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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 10-SB/A
GENERAL FORM FOR REGISTRATION OF SECURITIES OF
SMALL BUSINESS ISSUERS
Under Section 12(g) of
The Securities Exchange Act of 1934
EXPRESS INVESTMENTS ASSOCIATES, INC.
(Name of Small Business Issuer in its charter)
NEVADA 98-0204680
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
SUITE 106, 1460 PANDOSY ST., KELOWNA,
BRITISH COLUMBIA, CANADA V1Y 1P3
(Address of principal executive offices) (Zip code)
(250) 868-8177
(Issuer's telephone number)
Securities to be registered pursuant to Section 12(b) of the Act:
none
Securities to be registered pursuant to Section 12(g) of the Act:
Common Stock
(Title of Class)
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TABLE OF CONTENTS
Page
Description of Business .......................................................3
Plan of Operation .............................................................4
Risk Factors .................................................................10
Description of Property .......................................................3
Security Ownership of Certain
Beneficial Owners and Management.....................................14
Directors, Executive Officers, Promoters
and Control Persons .................................................15
Executive Compensation .......................................................16
Certain Relationships and
Related Transactions ................................................17
Legal Proceedings ............................................................17
Market for Common Equities and Related Stockholder
Matters .............................................................17
Recent Sales of Unregistered Securities.......................................19
Description of Securities ....................................................20
Indemnification of Directors and Officers.....................................20
Changes in and Disagreements With Accountants on
Accounting and Financial Disclosure..................................21
Financial Statements..........................................................22
Part F/S......................................................................23
Exhibit Index ................................................................24
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DESCRIPTION OF BUSINESS
Express Investments Associates, Inc. (the "Company"), was incorporated
on July 25, 1997 under the laws of the State of Nevada to engage in any lawful
corporate purpose. Other than issuing shares to its shareholders, the Company
never commenced any other operational activities. As such, the Company can be
defined as a "shell" company, whose sole purpose at this time is to locate and
consummate a merger or acquisition with a private entity. The Board of Directors
of the Company has elected to commence implementation of the Company's principal
business purpose, described below under "Plan of Operation."
The Company is filing this registration statement on a voluntary basis
because the primary attraction of the Company as a merger partner or acquisition
vehicle will be its status as a public company. Any business combination or
transaction will likely result in a significant issuance of shares and
substantial dilution to present stockholders of the Company.
The proposed business activities classify the Company as a "blank
check" company. The Securities and Exchange Commission defines such 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 the Company's securities
or undertake any offering of the Company's securities, either debt or equity,
until such time as the Company has successfully implemented its business plan.
The Company intends to comply with the periodic reporting requirements of the
Securities Exchange Act of 1934 for so long as it is subject to those
requirements.
Lock-up Agreement
Each shareholder of the Company has executed and delivered a "lock-up"
letter agreement, affirming that they shall not sell their respective shares of
the Company's common stock until such time as the Company has successfully
consummated a merger or acquisition and the Company is no longer classified as a
"blank check" company. In order to provide further assurances that no trading
will occur in the Company's securities until a merger or acquisition has been
consummated, each shareholder has agreed to place their respective stock
certificate with the Company's legal counsel, Evers & Hendrickson, LLP, who will
not release these respective certificates until such time as legal counsel has
confirmed that a merger or acquisition has been successfully consummated.
However, while management believes that the procedures established to preclude
any sale of the Company's securities prior to closing of a merger or acquisition
will be sufficient, there can be no assurances that the procedures established
will unequivocally limit any shareholder's ability to sell their respective
securities before such closing.
Investment Company Act of 1940
Although the Company 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"),
insofar as the Company will not be engaged in the business of investing or
trading in securities. In the event the Company engages in business combinations
which result in the Company holding passive investment interests in a number of
entities, the Company could be subject to regulation under the '40 Act. In such
event, the Company would be required to register as an investment company and
could be expected to incur significant registration and compliance costs. The
Company has obtained no formal determination from the Securities and Exchange
Commission as to the status of the Company under the '40 Act and, consequently,
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a violation of such Act could subject the Company 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 or promulgates analyses or reports concerning
securities. The Company shall only seek to locate a suitable merger of
acquisition candidate, and does not intend to engage in the business of advising
others in investment matters for a fee or otherwise.
Dissenter's Rights
In accordance with Nevada Revised Statutes ("NRS") ss. 78.3793, 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.
Market Makers
The Company has not, and does not intend to enter in to discussions
with broker-dealers or market makers regarding developing a trading market in
its stock until a qualified merger or acquisition candidate has been identified.
Forward Looking Statements
Because we desire to take advantage of the "safe harbor" provisions of
the Private Securities Litigation Reform Act of 1995 (the "PSLRA"), the Company
cautions 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 the behalf of the Company, whether or not in future
filings with the Securities and Exchange Commission. Forward looking statements
are statements not based on historical information and which relate to future
operations, strategies, financial results or other developments. Forward looking
statements are necessarily based upon estimates and assumptions that are
inherently subject to significant business, economic and competitive
uncertainties and contingencies, many of which are beyond the Company's control
and many of which, with respect to future business decisions, are subject to
change. These uncertainties and contingencies can affect actual results and
could cause actual results to differ materially from those expressed in any
forward looking statements made by or on behalf of the Company. The Company
disclaims any obligation to update forward looking statements. Readers should
also understand that under Section 27A(b)(2)(D) of the '33 Act, and Section
21E(b)(2)(D) of the '34 Act, the "safe harbor" provisions of the PSLRA do not
apply to statements made in connection with an initial public offering.
PLAN OF OPERATION
The Company intends to seek to acquire assets or shares of an entity
actively engaged in a business that generates revenues, in exchange for its
securities. We have not identified a particular acquisition target and have not
entered into any negotiations regarding such an acquisition. As soon as this
registration
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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 between the Company and such other
company as of the date of this registration statement.
Depending upon the nature of the relevant business opportunity and the
applicable state statutes governing the manner in which the transaction is
structured, the Company's Board of Directors expects that it will provide the
Company's shareholders with complete disclosure documentation concerning a
potential business opportunity and the structure of the proposed business
combination prior to consummation. Such disclosure is expected to be in the form
of a proxy or information statement.
While such disclosure may include audited financial statements of such
a target entity, there is no assurance 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, such as statements of assets
and liabilities, material contracts, accounts receivable statements, or other
indicia of the target entity's condition prior to consummating such a
transaction, with further assurances that an audited statement would be provided
within sixty days after closing. Closing documents will include representations
that the value of the assets conveyed to or otherwise so transferred will not
materially differ from the representations included in such closing documents,
or the transaction will be voidable.
Due to the Company's intent to remain a shell corporation until a
merger or acquisition candidate is identified, it is anticipated that its cash
requirements shall be minimal, and that all necessary capital, to the extent
required, will be provided by the directors or officers. The Company does not
anticipate that it will have to raise capital in the next twelve months. The
Company also does not expect to acquire any plant or significant equipment.
