U. S. Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-SB
File No.: __________________
CIK: 0001098331
GENERAL FORM FOR REGISTRATION OF SECURITIES
OF SMALL BUSINESS ISSUERS
Under Section 12(b) or (g) of the Securities Exchange Act of 1934
MARATHON MARKETING CORP.
-------------------
(Name of Small Business Issuer in its charter)
COLORADO 84-1283938
State or other jurisdiction of IRS Employer ID Number
incorporation or organization
1529 SPRUCE STREET, #10, BOULDER, CO 80302
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (303) 440-5356
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
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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........................................ 21
Item 5. Directors and Executive Officers of the Registrant.......... 21
Item 6. Executive Compensation...................................... 25
Item 7. Certain Relationships and Related Transactions.............. 26
Item 8. Description of Securities................................... 27
PART II
Item 1. Market for Registrant's Common Stock and
Security Holder Matters............................... 28
Item 2. Legal Proceedings........................................... 29
Item 3. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure................ 29
Item 4. Recent Sales of Unregistered Securities..................... 29
Item 5. Indemnification of Directors and Officers................... 30
PART F/S
Signature Page............................................... 31
Financial Statements and Supplementary Data.................. F-1
Exhibits, Financial Statement Schedule and Reports on Form 8-K..... 32
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PART I
ITEM 1. DESCRIPTION OF BUSINESS.
GENERAL
The Company was incorporated under the laws of the State of Colorado on
November 21, 1991, and is in the early developmental and promotional stages. To
date the Company's activities have been organizational ones, directed at
developing its business plan and raising its initial capital. The Company was
formed to seek business opportunities and is currently a "shell" with no
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 is a "shell" company and its only 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. The Company intends to
seek opportunities demonstrating the potential of long-term growth as opposed to
short-term earnings.
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
because it may be listed to trade its shares on the OTCBB.
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
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relying upon an untested product or marketing concept; or (v) have a combination
of the 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 officers 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.
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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 Colorado law to enter into such a transaction if:
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.
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.
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It is emphasized that management of the Company may effect transactions
having a potentially adverse impact upon the Company's shareholders pursuant to
the 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;
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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
9. The accessibility of required management expertise, personnel, raw
materials, services, professional assistance, and other required items.
In regard to the possibility that the shares of the Company would
qualify for listing on NASDAQ, the current standards include the requirements
that the issuer of the securities that are sought to be listed have total net
tangible assets of at least $4,000,000. 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 specific proposals and
the selection of a business opportunity may take several months or more. Prior
to making a decision to participate in a business opportunity, the Company will
generally request that it be provided with written materials regarding the
business opportunity containing 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
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.
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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
and others. If a decision is made not to participate in a specific business
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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 Colorado
Business Corporation Act vests authority in the Board of Directors to decide and
approve matters involving acquisitions within certain restrictions. A
transaction could 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. Therefore, a shareholder will have no right of dissent under
Colorado 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 1529 Spruce
Street, #10, Boulder, Colorado 80302 which is the office address of its
President, Scott A. Deitler. 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
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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 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 any. 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."
2. Need For Additional Financing. The Company has very limited funds,
and such funds may not be adequate to take advantage of any available business
opportunities. Even if the Company's 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
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.
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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 November 1991
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 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."
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<PAGE>
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
reporting provisions of the Exchange Act, complete an acquisition of an entity
for which audited financial statements prove to be unobtainable, the Company
14
<PAGE>
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 three 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. Colorado 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
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<PAGE>
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.
15. Director's Liability Limited. Colorado 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
16
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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.
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 holding 360,000 common shares of
the Company have held their shares for two years and under Rule 144(K) 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. Of the total shares outstanding, 300,000 shares become available for
resale (subject to volume limitations for affiliates) under Rule 144 when the
Company's 12(g) Registration Statement becomes effective subject to other
applicable requirements 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.
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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 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 significant capital
resources and has stockholder's equity of only $165. The Company has current
assets in the form of cash of $165 and total assets of $165.
The Company will carry out its plan of business as discussed above. The
Company cannot predict to what extent its lack of liquidity and capital
resources 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.
During the period from November 21, 1991 (inception) through date of
this registration statement 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. No revenues were received by the Company during this period. The
company has incurred operating expenses since inception of the development stage
to August 31, 1999 of $135. The net loss on operations was $(95) through August
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 AUGUST 31, 1999 COMPARED TO 1998
The Company had no revenues in 1999 or 1998. The Company incurred $95
in expenses in 1999 as compared to $40 in expenses in 1998.
The net operating loss in 1999 was $95 as compared to $40 in 1998. The
losses in 1999 were as a result of miscellaneous out-of-pocket expenses. In 1998
the company incurred no expenses. The net loss per share each year was less than
($.01) per share.
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 QUARTER ENDED NOVEMBER 30, 1999
The Company incurred $1,750 in audit expenses in the quarter ended
November 30, 1999. The Company had no expenses in the same quarter period in
1998. The Company had no revenues in the quarter in either 1998 or 1999. The
Company had losses of ($1,750) on operations in the quarter in 1999 as compared
to no loss or gain in 1998.
At quarter end, the Company had approximately $3,250 in cash on hand,
which is insufficient for any operation. It will need loans or cash infusions
from shareholders in order to continue any efforts requiring cash.
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.
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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.
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 could be improved by non-IT systems that may suffer from
Year 2000 problems, including telephone systems and facsimile and other office
machines. Moreover, third-parties suppliers 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 minimal 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
1529 Spruce Street, #10, Boulder, CO 80302, which is the office address of its
President, Scott A. Deitler. 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.
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ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
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 executive officers, directors and persons who hold 5.0% or more of the
outstanding Common Stock of the Company. Also included are the shares held by
all executive officers and directors as a group.
<TABLE>
<CAPTION>
<S> <C> <C>
SHAREHOLDERS/ NUMBER OF SHARES OWNERSHIP
BENEFICIAL OWNERS PERCENTAGE
Scott A. Deitler
President & Director 224,000(1) 33.3%
James W. Toot
Secretary & Director 224,000 33.3%
Jeff P. Ploen
Treasurer & Director 224,000 33.3%
All directors and executive 672,000 100%
officers as a group (3 persons)
</TABLE>
(1) Includes shares owned by S.D.F. Enterprises, L.P. of which Scott Deitler is
manager.
Each principal shareholder has sole investment power and sole voting power
over the shares.
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS.
The directors and executive officers currently serving the Company are
as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
NAME POSITION HELD TENURE
- ------------------------------------ --------------------------- ------
Scott A. Deitler President and Director Annual since 1991
James W. Toot Secretary and Director Annual since 1997
Jeff P. Ploen Treasurer and Director Annual since 1998
</TABLE>
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.
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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.
BIOGRAPHICAL INFORMATION
SCOTT A. DEITLER, age 43, President and director since inception, received
a B.A. in Business and Conservation from the University of Colorado in 1978.
