U. S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-SB/A
File No.: __________________
CIK:
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. 2
FRANKLYN RESOURCES I, INC.
(Name of Small Business Issuer in its charter)
Nevada 84-1491678
State or other jurisdiction of IRS Employer ID Number
incorporation or organization
5330 E. 17th Ave. Pkwy, Denver, CO 80220
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (303) 394-1187
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
Not Applicable
Securities to be registered under Section 12(g) of the Act:
Common Stock
(Title of class)
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TABLE OF CONTENTS
PART I
Page
Item 1. Business........................................................3
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations......................................... 18
Item 3. Properties.....................................................20
Item 4. Security Ownership of Certain Beneficial Owners and
Management.....................................................20
Item 5. Directors and Executive Officers of the Registrant.............21
Item 6. Executive Compensation.........................................28
Item 7. Certain Relationships and Related Transactions.................29
Item 8. Description of Securities......................................30
PART II
Item 1. Market for Registrant's Common Stock and Security Holder
Matters........................................................31
Item 2. Legal Proceedings..............................................31
Item 3. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.......................................31
Item 4. Recent Sales of Unregistered Securities........................31
Item 5. Indemnification of Directors and Officers......................33
PART F/S
Financial Statements and Supplementary Data..................................F-1
Signature Page................................................................33
Exhibits, Financial Statement Schedule and Reports on Form 8-K................51
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PART I
Item 1. Description of Business.
General
Franklyn Resources I, Inc. (the Company) was incorporated under the laws of
the State of Nevada on March 3, 1999, and is in the developmental stage. In
1999, the Company raised $3,255 in a private placement. For the period of 1999
through date hereof, the Company had no revenues or business. The company has no
commercial operations as of date hereof. The company has no full-time employees
and owns no real estate.
The Company's current 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 purchase, merger, exchange of stock, or
otherwise, and may encompass assets or a business entity, such as a corporation,
joint venture, or partnership. The Company has no capital, and it is unlikely
that the Company will be able to take advantage of more than one such business
opportunity.
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. The Company is filing
Form 10-SB on a voluntary basis in order to become a 12(g) registered company
under the Securities Exchange Act of 1934. As a "reporting company," the Company
may be more attractive to a private acquisition target. In January 2000 a
position letter was issued by Richard Wulff Chief of the Small
Business/Corporate Finance Division of the SEC in which he elaborated upon the
SEC staff view that shares of "Blank Check" companies may not be sold under any
circumstances by anyone unless a Registration Statement is filed and declared
effective. This position letter was addressed to Ken Worm, as Chief of OTC
Compliance at the NASD and had the effect at the NASD of precluding the
clearance of any "Blank Check" companies for trading privileges on the OTC
Bulletin Board or the "Pink Sheets."
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
in corporate finance matters to advise them of the Company's existence and to
determine if any companies or businesses they represent have an interest in
considering a merger or acquisition with the Company. No assurance can be given
that the Company will be successful in finding or acquiring a desirable business
opportunity, given that no funds that are available for acquisitions, or that
any acquisition that occurs will be on terms that are favorable to the Company
or its stockholders.
The Company's search will be directed toward small and medium-sized
enterprises which have a desire to become public corporations and which are able
to satisfy, or anticipate in the reasonably near future being able to satisfy,
the minimum asset requirements in order to qualify shares for trading on NASDAQ
or a stock exchange (See "Investigation and Selection of Business
Opportunities"). The Company anticipates that the business opportunities
presented to it will (i) be recently organized with no operating history, or a
history of losses attributable to under-capitalization or other factors; (ii) be
experiencing financial or operating difficulties; (iii) be in need of funds to
develop a new product or service or to expand into a new market; (iv) be relying
upon an untested product or marketing concept; or (v) have a combination of the
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characteristics mentioned in (i) through (iv). The Company intends to
concentrate its acquisition efforts on properties or businesses that it believes
to be undervalued. Given the above factors, investors should expect that any
acquisition candidate may have 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 includes 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 be issued by the Company or purchased from the current
principal shareholders of the Company by the acquiring entity or its affiliates.
If stock is purchased from the current shareholders, the transaction is very
likely to result in substantial gains to them relative to their purchase price
for such stock. In the Company's judgment, none of its officers and directors
would thereby become an "underwriter" within the meaning of the Section 2(11) of
the Securities Act of 1933, as amended. The sale of a controlling interest by
certain principal shareholders of the Company could occur at a time when the
other shareholders of the Company remain subject to restrictions on the transfer
of their shares.
Depending upon the nature of the transaction, the current officers and
directors of the Company may resign management positions with the Company in
connection with the Company's acquisition of a business opportunity. See "Form
of Acquisition," below, and "Risk Factors - The Company - Lack of Continuity in
Management." In the event of such a resignation, the Company's current
management would not have any control over the conduct of the Company's business
following the Company's combination with a business opportunity.
It is anticipated that business opportunities will come to the Company's
attention from various sources, including its officer and director, 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
plans, 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 would 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 foregoing 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 Nevada law to enter into such a transaction if:
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1. 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 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
2. 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
approved in good faith by vote of the stockholders; or
3. 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.
Officers and directors have not worked with any particular consultants and
advisors, except that John O'Shea, a principal in Westminster Securities, has
been a shareholder in a number of companies in which the officers and directors
have participated.
The company has not established any criteria to use to hire consultants.
There is no requirement as to experience, services to be provided, or the term
of service. In all likelihood, a consultant would be hired only for a specific
task on a fixed fee basis, for a very limited time.
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 company 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 the possible need to
shift marketing approaches substantially, expand significantly, change product
emphasis, change or substantially augment management, or make other changes. The
Company will be dependent upon the owners of a business opportunity to identify
any such problems which may exist and to implement, or be primarily responsible
for the implementation of, required changes. Because the Company may participate
in a business opportunity with a newly organized firm or with a firm which is
entering a new phase of growth, it should be emphasized that the Company will
incur further risks, because management in many instances will not have proved
its abilities or effectiveness, the eventual market for such company's products
or services will likely not be established, and such company may not be
profitable when acquired.
It is anticipated that the Company will not be able to diversify, but will
essentially be limited to one such venture 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.
It is emphasized that management of the Company may effect transactions having a
potentially adverse impact upon the Company's shareholders pursuant to the
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authority and discretion of the Company's management to complete acquisitions
without submitting any proposal to the stockholders for their consideration.
Holders of the Company's securities should not anticipate that the Company
necessarily will furnish such holders, prior to any merger or acquisition, with
financial statements, or any other documentation, concerning a target company or
its business. In some instances, however, the proposed participation in a
business opportunity may be submitted to the stockholders for their
consideration, either voluntarily by such directors to seek the stockholders'
advice and consent or because state law so requires.
The analysis of business opportunities will be undertaken by or under the
supervision of the Company's President, who is not a professional business
analyst. 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 regarding 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, the Company anticipates that it will consider, among other things,
the following factors:
1. Potential for growth and profitability, indicated by new technology,
anticipated market expansion, or new products;
2. The Company's perception of how any particular business opportunity will be
received by the investment community and by the Company's stockholders;
3. 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 15c2-6 recently adopted by
the Securities and Exchange Commission. See "Risk Factors - The Company
Regulation of Penny Stocks."
4. 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;
5. The extent to which the business opportunity can be advanced;
6. 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;
7. Strength and diversity of existing management, or management prospects that
are scheduled for recruitment;
8. The cost of participation by the Company as compared to the perceived
tangible and intangible values and potential; and
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9. The accessibility of required management expertise, personnel, raw materials,
services, professional assistance, and other required items.
The company will contact persons and companies with which its officers
have an acquaintance to make known the search for an acquisition candidate for
the company. The company doesn't intend to advertise in media. The company will
screen potential acquisitions initially based upon whether a candidate has a
going business, not "development stage", audited financial statements for prior
fiscal years, and management experience in the industry.
No investors are intended to be solicited by the company in connection
with an acquisition.
No one has advanced operational funding to the company in the past other
than shareholders who have purchased stock as set forth in Part II, Item 4 of
this Registration Statement.
In regard to the possibility that the shares of the Company would qualify
for listing on NASDAQ, the current standards include the requirements that the
issuer of the securities that are sought to be listed have total assets of at
least $4,000,000 and total capital and surplus of at least $2,000,000. 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.
The Company is unable to predict when it may participate in a business
opportunity. It expects, however, that the analysis of any future specific
proposals, none of which have been submitted to the company, 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 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 services marks, or rights thereto; present and proposed
forms of compensation to management; a description of transactions between such
company and its affiliates during 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 assurances that audited financial
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statements would be able to be produced within a reasonable period of time not
to exceed 60 days following completion of a merger transaction; and other
information deemed relevant.