The Company has not, and does not intend to enter into, any
arrangement, agreement or understanding with non-management shareholders under
which non-management shareholders may directly or indirectly participate in or
influence the management of the Company. Management currently holds 60.8% of the
outstanding stock in the Company. As a result, management is in a position to
elect a majority of the directors and to control the Company's affairs.
The Company has no full time employees. Our President and Secretary
have agreed to allocate a portion of their time to the activities of the
Company, without compensation. These officers anticipate that the business plan
of the Company can be implemented by their devoting approximately 5 hours each
per month to the business affairs of the Company and, consequently, conflicts of
interest may arise with respect to the limited time commitment by such officers.
The Company does not expect any significant changes in the number of employees.
See "Directors, Executive Officers, Promoters and Control Persons - Conflicts of
Interest".
Our officers and directors may become involved with other companies who
have a business purpose similar to that of the Company. As a result, potential
conflicts of interest may arise in the future. If such a conflict does arise and
an officer or director of the Company is presented with business opportunities
under circumstances where there may be a doubt as to whether the opportunity
should belong to the Company or another "blank check" company they are
affiliated with, they will disclose the opportunity to all such companies. If a
situation arises in which more than one company desires to merge with or acquire
that target company and the principals of the proposed target company have no
preference as to which company will merge with or acquire such target company,
the company which first filed a registration statement with the Securities and
Exchange Commission will be entitled to proceed with the proposed transaction.
See "Risk
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Factors - Affiliation With Other "Blank Check" Companies."
General Business Plan
The Company's purpose is to seek, investigate and, if such
investigation warrants, acquire an interest in business opportunities presented
to it by persons or firms who or which desire to seek the perceived advantages
of an Exchange Act registered corporation. The Company will not restrict its
search to any specific business, industry, or geographical location and the
Company may participate in a business venture of virtually any kind or nature.
This discussion of the proposed business is purposefully general and is not
meant to be restrictive of the Company's virtually unlimited 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 the Company has nominal assets and limited financial resources.
See "Part F/S, Financial Statements." This lack of diversification should be
considered a substantial risk to shareholders of the Company because it will not
permit the Company to offset potential losses from one venture against gains
from another.
The Company may seek a business opportunity with entities 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 in which to
participate will be complex and extremely risky. Due to general economic
conditions, rapid technological advances being made in some industries and
shortages of available capital, management believes that there are numerous
firms seeking the perceived benefits of a publicly registered corporation. Such
perceived benefits may include facilitating or improving the terms on which
additional equity financing may be sought, providing liquidity for incentive
stock options or similar benefits to key employees, providing liquidity (subject
to restrictions of applicable statutes) for all shareholders and other factors.
Potentially, available business opportunities may occur in many different
industries and at various stages of development, all of which will make the task
of comparative investigation and analysis of such business opportunities
extremely difficult and complex.
We have, and will continue to have, no capital with which to provide
the owners of business opportunities with any significant cash or other assets.
However, management believes we will be able to offer owners of acquisition
candidates the opportunity to acquire a controlling ownership interest in a
publicly registered company without incurring the cost and time required to
conduct an 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 which 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, or
under the supervision of, the officers and directors of the Company, none of
whom is a professional business analyst. Management intends to concentrate on
identifying preliminary prospective business opportunities which may be brought
to its attention through present associations of our officers and directors, or
by our shareholders. In analyzing prospective business opportunities, management
will consider such matters as the available
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technical, financial and managerial resources; working capital and other
financial requirements; history of operations, if any; prospects for the future;
nature of present and expected competition; the quality and experience of
management services which may be available and the depth of that management; the
potential for further research, development, or exploration; specific risk
factors not now foreseeable but which then may be anticipated to impact the
proposed activities of the Company; the potential for growth or expansion; the
potential for profit; the perceived public recognition of acceptance of
products, services, or trades; name identification; and other relevant factors.
Officers and directors of the Company 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 the above factors. We will not
acquire or merge with any company that cannot provide audited financial
statements within a reasonable period of time after closing of the proposed
transaction.
Management of the Company, while not especially experienced in matters
relating to the new business of the Company, shall rely upon their own efforts
and, to a much lesser extent, the efforts of our shareholders, in accomplishing
the business purposes of the Company. It is not anticipated that any outside
consultants or advisors, except for our legal counsel and accountants, will be
utilized by the Company to effectuate its business purposes. However, if we do
retain such an outside consultant or advisor, any cash fee earned by such party
will be paid by the prospective merger/acquisition candidate, as the Company has
no cash assets with which to pay such obligation. 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, but may
acquire a venture that is in its preliminary or development stage or is already
operating. It is impossible to predict at this time the status of any business
in which the Company may become engaged, in that such business may need to seek
additional capital, may desire to have its shares publicly traded, or may seek
other perceived advantages which the Company may offer. Furthermore, we do not
intend to seek capital to finance the operation of any acquired business
opportunity until such time as the Company has successfully consummated a merger
or acquisition.
It is anticipated that the Company will incur nominal expenses in the
implementation of its business plan. Because the Company has no capital with
which to pay these anticipated expenses, present management of the Company will
pay these charges with their personal funds, as interest free loans to the
Company, 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 which management has to have these loans repaid
will be from a prospective merger or acquisition candidate. Management has no
agreements with the Company that would impede or prevent consummation of a
proposed transaction. There is no assurance, 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 the
dissolution of the Company.
Acquisition of Opportunities
In implementing a structure for a particular business acquisition, we
may become a party to a merger, consolidation, reorganization, joint venture, or
licensing agreement with another corporation or entity. It may also acquire
stock or assets of an existing business. On the consummation of a transaction,
it is probable that the present management and shareholders of the Company will
no longer be in control of the Company. 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 the Company's shareholders. Furthermore, management
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may negotiate or otherwise consent to the purchase of all or a portion its stock
in the Company. Any terms of sale of the shares presently held by officers
and/or directors of the Company will be also afforded to all other shareholders
of the Company on similar terms and conditions. Any and all such sales will only
be made in compliance with the securities laws of the United States and any
applicable state.
It is anticipated that any securities issued in any such reorganization
would be issued in reliance upon exemption from registration under applicable
federal and state securities laws. In some circumstances, however, as a
negotiated element of its transaction, we may agree to register all or a part of
such securities immediately after the transaction is consummated or at specified
times thereafter. If such registration occurs, of which there can be no
assurance, it will be undertaken by the surviving entity after the Company has
successfully consummated a merger or acquisition and the Company is no longer
considered a "shell" company. Until a merger or acquisition is consummated, the
Company will not attempt to register any additional securities. The issuance of
substantial additional securities and their potential sale into any trading
market which may develop in the Company's securities may have a depressive
effect on the value of the Company's securities in the future, if such a market
develops, of which there is no assurance.
While the actual terms of a transaction to which the Company may be a
party cannot be predicted, it may be expected that the parties to the business
transaction will find it desirable to avoid the creation of a taxable event and
thereby structure the acquisition in a 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 such 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 such shareholders.