From 1987 to 1995, he was President and a director of Colorado Coin Co. in
Boulder, Colorado. From 1993 to 1998, he was President of Ulta Travel, Inc., a
travel agency. He is President and Director of J.S.J. Capital Corp. (1999),
J.S.J. Capital II, Inc. (1999), J.S.J. Capital III, Inc. (1999), Investra
Enterprises, Inc. (1999), Advanced Ceiling Supplies, Inc. (1997), Cross Check
Corp. (1997), all of which are blank check companies without specific business,
but which are seeking an acquisition or merger.
JAMES W. TOOT, age 44, Secretary and director since 1997. Mr. Toot was a
licensed securities representative from 1981 to 1996. From 1986 to 1990, he was
a Vice President at Rocky Mountain Securities, Inc. From 1990 to 1994, he was a
vice president of Cohig & Associates, Inc., a broker/dealer. From 1994 to 1996,
he was vice president of Rocky Mountain Securities, Inc. Since 1996, he has been
an officer and director of J.S.J. Capital Corp. (1999), J.S.J. Capital II, Inc.
(1999), J.S.J. Capital III, Inc. (1999), Investra Enterprises, Inc. (1999),
Advanced Ceiling Supplies, Inc. (1997), Cross Check Corp. (1997), all of which
are blank check companies without specific business, but which are seeking an
acquisition or merger.
JEFF P. PLOEN, age 49, is a director and Treasurer of the Company since
1998. He received a B.S. in Business Administration from the University of
Wyoming. He was Branch Manager of Neidiger Tucker Bruner, Inc. (1990 to 1992)
and Branch Manager of Cohig & Associates, Inc. (1992 to 1993). He was a licensed
securities representative from 1972 to 1994. He was C.E.O. of Tamarron
Investments, Inc. from 1993 to 1995. He has been President and a Director of J.
Paul Consulting Corp. since 1995. He has been a director and Treasurer of J.S.J.
Capital Corp. (1999), J.S.J. Capital II, Inc. (1999), J.S.J. Capital III., Inc.
(1999), Cross Check Corp. (1997-1999), and Investra Enterprises, Inc. (1999),
all of which are blank check companies without specific business, but which are
seeking an acquisition or merger.
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 receives any
compensation for their respective services rendered to the Company, nor have
they received such compensation in the past. They all have agreed to act without
compensation until authorized by the Board of Directors, which is not expected
to occur until the Company has generated revenues from operations after
consummation of a merger or acquisition. 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.
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It is possible that, after the Company successfully consummates a
merger or acquisition with an unaffiliated entity, that entity may desire to
employ or retain one or a number of members of the Company's management for the
purposes of providing services to the surviving entity, or otherwise provide
other compensation to such persons. However, the Company has adopted a policy
whereby the offer of any post-transaction remuneration to members of management
will not be a consideration in the Company's decision to undertake any proposed
transaction. Each member of management has agreed to disclose to the Company's
Board of Directors any discussions concerning possible compensation to be paid
to them by any entity which proposes to undertake a transaction with the Company
and further, to abstain from voting on such transaction. Therefore, as a
practical matter, if each member of the Company's Board of Directors 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.
PREVIOUS "BLANK CHECK" OR "SHELL" COMPANY INVOLVEMENT
Management of the Company has been involved in prior private "blank check"
or "shell" companies as follows:
Each of the members of management are also officers and directors of
certain other "shell" companies, as follows: J.S.J. Capital Corp., J.S.J.
Capital II, Inc., J.S.J. Capital III, Inc., Cross Check Corp. and Investra
Enterprises, Inc. Scott Deitler and James Toot are President and Secretary,
respectively, and Directors of Advanced Ceiling Supplies, Inc. None of the
companies have completed an acquisition or merger and all of the companies are
in the development stage.
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INDEMNIFICATION OF OFFICERS AND DIRECTORS
As permitted by Colorado Statutes, the Company may indemnify its
directors and officers against expenses and liabilities they incur to defend,
settle, or satisfy any civil or criminal action brought against them on account
of their being or having been Company directors or officers unless, in any such
action, they are adjudged to have acted with gross negligence or willful
misconduct. Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers or persons
controlling the Company pursuant to the foregoing provisions, the Company has
been informed that, in the opinion of the Securities and Exchange Commission,
such indemnification is against public policy as expressed in that Act and is,
therefore, unenforceable.
EXCLUSION OF LIABILITY
The Colorado Corporation Act excludes personal liability for its
directors for monetary damages based upon any violation of their fiduciary
duties as directors, except as to liability for any breach of the duty of
loyalty, acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, acts in violation of the Colorado
Corporation Act, or any transaction from which a director receives an improper
personal benefit. This exclusion of liability does not limit any right which a
director may have to be indemnified and does not affect any director's liability
under federal or applicable state securities laws.
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
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<PAGE>
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, 1997.
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.
<TABLE>
<CAPTION>
ITEM 6. EXECUTIVE COMPENSATION.
SUMMARY COMPENSATION TABLE OF EXECUTIVES
<S> <C> <C> <C> <C> <C> <C>
Annual Compensation Awards
Name & Year Salary Bonus Other Annual Restricted Securities
Principal ($) ($) Compensation Stock Underlying
Position ($) Award(s) Options/
($) SARS (#)
- --------------------------------------------------------------------------------------------------------------------
Scott A. Deitler, 1997 0 0 0 0 0
President 1998 0 0 0 0 0
1999 0 0 0 0 0
- --------------------------------------------------------------------------------------------------------------------
James W. Toot, 1997 0 0 0 0 0
Secretary 1998 0 0 0 0 0
1999 0 0 0 0 0
- --------------------------------------------------------------------------------------------------------------------
Jeff P. Ploen 1997 0 0 0 0 0
Treasurer 1998 0 0 0 0 0
1999 0 0 0 0 0
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
25
<PAGE>
<TABLE>
<CAPTION>
Directors' Compensation
<S> <C> <C> <C> <C> <C>
Name Annual Meeting Consulting Number Number of
Retainer Fees ($) Fees/Other of Securities
Fee($) Fees ($) Shares Underlying
(#) Options SARS #
- -----------------------------------------------------------------------------------------------------------------
A. Director, Scott A. Deitler 0 0 0 0 0
B. Director, James W. Toot 0 0 0 0 0
C. Director, Jeff P. Ploen 0 0 0 0 0
</TABLE>
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. There is no
current plan in existence, 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.
In 1995, the Company issued to its founding director, Scott A. Deitler,
a total of 5,000 shares of Common Stock for a total of $5,000. In 1998, 3
persons purchased 582,000 shares at $.0004464 per share for a total of $298 as
follows: Scott Deitler, President and Director, purchased 134,000 shares, James
W. Toot, Secretary and Director, purchased 224,000 shares, and Jeff P. Ploen,
Treasurer and Director, purchased 224,000 shares. In 1998, S.D.F. Enterprises,
L.P. received 85,000 shares for services beneficially owned by Scott A. Deitler.
