FILED AS OF DATE: 20000920
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: NORTH SHORE CAPITAL III
CENTRAL INDEX KEY: 0001102262
STANDARD INDUSTRIAL CLASSIFICATION: BLANK CHECKS [6770]
IRS NUMBER: 541964053
STATE OF INCORPORATION: CO
FISCAL YEAR END: 1231
ZIP: 22151
<PAGE>
U. S. Securities and Exchange Commission
Washington, D.C. 20549
AMENDMENT NO. 2
Form 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES OF
SMALL BUSINESS ISSUERS
Under Section 12(b) or (g) of the Securities Exchange Act of 1934
NORTH SHORE CAPITAL III
(Name of Small Business Issuer in its charter)
Colorado 54-1964053
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
5627 BELLINGTON AVENUE, SPRINGFIELD, VA 22151
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (703)-307-2562
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 Not Applicable
Securities to be registered under Section 12(g) of the Act:
Common Stock
(Title of class)
<PAGE>
FORWARD LOOKING STATEMENTS
THIS FORM 10-SB12G AND OTHER STATEMENTS ISSUED OR MADE FROM TIME TO
TIME BY NORTH SHORE CAPITAL III, INC. (HEREINAFTER REFERRED TO AS "NORTH
SHORE" AND/OR "COMPANY") OR ITS REPRESENTATIVES CONTAIN STATEMENTS
WHICH MAY CONSTITUTE "FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING
OF THE SECURITIES ACT OF 1933 AND THE SECURITIES EXCHANGE ACT OF 1934,
AS AMENDED BY THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995.
FIFTEEN U.S.C.A. SECTIONS 77Z-2 AND 78U-5 (SUPP. 1996). THOSE
STATEMENTS INCLUDE STATEMENTS REGARDING THE INTENT, BELIEF OR CURRENT
EXPECTATIONS OF NORTH SHORE AND MEMBERS OF ITS MANAGEMENT TEAM AS WELL
AS THE ASSUMPTIONS ON WHICH SUCH STATEMENTS ARE BASED. PROSPECTIVE
INVESTORS ARE CAUTIONED THAT ANY SUCH FORWARD-LOOKING STATEMENTS ARE
NOT GUARANTEES OF FUTURE PERFORMANCE AND INVOLVE RISKS AND
UNCERTAINTIES, AND THAT ACTUAL RESULTS MAY DIFFER MATERIALLY FROM
THOSE CONTEMPLATED BY SUCH FORWARD-LOOKING STATEMENTS. IMPORTANT
FACTORS CURRENTLY KNOWN TO MANAGEMENT THAT COULD CAUSE ACTUAL RESULTS
TO DIFFER MATERIALLY FROM THOSE IN FORWARD-LOOKING STATEMENTS ARE
SET FORTH IN THE SAFE HARBOR COMPLIANCE STATEMENT FOR FORWARD-LOOKING
STATEMENTS INCLUDED AS EXHIBIT 99.1 TO THIS FORM 10-SB12G, AND ARE
HEREBY INCORPORATED HEREIN BY REFERENCE. THE COMPANY UNDERTAKES NO
OBLIGATION TO UPDATE OR REVISE FORWARD-LOOKING STATEMENTS TO REFLECT
CHANGED ASSUMPTIONS, THE OCCURRENCE OF UNANTICIPATED EVENTS OR CHANGES
TO FUTURE OPERATING RESULTS OVER TIME.
<PAGE> 1
DESCRIPTION OF BUSINESS
1. The Company is what is classified as a "blank-check" company, sometimes
referred to as a "shell" company. It is a legally formed entity that is
designed to facilitate transactions with and for other corporations that
have ongoing operations, but may not have, in the past, structured their
corporate formation to facilitate the eventual trading of their stock. As
a "blank-check" corporation, the Company may present an advantageous
merger candidate, as it has already establisheed an identity with the S.E.C.
in the form of a reporting history.
Blank check companies may offer alternative routes to "go public" for
smaller cap companies than a more costly initial public offering (IPO).
Companies that can afford an IPO may well find that route to be more
advantageous, as it is a process that can raise a large amount of
capital in a relatively short amount of time. Also, the forms necessary
for a company to trade publicly upon merging with a shell may present
a more onerous filing burden than the Form 1 filed preceding an IPO.
Certain disadvantages are inherent in becoming a public company, and
these should be carefully considered by any business considering a
possible business combination with the Company. Immediately upon
consummation of a merger with the Company, the surviving entity would
be subject to all of the reporting requirements of the '33 and '34
Acts. Additionally, management would assume certain fiduciary duties
with respect to shareholders and the public, including, but not limited
to; the timely disclosure of all material information regarding the
company that might bear upon the consideration of the Company's stock
as a suitable investment; the duties of care and loyalty in the conducting
of the Company's business; and the duty not to misappropriate corporate
opportunites.
Prior to entering into a business combination, the company will fulfill
the reporting requirements of the 1934 Act through the services of
its President and General Counsel. Gerard Werner is currently
President and Director of the Company, and, at present, is the sole
Officer and Director.
RISK FACTORS
1. Possible Lingering Problems Associated with the Year 2000.
It is possible that the Company's currently installed computer system,
software products or other business systems, or those of the Company's
customers, vendors or resellers, working either alone or in conjunction with
other software or systems, will not accept input of, store, manipulate and
output dates for the years 1999, 2000 or thereafter without error or
interruption (commonly known as the "Year 2000" problem). The Company has
conducted a review of its business systems, including its computer systems,
and is querying its customers, vendors and resellers as to their progress in
identifying and addressing problems that their computer systems may face in
correctly interrelating and processing date information as the year 2000
continues.
The detail planning and inventory for the majority of the Company's legacy
systems that are being modified for Year 2000 compatibility has been
completed and such systems are in remediation.
The company has experienced no significant problems thus far from "Year 2000"-
related problems; and in the unlikely event such problems do arise, the cost
of the Company's addressing "Year 2000"-related problems should be no more
than $1,000 to $1,500 over 2000 and 2001, the majority of which would
represent redirection of internal resources. However, there can be no
assurance that the Company will identify all such Year 2000 problems in its
computer systems or those of its customers, vendors or resellers in advance
of their occurrence or that the Company will be able to successfully remedy
any problems that are discovered. The expenses of the Company's efforts to
identify and address such problems, or the expenses or liabilities to which
the Company may become subject as a result of such problems, could have a
material adverse effect on the Company's business, financial condition and
results of operations.
In addition, failure of the Company to identify and remedy Year 2000
problems could put the Company at a competitive disadvantage relative to
companies that have corrected such problems.
<PAGE> 2
2. Majority Control by Principal Shareholders, Officers and Directors.
The Company's principal shareholders, officers and directors will
beneficially own approximately ninety-eight percent (98%) of the
Company's Common Stock. As a result, such persons may have the
ability to control the Company and direct its affairs and
business. Such concentration of ownership may also have the
effect of delaying, deferring or preventing change in control of
the Company. See "Principal Stockholders."
3. Potential Lack of Continuity in Management.
All references to management currently refer to Mr. Gerard Werner, the
sole officer and director at this time. Because the Company is a "blank-
check" company, the business plan foresees a potential merger
with an operating company; such a business combination would likely
result in significant changes in the company's management: i.e., Officers
and members of the Board of Directors. Current management is expected to
perform due diligence in the search for merger candidates and potential
successors as Officers and Directors. The prospect of an imminent
change in the company's management, and the uncertainties this entails,
is a risk that is especially acute for "blank-check" companies.
4. Conflicts of Interest.
Certain conflicts of interest exist between the Company and its
officer and director. He has other business interests to which
he devotes his attention, and he 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 his exercise of such judgment as is
consistent with his fiduciary duties to the Company. See
"Management," and "Conflicts of Interest."
The Company's President, and all current shareholders own all of the
issued and outstanding stock of three (3) additional corporations (North
Shore Capital I, II and IV) which are shell companies formed February 3,
1999. The Form 10-SB registration statement of North Shore Capital I, II
and IV may become effective by lapse of time on or about August 31, 2000,
respectively. (See "Item 5. Directors, Executive Officers, Promoters, and
Control Persons---Other Blind Pool Activities.") Thus, the Company may be in
competition with North Shore Capital I, II and IV in seeking merger
candidates.
The following table documents the current involvement of Gerard Werner
with each shell company (please see Item 2 below for elaboration):
<TABLE>
<CAPTION>
NORTH SHORE CAPITAL
<S> <C> <C> <C> <C>
NSC I, Inc. NSC II, Inc. NSC III, Inc. NSC IV, Inc.
Gerard Werner's President President President President
Titles Director Director Director Director
Gerard Werner's 97.89% 97.89% 97.89% 97.89%
Equity percentage
Filing Type 10-SB12G/A 10-SB12G/A 10-SB12G/A 10-SB12G/A
SEC File No. 0-30307 0-30295 0-30333 0-30383
Percentage time 12.5% 12.5% 12.5% 12.5%
Devoted to the
Company
</TABLE>
The Company's President may form Maui Capital I, Inc., which is a shell
company with the same capital structure and business plan as North Shore
Capital I, II and IV, and the Company. He may also elect, in the future,
to form one or more additional public shell companies with a business plan
similar or identical to that of the Company. Any such additional shell
companies would also be in direct competition with the Company for
available business opportunities. (See Item 5 - "Directors, Executive
Officers, Promoters and Control Persons - Conflicts of Interest.")
The Company's President was previously a Director and Vice-President of Oak
Brook Capital I, II, and IV, blank-check companies with similar
capital structures as the Company. As of this date, he has resigned his
positions as an officer and director with Oak Brook Capital I, II and IV,
each having consummated a business combination with an operating entity.
A letter of understanding has been entered into, whereby Mr. Werner will
will be resigning his positions as officer and director of Oak Brook
Capital III during the week of September 18, 2000. Mr. Werner retained
between 1.5% and 2.0% equity in the surviving companies, which are now
known as AEI Environmental, America's Power Partners, and PVAXX
corporation, respectively.
Shareholders have certain rights with regards to the Company's management,
in the event of breaches of certain obligations including loyalty and
the misappropriation of a corporate opportunity. Shareholders may
seek remedies under several provisions of the 1933 and 1934 acts.