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 another 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 shareholders,
acquisition candidates which have long-term plans for raising capital through
the 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.
There are no loan arrangements or arrangements for any financing whatsoever
relating to any business opportunities.
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 that 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, and although it is likely, there is no assurance that the Company
would be the surviving entity. In addition, the present management and
stockholders of the Company most likely will not have control of a majority of
the voting shares of the Company following a 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.
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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, 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
shareholders. (See "Description of Business - General").
It is anticipated that any new securities issued in any reorganization
would be issued in reliance upon exemptions, if any are available, from
registration under applicable federal and state securities laws. 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 or 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.
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 officers
and principal shareholders 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 concerning the acquisition
as described in the preceding paragraph 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 specified 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
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and others. If a decision is made not to participate in a specific business
opportunity, the costs theretofore 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 procure goods and services.
In all probability, upon completion of an acquisition or merger, there will
be a change in control through issuance of substantially more shares of common
stock. Further, in conjunction with an acquisition or merger, it is likely that
management may offer to sell a controlling interest at a price not relative to
or reflective of any value of the shares sold by management, and at a price
which could not be achieved by individual shareholders at the time.
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.
Section 3(a) of the Investment Act contains the definition of an
"investment company," and it excludes any entity that does not engage primarily
in the business of investing, reinvesting or trading in securities, or that does
not engage in the business of investing, owning, holding or trading "investment
securities" (defined as "all securities other than government securities or
securities of majority-owned subsidiaries") the value of which exceeds 40% of
the value of its total assets (excluding government securities, cash or cash
items). The Company intends to implement its business plan in a manner which
will result in the availability of this exception from the definition of
"investment company." Consequently, the Company's participation in a business or
opportunity through the purchase and sale of investment securities will be
limited.
The Company's plan of business may involve changes in its capital
structure, management, control and business, especially if it consummates a
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.
Any securities which the Company might acquire in exchange for its Common
Stock are expected to be "restricted securities" within the meaning of the
Securities Act of 1933, as amended (the "Act"). If the Company elects to resell
such securities, such sale cannot proceed unless a registration statement has
been declared effective by the Securities and Exchange Commission or an
exemption from registration is available. Section 4(1) of the Act, which exempts
sales of securities not involving a distribution, would in all likelihood be
available to permit a private sale. Although the plan of operation does not
contemplate resale of securities acquired, if such a sale were to be necessary,
the Company would be required to comply with the provisions of the Act to effect
such resale.
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An acquisition made by the Company may be in an industry which is regulated
or licensed by federal, state or local authorities. Compliance with such
regulations can be expected to be a time-consuming and expensive process.
Competition
The Company expects to encounter substantial competition in its efforts to
locate attractive opportunities, primarily from business development companies,
venture capital partnerships and corporations, venture capital affiliates of
large industrial and financial companies, small investment companies, and
wealthy individuals. Many of these entities will have significantly greater
experience, resources and managerial capabilities than the Company and will
therefore be in a better position than the Company to obtain access to
attractive business opportunities. The Company also will possibly experience
competition from other public "Blank Check" companies, some of which may have
more funds available than does the Company.
No Rights of Dissenting Shareholders
The Company does not intend to provide Company shareholders with
complete disclosure documentation including audited financial statements,
concerning a possible target company prior to acquisition, because Nevada
Business Corporation Act vests authority in the Board of Directors to decide and
approve matters involving acquisitions within certain restrictions. It is
possible that a transaction would be structured as an acquisition, not a merger,
with the Registrant being the parent company and the acquiree being merged into
a wholly owned subsidiary, and therefore, a shareholder would have no right of
dissent under Nevada law.
No Target Candidates for Acquisition
None of the Company's Officers, Directors, promoters, affiliates, or
associates have had any preliminary contact or discussion with any specific
candidate for acquisition. There are no present plans, proposals, arrangements,
or understandings with any representatives of the owners of any business or
company regarding the possibility of an acquisition transaction.
Administrative Offices
The Company currently maintains a mailing address at 5330 E. 17th Ave.
Pkwy, Denver, CO 80220 which is the office address of its President. 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 this mailing address.
Employees
The Company is a development stage company 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. Although there is no current plan with respect to its nature or
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amount, remuneration may be paid to or accrued for the benefit of, the Company's
officers prior to, or in conjunction with, the completion of a business
acquisition for services actually rendered, if for. See "Executive Compensation"
and under "Certain Relationships and Related Transactions."
Risk Factors
1. 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 devote their attention, and may be expected to continue to do so
although management time should be devoted to the business of the Company. As a
result, conflicts of interest may arise that can be resolved only through
exercise of such judgment as is consistent with fiduciary duties to the Company.
See "Management," and "Conflicts of Interest."
It is anticipated that Company's officers and directors may actively
negotiate or otherwise consent to the purchase of a portion of his common stock
as a condition to, or in connection with, a proposed merger or acquisition
transaction. In this process, the Company's officers may consider his own
personal pecuniary benefit rather than the best interests of other Company
shareholders, and the other Company shareholders are not expected to be afforded
the opportunity to approve or consent to any particular stock buy-out
transaction. See "Conflicts of Interest." It is anticipated that Company's
officers and directors may actively negotiate or otherwise consent to the
purchase of a portion of his common stock as a condition to, or in connection
with, a proposed merger or acquisition transaction. In this process, the
Company's officers may consider his own personal pecuniary benefit rather than
the best interests of other Company shareholders, and the other Company
shareholders are not expected to be afforded the opportunity to approve or
consent to any particular stock buy-out transaction. See "Conflicts of
Interest." There is an inherent conflict of interest in such a situation, and as
long as a person is an officer or director, such person would have a fiduciary
duty to act in the best interest of the shareholders.
2. Need For Additional Financing. The Company has very limited funds, andsuch
funds may not be adequate to take advantage of any available
businessopportunities. Even if the Company's funds prove to be sufficient to
acquire an interest in, or complete a transaction with, a business opportunity,
the Company may not have enough capital to exploit the opportunity. The ultimate
success of the Company may depend upon its ability to raise additional capital.
The Company has not investigated the availability, source, or terms that might
govern the acquisition of additional capital and will not do so until it
determines a need for additional financing. If additional capital is needed,
there is no assurance that funds will be available from any source or, if
available, that they 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.
3. Regulation of Penny Stocks. The Company's securities, when available for
trading, will be subject to a Securities and Exchange Commission rule that
imposes special sales practice requirements upon broker-dealers who sell such
securities to persons other than established customers or accredited investors.
For purposes of the rule, the phrase "accredited investors" 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
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transactions covered by the rule, the broker-dealer must make a special
suitability determination for the purchaser and receive the purchaser's 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 in this offering to sell their securities
in any market that might develop therefore.
In addition, the Securities and Exchange Commission has adopted a number
of rules to regulate "penny stocks." Such rules include Rules 3a51-1, 15g-1,
15g-2, 15g-3, 15g-4, 15g-5, 15g-6, 15g-7, and 15g-9 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 owners of Shares to sell the securities of the Company in any market that
might develop for them.
Shareholders should be aware that, according to Securities and Exchange
Commission, the market for penny stocks has suffered in recent years from
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 differentials 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 from being established with respect to the
Company's securities.
4. Lack of Operating History. The Company was formed in March 1999 for the
purpose of seeking a business opportunity. Due to 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.
5. 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
Common Stock will be increased thereby.
6. 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 and therefore can disclose the risks and hazards of a business or
opportunity that it may enter into in only a general manner, and cannot disclose
the risks and hazards of any specific business or opportunity that it may enter
into. An investor can expect a potential business opportunity to be quite risky.
The Company's acquisition of or participation in a business opportunity will
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likely be highly illiquid and could result in a total loss to the Company and
its stockholders if the business or opportunity proves to be unsuccessful. See
Item 1 "Description of Business."
7. 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.
8. Impracticability of Exhaustive Investigation. The Company's limited funds and
the lack of full-time management will likely 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.
9. 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.
10. Reliance upon Financial Statements. The Company generally will require
audited financial statements from companies that it proposes to acquire. Given
cases where audited financials are available, the Company will have to rely upon
interim period unaudited information received from target companies' management
that has not been verified by outside auditors. The lack of the type of
independent verification which audited financial statements would provide,
increases the risk that the Company, in evaluating an acquisition with such a
target company, will not have the benefit of full and accurate information about
the financial condition and recent interim operating history of the target
company. This risk increases the prospect that the acquisition of such a company
might prove to be an unfavorable one for the Company or the holders of the
Company's securities.
Moreover, the Company will be subject to the reporting provisions of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and thus will
be required to furnish certain information about significant acquisitions,
including audited financial statements for any business that it acquires.