As part of the Company's "due diligence" investigation, officers and
directors of the Company will meet personally with management and key personnel,
may visit and inspect material facilities, obtain independent analysis of
verification of certain information provided, check references of management and
key personnel, and take other reasonable investigative measures to the extent of
the Company's limited financial resources and management expertise. The manner
in which the Company participates in an opportunity will depend on the nature of
the opportunity, the respective needs and desires of the Company and other
parties, the management of the opportunity and the relative negotiation strength
of the Company and such other management.
With respect to any merger or acquisition, negotiations with target
company management is expected to focus on the percentage of the Company which
the target company shareholders would acquire in exchange for all of their
shareholdings in the target company. Depending upon, among other things, the
target company's assets and liabilities, the Company's shareholders will in all
likelihood hold a substantially lesser percentage ownership interest in the
Company following any merger or acquisition. The percentage ownership may be
subject to significant reduction in the event the Company acquires a target
company with substantial assets. Any merger or acquisition effected by the
Company can be expected to have a significant dilutive effect on the percentage
of shares held by the Company's then shareholders.
We will participate in a business opportunity only after the
negotiation and execution of appropriate written agreements. Although the terms
of such agreements cannot be predicted, generally such agreements will require
some specific representations and warranties by all of the parties, will specify
certain events of default, will detail the terms of closing and the conditions
that must be satisfied by each of the parties prior to and after such closing,
will outline the manner of bearing costs, including costs associated with the
Company's attorneys and accountants, will set forth remedies on default and will
include miscellaneous other terms.
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As stated previously, we will not acquire or merge with any entity that
cannot provide independent audited financial statements within a reasonable
period of time after closing of the proposed transaction. The Company is subject
to the reporting requirements of the '34 Act. Included in these requirements is
the affirmative duty of the Company 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 the
Company's audited financial statements included in its annual report on Form
10-K (or 10-KSB, as applicable) and quarterly reports on Form 10-Q (or 10-QSB,
as applicable). If such audited financial statements are not available at
closing, or within time parameters necessary to insure the Company's compliance
with the requirements of the '34 Act, 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 the present
management of the Company. If such transaction is voided, the agreement will
also contain a provision providing for the acquisition entity to reimburse the
Company for all costs associated with the proposed transaction.
Year 2000 Disclosure
Many existing computer programs use only two digits to identify a year
in the date field. These programs were designed and developed without
considering the impact of the upcoming change in the century. If not corrected,
many computer applications could fail or create erroneous results by or at the
year 2000. As a result, many companies will be required to undertake major
projects to address the Year 2000 issue. Because the Company has no assets,
including any personal property such as computers, it is not anticipated that we
will incur any negative impact as a result of this potential problem. However,
it is possible that this issue may have an impact on us after we successfully
consummate a merger or acquisition. Management intends to address this potential
problem with any prospective merger or acquisition candidate. There can be no
assurances that new management of the Company will be able to avoid a problem in
this regard after a merger or acquisition is consummated.
Competition
The Company will remain an insignificant participant among the firms
which engage in the acquisition of business opportunities. There are many
established venture capital and financial concerns which have significantly
greater financial and personnel resources and technical expertise than the
Company. In view of the Company's combined extremely limited financial resources
and limited management availability, the Company will continue to be at a
significant competitive disadvantage compared to the Company's competitors.
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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 its
inception. The Company has no significant assets or financial resources. We
will, in all likelihood, sustain operating expenses without corresponding
revenues, at least until the consummation of a business combination. This may
result in the Company incurring a net operating loss that will increase
continuously until we can consummate a business combination with a profitable
business opportunity. There is no assurance that the Company can identify such a
business opportunity and consummate such a business combination.
Speculative Nature of Company's Proposed Operations. The success of our
proposed 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, there can be no assurance we will be successful
in locating candidates meeting such 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 the Company. Nearly all such entities have significantly greater financial
resources, technical expertise and managerial capabilities than the Company and,
consequently, we will be at a competitive disadvantage in identifying possible
business opportunities and successfully completing a business combination.
Moreover, we will also compete in seeking merger or acquisition candidates with
numerous other small public companies.
No Agreement for Business Combination or Other Transaction. We have no
arrangement, agreement or understanding with respect to engaging in a merger
with, joint venture with or acquisition of, a private or public entity. There
can be no assurance we will be successful in identifying and evaluating suitable
business opportunities or in concluding a business combination. Management has
not identified any particular industry or specific business within an industry
for evaluation by the Company. There is no assurance we will be able to
negotiate a business combination on terms favorable to the Company.
No Standards for Business Combination. We have not established a
specific length of operating history or a specified level of earnings, assets,
net worth or other criteria which it will require a target business opportunity
to have achieved. 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 up to twenty hours per
month to the business of the Company. None of our officers have entered into a
written employment agreements with us and none is expected to do so in the
foreseeable future. We have not obtained key man life insurance on any of its
officers or directors. Notwithstanding the combined limited experience and time
commitment of management, loss of the services of any of these individuals would
adversely affect development of our business and its likelihood of continuing
operations. See "Directors, Executive Officers, Promoters and
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Control Persons."
Conflicts of Interest - General. Officers and directors of the Company
may participate in business ventures which could be deemed to compete directly
with the Company. Additional conflicts of interest and non-arms length
transactions may also arise in the event our officers or directors are involved
in the management of any firm with which we transact business. Management has
adopted a policy that the Company will not seek a merger with, or acquisition
of, any entity in which management serves as officers, directors or partners, or
in which they or their family members own or hold any direct or indirect
ownership interest.
Affiliation With Other "Blank Check" Companies. Officers and Directors
of the Company may be affiliated with other "blank check" companies that were
formed previously. In the event that management identifies a candidate for a
business combination, and the candidate expresses no preference for a particular
company, management intends to enter into a business combination with a
previously formed blank check company. As a result, there can be no assurance
that there will be sufficient business opportunities to consummate a business
combination.
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 such statements may
significantly delay or essentially preclude consummation of an otherwise
desirable acquisition by the Company. Acquisition prospects that do not have or
are unable to obtain the required audited statements may be inappropriate for
acquisition so long as the reporting requirements of the '34 Act are applicable.
Lack of Market Research or Marketing Organization. The Company has
neither conducted, nor have others made available to it, results of market
research indicating that market demand exists for the transactions contemplated
by the Company. Moreover, we do not have, and do not plan to establish, a
marketing organization. Even in the event demand is identified for a merger or
acquisition contemplated by the Company, there is no assurance we will be
successful in completing any such business combination.
Lack of Diversification. The Company's proposed operations, even if
successful, will in all likelihood result in the Company engaging in a business
combination with a business opportunity. Consequently, our activities may be
limited to those engaged in by business opportunities which the Company merges
with or acquires. The Company's inability to diversify its activities into a
number of areas may subject the Company to economic fluctuations within a
particular business or industry and therefore increase the risks associated with
our operations.
