of their common stock. The Selling Stockholders may also lend or pledge their
common stock to a broker-dealer and the broker-dealer may sell their common
stock so lent or, upon a default, the broker-dealer may sell the pledged shares.
In addition to the foregoing, the Selling Stockholders may enter into, from time
to time, other types of hedging transactions.
The Selling Stockholders and any broker-dealers participating in the
distributions of the our common stock may be deemed to be "underwriters" within
the meaning of Section 2(11) of the Securities Act of 1933, and any profit on
the sale of our common stock by the Selling Stockholders, and any commissions or
discounts given to any such broker-dealer, may be deemed to be underwriting
commissions or discounts pursuant to the Securities Act of 1933.
Our common stock may also be sold pursuant to Rule 144 pursuant to the
Securities Act of 1933 beginning one year after the shares of our common stock
were issued, provided such date is at least 90 days after the date of this
Prospectus.
The Company has filed the Registration Statement, of which this Prospectus forms
a part, for the sale of the Selling Stockholders' shares of our common stock. We
can give no assurance that the Selling Stockholders will sell any or all of the
shares of our common stock.
28
<PAGE>
Pursuant to the Securities Exchange Act of 1934, any person engaged in a
distribution of the common stock offered by this Prospectus may not
simultaneously engage in market making activities for our common stock during
the applicable "cooling off" periods prior to the commencement of such
distribution. In addition, the Selling Stockholders will be subject to
applicable provisions of the Securities Exchange Act of 1934 and the rules and
regulations thereunder.
The Company will pay all of the expenses incident to the offering and sale of
the Selling Stockholders' common stock, other than commissions, discounts and
fees of underwriters, dealers or agents.
Arbitrary Determination of Offering Price
The initial offering price of $1.00 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 Subscribing
Persons may subscribe by filling in and signing the share purchase agreement and
delivering it, prior to the expiration date, to us. The purchase price of $1.00
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.
LEGAL MATTERS
The validity of the shares offered under this prospectus is being passed upon
for us by Antoine Devine, of Evers & Hendrickson, LLP of San Francisco,
California.
EXPERTS
Our financial statements as of the period ended March 31, 2000 included in this
prospectus and in the registration statement, have been so included in reliance
upon the reports of Davidson & Company, independent certified public
accountants, included in this prospectus, and upon the authority of said firm as
experts in accounting and auditing.
29
<PAGE>
INDEMNIFICATION OF OFFICERS AND DIRECTORS
Article VI of our Bylaws sets 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 Bylaws provide 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.
Insofar as indemnification for liabilities arising under the '33 Act may be
permitted to officers, directors or persons controlling us pursuant to the
foregoing, 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
On October 20, 1999, we appointed Davidson & Company, Chartered Accountants 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
Davidson & Company 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.
000-26518) on November 1, 1999.
30
<PAGE>
FINANCIAL STATEMENTS
The following financial statements are attached to this report and filed as a
part of this Registration Statement.
Table of Contents - March 31, 2000 Financial Statements..................F-2
Independent Auditor's Report.............................................F-3
Balance Sheet as of March 31, 2000.......................................F-4
Statement of Operations as of March 31, 2000.............................F-5
Statement of Cash Flows as of March 31, 2000.............................F-6
Statement of Changes in Stockholders' Equity as of March 31, 2000........F-7
Notes to Financial Statements as of March 31, 2000.......................F-8
F-1
<PAGE>
EASTERN MANAGEMENT CORP.
(Formerly Inforetech Inc.)
(A Development Stage Company)
Financial Statements
MARCH 31, 2000
EASTERN MANAGEMENT CORP.
(Formerly Inforetech Inc.)
TABLE OF CONTENTS
Independent Auditor's Report..................................F-3
Financial Statements
Balance Sheet.................................................F-4
Statement of Operations.......................................F-5
Statement of Cash Flows.......................................F-6
Statement of Shareholders' Equity.............................F-7
Notes to Financial Statements.........................F-8 to F-10
F-2
<PAGE>
[DAVIDSON & COMPANY LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
To the Directors and Stockholders of
Eastern Management Corporation
(formerly inFOREtech Inc.)