Consequently, acquisition 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 so long as the reporting requirements of the Exchange Act are
applicable. Should the Company, during the time it remains subject to the
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reporting provisions of the Exchange Act, complete an acquisition of an entity
for which audited financial statements prove to be unobtainable, the Company
would be exposed to enforcement actions by the Securities and Exchange
Commission (the "Commission") and to corresponding administrative sanctions,
including permanent injunctions against the Company and its management. The
legal and other costs of defending a Commission enforcement action would have
material, adverse consequences for the Company and its business. The imposition
of administrative sanctions would subject the Company to further adverse
consequences.
In addition, the lack of audited financial statements would prevent the
securities of the Company from becoming eligible for listing on NASDAQ, 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. 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 until
such financial statements were to become available.
11. Other Regulation. 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.
12. Dependence upon Management; Limited Participation of Management. The Company
currently has only two individuals who are serving as its officers and directors
on a part time basis. The Company will be heavily dependent upon their skills,
talents, and abilities to implement its business plan, and may, from time to
time, find that the inability of the officers and directors to devote their full
time attention to the business of the Company results in a delay in progress
toward implementing its business plan. See "Management." Because investors will
not be able to evaluate the merits of possible business acquisitions by the
Company, they should critically assess the information concerning the Company's
officers and directors.
13. Lack of Continuity in Management. The Company does not have an employment
agreement with its officers and directors, and as a result, there is no
assurance 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 subject to compliance with Section 14f
of the Securities Exchange Act of 1934. 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.
14. Indemnification of Officers and Directors. Nevada Statutes 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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15. Director's Liability Limited. Nevada Statutes exclude personal liability of
its directors to the Company and its stockholders for monetary damages for
breach of fiduciary duty except in certain specified circumstances. Accordingly,
the Company will have a much more limited right of action against its directors
than otherwise would be the case. This provision does not affect the liability
of any director under federal or applicable state securities laws.
16. 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 President without
any input from stockholders. 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 President of the Company considers
it necessary to hire outside advisors, he may elect to hire persons who are
affiliates, if they are able to provide the required services.
17. 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.
18. 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.
19. No Foreseeable Dividends. The Company has not paid dividends on its
Common Stock and does not anticipate paying such dividends in the foreseeable
future.
20. Loss of Control by Present Management and Stockholders. The Company may
consider an acquisition in which the Company would issue as consideration for
the business opportunity to be acquired an amount of the Company's authorized
but unissued Common Stock that would, upon issuance, represent the great
majority of the voting power and equity of the Company. The result of such an
acquisition would be that the acquired company's stockholders and management
would control the Company, and the Company's management could be replaced by
persons unknown at this time. Such a merger would result in a greatly reduced
percentage of ownership of the Company by its current shareholders. In addition,
the Company's major shareholders could sell control blocks of stock at a premium
price to the acquired company's stockholders.
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21. No Public Market Exists. There is no public market for the Company's common
stock, and no assurance can be given that a market will develop or that a
shareholder ever will 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 purchaser finds a broker
willing to effect a transaction in these securities, the combination of
brokerage commissions, state transfer taxes, if any, and any other selling costs
may exceed the selling price. Further, many lending institutions will not permit
the use of such securities as collateral for any loans.
22. Rule 144 Sales. All of the outstanding shares of Common Stock held by
present officers, directors, and stockholders 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
exemptions from registration under the Act and as required under applicable
state securities laws. Rule 144 provides in essence that a person who has held
restricted securities for one year 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 the sale. There is
no limit on the amount of restricted securities that may be sold by a
nonaffiliate after the restricted securities have been held by the owner for a
period of two years. Nonaffiliate shareholders who have held their shares for
under Rule 144(K) two years are eligible to have freely tradable shares. A sale
under Rule 144 or under any other exemption from the Act, if available, or
pursuant to subsequent registration of shares of Common Stock of present
stockholders, may have a depressive effect upon the price of the Common Stock in
any market that may develop. All shares become available for resale (subject to
volume limitations for affiliates) under Rule 144, one year after date of
purchase subject to applicable volume restrictions under the Rule.
23. Blue Sky Considerations. 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 under any circumstances allow the trading or resale of blind-pool or
"blank-check" securities. Accordingly, investors should consider the secondary
market for the Company's securities to be a limited one.
24. Blue Sky Restrictions. Many states have enacted statutes or rules which
restrict or prohibit the sale of securities of "blank check" companies to
residents so long as they remain without specific business companies. To the
extent any current shareholders or subsequent purchaser from a shareholder may
reside in a state which restricts or prohibits resale of shares in a "blank
check" company, warning is hereby given that the shares may be "restricted" from
resale as long as the company is a shell company.
At the date of this registration statement, the Company has no intention
of offering further shares in a private offering to anyone. Further, the policy
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of the Board of Directors is that any future offering of shares will only be
made after an acquisition has been made and can be disclosed in appropriate 8-K
filings.
In the event of a violation of state laws regarding resale of "blank
check" shares the Company could be liable for civil and criminal penalties which
would be a substantial impairment to the Company. At date of this registration
statement, all shareholders' shares bear a "restrictive legend," and the Company
will examine each shareholders' resident state laws at the time of any proposed
resale of shares now outstanding to attempt to avoid any inadvertent breach of
state laws.
ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATIONS OR PLAN OF OPERATIONS.
Liquidity and Capital Resources
The Company remains in the development stage and, since inception, has
experienced significant liquidity problems and has no capital resources or
stockholder's equity. The Company has current assets in the form of cash of
$3,230 and total assets of $3,255 and no current liabilities. The cash assets
will have been depleted by the expenses of accounting and filing the Form 10SB.
The Company will need additional capital in the next twelve months for any
expenditures, and it has no source of such capital other than shareholders
advances.
The Company will carry out its plan of business as discussed above.
TheCompany cannot predict to what extent its lack of liquidity and
capitalresources will impair the consummation of a business combination or
whether it will incur further operating losses through any business entity which
the Company may eventually acquire.
There are no arrangements, agreements or understandings between
non-management shareholders and management under which non-management
shareholders may directly or indirectly participate in or influence the
management of affairs of the company. No shareholders have been approved to fund
any potential advances in the next twelve months nor is there any basis for
believing that shareholder advances would be available in the next twelve
months.
There are no currents plans understandings, agreements, or commitments
with anyone to act as a finder of opportunities for the company. In the case
that such efforts will ever be undertaken, it is unknown at this time who if
anyone would act as a finder. Such a finder would be engaged or used prior to an
concurrent with acquisition of an opportunity.
During the period from February 25, 1999 (inception) through May 31,
1999 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 and a limited venture into offering consulting services to clients
seeking debt or equity financing for start-up ventures. No revenues were
received by the Company during this period. The company has incurred operating
expenses since inception of $60,865. The net loss on operations was ($60,865)
through May 31, 1999. Such losses will continue unless revenues and business can
be acquired by the company. There is no assurance that revenues or profitability
will ever be achieved by the company.
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Results of Operations year ended May 31, 1999 compared to 1998
The Company had no revenues in period from inception to May 31, 1999.
The Company incurred $60,865 in expenses to May 31, 1999 as compared to no
expenses in any prior year.
The net operating loss from inception February 25, 1999 to May 31, 1999
as a result of organizational costs and expenses was ($60,865).
For the current fiscal year, the Company anticipates incurring a loss as
a result of legal and accounting expenses, expenses associated with registration
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 other than interest income, and may continue to operate at a
loss after completing a business combination, depending upon the performance of
the acquired business.
Results of Operations for the quarter ended August 31, 1999.
- ------------------------------------------------------------
The company had no revenues in the period in 1999. It incurred expenses for
audit costs of $1000.00 and $250.00 in legal fees. The company had a loss on
operations of ($1,250) for the period. The company had an accumulated operating
deficit of ($62,115) at the end of the quarter. Loss per share for the quarter
was minimal. The company had not been formed in 1998, and there is no prior year
comparable information.
The Company has no Non-Cash Assets.
Operating expenses are comprised of consulting fees and professional
services, of which $60,325 were incurred in exchange for stock. These expenses
are from past and ongoing services to date supplied by the principal
shareholders, in the areas of start up, incorporation, general and
administrative activities, and business plan. In each case, the shareholders
accepted the opportunity to purchase stock at a negotiated price as full
consideration for these services. Compensation cost was recorded to recognize
the approximate fair value of shares issued for services, based upon
contemporaneous cash sales of stock at $0.02 per share.
Need for Additional Financing
The Company does not have capital sufficient to meet the Company's cash
needs, including the costs of compliance with the continuing reporting
requirements of the Securities Exchange Act of 1934. The Company will have to
seek loans or equity placements to cover such cash needs. In the event the
Company is able to complete a business combination during this period, lack of
its existing capital may be a sufficient impediment to prevent it from
accomplishing the goal of completing a business combination. There is no
assurance, however, that without funds it will ultimately allow registrant to
complete a business combination. Once a business combination is completed, the
Company's needs for additional financing are likely to increase substantially.
