U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-SB
General Form for Registration of Securities
of Small Business Issuers
Under Section 12(b) or (g) of
the Securities Exchange Act of 1934
AMENDMENT NO. 1
SAN FABIAN RESOURCES, INC.
(Name of Small Business Issuer)
Delaware 13-4069962
(State or Other Jurisdiction of I.R.S. Employer Identification Number
Incorporation or Organization)
c/o Joseph Sierchio
41 East 57th Street, Penthouse A, New York, New York 10022
(Address of Principal Executive Offices including Zip Code)
(212) 446-9500
(Issuer's Telephone Number)
Securities to be Registered Under Section 12(b) of the Act:
None
Securities to be Registered Under Section 12(g) of the Act:
Common Stock, $.001 Par Value
(Title of Class)
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TABLE OF CONTENTS
PART 1
ITEM 1. DESCRIPTION OF BUSINESS....................................... 3
History and Organization......................................... 3
Proposed Business............................................... 3
Risk Factors.................................................... 4
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OR PLAN OF OPERATION...................................... 10
General Business Plan........................................... 10
Structure of Acquisition........................................ 12
No Dividend..................................................... 14
Employees....................................................... 14
Competition..................................................... 14
Liquidity and Capital Resources................................. 14
ITEM 3. DESCRIPTION OF PROPERTY...................................... 15
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT..................................... 15
ITEM 5. DIRECTORS AND EXECUTIVE OFFICERS, PROMOTER
AND CONTROL PERSONS....................................... 15
ITEM 6. EXECUTIVE COMPENSATION....................................... 17
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS............... 17
ITEM 8. DESCRIPTION OF SECURITIES.................................... 17
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON REGISTRANT'S COMMON
EQUITY AND RELATED STOCKHOLDER MATTERS19.................. 19
ITEM 2. LEGAL PROCEEDINGS............................................ 20
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH
ACCOUNTANTS............................................... 20
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES ..................... 20
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS ................... 20
PART F/S
FINANCIAL STATEMENTS..................................................... 21
PART III
ITEMS 1&2 INDEX TO AND DESCRIPTION OF EXHIBITS......................... 35
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PART I
ITEM 1. DESCRIPTION OF BUSINESS.
History And Organization
San Fabian Resources, Inc. (the "Company"), organized under the laws of the
State of Delaware on May 16, 1997. The Company was organized for the purposes of
creating a corporate vehicle to locate and acquire an operating business entity
which management believes is a suitable acquisition candidate (a "target
company").
The Company, in 1997, unsuccessfully attempted to acquire mineral resource
properties. In connection therewith the Company incurred approximately $20,000
of expenses, which consisted primarily of legal fees and disbursements due to
Maitland & Company, the Company's Canadian counsel; through a settlement
arrangement the Company converted this debt to a convertible debenture due July
14, 2003. See "Plan of Operations."
The Company will not restrict its search for a target company to any
specific business, industry or geographical location. The Company does not
currently engage in any business activities that provide any cash flow. The
costs of identifying, investigating, and analyzing business combinations will be
paid with money in the Company's treasury or loaned by management.
Although the Company was under no obligation to do so, it has voluntarily
filed this registration statement because it believes that it can better
facilitate its business goals if it were a "reporting issuer" under the
Securities Exchange Act of 1934 (the "Exchange Act").
The Company's proposed business activities, as described herein, classify
the Company as a "blank check" or "blind pool" company.
Proposed Business
The Company will seek to locate an acquire a target company which in the
opinion of the Company's management (sometimes referred to as the "Management")
offers long term growth potential. The Company will not restrict its search to
any specific business, industry or geographical location. The Company may seek
to acquire a target company which has just commenced operations, or which works
to avail itself of the benefits of being a "reporting issuer" in order to
facilitate capital formation to expand into new products or market.
There are certain perceived benefits to being a reporting company with a
class of publicly-traded securities. These are commonly thought to include the
following:
* the ability to use registered securities to make acquisitions of
assets or businesses;
* increased visibility in the financial community;
* the facilitation of borrowing from financial institutions;
* improved trading efficiency;
* shareholder liquidity;
* greater ease in subsequently raising capital;
* compensation of key employees through stock options;
* enhanced corporate image;
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* a presence in the United States capital market.
A target company, if any, which may be interested in a business combination
with the Company may include the following:
* a company for which a primary purpose of becoming public is the use of
its securities for the acquisition of assets or businesses;
* a company which is unable to find an underwriter of its securities or
is unable to find an underwriter of securities on terms acceptable to
it;
* a company which wishes to become public with less dilution of its
common stock than would occur upon an underwriting;
* a company which believes that it will be able obtain investment
capital on more favorable terms after it has become public;
* a foreign company which may wish an initial entry into the United
States securities market;
* a special situation company, such as a company seeking a public market
to satisfy redemption requirements under a qualified Employee Stock
Option Plan;
* a company seeking one or more of the other perceived benefits of
becoming a public company.
There is no assurances that the Company will be able to effect an
acquisition of a target company. In addition, at this time, no specifics as to
an acquisition or as to the nature of the target company can be provided.
Risk Factors
The Company's business is subject to numerous risk factors, including the
following:
Anticipated Change in Control and Management.
Upon the successful completion of the acquisition of a target company, the
Company anticipates that it will have to issue to the target company or its
shareholders some authorized but unissued common stock which, when issued will
comprise a majority of the Company's then issued and outstanding shares of
common stock. Therefore, the Company anticipates that upon the closing of the
acquisition of a target company, the Company will no longer be controlled by the
current shareholders. In addition, existing management and directors may resign.
The Company cannot give any assurance that the experience or qualifications of
new management, as it relates to either in the operation of the Company's
activities or in the operation of the business, assets or property being
acquired, will be adequate for such purposes.
Conflict of Interest - Management's Fiduciary Duties.
A conflict of interest may arise between management's personal financial
benefit and management's fiduciary duty to shareholders.
The Company's director and officer is or may become, in their individual
capacities, officers, directors, controlling shareholders and/or partners of
other entities engaged in a variety of businesses. Mr. Sierchio is engaged in
other business activities. Accordingly, the amount of time
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each will devote to the Company's business will only be about five (5) to ten
(10) hours per month. There exists potential conflicts of interest including
allocation of time between the Company and its representatives other business
interests.
Experience of Management; Consultants.
Although Management has general business experience, it has limited
experience in effecting business combinations and may not have any significant
experience in acquiring or operating certain business interests that the company
might choose to acquire. Management does not have, nor does it presently intend
to enter into, any contracts or agreements with any consultants or advisors with
respect to its proposed business activities. Consequently, Management has not
established the criteria that will be used to hire independent consultants
regarding their experience, the services to be provided, the term of service,
etc., and no assurance can be made that the Company will be able to obtain such
assistance on acceptable terms.
Potential Future Rule 144 Sales.
Of the 50,000,000 shares of the Company's Common Stock authorized, there
are presently issued and outstanding 560,000; all are "restricted securities" as
that term is defined under the Securities Act of 1933 (the "Securities Act"),
and in the future may be sold in compliance with Rule 144 of the Act, or
pursuant to a Registration Statement filed under the Act. Rule 144 provides, in
essence, that a person holding restricted securities for a period of 1 year may
sell those securities in unsolicited brokerage transactions of in transactions
with a market maker, in an amount equal to 1% of our outstanding common stock
every 3 months. Additionally, Rule 144 requires that an issuer of securities
make available if the issuer satisfies the reporting requirements of Sections 13
or 15(d) of the Exchange Act and of Rule 15c2-11 thereunder. Rule 144 also
permits, under certain circumstances, that sale of shares by a person who is not
an affiliate of ours and who has satisfied a 2 two year holding period without
any quantity limitation and whether or not there is adequate current public
information available. Investors should be aware that sales under Rule 144, or
pursuant to a registration statement filed under the Securities Act, may have a
depressive effect on the market price of our common stock in any market that may
develop for such shares.
