File No. 333-
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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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EXPRESS INVESTMENTS ASSOCIATES, INC.
(Name of small business issuer in its charter)
<TABLE>
<S> <C> <C>
Nevada 6770 98-0204680
(State or jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Identification No.) Classification Code No.)
</TABLE>
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Suite 104, 1456 St. Paul St., Kelowna,
British Columbia, Canada V1Y 2E6
(Address of principal place of business or intended principal place of business)
---------------------
Bob Hemmerling
Express Investments Associates, Inc.
Suite 104, 1456 St. Paul St., Kelowna,
British Columbia, Canada V1Y 2E6
(250) 868-8177 tel.
(Name, address and telephone number of agent for service)
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Copies to:
Antoine M. Devine, Esq.
Evers & Hendrickson LLP
155 Montgomery Street, Suite 1200
San Francisco, CA 94104
(415) 772-8109
Approximate date of proposed sale to the public: As soon as practicable after
this Registration Statement becomes effective.
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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Title of each
class of
securities to be Amount to be Proposed maximum Proposed maximum Amount of
registered registered offering price per unit(1) aggregate offering price registration fee
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<S> <C> <C> <C> <C>
Common Stock, 200,000 $1.00 $200,000 $56.00
par value
$0.0001
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<FN>
(1) Estimated solely for the purpose of calculating the registration fee and
pursuant to Rule 457.
</FN>
</TABLE>
The registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
PART I - INFORMATION REQUIRED IN PROSPECTUS
Cross Reference Sheet Showing the Location in Prospectus of Information Required
by Items of Form SB-2
Item No. Required Item Location of Caption in Prospectus
- -------- ------------- ---------------------------------
1. Forepart of the Registration Cover Page; Outside
Statement and Outside Front Front Page of
Cover of Prospectus Prospectus
2. Inside Front and Outside Back Inside Front and
Cover Pages of Prospectus Outside Back Cover
Pages of Prospectus
3. Summary Information and Prospectus Summary;
Risk Factors Risk Factors
4. Use of Proceeds Use of Proceeds
5. Determination of Offering Prospectus Summary -
Price Determination of Offering Price;
Risk Factors; Plan of Distribution
6. Dilution Dilution
7. Selling Security Holders Not Applicable
8. Plan of Distribution Plan of Distribution
9. Legal Proceedings Legal Proceedings
10. Director, Executive Officer, Management
Management and Promoters
and Control Persons
11. Security Ownership of Certain Principal Shareholders
Beneficial Owners and
Management
12. Description of Securities Description of Securities
13. Interest of Named Experts Not Applicable
and Counsel
14. Disclosure of Commission Indemnification of Officers and
Position on Indemnification Directors
for Securities Act Liabilities
15. Organization within Last Five Management, Certain Transactions
Years
16. Description of Business Business
ii
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17. Management's Discussion and Plan of Operation
Analysis or Plan of Operation
18. Description of Property Description of Property
19. Certain Relationships and Certain Transactions
Related 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 Changes in and Disagreements
with Accountants on Accounting with Accountants on Accounting
and Financial Disclosure and Financial Disclosure
PART II
24. Indemnification of Directors Indemnification of
and Officers Directors and Officers
25. Other Expenses of Issuance and Other Expenses of
Distribution Issuance and Distribution
26. Recent Sales of Unregistered Recent Sales of Unregistered
Securities Securities
27. Exhibits Exhibits
* Undertakings Undertakings
iii
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Subject To Completion, Dated , 2000
INITIAL PUBLIC OFFERING
PROSPECTUS
EXPRESS INVESTMENTS ASSOCIATES, INC.
200,000 SHARES OF COMMON STOCK
$1.00 PER SHARE
Express Investments Associates, Inc. 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. Bob Hemmerling,
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 9.
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Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense
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Offering Information
Per share Total
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Initial public offering price $......1.00 $200,000.00
Underwriting discounts/commissions (1) $...... .00 $ .00
Estimated offering expenses(1) $...... .00 $ .00
Net offering proceeds to Express
Investments Associates, Inc. $......1.00 $200,000.00(1)
(1) Does not include offering costs, including filing, printing, legal,
accounting, transfer agent and escrow agent fees estimated at $9,556.00. We will
pay these expenses.
The date of this Prospectus is ______________, 2000
<PAGE>
TABLE OF CONTENTS
Page
PROSPECTUS SUMMARY.............................................................4
LIMITED STATE REGISTRATION.....................................................4
SUMMARY FINANCIAL INFORMATION..................................................5
RISK FACTORS...................................................................8
No Operating History or Revenue and Minimal Assets...........................8
No access to your funds while held in escrow.................................8
Failure of sufficient number of investors to reconfirm investment............8
Extremely limited capitalization.............................................8
No transfer of escrowed securities...........................................8
Speculative Nature of Our Operations.........................................8
Scarcity of and Competition for Business Opportunities and Combinations......9
No Agreement for Business Combination or Other Transaction...................9
No Standards for Business Combination........................................9
Continued Management Control, Limited Time Availability......................9
Conflicts of Interest - General..............................................9
Affiliation with Other "Blank Check" Companies...............................9
Reporting Requirements May Delay or Preclude Acquisition....................10
Lack of Market Research or Marketing Organization...........................10
Lack of Diversification.....................................................10
Government Regulation.......................................................10
International Business Risk.................................................10
Probable Change in Control and Management...................................10
Reduction of Percentage Share Ownership Following a Business Combination....10
Disadvantages of Blank Check Offerings......................................11
Absence of Trading Market...................................................11
Limitations on Share Resale.................................................11
No Underwriter..............................................................11
"Penny" Stock Regulation of Broker-Dealer Sales of Our Securities...........11
Taxation....................................................................12
Requirement of Audited Financial Statements May Disqualify Business
Opportunities...............................................................12
YOUR RIGHTS AND SUBSTANTIVE PROTECTION UNDER RULE 419.........................13
DILUTION......................................................................14
USE OF PROCEEDS...............................................................15
CAPITALIZATION................................................................16
DESCRIPTION OF BUSINESS.......................................................17
PLAN OF OPERATION.............................................................18
DESCRIPTION OF PROPERTY.......................................................23
PRINCIPAL SHAREHOLDERS........................................................24
MANAGEMENT....................................................................25
2
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EXECUTIVE COMPENSATION........................................................27
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS................................27
LEGAL PROCEEDINGS.............................................................27
MARKET FOR OUR COMMON STOCK...................................................28
DESCRIPTION OF SECURITIES.....................................................30
SHARES ELIGIBLE FOR FUTURE RESALE.............................................30
WHERE CAN YOU FIND MORE INFORMATION...........................................31
REPORTS TO STOCKHOLDERS.......................................................31
PLAN OF DISTRIBUTION..........................................................31
LEGAL MATTERS.................................................................32
EXPERTS.......................................................................32
INDEMNIFICATION OF OFFICERS AND DIRECTORS.....................................33
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE..........................................................33
FINANCIAL STATEMENTS.........................................................F-1
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.
Express Investments Associates, Inc.
We are a blank check company subject to Rule 419. We were organized as a
vehicle to acquire or merge with another business or company. We have no present
plans, proposals, agreements, arrangements or understandings to acquire or merge
with any specific business or company nor have we identified any specific
business or company for investigation and evaluation for a merger with us. Since
our organization, our activities have been limited to the sale of initial shares
for our organization and our preparation in producing a registration statement
and prospectus for our initial public offering. We will not engage in any
substantive commercial business following the offering. We maintain our office
at Suite 104, 1456 St. Paul St., Kelowna, British Columbia, Canada V1Y 2E6. Our
phone number is (250) 868- 8445.