Government Regulation. Although we will be subject to the reporting
requirements under the '34 Act, as amended, management believes the Company will
not be subject to regulation under the '40 Act, as amended, insofar as the
Company will not be engaged in the business of investing or trading in
securities. In the event we engage in business combinations which result in the
Company holding passive investment interests in a number of entities, we could
be subject to regulation under the '40 Act. In such event, we would be required
to register as an investment company and could be expected to incur significant
registration and compliance costs. The Company has obtained no formal
determination from the Securities and Exchange Commission as to the status of
the Company under the '40 Act and, consequently, violation of such Act could
subject the Company to material adverse consequences.
International Business Risk. If the Company enters into a business
combination with foreign
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concern, the Company will be subject to risks inherent in business operations
outside of the United States. Such risks include, for example, currency
fluctuations, regulatory problems, punitive tariffs, unstable local tax
policies, trade embargoes, risks related to shipment of raw materials and
finished goods across national borders and cultural and language differences.
Foreign economies may differ favorably or unfavorably from the United States
economy in growth of gross national product, rate of inflation, market
development, rate of savings and capital investment, resource self-sufficiency
and balance of payments positions, and in other respects.
Probable Change in Control and Management. A business combination
involving the issuance of the Company's common stock will, in all likelihood,
result in shareholders of a private company obtaining a controlling interest in
the Company. Any such business combination may require management of the Company
to sell or transfer all or a portion of the Company's common stock held by them,
or resign as members of the Board of Directors of the Company. The resulting
change in control of the Company could result in removal of one or more present
officers and directors of the Company and a corresponding reduction in or
elimination of their participation in the future affairs of the Company.
Reduction of Percentage Share Ownership Following a Business
Combination. Our primary plan of operation is based upon a business combination
with a private concern which, in all likelihood, would result in the Company
issuing securities to shareholders of any such private company. The issuance of
previously authorized and unissued common stock of the Company would result in
reduction in percentage of shares owned by present and prospective shareholders
of the Company and may result in a change in control or management of the
Company.
Disadvantages of Blank Check Offering. We may enter into a business
combination with an entity 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. Such consequences may include, but are not limited
to, time delays of the registration process, significant expenses to be incurred
in such an offering, loss of voting control to public shareholders 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 the
Company's stock and there is no assurance that a trading market will develop.
"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 to all investors in penny stocks, a risk disclosure document required by
the rule, make a special suitability determination of the purchaser and have
received the purchaser's written agreement to the transaction prior to the sale.
In order to approve a person's account for transactions in penny stock, the
broker or dealer must (i) obtain information concerning the person's financial
situation, investment experience and investment objectives; (ii) reasonably
determine, based on the information required by paragraph (i) that transactions
in penny stock are suitable for the person and that the person has sufficient
knowledge and experience in financial matters that the person reasonably may be
expected to be capable of evaluating the rights of transactions in penny stock;
and (iii) deliver to the person a written statement setting forth the basis on
which the broker or dealer made the determination required by paragraph (ii) in
this section, stating in a highlighted format that it is unlawful for the broker
or dealer to effect a transaction in a designated security subject to the
provisions of paragraph (ii) of this section unless the broker or dealer has
received, prior to the transaction, a written agreement to the transaction from
the person; and stating in a highlighted format immediately preceding the
customer signature line that the broker or dealer is required to provide the
person with the written statement and the person should not sign and return the
written statement to the broker or dealer if it does not accurately
12
<PAGE>
reflect the person's financial situation, investment experience and investment
objectives and obtain from the person a manually signed and dated copy of the
written statement.
A penny stock means any equity security other than a security (i)
registered, or approved for registration upon notice of issuance on a national
securities exchange that makes transaction reports available pursuant to 17 CFR
11Aa3-1 (ii) authorized or approved for authorization upon notice of issuance,
for quotation on the Nasdaq NMS; (iii) that has a price of five dollars or more
or ... (iv) whose issuer has net tangible assets in excess of $2,000,000
demonstrated by financial statements dated less than fifteen months previously
that the broker or dealer has reviewed and has a reasonable basis to believe are
true and complete in relation to the date of the transaction with the person.
Consequently, the rule may affect the ability of broker-dealers to sell the
Company's securities.
Taxation. Federal and state tax consequences will, in all likelihood,
be major considerations in any business combination we may undertake. Currently,
such transactions may be structured so as to result in tax-free treatment to
both companies, pursuant to various federal and state tax provisions. The
Company intends to structure any business combination so as to minimize the
federal and state tax consequences to both the Company and the target entity;
however, there can be no assurance that such business combination will meet the
statutory requirements of a tax-free reorganization or that the parties will
obtain the intended tax-free treatment upon a transfer of stock or assets. A
non-qualifying reorganization could result in the imposition of both federal and
state taxes which may have an adverse effect on both parties to the transaction.
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.
DESCRIPTION OF PROPERTY
The Company has no properties and at this time has no agreements to
acquire any properties. The Company intends to attempt to acquire assets or a
business in exchange for its securities.
The Company operates from its offices at Suite 106, 1460 Pandosy St.,
Kelowna, British Columbia, Canada. Space is provided to the Company on a rent
free basis by Mr. Hemmerling, an officer and director of the Company, and it is
anticipated that this arrangement will remain until such time as the Company
successfully consummates a merger or acquisition. Management believes that this
space will meet the Company's needs for the foreseeable future.
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<PAGE>
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
Management
The table below lists the beneficial ownership of the Company's voting
securities by each person known by the Company to be the beneficial owner of
more than 5% of such securities, as well as the securities of the Company
beneficially owned by all directors and officers of the Company. Unless
otherwise 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 Bob Hemmerling 304,000 30.4%
Suite 106
1460 Pandosy St.
Kelowna, B.C., Canada
Common Phil Morehouse 304,000 30.4%
Suite 106
1460 Pandosy St.
Kelowna, B.C., Canada
Common All Officers and 608,000 60.8%
Directors as a
Group (2 persons)
The balance of the Company's outstanding Common stock are held by 8 persons.
14
<PAGE>
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS
AND CONTROL PERSONS
The directors and officers of the Company are as follows:
Name Age Position
- ---- --- --------
Robert Hemmerling 39 President, Chairman
Phil Morehouse 39 Secretary, Treasurer, Director
The above listed officers and directors will serve until the next
annual meeting of the shareholders or until their death, resignation,
retirement, removal, or disqualification, or until their successors have been
duly elected and qualified. Vacancies in the existing Board of Directors are
filled by majority vote of the remaining Directors. Officers of the Company
serve at the will of the Board of Directors. There are no other family
relationship between any executive officer and director of the Company.
Resumes
Robert Hemmerling, President and chairman, was appointed to his
positions with the Company on July 25, 1997. In addition to his positions with
the Company, since September 1996, Mr. Hemmerling has been employed with
Strathmore Resources, Ltd., Kelowna, British Columbia in the investor relations
department. Strathmore Resources is engaged in the business of acquiring and
developing uranium properties. Prior, from January 1996 through August 1996, Mr.
Hemmerling was unemployed. From January 1992 through December 1995, Mr.