Possible Issuance of Additional Shares.
The Company's Certificate of Incorporation, authorizes the issuance of
50,000,000 shares of common stock. The Company's Board of Directors has the
power to issue any or all of such additional shares without stockholder approval
for such consideration as it deems. Management presently anticipates that it may
choose to issue a substantial but as yet undetermined amount of the Company's
shares in connection with the acquisition of a target business.
Risks of Leverage.
There are currently no limitations relating to the Company's ability to
borrow funds to increase the amount of capital available to it to effect a
business combination or otherwise finance the operations of any acquired
business. The amount and nature of any borrowings by the Company will depend on
numerous factors, including the Company's capital requirements, the Company's
perceived ability to meet debt services on any such borrowings, and
then-prevailing conditions in the financial, if required or otherwise sought,
will be available on terms deemed to be commercially acceptable and
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in the best interest of the Company's inability to borrow funds required to
effect or facilitate a business combination, or to provide funds for an
additional infusion of capital into an acquired business, may have a material
adverse affect on the Company's financial condition and future prospects.
Additionally, to the extent that debt financing ultimately proves to be
available, any borrowings may subject the Company to various risks traditionally
associated with incurring of indebtedness, including:
if the Company's operating revenues after the acquisition were to be
insufficient to pay debt service, there would be a risk of default and
foreclosure on our assets.
if a loan agreement containing covenants is breached without a waiver or
renegotiation of the terms of that covenant, then the lender could have the
right to accelerate the payment of the indebtedness even if the Company has
made all principal and interest payments when due.
if the interest rate on a loan fluctuated or the loan was payable on
demand, the Company would bear the risk of variations in the interest rate
or demand for payment.
if the terms of a loan did not provide for amortization prior to maturity
of the full amount borrowed and the "balloon" payment could not be
refinanced at maturity on acceptable terms, we might be required to seek
additional financing and, to the extent that additional financing is not
available on acceptable terms, to liquidate the Company's assets.
Possible Need for Additional Financing.
The Company cannot ascertain with any degree of certainty the capital
requirements for an particular acquired business inasmuch as the Company has not
yet identified any acquisition candidates. If the target company requires
additional financing, such additional financing (which, among other forms, could
be derived from the public or private offering of securities or from the
acquisition of debt through conventional bank financing), may not be available,
due to, among other things, the target company not having sufficient:
o credit or operating history;
o income stream;
o profit level;
o asset base eligible to be collateralized; or
o market for its securities.
Since no specific business has been targeted for acquisition, it is not
possible to predict the specific reasons why conventional private or public
financing or conventional bank financing might not become available. Although
there are no agreements between the Company and any of its officers and/or
directors pursuant to which we may borrow and such officers and/or directors are
obligated to lend the Company monies, there are no restrictions on our right to
borrow money from officers and directors. No stockholder approval is required in
connection with any such loan.
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Penny Stock Rules.
Under Rule 15g-9, a broker or dealer may not sell a "penny stock" (as
defined in Rule 3a51- 1) to or effect the purchase of a penny stock by any
person unless:
(1) such sale or purchase is exempt from Rule 15g-9; or
(2) prior to the transaction the broker or dealer has (a) approved the
person's account for transaction in penny stocks in accordance with
Rule 15g-9 and (b) received from the person a written agreement to the
transaction setting forth the identity and quantity of the penny stock
to be purchased.
The United States Securities and Exchange Commission (the "Commission")
adopted regulations that generally define a penny stock to be any equity
security other than a security excluded from such definition by Rule 3a51-1.
Such exemptions include, but are not limited to (a) an equity security issued by
an issuer that has (i) net tangible assets of at least $2,000,000, if such
issuer has been in continuous operations for at least three years; (ii) net
tangible assets of at least $5,000,000, if such issuer has been in continuous
operation for less than three years; or (iii) average revenue of at least
$6,000,000 for the preceding three years; (b) except for purposes of Section
7(b) of the Exchange Act and Rule 419, any security that has a price of $5.00 or
more; (c) and a security that is authorized or approved for authorization upon
notice of issuance for quotation on the National Association of Securities
("NASD") Dealers Automated Quotation System ("NASDAQ").
It is likely that the Company's common stock will be subject to the
regulations on penny stocks; consequently, the market liquidity for our common
stock may be adversely affected by such regulations. This, in turn, will affect
shareholders ability to sell his shares following the completion of an
acquisition.
There is no current trading market for shares (the "Shares") the Company's
common stock and there can be no assurance that a trading market will develop,
or, if such a trading market does develop, that it will be sustained. The
Shares, to the extent that a market develops for the Shares at all, will likely
appear in what is customarily known as the "pink sheets" or on the NASD
over-the-counter Bulletin Board (the "OTCBB"), which may limit the marketability
and liquidity of the Shares. A trading market will develop, if at all, only
after the acquisition of a target company.
To date, neither the Company nor anyone acting on behalf of the Company has
taken any affirmative steps to request or encourage any broker/dealer to act as
a market maker for our common stock. The Company has had no discussions or
understandings, with any "market makers" regarding the participation of any such
market maker in the future trading market, if any, in the Company's common
stock. Management expects that discussions in this area will ultimately be
initiated by the management in office after completion of the acquisition of a
target company.
Risks Associated with Operations in Foreign Countries.
The Company's business plan is to seek to acquire a target company.
Management's discretion is unrestricted, and the Company may participate in any
business whatsoever that may in the opinion of Management meet the Company's
business objectives. The Company may acquire a business outside the United
States. The Company has not limited the scope of its search to a
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particular region or country. Accordingly, if the Company acquires a business
located, or operating in a foreign jurisdiction, the Company's operations may be
adversely affected to the extent of the existence of unstable economic, social
and/or political conditions in such foreign regions and countries.
No Operating History or Revenue and Minimal Assets.
The Company has had no operating history nor any revenues or earnings from
operations. The Company has no significant assets or financial resources. The
Company will, in all likelihood, sustain operating expenses without
corresponding revenues, at least until the consummation of a business
combination. This may result in the Company incurring a net operating loss which
will increase continuously until the Company can consummate a business
combination with a target company. There is no assurance that the Company can
identify such a target company and consummate such a business combination.
Speculative Nature of the Company's Proposed Operations.
The success of the Company's proposed plan of operation will depend to a
great extent on the operations, financial condition and management of the
identified target company. While management will prefer business combinations
with entities having established operating histories, there can be no assurance
that the Company will be successful in locating candidates meeting such
criteria. In the event the Company completes a business combination, of which
there can be no assurance, the success of the Company's operations will be
dependent upon management of the target company and numerous other factors
beyond the Company's control.
Scarcity of and Competition for Business Opportunities and Combinations.
The Company is and will continue to be an insignificant participant in the
business of seeking mergers with and acquisitions of business entities. A large
number of established and well-financed entities, including venture capital
firms, are active in mergers and acquisitions of companies which may be merger
or acquisition target candidates for the Company. Nearly all such entities have
significantly greater financial resources, technical expertise and managerial
capabilities than the Company and, consequently, the Company will be at a
competitive disadvantage in identifying possible business opportunities and
successfully completing a business combination. Moreover, the Company will also
compete with numerous other small public companies in seeking merger or
acquisition candidates.
No Agreement for Acquisition of a Target Company Combination.
The Company has no current arrangement, agreement or understanding with
respect to engaging in a merger with or acquisition of a specific business
entity. There can be no assurance that the Company will be successful in
identifying and evaluating suitable business opportunities or in concluding a
business combination. Management has not identified any particular industry or
specific business within an industry for evaluation by the Company. There is no
assurance that the Company will be able to negotiate a business combination on
terms favorable to the Company. The Company has not established a specific
length of operating history or a specified level of earnings, assets, net worth
or other criteria which it will require a target company to have achieved, or
without which the Company would not consider a business combination with such
business entity. Accordingly, the
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Company may enter into a business combination with a business entity having no
significant operating history, losses, limited or no potential for immediate
earnings, limited assets, negative net worth or other negative characteristics.