No commitments to provide additional funds have been made by management
or other stockholders. Accordingly, there can be no assurance that any
additional funds will be available to the Company to allow it to cover its
expenses as they may be incurred.
Irrespective 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 issuances of stock in lieu of cash.
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Year 2000 Issues
Year 2000 problems result primarily from the inability of some computer
software to property store, recall, or use data after December 31, 1999. These
problems may affect many computers and other devices that contain embedded
computer chips. The Company's operations, however, do not rely on information
technology (IT) systems. Accordingly, the Company does not believe it will be
material affected by Year 2000 problems.
The Company relies on non-IT systems that may suffer from Year 2000
problems, including telephone systems and facsimile and other office machines.
Moreover, the Company relies on third-parties that may suffer from Year 2000
problems that could affect the Company's operations, including banks, oil field
operators, and utilities. In light of the Company's substantially reduced
operations, the Company does not believe that such non-IT systems or third-party
Year 2000 problems will affect the Company in a manner that is different or more
substantial than such problems affect other similarly situated companies or
industry generally. Consequently, the Company does not currently intend to
conduct a readiness assessment of Year 2000 problems or to develop a detailed
contingency plan with respect to Year 2000 problems that may affect the Company.
Item 3. Description of Property.
The Company has no property. The Company does not currently maintain an
office or any other facilities. It does currently maintain a mailing address at
5330 E. 17th Ave. Pkwy, Denver CO 80220. 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 has an oral arrangements, with the President of the Company to
use his office as a mailing address without cost.
The company has established no investment policy regarding property. It
does not intend to acquire property, except as part of the assets of a business
which it might acquire as discussed under the Business section of this
Registration Statement.
Item 4. Security Ownership of Certain Beneficial Owners and Management.
a) The following table sets forth, as of the date of this Registration
Statement, the number of shares of Common Stock owned of record and beneficially
by and persons who hold 5.0% or more of the outstanding Common Stock of the
Company.
MANAGEMENT AND 5% OR GREATER NUMBER OF SHARES OWNERSHIP
SHAREHOLDERS/BENEFICIAL OWNERS PERCENTAGE
- --------------------------------------------------- ----------------------------
John P. O'Shea (1) 1,000,000 31.2%
355 South End Ave.
New York, NY 10280
Frank L. Kramer, President, Director (1) 1,000,000 31.2%
5330 E. 17th Ave.
Denver, CO 80220
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Deborah A. Salerno, Secretary, Director 1,000,000 31.2%
355 South End Ave., 22B
New York, NY 10280
(1) Each principal shareholder has sole investment power and sole voting power
over the shares.
b) The following table sets forth, as of the date of this Registration
Statement, the number of shares of common stock owned by each executive officer
and director of the company, and the total and percentage of the outstanding
shares held by such persons as a group.
Frank L. Kramer, President, Director 1,000,000 31.2%
5330 E. 17th Ave.
Denver, CO 80220
Deborah A. Salerno, Secretary, Director 1,000,000 31.2%
355 South End Ave., 22B
New York, NY 10280
All directors and executive 2,000,000 62.4%
officers as a group (2 persons)
It is forseeable that in any merger or acquisition, a change of control
from the persons listed in a) and b) above, will occur to persons as yet
unknown.
Item 5. Directors, Executive Officers, Promoters and Control Persons.
The directors and executive officers currently serving the Company are
as follows:
Name Position Held Tenure
- --------------------------------------------------------------------------------
Frank L. Kramer age 54 President and Director Annual
Deborah A. Salerno age 47 Secretary, Treasurer and
Director Annual
The directors named above will serve until the next annual meeting of
the Company's stockholders. Thereafter, 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 the directors and 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.
The directors and officers of the Company will devote such time to the
Company's affairs on an "as needed" basis, but less than 20 hours per month. As
a result, the actual amount of time which they will devote to the Company's
affairs is unknown and is likely to vary substantially from month to month.
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Biographical Information
Frank Lloyd Kramer, President and Director obtained his BS in Business
Administration from Louisiana State University in 1964. From 1968 through 1981,
them from 1987 to 1990, Mr. Kramer was employed by New York Life Insurance
Company in various positions, including agent, sales manager and general
manager. From 1981 to 1987 and from 1990 to present, he has been self-employed
as a private investor and financial consultant in the Denver area assisting
companies in obtaining financing for their business operations. Mr. Kramer has
had significant experience in "shell" or "blank check" companies which
experience is detailed on pages 23 and 24 hereof.
Mr. Kramer is currently President and Director of Park Hill Capital Corp.
(since February 1999), Park Hill Capital II Corp. (since August 1999) and
President and Director of Franklyn Resources I, Inc. (since February 1999),
Franklyn Resources II, Inc., and Secretary and Director of OSK Capital I Corp.
(since February 1999) and OSK Capital II Corp. (since August 1999) companies
formed in 1999 to seek acquisitions.
Deborah A. Salerno, the Company's Secretary and a Director, has been
president (and owner) of DAS Consulting, Inc., a private corporation located in
New York City, providing financial consulting services to corporations, from
1987 to date.
Ms. Salerno is President and Director of OSK Capital I Corp. (March 1999),
OSK Capital II Corp. (August 1999) and Secretary and Director of Park Hill
Capital I Corp. (March 1999), Park Hill Capital II Corp. (since August 1999) and
Franklyn Resources II Corp., (since August 1999) which are inception stage
"Blank Check" companies.
Ms. Salerno, who attended Pace University, has also been employed as a
trader in the over-the-counter market (Greentree Securities, October, 1986
through March, 1987); and as Vice President and Syndicate Manager (Yves Hentic &
Company, Inc., Jersey City, New Jersey, 1985 through 1986). She was also
involved with the risk arbitrage market from 1978 through 1985, and was vice
president of Bodkin Securities (1980 through 1985) and Assistant Options P&S
Manager for Ivan F. Boesky, from 1978 through 1980.
Ms. Salerno has had significant experience with "shell" or "Blank Check"
companies, which experience is detailed on pages 25 and 26 hereof.
Management will devote minimal time to the operations of the Company,
and any time spent will be devoted to screening and assessing and, if warranted,
negotiating to acquire business opportunities.
None of the Company's officers and/or directors currently receives any
compensation for their respective services rendered to the Company. The officers
and directors received share totaling 2,000,000 in consideration for cash of
$2,000 and services rendered in formation of the company, and formulation of the
business plan. The value of the issued stock for services was expensed as
required by accounting standards at a value of $19,000 for each officer and
director, and a consultant. As of the date of filing this report, the Company
has no funds available to pay officers or directors. Further, none of the
officers or directors is 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.
It is possible that, after the Company successfully consummates a merger
or acquisition with an unaffiliated entity, that entity may desire to employ or
retain one or a number of members of the Company's management for the purposes
of providing services to the surviving entity, or otherwise provide other
compensation to such persons. However, the Company has adopted a policy whereby
the offer of any post-transaction remuneration to members of management will not
be a consideration in the Company's decision to undertake any proposed
transaction. Each member of management has agreed to disclose to the Company's
Board of Directors any discussions concerning possible compensation to be paid
to them by any entity which proposes to undertake a transaction with the Company
and further, to abstain from voting on such transaction. Therefore, as a
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practical matter, if each member of the Company's Board of Directors were
offered compensation in any form from any prospective merger or acquisition
candidate, the proposed transaction would not be approved by the Company's Board
of Directors as a result of the inability of the Board to affirmatively approve
such a transaction.
It is possible that persons associated with management may refer a
prospective merger or acquisition candidate to the Company. In the event the
Company consummates a transaction with any entity referred by associates of
management, it is possible that such an associate will be compensated for their
referral in the form of a finder's fee. It is anticipated that this fee will be
either in the form of restricted Common Stock issued by the Company as part of
the terms of the proposed transaction, or will be in the form of cash
consideration. However, if such compensation is in the form of cash, such
payment will be tendered by the acquisition or merger candidate, because the
Company has insufficient cash available. The amount of such finder's fee cannot
be determined as of the date of filing this report, but is expected to be
comparable to consideration normally paid in like transactions. No member of
management of the Company will receive any finders fee, either directly or
indirectly, as a result of their respective efforts to implement the Company's
business plan outlined herein.
The Company has adopted a policy that its affiliates and management
shall not be issued further common shares of the Company, except in the event
discussed in the preceding paragraphs.
Management is involved in several other "blank check" or "blind pool"
companies as described in the following section.
Previous "Blank Check" or "Blind Pool" Experience
Management of the Company has been involved in prior "blind pool" or
"Blank Check" companies. As set forth below, management has been part of the
formation of many companies formed without a designated business.