Sections 11 and 12 of the '33 Act help safeguard investors against
materially false statements in Registration Statements (section 11);
and against materially false statements in prospectuses and other
communications (section 12). Remedies available under these sections
include the reimbursement to the investor, by the company, of the
consideration paid for the security minus any gain received thereupon.
Investors are also protected by section 10(b) of the '34 Act, which
proscribes manipulative or deceptive practices in connection with the
purchase or sale of a security; and by section 14(e) of the '34 Act,
which proscribes material misstatements in connection with proxies. As
many states, including Colorado, have securities laws modeled after
the '33 and '34 Acts, remedies may be available under state law as well.
In any case, lawsuits under section 11 of the '33 Act may be brought "at
law or in equity, in any court of competent jurisdiction".
It is anticipated that the Company's President 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 President and may consider
his own personal pecuniary
<PAGE> 3
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.
5. Eventual 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 opera-
tions will be limited to those that can be financed with its modest
capital.
6. 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.
The provisions of Rule 15g of the 1934 Act regulate sales of so-called
"penny stocks", which represent equity in relatively small-capitalization
companies, and are therefore generally considered to pose a greater risk
to investors, including the risk of possible loss of most or all of their
investment. 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 therefor.
Rule 15g-9 specifically limits transactions by broker-dealers in "penny
stocks", and details the procedural safeguards that must be undertaken
by a broker-dealer before transacting in "penny stocks", including
the obtaining of written approval from the client.
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"
<PAGE> 4
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 Release No. 34-29093, 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.
7. The Company has no Operating History.
The Company was formed in February of 1999 for the purpose of registering
its common stock under the 1934 Act and acquiring a business opportunity.
The Company has no operating history, revenues from operations, or assets
other than cash from private sales of stock. The Company faces all of
the risks of a new business and the special risks inherent in the
investigation, acquisition, or involvement in a new business opportunity.
As a "blank check" company in search of a merger partner, a special risk
includes the, at present, unknown operating history of merger candidates
with whom the Company may enter into a business combination. 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.
8. No Assurance of Success or Profitability.
As a "blank check" company, 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.
<PAGE> 5
9. Reporting Requirements May Delay Or Preclude Acquisition.
Section 13 of the Securities Exchange Act of 1934 (the "Exchange Act"),
requires companies subject thereto to provide certain information about
significant acquisitions, including certified financial statements for the
company acquired, covering one or two years, depending on the relative
size of the acquisition. The time and additional costs that may be
incurred by some target entities to prepare such statements may
significantly delay or essentially preclude consummation of an
otherwise desirable acquisition by the Company. Acquisition prospects
that do not have or are unable to obtain the required audited statements
may not be appropriate for acquisition so long as the reporting
requirements of the 1934 Act are applicable.
10. Possible Business Combination- 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." 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
reporting company. Moreover, any business opportunity acquired may be
<PAGE> 6
currently unprofitable or present other negative factors.
11. Lack of Research/ Inadequate Funds for 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 Com-
pany 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. The Company has neither conducted, nor have others made
available to it,results of market research indicating that market demand
exists for the transactions contemplated by the Company. Moreover, the
Company does not have, and does not plan to establish, a marketing
organization. Even in the event demand is identified for a merger or
acquisition contemplated by the Company, there is no assurance the
Company will be successful in completing any such business combination.
12. Insufficient Funds for 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. As a "blank-check" company, 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.
13. Possible Reliance upon Unaudited Financial Statements.
The Company generally will require audited financial statements from
companies that it proposes to acquire. No assurance can be given,
however, that audited financials will be available to the Company. In
cases where audited financials are unavailable, the Company will have
to rely upon 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 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.
<PAGE> 7
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 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 are likely to 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,
the automated quotation system sponsored by the National Association of
Securities Dealers, Inc., or on any existing stock exchange. Moreover,
the lack of such financial statements is likely to discourage broker-dealers
from becoming or continuing to serve as market makers in the securities
of the Company. 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.
14. Costs of Compliance with Other Possible 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.
<PAGE> 8
15. Dependence upon Management; Limited Participation of Management.
The Company currently has one individual who is serving as its sole
officer and director. The Company will be heavily dependent upon
his skills, talents, and abilities to implement its business plan,
and may, from time to time, find that the inability of the sole
officer and director to devote his full time attention to the
business of the Company results in a delay in progress toward
implementing its business plan. Furthermore, since only one individual
is serving as the sole officer and director of the Company, it will be
entirely dependent upon his experience in seeking, investigating, and
acquiring a business and in making decisions regarding the Company's
operations. 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
sole officer and director.
16. Potential Lack of Continuity in Management.
The Company does not have an employment agreement with its sole officer
and director, and as a result, there is no assurance that he will
continue to manage the Company in the future. In connection with
acquisition of a business opportunity, it is likely the current officers
and directors of the Company may resign. A decision to resign will be
based upon the identity of the business opportunity and the nature of the
transaction, and is likely to occur without the vote or consent of the
stockholders of the Company.
17. Indemnification of Officers and Directors.
The Company's Articles of Incorporation provide for the indemnification
of its directors, officers, employees, and agents, under certain
circumstances, against attorney's fees and other expenses incurred by them
in any litigation to which they become a party arising from their association
with or activities on behalf of the Company. The Company will also
bear the expenses of such litigation for any of its directors, officers,
employees, or agents, upon such person's promise to repay the Company
therefor if it is ultimately determined that any such person shall not
have been entitled to indemnification. This indemnification policy could
result in substantial expenditures by the Company which it will be unable
to recoup.
<PAGE> 9
18. Director's Liability Limited.
The Company's Articles of Incorporation 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.
19. Possible Dependence upon Outside Advisors.
To supplement the business experience of its sole officer and director,
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.
20. Financial Risk of 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.
21. Intense Competition for Profitable Businesses.
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.
<PAGE> 10
22. No Foreseeable Dividends on Company's Stock.
The Company has not paid dividends on its Common Stock and does not
anticipate paying such dividends in the foreseeable future.
23. Likely Loss of Control by Present Management and Stockholders.
The Company may consider an acquisition in which the Company
would issue as consideration for the business opportunity to be
acquired an amount of the Company's authorized but unissued
Common Stock that would, upon issuance, represent the great majority
of the voting power and equity of the Company. The result of such
an acquisition would be that the acquired company's stockholders and
management would control the Company, and the Company's
management could be replaced by persons unknown at this time.
Such a merger would result in a greatly reduced percentage of
ownership of the Company by its current shareholders. In addition, the
Company's President and could sell his control block of stock at a premium
price to the acquired company's stockholders.
24. Currently no Public Market for Company's Stock.
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.
25. Sales Under Rule 144 may be Limited.
In a private placement offering under section 506 of Regulation D, the
Company issued 47,500 shares of common stock in December of 1999.
Excepting the above shares, all of the outstanding shares of Common
Stock held by present 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 a
prescribed period may, under certain conditions, sell every three
<PAGE> 11
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. As a result of revisions to Rule 144 which
became effective on or about April 29, 1997, there will be 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. A sale under Rule 144 or under any other exemption
from the Act, if available, or pursuant to subsequent registrations 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 2,247,500 shares of common stock held
by present stockholders of the Company, 2,200,000 shares which were
issued pursuant to Rule 701, will become available for resale under Rule
144, on or about September 15, 2000, and the remaining 47,500 shares
will become available for resale starting in October, 2000.
The Securities and Exchange Commission has recently espoused the view
that principal shareholders of "blank check" companies may be deemed
underwriters in certain situations, thus potentially limiting the
availability of Rule 144 sales.
Investors should be advised that shares purchased under Rule 144 may
be highly illiquid, bear restrictive legends, and be subject to minimum
holding requirements, until such time as the securities are registered.
Sales under Rule 144 by "affiliates" of the issuer are also restricted
by the Rule. The Rule defines an affiliate as a person who "directly, or
indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with, such issuer."
Sales of restricted securities by affiliates over a three month period may
not exceed one percent of the shares outstanding as of the most recent
report published by the issuer, nor may they exceed the average weekly
reported volume of trading of such securities on all national securities
exchanges. Furthermore, any sales exceeding 500 shares or having an
aggregate sales price in excess of $10,000 over a three month period, if
such sales are made in reliance upon this Rule, shall be accompanied
by the filing of three Form 144's with the S.E.C. at its principal
office in Washington, D.C.
Sales by non-affiliates of the issuer are subject to the
same restrictions unless the person selling the securities is not, and has
not been, an affiliate of the issuer for at least three months; and at
least three years have elapsed since the securities were acquired from
either the issuer or an affiliate of the issuer.
26. Blue Sky Restrictions may Apply to Company's Stock.
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.
PART I
ITEM I. DESCRIPTION OF BUSINESS.
General
History and Operations
The Company was incorporated under the laws of the State of
Colorado on February 3, 1999, and is in the early developmental and
promotional stages. To date the Company's only activities have been
organizational ones, directed at developing its business plan and
raising its initial capital. The Company has not commenced any
commercial operations. The Company has no full-time employees and
owns no real estate.
<PAGE> 12
Regulation of "Blank Check" Companies
The proposed business activities described herein classify the Company
as a "blank check" or "shell company" whose sole purpose at this time is
to locate and consummate a merger or acquisition with a private entity.
Many states have enacted statutes, rules and regulations limiting the sale
of securities of "blank check" companies in their respective jurisdictions.
Management does not believe it will undertake any efforts to cause a market
to develop in the Company's securities until such time as the Company has
successfully implemented its business plan described herein. However,
if the Company intends to facilitate the eventual creation of a public trading
market in its outstanding securities, it must consider that 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 therefor.
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, and
15g-7 under the Securities Exchange Act of 1934, as amended.
Because the securities of the Company may constitute "penny stocks"
within the meaning of the rules, the rules would apply to the
Company and to its securities. The rules may further affect the ability
of owners of Shares to sell the securities of the Company in any
market that might develop for them.
Regulation of "blank check" companies by the State of Colorado
mirrors, to a large extent, the regulation thereof by the S.E.C.
The State of Colorado has adopted legislation based upon Section
21E of The Private Securities Litigation Reform Act of 1995. The Act
provides a safe harbor for issuers regarding certain forward-looking
statements, but specifially excludes from the safe harbor issuers
making statements in connection with an offering of securities of a
blank check company. Colorado has also adopted an amended Rule 504,
made effective August 13, 1992 as part of the Commission's Small Business
Intiatives. The amended Rule 504 exempts from registration certain
offerings up to $1,000,000. Notably, "blank check" or "development
stage" companies are excluded from this exemption also.