Reporting Requirements May Delay or Preclude Acquisition.
Section 13 of the Securities Exchange Act of 1934 (the "Exchange Act")
requires companies subject thereto to provide certain information about
significant acquisitions including certified financial statements for the
company acquired covering one or two years, depending on the relative size of
the acquisition. The time and additional costs that may be incurred by some
target companies to prepare such financial statements may significantly delay or
essentially preclude consummation of an otherwise desirable acquisition by the
Company. Acquisition prospects that do not have or are unable to obtain the
required audited statements may not be appropriate for acquisition so long as
the reporting requirements of the Exchange Act are applicable.
Lack of Market Research or Marketing Organization.
The Company has neither conducted, nor have others made available to it,
market research indicating that demand exists for the transactions contemplated
by the Company. Even in the event demand exists for a merger or acquisition of
the type contemplated by the Company, there is no assurance the Company will be
successful in completing any such business combination.
Lack of Diversification.
The Company's proposed operations, even if successful, will in all
likelihood result in the Company engaging in a business combination with only
one business entity. Consequently, the Company's activities will be limited to
those engaged in by the business entity which the Company merges with or
acquires. The Company's inability to diversify its activities into a number of
areas may subject the Company to economic fluctuations within a particular
business or industry and therefore increase the risks associated with the
Company's operations.
Regulation under Investment Company Act.
Although the Company will be subject to regulation under the Exchange Act,
management believes the Company will not be subject to regulation under the
Investment Company Act of 1940, insofar as the Company will not be engaged in
the business of investing or trading in securities. In the event the Company
engages in business combinations which result in the Company holding passive
investment interests in a number of entities, the Company could be subject to
regulation under the Investment Company Act of 1940. In such event, the Company
would be required to register as an investment company and could be expected to
incur significant registration and compliance costs. The Company has obtained no
formal determination from the Securities and Exchange Commission as to the
status of the Company under the Investment Company Act of 1940 and,
consequently, any violation of such Act could subject the Company to material
adverse consequences.
Probable Change In Control and Management.
A business combination involving the issuance of the Company's common stock
will, in all likelihood, result in shareholders of a target company obtaining a
controlling interest in the Company.
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Any such business combination may require shareholders of the Company to sell or
transfer all or a portion of the Company's common stock held by them. The
resulting change in control of the Company will likely result in removal of the
present officer and director of the Company and a corresponding reduction in or
elimination of his participation in the future affairs of the Company.
Taxation.
Federal and state tax consequences will, in all likelihood, be major
considerations in any business combination the Company may undertake. Currently,
such transactions may be structured so as to result in tax-free treatment to
both companies, pursuant to various federal and state tax provisions. The
Company intends to structure any business combination so as to minimize the
federal and state tax consequences to both the Company and the target company;
however, there can be no assurance that such business combination will meet the
statutory requirements of a tax-free reorganization or that the parties will
obtain the intended tax-free treatment upon a transfer of stock or assets. A
non-qualifying reorganization could result in the imposition of both federal and
state taxes which may have an adverse effect on both parties to the transaction.
Year 2000 Risks.
Many existing computer programs use only two digits to identify a year in
such program's date field. These programs were designed and developed without
consideration of the impact of the change in the century for which four digits
will be required to accurately report the date. If not corrected, many computer
applications could fail or create erroneous results by or following the year
2000 ("Year 2000 Problem"). Many of the computer programs containing such date
language problems have not been corrected by the companies or governments
operating such programs. It is impossible to predict what computer programs will
be effected, the impact any such computer disruption will have on other
industries or commerce or the severity or duration of a computer disruption.
The Company does not have operations and does not maintain computer
systems. Before the Company enters into any business combination, it may inquire
as to the status of any target company's Year 2000 Problem, the steps such
target company has taken or intends to take to correct any such problem and the
probable impact on such target company of any computer disruption. However,
there can be no assurance that the Company will not acquire a target company
that has an uncorrected Year 2000 Problem or that any planned Year 2000 Problem
corrections will be sufficient. The extent of the Year 2000 Problem of a target
company may be impossible to ascertain and any impact on the Company will likely
be impossible to predict.
ITEM 2. MANAGEMENT'S DISCUSSION ANALYSIS OR PLAN OF OPERATION
General Business Plan
The Company's purpose is to seek, investigate and, if such investigation
warrants, acquire a target company which desires to seek the perceived
advantages of a corporation which has a class of securities registered under the
Exchange Act.
Management anticipates seeking out a target company through solicitation.
Such solicitation may include newspaper or magazine advertisements, mailings and
other distributions to law firms,
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accounting firms, investment bankers, financial advisors and similar persons,
the use of one or more World Wide Web sites and similar methods. No estimate can
be made as to the number of persons who will be contacted or solicited.
Management may engage in such solicitation directly or may employ one or more
other entities to conduct or assist in such solicitation. Management and its
affiliates pay referral fees to consultants and others who refer target
businesses for mergers into public companies in which management and its
affiliates have an interest. Payments are made if a business combination occurs,
and may consist of cash or a portion of the stock in the Company retained by
management and its affiliates, or both.
The Company will not restrict its search to any specific business,
industry, or geographical location and the Company may participate in a business
venture of virtually any kind or nature. Management anticipates that it will be
able to participate in only one potential business venture because the Company
has nominal assets and limited financial resources. Please refer to "PART
F/S-"FINANCIAL STATEMENTS." This lack of diversification should be considered a
substantial risk to the shareholders of the Company because it will not permit
the Company to offset potential losses from one venture against gains from
another.
The Company may seek a business opportunity with entities which have
recently commenced operations, or which wish to utilize the public marketplace
in order to raise additional capital in order to expand into new products or
markets, to develop a new product or service, or for other corporate purposes.
The Company may acquire assets and establish wholly-owned subsidiaries in
various businesses or acquire existing businesses as subsidiaries.
The Company anticipates that the selection of a business opportunity in
which to participate will be complex and extremely risky. Management believes
(but has not conducted any research to confirm) that there are business entities
seeking the perceived benefits of a publicly registered corporation. Such
perceived benefits may include facilitating or improving the terms on which
additional equity financing may be sought, providing liquidity for incentive
stock options or similar benefits to key employees, increasing the opportunity
to use securities for acquisitions, providing liquidity for shareholders and
other factors. Business opportunities may be available 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
difficult and complex.
The Company has, and will continue to have, no capital with which to
provide the owners of business entities with any cash or other assets. However,
management believes the Company will be able to offer owners of acquisition
candidates the opportunity to acquire a controlling ownership interest in a
public company without incurring the cost and time required to conduct an
initial public offering. Management has not conducted market research and is not
aware of statistical data to support the perceived benefits of a merger or
acquisition transaction for the owners of a business opportunity.
The analysis of new business opportunities will be undertaken by, or under
the supervision of, the officer and director of the Company, who is not a
professional business analyst. In analyzing prospective business opportunities,
management may consider such matters as the available technical, financial and
managerial resources; working capital and other financial requirements; history
of operations, if any; prospects for the future; nature of present and expected
competition; the quality and experience of management services which may be
available and the depth of that management; the potential for further research,
development, or exploration; specific risk factors not now
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foreseeable but which then may be anticipated to impact the proposed activities
of the Company; the potential for growth or expansion; the potential for profit;
the perceived public recognition or acceptance of products, services, or trades;
name identification; and other relevant factors.