The Offering
Securities offered 200,000 shares of common stock, $0.0001 par
value, being offered at $1.00 per share. (See
"Description of Capital Stock.")
Common stock outstanding 1,000,000 shares
prior to the offering
Common stock to be 1,200,000 shares
outstanding after the offering
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.
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SUMMARY FINANCIAL INFORMATION
The table below contains certain summary historical financial data. The
historical financial data for the fiscal year ended June 30, 1999 has been
derived from our audited financial statements which are contained in this
Prospectus. The financial statements were filed as part of the Form 10-SB we
filed with the Commission on October 4, 1999, and should be read in conjunction
with those financial statements and notes.
June 30, 1999
INCOME STATEMENT:
<TABLE>
<CAPTION>
Three Months
Fiscal Year Ended June 30, Ended September 30,
(Audited) (Unaudited)
---------------------- ----------------------
1998 1999 1998 1999
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Revenue $ 0 $ 0 $ 0 $ 0
Expenses $ 0 $ 200 $ 0 $ 2,665
Net Income (loss) $ 0 $ (200) $ 0 $ 2,665
Basic Earnings (loss) per share $ 0 $ 0 $ 0 $ 0
Basic Number of Common Shares
Outstanding 1,000,000 1,000,000 1,000,000 1,000,000
BALANCE SHEET (at end of period):
Total Assets $ 0 $ 0 $ 0 $ 0
Total Liabilities $ 0 $ 200 $ 0 $ 2,865
Total Shareholders Equity (Net Assets) $ 100 $ 100 $ 100 $ 100
Net Income per share on a
fully dilated basis $ 0 $ 0 $ 0 $ 0
</TABLE>
5
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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 at our sole election.
Prescribed Acquisition Criteria
Rule 419 requires that, before the funds and the securities can be
released, we must first execute an agreement to acquire a candidate 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, as a
precondition to its closing, 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 $160,000 (80% of $200,000).
Post-Effective Amendment
Once the agreement governing the acquisition of a business meeting the
required criteria has been executed, Rule 419 requires us to update the
registration statement with a post-effective amendment. The post-effective
amendment must contain information about the proposed acquisition candidate and
their business, including audited financial statements, the results of this
offering and the use of the funds 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 funds and securities can be
released from escrow.
Reconfirmation Offering
The reconfirmation offer must commence after the effective date of the
post-effective amendment. Under Rule 419, the terms of the reconfirmation offer
must include the following conditions:
The prospectus contained in the post-effective amendment will be sent to
each investor whose securities 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 equaling $160,000 elect
to reconfirm their investment.
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If a closed acquisition has not occurred by ______________ (18 months from
the date of this prospectus), the funds held in the escrow account shall 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 funds will be released to us, and the securities will be released to
you, only after:
The escrow agent has received a signed representation from us and any
other evidence acceptable by the escrow agent that:
We have executed an agreement for the acquisition of an acquisition
candidate whose fair market value represents at least 80% of the
maximum offering proceeds and has filed the required post-effective
amendment.
The post-effective amendment has been declared effective.
We have satisfied all of the prescribed conditions of the
reconfirmation offer.
The closing of the acquisition of the business with a fair value of at
least 80% of the maximum proceeds.
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 its
inception. We have no significant assets or financial resources. We will, in all
likelihood, sustain operating expenses without corresponding revenues, at least
until the consummation of a business combination. This may result in our
incurring a net operating loss that will increase continuously until we can
consummate a business combination with a profitable business opportunity. We
cannot assure you that we can identify a suitable business opportunity and
consummate a business combination.
No access to your funds while held in escrow. If we are unable to locate an
acquisition candidate meeting these 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 execution 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, a sufficient number of
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 securities held in escrow
will be issued and the funds will be returned to you on a proportionate basis
without interest.
Extremely limited capitalization. As of June 30, 1999, there were $0 assets
and $2,865 in liabilities. There was $0 available in our treasury as of June 30,
1999. Assuming the sale of all the shares in this offering, we will receive net
proceeds of approximately $200,000.00, 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 or related
to the securities held in the Rule 419 escrow account other than under a
qualified domestic relations order in divorce proceedings. Therefore, 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.
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
8
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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. 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. 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 a specific
length of operating history or a specified level of earnings, assets, net worth
or other criteria that we will require a target business opportunity to have
achieved. Accordingly, we may enter into a business combination with a business
opportunity having no significant operating history, losses, limited or no
potential for earnings, limited assets, negative net worth or other
characteristics that are indicative of development stage companies.
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 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 "Management."
Conflicts of Interest - General. Our officers and directors may participate
in business ventures that could be deemed to compete directly with us.
Additional conflicts of interest and non-arms length transactions may also arise
in the event our officers or directors are involved in the management of any
firm with which we transact business. Management has adopted a policy that we
will not seek a merger with, or acquisition of, any entity in which management
serves as officers, directors or partners, or in which they or their family
members own or hold any direct or indirect ownership interest.
Affiliation With Other "Blank Check" Companies. Our officers and directors
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 may not 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
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size of the acquisition. The time and additional costs that may be incurred by
some target entities to prepare these statements may significantly delay or
essentially preclude consummation of an acquisition. Acquisition prospects that
do not have or are unable to obtain the required audited statements may be
inappropriate for acquisition so long as the reporting requirements of the '34
Act are applicable.
Lack of Market Research or Marketing Organization. We have neither
conducted, nor have others made available to us, results of market research
indicating that market demand exists for the transactions we contemplate.
Moreover, we do not have, and do not plan to establish, a marketing
organization. Even if demand is identified for a merger or acquisition, we
cannot assure you that we will be successful in completing a business
combination.
Lack of Diversification. Our proposed operations, even if successful, will
in all likelihood result in our engaging in a business combination with a
business opportunity. Consequently, our activities may be limited to those
engaged in by business opportunities that we merge with or acquire. Our
inability to diversify its 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.
Government Regulation. Although we will be subject to the reporting
requirements under the '34 Act, as amended, management believes we will not be
subject to regulation under the '40 Act, as amended, since we will not be
engaged in the business of investing or trading in securities. If we engage in
business combinations which result in our holding passive investment interests
in a number of entities, we could be subject to regulation under the '40 Act. If
so, 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, violation of the Act could
subject us to material adverse consequences.
International Business Risk. If we enter into a business combination with
foreign concern, we will be subject to risks inherent in business operations
outside of the United States. These risks include, for example, currency
fluctuations, regulatory problems, punitive tariffs, unstable local tax
policies, trade embargoes, risks related to shipment of raw materials and
finished goods across national borders and cultural and language differences.
Foreign economies may differ favorably or unfavorably from the United States
economy in growth of gross national product, rate of inflation, market
development, rate of savings and capital investment, resource self-sufficiency
and balance of payments positions, and in other respects.
Probable Change in Control and Management. A business combination involving
the issuance of our common stock will, in all likelihood, result in shareholders
of a private company obtaining a controlling interest in the Company. If that
occurs, management may be required to sell or transfer all or a portion of the
Company's common stock held by them, or resign as members of the Board of
Directors of the Company. The resulting change in control could result in
removal of one or more present officers and directors and a corresponding
reduction in or elimination of their participation in our future affairs.
Reduction of Percentage Share Ownership Following a Business Combination.