Shareholders should be aware that, according to Securities and
Exchange Commission Release No. 34-29093, the market for penny
stocks has suffered in recent years 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"
<PAGE 13>
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.
As part of its business plan, this Company is filing this registration
statement on Form 10-SB on a voluntary basis in order to become a "public"
company by virtue of being subject to the reporting requirements of the
Securities Exchange Act of 1934.
Search for Business Opportunity
The Company's 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 very limited capital, and it is unlikely
that the Company will be able to take advantage of more than one
such business opportunity. The Company intends to seek
opportunities demonstrating the potential of long-term growth as
opposed to short-term earnings.
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's officer and director has previously
been involved in transactions involving a merger between an
established company and a shell entity, and has a number of contacts
within the field of corporate finance. As a result, he has had
preliminary contacts with representatives of numerous companies
concerning the general possibility of a merger or acquisition by a shell
company. However, none of these preliminary contacts or discussions
involved the possibility of a merger or acquisition transaction with the
Company.
<PAGE> 14
It is anticipated that the Company's officer and director may
contact broker-dealers and other persons with whom he is acquainted
who are involved in corporate finance matters to advise him 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 the limited funds that are expected to be 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 on
a stock exchange (See "Investigation and Selection of Business
Opportunities"). The Company anticipates that the business
opportunities presented to it will (i) be recently organized with no
operating history, or a history of losses attributable to
under-capitalization or other factors; (ii) be experiencing financial or
operating difficulties; (iii) be in need of funds to develop a new
product or service or to expand into a new market; (iv) be relying
upon an untested product or marketing concept; or (v) have a
combination of the 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.
<PAGE> 15
Potential Consequences of Business Combination
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
officer and director of the Company may resign his management
positions with the Company in connection with the Company's
acquisition of a business opportunity. See "Form of Acquisition,"
below, and "Risk Factors - The Company - Lack of Continuity in
Management." In the event of such a resignation, the Company's
current management would not have any control over the conduct of
the Company's business following the Company's combination with
a business opportunity.
It is anticipated that business opportunities will come to the
Company's attention from various sources, including its officer and
director, its other stockholders, professional advisors such as attorneys
and accountants, securities broker-dealers, venture capitalists, members
of the financial community, and others who may present unsolicited
proposals. The Company has no plans, understandings, agreements,
or commitments with any individual for such person to act as a finder
of opportunities for the Company.
<PAGE> 16
The Company does not foresee that it would enter into a
merger or acquisition transaction with any business with which its
officer or director is currently affiliated. Should the Company
determine in the future, contrary to the 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 antici-
pated 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.
<PAGE> 17
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 fur-
ther risks, because management in many instances will not have
proved its abilities or effectiveness, the eventual market for such
company's products or services will likely not be established, and such
company may not be profitable when acquired.
It is anticipated that the Company will not be able to diversify,
but will essentially be limited to one such venture because of the
Company's limited financing. This lack of diversification will not
permit the Company to offset potential losses from one business
opportunity against profits from another, and should be considered an
adverse factor affecting any decision to purchase the Company's
securities.
It is emphasized that management of the Company may effect
transactions having a potentially adverse impact upon the Company's
shareholders pursuant to the 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." 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.
<PAGE> 18
The Company anticipates that it will consider, among other things,
the following factors:
1. Potential for growth and profitability, indicated by new
technology, anticipated market expansion, or new products;
2. The Company's perception of how any particular business
opportunity will be received by the investment community and
by the Company's stockholders;
3. Whether, following the business combination, the financial
condition of the business opportunity would be, or would have
a significant prospect in the foreseeable future of becoming
sufficient to enable the securities of the Company to qualify
for listing on an exchange or on a national automated
securities quotation system, such as NASDAQ, so as to permit
the trading of such securities to be exempt from the
requirements of Rule 15c2-6 recently adopted by the Securities
and Exchange Commission. See "Risk Factors - The
Company - Regulation of Penny Stocks."
4. Capital requirements and anticipated availability of required
funds, to be provided by the Company or from operations,
through the sale of additional securities, through joint ventures
or similar arrangements, or from other sources;
5. The extent to which the business opportunity can be advanced;
6. Competitive position as compared to other companies of
similar size and experience within the industry segment as
well as within the industry as a whole;
7. Strength and diversity of existing management, or management
prospects that are scheduled for recruitment;
8. The cost of participation by the Company as compared to the
perceived tangible and intangible values and potential; and
9. The accessibility of required management expertise, personnel,
raw materials, services, professional assistance, and other
required items.
<PAGE> 19
In regard to the possibility that the shares of the Company
would qualify for listing on NASDAQ, the current standards include
the requirements that the issuer of the securities that are sought to be
listed have total assets of at least $4,000,000 and total capital and
surplus of at least $2,000,000, and proposals have recently been made
to increase these qualifying amounts. 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
<PAGE> 20
produced within a reasonable period of time not to exceed 60 days
following completion of a merger transaction; and other information
deemed relevant.
As part of the Company's investigation, the Company's
executive officer and director 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. There will
be no loan agreements or understandings between the Company
and third parties, nor does the Company intend to raise any additional
operating capital by implementing private placements of restricted stock
and/or public offerings of its common stock.
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.
<PAGE> 21
Form of Acquisition
It is impossible to predict the manner in which the Company
may participate in a business opportunity. Specific business op-
portunities 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.
Depending on the nature of the business combination entered
into, it is possible that management will receive favorable terms
of exchange with the target company that will not be available to
other shareholders.
Management may actively negotiate or otherwise consent to the
purchase of any portion of their common shares as a condition to or
in connection with a proposed merger or acquisition transaction.
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.
Existing shareholders of the company may suffer significant
dilution to their ownership percentage of the company, insofar as
the business combination entered into may involve the issuance of
a large number of authorized but unissued shares to the target
company. Also, depending on the nature of the business combination,
existing shareholders may incur taxable capital gains as a result
thereof.
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
<PAGE> 22
circumstances the criteria for determining whether or not an acquisi-
tion 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 officer, director
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.
Operating within the parameters of Rule 145 of the Securities Act
of 1933 (the "Act"), the Company may attempt to rely on any of the
following exemptions from registration under the Act:
1. Section 4(2) of the Act;
2. Section 4(6) of the Act;
3. Section 3(a)1/ Rule 147 of the Act;
4. Section 3(a)(10) of the Act;
5. Rule 504, Regulation D of the Act;
6. Rule 505, Regulation D of the Act; and
7. Rule 506, Regulation D of the Act.
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
officer 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
<PAGE> 23
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 ac-
quisition 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 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.
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
<PAGE> 24
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.
The SEC, in a letter to the NASD has taken the position that in
some instances "both before and after the business combination or
transactions with an operating entity or other person, the promoters or
affiliates of blank check companies, as well as their transferees are
'underwriters' of the securities issued". If that determination were
made with regards to the Company and its shareholders, Rule 144
transactions might be precluded.
Any securities which the Company might acquire in exchange
for its Common Stock will 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.
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 experience competition
from other public "blind pool" companies, many of which may have
more funds available than does the Company.
<PAGE> 25
Administrative Offices
The Company currently maintains a mailing address at 5627
Bellington Avenue, Springfield, VA 22151, which is the office
address of its legal counsel. The Company's telephone number is
(703)-307-2562. 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 anti-
cipate a need to engage any full-time employees so long as it is
seeking and evaluating business opportunities. The need for em-
ployees and their availability will be addressed in connection with the
decision whether or not to acquire or participate in specific business
opportunities. Although there is no current plan with respect to its
nature or amount, remuneration may be paid to or accrued for the
benefit of, the Company's officer prior to, or in conjunction with,
the completion of a business acquisition. The Company's officer
has accepted common stock for services rendered for consulting,
organizing the corporation, seeking merger candidates and evaluating
these candidates. See "Executive Compensation" and under "Certain
Relationships and Related Transactions."
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR
PLAN OF OPERATIONS.
General
The Registrant intends to seek to acquire assets or shares of an entity
actively engaged in business which generates revenues, in exchange for its
securities. The Registrant has no particular acquisitions in mind and has not
entered into any negotiations regarding such an acquisition. None of the
Company's officers, directors, promoters or affiliates have engaged in any
preliminary contact or discussions with any representative of any other
company regarding the possibility of an acquisition or merger between the
Company and such other company as of the date of this registration statement.
<PAGE> 26
While the Company will attempt to obtain audited financial statements of
a target entity, there is no assurance that such audited financial statements
will be available. The Board of Directors does intend to obtain certain
assurances of value of the target entity's assets prior to consummating such a
transaction, with further assurances that an audited statement would be
provided within seventy-five days after closing of such a transaction.
Closing documents relative thereto will include representations that the value
of the assets conveyed to or otherwise so transferred will not materially
differ from the representations included in such closing documents.
The Company is filing this registration statement on a voluntary basis
because the primary attraction of the Registrant as a merger partner or
acquisition vehicle will be its status as an SEC reporting company. Any
business combination or transaction will likely result in a significant
issuance of shares and substantial dilution to present stockholders of the
Registrant.
The Company has, and will continue to have, little capital with which to
provide the owners of business opportunities with any significant cash or
other assets. However, management believes the Company will be able to offer
owners of acquisition candidates the opportunity to acquire a controlling
ownership interest in a publicly registered company without incurring the cost
and time required to conduct an initial public offering. The owners of the
business opportunities will, however, incur significant legal and accounting
costs in connection with the acquisition of a business opportunity, including
the costs of preparing Form 8-K's, 10-K's or 10-KSB's, agreements and related
reports and documents. The Securities Exchange Act of 1934 (the "34 Act"),
specifically requires that any merger or acquisition candidate comply with all
applicable reporting requirements, which include providing audited financial
statements to be included within the numerous filings relevant to complying
with the 34 Act. Nevertheless, the officer and director of the Company has
not conducted market research and is not aware of statistical data which
would support the perceived benefits of a merger or acquisition transaction
for the owners of a business opportunity.
