U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-SB
Amendment No.5
GENERAL FORM FOR REGISTRATION OF SECURITIES
OF SMALL BUSINESS ISSUERS
Under Section 12(b) or (g) of the Securities Exchange Act of 1934
Southern Group International, Inc.
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(Name of Small Business Issuer in its charter)
Florida 65-06001272
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(State or other jurisdiction of (IRS Employer
Incorporation or organization) Identification No.)
69 Mall Drive, Commack, NY 11725
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(Address of principal executive offices) (Zip code)
Issuer's telephone number (631) 543-2800
Securities to be registered under Section 12(b) of the Act:
Title of each class Name of each exchange on which
to be so registered each class is to be registered
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None N/A
Securities to be registered under Section 12(g) of the Act:
Common Stock, $.0001 par value
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(Title of class)
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Southern Group International, Inc. Form 10-SB
Table of Contents Page
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Part I
Item 1. Description of Business 1
Item 2. Management's Discussion and Analysis or Plan of Operations 17
Item 3. Description of Property 18
Item 4. Security Ownership of Certain Beneficial Owners and Management 18
Item 5. Directors, Executive Officers, Promoters, and Control Persons. 20
Item 6. Executive Compensation 21
Item 7. Description for Officers, Directors, Promoters, or Affiliates 21
Item 8. Description of Securities 22
Part II
Item 1. Market Price and Dividends on the Registrant's Common 23
Equity and other Shareholder Matters.
Item 2. Legal Proceedings 23
Item 3. Changes in and Disagreements with Accountants. 24
Item 4. Recent Sales of Unregistered Securities 24
Item 5. Indemnification of Directors and Officers 25
Item 6. Signature Page of officers of the Company 22
Part F/S
Exhibit 1. Independent Auditors Report and Financial Statements F-1
Exhibit 2. 2.1 Articles of Incorporation
2.2 By-Laws of the Company
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PART 1
Item 1. Description of Business.
Southern Group International, Inc. a Florida corporation ("SGI" or the
"Company") was incorporated on August 10, 1995 as Future Vision Products, Inc..
On August 11, 1995 the company changed its name to Hydrogen Technology, Inc.
with no change of control or ownership. On January 4, 1996, present management
took control of the Company and changed its name to Southern Group
International, Inc.("SGI"). SGI is in the development stage with no significant
assets or liabilities and has been essentially inactive, since inception. Its
only activities have been organizational ones, directed at developing its
business plan and conducting a limited search for business opportunities. The
Company has not commenced commercial operations. The Company has no full-time
employees and owns no real estate or personal property.
Forward-Looking Statement
This registration Statement contains certain forward-looking statements
and information relating to Southern Group International, Inc. that are based on
the beliefs of its management as well as assumptions made by and information
currently available to its management. When used in this report, the words
"anticipate", "believe', "expect", "intend", "plan" and similar expression, as
they relate to Southern Group International, Inc. to its management, are
intended to identify forward looking statements. These statements reflect
management's current view of Southern Group International, Inc. concerning
future events and are subject to certain risks, uncertainties and assumptions,
including among many others: a general economic downturn; a downturn in the
securities market; a general lack of interest for any reason in going public by
means of transactions involving public blank check companies; federal or state
laws or regulations having an adverse effect on blank check companies,
Securities and exchange Commission regulations which affect trading in the
securities of "penny stocks," and other risks and uncertainties.
Should any of these risks or uncertainties materialize, or should
underlying assumptions prove incorrect, actual results may vary materially form
those described in this report as anticipated, estimated or expected. Readers
should realize that Southern Group International, Inc. is in the development
stage, with only very limited assets, and that for Southern Group International,
Inc. to succeed requires that it either originate a successful business (for
which it lacks the funds) or acquire a successful business. Southern Group
International, Inc. realization of its business aims as stated herein will
depend in the near future principally on the successful completion of its
acquisition of a business, as discussed below.
Exchange Act Registration
The Company has elected to initiate the process of voluntarily becoming
a reporting company under the Securities Exchange Act of 1934 (the "'34 Act"),
by filing this Form 10-SB registration statement. Following the effective date
of this registration statement, the Company will be required to comply with the
periodic reporting requirements of the '34 Act. If the Company's obligation to
file periodic reports under the '34 Act is suspended, the Company intends to
continue to file such reports on a voluntary basis.
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The Company is a "blind pool" or "blank check" Company, whose business
plan is to seek, investigate, and if warranted, acquire one or more properties
or businesses, and to pursue other related activities intended to enhance
shareholder value. The acquisition of a business opportunity may be made by
purchaser, merger, and exchange of stock, or otherwise, and may encompass assets
or a business entity, such as a corporation, joint venture, or partnership. The
Company has very limited capital, and it is unlikely that the Company will be
able to take advantage of more than one such business opportunity. The Company
intends to seek opportunities demonstrating the potential of long-term growth as
opposed to short-term earnings. However, at the present time, the Company has
not identified any business opportunity that it plans to pursue, nor has the
Company reached any agreement or definitive understanding with any person
concerning an acquisition. Presently the Company's stock is trading on the
National Quotation Pink Sheets.
Alternatively, the Company may be referred to as a "shell corporation"
and once trading on the NASD Bulletin Board, a "trading and reporting shell
corporation." Shell corporations have zero or nominal assets and typically no
stated or contingent liabilities. Private companies wishing to become publicly
trading may wish to merge with a shell (a "reverse merger") whereby the
shareholders of the private Company become the majority of the shareholders of
the combined Company. The private Company may purchase for cash all or a portion
of the common share of the shell corporation from its major stockholders.
Typically, the Board and officers of the private Company become the new Board
and officers of the combined Company and often the name of the private Company
becomes the name of the combined Company.
Prior to the effective date of this registration statement, it is
anticipated that the Company's officers and directors will contact
broker-dealers and other persons with whom they are acquainted who are involved
with corporate finance matters to advise them of the Company's existence and to
determine if any companies or businesses that they represent have a general
interest in considering a merger or acquisition with a blind pool or blank check
or shell entity. No direct discussions regarding the possibility of merger are
expected to occur until after the effective date of this registration statement.
No assurance can be given that the Company will be successful in finding or
acquiring a desirable business opportunity, given the limited funds that are
expected to be available for acquisitions. Furthermore, no assurance can be
given that any acquisition, which does occur, will be on terms that are
favorable to the Company or its current stockholders.
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The Company's search will be directed toward small and medium-sized
enterprises, which have a desire to become public corporations. In addition
these enterprises may wish to satisfy, either currently or in the reasonably
near future, the minimum tangible asset requirement in order to qualify shares
for trading on NASDAQ or on an exchange such as the American Stock Exchange.
(See "Investigation and Selection of Business Opportunities"). The Company
anticipates that the business opportunities presented to it will (i) either be
in the process of formation, or be recently organized with limited operating
history or a history of losses attributable to under-capitalization or other
factors; (ii) experiencing financial or operating difficulties; (iii) be in need
of funds to develop new products or services or to expand into a new market, or
have plans for rapid expansion through acquisition of competing businesses; (iv)
or other similar characteristics. The Company intends to concentrate its
acquisition efforts on properties or businesses that it believes to be
undervalued or that it believes may realize a substantial benefit from being
publicly owned. Given the above factors, investors should expect that any
acquisition candidate may have little or no operating history, or a history of
losses or low profitability.
The Company does not propose to restrict its search for investment
opportunities to any particular geographical area or industry, and may,
therefore, engage in essentially any business, to the extent of its limited
resources. This included industries such as service, finance, natural resources,
manufacturing, high technology, product development, medical, communications and
others. The Company's discretion in the selection of business opportunities is
unrestricted, subject to the availability of such opportunities, economic
conditions, and other factors.
As a consequence of this registration of its securities, any entity,
which has an interest in being acquired by, or merging into the Company, is
expected to be an entity that desires to become a public Company and establish a
public trading market for its securities. In connection with such a merger or
acquisition, it is highly likely that an amount of stock constituting control of
the Company would either be issued by the Company or be purchased from the
current principal stockholders of the Company by the acquiring entity or its
affiliates. If stock is purchased from the current principal stockholders, the
transaction is very likely to be a private transaction rather than a public
distribution of securities, but is also likely to result in substantial gains to
the current principal stockholders relative to their purchase price for such
stock. In the Company's judgment, none of the officers and directors would
thereby become an "underwriter" within the meaning of the Section 2(11) of the
Securities Act of 1933, as amended as long as the transaction is a private
transaction rather than a public distribution of securities. The sale of a
controlling interest by certain principal shareholders of the Company would
occur at a time when minority stockholders are unable to sell their shares
because of the lack of a public market for such shares.
Depending upon the nature of the transaction, the current officers and
directors of the Company may resign their management and board positions with
the Company in connection with a change of control or acquisition of a business
opportunity (See "Form of Acquisition," below, and "Risk Factors - The Company -
Lack of Continuity of Management"). In the event of such a resignation, the
Company's current management would thereafter have no control over the conduct
of the Company's business.
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It is anticipated that business opportunities will come to the
Company's attention from various sources, including its officers and directors,
its other stockholders, professional advisors such as attorneys and accountants,
securities broker-dealers, venture capitalists, members of the financial
community, and others who may present unsolicited proposals. The Company has no
plan, understandings, agreements, or commitments with any individual for such
person to act as a finder of opportunities for the Company.
The Company does not foresee that it will enter into a merger or
acquisition transaction with any business with which its officers or directors
are currently affiliated. Should the Company determine in the future, contrary
to the forgoing expectations, that a transaction with an affiliate would be in
the best interests of the Company and its stockholders, the Company is, in
general, permitted by Florida law to enter into a transaction if:
The material facts as to the relationship or interest of the affiliate and as
to the contract or transaction are disclosed or are known to the Board of
Directors, and the Board in good faith authorizes, approves or ratifies the
contract or transaction by the affirmative vote of a majority of the
disinterested directors, even though the disinterested directors constitute less
than a quorum; or
The material facts as to the relationship or interest of the affiliate and as to
the contract or transaction are disclosed or are known to the stockholders
entitled to vote thereon, and the contract or transaction is specifically
authorized, approved or ratified in good faith by vote of the stockholders; or
The contract or transaction is fair as to the Company as of the time it is
authorized, approved or ratified, by the Board of Directors or the stockholders.