Our primary plan of operation is based upon a business combination with a
private concern that, in all likelihood, would 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 present and prospective 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 an entity that desires to establish a public trading market for
its shares. A business opportunity may attempt to avoid
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what it deems to be adverse consequences of undertaking its own public offering
by seeking a business combination with us. The consequences may include, but are
not limited to, 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 to all investors in penny stocks, a risk disclosure document required by
the rule, make a special suitability determination of the purchaser and have
received the purchaser's written agreement to the transaction prior to the sale.
In order to approve a person's account for transactions in penny stock, the
broker or dealer must (i) obtain information concerning the person's financial
situation, investment experience and investment objectives; (ii) reasonably
determine, based on the information required by paragraph (i) that transactions
in penny stock are suitable for the person and that the person has sufficient
knowledge and experience in financial matters that the person reasonably may be
expected to be capable of evaluating the rights of transactions in penny stock;
and (iii) deliver to the person a written statement setting forth the basis on
which the broker or dealer made the determination required by paragraph (ii) in
this section, stating in a highlighted format that it is unlawful for the broker
or dealer to effect a transaction in a designated security subject to the
provisions of paragraph (ii) of this section unless the broker or dealer has
received, prior to the transaction, a written agreement to the transaction from
the person; and stating in a highlighted format immediately preceding the
customer signature line that the broker or dealer is required to provide the
person with the written statement and the person should not sign and return the
written statement to the broker or dealer if it does not accurately reflect the
person's financial situation, investment experience and investment objectives
and obtain from the person a manually signed and dated copy of the written
statement.
A penny stock means any equity security other than a security (i)
registered, or approved for registration upon notice of issuance on a national
securities exchange that makes transaction reports available pursuant to 17 CFR
11Aa3-1 (ii) authorized or approved for authorization upon notice of issuance,
for quotation on the Nasdaq NMS ; (iii) that has a price of five dollars or more
or . . . . (iv) whose issuer has net tangible assets in excess of $2,000,000
demonstrated by financial statements dated less than fifteen months previously
that the broker or dealer has reviewed and has a reasonable basis to believe are
true and complete in relation to the date of the transaction with the person.
Consequently, the rule may affect the ability of broker-dealers to sell the
Company's securities.
Taxation. Federal and state tax consequences will, in all likelihood, be
major considerations in any business combination we may undertake. Currently, a
transaction may be structured so as 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 so as 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
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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.
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YOUR RIGHTS AND SUBSTANTIVE PROTECTION UNDER RULE 419
DEPOSIT OF OFFERING PROCEEDS AND SECURITIES
Rule 419 requires that offering proceeds, after deduction for underwriting
commissions, underwriting expenses and dealer allowances, if any, and the
securities purchased by you and other investors in this offering, be deposited
into an escrow or trust account governed by an agreement that contains certain
terms and provisions specified by Rule 419. Under Rule 419, the funds will be
released to us and the securities will be released to you only after we have met
the following three basic conditions:
First, we must execute an agreement for an acquisition of a business or
asset that will constitute our business and for which the fair value of the
business or net assets to be acquired represents at least 80% of the maximum
offering proceeds, but excluding underwriting commissions, underwriting expenses
and dealer allowances, if any.
Second, we must file a post-effective amendment to the registration
statement that includes the results of this offering including, but not limited
to, the gross offering proceeds raised to date, the amounts paid for
underwriting commissions, underwriting expenses and dealer allowances, if any,
amounts dispersed to us and amounts remaining in the escrow account. In
addition, we must disclose the specific amount, use and appropriation of funds
disbursed to us to date, including, payments to officers, directors, controlling
shareholders or affiliates, specifying the amounts and purposes of these
payments, and the terms of a reconfirmation offer that must contain conditions
prescribed by the rules. The post-effective amendment must also contain
information regarding the acquisition candidate and business, including audited
financial statements.
Third, we will mail to each investor within five business days of a
post-effective amendment, a copy of the prospectus contained therein. The
Reconfirmation Offering shall be made as described under "Prospectus Summary;
Reconfirmation Offering. " After we submit a signed representation to the escrow
agent that the requirements of Rule 419 have been met and after the acquisition
is closed, the escrow agent can release the funds and securities.
Accordingly, we have entered into an escrow agreement with ______________
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 promptly upon issuance. Your
name must be included on the stock certificates or other documents
evidencing the securities. The securities held in the escrow account are to
remain as issued, and are to be held for your sole benefit. You retain the
voting rights, if any, to the securities held in your name. The securities
held in the escrow account may neither be transferred or disposed of nor
any interest 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.
13
<PAGE>
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.
<TABLE>
As of June 30, 1999, our net tangible book value was $-2,865 or $-.0029 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 200,000 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), our adjusted pro forma net
tangible book value as of June 30, 1999, would have been $197,135 or $0.16 per
share. This represents an immediate increase in net tangible book value of $0.16
per share to existing shareholders and an immediate dilution of $0.84 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 $0.00
Increase per share attributable to new investors $0.16
-----
Dilution per share to new investors $0.84
=====
<S> <C> <C>
Number of Shares Before Money Received For Shares Net Tangible Book Value
Offering Before Offering Per Share Before Offering
-------- --------------- -------------------------
1,000,000 $100 $0.0029
Total Number of Shares After Total Amount Of Money Pro-Forma Net Tangible Book
Offering Received For Shares Value Per Share After Offering
-------- ------------------- ------------------------------
1,200,000 $200,000 $0.16
</TABLE>
14
<PAGE>
<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.
<CAPTION>
Shares Purchased Total Consideration Average Price
---------------- ------------------- -------------
Number Percent Amount Percent Paid Per Share
------ ------- ------ ------- --------------
<S> <C> <C> <C> <C> <C>
New Investors 200,000 16.67% $200,000 99.95% $1.00
Existing shareholders 1,000,000 83.33% $100 .0005% $.0001
</TABLE>
USE OF PROCEEDS
The gross proceeds of this offering will be $200,000. While Rule 419, prior
to the reconfirmation of the offering permits, 10% of the funds ($20,000) 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 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 $9556.00.
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,
$200,000, 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) $ 9,556 4.7%
Working Capital $190,444 95.3%
-------- -----
Total(3) $200,000 100%
======== =====
(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
15
<PAGE>
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 _________________________________.
CAPITALIZATION
The following table sets forth our capitalization as of June 30, 1999, and
pro-forma as adjusted to give close to the sale of 100,000 shares offered by us.
Actual As Adjusted
------- --------
Stockholders' equity: $(2,865) $197,135
common stock, $.001 par value;
authorized 50,000,000 shares,
issued and outstanding
1,000,000 shares and 1,200,000
shares, pro-forma as adjusted 100 200,100
Additional paid-in capital -0- 200,000
Deficit accumulated during the
development period (2,965) 197,035
------- --------
Total stockholders equity (2,865) 197,135
======= ========
Total Capitalization (2,865) 197,135
16
<PAGE>
DESCRIPTION OF BUSINESS
Express Investments Associates, Inc. (referred to as "us," "we" or "our"),
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, 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 for so long as it is subject to those requirements.
Lock-up Agreement
Each of our shareholders has executed and delivered a "lock-up" letter
agreement, affirming that they shall not sell their respective shares of common
stock until we have successfully consummated a merger or acquisition and we are
no longer classified as a "blank check" company. In order to provide further
assurances that no trading will occur in our securities until a merger or
acquisition has been consummated, each shareholder has agreed to place their
respective stock certificate with our legal counsel, Evers & Hendrickson, LLP,
who will not release these respective certificates until they have confirmed
that a merger or acquisition was successfully consummated. However, while
management believes that the procedures established to preclude any sale of our
securities prior to closing of a merger or acquisition will be sufficient, we
cannot assure you that the procedures established will unequivocally limit any
shareholder's ability to sell their respective securities before a closing.