1) Frank Kramer served as president and a director from 1984 to 1987 of Fi-Tek
Corp., a "blind pool" company headquartered in Aurora, Colorado, which completed
an offering of securities in 1986 for $250,000 cash @ $.02 per share. In 1987,
Fi-Tek Corp . acquired Boston Technology, Inc. and moved its operations to
Cambridge, Massachusetts. The company has since been acquired by Converse
Technology (CMVT).
2) From May 1987 to November 1988, Mr. Kramer served as president, treasurer and
the chairman of the board of Fi-Tek II, Inc., a "blind pool" company
headquartered in Aurora, Colorado, which completed an offering of securities for
$200,000 cash @ $.02 per share in July 1988. In October 1988, Fi-Tek II, Inc.,
acquired OnLine Communications, Inc. and moved its operations to San Jose,
California. The company subsequently changed its name to OnLine Network, Inc.
and has since ceased operations.
3) Mr. Kramer served, commencing in November 1988, as the president, treasurer
and a director of Fi-Tek III, Inc., a Delaware-chartered "blind pool"
corporation which completed an offering of securities in September 1989 $500,000
@ $.02/share, and which in August 1990 acquired Videoconferencing Systems, Inc.,
a Norcross, Georgia-based company. Effective as of the date of acquisition, Mr.
Kramer resigned as president and treasurer, but
23
<PAGE>
retained his position on the board of directors. The Company has since changed
its name to VSI Enterprises, Inc. and Mr. Kramer resigned his position as
director on July 15, 1991.
4) From February 1987 until December 1989, he was also the treasurer and a
director of Bluestone Capital Corp., a Colorado "blind pool" corporation which
completed an offering of securities in November 1988 $50,000 @ $.10/share and
which moved its operations to Braintree, Massachusetts after acquiring Dialogue,
Inc. in December 1989. The company has since ceased operations.
5) Mr. Kramer also served as an officer and director of Catalina Capital Corp.
("Catalina"), a Delaware chartered "blind pool" corporation which completed a
public offering of its securities in April 1991 $120,000 @ $.10/share and which
moved its operations to Scottsdale, Arizona after acquiring Explore Technology,
Inc. ("Explore") in August 1992. Mr. Kramer resigned all positions with Catalina
upon the closing of the acquisition of Explore. Explore has since changed its
name to Instant Video Technology, Inc.
6) Mr. Kramer also served as president, treasurer and a director from July 1990
to December 1992 of Fi-Tek IV, Inc., a Delaware chartered "blind pool"
corporation which completed an offering of securities in September 1990 $180,000
@ $.02/share. During December 1992, Fi-Tek IV completed a reverse acquisition
(stock-for-stock exchange) of DBS Network, Inc., a Mill Valley, California-based
company, which through its equity ownership of another entity, holds an interest
in a permit granted by the Federal Communications Commission for launch and
operation of direct broadcast satellites and is otherwise engaged in the
automated meter reading business for public utilities from satellites. Fi-Tek IV
has since changed its name to DBS Industries, Inc.
7) For approximately a one-month period in October 1990, Mr. Kramer served as a
director of Power Capital, Inc. (now known as lst National Film Corp.), a "blind
pool" company which completed a public offering of its securities in November
1989.
8) Mr. Kramer is also an officer and director of another "blind pool" company,
Fi-Tek V, Inc., which completed a "blind pool "public offering of its securities
in January 1992 $125,000 @ $.02/share. On June 7, 1999 Fi-Tek V completed a
reverse acquisition with Laidlaw Global Holdings and resigned his position as
President. Laidlaw Globlal Holdings is a provider of global investment and
financial services with offices in Miami, Paris, Geneva, Athens, Nassau,
Barelona, Hong Kong and Singapore.
9) Mr. Kramer was an officer (secretary treasurer) and director of Harbour
Capital Corp. fromm February 1993 to September 1997 which completed a "blind
pool" public offering of its securities in October 1993 $120,000 @ $.10/share.
On May 16, 1997, the company effected a reverse acquisition (stock-for-stock
exchange) with Benefits Administration, Inc. and Telesave Corporation.
10) Mr. Kramer also served as an officer and director of Fi Tek VI, Inc., a
"blind pool" company, (which raised $130,000 @ $.02/share in 1991) from its
inception in January 1990 until September 1997, at which time Fi-Tek VI
completed a reverse acquisition with Globle Water Technologies (GWT), and Mr.
Kramer resigned his positions with Fi-Tek VI (GWT), through its subsidiary PSI
and through its subsidiary Applied Water Technologies (AWT) provides customers
with proprietary non-chemical water treatment is a world-wide supplier of
cooling water towers for the power, refining, chemical HVAC and process
industries.
24
<PAGE>
11) Frank Kramer is President and a Director Fi-Tek VII, Inc. a Delaware
Corporation formed in 1997 to seek acquisitions.
12) Mr. Kramer is currently President and Director of Park Hill Capital Corp.
(since February 1999), Park Hill Capital II Corp. (since February 1999) and
President and Director of Franklyn Resources I, Inc., Franklyn Resources II,
Inc. (since February 1999), and Secretary and Director of OSK Capital I Corp.
(since February 1999) and OSK Capital II Corp. (since February 1999) companies
formed in 1999 to seek acquisitions.
Deborah Salerno has been an officer and director of many blank check or
Blind Pool corporations, excluding the Company. Eleven of the corporations have
conducted public offerings (pursuant to effective registration statements on
Form S-18, as filed with the Commission), and of those, all have completed
merger or acquisition transactions. (However, the acquisition transaction of one
of the corporations, Strategic Acquisitions, Inc., was subsequently canceled
when the acquiree failed to meet certain contractual obligations which were
deemed to be conditions precedent).
The blank check or blind pool companies with which Ms. Salerno has been
involved have concentrated primarily on companies with plans for expansion
and/or the introduction of new products or services; such new products or
services were, in some cases, the acquisition or merger candidate's primary
business, and in other cases, an addition to existing lines of business. There
can be no assurance that Management will concentrate on these factors, or any of
them, in the evaluation of any candidate for Business Combination, and
Management's discretion with respect to the selection of Business Combination
candidate is unfettered. No assurance can, be given that any Business
Combination candidate, or eventual participant, will be profitable. (See "Risk
Factors.")
The public offerings of all of the blank check companies In which Ms.
Salerno has been involved were underwritten by Westminster Securities Corp.
Ms. Salerno's past and present Blank Check or Blind Pool responsibilities are as
follows:
1. Formerly president and a director of Amsterdam Capital Corporation from
inception until it acquired Care Concepts, Inc. as of June 16, 1989. The
registration statement for Amsterdam Capital Corporation became effective on
January 17, 1989,for 40,000 Units @ $5.50 per unit raising $220,000.
2. Formerly president of East End Investment, Inc., from inception until it
acquired The Theme Factory, Inc. as of October, 16 1989. Ms. Salerno continued
to serve as a director of The Theme Factory, Inc. until her resignation in July,
1992. The registration statement for East End Investment, Inc. became effective
on September 8, 1989, for 10,000 Units @ $6 per unit raising $60,000.
3. Formerly president and a director of West End Ventures, Inc. from inception
until January 26, 1990, when it acquired Future Medical Technologies. The
registration statement for West End Ventures, Inc., became effective on, January
2, 1990 for 12,000 Units @ $6.00 per unit raising $72,000.
4. Formerly president and a director of Sharon Capital Corporation from
inception until it acquired Process Engineers Inc., as of April 5, 1990. The
registration statement for Sharon Capital Corporation became effective on
February 14, 1990 for 36,000 Units @ $6.00 per unit raising $216,000.
25
<PAGE>
5. Formerly president and a director of Fulton Ventures, Inc. , from inception
until June 16, 1990, which it acquired Triad Warranty Corporation. The
registration statement for Fulton Ventures, Inc. became effective on April 10,
1990 for 12,000 Units @ $6.00 per unit raising $72,000.
6. Formerly, president and a director of Elmwood Capital Corporation from
inception whose registration statement was declared effective on June 27, 1990
for 12,000 Units @ $6.00 per unit raising $72,000 Elmwood Capital Corporation
acquired U.S. Environmental Solutions, Inc., as of March 5, 1991 at which time
Ms. Salerno ceased acting as an officer or director.
7. Formerly president and a director of Carnegie Capital Corporation, from
inception whose registration statement became effective on February 1, 1991 for
18,000 Units @ $6.00 per unit raising $108,000 During November, 1991, Carnegie
Capital corporation acquired Nevada Construction supply, which later changed its
name to National Building Supply. Ms. Salerno resigned as president, upon the
acquisition but continued in her position as a director until September 29,
1992.