Investigation and Selection of Business Opportunities
To a large extent, a decision to participate in a specific business
opportunity may be made upon management's analysis of the quality of the other
Company's management and personnel, the anticipated acceptability of new
products or marketing concepts, the merit of technological changes, the
perceived benefit the business opportunity will derive from becoming a publicly
held entity, and numerous other factors which are difficult, if not impossible,
to analyze through the application of any objective criteria. In many instances,
it is anticipated that the historical operations of a specific business
opportunity may not necessarily be indicative of the potential for the future
because of a variety of factors, including, but not limited to, the possible
need to expand substantially, shift marketing approaches, change product
emphasis, change or substantially augment management, raise capital and the
like.
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It is anticipated that the Company will not be able to diversify, but
will essentially be limited to the acquisition of one business opportunity
because of the Company's limited financing. This lack of diversification will
not permit the Company to offset potential losses from one business opportunity
against profits from another, and should be considered an adverse factor
affecting any decision to purchase the Company's securities.
Certain types of business acquisition transactions may be completed
without any requirement that the Company first submit the transaction to the
stockholders for their approval. In the event the proposed transaction is
structured in such a fashion that stockholder approval is not required, holders
of the Company's securities (other than principal stockholders holding a
controlling interest) should not anticipate that they will be provided with
financial statements or any other documentation prior to the completion of the
transaction. Other types of transactions require prior approval of the
stockholders.
In the event a proposed business combination or business acquisition
transaction is structured in such a fashion that prior stockholder approval is
necessary, the Company will be required to prepare a Proxy or Information
Statement describing the proposed transaction, file it with the Securities and
Exchange Commission for review and approval, and mail a copy of it to all
Company stockholders prior to holding a stockholders meeting for purposes of
voting on the proposal. Minority shareholders who do not vote in favor of a
proposed transaction will then have the right, in the event the transaction is
approved by the required number of stockholders, to exercise statutory
dissenters' rights and elect to be paid the fair value of their shares.
The analysis of business opportunities will be undertaken by or under
the supervision of the Company's officers and directors, none of whom are
professional business analysts (See "Management"). Although there are no current
plans to do so, Company management might hire an outside consultant to assist in
the investigation and selection of business opportunities, and might pay a
finder's fee. Since Company management has no current plans to use any outside
consultants or advisors to assist in the investigation and selection of business
opportunities, no policies have been adopted regarding use of such consultants
or advisors, the criteria to be used in selecting such consultants or advisors,
the services to be provided, the term of service, or the total amount of fees
that may be paid. However, because of the limited resources of the Company, it
is likely that any such fee the Company agrees to pay would be paid in stock and
not in cash.
Otherwise, in analyzing potential business opportunities, Company
management anticipates that it will consider, among other things, the following
factors:
Potential for growth and profitability, indicated by new technology,
anticipated market expansion, or new products;
The Company's perception of how any particular business opportunity will be
received by the investment community and by the Company's stockholders;
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Whether, following the business combination, the financial condition of the
business opportunity would be, or would have a significant prospect in the
foreseeable future of becoming, sufficient to enable the securities of the
Company to qualify for listing on an exchange or on a national automated
securities quotation system, such as NASDAQ, so as to permit the trading of such
securities to be exempt from the requirements of Rule 15g-9 adopted by the
Securities and Exchange Commission (See "Risk Factors - The Company - Regulation
of Penny Stocks").
Capital requirements and anticipated availability of required funds, to be
provided by the Company or from operations, through the sale of additional
securities, through joint ventures or similar arrangements, or from other
sources;
The extent to which the business opportunity can be advanced;
Competitive position as compared to other companies of similar size and
experience within the industry segment as well as within the industry as a
whole;
Strength and diversity of existing management or management prospects that are
scheduled for recruitment;
The cost of participation by the Company as compared to the perceived tangible
and intangible values and potential; and
The accessibility of required management expertise, personnel, raw materials,
services, professional assistance, and other required items.
In regard to the possibility that the shares of the Company would
qualify for listing on NASDAQ, the current standards for initial listing
include, among other requirements, that the Company (1) have net tangible assets
of at least $4.0 million, or a market capitalization of $50.0 million, or net
income of not less that $0.75 million in its latest fiscal year or in two of the
last three fiscal years; (2) have a public float (i.e., shares that are not held
by any officer, director or 10% stockholder) of at least 1.0 million shares; (3)
have a minimum bid price of at least $4.00; (4) have at least 300 round lot
stockholders (i.e., stockholders who own not less than 100 shares); and (5) have
an operating history of at least one year or have a market capitalization of at
least $50 million. Many, and perhaps most, of the business opportunities that
might be potential candidates for a combination with the Company would not
satisfy the NASDAQ listing criteria.
No one of the factors described above will be controlling in the
selection of a business opportunity, and management will attempt to analyze all
factors appropriate to each opportunity and make a determination based upon
reasonable investigative measures and available data. Potentially available
business opportunities may occur in many different industries and at various
stages of development, all of which will make the task of comparative
investigation and analysis of such business opportunities extremely difficult
and complex. Potential investors must recognize that, because of the Company's
limited capital available for investigation and management's limited experience
in business analysis, the Company may not discover or adequately evaluate
adverse facts about the opportunity to be acquired.
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The Company is unable to predict when it may participate in a business
opportunity. It expects, however, that the analysis of specific proposals and
the selection of a business opportunity may take several months or more.
Prior to making a decision to participate in a business opportunity,
the Company will generally request that it be provided with written materials
regarding the business opportunity containing as much relevant information as
possible. Including, but not limited to, such items as a description of
products, services and Company history; management resumes; financial
information; available projections, with related assumptions upon which they are
based; an explanation of proprietary products and services; evidence of existing
patents, trademarks, or service marks, or rights thereto; present and proposed
forms of compensation to management; a description of transactions between such
Company and its affiliates during the relevant periods; a description of present
and required facilities;, an analysis of risks and competitive conditions; a
financial plan of operation and estimated capital requirements; audited
financial statements, or if they are not available, unaudited financial
statements, together with reasonable assurance that audited financial statements
would be able to be produced within a reasonable period of time not to exceed 60
days following completion of a merger or acquisition transaction; and the like.
As part of the Company's investigation, the Company's executive
officers and directors may meet personally with management and key personnel,
may visit and inspect material facilities, obtain independent analysis or
verification of certain information provided, check references of management and
key personnel, and take other reasonable investigative measures, to the extent
of the Company's limited financial resources and management expertise.
It is possible that the range of business opportunities that might be
available for consideration by the Company could be limited by the impact of
Securities and Exchange Commission regulations regarding purchase and sale of
"penny stocks." The regulations would affect, and possibly impair, any market
that might develop in the Company's securities until such time as they qualify
for listing on NASDAQ or on an exchange which would make them exempt from
applicability of the "penny stock" regulations. See "Risk Factors - Regulation
of Penny Stocks."
Company management believes that various types of potential merger or
acquisition candidates might find a business combination with the Company to be
attractive. These include acquisition candidates desiring to create a public
market for their shares in order to enhance liquidity for current stockholders,
acquisition candidates which have long-term plans for raising capital through
public sale of securities and believe that the possible prior existence of a
public market for their securities would be beneficial, and acquisition
candidates which plan to acquire additional assets through issuance of
securities rather than for cash, and believe that the possibility of development
of a public market for their securities will be of assistance in that process.
Acquisition candidates, which have a need for an immediate cash infusion, are
not likely to find a potential business combination with the Company to be an
attractive alternative.
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Form of Acquisition
It is impossible to predict the manner in which the Company may
participate in a business opportunity. Specific business opportunities will be
reviewed as well as the respective needs and desires of the Company and the
promoters of the opportunity and, upon the basis of the review and the relative
negotiating strength of the Company and such promoters, the legal structure or
method deemed by management to be suitable will be selected. Such structure may
include, but is not limited to leases, purchase and sale agreements, licenses,
joint ventures and other contractual arrangements. The Company may act directly
or indirectly through an interest in a partnership, corporation or other form of
organization. Implementing such structure may require the merger, consolidation
or reorganization of the Company with other corporations or forms of business
organization. In addition, the present management and stockholders of the
Company most likely will not have control of a majority of the voting stock of
the Company following a merger or reorganization transaction. As part of such a
transaction, the Company's existing directors may resign and new directors may
be appointed without any vote by stockholders.
It is likely that the Company will acquire its participation in a
business opportunity through the issuance of Common Stock or other securities of
the Company. Although the terms of any such transaction cannot be predicted, it
should be noted that in certain circumstances the criteria for determining
whether or not an acquisition is a so-called "tax free" reorganization under the
Internal Revenue Code of 1986 as amended, depends upon the issuance to the
stockholders of the acquired Company of a controlling interest (i.e., 80% or
more) of the common stock of the combined entities immediately following the
reorganization. If a transaction were structured to take advantage of these
provisions rather than other "tax free" provisions provided under the Internal
Revenue Code, the Company's current stockholders would retain in the aggregate
20% or less of the total issued and outstanding shares. This could result in
substantial additional dilution in the equity of those who were stockholders of
the Company prior to such reorganization. Any such issuance of additional shares
might also be done simultaneously with a sale or transfer of shares representing
a controlling interest in the Company by the current officers, directors and
principal stockholders. See "Description of Business - General."
It is anticipated that any new securities issued in any reorganization
would be issued in reliance upon one or more exemptions from registration under
applicable federal and state securities laws to the extent that such exemptions
are available. In some circumstances, however, as a negotiated element of the
transaction, the Company may agree to register such securities either at the
time the transaction is consummated or under certain conditions at specified
times thereafter. The issuance of substantial additional securities and their
potential sale into any trading market that might develop in the Company's
securities may have a depressive effect upon such market.