Investment Company Act of 1940
Although we will be subject to 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.
17
<PAGE>
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. We seek to locate a suitable merger of acquisition candidate, and we
do not intend to engage in the business of advising others in investment matters
for a fee or other type of consideration.
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.
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"), we caution
readers regarding forward looking statements found in the following discussion
and elsewhere in this registration statement and in any other statement made by,
or on our behalf, whether or not in future filings with the Securities and
Exchange Commission. Forward looking statements are statements not based on
historical information and that relate to future operations, strategies,
financial results or other developments. Forward looking statements are
necessarily based upon estimates and assumptions that are inherently subject to
significant business, economic and competitive uncertainties and contingencies,
many of which are beyond our control and many of which, with respect to future
business decisions, are subject to change. These uncertainties and contingencies
can affect actual results and could cause actual results to differ materially
from those expressed in any forward looking statements made by or on our behalf.
We disclaim any obligation to update forward looking statements. Readers should
also understand that under Section 27A(b)(2)(D) of the '33 Act, and Section
21E(b)(2)(D) of the '34 Act, the "safe harbor" provisions of the PSLRA do not
apply to statements made in connection with an initial public offering.
PLAN OF OPERATION
We intend to seek to acquire assets or shares of an entity actively engaged
in a business that generates revenues, in exchange for its securities. We have
not identified a particular acquisition target and have not entered into any
negotiations regarding an acquisition. As soon as this registration statement
becomes effective 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
18
<PAGE>
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,
with further assurances that an audited statement would be provided prior to
execution of a merger or acquisition agreement. Closing documents will include
representations that the value of the assets transferred will not materially
differ from the representations included in the closing documents, or the
transaction will be voidable.
Due to our intent to remain a shell corporation until a merger or
acquisition candidate is identified, it is anticipated that its cash
requirements shall be minimal, and that all necessary capital, to the extent
required, will be provided by the directors or officers. We do not anticipate
that we will have to raise capital in the next twelve months. We also do not
expect to acquire any plant or significant equipment.
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 have agreed to
allocate a portion of their time to our activities, without compensation. These
officers anticipate that our business plan can be implemented by their devoting
approximately five (5) hours each per month to our business affairs and,
consequently, conflicts of interest may arise with respect to their limited time
commitment. We do not expect any significant changes in the number of employees.
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. If a conflict does arise and an officer or
director is presented with business opportunities under circumstances where
there may be a doubt as to whether the opportunity should belong to the Company
or another "blank check" company they are affiliated with, they will disclose
the opportunity to all the companies. If a situation arises where more than one
company desires to merge with or acquire that target company and the principals
of the proposed target company have no preference as to which company will merge
with or acquire the target company, the company that first filed a registration
statement with the Securities and Exchange Commission will be entitled to
proceed with the proposed transaction. See "Risk Factors - Affiliation With
Other "Blank Check" Companies."
General Business Plan
Our purpose is to seek, investigate and, if investigation warrants, acquire
an interest in business opportunities presented to it by persons or firms that
desire to seek the perceived advantages of an Exchange Act registered
corporation. We will not restrict our search to any specific business, industry,
or geographical location and we may participate in a business venture of
virtually any kind or nature. This discussion of the proposed business is
purposefully general and is not meant to restrict our discretion to search for
and enter into potential business opportunities. Management anticipates that it
may be able to participate in only one potential business venture because we
have nominal assets and limited financial resources. See the financial
statements at page F-1 of this prospectus. This lack of diversification should
be considered a substantial risk to our shareholders because it will not permit
us to offset potential losses from one venture against gains from another.
19
<PAGE>
We may seek a business opportunity with entities that have recently
commenced operations, or that wish to utilize the public marketplace in order to
raise additional capital in order to expand into new products or markets, to
develop a new product or service, or for other corporate purposes. We may
acquire assets and establish wholly owned subsidiaries in various businesses or
acquire existing businesses as subsidiaries.
We anticipate that the selection of a business opportunity will be complex
and extremely risky. Due to general economic conditions, rapid technological
advances being made in some industries and shortages of available capital,
management believes that there are numerous firms seeking the perceived benefits
of a publicly registered corporation. The perceived benefits may include
facilitating or improving the terms for additional equity financing that may be
sought, providing liquidity for incentive stock options or similar benefits to
key employees, providing liquidity (subject to restrictions of applicable
statutes) for all shareholders and other factors. Potentially, available
business opportunities may occur in many different industries and at various
stages of development, all of which will make the task of comparative
investigation and analysis of these business opportunities extremely difficult
and complex.
We have, and will continue to have, no capital to provide the owners of
business opportunities with any significant cash or other assets. However,
management believes we will be able to offer owners of acquisition candidates
the opportunity to acquire a controlling ownership interest in a publicly
registered company without incurring the cost and time required to conduct an
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 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 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;
20
<PAGE>
* 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 the above factors. We will not
acquire or merge with any company that cannot provide audited financial
statements within a reasonable period of time after closing of the proposed
transaction.
Our management, while probably not especially experienced in matters
relating to the prospective new business of the Company, shall rely upon their
own efforts and, to a much lesser extent, the efforts of our shareholders, in
accomplishing our business purposes. We do not anticipate that any outside
consultants or advisors, except for our legal counsel and accountants, will be
utilized by us to accomplish our business purposes. However, if we do retain an
outside consultant or advisor, any cash fee will be paid by the prospective
merger/acquisition candidate, as we have no cash assets. We have no contracts or
agreements with any outside consultants and none are contemplated.
We will not restrict our search for any specific kind of firms, and may
acquire a venture that is in its preliminary or development stage or is already
operating. We cannot predict at this time the status of any business in which we
may become engaged, because the business may need to seek additional capital,
may desire to have its shares publicly traded, or may seek other perceived
advantages that we may offer. Furthermore, we do not intend to seek 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
its business plan. Because we has no capital to pay these anticipated expenses,
present management will pay these charges with their personal funds, as interest
free loans, for a minimum of twelve months from the date of this registration
statement. If additional funding is necessary, management and or shareholders
will continue to provide capital or arrange for additional outside funding.
However, the only opportunity that management has to have these loans repaid
will be from a prospective merger or acquisition candidate. Management has no
agreements with us that would impede or prevent consummation of a proposed
transaction. We cannot assure, however, that management will continue to provide
capital indefinitely if a merger candidate cannot be found. If a merger
candidate cannot be found in a reasonable period of time, management may be
required reconsider its business strategy, which could result in our
dissolution.
Acquisition of Opportunities
In implementing a structure for a particular business acquisition, we may
become a party to a merger, consolidation, reorganization, joint venture, or
licensing agreement with another corporation or entity. It may also acquire
stock or assets of an existing business. On the consummation of a transaction,
it is probable that our present management and shareholders will no longer be in
control. In addition, our directors may, as part of the terms of the acquisition
transaction, resign and be replaced by new directors without a vote of our
shareholders. Furthermore, management may negotiate or consent to the purchase
of all or a portion of our stock. Any terms of sale of the shares presently held
by officers and/or directors will be also afforded to all other shareholders on
similar terms and conditions. Any 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 transaction that management may not be a party
to cannot be predicted, it may be expected that the parties to the business
transaction will find it desirable to avoid the creation of
21
<PAGE>
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 analysis of verification of certain
information provided, check references of management and key personnel, and take
other reasonable investigative measures to the extent of our limited financial
resources and management expertise. How we will participate in an opportunity
will depend on the nature of the opportunity, the respective needs and desires
of the parties, the management of the target company and our relative
negotiation strength.