(A Development Stage Company)
We have audited the accompanying balance sheet of Eastern Management Corporation
(formerly inFOREtech Inc.) (A Development Stage Company) as at March 31, 2000
and the related statements of operations, changes in stockholders' equity and
cash flows for the year then ended and for the period from inception on July 23,
1997 to March 31, 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
in the United States of America. Those standards require that we plan and
perform an 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.
The accompanying financial statements have been prepared assuming that Eastern
Management Corporation (formerly inFOREtech Inc.) (A Development Stage Company)
will continue as a going concern. The Company is in the development stage and
does not have the necessary working capital for its planned activity which
raises substantial doubt about its ability to continue as a going concern.
Management's plans in regards to these matters are discussed in Note 2. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
In our opinion, the financial statements present fairly, in all material
respects, the financial position of Eastern Management Corporation (formerly
inFOREtech Inc.) (A Development Stage Company) as at March 31, 2000 and the
results of its operations and its cash flows for the year then ended and for the
period from inception on July 23, 1997 to March 31, 2000 in conformity with
generally accepted accounting principles in the United States of America.
The audited financial statements as at March 31, 1999 and for the year then
ended were examined by other auditors who expressed an opinion without
reservation on those statements in their report dated June 11, 1999.
"DAVIDSON & COMPANY"
Vancouver, Canada Chartered Accountants
May 3, 2000
A Member of SC INTERNATIONAL
Suite 1200, Stock Exchange Tower, 609 Granville Street, P.O. Box 10372,
Pacific Centre, Vancouver, BC, Canada, V7Y 1G6
TELEPHONE (604) 687-0947 FAX (604) 687-6172
<PAGE>
EASTERN MANAGEMENT CORPORATION
(formerly inFOREtech Inc.)
(A Development Stage Company)
BALANCE SHEETS
AS AT MARCH 31
<TABLE>
<CAPTION>
============================================================================================
2000 1999
--------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS $ -- $ --
============================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
STOCKHOLDERS' EQUITY
Capital stock (Note 4)
Authorized
100,000,000 common shares with a par value of $0.0001
Issued and outstanding
March 31, 2000 - 500,000 common shares
March 31, 1999 - 500,000 common shares 50 50
Additional paid-in capital 8,052 --
Deficit accumulated during the development stage (8,102) (50)
------- -----
$ -- $ --
============================================================================================
</TABLE>
On behalf of the Board:
/s/ Jason John, Sole Director
-----------------------------
Jason John
The accompanying notes are an integral part of these financial statements.
<PAGE>
EASTERN MANAGEMENT CORPORATION
(formerly inFOREtech Inc.)
(A Development Stage Company)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
===============================================================================================================================
Cumulative
Amounts
From Inception
on July 23,
1997
to Year Ended Year Ended
March 31, March 31, March 31,
2000 2000 1999
-------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
EXPENSES
Office and miscellaneous $ 50 $ -- $ --
Professional fees 8,052 8,052 --
--------- --------- --------
LOSS FOR THE YEAR $ 8,102 $ 8,052 $ --
===============================================================================================================================
BASIC AND DILUTED LOSS PER SHARE $ (0.01) $ --
===============================================================================================================================
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING 500,000 500,000
===============================================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
EASTERN MANAGEMENT CORPORATION
(formerly inFOREtech Inc.)
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
===============================================================================================================================
Cumulative
Amounts
From Inception
on July 23,
1997
to Year Ended Year Ended
March 31, March 31, March 31,
2000 2000 1999
-------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Loss for the year $(8,102) $ (8,052) $ --
Stock issued for services 50 --
------- -------- ---------
Net cash used in operating activities (8,052) (8,052) --
------- -------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Net cash used in investing activities -- -- --
------- -------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Shareholder capital contribution 8,052 8,052 --
------- -------- ---------
Net cash provided by financing activities 8,052 8,052 --
------- -------- ---------
CHANGE IN CASH POSITION DURING THE YEAR -- -- --
CASH POSITION, BEGINNING OF THE YEAR -- -- --
------- -------- ---------
CASH POSITION, END OF THE YEAR $ -- $ -- $ --
===============================================================================================================================
SUPPLEMENTAL DISCLOSURE WITH RESPECT TO CASH FLOWS:
Cash paid for income taxes $ -- $ -- $ --
Cash paid for interest $ -- $ -- $ --
===============================================================================================================================
SUPPLEMENTAL DISCLOSURE OF NON-CASH OPERATING, INVESTING,
AND FINANCING ACTIVITIES:
Common shares issued for services $ 50 $ -- $ --
===============================================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
EASTERN MANAGEMENT CORPORATION
(formerly inFOREtech Inc.)