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The Company will participate in a business opportunity only after the
negotiation and execution of a written agreement. Although the terms of such
agreement cannot be predicted, generally such an agreement would require
specific representations and warranties by all of the parties thereto, specify
certain events of default, detail the terms of closing and the conditions which
must be satisfied by each of the parties thereto prior to such closing, outline
the manner of bearing costs if the transaction is not closed, set forth remedies
upon default, and include miscellaneous other terms.
As a general matter, the Company anticipates that it, and/or its
principal stockholders will enter into a letter of intent with the management,
principals or owners of a prospective business opportunity prior to signing a
binding agreement. Such a letter of intent will set forth the terms of the
proposed acquisition but will not bind any of the parties to consummate the
transaction. Execution of a letter of intent will by no means indicate that
consummation of an acquisition is probable. Neither the Company nor any of the
other parties to the letter of intent will be bound to consummate the
acquisition unless and until a definitive agreement is executed. Even after a
definitive agreement is executed, it is possible that the acquisition would not
be consummated should any party elect to exercise any right provided in the
agreement to terminate it on specific grounds.
It is anticipated that the investigation of specific business
opportunities and the negotiation, drafting and execution of relevant
agreements, disclosure documents and other instruments will require substantial
management time and attention and substantial costs for accountants, attorneys
and others. If a decision is made not to participate in a specific business
opportunity, the costs incurred in the related investigation would not be
recoverable. Moreover, because many providers of goods and services require
compensation at the time or soon after the goods and services are provided, the
inability of the Company to pay until an indeterminate future time may make it
impossible to produce goods and services.
Investment Company Act and Other Regulation
The Company may participate in a business opportunity by purchasing,
trading or selling the securities of such business. The Company does not,
however, intend to engage primarily in such activities. Specifically, the
Company intends to conduct its activities so as to avoid being classified as an
"investment Company" under the Investment Company Act of 1940 (the "Investment
Act"), and therefore to avoid application of the costly and restrictive
registration and other provisions of the Investment Act, and the regulations
promulgated thereunder.
The Company's plan of business may involve changes in its capital
structure, management, control and business, especially if it consummates the
reorganization as discussed above. Each of these areas is regulated by the
Investment Act, in order to protect purchasers of investment Company securities.
Since the Company will not register as an investment Company, stockholders will
not be afforded these protections.
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Competition
The Company expects to encounter substantial competition in its efforts
to locate attractive business combination opportunities. The competition may in
part come from business development companies, venture capital partnerships and
corporations, small investment companies, brokerage firms, and the like. Some of
these types of organizations are likely to be in a better position than the
Company to obtain access to attractive business acquisition candidates either
because they have greater experience, resources and managerial capabilities than
the Company, because they are able to offer immediate access to limited amounts
of cash, or for a variety of other reasons. The Company also will experience
competition from other public "blind pool" companies, some of which may also
have funds available for use by an acquisition candidate.
Administrative Offices
The Company currently maintains a mailing address at 69 Mall Drive,
Commack, NY 11725. The Company's telephone number is (631) 543-2800. Other than
this mailing address, the Company does not currently maintain any other office
facilities, and does not anticipate the need for maintaining office facilities
at any time in the foreseeable future. The Company pays no rent or other fees
for the use of the mailing address.
Employees
The Company is in the development stage and currently has no employees.
Management of the Company expects to use consultants, attorneys and accountants
as necessary, and does not anticipate a need to engage any full-time employees
so long as it is seeking and evaluating business opportunities. The need for
employees and their availability will be addressed in connection with the
decision whether or not to acquire or participate in specific business
opportunities.
Risk Factors
Conflicts of Interest. Certain conflicts of interest may exist between
the Company and its officers and directors. They have other business interests
to which they currently devote attention, and are expected to continue to do so.
As a result, conflicts of interest may arise that can be resolved only through
their exercise of judgement in a manner which is consistent with their fiduciary
duties to the Company. See "Management," and "Conflicts of Interest."
It is anticipated that the Company's principal shareholders may
actively negotiate or otherwise consent to the purchase of a portion of their
common stock as a condition to, or in connection with, a proposed merger or
acquisition transaction. In this process, the Company's principal shareholders
may consider their own personal pecuniary benefit rather than the best interest
of other Company shareholders. Depending upon the nature of a proposed
transaction, Company shareholders other than the principal shareholders may not
be afforded the opportunity to approve or consent to a particular transaction.
See "Conflicts of Interest."
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Possible Need for Additional Financing.
The Company has very limited funds, and such funds, may not be adequate
to take advantage of any available business opportunities. Even if the Company's
currently available funds prove to be sufficient to pay for its operations until
it is able to acquire an interest in, or complete a transaction with, a business
opportunity, such funds will clearly not be sufficient to enable it to exploit
the opportunity. Thus, the ultimate success of the Company will depend, in part,
upon its availability to raise additional capital. In the event that the Company
requires modest amounts of additional capital to fund its operations until it is
able to complete a business acquisition or transaction, such funds, are expected
to be provided by the principal shareholders. However, the Company has not
investigated the availability, source, or terms that might govern the
acquisition of the additional capital which is expected to be required in order
to exploit a business opportunity, and will not do so until it has determined
the level of need for such additional financing. There is no assurance that
additional capital will be available from any source or, if available, that it
can be obtained on terms acceptable to the Company. If not available, the
Company's operations will be limited to those that can be financed with its
modest capital.
Regulation. of Penny Stocks.
The Company's securities, when available for trading, will be subject
to a Securities and Exchange Commission rule that impose special sales practice
requirements upon broker-dealers who sell such securities to persons other than
established customers or accredited investors. For purpose of the rule, the
phrase "accredited investor" means, in general terms, institutions with assets
in excess of $5,000,000, or individuals having a net worth in excess of
$1,000,000 or having an annual income that exceeds $200,000 (or that, when
combined with a spouse's income, exceeds $300,000). For transactions covered by
the rule, the broker dealer must make special suitability determination for the
purchaser and receive the purchasers written agreement to the transaction prior
to the sale. Consequently, the rule may affect the ability of broker-dealers to
sell the Company's securities and also may affect the ability of purchasers of
the Company's securities to sell such securities in any market that might
develop therefor.
In addition, the Securities and Exchange Commission has adopted a
number of rules to regulate "penny stocks." Such rules include Rule 3a51-1 under
the Securities Act of 1933, an Rules 15g-1, 15g-2, 15g-3, 15g-4, 15g-5, 15g-6,
and 15g-7 under the Securities Exchange Act of 1934, as amended. Because the
securities of the Company may constitute "penny stocks" within the meaning of
the rules, the rules would apply to the Company and to its securities. The rules
may further affect the ability of the Company's shareholders to sell their
shares in any public market, which might develop.
Shareholders should be aware that, according to Securities and Exchange
Commission Release No. 34-29093, the market for penny stocks has suffered in
recent years form patterns of fraud and abuse. Such patterns include (I) control
of the market for the security by one or a few broker-dealers that are often
related to the promoter or issuer; (ii) manipulation of prices through
prearranged matching of purchases and sales and false and misleading press
releases; (iii) "boiler room" practices involving high-pressure sales tactics
and unrealistic price projections by inexperienced sales persons; (iv) excessive
and undisclosed bid-ask differential and markups by selling broker-dealers; and
(v) the wholesale dumping of the same securities by promoters and broker dealers
after prices have been manipulated to a desired level, along with the resulting
inevitable collapse of those prices and with consequent investor losses. The
Company's management is aware of the abuses that have occurred historically in
the penny stock market. Although the Company does not expect to be in a position
to dictate the behavior of the market or of broker dealers who participate in
the market, management will strive within the confines of practical limitations
to prevent the described patterns form being established with respect to the
Company's securities.
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No Operating History.
The Company was formed in August 10, 1995, as a blind pool or blank
check entity, for the purpose of registering its common stock under the 1934 Act
and acquiring a business opportunity. The Company has no operating history,
revenues from operations, or assets other than a modest amount of cash from
private sales of stock. The Company faces all of the risks of a new business and
the special risks inherent in the investigation, acquisition, or involvement in
a new business opportunity. The Company must be regarded as a new or "start-up"
venture with all of the unforeseen costs, expenses, problems, and difficulties
to which such ventures are subject.
No Assurance of Success or Profitability.
There is no assurance that the Company will acquire a favorable
business opportunity. Even if the Company should become involved in a business
opportunity, there is no assurance that it will generate revenues or profits, or
that the market price of the Company's outstanding shares will be increased
thereby.
Possible Business --Not Identified and Highly Risky.
The Company has not identified and has no commitments to enter into or
acquire a specific business opportunity. As a result, it is only able to make
general disclosures concerning the risks and hazards of acquiring a business
opportunity, rather than providing disclosure with respect to specific risks and
hazards relating to a particular business opportunity. As a general matter,
prospective investors can expect any potential business opportunity to be quite
risky. See Item 1 " Description of Business."
Type of Business Acquired.
The type of business to be acquired may be one that desires to avoid
effecting its own public offering and the accompanying expense, delays,
uncertainties, and federal and state requirements which purport to protect
investors. Because of the Company's limited capital, it is more likely than not
that any acquisition by the Company will involve other parties whose primary
interest is the acquisition of control of a publicly traded Company. Moreover,
any business opportunity acquired may be currently unprofitable or present other
negative factors.
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Impracticability of Exhaustive Investigation.
The Company's limited funds and lack of full-time management will make
it impracticable to conduct a complete and exhaustive investigation and analysis
of a business opportunity before the Company commits its capital or other
resources thereto. Management decisions, therefore, will likely be made without
detailed feasibility studies, independent analysis, market surveys and the like
which, if the Company had more funds available to it, would be desirable. The
Company will be particularly dependent in making decisions upon information
provided by the promoter, owner, sponsor, or others associated with the business
opportunity seeking the Company's participation. A significant portion of the
Company's available funds may be expended for investigative expenses and other
expenses related to preliminary aspects of completing an acquisition
transaction, whether or not any business opportunity investigated is eventually
acquired.