With respect to any merger or acquisition, negotiations with target company
management are expected to focus on the percentage of our Company that the
target company shareholders would acquire in exchange for all of their
shareholdings in the target company. Depending upon, among other things, the
target company's assets and liabilities, our shareholders will probably hold a
substantially lesser percentage ownership interest following any merger or
acquisition. The percentage ownership may be subject to significant reduction in
the event we acquire a company with substantial assets. Any merger or
acquisition effected by us can be expected to have a significant dilutive effect
on the percentage of shares held by our remaining shareholders.
We will participate in a business opportunity only after the negotiation
and execution of appropriate written agreements. Although we cannot predict the
terms of the agreements, generally the agreements will require some specific
representations and warranties by all of the parties, will specify certain
events of default, will detail the terms of closing and the conditions that must
be satisfied by each of the parties prior to and after the closing, will outline
the manner of bearing costs, including costs associated with our attorneys and
accountants, will set forth remedies on default and will include miscellaneous
other terms.
As stated previously, we will not acquire or merge with any entity that
cannot provide independent audited financial statements concurrent with the
closing of the proposed transaction. We are subject to the reporting
requirements of the '34 Act. Included in these requirements is our affirmative
duty to file independent audited financial statements as part of its Form 8-K to
be filed with the Securities and Exchange Commission upon consummation of a
merger or acquisition, as well as our audited financial statements included in
our annual report on Form 10-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 will remain an insignificant participant among the firms that engage in
the acquisition of business opportunities. There are many established venture
capital and financial concerns that have significantly greater financial and
personnel resources and technical expertise than we do. In view of our combined
extremely limited financial resources and limited management availability, we
will continue to be at a
22
<PAGE>
significant competitive disadvantage compared to our competitors.
DESCRIPTION OF PROPERTY
We have no properties and at this time has no agreements to acquire any
properties. We intend to attempt to acquire assets or a business in exchange for
its securities.
We operate from our offices at Suite 104, 1456 St. Paul 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 we successfully consummate a merger or
acquisition. Management believes that this space will meet our needs for the
foreseeable future.
23
<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 Bob Hemmerling 304,000 30.4%
Suite 104
1456 St. Paul St.
Kelowna, B.C.
Canada V1Y 2E6
Common Phil Morehouse 304,000 30.4%
Suite 104
1456 St. Paul St.
Kelowna, B.C.,
Canada V1Y 2E6
Common All Officers and 608,000 60.8%
Directors as a
Group (2 persons)
The balance of our outstanding common stock is held by 8 persons.
24
<PAGE>
MANAGEMENT
Our directors and officers 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. Our officers serve at the will of the
Board of Directors. There are no family relationships between any executive
officer and director.
Resumes
Robert Hemmerling, President and chairman, was appointed to his positions
on July 25, 1997. In addition to his positions with us, since September 1996,
Mr. Hemmerling has been employed with Strathmore Resources, Ltd., Kelowna,
British Columbia in the investor relations department. Strathmore Resources is
engaged in the business of acquiring and developing uranium properties. Prior,
from January 1996 through August 1996, Mr. Hemmerling was unemployed. From
January 1992 through December 1995, Mr. Hemmerling was an electrician with
Concord Electric, Kelowna, British Columbia. He devotes his time as necessary to
our business, which time is expected to be nominal.
Phil Morehouse, Secretary, Treasurer and a director, was appointed to his
positions 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 his time as necessary to our business, 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 Corp., Triwest Management Resources Corp., and United
Management, Inc.
The other SEC reporting blank check companies that Bob Hemmerling served or
is serving as President and director are listed on the following table:
<TABLE>
<CAPTION>
Incorporation Name File Form Number Date of Filing
------------------ --------- ------ --------------
<S> <C> <C> <C>
Eye-Catching Marketing, Inc. 10-SB 000-28237 11-22-1999
Quiksilver International Holdings, Inc. 10-SB 000-28235 11-22-1999
</TABLE>
25
<PAGE>
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 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.
Insofar as the officers and directors are engaged in other business activities,
management anticipates it will devote only a minor amount of time to our
affairs.
Our officers and directors are now and may in the future become
shareholders, officers or directors of other companies that may be formed for
the purpose of engaging in business activities similar to those conducted by us.
Accordingly, additional direct conflicts of interest may arise in the future
with respect to individuals acting on behalf of the Company or other entities.
Moreover, additional conflicts of interest may arise with respect to
opportunities that come to the attention of these individuals in the performance
of their duties. The Company does not currently have a right of first refusal
pertaining to opportunities that come to management's attention where the
opportunity may relate to the Company's proposed business operations.
The officers and directors are, so long as they remain officers or
directors, subject to the restriction that all opportunities contemplated by our
plan of operation that come to their attention, either in the performance of
their duties or in any other manner, will be considered opportunities of, and be
made available to us and the other companies that they are affiliated with on an
equal basis. A breach of this requirement will be a breach of the fiduciary
duties of the officer or director. If we or the companies that the officers and
directors are affiliated with both desire to take advantage of an opportunity,
then those officers and directors would abstain from negotiating and voting upon
the opportunity. However, all directors may still individually take advantage of
opportunities if we should decline to do so. Except as set forth above, we have
not adopted any other conflict of interest policy with respect to those
transactions.
26
<PAGE>
EXECUTIVE COMPENSATION
None of our officers and/or directors have received any compensation for
their respective services rendered unto us. They all have agreed to act without
compensation until authorized by the Board of Directors, which is not expected
to occur until the we have generated revenues from operations after consummation
of a merger or acquisition. As of the date of this registration statement, we
have no funds available to pay directors. Further, none of the directors are
accruing any compensation pursuant to any agreement with us.
It is possible that, after we successfully consummate a merger or
acquisition with an unaffiliated entity, that entity may desire to employ or
retain one or a number of members of our management for the purposes of
providing services to the surviving entity. However, we have adopted a policy
whereby the offer of any post-transaction employment to members of management
will not be a consideration in our decision to undertake any proposed
transaction. Each member of management has agreed to disclose to the Board of
Directors any discussions concerning possible employment by any entity that
proposes to undertake a transaction with us and further, to abstain from voting
on the transaction. Therefore, as a practical matter, if each member of the
Board of Directors is offered employment in any form from any prospective merger
or acquisition candidate, the proposed transaction will not be approved by the
Board of Directors as a result of the inability of the Board to affirmatively
approve the transaction. The transaction would then be presented to our
shareholders for approval.
It is possible that persons associated with management may refer a
prospective merger or acquisition candidate to us. In the event we consummate a
transaction with any entity referred by associates of management, it is possible
that the associate will be compensated for their referral in the form of a
finder's fee. It is anticipated that this fee will be either in the form of
restricted common stock issued by us as part of the terms of the proposed
transaction, or will be in the form of cash consideration. However, if
compensation is in the form of cash, payment will be tendered by the acquisition
or merger candidate, because we have insufficient cash available. The amount of
any finder's fee cannot be determined as of the date of this registration
statement, but is expected to be comparable to consideration normally paid in
like transactions, which range up to ten (10%) percent of the transaction price.
No member of management will receive any finders fee, either directly or
indirectly, as a result of their respective efforts to implement our business
plan.
No retirement, pension, profit sharing, stock option or insurance programs
or other similar programs have been adopted 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.