Certificates evidencing the Common Stock 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 asset proposed to be
acquired by the Company through security holdings, contracts, options, or
otherwise.
26
<PAGE>
The Company has adopted a policy under which any consulting or finder's
fee that may be paid to a third party for consulting services to assist
management in evaluating a prospective business opportunity would be paid in
stock 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 management has no current plans to cause the Company to do so,
it is possible that the Company may enter into an agreement with an acquisition
candidate requiring the sale of all or a portion of the Common Stock held by the
Company's current stockholders to the acquisition candidate or principals
thereof, or to other individuals or business entities, or requiring some other
form of payment to the Company's current stockholders, or requiring the future
employment of specified officers and payment of salaries to them. It is more
likely than not that any sale of securities by the Company's current
stockholders to an acquisition candidate would be at a price substantially
higher than that originally paid by such stockholders. Any payment to current
stockholders in the context of an acquisition involving the Company would be
determined entirely by the largely unforeseeable terms of a future agreement
with an unidentified business entity.
ITEM 8. DESCRIPTION OF SECURITIES.
COMMON STOCK
The Company's Articles of Incorporation authorize the issuance of
200,000,000 shares of Common Stock $.00001 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.
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.
PREFERRED STOCK
The Company's Articles of Incorporation authorize the issuance of
40,000,000 shares of Preferred Stock. The Board of Directors of the Company is
authorized to issue the Preferred Stock from time to time in classes and series
and is further authorized to establish such classes and series to fix and
determine the variations in the relative rights and preferences as between
27
<PAGE>
series, to fix voting rights, if any, for each class or series, and to allow for
the conversion of Preferred Stock into Common Stock. No Preferred Stock has been
issued by the Company.
Preferred Stock may be utilized in making acquisitions.
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 Colorado laws,
no lock up agreement is required regarding the Company's shares as it might
relate to an acquisition.
TRANSFER AGENT
The Company has engaged Mountain Share Transfer, Inc., 1625 Abilene
Drive, Broomfield, Colorado 80020 as its transfer agent.
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
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
No public trading market exists for the Company's securities and all of
its outstanding securities are restricted securities as defined in Rule 144.
There were four (4) holders of record of the Company's common stock on August
31, 1999. No dividends have been paid to date and the Company's Board of
Directors does not anticipate paying dividends in the foreseeable future.
28
<PAGE>
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.
Not applicable.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES.
Since November 21, 1991 (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:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Purchase Date of
PURCHASER PER SHARE AMOUNT PURCHASE SHARES
Scott A. Deitler $1.00 $5,000 1/17/92 5,000
President & Director
1529 Spruce St., #2
Boulder, CO 80302
Scott A. Deitler $.00045 $60.00 1/1/98 134,000
President & Director
1529 Spruce St., #2
Boulder, CO 80302
S.D.F. Enterprises L.P. $.00045 Services 1/1/98 85,000
S.T.W. Inc. General Partner Rendered
James W. Toot $.00045 $100.00 1/1/98 224,000
Secretary & Director
7444 Singing Hills Court
Boulder, CO 80301
Jeff P. Ploen $.00045 $100.00 1/1/98 224,000
Treasurer & Director
6041 Syracuse Way, #307
Englewood, CO 80111
</TABLE>
29
<PAGE>
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.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Colorado 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.
30
<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 8, 1999
MARATHON MARKETING CORP.
BY: /S/SCOTT A. DEITLER
-----------------------------------
Scott A. Deitler, President
BY: /S/JAMES W. TOOT
-----------------------------------
James W. Toot, Secretary
Directors:
/S/JAMES W. TOOT
-----------------------------------
James W. Toot, Secretary & Director
/S/JEFF P. PLOEN
-----------------------------------
Jeff P. Ploen, Treasurer & Director
/S/SCOTT A. DEITLER
-----------------------------------
Scott A. Deitler, Director
31
<PAGE>
<TABLE>
<CAPTION>
INDEX TO FINANCIAL STATEMENTS
<S> <C>
PAGE
----
Independent Auditors' Report for year ended August 31, 1999 F-2
Financial Statements:
Balance Sheet F-3
Statements of Operations F-4
Statement of Changes in Stockholders' Equity F-5
Statements of Cash Flows F-6
Notes to Financial Statements F-7-F-8
Interim Financial Statements for Period ended November 30, 1999 F-9
Balance Sheet F-10
Statement of Operations F-11
Statement of Cash Flows F-12
Notes to Financial Statements F-13-F14
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
TO THE BOARD OF DIRECTORS AND STOCKHOLDERS
MARATHON MARKETING CORP.
BOULDER, COLORADO
We have audited the accompanying balance sheet of Marathon Marketing Corp. (a
development stage company) as of August 31, 1999, and the related statements of
operations, changes in stockholders' equity, and cash flows for the year ended
August 31, 1999, for the period from January 1, 1998 (inception of development
stage) to August 31, 1998 and for the period from January 1, 1998 (inception of
development stage) to August 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 audits.