As stated hereinabove, the Company will not acquire or merge with any
entity which cannot provide independent audited financial statements within a
reasonable period of time after closing of the proposed transaction. The
Company is subject to all of the reporting requirements included in the 34
Act. Included in these requirements is the affirmative duty of the Company to
file independent audited financial statements as part of its Form 8-K to be
filed with the Securities and Exchange Commission upon consummation of a
merger or acquisition, as well as the Company's audited financial statements
<PAGE> 27
included in its annual report on Form 10-K (or 10-KSB, as applicable). If
such audited financial statements are not available at closing, or within time
parameters necessary to insure the Company's compliance with the requirements
of the 34 Act, or if the audited financial statements provided do not conform
to the representations made by the candidate to be acquired in the closing
documents, the closing documents may provide that the proposed transaction
will be voidable, at the discretion of the present management of the Company.
The Company's officer and shareholders have verbally agreed that they
will advance to the Company certain additional funds which the Company needs
for operating capital and for costs in connection with searching for or
completing an acquisition or merger. These will primarily consist of
services rendered by the Company's president, specifically S.E.C. compliance
and the due diligence required as a condition precedent to any business
combination. These persons have also agreed that such advances will be made
interest free without expectation of repayment unless the owners of the
business which the Company acquires or merges with agree to repay all or a
portion of such advances. Such repayment will in no way be a condition to
the selection of a target company. The Company will not borrow any funds
from anyone other than its current shareholders for the purpose of repaying
advances made by the shareholders, and the Company will not borrow any funds
to make any payments to the Company's promoters, management or their
affiliates or associates.
Liquidity and Capital Resources
The Company remains in the development stage and, since
inception, has experienced no significant change in liquidity or capital
resources or stockholder's equity. The Company's balance sheet as of
March 31, 2000, reflects a current asset value of $2,334.00, and a
total asset value of $2,334 in the form of cash.
The Company will carry out its plan of business as discussed
above. The Company cannot predict to what extent its liquidity and
capital resources will be diminished prior to the consummation of a
business combination or whether its capital will be further depleted by
the operating losses (if any) of the business entity which the Company
may eventually acquire.
<PAGE> 28
Results of Operations
During the period from February 3, 1999 (inception) through
December 31, 1999, the Company has engaged in no significant
operations other than organizational activities, acquisition of capital
and preparation for registration of its securities under the Securities
Exchange Act of 1934, as amended. No revenues were received by
the Company during this period.
For the current fiscal year, the Company anticipates incurring
a loss as a result of organizational 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.
Need for Additional Financing
The Company believes that its existing capital will be
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, as amended, for a period of
approximately one year. Accordingly, in the event the Company is
able to complete a business combination during this period, it
anticipates that its existing capital will be sufficient to allow it to
accomplish the goal of completing a business combination. There is
no assurance, however, that the available funds will ultimately prove
to be adequate to allow it to complete a business combination, and
once a business combination is completed, the Company's needs for
additional financing are likely to increase substantially.
INCOME TAXES
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS
109") issued by the Financial Accounting Standards Board ("FASB"), under which
deferred tax assets and liabilities are provided on differences between the
carrying amounts for financial reporting and the tax basis of assets and
liabilities for income tax purposes using the enacted tax rates.
<PAGE> 29
Under SFAS 109, deferred tax assets may be recognized for temporary
differences that will result in deductible amounts in future periods. A
valuation allowance is recognized, if on the weight of available evidence, it
is more likely than not that some portion or all of the deferred tax asset
will not be realized.
NEW ACCOUNTING PRONOUNCEMENTS
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of"
("SFAS 121") issued by the FASB, is effective for financial statements for
fiscal years beginning after December 15, 1995. The standard establishes new
guidelines regarding when impairment losses on long-lived assets, which
include plant and equipment, certain identifiable intangible assets, and
goodwill, should be recognized and how impairment losses should be measured.
The Company does not expect adoption to have a material effect on its
financial position or results of operations.
Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation" ("SFAS 123") issued by the FASB, is effective for
specific transactions entered into after December 15, 1995. The disclosure
requirements of SFAS 123 are effective for financial statements for fiscal
years beginning no later than December 15, 1995. The new standard established
a fair value method of accounting for stock-based compensation plans and for
transactions in which an entity acquires goods or services from non-employees
in exchange for equity instruments. The Company does not expect adoption to
have a material effect on its financial position or results of operations.
Federal Income Tax Aspects of Investment in the Company
The discussion contained herein has been prepared by the
Company and is based on existing law as contained in the Code,
amended United States Treasury Regulations ("Treasury
Regulations"), administrative rulings and court decisions as of the
date of this Registration Statement. No assurance can be given
that future legislative enactments, administrative rulings or court
decisions will not modify the legal basis for statements contained
in this discussion. Any such development may be applied
retroactively to transactions completed prior to the date thereof,
and could contain provisions having an adverse affect upon the
Company and the holders of the Common Stock. In addition, several
of the issues dealt with in this summary are the subject of
<PAGE> 30
proposed and temporary Treasury Regulations. No assurance can be
given that these regulations will be finally adopted in their
present form.
Basis in Common Stock
The tax basis that a Shareholder will have in his Common Stock
will equal his cost in acquiring his Common Stock. If a
Shareholder acquires Common Stock at different times or at
different prices, he must maintain records of those transactions so
that he can accurately report gain or loss realized upon
disposition of the Common Stock.
Dividends on Common Stock
Distributions made by the Company with respect to the Common
Stock will be characterized as dividends that are taxable as
ordinary income to the extent of the Company's current or
accumulated earnings and profits ("earnings and profits"), if any,
as determined for U.S. federal income tax purposes. To the extent
that a distribution on the Common Stock exceeds the holder's
allocable share of the Company's earnings and profits, such
distribution will be treated first as a return of capital that will
reduce the holder's adjusted tax basis in such Common Stock, and
then as taxable gain to the extent the distribution exceeds the
holder's adjusted tax basis in such Common Stock. The gain will
generally be taxed as a long-term capital gain if the holder's
holding period for the Common Stock is more than one year.
The availability of earnings and profits in future years will
depend on future profits and losses which cannot be accurately
predicted. Thus, there can be no assurance that all or any portion
of a distribution on the Common Stock will be characterized as a
dividend for general income tax purposes. Corporate shareholders
will not be entitled to claim the dividends received deduction with
respect to distributions that do not qualify as dividends. See the
discussion regarding the dividends received deduction below.
<PAGE> 31
Redemption of Common Stock
The Company does not have the right to redeem any Common
Stock. However, any redemption of Common Stock, with the consent
of the holder, will be a taxable event to the redeemed holder.
The Company does not believe that the Common Stock will be
treated as debt for federal income tax purposes. However, in the
event that the Common Stock is treated as debt for federal tax
purposes, a holder generally will recognize gain or loss upon the
redemption of the Common Stock measured by the difference between
the amount of cash or the fair market value of property received
and the holder's tax basis in the redeemed Common Stock. To the
extent the cash or property received are attributable to accrued
interest, the holder may recognize ordinary income rather than
capital gain. Characterization of the Common Stock as debt would
also cause a variety of other tax implications, some of which may
be detrimental to either the holders, the Company, or both
(including, for example, original issue discount treatment to the
Investors). Potential Investors should consult their tax advisors
as to the various ramifications of debt characterization for
federal income tax purposes.
Other Disposition of the Common Stock
Upon the sale or exchange of shares of Common Stock, to or
with a person other than the Company, a holder will recognize
capital gain or loss equal to the difference between the amount
realized on such sale or exchange and the holder's adjusted basis
in such stock. Any capital gain or loss recognized will generally
be treated as a long-term capital gain or loss if the holder held
such stock for more than one year. For this purpose, the period
for which the Common Stock was held would be included in the
holding period of the Common Stock received upon a conversion.
State, Local and Foreign Taxes
In addition to the federal income tax consequences described
above, prospective investors should consider potential state, local
and foreign tax consequences of an investment in the Common Stock.
<PAGE> 32
ITEM III. DESCRIPTION OF PROPERTY.
The Company does not currently maintain an office or any
other facilities. It does currently maintain a mailing address at 5627
Bellington Avenue, Springfield, VA 22151, which is the office
address of its legal counsel. The Company pays no rent for the use
<PAGE> 33
of this mailing address. The Company does not believe that it will
need to maintain an office at any time in the foreseeable future in
order to carry out its plan of operations described herein. The
Company's telephone number is (703)-307-2562.
ITEM IV. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
The following table sets forth as of January 15, 2000, information with
respect to the beneficial ownership of the Company's outstanding Common Stock
by (i) each director and executive officer of the Company, (ii) all directors
and executive officers of the Company as a group, and (iii) each shareholder
who was known by the Company to be the beneficial owner of more than 5% of
the Company's outstanding Common Stock. Except as otherwise indicated,
the persons or entities listed below have sole voting and investment power
with respect to all shares of Common Stock beneficially owned by them.
<TABLE>
<CAPTION>
Name and Address Number of Percent of
Shares Owned Class Owned
Beneficially
<S> <C> <C>
Gerard Werner, Esq.(1)
5627 Bellington Avenue 2,200,000 97.89%
Springfield, VA 22151
All directors and executive
officers as a group (1 person) 2,200,000 97.89%
</TABLE>
<PAGE> 34
(1) The person listed is the sole officer and director of the Company.
Management has no plans to issue any additional securities to management,
promoters or their affiliates or associates and will do so only if such
issuance is in the best interests of shareholders of the Company and
complies with all applicable federal and state securities rules and
regulations.
Although the Company has a very large amount of authorized but unissued
common and preferred stock that may be issued without further shareholder
approval or notice, it is the intention of the Company to avoid inhibiting
certain transactions with prospective acquisition or merger candidates,
based upon the perception by such candidate that they may be engaged
in a rapidly expanding industry (i.e. Internet) and cannot afford to proxy
shareholders each time their management needs to authorize additional
shares.
ITEM V. DIRECTORS, EXECUTIVE OFFICES, PROMOTERS AND CONTROL PERSONS
The directors and executive officers currently serving the
Company are as follows:
<TABLE>
<CAPTION>
Name Age Positions Held and Tenure
<S> <C> <C>
Gerard Werner 28 President and Director since
February 3, 1999
</TABLE>
The director named above will serve until the first 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
<PAGE> 35
between the sole director and officer of the Company and any other
person pursuant to which any director or officer was or is to be
selected as a director or officer.
The sole director and officer of the Company will devote his
time to the Company's affairs on an "as needed" basis. As a result,
the actual amount of time which he will devote to the Company's
affairs is unknown and is likely to vary substantially from month to
month.