Hemmerling was an electrician with Concord Electric, Kelowna, British Columbia.
He devotes only such time as necessary to the business of the Company, which
time is expected to be nominal.
Phil Morehouse, Secretary, Treasurer and a director, was appointed to
his positions with the Company on July 25, 1997. He is currently the President
and a managing partner of Epicenter Resources, Inc. - a private corporation
specializing in human resource development and training since 1991. From 1985 to
1991 he held a management position with the British Columbia government. Mr.
Morehouse received a Bachelor of Arts degree from Trinity Western University of
Langley, British Columbia in 1985, and a Master of Business Administration from
City University of Seattle in 1990. He devotes only such time as necessary to
the business of the Company, which time is expected to be nominal.
Prior "Blank Check" Experience
Bob Hemmerling has served as President and chairman of the following
companies since inception: Eye-Catching Marketing, Inc. and Quiksilver
International Holdings, Inc.
Mr. Hemmerling has also served as Secretary and Treasurer of the
following companies since inception: Above Average Investments, Inc., Amiable
Investment Holdings, Ltd., Asset Dissolution Services, Ltd., Big Cat Investment
Services, Inc., Blank Resources, Ltd., Blue Moon Investments, Caddo Enterprises,
Inc., Century Plus Investments Corp., Consumer Marketing Corporation, Crash
Course Holdings, Ltd., Cutting Edge Corner Corporation, Delightful Holdings
Corporation, Eastern Management Corp., Emerald Coast Enterprises, Inc., Later
Life Resources, Inc., LEK International, Modern Day Investments, Inc., Moonwalk
Enterprises, Multiple Assets & Investment, Inc., Profit Based Investments, Inc.,
Solid Management Corp., Sunny Skies Investments, Total Serenity Company, Inc.,
Tripacific Development
15
<PAGE>
Corp., Triwest Management Resources Corp., and United Management, Inc.
The SEC reporting blank check companies that Bob Hemmerling served or
is serving as President and director are listed on the following table:
Incorporation Name File Form Number Date of Filing
Eye-Catching Marketing, Inc. 10-SB 000-28237 11-22-1999*
Quiksilver International Holdings, Inc. 10-SB 000-28235 11-22-1999*
*Effective 1-21-2000
Phil Morehouse 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 the Company's 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. Insofar as the officers and directors are engaged in other business
activities, management anticipates it will devote only a minor amount of time to
the Company's affairs.
The officers and directors of the Company are now and may in the future
become shareholders, officers or directors of other companies which may be
formed for the purpose of engaging in business activities similar to those
conducted by the Company. Accordingly, additional direct conflicts of interest
may arise in the future with respect to such individuals acting on behalf of the
Company or other entities. Moreover, additional conflicts of interest may arise
with respect to opportunities which come to the attention of such individuals in
the performance of their duties or otherwise. The Company does not currently
have a right of first refusal pertaining to opportunities that come to
management's attention insofar as such opportunities may relate to the Company's
proposed business operations.
The officers and directors are, so long as they are officers or
directors of the Company, subject to the restriction that all opportunities
contemplated by the Company's plan of operation which 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 the Company and the
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 the Company or the companies in which the officers and directors are
affiliated with both desire to take advantage of an opportunity, then said
officers and directors would abstain from negotiating and voting upon the
opportunity. However, all directors may still individually take advantage of
opportunities if the Company should decline to do so. Except as set forth above,
we have not adopted any other conflict of interest policy with respect to such
transactions.
EXECUTIVE COMPENSATION
None of our officers and/or directors receive any compensation for
their respective services rendered unto the Company, nor have they received such
compensation in the past. They all have agreed to act without compensation until
authorized by the Board of Directors, which is not expected to occur until the
we have generated revenues from operations after consummation of a merger or
acquisition. As of the date of this registration statement, the Company has no
funds available to pay directors. Further, none of the directors are accruing
any compensation pursuant to any agreement with the Company.
16
<PAGE>
It is possible that, after the Company successfully consummates a
merger or acquisition with an unaffiliated entity, that entity may desire to
employ or retain one or a number of members of the Company's management for the
purposes of providing services to the surviving entity or otherwise provide
other compensation to such persons. However, the Company has adopted a policy
whereby the offer of any post-transaction remuneration to members of management
will not be a consideration in the Company's decision to undertake any proposed
transaction. Each member of management has agreed to disclose to the Company's
Board of Directors any discussions concerning possible compensation to be paid
to them by any entity which proposes to undertake a transaction with the Company
and further, to abstain from voting on such transaction. Therefore, as a
practical matter, if each member of the Company's Board of Directors is offered
compensation in any form from any prospective merger or acquisition candidate,
the proposed transaction will not be approved by the Company's Board of
Directors as a result of the inability of the Board to affirmatively approve
such a transaction.
It is possible that persons associated with management may refer a
prospective merger or acquisition candidate to the Company. In the event the
Company consummates a transaction with any entity referred by associates of
management, it is possible that such an 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 the Company as part of
the terms of the proposed transaction, or will be in the form of cash
consideration. However, if such compensation is in the form of cash, such
payment will be tendered by the acquisition or merger candidate, because the
Company has insufficient cash available. The amount of such 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 of the
Company will receive any finders fee, either directly or indirectly, as a result
of their respective efforts to implement the Company's business plan.
No retirement, pension, profit sharing, stock option or insurance
programs or other similar programs have been adopted by the Company for the
benefit of its employees.
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 the Company.
MARKET PRICE FOR COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
There is no trading market for the Company's Common stock at present
and there has been no trading market to date. Management has not undertaken any
discussions, preliminary or otherwise, with any prospective market maker
concerning the participation of such market maker in the aftermarket for the
Company's securities and management does not intend to initiate any such
discussions until such time as the Company has consummated a merger or
acquisition. There is no assurance that a trading market will ever develop or,
if such a market does develop, that it will continue.
Market Price
The Company's Common stock is not quoted at the present time. The
Securities and Exchange
17
<PAGE>
Commission has adopted a Rule which established the definition of a "penny
stock," for purposes relevant to the Company, 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
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 intends to strongly consider undertaking a transaction with
any merger or acquisition candidate which will allow the Company's securities to
be traded without the aforesaid limitations. However, there can be no assurances
that, upon a successful merger or acquisition, the Company will qualify its
securities for listing on Nasdaq or some other national exchange, or be able to
maintain the maintenance criteria necessary to insure continued listing. The
failure of the Company to qualify its securities or to meet the relevant
maintenance criteria after such qualification in the future may result in the
discontinuance of the inclusion of the Company's securities on a national
exchange. In such events, trading, if any, in the Company's securities may then
continue in the non-Nasdaq over-the-counter market. As a result, a shareholder
may find it more difficult to dispose of, or to obtain accurate quotations as to
the market value of, the Company's securities.
Effective January 4, 1999, the National Association of Securities
Dealers, Inc. (the "NASD") requires that companies listed for trading on the
Bulletin Board must file a Form 10-SB that must become effective by operation of
law and have no outstanding comments before trading may commence.