This discussion of the proposed criteria is not meant to be restrictive of
the Company's virtually unlimited discretion to search for and enter into
potential business opportunities.
The Exchange Act requires that any merger or acquisition candidate comply
with certain reporting requirements, which include providing audited financial
statements to be included in the reporting filings made under the Exchange Act.
The Company will not acquire or merge with any company for which audited
financial statements cannot be obtained at or within a reasonable period of time
after closing of the proposed transaction.
The Company may enter into a business combination with a business entity
that desires to establish a public trading market for its shares. A target
company may attempt to avoid what it deems to be adverse consequences of
undertaking its own public offering by seeking a business combination with the
Company. Such consequences may include, but are not limited to, time delays of
the registration process, significant expenses to be incurred in such an
offering, loss of voting control to public shareholders or the inability to
obtain an underwriter or to obtain an underwriter on satisfactory terms.
The Company will not restrict its search for any specific kind of business
entities, but may acquire a venture which is in its preliminary or development
stage, which is already in operation, or in essentially any stage of its
business life. It is impossible to predict at this time the status of any
business in which the Company may become engaged, in that such business may need
to seek additional capital, may desire to have its shares publicly traded, or
may seek other perceived advantages which the Company may offer.
Management of the Company, which in all likelihood will not be experienced
in matters relating to the business of a target company, will rely upon its own
efforts in accomplishing the business purposes of the Company. Outside
consultants or advisors may be utilized by the Company to assist in the search
for qualified target companies. If the Company does retain such an outside
consultant or advisor, any cash fee earned by such person will need to be
assumed by the target company, as the Company has limited cash assets with which
to pay such obligation. No such consultant or advisor has been retained.
Following a business combination the Company may benefit from the services
of others in regard to accounting, legal services, underwriting and corporate
public relations. If requested by a target company, management may recommend one
or more underwriters, financial advisors, accountants, public relations firms or
other consultants to provide such services.
A potential target company may have an agreement with a consultant or
advisor providing that services of the consultant or advisor be continued after
any business combination. Additionally, a target company may be presented to the
Company only on the condition that the services of a consultant or advisor be
continued after a merger or acquisition. Such preexisting agreements of target
companies for the continuation of the services of attorneys, accountants,
advisors or consultants could be a factor in the selection of a target company.
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Structure of Acquisition
In implementing a structure for a particular business acquisition, the
Company may become a party to a merger, consolidation, reorganization, joint
venture, or licensing agreement with a target company. It may also acquire stock
or assets of a target company. Upon consummation of a an acquisition, it is
likely that the present management and shareholders of the Company will no
longer be in control of the Company. In addition, it is likely that the
Company's officers and directors will, as part of the terms of the acquisition
transaction, resign and be replaced by one or more new officers and directors.
It is anticipated that any securities issued in any such reorganization
would be issued in reliance upon exemption from registration under applicable
federal and state securities laws. In some circumstances, however, as a
negotiated element of its transaction, the Company may agree to register all or
a part of such securities immediately after the transaction is consummated or at
specified times thereafter. If such registration occurs, of which there can be
no assurance, it will be undertaken by the surviving entity after the Company
has entered into an agreement for a business combination or has consummated a
business combination and the Company is no longer considered a blank check
company. The issuance of additional securities and their potential sale into any
trading market which may develop in the Company's securities may depress the
market value of the Company's securities in the future if such a market
develops, of which there is no assurance.
While the terms of a business transaction to which the Company may be a
party cannot be predicted, it is expected that the parties to the business
transaction will desire to avoid the creation of a taxable event and thereby
structure the acquisition in a "tax-free" reorganization under Sections 351 or
368 of the Internal Revenue Code of 1986, as amended (the "Code").
With respect to any merger or acquisition negotiations with a target
company, management expects to focus on the percentage of the Company which
target company shareholders would acquire in exchange for their shareholdings in
the target company. Depending upon, among other things, the target company's
assets and liabilities, the Company's shareholders will in all likelihood hold a
substantially lesser percentage ownership interest in the Company following any
merger with or acquisition of a target company. The percentage of ownership may
be subject to significant reduction in the event the Company acquires a target
company with substantial assets. Any merger or acquisition effected by the
Company can be expected to have a significant dilutive effect on the percentage
of shares held by the Company's shareholders at such time.
The Company will participate in a business opportunity only after the
negotiation and execution of appropriate agreements. Although the terms of such
agreements cannot be predicted, generally such agreements will require certain
representations and warranties of the parties thereto, will specify certain
events of default, will detail the terms of closing and the conditions which
must be satisfied by the parties prior to and after such closing and will
include miscellaneous other terms..
The Company will not acquire or merge with any entity which cannot provide
audited financial statements at or within a reasonable period of time after
closing of the proposed transaction. The Company is subject to all of the
reporting requirements included in the Exchange Act. Included in these
requirements is the duty of the Company to file audited financial statements as
part of or within 60 days following its Form 8-K to be filed with the Securities
and Exchange Commission upon consummation of a merger or acquisition, as well as
the Company's audited financial statements
13
<PAGE>
included in its annual report on Form 10-K (or 10-KSB, as applicable). If such
audited financial statements are not available at closing, or within time
parameters necessary to insure the Company's compliance with the requirements of
the Exchange Act, or if the audited financial statements provided do not conform
to the representations made by the target company, the closing documents may
provide that the proposed transaction will be voidable at the discretion of the
present management of the Company.
No Dividends
The Company has not paid any dividends on its common stock; nor does the
Company intend to declare and pay dividends prior to the consummation of an
acquisition. The payment of dividends after any acquisition will be within the
discretion of the Company's then Board of Directors.
Employees
The Company presently has no employees. The Company has one officer and
director. Mr. Sierchio is engaged in other business activities, and the amount
of time he will devote to the Company's business will only be between five (5)
and ten (10) hours per month. Upon completion of the public offering, it is
anticipated that management will devote such time to our affairs each month as
may be necessary to carry on our business plans.
Competition
The Company will remain an insignificant participant among the firms which
engage in the acquisition of business opportunities. There are many established
venture capital and financial concerns which have significantly greater
financial and personnel resources and technical expertise than the Company. In
view of the Company's combined extremely limited financial resources and limited
management availability, the Company will continue to be at a significant
competitive disadvantage compared to the Company's competitors.
Liquidity And Capital Resources
The Company has limited working capital and a deficit. The ability of the
Company to continue as a going concern is dependent upon its ability to obtain
adequate financing to reach profitably levels of operation. It is not possible
to predict whether financing efforts will be successful or it the Company will
attain profitable levels of operations. Mr. Sierchio has agreed to loan the
Company, on an as needed basis, up to $10,000 through December 31, 2000. The
Company anticipates that such amounts will be (a) sufficient for payment of the
Company's operating expenses through December 31, 2000 and (b) repaid upon
completion of the acquisition of a target business.
On July 14, 1998 the Company issued a 5% Convertible Debenture in the
amount of $20,000US due July 14, 2003 in partial settlement of outstanding legal
fees due to Maitland & Company a Canadian law firm which performed legal
services for the Company in connection with its unsuccessful efforts to acquire
mineral resource properties. The Company also issued 60,000 shares of its common
stock to Maitland & Company in settlement of its claims. The debenture bears
interest at 5% per annum payable on the maturity date.
14
<PAGE>
The principal and accrued and unpaid interest therein (collectively, the
"Debenture Indebtedness) is convertible in whole or in part converted into
shares of the Company's common stock on the basis of $.01 per share. In order to
effectuate the conversion in privilege, the holder must first give the Company
90 days prior written notice if the Holder of the Debentures desires to convert
all or a portion of the Debenture Indebtedness conversion privilege. Upon
expiration of said 90 day period and within the 30 day period thereafter the
holder must submit a written notice of conversion specifying the amount of
Debenture Indebtedness to be converted. If less then the entire amount of the
then outstanding indebtedness represented by the debenture is converted, the
aforesaid notice procedures must again be followed with respect to any future
conversions. The debenture may be redeemed at any time by the Company after July
31, 2000 on written notice to the holder; provided however, if the Company has
received a Notice of Conversion (as opposed to the Notice of Implementation) it
will be required to honor such notice. Notwithstanding the foregoing, the
Debentrue may not be converted prior to the Company completing an acquisition of
a target company having assets or valuation of at least $100,000.