(A Development Stage Company)
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
===============================================================================================================================
Deficit
Accumulated
During
Common Stock Additional the Total
------------------------- Paid-in Development Stockholders'
Shares Amount Capital Stage Equity
-------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
BALANCE, JULY 23, 1997 -- $ -- $ -- $ -- $ --
Capital stock issued for services 500,000 50 -- -- 50
Loss for the period -- -- -- (50) (50)
------- ------- ------- ------- -------
BALANCE, MARCH 31, 1998 AND 1999 500,000 50 -- (50) --
Shareholder capital contribution -- -- 8,052 -- 8,052
Loss for the year -- -- -- (8,052) (8,052)
------- ------- ------- ------- -------
BALANCE, MARCH 31, 2000 500,000 $ 50 $ 8,052 $(8,102) $ --
===============================================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
EASTERN MANAGEMENT CORPORATION
(formerly inFOREtech Inc.)
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
MARCH 31, 2000
================================================================================
1. ORGANIZATION OF THE COMPANY
The Company was incorporated on July 23, 1997 under the laws of Nevada
to engage in any lawful business or activity for which corporations may
be organized under the laws of the State of Nevada. On September 24,
1999, the Company changed its name to inFOREtech Inc. On January 17,
2000, the Company changed its name back to Eastern Management
Corporation.
The Company entered the development stage in accordance with Statement
of Financial Accounting Standards No. 7 on July 23, 1997. Its purpose
is to evaluate, structure and complete a merger with, or acquire of a
privately owned corporation.
2. GOING CONCERN
The Company's financial statements are prepared using the generally
accepted accounting principles applicable to a going concern, which
contemplates the realization of assets and liquidation of liabilities
in the normal course of business. However, the Company has no current
source of revenue. Without realization of additional capital, it would
be unlikely for the Company to continue as a going concern. The
Company's management plans on advancing funds on an as needed basis and
in the longer term, revenues from the operations of the merger or
acquisition candidate, if found. The Company's ability to continue as a
going concern is dependent on these additional management advances,
and, ultimately, upon achieving profitable operations through a merger
or acquisition candidate.
=======================================================================
2000 1999
-----------------------------------------------------------------------
Deficit accumulated during the development stage $(8,102) $ (50)
=======================================================================
3. SIGNIFICANT ACCOUNTING POLICIES
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amount of assets and
liabilities, disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amount of revenues
and expenses during the year. Actual results could differ from these
estimates.
BASIC LOSS PER SHARE
Earnings per share are provided in accordance with Statement of
Financial Accounting Standards No. 128, "Earnings Per Share". Due to
the Company's simple capital structure, with only common stock
outstanding, only basic loss per share must be presented. Basic loss
per share is computed by dividing losses available to common
shareholders by the weighted average number of common shares
outstanding during the year.
<PAGE>
EASTERN MANAGEMENT CORPORATION
(formerly inFOREtech Inc.)
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
MARCH 31, 2000
3. SIGNIFICANT ACCOUNTING POLICIES (cont'd.....)
INCOME TAXES
Income taxes are provided in accordance with Statement of Financial
Accounting Standards No. 109 ("SFAS 109"), "Accounting for Income
Taxes". A deferred tax asset or liability is recorded for all temporary
differences between financial and tax reporting and net operating loss
carryforwards. Deferred tax expenses (benefit) result from the net
change during the year of deferred tax assets and liabilities.
Deferred tax assets are reduced by a valuation allowance when, in the
opinion of management, it is more likely than not that some portion or
all of the deferred tax assets will not be realized. Deferred tax
assets and liabilities are adjusted for the effects of changes in tax
laws and rates on the date of enactment.
COMPREHENSIVE INCOME
The Company has adopted Statement of Financial Accounting Standards No.