Holders
There are ten (10) holders of the Company's Common stock. In July 1997,
the Company issued 1,000,000 of its Common stock for services in forming and
organizing the Company valued at $.0001 per share ($100.00). All of the issued
and outstanding shares of the Company's Common stock were issued in accordance
with the exemption from registration afforded by Section 4(2) of the Securities
Act of 1933.
As of the date of this report, all of the Company's Common stock are
eligible for sale under Rule 144 promulgated under the '33 Act, as amended,
subject to certain limitations included in said Rule. In general, under Rule
144, a person (or persons whose shares are aggregated), who has satisfied a one
year holding period, under certain circumstances, may sell within any
three-month period a number of shares which does not exceed the greater of one
percent of the then outstanding Common stock or the average weekly trading
volume during the four calendar weeks prior to such sale. Rule 144 also permits,
under certain circumstances, the sale of shares without any quantity limitation
by a person who has satisfied a two-year holding period and who is not, and has
not been for the preceding three months, an affiliate of the Company.
18
<PAGE>
Dividends
We have not paid any dividends to date, and has no plans to do so in
the immediate future.
Transfer Agent
The Company does not have a transfer agent at this time.
RECENT SALES OF UNREGISTERED SECURITIES
On July 25, 1997, the Company issued 1,000,000 shares of Common stock
to Devinder Randhawa, for $50. The Company relied on exemption provided by
Section 4(2) of the Securities Act of 1933, as amended, for the issuance of
1,000,000 shares of Common Stock to Mr. Randhawa. All of the shares of Common
stock of the Company previously issued have been issued for investment purposes
in a "private transaction" and are "restricted" shares as defined in Rule 144
under the '33 Act, as amended. These shares may not be offered for public sale
except under Rule 144, or otherwise, pursuant to the '33 Act.
On July 25, 1997, Mr. Randhawa gifted 304,000 shares of Common stock to
Bob Hemmerling, President of the Company, 304,000 shares of Common stock to Phil
Morehouse, Secretary of the Company, and 343,000 shares of Common stock to seven
other shareholders for a total of 951,000 shares of Common stock. The shares
were gifted to increase the number of shareholders. Mr. Randhawa relied on
exemption provided by Section 4(1) of the Securities Act of 1933, as amended,
for the transfer of the 951,000 shares. All of these shares are "restricted"
shares as defined in Rule 144 under the Securities Act of 1933, as amended (the
"Act"). These shares may not be offered for public sale except under Rule 144,
or otherwise, pursuant to the Act.
As of the date of this report, all of the issued and outstanding shares
of the Company's Common stock are eligible for sale under Rule 144 promulgated
under the '33 Act, as amended, subject to certain limitations included in said
Rule.
However, all of the shareholders of the Company have executed and
delivered a "lock-up" letter agreement which provides that each such shareholder
shall not sell their respective securities until such time as the Company has
successfully consummated a merger or acquisition. Further, each shareholder has
placed their respective stock certificate with the Company's legal counsel,
Evers & Hendrickson, LLP, who has agreed not to release any of the certificates
until the Company has closed a merger or acquisition. Any liquidation by the
current shareholders after the release from the "lock-up" selling limitation
period may have a depressive effect upon the trading prices of the Company's
securities in any future market which may develop.
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 which
does not exceed the greater of one percent of the then outstanding Common stock
or the average weekly trading volume during the four calendar weeks prior to
such sale. Rule 144 also permits, under certain circumstances, the sale of
shares without any quantity limitation by a person who has satisfied a two-year
holding period and who is not, and has not been for the preceding three months,
an affiliate of the Company.
19
<PAGE>
DESCRIPTION OF SECURITIES
The Company's authorized capital stock consists of 100,000,000 shares,
of Common stock, par value $.0001 per share. There are 1,000,000 shares of
Common stock issued and outstanding as of the date of this filing.
Common Stock
All shares of Common stock have equal voting rights and, when validly
issued and outstanding, are entitled to one vote per share in all matters to be
voted upon by shareholders. The shares of Common stock have no preemptive,
subscription, conversion or redemption rights and may be issued only as fully
paid and nonassessable shares. Cumulative voting in the election of directors is
not permitted, which means that the holders of a majority of the issued and
outstanding shares of Common stock represented at any meeting at which a quorum
is present will be able to elect the entire Board of Directors if they so choose
and, in such event, the holders of the remaining shares of Common stock will not
be able to elect any directors. In the event of liquidation of the Company, each
shareholder is entitled to receive a proportionate share of the Company's assets
available for distribution to shareholders after the payment of liabilities and
after distribution in full of preferential amounts, if any. All shares of the
Company's Common stock issued and outstanding are fully paid and nonassessable.
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 therefor. The Company has no
intention to issue additional shares of stock.
INDEMNIFICATION OF OFFICERS AND DIRECTORS
Article XII of the Articles of Incorporation and Article VI of the
Bylaws of the Company, as amended, set forth certain indemnification rights. The
Bylaws of the Company provide that the Company shall possess and may exercise
all powers of indemnification of officers, directors, employees, agents and
other persons and all incidental powers and authority. The Company's Board of
Directors is authorized and empowered to exercise all of the Company's powers of
indemnification, without shareholder action. The assets of the Company could be
used or attached to satisfy any such liabilities subject to such
indemnification. See Exhibit 3.1 hereto.
Disclosure of Commission Position On Indemnification for
Securities Act Liabilities
The Nevada Revised Statutes, as amended, authorize the Company 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 such person is a party by reason of being a director or officer of the
Company if it is determined that such person acted in accordance with the
applicable standard of conduct set forth in such statutory provisions. The
Company's Articles of Incorporation provides for the indemnification of
directors and officers to the full extent permitted by Nevada law.
The Company may also purchase and maintain insurance for the benefit of
any director or officer which may cover claims for which the Company could not
indemnify such person.
Insofar as indemnification for liabilities arising under the '33 Act
may be permitted to officers, directors or persons controlling the Company
pursuant to the foregoing, the Company has been informed
20
<PAGE>
that in the opinion of the U.S. Securities and Exchange Commission such
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
We have not changed accountants since its formation and there are no
disagreements with the findings of said accountants.
21
<PAGE>
Financial Statements.
The following financial statements are attached to this report and
filed as a part thereof.
Table of Contents - Financial Statements ...................................F-2
Independent Auditor's Report ...............................................F-3
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
Unaudited Balance Sheet.....................................................F-11
Unaudited Statement of Operations...........................................F-12
Unaudited Statement of Cash Flows...........................................F-13
Unaudited Statement of Shareholders Equity..................................F-14
Notes to Unaudited Financial Statements.....................................F-15
22
<PAGE>
Part F/S
23
<PAGE>
Express Investments Associates, Inc.
Audited Financial Statements
For the Years Ended June 30, 1999 and 1998
and the Period July 25, 1997 (Inception)
through June 30, 1999
F-1
<PAGE>
EXPRESS INVESTMENTS ASSOCIATES, INC.