27
<PAGE>
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
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 that will allow our securities to be traded
without the aforesaid limitations. However, we cannot predict whether, upon a
successful merger or acquisition, we will qualify our securities for listing on
Nasdaq or some other national exchange, or be able to maintain the maintenance
criteria necessary to insure continued listing. Failure to qualify our
securities or to meet the relevant maintenance criteria after qualification in
the future may result in the discontinuance of the inclusion of our securities
on a national exchange. However, trading, if any, in our securities may then
continue in the non-Nasdaq over-the-counter market. As a result, a shareholder
may find it more difficult to dispose of, or to obtain accurate quotations as to
the market value of, our securities.
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 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
1,000,000 of common stock for services in formation and organization valued at
$.0001 per share ($100.00). 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 report, all of our common stock are eligible for
sale under Rule 144 promulgated under the '33 Act, as amended, subject to
certain limitations included in said Rule. In general, under Rule 144, a person
(or persons whose shares are aggregated), who has satisfied a one year holding
period, under certain circumstances, may sell within any three-month period a
number of shares that does not exceed the
28
<PAGE>
greater of one percent of the then outstanding common stock or the average
weekly trading volume during the four calendar weeks prior to the sale. Rule 144
also permits, under certain circumstances, the sale of shares without any
quantity limitation by a person who has satisfied a two-year holding period and
who is not, and has not been for the preceding three months, an affiliate.
Dividends
We have not paid any dividends to date, and have no plans to do so in the
immediate future.
Transfer Agent
We do not have a transfer agent at this time.
DESCRIPTION OF SECURITIES
Our authorized capital stock consists of 100,000,000 shares, of common
stock, par value $.0001 per share. There are 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 where a quorum is
present will be able to elect the entire Board of Directors if they so choose.
In that event, the holders of the remaining shares of common stock will not be
able to elect any directors. In the event of liquidation, each shareholder is
entitled to receive a proportionate share of our assets available for
distribution to shareholders after the payment of liabilities and after
distribution in full of preferential amounts, if any. All shares of our common
stock issued and outstanding are fully paid and nonassessable. Holders of stock
are entitled to share pro rata in dividends and distributions with respect to
the common stock, as may be declared by the Board of Directors out of funds
legally available therefor. We have no intention to issue additional shares of
stock.
There are no outstanding options or warrants to purchase, or securities
convertible into, our common equity. The1,000,000 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 July 24, 1999.
We are offering 200,000 shares of our common stock at $1.00 per share. Dilution
to the investors in this offering shall be approximately $.84 per share.
29
<PAGE>
SHARES ELIGIBLE FOR FUTURE RESALE
There has been no public market for our common stock and we cannot assure
you that a significant public market for our common stock will be developed or
be sustained after this offering. Sales of substantial amounts of common stock
in the public market after this offering, or the possibility of substantial
sales occurring, could adversely affect prevailing market prices for the common
stock or our future ability to raise capital through an offering of equity
securities.
Upon completion of this offering, we will have 1,200,000 shares
outstanding. The 200,000 shares sold in this offering will be freely tradeable
without restriction or further registration under the Securities Act unless
purchased by "affiliates" of Express Investments Associates, 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 pursuant to a registration in or applicable exemption from the
registration provisions of the securities laws of those states or jurisdictions.
The remaining 1,000,000 shares of common stock outstanding upon completion
of this Offering, which are held of record by stockholders prior to this
Offering are "restricted securities" and may not be sold in a public
distribution except in compliance with the registration requirements of the
Securities Act or an applicable exemption under the Securities Act, including an
exemption pursuant to Rule 144. In general, under Rule 144 as in effect at the
closing of this offering, beginning 90 days after the date of this prospectus, a
person (or persons whose shares are aggregated) who has beneficially owned
Restricted Shares for at least one year (including the holding period of any
prior owner who is not an affiliate of Express Investments Associates) would be
entitled to sell within any three-month period a number of shares that does not
exceed the greater of one percent of the then outstanding shares of common stock
(12,000 shares immediately after this offering) or the average weekly trading
volume of the common stock during the four calendar weeks preceding the filing
of a Form 144 with respect to the sale. Sales under Rule 144 are also subject to
certain manner of sale and notice requirements and to the availability of
current public information about Express Investments Associates. Under Rule
144(k), a person who is not deemed to have been an affiliate of Express
Investments Associates at any time during the 90 days preceding a sale and who
has beneficially owned the shares proposed to be sold for at least two years
(including the holding period of any prior owner who is not an affiliate of
Express Investments Associates) is entitled to sell their shares without
complying with the manner of sale, public information, volume limitation or
notice provisions of Rule 144.
A substantial number of shares currently restricted from resale under Rule
144 will become freely tradeable 90 days after this offering. We are unable to
estimate the number of shares that will be sold under Rule 144, since this will
depend on the market price for the common stock, the personal circumstances of
the sellers and other factors. Sales of substantial amounts of shares in the
public market could adversely affect prevailing market prices and could impair
our future ability to raise capital through an offering of its equity
securities.
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 October 4, 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
30
<PAGE>
World Wide Web at http://www.sec.gov.
You can also call or write us at any time with any questions you may have.
We'd be pleased to speak with you about any aspect of our business and this
offering.
REPORTS TO STOCKHOLDERS
We intend to furnish our stockholders with annual reports containing
audited financial statements as soon as practicable at the end of each fiscal
year. Our fiscal year ends on June 30th.
PLAN OF DISTRIBUTION
We offer the right to subscribe for 200,000 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.
31
<PAGE>
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 Evers & Hendrickson, LLP of San Francisco, California.
EXPERTS
Our financial statements as of the period ended June 30, 1999 and period
ended September 30, 1999, included in this prospectus and in the registration
statement, have been so included in reliance upon the reports of Kish, Leake &
Associates, P.C., independent certified public accountants, included in this
prospectus, and upon the authority of said firm as experts in accounting and
auditing.
32
<PAGE>
INDEMNIFICATION OF OFFICERS AND DIRECTORS
Article XII of the Articles of Incorporation and Article VI of our Bylaws,
as amended, set forth certain indemnification rights. Our Bylaws provide that we
will possess and may exercise all powers of indemnification of officers,
directors, employees, agents and other persons and all incidental powers and
authority. Our Board of Directors is authorized and empowered to exercise all of
our powers of indemnification, without shareholder action. Our assets could be
used or attached to satisfy any liabilities subject to indemnification. See
Exhibit 3.1 hereto.
Disclosure of Commission Position on Indemnification for
Securities Act Liabilities
The Nevada Revised Statutes, as amended, authorize us to indemnify any
director or officer under certain prescribed circumstances and subject to
certain limitations against certain costs and expenses, including attorneys'
fees actually and reasonably incurred in connection with any action, suit or
proceedings, whether civil, criminal, administrative or investigative, to which
the person is a party by reason of being a director or officer if it is
determined that the person acted in accordance with the applicable standard of
conduct set forth in the statutory provisions. Our Articles of Incorporation
provides for the indemnification of directors and officers to the full extent
permitted by Nevada law.
We may also purchase and maintain insurance for the benefit of any director
or officer that may cover claims for situations where we could not provide
indemnification.
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
In January, 2000, we appointed Cordovano & Harvey, P.C. to replace Kish,
Leake & Associates, P.C. as our principal accountants. The report of Kish, Leake
& Associates, P.C. on our financial statements did not contain an adverse
opinion or a disclaimer of opinion, and was not qualified or modified as to
uncertainty, audit scope or accounting principles. We had no disagreements with
them on any matter of accounting principles or practices, financial statement
disclosure or auditing scope or procedure. We did not consult with Cordovano &
Harvey, P.C. on any accounting or financial reporting matters in the periods
prior to their appointment. The change in accountants was approved by the Board
of Directors. We filed a Form 8-K with the Commission (File No. 000-27543) on
January 24, 2000.