ITEM 3. DESCRIPTION OF PROPERTY
The Company has no properties and at this time has no agreements to acquire
any properties. The Company is presently using as a mailing address, at no cost,
the office of it counsel Sierchio & Albert, P.C. 41 East 57th Street, New York,
New York 10022, at no cost as our office. Such arrangement is expected to
continue until completion of the acquisition of a target company. See "Part
I-Item 7. Certain Relationships and Related Transactions."
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth each person known by the Company to be the
beneficial owner of five percent or more of the Company's Common Stock, all
directors individually and all directors and officers of the Company as a group.
Except as noted, each person has sole voting and investment power with respect
to the shares shown.
================================================================================
SHARES OF COMMON APPROXIMATE
NAME AND ADDRESS OF STOCK BENEFICIALLY PERCENTAGE
BENEFICIAL OWNED OWNED
OWNER
- - - - - - - - --------------------------------------------------------------------------------
Joseph Sierchio 250,000 45%
41 East 57th Street
Penthouse A,
New York, NY 10022
- - - - - - - - --------------------------------------------------------------------------------
Stephen A. Albert 250,000 45%
41 East 57th Street
Penthouse A,
New York, NY 10022
- - - - - - - - --------------------------------------------------------------------------------
Maitland & Company(1) 52,500 9%
700-625 Howe St.
Vancouver, B.C. V2C 2T6
- - - - - - - - --------------------------------------------------------------------------------
Officers and Directors as a Group (1 persons) 250,000 45%
================================================================================
15
<PAGE>
(1) Maitland & Company is a law firm based in Vancouver Canada. The Company
owes Maitland & Company $20,000 for legal fees and disbursements incurred
in the Company's unsuccessful efforts in 1997 to acquire certain mineral
resource properties.
ITEM 5. DIRECTORS AND EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS.
The Company's Directors and Officer are as follows:
Set forth below is the name of each of the directors and officers of the
Company, all positions and offices with the Company held, the period during
which such person has never served as such, and the business experience during
at least the last five years:
Name Age Positions and Offices Held
Joseph Sierchio 49 President and Director (Since 1997)
There are no agreements or understandings for the officer or director to
resign at the request of another person and the above-named officer and director
is not acting on behalf of nor will act at the direction of any other person.
Mr. Sierchio is a principal of the law firm of Sierchio & Albert, P.C. Mr.
Sierchio has practiced law in New York since 1975. Mr. Sierchio received a
Bachelor of Arts degree from Rutgers College in 1971 and a Juris Doctor degree
from Cornell Law School in 1974.
Conflicts of Interest.
The Company's officer and director and expects to organize other companies
of a similar nature and with a similar purpose as the Company. Consequently,
there are potential inherent conflicts of interest in acting as an officer and
director of the Company. Insofar as the officer and director is engaged in other
business activities, he will devote only a minor amount of time to the Company's
affairs. The Company does not have a right of first refusal pertaining to
opportunities that come to management's attention insofar as such opportunities
may relate to the Company's proposed business operations.
A conflict may arise in the event that another blank check and/or blind
pool company (a "blind pool company") with which management is affiliated is
formed and actively seeks a target company. It is anticipated that target
companies will be located for the Company and other blind pool companies in
chronological order of the date of formation of such blind pool companies or by
lot. However, any blank check companies that may be formed may differ from the
Company in certain items such as place of incorporation, number of shares and
shareholders, working capital, types of authorized securities, or other items.
It may be that a target company may be more suitable for or may prefer a certain
blind pool company formed after the Company. In such case, a business
combination might be negotiated on behalf of the more suitable or preferred
blind pool company regardless of date of formation or choice by lot. Mr.
Sierchio will be responsible for seeking, evaluating, negotiating and
consummating a business combination with a target company which may result in
terms providing benefits to Mr. Sierchio.
16
<PAGE>
The Company may agree to pay finder's fees, as appropriate and allowed, to
unaffiliated persons who may bring a target company to the Company where that
reference results in a business combination. No finder's fee of any kind will be
paid by the Company to management or promoters of the Company or to their
affiliates. No loans of any type have, or will be, made by the Company to
management or promoters of the Company or to any of their associates or
affiliates.
Management has not adopted policies involving possible conflicts of
interest.
There are no binding guidelines or procedures for resolving potential
conflicts of interest. Failure by Management to resolve conflicts of interest in
favor of the Company could result in liability of Management to the Company.
However, any attempt by shareholders to enforce a liability of Management to the
Company would most likely be prohibitively expensive and time consuming.
Investment Company Act of 1940.
Although the Company will be subject to regulation under the Securities Act
of 1933 (the "Securities Act") and the Exchange Act, management believes the
Company will not be subject to regulation under the Investment Company Act of
1940 insofar as the Company will not be engaged in the business of investing or
trading in securities. In the event the Company engages in business combinations
which result in the Company holding passive investment interests in a number of
entities the Company could be subject to regulation under the Investment Company
Act of 1940. In such event, the Company would be required to register as an
investment company and could be expected to incur significant registration and
compliance costs. The Company has not obtained a formal determination from the
Commission as to the status of the Company under the Investment Company Act of
1940. Any violation of such Investment Company Act would subject the Company to
material adverse consequences.
ITEM 6. EXECUTIVE COMPENSATION.
The Company's sole officer and director does not receive any compensation
for his services rendered to the Company, has not received such compensation in
the past, and is not accruing any compensation pursuant to any agreement with
the Company.
No retirement, pension, profit sharing, stock option or insurance programs
or other similar programs have been adopted by the Company for the benefit of
its employees.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The Company has no properties and at this time has no agreements to acquire
any properties. The Company is presently using as a mailing address, at no cost,
the office of it counsel Sierchio & Albert, P.C. 41 East 57th Street, New York,
New York 10022, at no cost as our office. Such arrangement is expected to
continue until completion of the acquisition of a target company.
ITEM 8. DESCRIPTION OF SECURITIES.
The Company is authorized to issue fifty-five million (55,000,000) shares
of common stock, $.001 par value per share, of which 560,000 shares were issued
and outstanding as of the date of this Registration Statement. Each outstanding
share of common stock entitles the holder to one vote,
17
<PAGE>
either in person or by proxy, on all matters that may be voted upon by the
owners thereof at meetings of the stockholders.
The holders of common stock (i) have equal rights to dividends from funds
legally available therefor, when, as and if declared by the Board of Directors
of the Company; (ii) are entitled to share ratably in all of the assets of the
Company available for distribution to holders of common stock upon liquidation,
dissolution or winding up of the affairs of the Company; (iii) do not have
preemptive, subscription or conversion rights, and (iv) are entitled to one
non-cumulative vote per share on all matters on which stockholders may vote at
all meetings of stockholders.
Reports to Stockholders.
The Company intends to furnish its stockholders with annual reports
containing audited financial statements as soon as practicable after the end of
each fiscal year. Our fiscal year ends on December 31. In addition, we intend to
issue unaudited interim reports and financial statements on a quarterly basis.
Dividends.
The Company has not declared any dividends since inception, and has no
present intention of paying any cash dividends on its common stock in the
foreseeable future. The payment by the Company of dividends, if any, in the
future, rests within the discretion of our Board of Directors and will depend,
among other things, upon our earnings, capital requirements and financial
condition, as well as other relevant factors.
18
<PAGE>
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS.