We conducted our audits 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 audits provide 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 Marathon Marketing Corp. as of
August 31, 1999, and the results of its operations and its cash flows for the
year ended August 31, 1999 for the period from January 1, 1998 (inception of
development stage) to August 31, 1998 and for the period from January 1, 1998
(inception of development stage) to August 31, 1999, in conformity with
generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company is in the development stage and has not
commenced operations. Its ability to continue as a going concern is dependent
upon its ability to develop additional sources of capital, locate and complete a
merger with another company and ultimately achieve profitable operations. These
conditions raise substantial doubt about its ability to continue as a going
concern. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
/S/A.J. ROBBINS
DENVER, COLORADO
OCTOBER 12, 1999
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
F-2
<PAGE>
<TABLE>
<CAPTION>
MARATHON MARKETING CORP.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
AUGUST 31, 1999
ASSETS
<S> <C>
CURRENT ASSETS, CASH ON HAND $ 165
==================
LIABILITIES AND STOCKHOLDERS' EQUITY
TOTAL LIABILITIES $ -
------------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
PREFERRED STOCK, 40,000,000 SHARES AUTHORIZED, NONE
ISSUED AND OUTSTANDING
COMMON STOCK, $.00001 PAR VALUE, 200,000,000 SHARES
AUTHORIZED, 672,000 SHARES ISSUED AND
OUTSTANDING 7
ADDITIONAL PAID-IN CAPITAL 6,793
(DEFICIT) ACCUMULATED DURING THE DEVELOPMENT STAGE (6,635)
-------------------
TOTAL STOCKHOLDERS' EQUITY 165
-------------------
$ 165
===================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
F-3
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
MARATHON MARKETING CORP.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
<S> <C> <C> <C>
CUMULATIVE
FOR THE PERIOD FROM
JANUARY 1, JANUARY 1,
1998 1998
(INCEPTION OF THE (INCEPTION OF
DEVELOPMENT THE
FOR THE YEAR DEVELOPMENT)
ENDED STAGE) TO Stage to
AUGUST 31, August 31, August 31,
1999 1998 1999
REVENUE $ - $ - $ -
----------------- ----------------- -----------------
EXPENSES:
GENERAL AND ADMINISTRATIVE 95 40 135
----------------- ---------------- -----------------
TOTAL EXPENSES 95 40 135
----------------- ---------------- -----------------
NET INCOME/(LOSS) $ (95) $ (40) $ (135)
================= ================ =================
NET INCOME/(LOSS) PER COMMON SHARE - BASIC $ * $ *
================= ================
WEIGHTED AVERAGE NUMBER OF COMMON SHARES 672,000 672,000
OUTSTANDING ================= ================
*Less than $(.01)
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
F-4
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
MARATHON MARKETING CORP.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM JANUARY 1, 1998 (INCEPTION OF DEVELOPMENT STAGE)
TO AUGUST 31, 1999
<S> <C> <C> <C> <C> <C>
(DEFICIT)
ACCUMULATED
ADDITIONAL DURING THE
COMMON STOCK PAID-IN Development
SHARES Amount Capital Stage Total
BALANCES, JANUARY 1, 1998 5,000 $ - $ 6,500 $ (6,500) $ -
Issuance of stock for cash on
January 1, 1998 at $.00045
per share 582,000 6 254 - 260
Issuance of stock for services
on January 1, 1998 85,000 1 39 - 40
NET (LOSS) - - - (40) (40)
----------------
BALANCES, AUGUST 31, 1998 672,000 7 6,793 (6,540) 260
NET (LOSS) - - - (95) (95)
----------------
BALANCES, AUGUST 31, 1999 672,000 7 $ 6,793 $ (6,635) $ 165
================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
F-5
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
MARATHON MARKETING CORP.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
<S> <C> <C> <C>
CUMULATIVE
FOR THE PERIOD FROM
JANUARY 1, JANUARY 1,
1998 1998
(INCEPTION OF (INCEPTION OF
THE THE
FOR THE YEAR DEVELOPMENT DEVELOPMENT
ENDED STAGE) TO STAGE) TO
AUGUST 31, AUGUST 31, AUGUST 31,
1999 1998 1999
CASH FLOWS FROM (TO) OPERATING ACTIVITIES:
NET (LOSS) FROM OPERATIONS $ (95) $ (40) $ (135)
----------------- ----------------- -------------
ADJUSTMENTS TO RECONCILE NET (LOSS) TO NET CASH USED BY
OPERATING ACTIVITIES:
COMMON STOCK ISSUED FOR SERVICES - 40 40
----------------- ----------------- --------------
NET CASH (USED) BY OPERATING ACTIVITIES (95) - (95)
----------------- ----------------- --------------
CASH FLOWS FROM (TO) FINANCING ACTIVITIES:
COMMON STOCK ISSUED FOR CASH - 260 260
----------------- ----------------- --------------
NET CASH PROVIDED BY FINANCING ACTIVITIES - 260 260
----------------- ----------------- --------------
NET INCREASE IN CASH (95) 260 165
CASH, BEGINNING OF PERIOD 260 - -
----------------- ----------------- --------------
CASH, END OF PERIOD $ 165 $ 260 $ 165
================= ================= ==============
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
F-6
</TABLE>
<PAGE>
MARATHON MARKETING CORP.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
HISTORY
Marathon Marketing Corp. (the Company), a development stage company, was
organized under the laws of the State of Colorado on November 21, 1991. The
Company commenced operations in January 1995 and became dormant on December 31,
1997. The Company is now in the development stage as defined in Financial
Accounting Standards Board Statement No. 7. The fiscal year end is August 31.
GOING CONCERN
The Company's financial statements have been presented on the basis that it is a
going concern, which contemplates the realization of assets and the satisfaction
of liabilities in the normal course of business. The Company is in the
development stage and has not earned any revenues from operations to date.
The Company is currently devoting its efforts to locating merger candidates. The
Company's ability to continue as a going concern is dependent upon its ability
to develop additional sources of capital, locate and complete a merger with
another company, and ultimately, achieve profitable operations. The accompanying
financial statements do not include any adjustments that might result from the
outcome of these uncertainties.
INCOME TAXES
The Company has elected, with the shareholders' consent, to be taxed under
provisions of Subchapter S of the Internal Revenue Code. Under those provisions,
the Company does not pay federal corporate income taxes on its taxable income
and is not allowed a net operating loss carryover or carryback as a deduction.
Instead, the stockholders are liable for individual federal income taxes on
their respective shares of the Company's taxable income and, subject to certain
limitations, include their respective shares of the Company's net operating loss
in their individual income tax returns.
EARNINGS (LOSS) PER COMMON SHARE
During 1997 the Financial Accounting Standard Board (FASB) issued Statement of
Financial Accounting Standards No. 128, "Earnings per Share" (SFAS 128). SFAS
128 replaced the calculation of primary and fully diluted earnings per share
with basic and diluted earnings per share. Basic earnings (loss) per common
share is computed based upon the weighted average number of common shares
outstanding during the period. Diluted earnings per share consists of the
weighted average number of common shares outstanding plus the dilutive effects
of options and warrants calculated using the treasury stock method. In loss
periods, dilutive common equivalent shares are excluded as the effect would be
anti-dilutive.
F-7
<PAGE>
MARATHON MARKETING CORP.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities, the disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting periods.
Actual results could differ from those estimates and assumptions.
NOTE 2 - STOCKHOLDERS' EQUITY
During January 1998, the Company issued for cash 582,000 shares of its $.00001
par value common stock at $.00045 per share. The Company also issued 85,000
shares of its $.00001 par value common stock to a related party in exchange for
services rendered, valued at $40.
NOTE 3 - RELATED PARTY TRANSACTIONS
The Company received services valued at $40 in period from January 1, 1998 to
August 31, 1998 from a related party. These services were exchanged for 85,000
shares of the Company's $.00001 par value common stock.
NOTE 4 - SUBSEQUENT EVENT
On October 5, 1999, the Company received loans from stockholders in the amount
of $7,500.
F-8
<PAGE>
MARATHON MARKETING CORP.
(A DEVELOPMENT STAGE COMPANY)
INTERIM FINANCIAL STATEMENTS
(UNAUDITED)
FOR PERIOD ENDED NOVEMBER 30, 1999
F-9
<PAGE>
<TABLE>
<CAPTION>
MARATHON MARKETING CORP.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
NOVEMBER 30, 1999
(UNAUDITED)
ASSETS
<S> <C>
CURRENT ASSETS, CASH ON HAND $ 3,415
==================
LIABILITIES AND STOCKHOLDERS' EQUITY
TOTAL LIABILITIES (SHAREHOLDER LOAN) $ 5,000
------------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
PREFERRED STOCK, 40,000,000 SHARES AUTHORIZED, NONE
ISSUED AND OUTSTANDING
COMMON STOCK, $.00001 PAR VALUE, 200,000,000 SHARES
AUTHORIZED, 672,000 SHARES ISSUED AND
OUTSTANDING 7
ADDITIONAL PAID-IN CAPITAL 6,793
(DEFICIT) ACCUMULATED DURING THE DEVELOPMENT STAGE (8,585)
------------------
TOTAL STOCKHOLDERS' LIABILITIES AND EQUITY (1,585)
==================
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
F-10
<PAGE>
<TABLE>
<CAPTION>
MARATHON MARKETING CORP.