Biographical Information
<PAGE> 36
Gerard Werner
Mr. Werner is a member of the District of Columbia Bar Association
and has worked on Antitrust cases for Compliance, Inc., responding to
document requests from the U.S. Department of Justice.
Mr. Werner serves as a Director and Secretary of Cyberfast Systems,
Inc., a Florida corporation that specializes in Internet Telephony. He
previously served on the Board of Directors of Global Telcom and Internet
Ventures, Inc., prior to that company being acquired by Cyberfast.
Mr. Werner passed the District of Columbia, Court of Appeals Bar
examination in February 1998. He served as Case Design Manager for The
Equitable, April 1998- Sep. 1998, during which time he was also a
registered representative, having passed the series 6 and series 63, as
well as Virginia's Life and Health Insurance licensing exams.
Mr. Werner graduated from the Georgetown University Law School
in 1997 where he served as a staff member of the American Criminal
Law Review Volume 33, and as Articles and Notes Editor Volume 34.
He is a contributing author of Volume 33-3, Eleventh Survey of White
Collar Crime- "Tax Evasion".
Mr. Werner graduated in 1994 from Georgetown University with a
double major in philosophy and government. He served as an intern
in United States Representative Thomas Petri's office on three separate
occasions: 1992, 1994 and 1995.
Indemnification of Officers and Directors
As permitted by Colorado law, the Company's Articles of In-
corporation provide that the Company will 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
Pursuant to the Colorado Business Corporation Act, the
Company's Articles of Incorporation exclude 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 Section 7-106-401 of the Colorado Business Corporation Act, or
<PAGE> 37
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.
Other Public Shell Activities
The Company's President has also recently formed three other
shell companies, North Shore Capital I, II and IV. Each of the persons
who is currently a shareholder in the Company is also a shareholder in
these other shell companies.
North Shore Capital I , II, and IV were formed February 3, 1999,
and are scheduled to file Registration Statements during the first
quarter of the year 2000. There is not currently a market for resale of
the outstanding shares of North Shore Capital I, II, or IV.
Conflicts of Interest
The sole officer and director of the Company will devote only
a small portion of his time to the affairs of the Company, estimated
to be no more than approximately 20 hours per month. Mr. Werner
also serves as Secretary and director of Cyberfast Systems, Inc.,
which will also occupy a portion of his time each month. There will be
occasions when the time requirements of the Company's business
conflict with the demands of his 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.
<PAGE> 38
The Company's sole officer and director will promote all four (4)
"blank check" entities noted above and will use the vehicles in
an ascending selection from North Shore Capital I, Inc. to North Shore
Capital IV, Inc. to justify placing a particular privately held entity
into one of the "blank check" entities. Therefore, the first privately
held entity that elects to consummate an acquisition or merger with
one of North Shore Capital entities will be provided with North Shore
Capital I, Inc. Management does not intend to promote any other
"blank check" entities until business combination transactions
are completed on behalf of all four (4) North Shore Capital
entities.
The Company's President was previously a Director and Vice-President
of Oak Brook Capital I, II, III, and IV, blank-check companies with similar
capital structures as the Company. As of this date, he has resigned his
positions as an officer and director with all four Oak Brook Capital
companies, each having consummated a business combination with an
operating entity. Mr. Werner retained equity in the surviving companies,
which are now known as AEI Environmental, America's Power Partners,
Alpha Fibre Ltd, and PVAXX corporation, respectively.
There is no procedure in place which would allow Mr. Werner to resolve
potential conflicts in an arms-length fashion. Accordingly, he will be
required to use his discretion to resolve them in a manner which he considers
appropriate.
The Company's sole officer and director 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. 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
officer and director 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 sole officer and
director to acquire his shares creates a potential conflict of interest for
him in satisfying his fiduciary duties to the Company and its other
shareholders. Even though such a sale could result in a substantial
profit to him, he would be legally required to make the decision based
upon the best interests of the Company and the Company's other
shareholders, rather than his own personal pecuniary benefit.
ITEM VI. EXECUTIVE COMPENSATION
At inception of the Company, its Director, Gerard Werner received
2,200,000 shares of Common Stock valued at $0.002 per share in consideration
for pre-incorporation services rendered to the Company related to
investigating and developing the Company's proposed business plan and capital
structure, and completion of the incorporation and organization of the Company.
In previous "blank-check" corporate transactions, Mr. Werner received
shares of the Oak Brook Capital corporations for pre-incorporation services,
but received no other legal or consulting fees from these companies. No
officer or director has received any other remuneration. Although there is
<PAGE> 39
no current plan in existence, it is possible that the Company will adopt
a plan to pay or accrue compensation to its sole 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.
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 more 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 is offered compensation in any form from any
prospective merger or acquisition candidate, the proposed transaction will 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.
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. Also, there are no plans,
proposals, arrangements or understandings with respect to the sale or issuance
of additional securities by the Company prior to the location of an
acquisition or merger candidate. Please also see Item I, Description of
Business-General for information regarding the seeking out and selection of
a target company, addressing matters such as the manner of solicitation of
potential investors, the approximate number of persons who will be contacted
or solicited, their relationships to the Company's management, etc.
<PAGE> 40
ITEM VII. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
There is no public market for NORTH SHORE Common Stock. The
NORTH SHORE Common Stock may be traded in the over-the-counter market
in the near future, however, there can be no assurance as to the price
at which trading in NORTH SHORE Common Stock will occur.
With respect to financial and other information relating to
NORTH SHORE, Gerard Werner, P.C., whose address is 5627 Bellington Avenue,
Springfield, VA 22151 will file annual and periodic reports with the Securities
and Exchange Commission pursuant to the Securities Exchange Act of 1934. Copies
of such reports may be inspected by anyone without charge at the public
reference facilities maintained by the Commission at 450 Fifth Street, N.W.,
Room 1024, Washington D.C. 20549, and copies may be obtained from
the Commission at prescribed rates. In addition, NORTH SHORE will
provide without charge, upon the request of any stockholder,
a copy of its Annual Report on Form 10-KSB for the fiscal year ended
December 31, 2000, to be filed with the Commission. Any such
requests should be directed to the President of NORTH SHORE, address
5627 Bellington Avenue, Springfield, VA 22151.
Prior to the date of this Registration Statement, the Company
issued to its officer and director a total of 2,200,000 shares of Common
Stock for a total services valued at $4,400. Certificates evidencing the
Common Stock issued by the Company to this person 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."
In December of 1999, concurrent with a Private Placement under
Regulation D, the Company issued 30,000 shares of common stock and
$10,000 cash to a brother of the Company's President as compensation
for consulting services rendered. The consulting services pertained to
corporate development and strategy for this Company, as a "blank-check"
company.
No officer, director, promoter, 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.
Although there is no current plan in existence, it is possible
that the Company will adopt a plan to pay or accrue compensation to
its sole officers and directors for services related to seeking business
opportunities and completing a merger or acquisition transaction.
<PAGE> 41
The Company maintains a mailing address at the office of its
legal counsel, but otherwise does not maintain an office. As a result,
it pays no rent and incurs no expenses for maintenance of an office
and does not anticipate paying rent or incurring office expenses in the
future.
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 VIII. DESCRIPTION OF SECURITIES
Common Stock
The Company's Articles of Incorporation authorize the issu-
ance of 50,000,000 shares of Common Stock, of which 40,000,000 shares
are voting stock. Each record holder of the Company's voting
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
<PAGE> 42
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 issu-
ance of 10,000,000 shares of preferred stock. The Board of Directors
of the Company is authorized to issue the preferred stock from time
to time in series and is further authorized to establish such series, to
fix and determine the variations in the relative rights and preferences
as between series, to fix voting rights, if any, for each series, and to
allow for the conversion of preferred stock into Common Stock. No
preferred stock has been issued by the Company. The Company anti-
cipates that preferred stock may be utilized in making acquisitions.
Transfer Agent
The Company is currently serving as its own transfer agent,
and plans to continue to serve in that capacity until such time as
management believes it is necessary or appropriate to employ an
independent transfer agent in order to facilitate the creation of a public
trading market for the Company's securities. Since the Company does
not currently expect any public market to develop for its securities
until after it has completed a business combination, it does not
currently anticipate that it will seek to employ an independent transfer
agent until it has completed such a transaction.
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. Additionally, the Company may, in its sole
discretion, issue unaudited quarterly or other interim reports to its
stockholders when it deems appropriate. The Company intends to
comply with the periodic reporting requirements of the Securities
Exchange Act of 1934 for so long as it is subject to those
requirements.
<PAGE> 43
PART II
ITEM I. 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 seven (7) holders of record of the Company's
common stock on January 15, 2000. No dividends have been paid to date and
the Company's Board of Directors does not anticipate paying dividends in
the foreseeable future.
The Company does not plan to take affirmative steps to request or
encourage any broker-dealer to act as a market maker for the Company's
securities. There are to date no understandings, agreements or discussions
in place with any such broker-dealer. Although management has set forth
disclosure throughout this registration statement indicating it would consider
the public "trading" of its securities if such activity was in the best
interests of its shareholders, it presently has no plans to do so.
(a) MARKET PRICE. The Registrant's Common Stock is not quoted at the
present time.
Effective August 11, 1993, the Securities and Exchange Commission adopted
Rule 15g-9, which established the definition of a "penny stock," for purposes
relevant to the Company, as any equity security that has a market price of
less than $5.00 per share or with an exercise price of less than $5.00 per
share, subject to certain exceptions. For any transaction involving a penny
stock, unless exempt, the rules require: (i) that a broker or dealer approve
a person's account for transactions in penny stocks; and (ii) the broker or
dealer receive from the investor a written agreement to the transaction,
setting forth the identity and quantity of the penny stock to be purchased.
In order to approve a person's account for transactions in penny stocks, the
broker or dealer must (i) obtain financial information and investment
experience and objectives of the person; and (ii) make a reasonable
determination that the transactions in penny stocks are suitable for that
person and that person has sufficient knowledge and experience in financial
matters to be capable of evaluating the risks of transactions in penny
stocks.