33
<PAGE>
Financial Statements
The following financial statements are attached to this report and filed as
a part of this Registration Statement.
Table of Contents - June 30, 1999 Financial Statements.......................F-2
Independent Auditor's Report.................................................F-3
Balance Sheet as of June 30, 1999............................................F-4
Statement of Operations as of June 30, 1999..................................F-5
Statement of Cash Flows as of June 30, 1999..................................F-6
Statement of Shareholders' Equity as of June 30, 1999........................F-7
Notes to Financial Statements as of June 30, 1999............................F-8
Unaudited Balance Sheet as of September 30, 1999............................F-11
Unaudited Statement of Operations as of September 30, 1999..................F-12
Unaudited Statement of Cash Flows as of September 30, 1999..................F-13
Unaudited Statement of Shareholders Equity as of September 30, 1999.........F-14
Notes to Unaudited Financial Statements as of September 30, 1999............F-15
Unaudited Balance Sheet as of December 31, 1999.............................F-16
Unaudited Statement of Operations as of December 31, 1999...................F-17
Unaudited Statement of Cash Flows as of December 31, 1999...................F-18
Notes to Unaudited Financial Statements as of December 31, 1999.............F-19
F-1
<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
<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>
Express Investment Associates, Inc.
(A Development Stage Company)
Unaudited Statement Of Operations
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
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
The Accompanying Notes Are An Integral Part Of These
Unaudited Financial Statements.
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>
Part I. Item 1. Financial Information
EXPRESS INVESTMENT ASSOCIATES, INC.
(A Development Stage Company)
CONDENSED BALANCE SHEET
(Unaudited)
December 31, 1999
ASSETS
TOTAL ASSETS .............. $ --
=======
LIABILITIES AND SHAREHOLDERS' (DEFICIT)
LIABILITIES
Accrued liabilities ......................................... $ 2,765
-------
TOTAL LIABILITIES .............. 2,765
-------
SHAREHOLDERS' (DEFICIT)
Common stock, $.0001 par value, 100,000,000 shares
authorized, 1,000,000 shares issued and outstanding
(See Note B) ............................................. 100
Additional paid-in capital .................................. 3,085
Deficit accumulated during the development stage ............ (5,950)
-------
TOTAL SHAREHOLDERS' (DEFICIT) .... (2,765)
-------
$ --
=======
See accompanying notes to condensed financial statements
F-16
<PAGE>
<TABLE>
EXPRESS INVESTMENT ASSOCIATES, INC.
(A Development Stage Company)
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
<CAPTION>
July 25, 1997
Three Months Ended Six Months Ended (inception)
----------------------- ----------------------- Through
December 31, December 31, December 31, December 31, December 31,
1999 1998 1999 1998 1999
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
COSTS AND EXPENSES
Legal fees ............................ $ 2,502 $ -- $ 3,544 $ -- $ 3,544
Accounting fees ....................... 483 -- 2,106 -- 2,106
Licenses and fees ..................... -- -- -- -- 200
Stock-based compensation for
organizational costs (Note B) ..... -- -- -- -- 100
--------- --------- --------- --------- ---------
LOSS FROM OPERATIONS (2,985) -- (5,650) -- (5,950)
--------- --------- --------- --------- ---------
INCOME TAX BENEFIT (EXPENSE) (NOTE C)
Current tax benefit .............. 568 -- 1,076 -- 1,133
Deferred tax expense ............. (568) -- (1,076) -- (1,133)
--------- --------- --------- --------- ---------
NET LOSS $ (2,985) $ -- $ (5,650) $ -- $ (5,950)
========= ========= ========= ========= =========
BASIC AND DILUTED
LOSS PER COMMON SHARE ......... $ * $ * $ * $ * $ *
========= ========= ========= ========= =========
BASIC AND DILUTED WEIGHTED AVERAGE
COMMON SHARES OUTSTANDING ..... 500,000 500,000 500,000 500,000 500,000
========= ========= ========= ========= =========
<FN>
* Less than .01 per share
See accompanying notes to condensed financial statements
</FN>
</TABLE>
F-17
<PAGE>
<TABLE>
EXPRESS INVESTMENT ASSOCIATES, INC.
(A Development Stage Company)
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
July 25, 1997
Six Months Ended (inception)
-------------------------- Through
December 31, December 31, December 31,
1999 1998 1999
------------ ------------ ------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net loss ................................................... $(5,650) $ -- $(5,950)
Non-cash transactions:
Stock-based compensation for
organizational costs (Note B) ....................... -- -- 100
Changes in operating assets and liabilities:
Accounts payable and accrued liabilities ................ 2,565 -- 2,765
------- ----- -------
NET CASH (USED IN)
OPERATING ACTIVITIES $(3,085) $ -- $(3,085)
------- ----- -------
FINANCING ACTIVITIES
Third party expenses paid by affiliate on
behalf of the company, recorded as
additional-paid-in capital ................................ 3,085 -- 3,085
------- ----- -------
NET CASH PROVIDED BY
FINANCING ACTIVITIES 3,085 -- 3,085
------- ----- -------
NET CHANGE IN CASH -- -- --
Cash, beginning of period ................................... -- -- --
------- ----- -------
CASH, END OF PERIOD $ -- $ -- $ --
======= ===== =======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest .................................................... $ -- $ -- $ --
======= ===== =======
Income taxes ................................................ $ -- $ -- $ --
======= ===== =======
Non-cash financing activities:
1,000,000 shares common stock
issued for services ..................................... $ -- $ -- $ 100
======= ===== =======
<FN>
See accompanying notes to condensed financial statements
</FN>
</TABLE>
F-18
<PAGE>
EXPRESS INVESTMENT ASSOCIATES, INC.
(A Development Stage Company)
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
NOTE A: BASIS OF PRESENTATION
The condensed financial statements presented herein have been prepared by the
Company in accordance with the accounting policies in its audited financial
statements for the year ended June 30, 1999 as filed in its form 10-SB filed
January 5, 2000 and should be read in conjunction with the notes thereto. The
Company entered the development stage in accordance with Statement of Financial
Accounting Standard ("SFAS") No. 7 on July 25, 1997 and is a "blank check"
company with the purpose to evaluate, structure and complete a merger with, or
acquisition of, a privately owned corporation.
In the opinion of management, all adjustments (consisting only of normal
recurring adjustments) which are necessary to provide a fair presentation of
operating results for the interim period presented have been made. The results
of operations for the periods presented are not necessarily indicative of the
results to be expected for the year.
Interim financial data presented herein are unaudited.
NOTE B: RELATED PARTY TRANSACTIONS
The Company has issued an officer 1,000,000 shares of common stock in exchange
for services related to management and organization costs of $100. The officer
will provide administrative and marketing services as needed. The officer may,
from time to time, advance to the Company any additional funds that the Company
needs for costs in connection with searching for or completing an acquisition or
merger.
The Company does not maintain a checking account and all expenses incurred by
the Company are paid by an affiliate. For the three months ended December 31,
1999 the Company incurred legal expense of $2,502 and accounting expense of
$483. For the six months ended December 31, 1999 the Company incurred legal
expense of $3,544 and accounting expense of $2,106. The affiliate does not
expect to be repaid for the expenses it pays on behalf of the Company.
Accordingly, as the expenses are paid, they are classified as additional paid-in
capital.