Lack of Diversification.
Because of the limited financial resources that the Company has, it is
unlikely that the Company will be able to diversify its acquisitions or
operations. The Company's probable inability to diversify its activities into
more than one area will subject the Company to economic fluctuations within a
particular business or industry and therefore increase the risks associated with
the Company's operations.
Need for Audited Financial Statements.
The Company will require audited financial statements from any business
that it proposes to acquire. Since the Company will be subject to the reporting
provisions of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), it will be required to include audited financial statements in its
periodical reports for any existing business it may acquire. In addition, the
lack of audited financial statements would prevent the securities of the Company
from becoming eligible for listing on NASDAQ, the automated quotation system
sponsored by the Association of Securities Dealers, Inc., or on any existing
stock exchange. Moreover, the lack of such financial statements is likely to
discourage broker-dealers from becoming or continuing to serve as market makers
in the securities of the Company. Finally, without audited financial statements,
the Company would almost certainly be unable to offer securities under a
registration statement pursuant to the Securities Act of 1933, and the ability
of the Company to raise capital would be significantly limited. Consequently,
acquisitions prospects that do not have, or are unable to provide reasonable
assurances that they will be able to obtain, the required audited statements
would not be considered by the Company to be appropriate for acquisition.
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Other Regulations
An acquisition made by the Company may be of a business that is subject
to regulation or licensing by federal, state, or local authorities. Compliance
with such regulations and licensing can be expected to be a time-consuming,
expensive process and may limit other investment opportunities of the Company.
Dependence upon Management; Limited Participation of Management.
The Company will be entirely dependant upon the experience of its
officers and directors in seeking, investigating, and acquiring a business and
in making decisions regarding the Company's operations. It is possible that,
from time to time, the inability of such persons to devote their full time
attention to the business of the Company could result in a delay in progress
toward implementing its business plan. See "Management." Because investors will
not be able to evaluate the merits of possible future business acquisitions by
the Company, they should critically assess the information concerning the
Company's officers and directors.
Lack of Continuity in Management.
The Company does not have an employment agreement with any of its
officers or directors, and as a result, there is no assurance that they will
continue to manage the Company in the future. In connection with acquisition of
a business opportunity, it is likely the current officers and directors of the
Company may resign. A decision to resign will be based upon the identity of the
business opportunity and the nature of the transaction, and is likely to occur
without the vote or consent of the stockholders of the Company.
Indemnification of Officers and Directors.
The Company's articles of Incorporation provide for the indemnification
of its, directors, officers, employees, and agents, under certain circumstances,
against attorney's fees and other expenses incurred by them in any litigation to
which they become a party arising from their association with or activities on
behalf of the Company. The Company will also bear the expenses of such
litigation for any of its directors, officers, employees, or agents, upon such
person's promise to repay the Company therefor if it is ultimately determined
that any such person shall not have been entitled to indemnification. This
indemnification policy could result in substantial expenditures by the Company,
which it will be unable to recoup.
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Dependence upon Outside Advisors.
To supplement the business experience of its officers and directors,
the Company may be required to employ accountants, technical experts,
appraisers, attorneys, or other consultants or advisors. The selection of any
such advisors will, be made by the Company's officers, without any input by
shareholders. Furthermore, it is anticipated that such persons may be engaged on
an "as needed" basis without a continuing fiduciary or other obligation to the
Company. In the event the officers of the Company consider it necessary to hire
outside advisors, they may elect to hire persons who are affiliates, if those
affiliates are able to provide the required services.
Leveraged Transactions.
There is a possibility that any acquisition of a business opportunity
by the Company may be leveraged, i.e. the Company may finance the acquisition of
the business opportunity by borrowing against the assets of the business
opportunity to be acquired, or against the projected future revenues or profits
of the business opportunity. This could increase the Company's exposure to
larger losses. A business opportunity acquired through a leveraged transaction
is profitable only if it generates enough revenues to cover the related debt and
expenses. Failure to make payments on the debt incurred to purchase the business
opportunity could result in the loss of a portion or all of the assets acquired.
There is no assurance that any business opportunity acquired through a leveraged
transaction will generate sufficient revenues to cover the related debt and
expenses.
Competition.
The search for potentially profitable business opportunities is
intensely competitive. The Company expects to be at a disadvantage when
competing with many firms that have substantially greater financial and
management resources and capabilities than the Company. These competitive
conditions will exist in any industry in which the Company may become
interested.
No Foreseeable Dividends.
The Company has not paid dividends on its Common Stock and does not
anticipate paying such dividends in the foreseeable future.
Loss of Control by Present Management and Stockholders.
In conjunction with completion of a business acquisition, it is
anticipated that the Company will issue an amount of the Company's authorized
but unissued Common Stock that represents the greater majority of the voting
power and equity of the Company. In conjunction with such a transaction, the
Company's current Officers, Directors, and principal shareholders could also
sell all, or a portion, of their controlling block of stock to the acquired
Company's stockholders. Such a transaction would result in a greatly reduced
percentage of ownership of the Company by its current shareholders. As a result,
the acquired Company's stockholders would control the Company, and it is likely
that they would replace the Company's management with persons who are unknown to
the Company at this time.
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No Public Market Exists.
There is currently no public market for the Company's common stock, and
no assurance can be given that a market will develop or that a shareholder will
ever be able to liquidate his investment without considerable delay, if at all.
If a market should develop, the price may be highly volatile. Factors such as
those discussed in this "Risk Factors" section may have a significant impact
upon the market price of the securities offered hereby. Owing to the low price
of the securities, many brokerage firms may not be willing to effect
transactions in the securities. Even if a purchasers finds a broker willing to
effect a transaction in theses securities, the combination of brokerage
commissions, state transfer taxes, if any, and any other selling costs may
exceed the selling price. Further, many leading institutions will not permit the
use of such securities as collateral for any loans.
Rule 144 Sales.
All of the presently outstanding shares of Common Stock are "restricted
securities" within the meaning of Rule 144 under the Securities Act of 1933, as
amended. As restricted shares, these shares may be resold only pursuant to an
effective registration statement or under the requirements of Rule 144 or other
applicable state securities laws. Rule 144 provides in essence that a person who
has held restricted securities for a prescribed period, may under certain
conditions, sell every three months, in brokerage transactions, a number of
shares that does not exceed the greater of 1.0% of a Company's outstanding
common stock or the average weekly trading volume during the four calendar weeks
prior to sale. There is no limit on the amount of restricted securities that may
be sold by a non-affiliate after, the restricted securities have been held by
the owner, for a period of at least two years. A sale under Rule 144 or under
any other exemption from the Act, if available, or pursuant to subsequent
registrations of common stock of present shareholders, may have a depressive
effect upon the price of the Common Stock in any market that may develop. As of
the date hereof 645,800, of the currently outstanding shares of common stock of
the Company have been held by the current owners, thereof for a period of more
than two years. Accordingly, such shares are currently available for resale in
accordance with the provisions of Rule 144.
Blue Sky Consideration.
Because the securities registered hereunder have not been registered
for resale under the Blue Sky laws of any state, the holders of such shares and
persons who desire to purchase them in any trading market that might develop in
the future, should be aware, that there may be significant state Blue Sky law
restrictions upon the ability of investors to sell the securities and of
purchasers to purchase the securities. Some jurisdictions may not allow the
trading or resale of blind pool or "blank check" securities under any
circumstances. Accordingly, investors should consider the secondary market for
the Company's securities to be a limited one.
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Item 2. Management's Discussion and Analysis or Plan of Operations.
Liquidity and Capital Resources
The Company remains in the development stage and, since inception, has
experienced no significant change in liquidity or capital resources or
stockholders equity other than the receipt of proceeds in the amount of $63,064
for its inside capitalization funds. Substantially all of such funds have been
used to pay expenses incurred by the Company.
The Company intends to seek to carry out its plan of business as
discussed herein. In order to do so, it will require additional capital to pay
ongoing expenses, including particularly legal and accounting fees incurred in
conjunction with preparation and filing of this registration statement on form
10-SB, and in conjunction with future compliance with its on-going reporting
obligations.
Results of Operations
During the period from August 10, 1995 (inception) through June 30,
2000, the Company has engaged in no significant operations other than
organizational activities, acquisition of capital and preparation for
registration of its securities under the Securities Exchange Act of 1934, as
amended. During this period, the Company received no revenues.
For the current fiscal year, the Company anticipates incurring a loss
as a result of expenses associated with registration and compliance with
reporting obligations under the Securities Exchange Act of 1934, and expenses
associated with locating and evaluating acquisition candidates. The Company
anticipates that until a business combination is completed with an acquisition
candidate, it will not generate revenues. The Company may also continue to
operate at a loss after completing a business combination, depending upon the
performance of the acquired business.
Need for Additional Financing
The Company's existing capital will not be sufficient to meet the
Company's cash needs, including the costs of completing its registration and
complying with its continuing reporting obligation under the Securities Exchange
Act of 1934. Accordingly, additional capital will be required.
No commitments to provide additional funds have been made by management
or other stockholders, and the Company has no plans, proposals, arrangements or
understandings with respect to the sale or issuance of additional securities
prior to the location of a merger or acquisition candidate. Accordingly, there
can be no assurance that any additional funds will be available to the Company
to allow it to cover its expenses. Notwithstanding the forgoing, to the extent
that additional funds are required, the Company anticipates receiving such funds
in the form of advancements from current shareholders without issuance of
additional shares or other securities, or through the private placement of
restricted securities rather than through a public offering. The Company does
not currently contemplate making a Regulation S offering.
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Regardless of whether the Company's cash assets prove to be inadequate
to meet the Company's operational needs, the Company might seek to compensate
providers of services by issuance of stock in lieu of cash. For information as
to the Company's policy in regard to payment for consulting services, see
"Certain Relationships and Transactions."