There is no trading market for the Company's Common Stock at present and
there has been no trading market to date. There is no assurance that a trading
market will ever develop or, if such a market does develop, that it will
continue. If a trading market develops, if at all, it will develop only after
the acquisition of a target company.
The National Securities Market Improvement Act of 1996 limited the
authority of states to impose restrictions upon sales of securities made
pursuant to Sections 4(1) and 4(3) of the Securities Act, of companies which
file reports under Sections 13 or 15(d) of the Exchange Act. The Company files
such reports. As a result, sales of the Company's common stock in the secondary
trading market by the holders thereof may be made pursuant to Section 4(1)of the
Securities Act (sales other than by an issuer, underwriter or broker).
The Commission has adopted Rule 15g-9 which establishes the definition of a
"penny stock," for purposes relevant to the Company, as any equity security that
has a market price of less than $5.00 per share or with an exercise price of
less than $5.00 per share, subject to certain exceptions. For any transaction
involving a penny stock, unless exempt, the rules require: (i) that a broker or
dealer approve a person's account for transactions in penny stocks and (ii) the
broker or dealer receive from the investor a written agreement to the
transaction, setting forth the identity and quantity of the penny stock to be
purchased. In order to approve a person's account for transactions in penny
stocks, the broker or dealer must (i) obtain financial information and
investment experience and objectives of the person; and (ii) make a reasonable
determination that the transactions in penny stocks are suitable for that person
and that person has sufficient knowledge and experience in financial matters to
be capable of evaluating the risks of transactions in penny stocks. The broker
or dealer must also deliver, prior to any transaction in a penny stock, a
disclosure schedule prepared by the Commission relating to the penny stock
market, which, in highlight form, (i) sets forth the basis on which the broker
or dealer made the suitability determination and (ii) that the broker or dealer
received a signed, written agreement from the investor prior to the transaction.
Disclosure also has to be made about the risks of investing in penny stocks in
both public offerings and in secondary trading, and about commissions payable to
both the broker-dealer and the registered representative, current quotations for
the securities and the rights and remedies available to an investor in cases of
fraud in penny stock transactions. Finally, monthly statements have to be sent
disclosing recent price information for the penny stock held in the account and
information on the limited market in penny stocks.
If, after a merger or acquisition, the Company does not meet the
qualifications for listing on the Nasdaq Stock Market Inc.'s SmallCap Market
("NASDAQ_SCM"), the Company's securities may be traded on the OTCBB. The OTCBB
market differs from national and regional stock exchanges in that it (1) is not
sited in a single location but operates through communication of bids, offers
and confirmations between broker-dealers and (2) securities admitted to
quotation are offered by one or more broker-dealers rather than the "specialist"
common to stock exchanges. The Company may seek to have its securities quoted on
the OTCBB or may offer its securities in what are commonly referred to as the
"pink sheets" of the National Quotation Bureau, Inc.
19
<PAGE>
In order to qualify for listing on the NASDAQ-SCM, a company must have at
least (i) net tangible assets of $4,000,000 or market capitalization of
$50,000,000 or net income for two of the last three years of $750,000; (ii)
public float of 1,000,000 shares with a market value of $5,000,000; (iii) a bid
price of $4.00; (iv) three market makers; (v) 300 shareholders and (vi) an
operating history of one year or, if less than one year, $50,000,000 in market
capitalization. For continued listing on the Nasdaq SmallCap Market, a company
must have at least (i) net tangible assets of $2,000,000 or market
capitalization of $35,000,000 or net income for two of the last three years of
$500,000; (ii) a public float of 500,000 shares with a market value of
$1,000,000; (iii) a bid price of $1.00; (iv) two market makers; and (v) 300
shareholders.
If the Company is unable initially to satisfy the requirements for
quotation on the NASDAQ-SCM or becomes unable to satisfy the requirements for
continued quotation thereon, and trading, if any, is conducted in the OTCBB, a
shareholder may find it more difficult to dispose of, or to obtain accurate
quotations as to the market value of, the Company's securities.
Holders. There are only 18 holders of the Company's Common Stock. The
issued and outstanding shares of the Company's Common Stock were issued in
accordance with the exemptions from registration afforded by Sections 3(b) and
4(2) of the Securities Act.
Dividends. The Company has not paid any dividends to date, and has no plans
to do so in the immediate future.
ITEM 2. LEGAL PROCEEDINGS.
There is no litigation pending or threatened by or against the Company.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS.
The Company has not changed accountants since its formation and there are
no disagreements with the findings of its accountants.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES.
The Company has sold securities which were not registered as follows:
(1) 250,000 shares to each of Messrs Sierchio & Albert for cash consideration
of $500.00.
(2) 60,000 shares to Maitland & Company in partial settlement of outstanding
invoices for legal services rendered.
The Company believes that all of these securities were issued in
transactions except from the registration requirements of the Securities Act by
virtue of Section 4(2) thereof.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the General Corporation Law of the State of Delaware
provides that a Delaware corporation has the power, under specified
circumstances, to indemnify its directors, officers, employees and agents,
against expenses incurred in any action, suitor proceeding. The Certificate of
20
<PAGE>
Incorporation and the By-laws of the Company provide for indemnification of
directors and officers to the fullest extent permitted by the General
Corporation Law of the State of Delaware.
The General Corporation Law of the State of Delaware provides that a
certificate of incorporation may contain a provision eliminating the personal
liability of a director to the corporation or its stockholders for monetary
damages for breach of fiduciary duty as a director provided that such provision
shall not eliminate or limit the liability of a director (i) for any breach of
the director's duty of loyalty to the corporation or its stockholders, (ii) for
acts or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 (relating to liability for
unauthorized acquisitions or redemptions of, or dividends on, capital stock) of
the General Corporation Law of the State of Delaware, or (iv) for any
transaction from which the director derived an improper personal benefit. The
Company's Certificate of Incorporation contains such a provision.
INSOFAR AS INDEMNIFICATION FOR LIABILITIES ARISING UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, MAY BE PERMITTED TO DIRECTORS, OFFICERS OR PERSONS
CONTROLLING THE COMPANY PURSUANT TO THE FOREGOING PROVISIONS, IT IS THE OPINION
OF THE SECURITIES AND EXCHANGE COMMISSION THAT SUCH INDEMNIFICATION IS AGAINST
PUBLIC POLICY AS EXPRESSED IN THE ACT AND IS THEREFORE UNENFORCEABLE.
PART F/S
FINANCIAL STATEMENTS
Index
Page
----
Auditors Report Dated May 17, 1999............................................22
Audited Balance Sheets as at April 30, 1999 and 1998..........................23
Audited Statement of Loss for the year ended
April 30, 1999 and 1998.....................................................24
Audited Statement of Cash Flow for the Year Ended
April 30, 1999 and 1998.....................................................25
Notes to Financial Statements.................................................26
Audited Statement of Shareholders Equity......................................28
Unadited Balance Sheets as at April 30, 1999 and 1998.........................29
Unaudited Statement of loss for the four month period ended
August 30, 1999.............................................................30
Unaudited Statement of Cash Flow for the four month period ended
August 30, 1999.............................................................31
Notes to Unauidted Financial Statements.......................................32
Unaudited Statement of Shareholder's Equity...................................34
21
<PAGE>
Russell & Co.
AUDITORS' REPORT TO THE DIRECTORS OF:
SAN FABIAN RESOURCES INC.