<PAGE> 44
The broker or dealer must also deliver, prior to any transaction in a penny
stock, a disclosure schedule prepared by the Commission relating to the penny
stock market, which, in highlight form, (i) sets forth the basis on which the
broker or dealer made the suitability determination; and (ii) that the broker
or dealer received a signed, written agreement from the investor prior to the
transaction. Disclosure also has to be made about the risks of investing in
penny stocks in both public offerings and in secondary trading, and about
commissions payable to both the broker-dealer and the registered
representative, current quotations for the securities and the rights and
remedies available to an investor in cases of fraud in penny stock
transactions. Finally, monthly statements have to be sent disclosing recent
price information for the penny stock held in the account and information on
the limited market in penny stocks.
The National Association of Securities Dealers, Inc. (the "NASD"), which
administers NASDAQ, has recently made changes in the criteria for initial
listing on the NASDAQ Small Cap market and for continued listing. For initial
listing, a company must have net tangible assets of $4 million, market
capitalization of $50 million or net income of $750,000 in the most recently
completed fiscal year or in two of the last three fiscal years. For initial
listing, the common stock must also have a minimum bid price of $4 per share,
at least three market makers in its stock, and at least 300 round lot share-
holders. In order to continue to be included on NASDAQ, a company must maintain
$2,000,000 in net tangible assets and a $1,000,000 market value of its
publicly-traded securities. In addition, continued inclusion requires two
market-makers and a minimum bid price of $1.00 per share, as well as 300
round lot holders of the company's securities.
The NASD requirements for small-cap listings are more stringent than
those for the OTC BB (Over the counter Bulletin Board) listings. Listing
as an OTC BB stock requires the filing of a Form 211 by a brokerage firm.
Stocks traded OTC BB are required to have audited financial statements.
On October 7, 1998, the National Association of Securities Dealers,
Inc. ("NASD"), through its wholly-owned subsidiary, the Nasdaq Stock
Market, Inc. ("Nasdaq") submitted to the Securities and Exchange
Commission ("SEC" or "Commission"), pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 ("Exchange Act" or "Act") \1\ and Rule
19b-4 thereunder,\2\ proposed amendments to NASD Rules 6530 and 6540 to
limit quotations on the OTC Bulletin Board- ("OTCBB") to the securities
of issuers that are current in their reports filed with the SEC or other
regulatory authority, and to prohibit a member from quoting a security
on the OTCBB unless the issuer has made current filings, respectively.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
The OTCBB provides a real-time quotation medium that NASD member firms can
use to enter, update, and retrieve quotation information (including
unpriced indications of interest) for equity securities traded over-the-
counter that are neither listed on Nasdaq nor on a primary national
securities exchange. Eligible securities include national, regional, and
foreign equity issues, warrants, units, Direct Participation Programs
("DPPs") \6\ and American Depositary Receipts ("ADRs") \7\ not listed on
any other U.S. national securities market or exchange. Unlike Nasdaq or
registered exchanges where individual companies apply for listing on the
market--and must meet and maintain strict listing standards--there are no
listing standards for the OTCBB, and there currently is no requirement that
issuers of securities on the OTCBB make current, publicly-available reports
with the SEC or other regulator. In fact, over half of the companies that are
currently quoted on the OTCBB are not subject to any public reporting
requirements.
---------------------------------------------------------------------------
\6\ DPP's are securities offerings that permit investors to directly
participate in the cash flow and tax consequences of the underlying
investments. DPPs provide for the ``flow through'' of tax results. Thus, gains
and losses are taxed to the investor not the issuer of the security.
\7\ ADRs are receipts for shares of foreign corporations that are held by U.S.
banks and bought and sold in the U.S. by investors, without utilizing overseas
markets.
---------------------------------------------------------------------------
The proposed rule change was approved and ordered in an effort to balance the
benefits that the transparency of the OTCBB provides with the public need for
information about the issuers being quoted. The NASD is concerned that where
there is no public information available regarding a security, the broad-based
automated display of quotations in that security creates an unjustified
perception of reliability. While the NASD realizes that the new rule may result
in the lack of real-time quotations for those securities that become ineligible
for the OTCBB, it believes that this loss is outweighted by the benefit to
investors who would, under the proposed rule, have access to information about
the companies in which they may invest. In addition, transactions in securities
ineligible for the OTCBB are still subject to real-time last sale trade
reporting. These reports are publicly disseminated through market data vendors
on a real-time basis.
To remain eligible for quotation on the OTCBB, an issuer must remain current in
its filings with the SEC or applicable regulatory authority. A member is
required to inform the NASD of the issuer's reporting schedule.
Once an issuer is delinquent in filing a required report (e.g., Form 10-K, Form
10-Q, Form 20-F, Insurance Company Annual Statement, or call report), a
security of the issuer may continue to be quoted on the OTCBB for a 30 or 60
calendar day grace period from the due date of the report, depending on the
type of issuer. After the grace period, quotations in the security of the
delinquent issuer are not permitted on the OTCBB.
The Commission believes that the Amendments are consistent with Section 15A of
the Act as it will protect investors and the public interest by requiring
issuers listed on the OTCBB to file reports containing current financial
information with the Commission or appropriate regulatory agency. Specifically,
the Commission believes the proposal is consistent with the requirements of
Section 15A(b)(6) and (11) of the Act.\16\ Section 15A(b)(6) requires, among
other things, that the association's rules be designed to prevent fraudulent
and manipulative acts and practices, to promote just and equitable principles
of trade, to remove impediments to and perfect the mechanism of a free and
open market and a national market system, and, in general, to protect investors
and the public interest.\17\ Section 15A(b)(11) requires that the rules of the
association be designed to produce fair and informative quotations, to prevent
fictitious or misleading quotations, and to promote orderly procedures for
collecting, distributing, and publishing quotations.\18\
---------------------------------------------------------------------------
\15\ 15 U.S.C. 78o-3.
\16\ 15 U.S.C. 78o-3(b)(6) and (11).
\17\ 15 U.S.C. 78o-3(b)(6).
\18\ 15 U.S.C. 78o-3(b)(11).
---------------------------------------------------------------------------
Market makers will not be permitted to quote OTCBB traded securities unless the
issuer has made current filings with the appropriate regulatory agency. The
filing requirement ensures that companies trading on the OTCBB market will have
current, public information that investors can access, from the appropriate
regulatory agency, when considering whether to invest in an OTCBB traded
security. Rule 6530 should provide investors in OTCBB securities with more
information on which to base investment decisions. The Commission also believes
that limiting quotations on the OTCBB to the securities of issuers that report
to the SEC or applicable regulatory authority may help to reduce fraud and
manipulation. As a result of the reporting requirement, financial data on
issuers is available and issuers that provide false or misleading information
in their required filings are subject to liability for making those statements.
\19\ The Commission finds that Rule 6530 is consistent with the Act because it
will protect investors and the public interest.\20\
---------------------------------------------------------------------------
\19\ See, e.g., SEC v. Savoy Industries, Inc., 587 F.2d 1149 (D.C. Cir. 1978),
cert denied, 440 U.S. 913 (1979); Exchange Act Rule 10b-5, 17 CFR 240.10b-5.
\20\ 15 U.S.C. 78o-3(b)(6).
---------------------------------------------------------------------------
Management intends to strongly consider undertaking a transaction with
any merger or acquisition candidate which will allow the Company's securities
to be traded without the aforesaid limitations. However, there can be no
assurances that, upon a successful merger or acquisition, the Company will
qualify its securities for listing on NASDAQ or some other national exchange,
or be able to maintain the maintenance criteria necessary to insure continued
listing. The failure of the Company to qualify its securities or to meet the
relevant maintenance criteria after such qualification in the future may
result in the discontinuance of the inclusion of the Company's securities on a
national exchange. In such events, trading, if any, in the Company's
securities may then continue in the non-NASDAQ over-the-counter market. As a
result, a shareholder may find it more difficult to dispose of, or to obtain
accurate quotations as to the market value of, the Company's securities.
<PAGE> 45
(b) HOLDERS. There are seven (7) holders of the Company's
Common Stock. Prior to the date of this Registration Statement, the Company
issued to its officers and directors a total of 2,200,000 shares of Common
Stock for a total services valued at $4,400. Additionally, six
(6) of the Company's stockholders were issued their shares pursuant to a
private placement offering under section 506 of Regulation D. All such
investors were "sophisticated". The Company anticipates that certain
potential acquisition or merger candidates might satisfy the NASDAQ SmallCap
requirements, but would need at least one hundred (100) round-lot holders of
their common stock.
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.
The Company has taken the following action to ensure that a public
re-distribution of the Shares does not take place:
(i) a "restrictive" legend will be placed on each stock certificate issued
to stockholders;
(ii) "stop transfer" order instructions will be placed on each stock
certificate issued;
(iii) stockholders have been placed on notice that their securities will need
to be sold in compliance with Rule 144 of the Act, and may not be
transferred otherwise;
<PAGE> 46
(iv) disclosure has been set forth throughout the Form 10SB describing the
above restrictions.
Redistribution - Rule 144
Rule 144 of the Securities Act lists criteria under which
restricted securities and securities held by affiliates or
control persons may be resold without registration. The rule
prevents the creation of public markets in securities when the
issuers have not made adequate current information available to
the public. Preliminary Note to Securities Act Rule 144. The
requirements of Rule 144(b) through (i) include provisions that:
1) current public information be available regarding
the issuer of the securities;
2) at least one year elapse between the time the
securities are acquired from an issuer or affiliate and
the date the securities are resold under the rule;
3) the amount of securities able to be sold is limited,
depending on whether the sale is by an affiliate or
not;
4) the securities be sold in brokers' transactions or
with a market maker;
5) Commission Form 144 be filed depending on the size
of the transaction; and
6) the person filing the form has a bona fide intention
to sell the securities within a reasonable time.
State Exemptions Following the Section 4(2) Exemption:
A number of states exempt from their registration requirements offers and
sales exempt from federal registration by reason of Section 4(2) of the
Securities Act. That provision provides an exemption for transactions not
involving a public offering and constitutes the issuer private placement
exemption. The exemption may explicitly refer to Section 4(2) of the
Securities Act or may exempt non-public offerings. Of course, those
jurisdictions without general securities registration requirements, including
Colorado, District of Columbia, New York, and Nevada may also rely on the
Section 4(2) exemption.
<PAGE> 47
<PAGE> 50
(c) DIVIDENDS. The Registrant has not paid any dividends to date, and
has no plans to do so in the immediate future.
ITEM II. 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 pending litigation.
ITEM III. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
Not applicable.