Year 2,000 compliance Issues
To date, the Company has not been effected by Year 2,000 compliance
problems. We conducted a comprehensive Year 2,000 investigation with respect to
our internal business-critical systems. This investigation encompassed
information technology systems and equipment with embedded technology such as
fax machines and telephone systems. None of these systems were affected by the
passage into the Year 2,000. Nonetheless, we have no assurance that we will not
experience isolated system failures as a result of third party technical
problems.
Item 3. Description of Property.
The Company currently maintains a mailing address at 69 Mall Drive,
Commack, NY 11725. The Company pays no rent for the use of this mailing address.
The Company does not believe that it will need to maintain an office at any time
in the foreseeable future in order to carry out its plan of operations described
herein. The Company's telephone number is (631) 543-2800
Item 4. Security Ownership of Certain Beneficial Owners and Management.
Beneficial Ownership
The following table sets forth, as of the date of this Registration
Statement, the stock ownership of each executive officer and director of
Southern Group International, Inc., of all executive officers and directors of
the Company as a group, and of each person known by Southern Group
International, Inc. to be a beneficial owner of 5% or more of its Common Stock.
Except as otherwise noted, each person listed below is the sole beneficial owner
of the shares and has sole investment and voting power for such shares. No
person listed below has any options, warrant or other right to acquire
additional securities of the Company, except as may be otherwise noted.
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# of Shares % of Class
Name and Address Owned Beneficially Owned
---------------- ------------------ ----------
Surinder Rametra 475,000(4) 38%
27 Riesling Ct
Commack, NY 11725
Beresford Overseas Limited(5) 300,000 24%
P.O. Box 174
St. James Chambers
Athol Street
Douglas, Isle of Man 1M99 1PP
Nirmala Rametra(1) 152,000(4) 12%
27 Riesling Court
Commack, NY 11725
Seema Wasil(2) 27,000(2) ***
27 Riesling Court
Commack, NY 11725
Rahul Rametra 2,000(3) ***
209 Crombie Street
Huntington Station, NY 11746
All Directors and 29,000 5.3%
Executive officers (3)persons)
*** Less than 1%
(1) Nirmala Rametra is the wife of Surinder Rametra.
(2) Seema Wasil is the Secretary and Director of Southern Group
International,Inc. and is the daughter of Surinder Rametra and Nirmala
Rametra.
(3) Rahul Rametra is a Director of Southern Group International, Inc. and the
nephew of Surinder Rametra and Nirmala Rametra.
(4) Does not include 57,000 shares held by S&N Associates, Inc. a corporation
of which Surinder Rametra and Nirmala Rametra are the sole shareholders.
(5) Phillips Scales and Arthur Corwther both of who reside in the Isle of Man,
are the sale record and beneficial shareholders of Beresford Overseas
Limited.
All of the above disclaim any beneficial ownership in shares owned by family
members.
Changes in Control
A change in control of the Company will probably occur upon
consummation of a business combination, which is anticipated to involve
significant change in ownership of stock of the company, membership of the board
of directors. The extent of any such shance or control in ownership or board
composition cannot be predicted at this time.
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Item 5. Directors, Executive Officers, Promoters, and Control Persons.
The directors and executive officers serving the Company are as follows:
Name Age Position Held and Tenure
---- --- ------------------------
Konrad C. Kim 29 President, Director
Seema Wasil 30 Secretary, Director
Rahul Rametra 27 Director
The directors named above will serve until the next annual meeting of
the Company's stockholders or until their successors are duly elected and have
qualified. Directors will be elected for one-year terms at the annual
stockholders meeting. Officers will hold their positions at the pleasure of the
board of directors, absent any employment agreement, of which none currently
exists or is contemplated. There is no arrangement or understanding between any
of the directors or officers of the Company and any other person pursuant to
which any director or officer was or is to be selected as a director or officer,
and there is no arrangement, plan or understanding as to whether non-management
shareholders will exercise their voting rights to continue to elect the current
directors to the Company's board. There are also no arrangements, agreements or
understandings between non-management shareholders that may directly or
indirectly participate in or influence the management of the Company's affairs.
The directors and officers will devote their time to the Company's
affairs on an "as needed" basis, which, depending on the circumstances, could
amount to as little as two hours per month, or more than forty hours per month,
but more than likely will fall within the range of five to ten hours per month.
There are no agreements or understandings for any officer or director to resign
at the request of another person, and none of the officers or directors are
acting on behalf of, or will act at the direction of, any other person.
Biographical Information
Konrad C. Kim- received a Bachelor of Science degree from the
University of Wisconsin in 1992. From 1995 - 1997 he was a Consultant Systems
Administrator for SONY Entertainment, Columbia House, and The Village Voice
newspaper. From 1997 - 1999 he was a Technical Systems Analyst at Moody's
Investor's Services. Since 1999 he has been a Systems Engineer at Gateway.com.
Seema Wasil- earned a Bachelors Degree in Accounting from Hofstra
University in 1991 and a Masters Degree in Special Education from Hofstra in
1993. From 1995 to 1998 she worked in the Accounting and Public Relations
departments of Atec Group, Inc. a publicly traded Company. From 1999 to the
present, she has been a Vice-President of Stern Capital Partners, Ltd, a private
consulting firm.
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Rahul Rametra- received a Bachelors Degree from State University of New
York, Stony Brook in 1995and earned a Masters Degree in Finance from C.W. Post
University in 1998. He has been employed by ATEC Group, Inc. since 1995 and is
currently a sales representative for Atec Group, Inc. and Chief Operating
Officer of Nexar, Inc. a subsidiary of Atec Group, Inc.
Conflicts of Interest
The directors and officers will devote their time to the Company's
affairs on an "as needed" basis, which, depending on the circumstances, could
amount to as little as two hours per month, or more than forty hours per month,
but more likely will fall within the range of five to ten hours per month. There
are no agreements or understandings for any officer or director to resign at the
request of another person, and none of the officers or directors are acting on
behalf of, or will act at the direction of, any other person. There may be
occasions when the time requirements of the Company's business conflict with the
demands of the officers other business and investment activities. Such conflicts
may require that the Company attempt to employ additional personnel. There is no
assurance that the services of such persons will be available or that they can
be obtained upon terms favorable to the Company.
The officers, directors and principal shareholders of the Company may
actively negotiate for the purchase of a portion of their common stock as a
condition to, or in connection with, a proposed merger or acquisition
transaction. It is anticipated that a substantial premium may be paid by the
purchaser in conjunction with any sale of shares by the Company's officers,
directors and principal shareholders made as a condition to, or in connection
with, a proposed merger or acquisition transaction. The fact that a substantial
premium may be paid to members of Company management to acquire their shares
creates a conflict of interest for them and may compromise their state law
fiduciary duties to the Company's other shareholders. In making any such sale,
members of Company management may consider their own personal pecuniary benefit
rather than the best interests of the Company and the Company's other
shareholders, and the other shareholders are not expected to be afforded the
opportunity to approve or consent to any particular buy-out transaction
involving shares held by members of Company management.
Item 6. Executive Compensation.
No officer or director has received any compensation from the Company.
Until the Company acquires additional capital, it is not anticipated that any
officer or director will receive compensation from the Company other than
reimbursement for out-of-pocket expenses incurred on behalf of the Company. See
"Certain Relationships and Related Transactions." The Company has no stock
option, retirement, pension, or profit-sharing programs for the benefit of
directors, officers or other employees, but the Board of Directors may recommend
adoption of one or more such programs in the future.
Item 7. Certain Relationships and Related Tranasactions.
The Company has adopted a policy under which any consulting or finder's
fee that may be paid to a third party for consulting services to assist
management in evaluating a prospective business opportunity would be paid in
stock rather than in cash. Any such issuance of stock would be made on an ad hoc
basis. Accordingly, the Company is unable to predict whether, or in what amount,
such stock issuance might be made.
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It is not currently anticipated that any salary, consulting fee, or
finder's fee shall be paid to any of the Company's directors or executive
officers, or to any other affiliate of the Company except as described under
"Executive Compensation" above.
Although management has no current plans to cause the Company to do so,
it is possible that the Company may enter into an agreement with an acquisition
candidate requiring the sale of all or a portion of the Common Stock held by the
Company's current stockholders to the acquisition candidate or principals
thereof, or to other individuals or business entities, or requiring some other
form of payment to the Company's current stockholders, or requiring the future
employment of specified officers and payment of salaries to them. It is more
likely than not that any sale of securities by the Company's current
stockholders to an acquisition candidate would be at a price substantially
higher than that originally paid by such stockholders. Any payment to current
stockholders in the context of an acquisition involving the Company would be
determined entirely by the largely unforeseeable terms of a future agreement
with an unidentified business entity.
Item 8. Description of Securities
Common Stock
The Company's Articles of incorporation authorize the issuance of
80,000,000 shares of Common Stock par value $.0001. Each record holder of Common
Stock is entitled to one vote for each share held on all matters properly
submitted to the stockholders for their vote. The Articles of Incorporation do
not permit cumulative voting for the election of directors.
Holders of outstanding shares of Common Stock are entitled to such
dividends as may be declared from time to time by the Board of Directors out of
legally available funds; and, in the event of liquidation, dissolution or
winding up of the affairs of the Company, holders are entitled to receive,
ratably, the net assets of the Company available to stockholders after
distribution is made to the preferred stockholders, if any, who are given
preferred rights upon liquidation. Holders of outstanding shares of Common Stock
have no preemptive, conversion or redemptive rights. All of the issued and
outstanding shares of Common Stock are, and all unissued shares when offered and
sold will be, duly authorized, validly issued, fully paid, and non-assessable.
To the extent that additional shares of the Company's Common Stock are issued,
the relative interests of then existing stockholders may be diluted.
Preferred Stock
The Company's Articles of Incorporation authorize the issuance of
10,000,000 shares preferred stock par value $0.0001. The Board of Directors of
the Company is authorized to issue the preferred stock from time to time in
series and is further authorized to establish such series, to fix and determine
the variations in the relative rights and preferences as between series, to fix
voting rights, if any, for each series, and to allow for the conversion of
preferred stock into Common Stock. The Company has issued no preferred stock.