(A Development Stage Company)
STATEMENT OF OPERATIONS
(UNAUDITED)
<S> <C> <C>
FOR THE PERIOD
JANUARY 1,
1998
(INCEPTION OF THE
FOR THE QUARTER DEVELOPMENT
ENDED STAGE) TO
NOVEMBER 30 November 30
1999 1998
----------------- --------------------
REVENUE $ - $ -
----------------- --------------------
EXPENSES:
General and administrative 0 135
ACCOUNTING 1,750 1,750
----------------- --------------------
TOTAL EXPENSES 1,750 1,885
----------------- --------------------
NET INCOME/(LOSS) $ (1,750) $ (1,885)
================= ====================
NET INCOME/(LOSS) PER COMMON SHARE - BASIC $ * $ *
================= ====================
WEIGHTED AVERAGE NUMBER OF COMMON SHARES 672,000 672,000
OUTSTANDING ================ ===================
*Less than $(.01)
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
F-11
<PAGE>
<TABLE>
<CAPTION>
MARATHON MARKETING CORP.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<S> <C> <C>
FOR THE PERIOD
JANUARY 1, 1998
(INCEPTION OF THE
FOR THE QUARTER DEVELOPMENT
ENDED STAGE) TO
NOVEMBER 30 NOVEMBER 30,
1999 1999
----------------- -----------------
CASH FLOWS FROM (TO) OPERATING ACTIVITIES:
NET (LOSS) FROM OPERATIONS $ 1,750 $ 1,885
----------------- -----------------
ADJUSTMENTS TO RECONCILE NET (LOSS) TO NET CASH USED BY
OPERATING ACTIVITIES:
COMMON STOCK ISSUED FOR SERVICES - 40
----------------- -----------------
NET CASH (USED) BY OPERATING ACTIVITIES 1,750 1,845
----------------- -----------------
CASH FLOWS FROM (TO) FINANCING ACTIVITIES:
COMMON STOCK ISSUED FOR CASH - 260
LOANS 5,000 5,000
------------------- --------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 5,000 5,260
----------------- -----------------
NET INCREASE IN CASH 3,250 5,260
CASH, BEGINNING OF PERIOD 165
CASH, END OF PERIOD $ 3,415
=================
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
F-12
<PAGE>
MARATHON MARKETING CORP.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
HISTORY
Marathon Marketing Corp. (the Company), a development stage company, was
organized under the laws of the State of Colorado on November 21, 1991. The
Company commenced operations in January 1995 and became dormant on December 31,
1997. The Company is now in the development stage as defined in Financial
Accounting Standards Board Statement No. 7. The fiscal year end is August 31.
GOING CONCERN
The Company's financial statements have been presented on the basis that it is a
going concern, which contemplates the realization of assets and the satisfaction
of liabilities in the normal course of business. The Company is in the
development stage and has not earned any revenues from operations to date.
The Company is currently devoting its efforts to locating merger candidates. The
Company's ability to continue as a going concern is dependent upon its ability
to develop additional sources of capital, locate and complete a merger with
another company, and ultimately, achieve profitable operations. The accompanying
financial statements do not include any adjustments that might result from the
outcome of these uncertainties.
INCOME TAXES
The Company has elected, with the shareholders' consent, to be taxed under
provisions of Subchapter S of the Internal Revenue Code. Under those provisions,
the Company does not pay federal corporate income taxes on its taxable income
and is not allowed a net operating loss carryover or carryback as a deduction.
Instead, the stockholders are liable for individual federal income taxes on
their respective shares of the Company's taxable income and, subject to certain
limitations, include their respective shares of the Company's net operating loss
in their individual income tax returns.
EARNINGS (LOSS) PER COMMON SHARE
During 1997 the Financial Accounting Standard Board (FASB) issued Statement of
Financial Accounting Standards No. 128, "Earnings per Share" (SFAS 128). SFAS
128 replaced the calculation of primary and fully diluted earnings per share
with basic and diluted earnings per share. Basic earnings (loss) per common
share is computed based upon the weighted average number of common shares
outstanding during the period. Diluted earnings per share consists of the
weighted average number of common shares outstanding plus the dilutive effects
of options and warrants calculated using the treasury stock method. In loss
periods, dilutive common equivalent shares are excluded as the effect would be
anti-dilutive.
F-13
<PAGE>
MARATHON MARKETING CORP.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities, the disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting periods.
Actual results could differ from those estimates and assumptions.
NOTE 2 - STOCKHOLDERS' EQUITY
During January 1998, the Company issued for cash 582,000 shares of its $.00001
par value common stock at $.00045 per share. The Company also issued 85,000
shares of its $.00001 par value common stock to a related party in exchange for
services rendered, valued at $40.
NOTE 3 - RELATED PARTY TRANSACTIONS
The Company received services valued at $40 in period from January 1, 1998 to
August 31, 1998 from a related party. These services were exchanged for 85,000
shares of the Company's $.00001 par value common stock.
NOTE 4 - SUBSEQUENT EVENT
On October 5, 1999, the Company received loans from stockholders in the amount
of $7,500.
F-14
<PAGE>
INDEX TO EXHIBITS
------------
SK# 3.1 Articles of Incorporation
3.2 Bylaws of Marathon Marketing Corp.
27.1 Financial Data Schedules
32
<PAGE>
EXHIBIT 3.1
FILED NOV 21 1991
STATE OF COLORADO
DEPARTMENT OF STATE
ARTICLES OF INCORPORATION FOR
MARATHON MARKETING CORP.
Know All Men By These Presents:
That the undersigned incorporator, being a natural person of the age of eighteen
(18) years or more, and desiring to form a corporation under the laws of the
State of Colorado, does hereby sign, verify and deliver in duplicate to the
Secretary of State of Colorado these ARTICLES OF INCORPORATION.
ARTICLE I
The name of this corporation is Marathon Marketing Corp.
ARTICLE II
This corporation shall have perpetual existence.
ARTICLE III
The purpose for which this corporation is organized is to transact any lawful
business for which corporations may be incorporated pursuant to the Colorado
Corporation Code.
ARTICLE IV
This corporation is authorized to issue 40,000,000 shares of preferred stock,
par value $.0001 and 200,000,000 shares of common stock of $.00001 par value.
ARTICLE V
The stockholders of any class of stock of the Company shall not have preemptive
rights to subscribe to further shares of stock.
ARTICLE VI
Cumulative voting is not permitted in any election of directors.
ARTICLE VII
The street address of the initial registered office of this corporation is: 1529
Spruce Street, Suite 10, Boulder, Colorado 80302.