8. Formerly president and a director of Avalon Enterprises Inc., from inception
which had its registration statement declared area effective on March 26, 1991,
for 16,000 Units @ $6.00 per unit raising a total of $96,000. It acquired
Southern Corrections Services, Inc. on June 15, 1992. The company's name was
thereafter changed to Avalon Community Services, Inc., and then to Avalon
Correctional Services, Inc. post-effective amendment to its registration
statement became effective on November 16, 1991.
9. Formerly president and a director of South End Ventures, Inc. ,from inception
whose registration statement became effective on November 15, 1991, for 12,000
Units @ $6.00 per unit raising $72,000. South End Ventures completed an
acquisition of Shore Group, Inc., a private company located, in Philadelphia,
PA, during December, 1992, at which time Ms. Salerno resigned as officer and
director. The name of the company has been changed to Shore Group Incorporated.
10. Formerly President and a director of Hard Funding, Inc. ,from inception a
blank check company which merged with Marinex which subsequently merged with
Texas Equipment Corp. A Registration Statement was effective for 8,500 Units @
$6.00 per unit raising a total of $51,000.
11. Vice-president and a director of Strategic Acquisitions, Inc.from inception
which had a registration statement declared effective on October 16, 1989 for
40,000 Units @ $6.00 per unit raising $240,000. Subsequently Strategic
Acquisitions, Inc. acquired Viatool, Inc. but the transaction was later
canceled, as the acquiree failed to meet certain terms of the acquisition
agreement which were deemed to be conditions precedent. Litigation arising from
the transaction was eventually settled. Substantially all of the unexpended net
proceeds of the offering was repaid to the company, and its securities issued in
the transaction were also returned.) Ms. Salerno resumed her former positions
vice-president and director upon the settlement of the lawsuits.
12. Former president and director of Bishop Equities, Inc. from inception which
registered with the SEC effective March 8, 1992 which raised $60,000. Bishop
completed acquisition of Aethlon Medical, Inc. on March 3, 1993.
26
<PAGE>
Detailed information and financial data about the above companies may be
obtained, where applicable, by reviewing the post-effective amendments to
registration statements on file with the Commission together with other
subsequent filings. No assurance can be given that Management will investigate
or eventually engage in a combination with, similar companies, focus on the same
or similar industries, or utilize similar criteria in the evaluation of Business
Combination candidates.
Ms. Salerno is President and Director of OSK Capital I Corp. ( March 1999),
OSK Capital II Corp. (August 1999) and Secretary and Director of Park Hill
Capital Corp. (March 1999), Park Hill Capital II Corp. and Franklyn Resources II
Corp., (August 1999) inception stage "Blank Check" companies.
Conflicts of Interest
The officers and directors of the Company will not devote more than a
portion of their time to the affairs of the Company. There will be occasions
when the time requirements of the Company's business conflict with the demands
of their 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.
Conflicts of Interest - General. Certain of the officers and directors of the
Company may be directors and/or principal shareholders of other companies and,
therefore, could face conflicts of interest with respect to potential
acquisitions. In addition, officers and directors of the Company may in the
future participate in business ventures which could be deemed to compete
directly with the Company. Additional conflicts of interest and non-arms length
transactions may also arise in the future in the event the Company's officers or
directors are involved in the management of any firm with which the Company
transacts business. The Company's Board of Directors has adopted a policy that
the Company will not seek a merger with, or acquisition of, any entity in which
management serve as officers or directors, or in which they or their family
members own or hold a controlling ownership interest. Although the Board of
Directors could elect to change this policy, the Board of Directors has no
present intention to do so. In addition, if the Company and other companies with
which the Company's officers and directors are affiliated both desire to take
advantage of a potential business opportunity, then the Board of Directors has
agreed that said opportunity should be available to each such company in the
order in which such companies registered or became current in the filing of
annual reports under the Exchange Act subsequent to January 1, 1999.
The Company's officers and directors 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. It is
anticipated that a substantial premium over the initial cost of such shares may
be paid by the purchaser in conjunction with any sale of shares by the Company's
officers and directors which is 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 the Company's officers and directors to acquire their shares
creates a potential conflict of interest for them in satisfying their fiduciary
duties to the Company and its other shareholders. Even though such a sale could
result in a substantial profit to them, they would be legally required to make
the decision based upon the best interests of the Company and the Company's
other shareholders, rather than their own personal pecuniary benefit.
27
<PAGE>
Item 6. Executive Compensation.
SUMMARY COMPENSATION TABLE OF EXECUTIVES
Annual Compensation Awards
- --------------------------------------------------------------------------------
Name and Principal Year Salary Bonus Other Annual Restricted Securities
Position ($) ($) Compensation Stock Award(s) Underlying
($) ($) Options/
SARs (#)
====================------------------------------------------------------------
Frank L. Kramer 1997 0 0 0 0 0
President, 1998 0 0 0 0 0
-----------------------------------------------------------
1999 0 0 0 0* (see 0
below)
====================------------------------------------------------------------
Deborah A. Salerno 1997 0 0 0 0 0
Secretary, 1998 0 0 0 0 0
-----------------------------------------------------------
1999 0 0 0 0* (see 0
below)
====================------------------------------------------------------------
Directors' Compensation
-----------------------
Name Annual Meeting Consulting Number Number of
- ----
Retainer Fees Fees/Other of Securities
-----
Fee ($)($) Fees ($) Shares Underlying(#)
---------- -------- ------
Options
SARs (#)
A. Director 0 0 0 1,000,000* 0
Frank L. Kramer
B. Director
Deborah A. Salerno 0 0 0 1,000,000* 0
*Issued to founding director for services valued @ $19,000 and cash of $1,000
Option/SAR Grants Table (None)
Aggregated Option/SAR Exercises in Last Fiscal Year an FY-End Option/SAR
value (None)
Long Term Incentive Plans - Awards in Last Fiscal Year (None)
No officer or director has received any other remuneration in the two
year period prior to the filing of this registration statement, except as
28
<PAGE>
defined in Certain Transactions, Item 7, immediately following. Although there
is no current plan in existence, it is possible that the Company will adopt a
plan to pay or accrue compensation to its officers and directors for services
related to seeking business opportunities and completing a merger or acquisition
transaction. 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 Transactions.
The Company issued to its founding directors a total of 2,000,000 shares
of Common Stock for cash of a total of $2,000 and services of $38,000 . The
Company also issued 1,000,000 shares to John P. O'Shea as a founder for cash of
$1,000 and services of $19,000. Mr. O'Shea is a founding shareholder. His
services were rendered at commencement of the company and on a on going basis to
date of filing of the Registration Statement. Mr. O'Shea is a licensed NASD
principal with Westminster Securities in New York.
Certificates evidencing the Common Stocks issued by the Company to these
persons have all been stamped with a restrictive legend, and are subject to stop
transfer orders by the Company. For additional information concerning
restrictions that are imposed upon the securities held by current stockholders,
and the responsibilities of such stockholders to comply with federal securities
laws in the disposition of such Common Stock, see "Risk Factors - Rule 144
Sales."
No officer, director, or affiliate of the Company has or proposes to
have any direct or indirect material interest in any business proposed to be
acquired by the Company through security holdings, contracts, options, or
otherwise.
The Company has adopted a policy under which any consulting or finder's
fee that may be paid to a third party or affiliate for consulting services to
assist management in evaluating a prospective business opportunity would be paid
in stock or 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 a stock issuance might be made.
Although there is no current plan in existence, it is possible that the
Company will adopt a plan to pay or accrue compensation to its officers and
directors for services related to seeking business opportunities and completing
a merger or acquisition transaction.
The company maintains a mailing address at the office of its President,
Frank L. Kramer, but otherwise does not maintain an office. As a result, it pays
no rent and incurs no expenses for maintenance of an office and does not
anticipate paying rent or incurring office expenses in the future. It is likely
that the Company will establish and maintain an office after completion of a
business combination.
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
29
<PAGE>
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
25,000,000 shares of Common Stock $.001 par value. 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. Cumulative voting for the election
of directors is not permitted by the Articles of Incorporation.
As of August 24, 1999, a total of 3,206,000 common shares were issued
and outstanding.
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 nonassessable. To
the extent that additional shares of the Company's Common Stock are issued, the
relative interests of then existing stockholders may be diluted.
Shareholders
Each shareholder has sole investment power and sole voting power over
the shares owned by such shareholder.
No shareholder has entered into or delivered any lock up agreement or
letter agreement regarding their shares or options thereon. Under Nevada laws,
no lock up agreement is required regarding the Company's shares as it might
relate to an acquisition.
Transfer Agent
The Company transfer agent is Mountain Share Transfer, Inc., 1625
Abilene Drive, Broomfield, CO 80020.