130 ("SFAS 130"), "Reporting Comprehensive Income". This statement
establishes rules for the reporting of comprehensive income and its
components. The adoption of SFAS 130 had no impact on total
stockholders' equity as of March 31, 2000.
ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 133 ("SFAS 133"),
"Accounting for Derivative Instruments and Hedging Activities" which
establishes accounting and reporting standards for derivative
instruments and for hedging activities. SFAS 133 is effective for all
fiscal quarters of fiscal years beginning after June 15, 1999. In June
1999, the FASB issued SFAS 137 to defer the effective date of SFAS 133
to fiscal quarters of fiscal years beginning after June 15, 2000. The
Company does not anticipate that the adoption of the statement will
have a significant impact on its financial statements.
STOCK-BASED COMPENSATION
Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation," encourages, but does not require, companies
to record compensation cost for stock-based employee compensation plans
at fair value. The Company has chosen to account for stock-based
compensation using Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees." Accordingly compensation
cost for stock options is measured as the excess, if any, of the quoted
market price of the Company's stock at the date of the grant over the
amount an employee is required to pay for the stock.
4. CAPITAL STOCK
The Company's authorized capital stock consists of 100,000,000 shares
of common stock, with a par value of $0.0001 per share. 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
pre-emptive, subscription, conversion or redemption rights and may be
issued only as fully paid and non-assessable shares. Holders of the
common 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.
<PAGE>
EASTERN MANAGEMENT CORPORATION
(formerly inFOREtech Inc.)
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
MARCH 31, 2000
================================================================================
4. CAPITAL STOCK (cont'd.....)
On July 18, 1997, the Company issued 500,000 shares of common stock for
services at a deemed value of $50.
On September 21, 1999, the Company implemented a 31:1 forward stock
split. Subsequent to year end, on April 3, 2000, the Company reversed
the previous 31:1 forward stock split. The statements of changes in
stockholders' equity have been restated to give retroactive recognition
of the stock split presented by reclassifying from common stock to
deficit accumulated during the development stage, the par value of
shares arising from the split. In addition, all references to number of
shares and per share amounts of common stock have been restated to
reflect the stock split.
5. INCOME TAXES
The Company's total deferred tax asset at March 31 is as follows:
=======================================================================
2000 1999
-----------------------------------------------------------------------
Tax benefit of net operating loss carryforward $ 1,215 $ --
Valuation allowance (1,215) --
-------- --------
$ -- $ --
========================================================================
The Company has a net operating loss carryforward of approximately
$8,102, which if not used, will expire between the years of 2019 and
2020. The Company has provided a full valuation allowance on the
deferred tax asset because of the uncertainty regarding realizability.
6. SUBSEQUENT EVENT
The Company's issued and outstanding 15,500,000 common shares were
consolidated on a 1:31 ratio. As a result, the Company's shares have
been restated to give retroactive recognition of the reverse stock
split, whereby the Company's share capital decreased from 15,500,000
common shares to 500,000 common shares.
<PAGE>
PART II - INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24 Indemnification of Directors and Officers
Item 25 Other Expenses of Issuance and Distribution
Item 26 Recent Sales of Unregistered Securities
Item 27-Exhibits
3.1* Articles of Incorporation
3.21 Amendment to Articles of Incorporation filed September 24, 1999
3.22 Amendment to Articles of Incorporation filed January 27, 2000
3.3* Bylaws
4.1* Form of Lock Up Agreement Executed by the Company's
Shareholders
4.1.1* Specimen Informational Statement
5.1 Opinion of Evers & Hendrickson with respect to the legality of
the shares being registered
23.1 Consent of Davidson & Company
23.2 Consent of Evers & Hendrickson (included in Exhibit 5.1)
27.1 Financial Data Schedule
99.1** Escrow Agreement
* Previously filed with Form 10SB.
** To be filed in an amendment
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 Vancouver, Province of British Columbia, Canada,
on June 2, 2000.
EASTERN MANAGEMENT CORP.
(formerly Inforetech Inc.)
/s/ Jason John
-------------------------------------------
Jason John, President
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/ Jason John President, Secretary June 2, 2000
-------------- and Director
Jason John