The Company anticipates that preferred stock may be utilized in making
acquisitions.
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Reports to Stockholders
The Company plans to furnish it's stockholders with an annual report
for each fiscal year ending December 31 containing financial statements audited
by its independent certified public accountants. In the event the Company enters
into a business combination with another Company, it is the present intention of
management to continue furnishing annual reports to stockholders. Additionally,
the Company may, in its sole discretion, issue unaudited quarterly or other
interim reports to its stockholders when it deems appropriate. The Company
intends to comply with the periodic reporting requirements of the Securities
Exchange Act of 1934.
Transfer Agent
The Company's Transfer Agent is Manhattan Transfer Registrar Co, 58
Dorchester Rd, Lake Ronkonkoma, NY 11779.
Part II
Item 1. Market Price and Dividends on the Registrant's Common equity and other
Shareholder Matters
There has been no established public trading market for the Company's
securities since its inception on August 10, 1995. However, the Company's
securities are traded on the National Quotation Bureau pink sheets with no bid
and no offer. The company's trading symbol is SGPI. As of June 30, 2000 there
were 1,402,200 shares outstanding, and the Company has 65 shareholders of
record. No dividends have been paid to date and the Company's Board of directors
does not anticipate paying dividends in the foreseeable future.
Item 2. Legal Proceedings.
The Company is not a party to any pending legal proceedings, and no
such proceedings are known to be contemplated.
Item 3. Changes in and Disagreements with Accountants.
The Company has had no changes in or disagreements with accountants on
matters of accounting or financial disclosure.
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Item 4. Recent Sales of Unregistered Securities.
The following unregistered securities of the Company have been issued
in the past three years:
a) On May 6, 1999, the Company issued 600,000 restricted shares at a purchase
price of $.10 per share for an aggregate consideration of $60,000 as follows:
1. 42,500 shares to Amit Rametra who was an officer and
director at that time and who subsquently resigned as
such
2. 300,000 shares to Beresford Overseas, Ltd.
3. 25,000 shares to Seema Wasil, an officer and director;
4. 25,000 shares to Munish Rametra, a non-affiliate;
5. 57,500 shares to S & N Associates, Inc., a corporation
wholly owned by Surinder Rametra and Nirmala Rametra,
his wife.
6. 150,000 shares to Nirmala Rametra, wife of Surinder
Rametra.
b) On June 29, 2000, the Company issued 78,200 shares of unregistered common
stock to an affiliate and 78,200 shares to a non-affiliate, both of which are
shareholders for an aggregate of 156,400 shares in consideration of conversion
of loans in the aggregate amount of $15,640 owed to such shareholders at a
conversion rate of $.10 per share. Said shares were issued pursuant to an
exemption from registration under Section 4(2) of the Act.
All of these shares were exempt from registration pursuant to Section 4(2)
of the Securities Act of 1933, as amended.
Item 5. Indemnification of Directors and Officers
The Articles of Incorporation and the Bylaws of the Company, provide
that the Company will indemnify its officers and directors for costs and
expenses incurred in connection with the defense of actions, suits, or
proceedings where the officer or director acted in good faith and in a manner he
reasonably believed to be in the Company's best interest and is a party by
reason of his status as an officer or director, absent a finding of negligence
or misconduct in the performance of duty.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers or persons controlling the Company,
we have been informed that in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
Act and is therefore unenforceable.
Part F/S
The Financial Statements of Southern Group International, Inc. required
by regulation S-B commence on page F-1 hereof and are incorporated herein by
reference.
Part III
Items 1 & 2 Index to Exhibits and Description of Exhibits
Item 1 Articles of Incorporation.*
Item 2 By-Laws*
* Previously filed
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Signatures
In accordance with Section 12 of the Securities Exchange Act of 1934, the
registrant caused this Amendment No. 5 to the registration statement to be
signed on its behalf by the undersigned, thereunto duly authorized.
Southern Group International, Inc.
Date: August 10, 2000 By:
----------------------------
Konrad C. Kim, President
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SOUTHERN GROUP INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND 1999
AND FOR THE PERIOD AUGUST 10, 1995 (INCEPTION) TO
JUNE 30, 2000
F-1
<PAGE>
TABLE OF CONTENTS
Page No.
ACCOUNTANT'S REPORT.................................................. F-3
FINANCIAL STATEMENTS
Balance sheets................................................... F-4
Statements of Operations......................................... F-5
Statements of Changes in Stockholders' Equity.................... F-6
Statements of Cash Flows......................................... F-7
Notes to Financial Statements.................................... F-10
F-2
<PAGE>
STEWART H. BENJAMIN
CERTIFIED PUBLIC ACCOUNTANT, P.C.
27 SHELTER HILL ROAD
PLAINVIEW, NY 11803
TELEPHONE: (516) 933-9781
FACSIMILE: (516) 827-1203
To the Board of Directors and Shareholders
Southern Group International, Inc.
Hauppauge, New York
I have reviewed the accompanying balance sheets of Southern Group International,
Inc. (a development stage company) as of March 31, 2000 and December 31, 1999,
and the related statements of operations, stockholders' equity and cash flows,
for the three months ended March 31, 2000 and 1999, and for the period from
August 10, 1995 (inception), to March 31, 2000, in accordance with Statements on
Standards for Accounting and Review Services, issued by the American Institute
of Certified Public Accountants. All information included in these financial
statements is the representation of the management of Southern Group
International, Inc.
A review consists principally of inquiries of Company personnel analytical
procedures applied to financial data. It is substantially less in scope than an
audit in accordance with generally accepted auditing standards, the objective of
which is the expression of an opinion regarding the financial statements taken
as a whole. Accordingly, I do not express such an opinion.
Based on my reviews, I am not aware of any material modifications that should be
made to the accompanying financial statements in order for them to be in
conformity with generally accepted accounting principles.
Stewart H. Benjamin
Certified Public Accountant, P.C.
Plainview, New York
July 31, 2000
F-3
<PAGE>
SOUTHERN GROUP INTERNATIONAL, INC.
(A Development Stage Company)
Balance Sheets
ASSETS
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
(Unaudited) (Audited)
-------------------- ---------------------
<S> <C> <C>
Current assets
Cash $ 21,242 $ 1,976
Securities available-for-sale (Notes 1 & 2) -- 29,531
-------------------- ---------------------
$ 21,242 $ 31,507
==================== =====================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Loan payable (Note 3) $ -- $ 2,831
Loans payable, related parties (Note 4) -- 15,039
-------------------- ---------------------
Total liabilities -- 17,870
-------------------- ---------------------
Stockholders' equity (Note 5)
Preferred stock, $.0001 par value, 10,000,000 shares
authorized and zero shares issued and outstanding -- --
Common stock, $.0001 par value; authorized -
80,000,000 shares; issued and outstanding -
1,402,200 shares in 2000 and 1,245,800 in 1999 140 125
Additional paid-in capital 78,564 62,939
Deficit accumulated during the development stage (57,462) (72,083)
Unrealized gain on marketable securities -- 22,656
-------------------- ---------------------
Total stockholders' equity 21,242 13,637
-------------------- ---------------------
$ 21,242 $ 31,507
==================== =====================
</TABLE>
See accompanying notes and accountant's review report.
F-4
<PAGE>
SOUTHERN GROUP INTERNATIONAL, INC.
(A Development Stage Company)
Statements of Operations
<TABLE>
<CAPTION>
Six Months Six Months Aug. 10, 1995
Ended Ended (inception) to
June 30, June 30, June 30,
2000 1999 2000
-------------------- --------------------- ---------------------
<S> <C> <C> <C>
Costs and expenses
General and administrative:
Bank charges $ 42 $ 85 $ 1,674
Filing fees 300 250 900
Edgar filing service fees 305 677 1,045
Legal fees -- 10,000 10,500
Accounting fees 1,250 1,100 3,350
Transfer agent fees -- -- 2,360
Miscellaneous -- -- 64
-------------------- --------------------- ---------------------
Total costs and expenses 1,897 12,112 19,893
-------------------- --------------------- ---------------------
Other income (expenses)
Gain on sale of marketable securities 17,089 -- 17,089
Impairment of investment in related party -- -- (50,000)
Interest income 81 -- 81
Interest expense (652) (1,989) (4,739)
-------------------- --------------------- ---------------------
Total other income (expenses) 16,518 (1,989) (37,569)
-------------------- --------------------- ---------------------
Net income (loss) $ 14,621 $ (14,101) $ (57,462)
==================== ===================== =====================
Income (loss) per common share $ .01 $ (.02)
==================== =====================
Weighted average common shares outstanding 1,247,519 645,800
==================== =====================
</TABLE>
See accompanying notes and accountant's review report.
F-5
<PAGE>
SOUTHERN GROUP INTERNATIONAL, INC.
(A Development Stage Company)
Statements of Changes in Stockholders' Equity
Period from August 10, 1995 (Date of Inception), to June 30, 2000
<TABLE>
<CAPTION>
Deficit Unrealized
Common stock Additional Accumulated Gain on
--------------------------- Paid-in From Marketable
Shares Amount Capital Inception Securities
----------- ------------- -------------- -------------- ------------
<S> <C> <C> <C> <C> <C>
Balances, August 10, 1995 -- $ -- $ -- $ -- $ --
Sale of common stock 642,800 64 -- -- --
Net loss for the period (64)
----------- ------------- ------------- ------------ ----------
Balances, December 31, 1995 642,800 64 -- (64) --
The Company was inactive
during 1996 -- -- -- -- --
----------- ------------- ------------- ------------ ----------
Balances, December 31, 1996 642,800 64 -- (64) --
The Company was inactive
during 1997 -- -- -- -- --
----------- ------------- ------------- ------------ ----------
Balances, December 31, 1997 642,800 64 -- (64) --
Sale of common stock 3,000 1 2,999 -- --
Net loss (3,589)
----------- ------------- ------------- ------------ ----------
Balances, December 31, 1998 645,800 65 2,999 (3,653) --
Prior period adjustment -- -- -- (833) --
Sale of common stock 297,500 30 29,720 -- --
Shareholders loans converted to stock 233,750 23 23,352 -- --
Common stock issued for marketable
securities, valued at $.10 per share 68,750 7 6,868 -- --
Change in unrealized gain on
marketable securities -- -- -- -- 22,656
Net loss (67,597)
----------- ------------- ------------- ------------ ----------
Balances, December 31, 1999 1,245,800 125 62,939 (72,083) 22,656
Shareholders loans converted to stock 156,400 15 15,625 -- --
Change in unrealized gain on
marketable securities -- -- -- -- (22,656)
Net income 14,621
----------- ------------- ------------- ------------ ----------
Balances, June 30, 2000 1,402,200 $ 140 $ 78,564 $ (57,462) $ --
=========== ============= ============= ============ ==========
</TABLE>
See accompanying notes and accountant's review report.