Reports to Stockholders
The Company plans to furnish its stockholders with an annual report for
each fiscal year 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
30
<PAGE>
continue furnishing annual reports to stockholders. The Company intends to
comply with the periodic reporting requirements of the Securities Exchange Act
of 1934 for so long as it is subject to those requirements, and to file
unaudited quarterly reports and annual reports with audited financial statements
as required by the Securities Exchange Act of 1934.
PART II
Item 1. Market Price and Dividends on the Registrant's Common Equity and Other
Shareholder Matters
The Company's shares of common stock have never traded on the Over-the
Counter Bulletin Board or in "Pink Sheets". There have never been any quotes for
the shares.
At August 24, 1999 there were 34 holders of record of the Company's
common stocks. The Board of Directors does not anticipate paying dividends at
anytime 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.
No director, officer or affiliate of the Company, and no owner of record
or beneficial owner of more than 5.0% of the securities of the Company, or any
associate of any such director, officer or security holder is a party adverse to
the Company or has a material interest adverse to the Company in reference to
any litigation.
Item 3. Changes in and Disagreements with Accountants.
None.
Item 4. Recent Sales of Unregistered Securities.
Since March 2, 1999 (the date of the Company's formation), the Company has
sold its Common Stock to the persons listed in the table below in transactions
summarized as follows:
Date of Price per
Purchaser Purchase Shares Purchase Price Share
- --------- -------- ------ -------------- -----
Frank L. Kramer 3/5/99 1,000,000 $1000 cash $.001
$19,000 in
services @ $.019
John P. O'Shea 3/5/99 1,000,000 $1000 cash $.001
$19,000 in
services @ $.019
Deborah A. Salerno 3/5/99 1,000,000 $1000 cash $.001
$19,000 in
services @ $.019
31
<PAGE>
Lynn Sauve 3/5/99 150,000 $150 cash $.001 and
(administrative services of
services rendered $2,850 @ $.019
preparatory to
Registration
Statement)
Michael Littman 3/05/99 25,000 $25 cash $.001
Heather Z. Anderson 3/05/99 1,000 $20 cash $.02
Elizabeth Kramer 3/05/99 1,000 $20 cash $.02
Kevin Whatley 3/05/99 1,000 $20 cash $.02
Philip Berman 4/01/99 1,000 $20 cash $.02
Raymond F. McKinstry 4/03/99 1,000 $20 cash $.02
Anne Marie McKinstry 4/03/99 1,000 $20 cash $.02
Jeffrey S. Rose 4/09/99 1,000 $20 cash $.02
Susan Slow 4/07/99 1,000 $20 cash $.02
George Groehsl 4/07/99 1,000 $20 cash $.02
Edward Slow 4/07/99 1,000 $20 cash $.02
Robert L. Krekel 4/21/99 1,000 $20 cash $.02
Alvin D. Leach 4/21/99 1,000 $20 cash $.02
Don Sullivan 4/20/99 1,000 $20 cash $.02
Holly R. Zane 4/20/99 1,000 $20 cash $.02
Kathleen E. Borchard 4/22/99 1,000 $20 cash $.02
Frederick E. Welsh, Jr. 4/22/99 1,000 $20 cash $.02
Claudia J. Kelly 4/22/99 1,000 $20 cash $.02
Robert Bruce Christopher 4/22/99 1,000 $20 cash $.02
David Hepworth 4/22/99 1,000 $20 cash $.02
Daniel B. Sweeney 4/28/99 1,000 $20 cash $.02
Thomas D. Gearke 4/28/99 1,000 $20 cash $.02
Nancy J. Sullivan 4/28/99 1,000 $20 cash $.02
Rhadica Singh 4/28/99 1,000 $20 cash $.02
Richard Wong 4/28/99 1,000 $20 cash $.02
Gary Greenberg 4/28/99 1,000 $20 cash $.02
John J. Memolo 4/28/99 1,000 $20 cash $.02
Linda M. Carlson 4/28/99 1,000 $20 cash $.02
Lincoln W. Anderson 5/09/99 1,000 $20 cash $.02
Jennifer R. Bell 5/11/99 1,000 $20 cash $.02
Britta Rueschhoff 7/01/99 1,000 $20 cash $.02
Bernard Rueschhoff 7/01/99 1,000 $20 cash $.02
Each of the sales listed above was made for cash as listed. All of the listed
sales were made in reliance upon the exemption from registration offered by
Section 4(2) of the Securities Act of 1933, as amended. Based upon Subscription
Agreements completed by each of the subscribers, the Company had reasonable
grounds to believe immediately prior to making an offer to the private
investors, and did in fact believe, when such subscriptions were accepted, that
such purchasers (1) were purchasing for investment and not with a view to
distribution, and (2) had such knowledge and experience in financial and
business matters that they were capable of evaluating the merits and risks of
their investment and were able to bear those risks. The purchasers had access to
pertinent information enabling them to ask informed questions. The shares were
issued without the benefit of registration. An appropriate restrictive legend is
imprinted upon each of the certificates representing such shares, and
stop-transfer instructions have been entered in the Company's transfer records.
All such sales were effected without the aid of underwriters, and no sales
commissions were paid.
32
<PAGE>
Item 5. Indemnification of Directors and Officers
The Nevada Statutes provide that the Company may 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.
33
<PAGE>
SIGNATURES:
Pursuant to the requirements of Section 12 of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
DATED: December 27, 1999
FRANKLYN RESOURCES I, INC.
------------------------
by: /s/Frank Kramer
President, Frank Kramer
/s/Deborah A. Salerno
Deborah A. Salerno
Directors:
/s/Frank Kramer
Director, Frank Kramer
/s/Deborah A. Salerno
Director, Deborah A. Salerno
34
<PAGE>
FRANKLYN RESOUCES I, INC.
(A Development Stage Company)
Financial Statements
May 31, 1999
<PAGE>
COMISKEY & COMPANY
PROFESIONAL CORPORATION
789 Sherman St., Suite 440
Denver, CO 80203
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors and Stockholders of FRANKLYN RESOUCES I, INC.
We have audited the accompanying balance sheet of Franklyn Resources, Inc. (a
development stage company) as of May 31, 1999, and the related statement of
operations, stockholders' equity, and cash flows for the initial period from
inception (February 25, 1999) to May 31, 1999. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of FRANKLYN RESOUCES I, INC. as of
May 31, 1999, and the results of its operations and cash flows for the initial
period then ended in conformity with generally accepted accounting principles.
Denver, Colorado
June 24, 1999
/s/ Comiskey & Company
----------------------
PROFESSIONAL CORPORATION
F-1
<PAGE>
FRANKLYN RESOURCES I, INC.
(A Development Stage Company)
Balance Sheet
May 31, 1999
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 3,230
Stock subscription receivable 25
--------
Total current assets 3,255
--------
TOTAL ASSETS 3,255
========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES -
--------
Total current liabilities -
STOCKHOLDERS' EQUITY
Common stock, $0.001 par value; 25,000,000
shares authorized; 3,204,000 shares issued and
outstanding 3,204
Common stock subscribed 40
Additional paid-in capital 60,876
Deficit accumulated during the development
stage (60,865)
--------
3,255
--------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 3,255
========
The accompanying notes are an integral part of the financial statements.
F-2
<PAGE>
FRANKLYN RESOURCES I, INC.
(A Development Stage Company)
Statement of Operations
For the initial period from inception (February 26, 1999) to May 31, 1999
REVENUES
$ -
EXPENSES
Selling, general and administrative 60,865
-----------
Total expenses 60,865
-----------
NET LOSS (60,865)
Accumulated deficit
Balance, beginning of period -
-----------
Balance, end of period $ (60,865)
===========
NET LOSS PER SHARE $ (0.02)
===========
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 3,204,000
===========
F-3
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
<CAPTION>
FRANKLYN RESOURCES I, INC.
(A Development Stage Company)
Statement of Stockholders' Equity
For the initial period from inception (February 26, 1999) to May 31, 1999
Deficit
accumulated
Common stock Additional during the Total
Number of paid-in development stockholders'
shares Amount capital stage equity
<S> <C> <C> <C> <C> <C>
Common stock issued for
cash and services,
February 1999
at $0.02 per share 3,175,000 $3,175 $ 60,325 $ - $63,500
Common stock issued for
cash, February 1999
at $0.02 per share 29,000 29 551 - 580
Net loss for the year ended
May 31, 1999 - - - (60,865) (60,865)
----------- ----------- ----------- ----------- -----------
Balance, May 31, 1999 3,204,000 3,204 $ 60,876 $ (60,865) $ 3,215
=========== ========== ========= =========== ===========
F-4
The accompanying notes are an integral part of the financial statements
</TABLE>
<PAGE>
FRANKLYN RESOURCES I, INC.