(A Delaware Corporation)
(A development stage company)
We have audited the balance sheet of San Fabian Resources Inc. as at April 30,
1999 and April 30, 1998 and the statements of loss and shareholders' equity
(deficit) and cash flows for the year ended April 30, 1999 and from the date of
incorporation, May 19, 1997, to April 30, 1998. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform an audit to obtain reasonable
assurance whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation.
s
In our opinion, these financial statements present fairly, in all material
respects, the financial position of the Company as at April 30, 1999 and April
30, 1998 and the results of its operations and its cash flows for the year ended
April 30, 1999 and from the date of incorporation, May 19, 1997, to April 30,
1998 in accordance with accounting principles generally accepted in the United
States.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company's negative working capital and deficit raises
substantial doubt about its ability to continue as a going concern. The
financial statements do not contain any adjustments that might result from the
outcome of this uncertainty.
/s/Russel & Co.
Chartered Accountant
West Vancouver, B.C.
Canada.
June 30, 1999
415 Gordon Ave., West Vancouver, B.C., V7T 1P4
Telephone: (604) 913-0405 - Fax: (604) 913-0406
22
<PAGE>
SAN FABIAN RESOURCES INC.
(A Delaware Corporation)
(A development stage company)
Balance Sheet
as at April 30, 1999 and April 30, 1998
(U.S. DOLLARS)
1999 1998
Assets
Current assets
- - - - - - - - --------------------------------------------------------------------------------
Cash and bank $ 47 $ 47
Total Assets $ 47 $ 47
===============================================================================
Liabilities
Current liabilities
Accounts payable $ 535 $ 114
Accrued interest 797 --
Convertible Debenture 20,000 --
- - - - - - - - -------------------------------------------------------------------------------
Total Liabilities 21,332 114
Shareholders' equity (deficit)
Authorized:
50,000,000 common shares with a par value of $.001 each
Issued and outstanding
560,000 common shares with a par value of $0.001
at April 30, 1999 and 500,000 at April 30, 1998 1,100 500
- - - - - - - - -------------------------------------------------------------------------------
1,100 500
Accumulated Deficit (22,385) (567)
- - - - - - - - -------------------------------------------------------------------------------
(21,285) (67)
- - - - - - - - -------------------------------------------------------------------------------
$ 47 $ 47
===============================================================================
CONTINUING OPERATIONS (NOTE 1)
23
<PAGE>
SAN FABIAN RESOURCES INC.
(A Delaware Corporation)
(A development stage company)
Statement of Loss
Year ended April 30, 1999
and from the date of incorporation, May 19, 1997 to April 30, 1998
(U.S. DOLLARS)
1999 1998
Expenses
Legal $ 20,891 $ --
Interest and bank charges 797 --
- - - - - - - - -------------------------------------------------------------------------------
Filing fees 130 567
Net earnings (loss) for the period $(21,818) (567)
===============================================================================
Basic and diluted loss per share $(0.0398) $(0.0018)
- - - - - - - - -------------------------------------------------------------------------------
Weighted average shares Outstanding 547,671 311,428
- - - - - - - - -------------------------------------------------------------------------------
24
<PAGE>
SAN FABIAN RESOURCES INC.
(A Delaware Corporation)
(A development stage company)
Statement of Cash Flow
Year ended April 30, 1999
and from the date of incorporation, May 19, 1997 to April 30, 1998
(U.S. DOLLARS)
1999 1998
Cash provided by (used in)
Operations
Net Loss for period $(21,818) $ (567)
- - - - - - - - -------------------------------------------------------------------------------
(21,818) (567)
Net change in non-cash working capital balances
Accounts payable 421 114
Accrued interest 797
--
Convertible Debenture 20,000 --
- - - - - - - - --------------------------------------------------------------------------------
Net cash used in operating activities (600) (453)
Financing
Issuance of capital stock 600 500
- - - - - - - - -------------------------------------------------------------------------------
Net cash generated by financing activities 600 500
- - - - - - - - -------------------------------------------------------------------------------
Cash for period -- 47
Cash, beginning of period 47 --
- - - - - - - - --------------------------------------------------------------------------------
Cash, end of period $ 47 $ 47
===============================================================================
25
<PAGE>
SAN FABIAN RESOURCES INC.
(A Delaware Corporation)
(A development stage company)
Notes to Financial Statements
Year ended April 30, 1999 and April 30, 1998
(U.S. DOLLARS)
1. Continuing operations
San Fabian Resources Inc. was incorporated on May 19, 1997 in Delaware,
U.S.A.
The Company has negative working capital and a deficit. The ability for the
Company to continue as a going concern is dependent upon its ability to
obtain adequate financing to reach profitable levels of operations. It is
not possible to predict whether financing efforts will be successful or if
the Company will attain profitable levels of operations.
2. Summary of significant accounting policies
These financial statements have been prepared in accordance with generally
accepted accounting principles in the United States and reflect the
following significant accounting principles:
a. Estimates and assumptions
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements
and the reported amount of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
b. Earnings (loss) per common share
In February, 1997, the Financial Accounting Standards Board issued
Statement No. 128, Earnings Per Share (SFAS 128), which established new
standards for computing and presenting earnings per share effective for
fiscal years ending after December 15, 1997. With SFAS 128, primary
earnings per share is replaced by basic earnings per share, which is
computed by dividing income available to common shareholders by the
weighted average number of shares outstanding for the period. In addition,
SFAS 128 requires the presentation of diluted earnings per share, which
includes the potential dilution that could occur if dilutive securities
were exercised or converted into common stock. The computation of diluted
EPS does not assume the conversion or exercise of securities if their
effect is anti-dilutive. Common equivalent shares consist of the common
shares issuable upon the conversion of the convertible loan notes and
special warrants (using the if-converted method) and incremental shares
issuable upon the exercise of stock options and share purchase warrants (
using the treasury stock method).
c. Cash and cash equivalents
Cash and cash equivalents consist of cash on hand, deposits in banks and
highly liquid investments with an original maturity of three months or
less.
26
<PAGE>
3. Convertible debenture
On July 14, 1998 the Company issued a 5% Convertible Debenture in the
amount of $20,000U.S. due July 14, 2003 in partial settlement of
outstanding legal fees. The debenture principle bears interest at 5% per
annum and the accrued interest and the principle shall be convertible, in
part or in whole on the basis of 1 share for every $0.01U.S. of debt, at
the holder's option by giving the Company (a) 90 days prior written notice
of its intention to implement the conversion privilege and (b) a Notice of
Conversion within 30 days following the expiration of the aforesaid 90 day
period.
4. Related party transactions
At April 30, 1999, members of Maitland & Company, Canadian legal counsel
owned 52,500 shares of the Company's common stock.
5. Income taxes
The Company has net operating losses which may give rise to future tax
benefits of approximately $21,818 and $567 of April 30, 1999 and April 30,
1998 respectively. To the extent not used, net operating loss carryforwards
expire in varying amounts beginning in the year 2013. Income taxes are
accounted for in accordance with Statement of Financial Accounting
Standards No.109 (SFAS 109). Under this method, deferred income taxes are
determined based on differences between the tax basis of assets and
liabilities and their financial reporting amounts at each year end, and are
measured based on enacted tax rates and laws that will be in effect when
the differences are expected to reverse. Valuation allowances are
established, when necessary, to reduce deferred tax assets to the amount
expected to be realized. No provision for income taxes is included in the
statement due to its immaterial amount.
27
<PAGE>
SAN FABIAN RESOURCES INC.
(A Delaware Corporation)
(A development stage company)
Statement of Shareholders' Equity (Deficit)
Year ended April 30, 1999
and from the date of incorporation, May 19, 1997 to April 30, 1998
(U.S. DOLLARS)
Common shares Total
Accumulated Shareholders'
Shares Amount (Deficit) Equity
- - - - - - - - -------------------------------------------------------------------------------
(Deficit)
Issued on incorporation 500,000 $ 500 -- $ 500
Net loss -- -- (567) (567)
- - - - - - - - -------------------------------------------------------------------------------
Balance at April 30, 1998 500,000 500 (567) (67)
Settlement of debt 60,000 600 -- 600
Net loss -- -- (21,818) (21,818)
- - - - - - - - -------------------------------------------------------------------------------
Balance at April 30, 1999 560,000 $ 1,100 $(22,385) $(21,285)
===============================================================================
28
<PAGE>
SAN FABIAN RESOURCES INC.