TABLE OF CONTENTS
Page
Independent Auditors' Report F-3
Financial Statements
Balance Sheet F-4
Statement of Operations F-5
Statement of Cash Flow F-6
Statement of Shareholders' Equity F-7
Notes to the Financial Statements F-8 to
F-10
F-2
<PAGE>
KISH, LEAKE, & ASSOCIATES P.C.
7901 E. BELLEVIEW AVE. - SUITE 220
ENGLEWOOD, COLORADO 80111
303.779.5006
Independent Auditors' Report
We have audited the accompanying balance sheet of Express Investments
Associates, Inc. (a developmental stage company), as of June 30, 1999 and the
related statements of income, shareholders' equity, and cash flows for the
fiscal years ended June 30, 1999 and 1998 and period July 25, 1997 (Inception)
through June 30, 1999. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Express Investments Associates,
Inc. at June 30, 1999 and the results of its operations and its cash flows for
the fiscal years ended June 30, 1999 and 1998 and the period July 25, 1997
(Inception) through June 30, 1999 in conformity with generally accepted
accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 5, the Company is
in the development stage and has no operations as of June 30, 1999. The
deficiency in working capital as of June 30, 1999 raises substantial doubt about
its ability to continue as a going concern. Management's plans concerning these
matters are described in Note 5. The financial statements do not include any
adjustments that might result from the outcome of these uncertainties.
Kish, Leake & Associates, P.C.
Certified Public Accountants
Englewood, Colorado
August 27, 1999
F-3
<PAGE>
Express Investments Associates, Inc.
(A Development Stage Company)
Balance Sheet
June
30, 1999
ASSETS $0
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES - Due to related entity 200
SHAREHOLDERS' EQUITY
Common Stock, $.0001 Par Value
Authorized 100,000,000 Shares; Issued
And Outstanding 1,000,000 Shares 100
Additional Paid In Capital On Common Stock 0
Deficit Accumulated During The Development Stage -300
TOTAL SHAREHOLDERS' EQUITY -200
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $0
The Accompanying Notes Are An Integral Part Of These Audited Financial
Statements.
F-4
<PAGE>
Express Investments Associates, Inc.
(A Development Stage Company)
Statement Of Operations
July
25, 1997
Fiscal Fiscal (Inception)
Year Ended Year Ended Through
June June June
30, 1999 30, 1998 30, 1999
Revenue $0 $0 $0
Expenses:
Licenses & Fees 200 0 200
Office 0 0 100
Total 200 0 300
Net (Loss) ($200) $0 ($300)
Basic (Loss) Per Common Share $0.00 $0.00
Basic Common Shares Outstanding 1,000,000 1,000,000
The Accompanying Notes Are An Integral Part Of These Unaudited Financial
Statements.
F-5
<PAGE>
Express Investments Associates, Inc.
(A Development Stage Company)
Statement Of Cash Flows
July
25, 1997
Fiscal Fiscal (Inception)
Year Ended Year Ended Through
June June June
30, 1999 30, 1998 30, 1999
Net (Loss) Accumulated During
The Development Stage ($200) $0 ($300)
Issuance Of Common Stock For Services 0 0 100
Net Cash Flows From Operations -200 0 -200
Cash Flows From Investing Activities: 0 0 0
Cash Flows From Financing Activities:
Expenses paid by related entity 200 0 200
Cash Flows From Financing 200 0 200
Net Increase In Cash 0 0 0
Cash At Beginning Of Period 0 0 0
Cash At End Of Period $0 $0 $0
Non - Cash Activities:
Stock Issued For Services $0 $0 $100
The Accompanying Notes Are An Integral Part Of These Unaudited Financial
Statements.
F-6
<PAGE>
<TABLE>
Express Investments Associates, Inc.
(A Development Stage Company)
Statement Of Shareholders' Equity
<CAPTION>
Deficit
Accumulated
Number Of Capital Paid During The
Common Common In Excess Development
Shares Stock of Par Value Stage Total
<S> <C> <C> <C> <C> <C>
Balance At July 25, 1997 0 $0 $0 $0 $0
Issuance Of Common Stock:
July 25, 1997 for Services Valued
at $.0001 Per Share 1,000,000 100 0 100
Net (Loss) -100 -100
Balance At June 30, 1998 1,000,000 100 0 -100 0
Net (Loss) -200 -200
Balance At June 30, 1999 1,000,000 $100 $0 ($300) ($200)
<FN>
The Accompanying Notes Are An Integral Part Of These Unaudited Financial Statements.
</FN>
</TABLE>
F-7
<PAGE>
Express Investments Associates, Inc.
(A Development Stage Company)
Notes to Financial Statements
For The Fiscal Years Ended June 30, 1999 and 1998
Note 1 - Organization and Summary of Significant Accounting Policies
Organization:
On July 25, 1997, Express Investments Associates, Inc. (the Company) was
incorporated 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.
Development Stage:
The company entered the Development stage in accordance with SFAS No. 7 on July
25, 1997, 1997. Its purpose is to evaluate, structure and complete a merger
with, or acquisition a privately owned corporation.
Statement of Cash Flows:
For the purpose of the statement of cash flows, the company considers demand
deposits and highly liquid-debt instruments purchased with a maturity of three
months or less to be cash equivalents.
Cash paid for interest in fiscal year ended June 30, 1999 and 1998 was $-0-.
Cash paid for income taxes in fiscal year ended June 30, 1999 and 1998 was $-0-.
Basic (Loss) per Common Share:
Basic (Loss) per common share is computed by dividing the net loss for the
period by the weighted average number of shares outstanding at June 30, 1999 and
June 30, 1998.
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 amounts. Actual results could differ from those estimates.
F-8
<PAGE>
Express Investments Associates, Inc.
(A Development Stage Company)
Notes to Financial Statements
For The Fiscal Years Ended June 30, 1999 and 1998
Note 2 - Capital Stock and Capital in Excess of Par Value
The Company initially authorized 25,000 shares of $1.00 par value common stock.
On July 25, 1997 the Board of Directors approved an increase in authorized
shares to 100,000,000 and changed the par value to $.0001. On July 25, 1997 the
Company issued 1,000,000 shares of common stock for services valued at $.0001
per share or $100.
3 - Related Party Events
The Company maintains a mailing address at an officers place of business. This
address is located at Suite 106, 1460 Pandosy Street, Kelowna, B.C., Canada, V1Y
1P3. At this time the Company has no need for an office. As of June 30, 1999
management has incurred a minimal amount of time and expense on behalf of the
Company.
Note 4 - Income Taxes
At June 30, 1999, the company had net operating loss carryforwards available for
financial statement and Federal income tax purposes of approximately $300 which,
if not used, will expire in the year 2019.
The Company follows Financial Accounting Standards Board Statement No. 109,
"Accounting for Income Taxes" (SFAS #109), which requires, among other things,
an asset and liability approach to calculating deferred income taxes. As of June
30, 1999, the Company has a deferred tax asset of $40 which has been fully
reserved through the valuation allowance. The change in the valuation allowance
for 1999 is $40.