ITEM IV. RECENT SALES OF UNREGISTERED SECURITIES
Since February 3, 1999 (the date of the Company's formation),
the Company has sold its Common Stock to the persons listed in the
table below in transactions summarized as follows:
<TABLE>
<CAPTION>
Name Date of Shares Aggregate Purchase
Sale Purchase Price
Price per Share
<S> <C> <C> <C> <C>
Gerard Werner 02/03/99 2,200,000 $4400(1) $0.002
</TABLE>
(1) Consideration consisted of pre-incorporation consulting services
rendered to the Registrant related to investigating and developing the
Registrant's proposed business plan and capital structure and
completing the organization and incorporation of the Registrant.
With respect to the sales made, the Registrant relied on Section 4(2) of
the Securities Act of 1933, as amended. No advertising or general
solicitation was employed in offering the shares. The securities were offered
for investment only and not for the purpose of resale or distribution, and the
transfer thereof was appropriately restricted.
In general, under Rule 144, a person (or persons whose shares are
aggregated) who has satisfied a one year holding period, under certain
circumstances, may sell within any three-month period a number of shares which
does not exceed the greater of one percent of the then outstanding Common
Stock or the average weekly trading volume during the four calendar weeks
prior to such sale. Rule 144 also permits, under certain circumstances, the
sale of shares without any quantity limitation by a person who has satisfied a
two-year holding period and who is not, and has not been for the preceding
three months, an affiliate of the Company.
Each of the sales listed above was made either for cash or for
services. Sales for which the consideration was services were made in
reliance upon the exemption from registration provided by Rule 701
adopted pursuant to Section 3(b) of the Securities Act of 1933. Sales for
which the consideration was cash were made in reliance upon the
exemption from registration offered by Section 4(2) of the Securities Act
of 1933. Based upon the Preincorporation Consultation and Subscription
Agreement executed by the persons who acquired shares for services, and
the Subscription Agreement and Investment Representations executed by
persons who acquired shares for cash, and based upon the pre-existing
relationship between the cash subscribers and the Company's officers and
directors, 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.
<PAGE> 52
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Articles 7-109-101 through 7-109-109 of the Colorado Business
Corporation Act provides that any director or officer of a Colorado
corporation may be indemnified against judgments, penalties, fines,
settlements and reasonable expenses actually incurred by him in
connection with or in defending any action, suit or proceeding in
which he is a party by reason of his position, so long as it shall
be determined that he conducted himself in good faith and that he
reasonably believed that his conduct was in the corporation's best
interest. If a director or officer is wholly successful, on the
merits or otherwise, in connection with such proceeding, such
indemnification is mandatory.
The Company's articles of incorporation and bylaws contain
provisions which provide, among other things, that the Company
shall indemnify certain persons, including officers and directors,
against judgments, fines and amounts paid in settlement actually
and reasonably incurred by such person in connection with any
action, suit or proceeding if he acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best
interest of the Company, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was
unlawful. As to any action brought by or in the right of the
Company, such indemnification is limited to expenses (including
attorney's fees) actually and reasonably incurred in connection
with the defense or settlement of the case, and shall not be made,
absent court approval, if it was determined that such person was
liable for negligence or misconduct in the performance of his duty
to the Company.
The Articles of Incorporation and the Bylaws of the Company,
filed as Exhibits 3.1 and 3.2, respectively, provide that the Company
will indemnify its officers and directors for costs and expenses
incurred in connection with the defense of actions, suits, or
proceedings where the officer or director acted in good faith and in a
manner he reasonably believed to be in the Company's best interest
and is a party by reason of his status as an officer or director, absent
a finding of negligence or misconduct in the performance of duty.
<PAGE> 53
NORTH SHORE CAPITAL III
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1999
The following financial statements include a balance sheet as of
December 31, 1999, a statement of operations and a statement of changes
in stockholders' equity for the period from February 3, 1999
(inception) through December 31, 1999.
NORTH SHORE CAPITAL III, INC.
(A Development Stage Company)
Index to Financial Statements 1
Report of Independent Auditor 2
Balance Sheet (Exhibit 1) 3
Statement of Operations (Exhibit 2) 4
Statement of Changes in
Stockholders' Equity (Exhibit 3) 5
Statement of Cash Flows (Exhibit 4) 6
Notes to Financial Statements 7
<PAGE> 54
NORTH SHORE CAPITAL III, INC.
(A Development Stage Company)
June 21, 2000
Shareholders and Board of Directors
NORTH SHORE CAPITAL III, INC.
SPRINGFIELD, VA 22151
Report of Independent Auditors
I have audited the accompanying balance sheet of North Shore Capital
III, Inc. (a development stage Company) as of December 31, 1999, and the
related statements of operations and stockholders' equity from the company's
inception on February 3, 1999. These financial statements are the
responsibility of the Company's management. My responsibility is to
express an opinion on these financial statements based on our audit.
I conducted my audit in accordance with generally accepted
auditing standards. Those standards require that I 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 by
management, as well as evaluating the overall financial statement
presentation. I believe that my audit provides a reasonable basis for
my opinion.
In my opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of North Shore
Capital III, Inc. (a development stage Company) as of December 31, 1999, and
the results of operations, and its cash flows, for the period from February 3,
1999 (inception) to December 31, 1999, in conformity with generally
accepted accounting principles.
/s/ Dennis W. Bersch
Milwaukee, Wisconsin
March 14, 2000
<PAGE> 55
NORTH SHORE CAPITAL III, INC. (Exhibit 1)
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET AS OF DECEMBER 31, 1999
<TABLE>
<CAPTION>
ASSETS
<S> <C> <C> <C>
CURRENT ASSETS
Cash $2,471
Total assets $ 2,471
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
EQUITY:
Preferred Stock, no par value,
10,000,000 shares authorized
Common Stock, no par value,
50,000,000 shares authorized,
2,247,500 shares outstanding;
2,200,000 shares issued at $.002 $4,400
47,500 shares issued pursuant
to Private Placement $47,500
Issued and Outstanding $51,900
Deficit accumulated during the
development stage (49,429)
Total equity $2,471
Total liabilities and equity $2,471
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 56
NORTH SHORE CAPITAL III, INC. (Exhibit 2)
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF OPERATIONS
FOR THE PERIOD FEBRUARY 3, 1999 (Inception) to
DECEMBER 31, 1999
<TABLE>
<CAPTION>
<S> <C>
REVENUE $ 0
COSTS AND EXPENSES:
Bank charges $ 29
Audit fees 5,000
Organization cost (Note 3) 4,400
Professional fees (Note 3) 40,000
Net loss $ (49,429)
PER SHARE INFORMATION:
Weighted average number of
common shares outstanding 2,018,494
Profit (loss) per share $ (0.02)
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 57
NORTH SHORE CAPITAL III, INC. (Exhibit 3)
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM FEBRUARY 3, 1999 (INCEPTION)
THROUGH DECEMBER 31, 1999
<TABLE>
<CAPTION>
Common Price
Shares Per Stock Retained
Issued Share Amount Earnings Equity
<S> <C> <C> <C> <C> <C>
Equity at Inception $ -
Shares issued at inception
for services at $0.002
per share 2,200,000 $0.002 $ 4,400 $ 4,400
Shares issued pursuant to
Private Placement under
Regulation D 17,500 $1.00 17,500 17,500
For cash
In exchange for
services by a
related party 30,000 $1.00 30,000 30,000
Net loss for the period $(49,429) (49,429)
TOTAL 2,247,500 $51,900 $(49,429) $ 2,471
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 58
NORTH SHORE CAPITAL III, INC. (Exhibit 4)
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM FEBRUARY 3, 1999 (INCEPTION)
THROUGH DECEMBER 31, 1999
<TABLE>
<CAPTION>
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income ($49,429)
Net Cash Used by Operating Activities ($49,429)
CASH FLOWS FROM FINANCING ACTIVITIES
Purchase of Common Stock $17,500
Issuance of Stock in exchange
for organization costs 4,400
Issuance of Stock in exchange
for professional fees 30,000
Cash provided by financing activities 51,900
Net Increase in Cash $2,471
Cash at Beginning of Period -
Cash at End of Period $2,471
</TABLE>
The accompanying notes are an integral part of these financial statements.
NORTH SHORE CAPITAL III, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1999
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
The Company was incorporated on February 3, 1999, in the State of Colorado.
The Company is in the development stage and its intent is to operate as
a capital market access corporation and to acquire one or more existing
businesses through merger or acquisition. The Company has had no significant
business activity to date. The Company has selected the calendar year as its
fiscal year.
Organizational costs
Organizational costs include costs for professional fees and have been
charged directly to expense accounts.
Net loss per share
The net loss per share is computed by dividing the net loss for the period
by the weighted average number of common shares outstanding for the
period.
Estimates
The preparation of the Company's financial statements in conformity
with generally accepted accounting principles requires the Company's
management to make estimates and assumptions that affect the amounts
reported in these financial statements and accompanying notes. Actual
results could differ from those estimates.
2. STOCKHOLDERS' EQUITY
On February 3, 1999, the Company issued 2,200,000 shares of its no par value
common stock in exchange for professional services in organizing the
company valued at $4,400, or $.002 per share. The shares were issued
pursuant to Rule 701 of the Securities Act of 1933 (the "Act") and are
restricted securities within the meaning of Rule 144 of the Act. An
additional 47,500 shares were issued in private placements, $17,500 for
cash, $30,000 for services.
3. RELATED PARTY TRANSACTIONS
The company issued shares to its organizing and principal shareholder using
organization costs of $4,400 as consideration. A brother of the founder
was paid $10,000 in cash and issued 30,000 shares at the same $1.00 rate as
the concurrent private placement, in exchange for consulting services
valued at $40,000.
NORTH SHORE CAPITAL III, INC.
(A Development Stage Company)
FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH, 31, 2000
AND THE PERIOD FROM FEBRUARY 3, 1999
(DATE OF INCEPTION) TO MARCH 31, 2000
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS' REVIEW REPORT
To the Board of Directors
NORTH SHORE CAPITAL III, Inc.
(a Development Stage Company)
I have reviewed the accompanying balance sheet of North Shore Capital III,
Inc. (a development stage company) as of March 31, 2000, and the related
statements of operations, stockholders' equity, and cash flows for the three
month period then ended and the period from February 3, 1999 (inception) to
March 31, 1999, as well as the period from February 3, 1999 (inception) to
March 31, 2000 in accordance with Statements on Standards for Accounting and
Review Services issued by the American Institute of Certified Public
Accountants. All information in the financial statements is the
representation of the management of North Shore Capital III, Inc.