The name of the initial registered agent of this corporation at that address is:
Scott A. Deitler.
Either the registered office or the registered agent may be changed in the
manner provided by law.
33
<PAGE>
ARTICLE VIII
This corporation shall have three directors initially. The number of directors
may either be increased or diminished from time to time by the By-Laws. The name
and address of the persons who are to serve as initial directors of this
corporation until the first annual meeting of shareholders or until their
successors are elected and qualified are:
Scott A. Deitler, 1529 Spruce Street, #10, Boulder, Colorado 80302
Barry D. Lindgren, 1355 Ithaca Drive, Boulder, Colorado 80303
Jay G. Garamone, 1529 Spruce Street, #10, Boulder, Colorado 80302
ARTICLE IX
The name and address of the person signing these Articles is: Scott A. Deitler,
1529 Spruce Street, #10, Boulder, Colorado 80302.
ARTICLE X
The power to adopt, amend or repeal the By-Laws shall be vested in the Board of
Directors and the Shareholders.
IN WITNESS WHEREOF, the undersigned subscriber has executed these Articles of
Incorporation THIS 6TH day of November, 1991.
/S/SCOTT A. DEITLER
- --------------------
Scott A. Deitler
STATE OF COLORADO COUNTY OF BOULDER
BEFORE ME, a notary public authorized to take acknowledgments in the State and
County above-named, personally appeared Scott A. Deitler, known to me to be the
person who executed the foregoing Articles of Incorporation, he acknowledged
before me that he executed the same.
IN WITNESS WHEREOF, I have hereto set my hand and affixed my seal this 6th day
of November, 1991.
/S/ LORI A. RIMIS
Notary Public
Commission Expires 12-6-93
34
<PAGE>
EXHIBIT 3.2
BY-LAWS
OF
MARATHON MARKETING CORP.
a Colorado Corporation
ARTICLE I
The initial principal office of the Corporation shall be in Boulder,
Colorado. The Corporation may have offices at such other places within or
without the State of Colorado as the Board of Directors may from time to time
establish.
ARTICLE II
CONSENT OF STOCKHOLDERS IN LIEU OF MEETING. Whenever the vote
of stockholders at a meeting thereof is required or permitted to be taken in
connection with corporate action, by any provisions of the statutes of the
Certificate of Incorporation, the meeting and vote of stockholders may be
dispensed with, if all the stockholders who should have been entitled to vote
upon the action if such meeting were held, shall consent in writing to such
corporate action being taken.
ARTICLE III
Board of Directors
Section 1. GENERAL POWERS. The business of the Corporation
shall be managed by the Board of Directors, except as otherwise provided by
statute or by the Certificate of Incorporation.
Section 2. NUMBER AND QUALIFICATIONS. The Board of Directors
shall consist of up to three (3) members. Except as provided in the Certificate
of Incorporation, this number can be increased only by the vote or written
consent of the holders of ninety (90) percent of the stock of the Corporation
outstanding and entitled to vote. The current number of Directors shall be
determined by the Board of Directors at its annual meeting. No Director need be
a stockholder.
Section 3. ELECTION AND TERM OF OFFICE. The Directors shall be
elected annually by the stockholders, and shall hold office until their
successors are respectively elected and qualified.
Election of Directors need not be by ballot.
35
<PAGE>
Section 4. COMPENSATION. The members of the Board of Directors
shall be paid a fee of $10.00 for attendance at all annual, regular, special and
adjourned meetings of the Board. No such fee shall be paid any director if
absent. Any director of the Corporation may also serve the Corporation in any
other capacity, and receive compensation therefor in any form. Members of
special or standing committees may be allowed like compensation for attending
committee meetings.
Section 5. REMOVAL AND RESIGNATIONS. The stockholders may, at
any meeting called for the purpose, by vote of two-thirds of the capital stock
issued and outstanding, remove any directors from office, with or without cause;
provided however, that no director shall be removed in case the vote of a
sufficient number of shares are cast against his removal, which if cumulatively
voted at any election of directors would be sufficient to elect him, if
cumulative voting is allowed by the Articles of Incorporation.
The stockholders may, at any meeting, by vote of a majority of
such stock represented at such meeting accept the resignation of any director.
Section 6. VACANCIES. Any vacancy occurring in the office of
director may be filled by a majority of the directors then in office, though
less than a quorum, and the directors so chosen shall hold office until the next
annual election and until their successors are duly elected and qualified,
unless sooner displaced.
When one or more directors resign from the Board, effective at
a future date, a majority of the directors then in office, including those who
have so resigned, shall have powers to fill such vacancy or vacancies, the vote
thereon to take effect when such resignation or resignations become effective.
ARTICLE IV
Meetings of Board of Directors
Section 1. REGULAR MEETINGS. A regular meeting of the Board of
Directors may be held without call or formal notice immediately after and at the
same place as the annual meeting of the stockholders or any special meeting of
the stockholders at such places within or without the State of Colorado and at
such times as the Board may by vote from time to time determine.
Section 2. SPECIAL MEETINGS. Special meetings of the Board of
Directors may be held at any place whether within or without the State of
Colorado at any time when called by the President, Treasurer, Secretary or two
or more directors. Notice of the time and place thereof shall be given to each
director at least three (3) days before the meeting if by mail or at least
twenty-four hours if in person or by telephone or telegraph. A waiver of such
notice in writing, signed by the person or persons entitled to said notice,
either before or after the time stated therein, shall be deemed equivalent to
such notice. Notice of any adjourned meeting of the Board of Directors need not
be given.
Section 3. QUORUM. The presence, at any meeting, of one-third
of the total number of directors, but in no case less than two (2) directors,
shall be necessary and s ufficient to constitute a quorum for the transaction of
business except as otherwise required by statute or by the Certificate
36
<PAGE>
of Incorporation, the act of a majority of the directors present at a meeting at
which a quorum is present shall be the act of the Board of Directors. In the
absence of a quorum, a majority of the directors present at the time and place
of any meeting may adjourn such meeting from time to time until a quorum be
present.
Section 4.a. CONSENT OF DIRECTORS IN LIEU OF MEETING. Unless
otherwise restricted by the Certificate of Incorporation, any action required or
permitted to be taken at any meeting of the Board of Directors or any committee
thereof may be taken without a meeting, if prior to such action a written
consent thereto is signed by all members of the Board or committee, and such
written consent is filed within the minutes of the Corporation.
b. The Board of Directors may hold regular or special meetings
by telephone conference call, provided that any resolutions adopted shall be
recorded in writing within 3 days of such telephone conference, and written
ratification of such resolutions by the directors shall be provided within 10
days thereafter.
ARTICLE V
Committees of Board of Directors
The Board of Directors may, by resolution passed by a majority
of the whole Board, designate one or more committees, each committee to consist
of two or more of the directors of the Corporation, which, to the extent
provided in the resolution, shall have and may exercise the powers of the Board
of Directors in the management of the business and affairs of the Corporation,
and may authorize the seal of the Corporation to be affixed to all papers which
may require it. Such committee or committees shall have such name or names as
may be determined from time to time by resolution adopted by the Board of
Directors.