NOTE C: INCOME TAXES
The Company records its income taxes in accordance with Statement of Financial
Accounting Standard No. 109, "Accounting for Income Taxes". The Company incurred
net operating losses during the periods shown on the condensed financial
statements resulting in a deferred tax asset, which was fully allowed for,
therefore the net benefit and expense result in $-0- income taxes.
F-19
<PAGE>
Part II. Information Not Required In Prospectus
Item 24. Indemnification of officers and directors
The information required by this Item is incorporated by reference to
"Indemnification of Officers and Directors" in the Prospectus.
Item 25 -- Other Expenses of Issuance and Distribution
Our estimated expenses in connection with the issuance and distribution of
the securities being registered are estimated to be as follows:
Securities and Exchange Commission filing fee $ 56.00
Blue Sky filing fees 500.00
Legal fees and expenses 6,000.00
Printing 1,500.00
Marketing expenses 1,000.00
Miscellaneous 500.00
---------
Total $9,556.00
=========
We will bear all expenses shown above.
Item 26 -- Recent Sales of Unregistered Securities
On July 25, 1997, the Company issued1,000,000 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 that may develop.
II-1
<PAGE>
In general, under Rule 144, a person (or persons whose shares are
aggregated) who has satisfied a one year holding period, under certain
circumstances, may sell within any three-month period a number of shares that
does not exceed the greater of one percent of the then outstanding common stock
or the average weekly trading volume during the four calendar weeks prior to
such sale. Rule 144 also permits, under certain circumstances, the sale of
shares without any quantity limitation by a person who has satisfied a two-year
holding period and who is not, and has not been for the preceding three months,
an affiliate of the Company.
II-2
<PAGE>
Item 27-Exhibits
3.1* Articles of Incorporation
3.2* Amendment to Articles of Incorporation
3.3* Bylaws
4.1* Specimen Informational Statement
4.1.1* Form of Lock-up Agreement Executed by the Company's Shareholders
5.1 Opinion of Evers & Hendrickson, LLP with respect to the legality of
the shares being registered
23.1** Consent of Kish, Leake & Associates, P.C.
23.1** Consent of Cordovano & Harvey, P.C.
23.2 Consent of Evers & Hendrickson, LLP (included in Exhibit 5.1)
27.1*** Financial Data Schedule
99.1** Escrow Agreement
*Previously filed with the Company's Form 10-SB, filed October 4, 1999.
**To be filed in an amendment.
***Previously filed with the Company's Form 10-QSB, filed February 15, 2000.
II-3
<PAGE>
Item 28 -- Undertakings
We undertake that we will:
1) File, during any period in which it offers or sells securities, a
post-effective amendment to this registration statement to:
(i) Include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) Reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in the
information in the registration statement; and
(iii) Include any additional or changed material information on the
plan of distribution.
2) For determining liability under the Securities Act, treat each
post-effective amendment as a new registration statement of the
securities offered, and the offering of the securities at that time to
be the bona fide offering.
3) File a post-effective amendment to remove from registration any of the
securities that remain unsold at the end of the offering.
We undertake to provide to the underwriters at the closing specified in the
underwriting agreement certificates in such denominations and registered in such
names as the underwriter requires to permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, we have been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable.
II-4
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form SB-2 and authorized this registration
statement on Form SB-2 to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Kelowna, Province of British Columbia, Canada,
on March 1, 2000.
Express Investments Associates, Inc.
/s/ Bob Hemmerling
----------------------------------------
Bob Hemmerling, 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/ Bob Hemmerling President, Director March 1, 2000
- -----------------------
Bob Hemmerling
/s/ Phil Morehouse Director March 1, 2000
- -----------------------
Phil Morehouse
II-5
<PAGE>
POWER OF ATTORNEY
I, Bob Hemmerling, whose signature appears below, constitute and appoint
Phil Morehouse, my true and lawful attorney-in-fact and agent, with full power
of substitution and resubstitution in him, for him and in his name, place and
stead, and in any and all capacities, to sign the Registration Statement on Form
SB-2, and any required amendments or supplements thereto, (and any other
registration statement for the same Offering that is to be effective upon filing
pursuant to Rule 415 under the Securities Act of 1933, as amended) and to file
the same, with all exhibits thereto and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto said attorney-in-fact
and agent, full power and authority to do and perform each and every act and
thing requisite or necessary to be done in or about the premises, for to all
intents and purposes as she might or could do in person, hereby ratifying and
confirming all that said attorney-in-fact and agent or her substitute or
substitutes lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has caused this Power of Attorney to be
executed as of this 1st day of March, 2000.
/s/ Bob Hemmerling
------------------
II-6
<PAGE>
================================================================================
You should rely only on the
information contained in this
prospectus. We have not authorized
anyone to provide you with information 200,000 Shares
different from that contained in this common stock
prospectus. We are offering to sell,
and seeking offers to buy, shares of
common stock only in jurisdictions
where offers and sales are permitted.
The information contained in this
prospectus is accurate only as of the
date of this prospectus, regardless of
the time of delivery of this
prospectus or of any sale of our
common stock. In this prospectus, the
words "we," "us" and "our" refer to
Express Investments Associates (unless
the context indicates otherwise). EXPRESS INVESTMENTS
ASSOCIATES, INC.
TABLE OF CONTENTS
PROSPECTUS SUMMARY...................4
LIMITED STATE REGISTRATION...........4
SUMMARY FINANCIAL INFORMATION........5
RISK FACTORS.........................8
YOUR RIGHTS AND SUBSTANTIVE
PROTECTION UNDER RULE 419...........13
DILUTION............................14
USE OF PROCEEDS.....................15
CAPITALIZATION......................16
DESCRIPTION OF BUSINESS.............17 ____________________
PLAN OF OPERATION...................18
DESCRIPTION OF PROPERTY.............23 PROSPECTUS
PRINCIPAL SHAREHOLDERS..............24 ____________________
MANAGEMENT..........................25
EXECUTIVE COMPENSATION..............27
CERTAIN RELATIONSHIPS AND
RELATED TRANSACTIONS................27 __________________,2000
LEGAL PROCEEDINGS...................27
MARKET FOR OUR COMMON STOCK.........28
DESCRIPTION OF SECURITIES...........29
SHARES ELIGIBLE FOR FUTURE
RESALE..............................30
WHERE CAN YOU FIND MORE
INFORMATION.........................30
REPORTS TO STOCKHOLDERS.............31
PLAN OF DISTRIBUTION................31
LEGAL MATTERS.......................32
EXPERTS.............................32
INDEMNIFICATION OF OFFICERS
AND DIRECTORS.......................33
CHANGES IN AND DISAGREEMENTS
WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL
DISCLOSURE..........................33
FINANCIAL STATEMENTS...............F-1
================================================================================
EVERS
& HENDRICKSON LLP
- -----------------------
155 Montgomery Street, 12th Floor, San Francisco, CA 94104 Antoine M. Devine
Partner
Direct (415) 772-8109
Main (415) 772-8100
March 1, 2000 Fax (415) 772-8101
[email protected]
Securities and Exchange Commission
Division of Corporate Finance
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Express Investments Associates, Inc., Legality of Shares
Dear Madam/Sirs:
We have made reasonable inquiry and are of the opinion that the
securities being offered, will, when sold, be legally issued, fully paid and
non-assessable.
We are not opining as to any other statements contained in the Form
SB-2 registration statement, nor as to matters that occur after the date
thereof.
Very truly yours,
EVERS & HENDRICKSON, LLP
/s/ Antoine M. Devine
---------------------------------
By: Antoine M. Devine, Partner
cc: Bob Hemmerling