Note 5 - Basis of Presentation
In the course of its development activities the Company has sustained continuing
losses and expects such losses to continue for the foreseeable future. The
Company's management plans on advancing funds on an as needed basis and in the
longer term, revenues from the operations of a merger candidate, if found. The
Company's ability to continue as a going concern is dependent on these
additional management advances, and, ultimately, upon achieving profitable
operations through a merger candidate.
F-9
<PAGE>
Express Investments Associates, Inc.
(A Development Stage Company)
Notes to Financial Statements
For The Fiscal Years Ended June 30, 1999 and 1998
Note 6 - Subsequent Events
On August 18, 1999 the Company filed amended articles with the state of Nevada
to change the authorized shares to the 100,000,000 original approved by the
Board of Directors on July 25, 1997. Nevada Revised Statues Section 78.385(c)
treats this amendment as if it was filed on July 25, 1997 therefore giving the
Company enough shares for the original issuance of 1,000,000 shares of common
stock.
The Board of Directors approved June 30, 1999 as the Company's fiscal year end.
The Company will be filing a form 10 SB with the Securities and Exchange
Commission thereby electing to be a reporting company under the Securities Act
of 1934.
F-10
<PAGE>
Express Investment Associates, Inc.
(A Development Stage Company)
Unaudited Balance Sheet
Unaudited Audited
September June
30, 1999 30, 1999
ASSETS $0 $0
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Current Liabilities:
Accounts Payable $2,019 $0
Advances Due to Related Entity 846 200
Total Current Liabilities 2,865 200
TOTAL LIABILITIES 2,865 200
SHAREHOLDERS' EQUITY
Common Stock, $.0001 Par Value
Authorized 100,000,000 Shares;
Issued And Outstanding 1,000,000 Shares 100 100
Capital Paid In Excess Of
Par Value Of Common Stock 0 0
(Deficit Accumulated During the Development Stage -2,965 -300
TOTAL SHAREHOLDERS' EQUITY -2,865 -200
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $0 $0
The Accompanying Notes Are An Integral Part Of These Unaudited Financial
Statements.
F-11
<PAGE>
<TABLE>
Express Investment Associates, Inc.
(A Development Stage Company)
Unaudited Statement Of Operations
<CAPTION>
Unaudited
Unaudited Unaudited July
Three Month Three Month 25, 1997
Interim Period Interim Period (Inception)
Ended Ended Through
September September September
30, 1999 30, 1998 30, 1999
<S> <C> <C> <C>
Revenue $0 $0 $0
Expenses:
Legal and Accounting 2,665 0 100
Licenses & Fees 0 0 2,665
Office 0 0 200
Total Expenses 2,665 0 2,965
Net Income (Loss) ($2,665) $0 ($2,965)
Basic Earnings (Loss) Per Share $0.00 $0.00
Weighted Average Common Shares
Outstanding 1,000,000 1,000,000
<FN>
The Accompanying Notes Are An Integral Part Of These Unaudited Financial Statements.
</FN>
</TABLE>
F-12
<PAGE>
<TABLE>
Express Investment Associates, Inc.
(A Development Stage Company)
Unaudited Statement Of Cash Flows
<CAPTION>
Unaudited
Unaudited Unaudited July
Three Month Three Month 25, 1997
Interim Period Interim Period (Inception)
Ended Ended Through
September September September
30, 1999 30, 1998 30, 1999
<S> <C> <C> <C>
Net (Loss) ($2,665) $0 ($2,965)
Adjustments To Reconcile Net Loss To Net Cash
Used In Operating Activities:
Stock Issued For Services 0 0 100
Expenses Paid by Related Entity on Behalf of Company 646 0 846
Increase in Accounts Payable 2,019 2,019
Net Cash Flows Provided By Operations 0 0 0
Cash Flows From Investing Activities:
Net Cash Flows Provided By Investing Activities 0 0 0
Cash Flows From Financing Activities:
Issuanance of Common Stock 0 0 0
Net Cash Flows Provided By Financing Activities 0 0 0
Net Increase In Cash 0 0 0
Cash At Beginning Of Period 0 0 0
Cash At End Of Period $0 $0 $0
Summary of non-cash investing and financing activities:
Stock Issued for Services $0 $0 $100
Expenses Paid by Related Entity on Behalf of Company $646 $0 $846
<FN>
The Accompanying Notes Are An Integral Part Of These Unaudited Financial Statements.
</FN>
</TABLE>
F-13
<PAGE>
<TABLE>
Express Investment Associates, Inc.
Unaudited Statement Of Shareholders' Equity
<CAPTION>
(Deficit)
Accumulated
Number Of Additional During The
Common Common Paid-In Development
Shares Stock Capital Stage Total
<S> <C> <C> <C> <C> <C>
Balance At July 25, 1997 0 $0 $0 $0 $0
Issuance of Common Stock:
July 25, 1997 for Services Valued
at $.0001 Per Share 1,000,000 100 100
Net Loss -300 -300
Balance At June 30, 1998 and 1999 1,000,000 100 0 -300 -200
Net Loss September 30, 1999 -2,665 -2,665
Balance At September 30, 1999 1,000,000 $100 $0 ($2,965) ($2,865)
<FN>
The Accompanying Notes Are An Integral Part Of These Unaudited Financial Statements.
</FN>
</TABLE>
F-14
<PAGE>
Express Investment Associates, Inc.
Notes To Unaudited Financial Statements
For The Three Month Period Ended September 30, 1999
Note 1 - Unaudited Financial Information
The unaudited financial information included for the three month interim period
ended September 30, 1999 were taken from the books and records without audit.
However, such information reflects all adjustments (consisting only of normal
recurring adjustments, which are of the opinion of management, necessary to
reflect properly the results of interim period presented). The results of
operations for the three month period ended September 30, 1999 are not
necessarily indicative of the results expected for the fiscal year ended June
30, 2000.
Note 2 - Financial Statements
Management has elected to omit substantially all footnotes relating to the
condensed financial statements of the Company included in the report. For a
complete set of footnotes, reference is made to the Company's Report on Form 10
for the year ended June 30, 1999 as filed with the Securities and Exchange
Commission and the audited financial statements included therein.
F-15
<PAGE>
ITEM 1. EXHIBIT INDEX
No.
3.1* Articles of Incorporation
3.2* Amendment to Articles of Incorporation
3.3* Bylaws
4.1* Specimen Informational Statement
4.1.1* Form of Lock-up Agreement Executed by the
Company's Shareholders
27.1* Financial Data Schedule
*Previously filed.
24
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange
Act of 1934, the Registrant has duly caused this registration statement to be
signed on its behalf by the undersigned, thereunto duly authorized.
Express Investments Associates, Inc.
Date: December 14, 1999
By: Bob Hemmerling
---------------------------------
Bob Hemmerling, President
By: Phil Morehouse
---------------------------------
Phil Morehouse, Secretary
25