The committees of the Board of Directors shall keep regular
minutes of their proceedings and report the same to the Board of Directors when
required.
ARTICLE VI
Officers
Section 1. NUMBER. The Corporation shall have a President, one
or more Vice Presidents, a Secretary and a Treasurer, and such other officers,
agents and factors as may be deemed necessary. One person may hold any two
offices except the offices of President and Vice President and the offices of
President and Secretary.
Section 2. ELECTION, TERM OF OFFICE AND QUALIFICATION. The
officers specifically designated in Section 1 of this Article VI shall be chosen
annually by the Board of Directors and shall hold office until their successors
are chosen and qualified. No officer need be a director.
37
<PAGE>
Section 3. SUBORDINATE OFFICERS. The Board of Directors from
time to time may appoint other officers and agents, including one or more
Assistant Secretaries and one or more Assistant Treasurers, each of whom shall
hold office for such period, have such authority and perform such duties as are
provided in these By-Laws or as the Board of Directors from time to time may
determine. The Board of Directors may delegate to any office the power to
appoint any such subordinate officers, agents and factors and to prescribe their
respective authorities and duties.
Section 4. REMOVALS AND RESIGNATIONS. The Board of Directors
may at any meeting called for the purpose, by vote of a majority of their entire
number, remove from office any officer or agent of the Corporation, or any
member of any committee appointed by the Board of Directors.
The Board of Directors may at any meeting, by vote of a
majority of the directors present at such meeting, accept the resignation of any
officer of the Corporation.
Section 5. VACANCIES. Any vacancy occurring in the office of
President, Vice President, Secretary, Treasurer or any other office by death,
resignation, removal or otherwise shall be filled for the expired portion of the
term in the manner prescribed by these By-Laws for the regular election or
appointment to such office.
Section 6. THE PRESIDENT. The President shall be the chief
executive officer of the Corporation and, subject to the direction and under the
supervision of the Board of Directors, shall have general charge of the
business, affairs and property of the Corporation, and control over its
officers, agents and employees. The President shall preside at all meetings of
the stockholders and of the Board of Directors at which he is present. The
President shall do and perform such other duties and may exercise such other
powers as from time to time may be assigned to him by these By-Laws or by the
Board of Directors.
Section 7. THE VICE PRESIDENT. At the request of the President
or in the event of his absence or disability, the Vice President, or in case
there shall be more than one Vice President, the Vice President designated by
the President, or in the absence of such designation, the Vice President
designated by the Board of Directors, shall perform all the duties of the
President, and when so acting, shall have all the powers of, and be subject to
all the restrictions upon, the President. Any Vice President shall perform such
other duties and may exercise such other powers as from time to time may be
assigned to him by these By-Laws or by the Board of Directors, or the President.
Section 8. THE SECRETARY. The Secretary shall:
a. Record all the proceedings of the meetings of the
Corporation and directors in a book to be kept for that purpose;
38
<PAGE>
b. Have charge of the stock ledger (which may, however, be
kept by any transfer agent or agents of the Corporation under the direction of
the Secretary), an original or duplicate of which shall be kept at the principal
office or place of business of the Corporation in the State of Colorado;
c. Prepare and make, at least ten (10) days before every
election of directors, a complete list of the stockholders entitled to vote at
said election, arranged in alphabetical order;
d. See that all notices are duly given in accordance with the
provisions of these By-Laws or as required by statute;
e. Be custodian of the records of the Corporation and the
Board of Directors, and of the seal of the Corporation, and see that the seal is
affixed to all stock certificates prior to their issuance and to all documents,
the execution of which on behalf of the Corporation under its seal have been
duly authorized;
f. See that all books, reports, statements, certificates and
the other documents and records required by law to be kept or filed are properly
kept or filed; and
g. In general, perform all duties and have all powers incident
to the office of Secretary and perform such other duties and have such powers as
from time to time may be assigned to him by these By-Laws or by the Board of
Directors or the President.
Section 9. THE TREASURER. The Treasurer shall:
a. Have supervision over the funds, securities, receipts, and
disbursements of the Corporation;
b. Cause all monies and other valuable effects of the
Corporation to be deposited in its name and to its credit, in such depositories
as shall be selected by the Board of Directors or pursuant to authority
conferred by the Board of Directors.
c. Cause the funds of the Corporation to be disbursed by
checks or drafts upon the authorized depositories of the Corporation, when such
disbursements shall have been duly authorized;
d. Cause to be taken and preserved proper vouchers for all
monies disbursed;
e. Cause to be kept at the principal office of the Corporation
correct books of account of all its business and transactions;
f. Render to the President or the Board of Directors, whenever
requested, an account of the financial condition of the Corporation and of his
transactions as Treasurer;
39
<PAGE>
g. Be empowered to require from the officers or agents of the
Corporation reports or statements giving such information as he may desire with
respect to any and all financial transactions of the Corporation; and
h. In general, perform all duties and have all powers incident
to the office of Treasurer and perform such other duties and have such power as
from time to time may be assigned to him by these By-Laws or by the Board of
Directors or President.
Section 10. ASSISTANT SECRETARIES AND ASSISTANT TREASURERS.
The Assistant Secretaries and Assistant Treasurers shall have such duties as
from time to time may be assigned to them by the Board of Directors or the
President.
Section 11. SALARIES. The salaries of the officers of the
Corporation shall be fixed from time to time by the Board of Directors, except
that the Board of Directors may delegate to any person the power to fix the
salaries or other compensation of any officers or agents appointed in accordance
with the provisions of Section 3 of this Article VI. No officer shall be
prevented from receiving such salary by reason of the fact that he is also a
director of the Corporation.
Section 12. SURETY BOND. The Board of Directors may secure the
fidelity of any or all of the officers of the Corporation by bond or otherwise.
ARTICLE VII
Execution of Instruments
Section 1. EXECUTION OF INSTRUMENTS GENERALLY. All documents
or writings of any nature shall be signed, executed, verified, acknowledged and
delivered by such officer or officers or such agent of the Corporation and in
such manner as the Board of Directors from time to time may determine.
Section 2. CHECKS, DRAFTS, ETC. All notes, drafts,
acceptances, checks, endorsements, and all evidence of indebtedness of the
corporation whatsoever, shall be signed by such officer or officers or such
agent or agents of the Corporation and in such manner as the Board of Directors
from time to time may determine. Endorsements for deposit to the credit of the
Corporation in any of its duly authorized depositories shall be made in such
manner as the Board of Directors from time to time may determine.
Section 3. PROXIES. Proxies to vote with respect to shares of
stock of other corporations owned by or standing in the name of the Corporation
may be executed and delivered from time to time on behalf of the Corporation by
the President or Vice President and the Secretary or Assistant Secretary of the
Corporation or by any other person or persons duly authorized by the Board of
Directors.