(A Delaware Corporation)
(A development stage company)
Unaudited
Balance Sheet
as at August 30, 1999 and August 30, 1998
(U.S. DOLLARS)
1999 1998
Assets
Current assets
Cash and bank $ 47 $ 47
- - - - - - - - -------------------------------------------------------------------------------
Total Assets $ 47 $ 47
================================================================================
Liabilities
Current liabilities
Accounts payable $ 1,535 $ 114
Accrued interest 838 --
Convertible Debenture 20,000 --
- - - - - - - - -------------------------------------------------------------------------------
Total Liabilities 22,373 114
- - - - - - - - -------------------------------------------------------------------------------
Shareholders' equity (deficit)
Authorized:
50,000,000 common shares with a par value of $.001 each
Issued and outstanding
560,000 common shares with a par value of $0.001
at August 30, 1999 and 500,000 at August 30, 1998 1,100 500
- - - - - - - - -------------------------------------------------------------------------------
1,100 500
- - - - - - - - -------------------------------------------------------------------------------
Accumulated Deficit (24,426) (567)
- - - - - - - - -------------------------------------------------------------------------------
(23,326) (67)
- - - - - - - - -------------------------------------------------------------------------------
$ 47 $ 47
================================================================================
CONTINUING OPERATIONS (NOTE 1)
29
<PAGE>
SAN FABIAN RESOURCES INC.
(A Delaware Corporation)
(A development stage company)
Unaudited
Statement of Loss
Four Month Period ended August 30, 1999
(U.S. DOLLARS)
1999
Expenses
Legal $ 0
Interest and bank charges 41
Filing fees 100
- - - - - - - - --------------------------------------------------------------------------------
Net earnings (loss) for the period $ (1,041)
================================================================================
Basic and diluted loss per share $ (0.0019)
- - - - - - - - --------------------------------------------------------------------------------
Weighted average shares Outstanding 547,671
- - - - - - - - --------------------------------------------------------------------------------
30
<PAGE>
SAN FABIAN RESOURCES INC.
(A Delaware Corporation)
(A development stage company)
Unaudited
Statement of Cash Flow
Four Month Period ended August 30, 1999
(U.S. DOLLARS)
1999
Cash provided by (used in)
Operations
Net Loss for period $(21,818)
- - - - - - - - --------------------------------------------------------------------------------
Net change in non-cash working capital balances
Accounts payable 1,421
Accrued interest 838
Convertible Debenture 20,000
- - - - - - - - --------------------------------------------------------------------------------
Net cash used in operating activities (600)
Financing
Issuance of capital stock 600
- - - - - - - - --------------------------------------------------------------------------------
Net cash generated by financing activities 600
- - - - - - - - --------------------------------------------------------------------------------
Change in cash for period --
Cash, beginning of period 47
- - - - - - - - --------------------------------------------------------------------------------
Cash, end of period $ 47
================================================================================
31
<PAGE>
SAN FABIAN RESOURCES INC.
(A Delaware Corporation)
(A development stage company)
Notes to Unaudited Financial Statements
For the Four Month Period ended August 30, 1999
(U.S. DOLLARS)
1. Continuing operations
San Fabian Resources Inc. was incorporated on May 19, 1997 in Delaware,
U.S.A.
The Company has negative working capital and a deficit. The ability for the
Company to continue as a going concern is dependent upon its ability to
obtain adequate financing to reach profitable levels of operations. It is
not possible to predict whether financing efforts will be successful or if
the Company will attain profitable levels of operations.
2. Summary of significant accounting policies
These financial statements have been prepared in accordance with generally
accepted accounting principles in the United States and reflect the
following significant accounting principles:
a. Estimates and assumptions
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make assumptions
that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amount of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
b. Earnings (loss) per common share
In February, 1997, the Financial Accounting Standards Board issued
Statement No. 128, Earnings Per Share (SFAS 128), which established
new standards for computing and presenting earnings per share
effective for fiscal years ending after December 15, 1997. With SFAS
128, primary earnings per share is replaced by basic earnings per
share, which is computed by dividing income available to common
shareholders by the weighted average number of shares outstanding for
the period. In addition, SFAS 128 requires the presentation of diluted
earnings per share, which includes the potential dilution that could
occur if dilutive securities were exercised or converted into common
stock. The computation of diluted EPS does not assume the conversion
or exercise of securities if their effect is anti-dilutive. Common
equivalent shares consist of the common shares issuable upon the
conversion of the convertible loan notes and special warrants (using
the if-converted method) and incremental shares issuable upon the
exercise of stock options and share purchase warrants ( using the
treasury stock method).
c. Cash and cash equivalents
Cash and cash equivalents consist of cash on hand, deposits in banks
and highly liquid investments with an original maturity of three
months or less.
32
<PAGE>
3. Convertible debenture
On July 14, 1998 the Company issued a 5% Convertible Debenture in the
amount of $20,000U.S. due July 14, 2003 in partial settlement of
outstanding legal fees. The debenture principle bears interest at 5% per
annum and the accrued interest and the principle shall be convertible, in
part or in whole on the basis of 1 share for every $0.01U.S. of debt, at
the holder's option by giving the Company (a) 90 days prior written notice
of its intention to implement the conversion privilege and (b) a Notice of
Conversion within 30 days following the expiration of the aforesaid 90 day
period.
4. Related party transactions
At August 30, 1999, members of Maitland & Company, Canadian legal counsel
owned 52,500 shares of the Company's common stock.
5. Income taxes
The Company has net operating losses which may give rise to future tax
benefits of approximately $22,859 and $567 of August 30, 1999 and August
30, 1998 respectively. To the extent not used, net operating loss
carryforwards expire in varying amounts beginning in the year 2013. Income
taxes are accounted for in accordance with Statement of Financial
Accounting Standards No.109 (SFAS 109). Under this method, deferred income
taxes are determined based on differences between the tax basis of assets
and liabilities and their financial reporting amounts at each year end, and
are measured based on enacted tax rates and laws that will be in effect
when the differences are expected to reverse. Valuation allowances are
established, when necessary, to reduce deferred tax assets to the amount
expected to be realized. No provision for income taxes is included in the
statement due to its immaterial amount.
33
<PAGE>
SAN FABIAN RESOURCES INC.
(A Delaware Corporation)
(A development stage company)
Statement of Shareholders' Equity (Deficit)
Year ended April 30, 1999
and from the date of incorporation, May 19, 1997 to April 30, 1998
(U.S. DOLLARS)
<TABLE>
<CAPTION>
Total
Common shares Accumulated Shareholders'
Shares Amount (Deficit) Equity (Deficit)
- - - - - - - - ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Issued on incorporation 500,000 $ 500 -- $ 500
Balance at April 30, 1999 560,000 1,000 (22,385) (21,285)
Net loss -- -- (1,041) (1,041)
- - - - - - - - ----------------------------------------------------------------------------------------------------------------------------
Balance at August 30, 1999 560,000 $ 1,100 $(24,426) $(23,326)
============================================================================================================================
</TABLE>
34
<PAGE>
PART III
ITEM 1 & 2 INDEX TO AND DESCRIPTION OF EXHIBITS
Exhibit
2(1) Certificate of Incorporation
2(2) By-Laws
35
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Act of 1934, as amended, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form 10SB and has duly caused this
Registration Statement to be signed on its behalf by the undersigned hereunto
duly authorized in the City of New York, on the 24th day of September, 1999.
SAN FABIAN RESOURCES, INC.
(Registrant)
By: /s/Joseph Sierchio
----------------------
Joseph Sierchio, President and Director
36