(A Development Stage Company)
Statement of Cash Flows
For the initial period from inception (February 26, 1999) to May 31, 1999
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(60,865)
Adjustments to reconcile
net loss to net cash used
by operating activities:
Stock issued for services 60,325
--------
Net cash from operating activities (540)
CASH FLOWS FROM INVESTING ACTIVITIES
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of common stock 3,755
Increase in stock subscription receivable (25)
Increase in stock subscribed 40
--------
Net cash provided by financing activities 3,770
--------
NET INCREASE IN CASH
AND CASH EQUIVALENTS 3,230
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD -
--------
CASH AND CASH EQUIVALENTS,
END OF PERIOD $ 3,230
========
F-5
The accompanying notes are an integral part of the financial statements.
<PAGE>
FRANKLYN RESOURCES I, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
May 31, 1999
1. Summary of Significant Accounting Policies
Development Stage Company
FRANKLYN RESOURCES I, INC. (a development stage company) (the "Company") was
incorporated under the laws of the State of Nevada on March 3, 1999. The initial
principal office of the corporation is 502 East John Street, Carson City, Nevada
89706.
The Company is a new enterprise in the development stage as defined by Statement
No. 7 of the Financial Accounting Standards Board and has not engaged in any
business other than organizational efforts. It has no full-time employees and
owns no real property. The Company intends to operate as a capital market access
corporation by registering with the U.S. Securities and Exchange Commission
under the Securities Exchange Act of 1934. After this, the Company intends to
seek to acquire one or more existing businesses which have existing management,
through merger or acquisition. Management of the Company will have virtually
unlimited discretion in determining the business activities in which the Company
might engage.
Accounting Method
The Company records income and expenses on the accrual method.
Fiscal Year
The fiscal year of the corporation shall be established by the board of
directors.
Loss per Share
Loss per share was computed using the weighted average number of shares
outstanding during the period. Shares issued to insiders in anticipation of a
public offering have been accounted for as outstanding since inception.
Organization Costs
Costs to incorporate the Company are charged to expense as incurred..
Financial Instruments
Unless otherwise indicated, the fair value of all reported assets and
liabilities which represent financial instruments (none of which are held for
trading purposes) approximate the carrying values of such amount.
Statement of Cash Flows
For purposes of the statement of cash flows, the Company considers all highly
liquid debt instruments purchased with an original maturity of three months or
less to be cash equivalents.
Use of Estimates
The preparation of the Company's financial statements in conformity with
generally accepted accounting principles requires the Company's management to
make estimates and assumptions that effect the amounts reported in these
financial statements and accompanying notes. Actual results could differ from
those estimates.
F-6
<PAGE>
FRANKLYN RESOURCES I, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
May 31, 1999
2. Stockholders' Equity
As of May 31, 1999, 25,000,000 shares of the Company's $0.001 par value common
stock had been authorized, of which 3,204,000 were issued and outstanding, and
2,000 were subscribed but not issued. Of the total shares authorized for
issuance, 3,175,000 were issued for cash of $0.001 per share and services of
$0.019 per share, with a total of $60,325 recorded as general and administrative
costs in connection with the formation of the Company. The other 31,000 were
issued for $620, or $0.02 per share.
As of July 5, 1999, the stock subscriptions receivable had been collected.
3. Related Party Transactions
As of the date hereof, Frank L. Kramer and Deborah A. Salerno are the officers
and directors of the Company, and are the owners of 2,000,000 shares of its
issued and outstanding common stock, constituting approximately 62% of the
Company's issued and outstanding common stock. The shares were issued for cash
of $0.001 per share and services provided which have been valued at a total of
$38,000.
Officers and directors are reimbursed for all out-of-pocket expenses.
F-7
<PAGE>
Franklyn Resources I, Inc.
(Development Stage Company)
Financial Statements
(Unaudited)
August 31, 1999
F-8
<PAGE>
CONTENTS
PAGE
ACCOUNTANTS' REPORT F-9
BALANCE SHEET F-10
STATEMENT OF OPERATIONS F-11
STATEMENT OF CASH FLOWS F-12
NOTES TO FINANCIAL STATEMENTS F-13
<PAGE>
The Board of Directors and Stockholders of
Franklyn Resources I, Inc.
The accompanying balance sheet of Franklyn Resources I, Inc. (a development
stage company) as of August 31, 1999, and the related statements of operations
and cash flows for the period then ended were not audited by us and,
accordingly, we do not express an opinion on them.
Denver, Colorado
September 29, 1999 /s/ Comiskey & Co.
COMISKEY & CO.
PROFESSIONAL CORPORATION
F-9
<PAGE>
Franklyn Resources I, Inc.
(A Development Stage Company)
BALANCE SHEET
August 31, 1999
(Unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 2,005
--------
Total current assets 2,005
--------
TOTAL ASSETS $ 2,005
========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES $ --
--------
Total current liabilities --
STOCKHOLDERS' EQUITY
Common stock, $0.001 par value; 25,000,000
shares authorized; 3,206,000 shares issued and
outstanding 3,206
Additional paid-in capital 60,914
Deficit accumulated during the development
stage (62,115)
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 2,005
The accompanying notes are an integral partof this financial statement.
F-10
<PAGE>
Franklyn Resources I, Inc.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
August 31, 1999
(Unaudited)
For the period
from inception For the three
(February 26, 1999) months ended
to August 31, 1999 August 31, 1999
REVENUES $ -- $ --
EXPENSES
Selling, general and administrative 62,115 1,250
Total expenses 62,115 1,250
---------- -------
NET LOSS (62,115) (1,250)
Accumulated deficit
Balance, beginning of period -- (60,865)
----------- -------
Balance, end of period $ (62,115) $ (62,115)
=========== =======
NET LOSS PER SHARE $ (0.02) $ (0.00)
=========== =======
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 3,206,000 3,206,000
=========== =======
The accompanying notes are an integral partof this financial statement.
F-11
<PAGE>
Franklyn Resources I, Inc.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
August 31, 1999
(Unaudited)
For the period
from inception For the three
(February 26, 1999) months ended
to August 31, 1999 August 31, 1999
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(62,115) $ (1,250)
Adjustments to reconcile
net loss to net cash used
by operating activities:
Stock issued for services 60,325 --
-------- ------
Net cash flows from operating activities (1,790) (1,250)
CASH FLOWS FROM INVESTING ACTIVITIES -- --
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of common stock 3,795 40
Decrease in stock subscription receivable -- 25
Decrease in stock subscribed -- (40)
-------- ------
Net cash flows from financing activities 3,795 25
-------- ------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 2,005 (1,225)
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD -- 3,230
-------- ------
CASH AND CASH EQUIVALENTS,
END OF PERIOD $ 2,005 $ 2,005
======== ======
The accompanying notes are an integral part of the financial statements
F-12
<PAGE>
Franklyn Resources I, Inc.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
August 31, 1999
(Unaudited)
1. Management's Representation of Interim Financial Information The accompanying
financial statements have been prepared by Franklyn Resources I, Inc. without
audit pursuant to rules and regulations of the U. S. Securities and Exchange
Commission. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted as allowed by such rules and
regulations, and management believes that the disclosures are adequate to make
the information presented not misleading. These financial statements include all
of the adjustments, which, in the opinion of management, are necessary to a fair
presentation of financial position and results of operations. All such
adjustments are of a normal and recurring nature. These financial statements
should be read in conjunction with the audited financial statements at May 31,
1999.
F-13
<PAGE>
INDEX TO EXHIBITS
SK#
*3.1 Articles of Incorporation
*3.2 Amendment to Articles of Incorporation
*3.3 Bylaws
* Previously filed
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> OTHER 3-MOS
<FISCAL-YEAR-END> MAY-31-1999 MAY-31-2000
<PERIOD-END> MAY-31-1999 AUG-31-1999
<CASH> 3,230 2,005
<SECURITIES> 0 0
<RECEIVABLES> 25 0
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 3,255 2,005
<PP&E> 0 0
<DEPRECIATION> 0 0
<TOTAL-ASSETS> 3,255 2,005
<CURRENT-LIABILITIES> 0 0
<BONDS> 0 0
0 0
0 0
<COMMON> 0 0
<OTHER-SE> 51 (1,201)
<TOTAL-LIABILITY-AND-EQUITY> 3,255 2,005
<SALES> 0 0
<TOTAL-REVENUES> 0 0
<CGS> 0 0
<TOTAL-COSTS> 0 0
<OTHER-EXPENSES> 60,865 1,250
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> (60,865) (1,250)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (60,865) (1,250)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (60,865) (1,250)
<EPS-BASIC> (.02) (0)
<EPS-DILUTED> (.02) (0)
</TABLE>