F-6
<PAGE>
SOUTHERN GROUP INTERNATIONAL, INC.
(A Development Stage Company)
Statements of Cash Flows
<TABLE>
<CAPTION>
Six Months Six Months Aug. 10, 1995
Ended Ended (inception) to
June 30, June 30, June 30,
2000 1999 2000
------------- ------------- -------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 14,621 $ (14,101) $ (56,629)
Adjustments to reconcile net income (loss) to net
cash used in operating activities
Realized gain on sale of available-for-sale securities (17,089) -- (17,089)
Impairment loss on related party receivable -- -- 50,000
Changes in assets and liabilities
Increase (decrease) in accrued expenses -- (200) --
----------- ------------ -----------
NET CASH USED IN OPERATING ACTIVITIES (2,468) (14,301) (23,718)
----------- ------------ -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of available-for-sale securities 23,965 -- 23,965
Increase in loan receivable, related party -- -- (51,633)
Decrease in loan receivable, related party -- -- 800
----------- ------------ -----------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES 23,965 -- (26,868)
----------- ------------ -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from short-term debt 600 38,672 99,682
Repayment of short-term debt (2,831) (43,128) (60,668)
Proceeds from issuance of common stock -- 17,250 32,814
----------- ------------ -----------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (2,231) 12,794 71,828
----------- ------------ -----------
NET INCREASE (DECREASE) IN CASH 19,266 (1,507) 21,242
CASH - BEGINNING OF PERIOD 1,976 2,396 --
----------- ------------ -----------
CASH - END OF PERIOD $ 21,242 $ 889 $ 21,242
=========== ============ ===========
SUPPLEMENTAL DISCLOSURES:
Cash paid during the period for interest $ 652 $ 1,989 $ 3,774
=========== ============ ===========
Cash paid during the period for income taxes $ -- $ -- $ --
=========== ============ ===========
Change in unrealized gain on marketable securities $ (22,656) $ -- $ --
=========== ============ ===========
Common stock issued for marketable securities $ -- $ -- $ 6,875
=========== ============ ===========
Conversion of shareholders loans to capital stock $ (15,640) $ (23,375) $ (39,015)
=========== ============ ===========
</TABLE>
See accompanying notes and accountant's review report.
F-7
<PAGE>
SOUTHERN GROUP INTERNATIONAL, INC.
(A Development Stage Company)
Notes to Financial Statements
Note 1 - Summary of Significant Accounting Policies
Nature of Operations
The financial statements presented are those of Southern Group International,
Inc., a development stage company (the "Company"). The Company was incorporated
under the laws of the state of Florida on August 10, 1995. The Company's
activities, to date, have been primarily directed towards the raising of
capital.
As shown in the financial statements, as of June 30, 2000, the Company has
incurred an accumulated deficit of $57,462. The Company's continued existence is
dependent on its ability to generate sufficient cash flow to meet its
obligations on a timely basis. Accordingly, the financial statements do not
include any adjustments that might be necessary should the Company be unable to
continue in existence. The Company has been exploring sources to obtain
additional equity or debt financing. The Company has also indicated its
intention to participate in one or more as yet unidentified business ventures,
which management will select after reviewing the business opportunities for
their profit or growth potential.
The Company will engage a consultant, who will be compensated based on
performance, to effect a merger once a candidate has been identified. The
Company has elected not to recognize compensation expense for its executive
officers, as they devote an insignificant amount of time to the Company.
Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reporting amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the period. Actual results
could differ from those estimates.
Securities Available-For-Sale
Securities available-for-sale consist of marketable equity securities not
classified as trading securities. Securities available-for-sale are stated at
fair value, and unrealized holding gains and losses are reported as a separate
component of stockholders' equity.
Dividends on marketable equity securities are recognized in income when
declared. Realized gains and losses are determined on the basis of the actual
cost of the securities sold.
F-8
<PAGE>
SOUTHERN GROUP INTERNATIONAL, INC.
(A Development Stage Company)
Notes to Financial Statements
Income (Loss) Per Common Share
Income (loss) per common share is computed by dividing the net income (loss) by
the weighted average shares outstanding during the period.
Note 2 - Securities Available-For-Sale
Securities available-for-sale at December 31, 1999 consisted of 8,750 shares of
Yournet Inc., which is traded on the OTC Bulletin Board. During the six months
ended June 30, 2000, the Company sold securities available-for-sale for total
proceeds of $23,965 resulting in gross realized gains of $17,089.
Note 3 - Loan Payable
The Company has a bank line-of-credit which provides borrowings up to $75,000.
The line-of-credit is guaranteed by a stockholder of the Company, and principal
and interest on advances are payable monthly at the bank prime rate plus 1%. The
line-of-credit is due to expire in October 2001. The Company has fully repaid
the bank line-of-credit on February 25, 2000. Interest expense related to the
bank line-of-credit was $51 during the six months ended June 30, 2000.
Note 4 - Loans Payable - Stockholders
Loans of $37,450 were received from certain stockholders during the year ended
December 31, 1999, proceeds of which were used to repay a portion of the bank
line-of-credit. Stockholders' loans totaling $23,375 were converted to equity as
a result of a resolution adopted by the board of directors on May 5, 1999,
whereby 600,000 shares of restricted common stock were issued for an aggregate
consideration of $60,000. The loans provide for interest at a rate of 8% and
were due on January 31, 2000. Pursuant to a resolution by the board of directors
on June 29, 2000, the loans and accrued interest totaling $15,640 were converted
to equity. The stockholders received 156,400 shares of common stock, valued at
$.10 per share. Interest expense related to the stockholders' loans was $600
during the six months ended June 30, 2000.
F-9
<PAGE>
SOUTHERN GROUP INTERNATIONAL, INC.
(A Development Stage Company)
Notes to Financial Statements
Note 5 - Common Stock Transactions
Pursuant to a resolution adopted by the Board of Directors on May 5, 1999, the
Company issued 600,000 shares of restricted common stock at a price of $.10 per
share, for an aggregate consideration of $60,000, which includes conversion of
stockholders' loans of $23,375, cash contributions of $29,750 and marketable
securities valued at $6,875. The price of $.10 per share, which exceeds the book
value per share, was determined as the fair value by management, as there was no
public market for the stock on the date of issuance.
Pursuant to a resolution adopted by the Board of Directors on June 29, 2000, the
Company converted stockholders' loans totaling $15,640 to 156,400 shares of
common stock, valued at $.10 per share. The price of $.10 per share, which
exceeds the book value per share, was determined as the fair value by
management, as there was no public market for the stock on the date of issuance.
F-10
<PAGE>
SOUTHERN GROUP INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
AND FOR THE PERIOD AUGUST 10, 1995 (INCEPTION) TO
DECEMBER 31, 1999
<PAGE>
TABLE OF CONTENTS
Page No.
--------
AUDITOR'S REPORT.................................................... F-13
FINANCIAL STATEMENTS
Balance sheets................................................. F-14
Statements of Operations....................................... F-15
Statements of Changes in Stockholders' Equity.................. F-16
Statements of Cash Flows....................................... F-17
Notes to Financial Statements.................................. F-18
<PAGE>
STEWART H. BENJAMIN
CERTIFIED PUBLIC ACCOUNTANT, P.C.
27 SHELTER HILL ROAD
PLAINVIEW, NY 11803
-------
TELEPHONE: (516) 933-9781
FACSIMILE: (516) 827-1203
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Stockholders
Southern Group International, Inc.
Hauppauge, New York
I have audited the accompanying balance sheets of Southern Group International,
Inc. (a development stage company) as of December 31, 1999 and 1998, and the
related statements of operations, stockholders' equity and cash flows for the
years then ended and for the period from August 10, 1995 (inception), to
December 31, 1999. These financial statements are the responsibility of the
Company's management. My responsibility is to express an opinion on these
financial statements based on my audits.
I conducted my audits in accordance with generally accepted auditing standards.
Those standards require that I plan and perform the audits to obtain reasonable
assurance about whether the financial statements are free of material
misstatements. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
I believe that my audits provide a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Southern Group International, Inc.
as of December 31, 1999 and 1998, and the results of its operations and cash
flows for the years then ended and from August 10, 1995 (inception), to December
31, 1999, in conformity with generally accepted accounting principles.
/s/ Stewart H. Benjamin
---------------------------
Stewart H. Benjamin
Certified Public Accountant, P.C.
Plainview, New York
February 4, 2000
F-13
<PAGE>
SOUTHERN GROUP INTERNATIONAL, INC.