40
<PAGE>
ARTICLE VIII
Section 1. CERTIFICATES OF STOCK. Every holder of stock in the
Corporation shall be entitled to have a certificate, signed in the name of the
Corporation by the Chairman or Vice President of the Board of Directors, the
President or a Vice President and by the Treasurer or an Assistant Treasurer, or
the Secretary or an Assistant Secretary of the Corporation, certifying the
number of shares owned by him in the Corporation; provided, however, that where
such certificate is signed by a transfer agent or an assistant transfer agent or
by a transfer clerk acting on behalf of the Corporation and a registrar, the
signature of any such Chairman of the Board of Directors, President, Vice
President, Treasurer, Assistant Treasurer, Secretary, or Assistant Secretary may
be facsimile. In case any officer or officers who shall have signed, or whole
facsimile signature or signatures shall have been used thereon, any such
certificate or certificates shall cease to be such officer or officers of the
Corporation, whether because of death, resignation or otherwise, before such
certificate or certificates shall have been delivered by the Corporation, such
certificate or certificates may nevertheless be adopted by the Corporation and
be issued and delivered as though the person or persons who signed such
certificate or certificates, or whose facsimile signature or signatures shall
have been used thereon, had not ceased to be such officer or officers of the
Corporation, and any such delivery shall be regarded as an adoption by the
Corporation of such certificate or certificates.
Certificates of stock shall be in such form as shall, in
conformity to law, be prescribed from time to time by the Board of Directors.
Section 2. TRANSFER OF STOCK. Shares of stock of the
Corporation shall only be transferred on the books of the Corporation by the
holder of record thereof or by his attorney duly authorized in writing, upon
surrender to the Corporation of the certificates for such shares endorsed by the
appropriate person or persons, with such evidence of the authenticity of such
endorsement, transfer, authorization and other matters as the Corporation may
reasonably require, and accompanied by all necessary stock transfer tax stamps.
In that event, it shall be the duty of the Corporation to issue a new
certificate to the person entitled thereto, cancel the old certificate, and
record the transaction on its books.
Section 3. RIGHTS OF CORPORATION WITH RESPECT TO REGISTERED
OWNERS. Prior to the surrender to the Corporation of the certificates for shares
of stock with a request to record the transfer of such shares, the Corporation
may treat the registered owner as the person entitled to receive dividends, to
vote, to receive notifications, and otherwise to exercise all the rights and
powers of an owner.
Section 4. CLOSING STOCK TRANSFER BOOK. The Board of Directors
may close the Stock Transfer Book of the Corporation for a period not exceeding
fifty (50) days preceding the date of any meeting of the stockholders or the
date for payment of any dividend or the date for the allotment of rights or the
date when any change or conversion or exchange of capital stock shall go into
effect or for a period of not exceeding (50) days in connection with obtaining
the consent of stockholders for any purpose. However, in lieu of closing the
Stock Transfer Book, the Board of Directors may fix in advance a date, not
41
<PAGE>
exceeding fifty (50) days preceding the date of any meeting of stockholders or
the date for the payment of any dividend or the date for the allotment of
rights, or the date when any change or conversion or exchange of capital stock
shall go into effect, or a date in connection with obtaining such consent, as a
record date for the determination of the stockholders entitled to notice of, and
to vote at, any such meeting and any adjournment thereof, or entitled to receive
payment of any such dividend, or to any such allotment of rights or to exercise
the rights in respect of any such change, conversion or exchange of capital
stock, or to give such consent, and in such case such stockholders, and only
such stockholders as shall be stockholders of record on the date so fixed shall
be entitled to such notice of, and to vote at, such meeting and any adjournment
thereof, or to receive payment of such dividend, or to receive such allotment of
rights, or to exercise such rights, or to give such consent, as the case may be,
notwithstanding any transfer of any stock on the books of the Corporation after
any such record date fixed as aforesaid.
Section 5. LOST, DESTROYED AND STOLEN CERTIFICATES. Where the
owner of a Certificate for shares claims that such certificate has been lost,
destroyed or wrongfully taken, the Corporation shall issue a new certificate in
place of the original certificate if the owner (a) so requests before the
Corporation has notice that the shares have been acquired by a bona fide
purchaser; (b) files with the Corporation a sufficient indemnity bond; and (c)
satisfies such other reasonable requirements, including evidence of such loss,
destruction, or wrongful taking, as may be imposed by the Corporation.
ARTICLE IX
Dividends
Section 1. SOURCES OF DIVIDENDS. The directors of the
Corporation, subject to any restrictions contained in the statutes and
Certificate of Incorporation, may declare and pay dividends upon the shares of
the capital stock of the Corporation either (a) out of its new assets in excess
of its capital, or (b) in case there shall be no such excess, out of its net
profits for the fiscal year then current or the current and preceding fiscal
year.
Section 2. RESERVES. Before the payment of any dividend, the
directors of the Corporation may set apart out of any of the funds of the
Corporation available for dividends a reserve or reserves for any proper
purpose, and the directors may abolish any such reserve in the manner in which
it was created.
Section 3. RELIANCE ON CORPORATE RECORDS. A director shall be
fully protected in relying in good faith upon the books of account of the
Corporation or statements prepared by any of its officials as to the value and
amount of the assets, liabilities and net profits of the Corporation, or any
other facts pertinent to the existence and amount of surplus or other funds from
which dividends might properly be declared and paid.
Section 4. MANNER OF PAYMENT. Dividends may be paid in cash,
in property, or in shares of the capital stock of the Corporation at par.
42
<PAGE>
ARTICLE X
Seal
The Corporate seal, subject to alteration by the Board of
Directors, shall be in the form of a circle and shall bear the name of the
Corporation and shall indicate its formation under the laws of the State of
Colorado. Such seal may be used by causing it or a facsimile thereof to be
impressed or affixed or reproduced or otherwise.
ARTICLE XI
Fiscal Year
Except as from time to time otherwise provided by the Board of
Directors, the fiscal year of the Corporation shall be the calendar year.
ARTICLE XII
Amendments
Section 1. BY THE STOCKHOLDERS. Except as otherwise provided
in the Certificate of Incorporation or in these By-Laws, these By-Laws may be
amended or repealed, or new By-Laws may be made and adopted by a majority vote
of all the stock of the Corporation issued and outstanding and entitled to vote
at any annual or special meeting of the stockholders, provided that notice of
intention to amend shall have been contained in the notice of meeting.
Section 2. BY THE DIRECTORS. Except as otherwise provided in
the Certificate of Incorporation or in these By-Laws, these By-Laws, including
amendments adopted by the stockholders, may be amended or repealed by a majority
vote of the whole Board of Directors at any regular or special meeting of the
Board, provided that the stockholders may from time to time specify particular
provisions of the By-Laws which shall not be amended by the Board of Directors.
ARTICLE XIII
Indemnification
The Board of Directors hereby adopt the provision of C.R.S.
7-109-101 through 110 (as it may be amended from time to time) relating to
Indemnification and in corporate such provisions by this reference as fully as
if set forth herein.
43
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