A review consists principally of inquiries of Company personnel and analytical
procedures applied to financial data. It is substantially less in scope than
an audit in accordance with generally accepted auditing standards, the objective
of which is the expression of an opinion regarding the financial statements
taken as a whole. Accordingly, I do not express such an opinion.
Based on my review, I am not aware of any material modifications that should
be made to the accompanying financial statements in order for them to be in
conformity with generally accepted accounting principles.
/S/ Dennis W. Bersch
Milwaukee, Wisconsin
August 14, 2000
<TABLE>
<CAPTION>
NORTH SHORE CAPITAL III, INC.
(A Development Stage Company)
BALANCE SHEET
MARCH 31, 2000
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash $2,334
TOTAL ASSETS $2,334
LIABILITIES AND EQUITY
TOTAL LIABILITIES -0-
Stockholders' equity:
Preferred stock, no par value,
10,000,000 shares authorized,
no shares outstanding
Common stock, $.001 par value;
50,000,000 shares authorized,
2,247,500 issued and outstanding $2,248
Paid in Capital $49,652
Deficit accumulated during the
development stage (49,566)
Total stockholders equity (deficit) $2,334
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $2,334
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS AND
INDEPENDENT CERTIFIED ACCOUNTANTS' REVIEW REPORT.
<TABLE>
<CAPTION>
North Shore Capital III, Inc.
(A Development Stage Company)
STATEMENT OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2000,
THE PERIOD FROM FEBRUARY 3, 1999 (INCEPTION) TO MARCH 31, 1999,
AND THE PERIOD FROM FEBRUARY 3, 1999 (INCEPTION)
TO MARCH 31, 2000
<S> <C> <C> <C>
February 3, 1999 Three Months February 3, 1999
(Inception) to Ended (Inception) to
March 31, 1999 March 31, 2000 March 31, 2000
REVENUE $ 0 $ 0 $ 0
EXPENSES:
Audit fees 5,000
Professional fees (note 3) 40,000
Organization costs (note 3) 4,400 4,400
Bank fees 137 166
Net loss $ (4,400) $ ( 137) $ (49,566)
PER SHARE INFORMATION:
Weighted average number of
Common shares outstanding 1,100,000 2,247,500 2,213,571
Loss Per Common Share $ (.00) $ (.00) $ (.02)
SEE NOTES TO FINANCIAL STATEMENTS
</TABLE>
<TABLE>
<CAPTION>
NORTH SHORE CAPITAL III, INC.
(A Development Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY
THREE MONTHS ENDED MARCH 31, 2000
AND THE PERIOD FROM FEBRUARY 3, 1999 (DATE OF INCEPTION)
TO MARCH 31, 2000
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Shares Par Paid Retained
in Earnings
Issued Value Capital (Deficit) Equity
Balance at February 3, 1999 0 $ 0 $ 0 $ 0 $ 0
Issuance of common stock for 2,200,000 2,200 2,200 4,400
Services Rendered at inception
at $.002 on February 3, 1999
(See Note 2)
Shares issued pursuant to
Private Placement under
Regulation D 17,500 18 17,482 17,500
Issued in exchange 30,000 30 29,970 30,000
for cash and servicces
at $1.00 per share
Net loss for the period from ($49,429) (49,429)
February 3, 1999 through
March 31, 2000
Net loss for the three months
ended March 31, 2000 (137 (137)
Balance at March 31, 2000 2,247,500 $2,248 $ 49,652 ($49,566) 2,334
SEE NOTES TO FINANCIAL STATEMENTS AND
INDEPENDENT CERTIFIED ACCOUNTANTS' REVIEW REPORT.
</TABLE>
<TABLE>
<CAPTION>
North Shore Capital III, Inc.
(A Development Stage Company)
STATEMENT OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 2000,
THE PERIOD FROM FEBRUARY 3, 1999 TO MARCH 31, 1999 (INCEPTION),
AND THE PERIOD FROM FEBRUARY 3, 1999 (DATE OF INCEPTION)
TO MARCH 31, 2000
<S> <C> <C> <C>
February 3, 1999 Three Months February 3, 1999
(Inception) to Ended (Inception) to
March 31, 1999 March 31, 2000 March 31, 2000
CASH FLOWS FROM
OPERATING ACTIVITIES
Net Income ($137) ($49,566)
Cash flow from
operating activities -0- ($137) ($49,566)
CASH FLOWS FROM
FINANCING ACTIVITIES
Purchase of Common Stock 17,500
Issuance of stock in exchange
For organizational activities 4,400 4,400
Issuance of stock in exchange
For professional fees 30,000
Cash provided by
financing activities 4,400 51,900
Net cash provided this peiod 0 (137) 2,334
Cash and cash equivalents,
beginning of period 0 2,471 0
Cash and cash equivalents,
end of period $ 2,334 $ 2,334
SEE NOTES TO FINANCIAL STATEMENTS AND
INDEPENDENT CERTIFIED ACCOUNTANTS' REVIEW REPORT.
</TABLE>
North Shore Capital III, Inc.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2000
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Development Stage Operations
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements. Actual results may
differ from those estimates.
North Shore Capital III, Inc. (a Development Stage Company) (the Company)
was incorporated on February 3, 1999, in the State of Colorado. The Company
is in the development stage and its intent is to operate as a capital market
access corporation and to acquire one or more existing businesses through merger
or acquisition. The Company has had no significant business activity to date.
The Company has selected the calendar year as its fiscal year. Costs
associated with organization have been expensed in accordance with SOP 98-5.
Stock-Based Compensation
The Company accounts for stock-based compensation under Statement of
Financial Accounting Standards ("SFAS") No. 123 "Accounting for Stock-Based
Compensation". The Company accounts for stock-based compensation based on the
fair value of the consideration received or the fair value of the stock issued,
whichever is more reliably measurable.
Estimates
These condensed consolidated financial statements as of March 31, 2000
and for the periods ended March 31, 2000 and 1999 and the related footnote
information are unaudited and have been prepared on a basis substantially
consistent with the audited financial statements of the Company ("North
Shore Capital III" or "North Shore") as of and for the year ended December 31,
1999 included in the Company's Registration Statement, or Form 10SB, as
filed with the Securities and Exchange Commission ("SEC"). These condensed
financial statements should be read in conjunction with the audited
consolidated financial statements and the related notes to the consolidated
financial statements of the Company as of and for the year ended December 31,
1999. In the opinion of management, the accompanying unaudited condensed
financial statements contain all adjustments (consisting of normal recurring
adjustments) which management considers necessary to present fairly the
consolidated financial position of the Company at March 31, 2000, its results
of operations for the periods ended March 31, 2000 and 1999 and its cash
flows for the periods ended March 31, 2000 and 1999. The results of
operations for the periods ended March 31, 2000 may not be indicative of
the results expected for any succeeding quarter or for the entire year
ending December 31, 2000.
The preparation of the Company's financial statements in conformity with
generally accepted accounting principles requires the Company's management to
make estimates and assumptions that affect the amounts reported in these
financial statements and accompanying notes. Actual results could differ from
those estimates.
2. STOCKHOLDERS' EQUITY
On February 3, 1999, the Company issued two million two hundred thousand
(2,200,000) shares of its $.001 par value common stock for services, rendered by
related parties, valued at their fair market value of $4,400. The shares were
issued pursuant to Rule 701 of the Securities Act of 1933 (the "Act") and are
restricted securities within the meaning of Rule 144 of the Act. The company
issued an additional 47,500 shares of stock pursuant to a private placement
under Regulation D.
The Company authorized 10,000,000 shares of Series A convertible preferred
stock with a par value of $.001 per share. Currently, there are no shares
outstanding. Each share of preferred stock can be converted into one share of
common stock and each share is entitled to one vote, voting together with the
holders of shares of common stock.
3. RELATED PARTY TRANSACTIONS
An amount totalling $40,000 ($10,000 cash, 30,000 shares of common stock valued
at $1.00 per share) was paid for consulting services rendered in connection
with business planning and compliance. Those consulting services were rendered
by shareholders of the Company.
As described in footnote #2 the Company issued common stock for services
provided by related parties that are valued at the fair market value of
$4,400.
SEE INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS' REVIEW REPORT.
(CONTINUED)
North Shore Capital III, Inc.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2000
4. INCOME TAXES
Due to the current period's operating loss, the Company has no provision for
income taxes.
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. The Company's net
deferred tax asset balances are attributable to net operating loss carry-
forwards. At March 31, 2000, the Company's deferred tax asset consisted of
the following:
Deferred tax asset $ 13,455
Valuation allowance (13,455)
Net deferred tax assets recognized on
the accompanying balance sheets $ 0
The components of the income tax provision (benefit) consisted of the following
for the period ended March 31, 2000.
Current $ 0
Deferred 13,455
Tentative tax provision (benefit) 13,455
Change in valuation allowance (13,455)
Net income tax provision (benefit) $ 0
The Company has a net operating and economic loss carryforward of
approximately $45,000 available to offset future federal and state taxable
income through 2019 as follows:
Year of Expiration Amount
2019 $ 45,000
SEE INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS' REVIEW REPORT.
(CONCLUDED)
<PAGE> 59
PART III
ITEM I. INDEX TO EXHIBITS
(b) Exhibits
3(a) Articles of Incorporation
3(b) Bylaws
4(a) Agreements Defining Certain Rights of Shareholders
4(b) Specimen Stock Certificate
7 Not applicable
9 Not applicable
10(a) Pre-incorporation Consultation and
Subscription Agreement
11 Not applicable
14 Not applicable
16 Not applicable
21 Not applicable
23.1 Consent of Counsel, Gerard Werner, P.C.
24 Not applicable
27 Financial Data Schedule
28 Not applicable
99 Not applicable
<PAGE> 60
ITEM 2. DESCRIPTION OF EXHIBITS
See Item I above.
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of
1934, the registrant caused this registration statement to be
signed on its behalf by the undersigned, thereunto duly authorized.
NORTH SHORE CAPITAL III, INC.
By: /s/ Gerard M. Werner
________________________________
Gerard M. Werner
General Counsel and Director
Date: September 15, 2000
<PAGE>