(A Development Stage Company)
Balance Sheets
ASSETS
<TABLE>
<CAPTION>
December 31,
1999 1998
-------------- --------------
<S> <C> <C>
Current assets
Cash $ 1,976 $ 2,396
Securities available-for-sale (Notes 1 & 2) 29,531 --
Loan receivable, related party (Note 3) 54,900 51,634
-------------- --------------
$ 86,407 $ 54,030
============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities
Loan payable (Note 4) $ 2,831 $ 54,419
Loans payable, related parties (Note 5) 15,039 --
Accrued expenses -- 200
-------------- --------------
Total liabilities 17,870 54,619
-------------- --------------
Stockholders' equity (deficit)
Preferred stock, $.0001 par value, 10,000,000 shares
authorized and zero shares issued and outstanding -- --
Common stock, $.0001 par value, 80,000,000 shares
authorized and 1,245,800 shares issued and outstanding
in 1999 and 645,800 in 1998 125 65
Additional paid-in capital 62,939 2,999
Deficit accumulated during the development stage (17,183) (3,653)
Unrealized gain on marketable securities 22,656 --
-------------- --------------
Total stockholders' equity (deficit) 68,537 (589)
-------------- --------------
$ 86,407 $ 54,030
============== ==============
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-14
<PAGE>
SOUTHERN GROUP INTERNATIONAL, INC.
(A Development Stage Company)
Statements of Operations
<TABLE>
<CAPTION>
Aug. 10, 1995
Year Ended Year Ended (inception) to
December 31, December 31, December 31,
1999 1998 1999
------------------ ------------------ -----------------
<S> <C> <C> <C>
Costs and expenses
General and administrative:
Bank charges $ 675 $ 957 $ 1,632
Filing fees 250 350 600
Edgar filing service fees 740 -- 740
Legal fees 10,000 500 10,500
Accounting fees 1,725 375 2,100
Transfer agent fees 750 1,610 2,360
Miscellaneous -- -- 64
------------------ ------------------ ------------------
Total costs and expenses 14,140 3,792 17,996
------------------ ------------------ ------------------
Other income (expenses)
Interest income 4,067 833 4,900
Interest expense (3,457) (630) (4,087)
------------------ ------------------ ------------------
Total other income (expenses) 610 203 813
------------------ ------------------ ------------------
Net loss $ (13,530) $ (3,589) $ (17,183)
================== ================== ==================
Loss per common share $ (.013) $ (.006)
================== ==================
Weighted average common shares outstanding 1,041,964 644,386
================== ==================
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-15
<PAGE>
SOUTHERN GROUP INTERNATIONAL, INC.
(A Development Stage Company)
Statements of Changes in Stockholders' Equity
Period from August 10, 1995 (Date of Inception), to December 31, 1999
<TABLE>
<CAPTION>
Deficit Unrealized
Common stock Additional Accumulated Gain on
--------------------------------- Paid-in From Marketable
Shares Amount Capital Inception Securities
--------------- --------------- -------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Balances, August 10, 1995 -- $ -- $ -- $ -- $ --
Issuance of common stock 642,800 64 -- -- --
Net loss for the period (64)
--------------- --------------- -------------- --------------- ---------------
Balances, December 31, 1995 642,800 64 -- (64) --
The Company was inactive
during 1996 -- -- -- -- --
--------------- --------------- -------------- --------------- ---------------
Balances, December 31, 1996 642,800 64 -- (64) --
The Company was inactive
during 1997 -- -- -- -- --
--------------- --------------- -------------- --------------- ---------------
Balances, December 31, 1997 642,800 64 -- (64) --
Issuance of common stock 3,000 1 2,999 -- --
Net loss (3,589)
--------------- --------------- -------------- --------------- ---------------
Balances, December 31, 1998 645,800 65 2,999 (3,653) --
Issuance of common stock 600,000 60 59,940 -- --
Change in unrealized gain on
marketable securities -- -- -- -- 22,656
Net loss (13,530)
--------------- --------------- -------------- --------------- ---------------
Balances, December 31, 1999 1,245,800 $ 125 $ 62,939 $ (17,183) $ 22,656
=============== =============== ============== =============== ===============
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-16
<PAGE>
SOUTHERN GROUP INTERNATIONAL, INC.
(A Development Stage Company)
Statements of Cash Flows
<TABLE>
<CAPTION>
Aug. 10, 1995
Year Ended Year Ended (inception) to
December 31, December 31, December 31,
1999 1998 1999
------------------ ------------------ ------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (13,530) $ (3,589) $ (17,183)
Adjustments to reconcile net loss to net
cash used in operating activities
Contribution of marketable securities (6,875) -- (6,875)
Changes in assets and liabilities
Increase (decrease) in accrued expenses (200) 200 --
------------------ ------------------ ------------------
NET CASH USED IN OPERATING ACTIVITIES (20,605) (3,389) (24,058)
------------------ ------------------ ------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Increase in loan receivable, related party (3,267) (51,634) (54,900)
------------------ ------------------ ------------------
NET CASH USED IN INVESTING ACTIVITIES (3,267) (51,634) (54,900)
------------------ ------------------ ------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from short-term debt 15,039 58,654 72,539
Repayment of short-term debt (51,587) (4,235) (54,669)
Proceeds from issuance of common stock 60,000 3,000 63,064
------------------ ------------------ ------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 23,452 57,419 80,934
------------------ ------------------ ------------------
NET INCREASE (DECREASE) IN CASH (420) 2,396 1,976
CASH - BEGINNING OF YEAR 2,396 -- --
------------------ ------------------ ------------------
CASH - END OF YEAR $ 1,976 $ 2,396 $ 1,976
================== ================== ==================
SUPPLEMENTAL DISCLOSURES:
Cash paid during the year for interest $ 2,493 $ 630 $ 3,123
================== ================== ==================
Cash paid during the year for income taxes $ - $ - $ -
================== ================== ==================
Change in unrealized gain on marketable securities $ 22,656 $ - $ 22,656
================== ================== ==================
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-17
<PAGE>
SOUTHERN GROUP INTERNATIONAL, INC.
(A Development Stage Company)
Notes to Financial Statements
Note 1 - Summary of Significant Accounting Policies
Nature of Operations
The financial statements presented are those of Southern Group International,
Inc., a development stage company (the "Company"). The Company was incorporated
under the laws of the state of Florida on August 10, 1995. The Company's
activities, to date, have been primarily directed towards the raising of
capital.
As shown in the financial statements, as of December 31, 1999, the Company has
incurred an accumulated deficit of $17,183. The Company's continued existence is
dependent on its ability to generate sufficient cash flow to meet its
obligations on a timely basis. Accordingly, the financial statements do not
include any adjustments that might be necessary should the Company be unable to
continue in existence. The Company has been exploring sources to obtain
additional equity or debt financing. The Company has also indicated its
intention to participate in one or more as yet unidentified business ventures,
which management will select after reviewing the business opportunities for
their profit or growth potential.
The Company will engage a consultant, who will be compensated based on
performance, to effect a merger once a candidate has been identified. The
Company has elected not to recognize compensation expense for its executive
officers, as they devote an insignificant amount of time to the Company.
Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reporting amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the period. Actual results
could differ from those estimates.
Securities Available-For-Sale
Securities available-for-sale consist of marketable equity securities not
classified as trading securities. Securities available-for-sale are stated at
fair value, and unrealized holding gains and losses are reported as a separate
component of stockholders' equity.
Dividends on marketable equity securities are recognized in income when
declared. Realized gains and losses are determined on the basis of the actual
cost of the securities sold.
F-18
<PAGE>
SOUTHERN GROUP INTERNATIONAL, INC.
(A Development Stage Company)
Notes to Financial Statements
Loss Per Common Share
Loss per common share is computed by dividing the net loss by the weighted
average shares outstanding during the period.
Note 2 - Securities Available-For-Sale
The amortized cost and fair value of securities available-for-sale at December
31, 1999 are as follows:
Amortized cost $ 6,875
Gross unrealized gain 22,656
---------
Fair value $ 29,531
==========
The Company sold no securities during the year ended December 31, 1999.
Note 3 - Loan Receivable, Related Party
On October 27, 1998 the Company made a short-term loan of $50,000 with proceeds
from a bank line-of-credit to a Hungarian company that is wholly owned by a U.S.
corporation in which certain stockholders of the Company own an equity interest.
The purpose of the loan was to provide working capital to the Hungarian company.
The loan is uncollateralized, provides for interest at a rate of 8% per annum
and is due on June 30, 2000. The Company has received no payments from the
related party loan as of December 31, 1999, but management believes that the
loan will be fully repaid by June 30, 2000. The balance of $54,900 at December
31, 1999 includes interest receivable of $4,900.
Note 4 - Loan Payable
The Company has a bank line-of-credit which provides borrowings up to $75,000.
The line-of-credit is guaranteed by a stockholder of the Company, and principal
and interest on advances are payable monthly at the bank prime rate plus 1%. The
line-of-credit is due to expire in October 2001. There was an outstanding
balance on this line-of-credit of $2,832 at December 31, 1999, which the Company
has repaid on February 25, 2000. Interest expense related to the bank
line-of-credit was $2,493 during the year ended December 31, 1999.
F-19
<PAGE>
SOUTHERN GROUP INTERNATIONAL, INC.
(A Development Stage Company)
Notes to Financial Statements
Note 5 - Loans Payable - Stockholders
Loans of $37,450 were received from certain stockholders during the year ended
December 31, 1999, proceeds of which were used to repay a portion of the bank
line-of-credit. Stockholders' loans totaling $23,375 were converted to equity as
a result of a resolution adopted by the board of directors on May 5, 1999,
whereby 600,000 shares of restricted common stock were issued for an aggregate
consideration of $60,000. The loans provide for interest at a rate of 8% and are
due on January 31, 2000. Management has indicated its intentions to convert the
loans, totaling $15,039 at December 31, 1999, to equity in the second quarter of
2000. Interest expense related to the stockholders' loans was $2,153 during the
year ended December 31, 1999.
Note 6 - Common Stock Transactions
Pursuant to a resolution adopted by the Board of Directors on May 5, 1999, the
Company issued 600,000 shares of restricted common stock at a price of $.10 per
share, for an aggregate consideration of $60,000, which includes conversion of
stockholders' loans of $23,375, cash contributions of $29,750 and marketable
securities valued at $6,875. The price of $.10 per share, which exceeds the book
value per share, was determined as the fair value by management, as there was no
public market for the stock on the date of issuance.
F-20