UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Amendment 2
to
FORM 10SB
essentialsystems.com, Inc.
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(Name of Small Business Issuer in its Charter)
Florida 65-0965465
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification no.)
222 Lakeview Avenue, PMB 160-183
West Palm Beach 33401
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (561) 659-6530
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 to be registered
None None
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Securities to be registered under Section 12(g) of the Act:
Common Stock, $.0001 par value per share
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(Title of class)
Copies of Communications Sent to:
Mintmire & Associates
265 Sunrise Avenue, Suite 204
Palm Beach, FL 33480
Tel: (561) 832-5696 - Fax: (561) 659-5371
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PART I
Item 1. Description of Business
Business Development
essentialsystems.com, Inc. (the "Company") was organized on March 15, 1996,
under the laws of the State of Florida, having the stated purpose of engaging in
any lawful activities. The Company was formed with the contemplated purpose
distribute and sell at wholesale sophisticated electronic surveillance equipment
and devices for security and other purposes.
The incorporator was unable to successfully implement the initial business
plan. After development of a business plan efforts to develop the business
failed and all such efforts were abandoned in December 1996.
The Company never engaged in an active trade or business throughout the
period from August 1996 until just recently. In December 1999, all of the issued
and outstanding shares of the common stock of the Company were acquired from
Alexis Mandelbaum, (5,000,000 shares) and Donald F. Mintmire (500,000 shares),
its two (2) shareholders. At that time neither was an officer or director of the
Company. T he 5,000,000 shares were purchased from Alexis Mandelbaum by Mr.
Kevin L. Bell, the principal of the Company. The 500,000 shares were purchased
from Donald F. Mintmire on that same date by a number of investors which did not
include Mr. Bell. Alexis Mandelbaum agreed to exchange the 5,000,000 issued and
outstanding shares held by such shareholder in exchange for a commitment to
arrange to pay the costs of the continued operations of the corporation, and
bringing its books and records up to date. The 500,000 shares held by Donald F.
Mintmire were purchased for $1,000.00. Ms. Alexis Mandelbaum was introduced to
Mr. Kevin L. Bell by Mr. Donald F. Mintmire. Mr. Bell and Mr. Mintmire were
business and social acquaintances at that time. Mr. Mintmire served as legal
advisor to the Company since Ms. Mandelbaum formed the Company. Mr. Bell is not
related to either Ms. Mandelbaum or Mr. Mintmire, except that Mr. Mintmire also
serves as legal advisor to Mr. Bell and the Company and as legal advisor to
other companies. Mr. Mintmire is not engaged in the activities of the business
except as a legal advisor. There are no arrangements or agreements between Ms.
Mandelbaum, Mr. Bell and/or Mr. Mintmire relating to either of them
participating in any future transactions with the Company.
The Company subsequently received gross proceeds in the amount of
$12,500.00 from the sale of a total of 500,000 shares of common stock, $.0001
par value per share (the "Common Stock"), in an offering conducted pursuant to
Section 3(b) and 4(2) of the Securities Act of 1933, as amended (the "Act"), and
Rules 505 and 506 of Regulation D promulgated thereunder. This offering was made
in the State of Florida. The Company undertook the offering of shares of Common
Stock in February 2000.
The Company then began to consider and investigate potential business
opportunities. The Company is considered a development stage company and, due to
its status as a "shell" corporation, its principal business purpose is to locate
and consummate a merger or acquisition with a private entity. Because of the
Company's current status of having limited assets and no recent operating
history, in the event the Company does successfully acquire or merge with an
operating business
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opportunity, it is likely that the Company's present shareholders will
experience substantial dilution and there will be a probable change in control
of the Company.
In December 1999, the Company also determined it should become active in
seeking potential operating businesses and business opportunities with the
intent to acquire or merge with such businesses.
Under the Exchange Act, a non-reporting Company will not be treated as a
successor issuer after the non-reporting Company acquires a reporting blank
check company or shell company. However, a non-reporting company that acquires a
blank check or shell company may use a different registration procedure which
requires reporting under the Act within fifteen (15) days of occurrence and
filing within such time period complete audited and pro forma financials as a
part of such filing. Mergers or acquisitions under such circumstances with a
private entity require filing such financial documentation, and other detailed
information regarding the non-reporting company and its nonfinancial operations.
In addition, shareholders of either company may acquire stock in the other
company which may or may not be exempt from registration, may change the holding
period of the stock for tradability purposes under Rule 144, and may otherwise
limit or restrict the tradability of certain stock. Under any of the above
circumstances shareholders may be affected by any such merger or acquisition.
The Company is voluntarily filing its registration statement on Form 10-SB
in order to make information concerning itself more readily available to the
public. Management believes that being a reporting company under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), could provide a
prospective merger or acquisition candidate with additional information
concerning the Company. In addition, management believes that this might make
the Company more attractive to an operating business as a potential business
combination candidate. As a result of filing its registration statement, the
Company is obligated to file with the Commission certain interim and periodic
reports including an annual report containing audited financial statements. The
Company intends to continue to voluntarily file these periodic reports under the
Exchange Act even if its obligation to file such reports is suspended under
applicable provisions of the Exchange Act.
Any target acquisition or merger candidate of the Company will become
subject to the same reporting requirements as the Company upon consummation of
any such business combination. Thus, in the event that the Company successfully
completes an acquisition or merger with another operating business, the
resulting combined business must provide audited financial statements for at
least the two most recent fiscal years, or in the event that the combined
operating business has been in business less than two years, audited financial
statements will be required from the period of inception of the target
acquisition or merger candidate.
The Company's principal executive offices are located at 222 Lakeview
Avenue, PMB 160- 183, West Palm Beach, FL 33401 and its telephone number is
(561) 659-6530.
Business of Company
The Company has no recent operating history and no representation is made,
nor is any intended, that the Company will be able to carry on future business
activities successfully. There
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can be no assurance that the Company will have the ability to acquire or merge
with an operating business, business opportunity or property that will be of
material value to the Company.
Management plans to investigate, research and, if justified, potentially
acquire or merge with one or more businesses or business opportunities. The
Company currently has no commitment or arrangement, written or oral, to
participate in any business opportunity and management cannot predict the nature
of any potential business opportunity it may ultimately consider. Management
will have broad discretion in its search for and negotiations with any potential
business or business opportunity.
Management does not contemplate that the Company would acquire or merge
with a business entity in which any officer or director of the Company has an
interest. Any such related party transaction, however remote, would be submitted
for approval by the Board of Directors and the proposed transaction would be
submitted to the shareholders for prior approval in an appropriate manner. Thus
any such transaction would be approved only by the shareholders. The Company
will not obtain an independent appraisal of the value of the target if this
transaction involves a related party transaction. The Company's management has
not had any contact, discussions, or other understandings regarding any
particular business opportunity at this time, regardless of any potential
conflict of interest issues. The potential conflict of interest is merely a
remote theoretical possibility at this time.
The terms of the sale of any and all shares held by officers, directors,
management or associates will be afforded all other shareholders absent consent
of all shareholders.
Management (Kevin L. Bell) was sole Officer and Director of Lucid Concepts,
Inc. which was structured as a shell. A merger with that company was effected on
December 31, 1999. Mr. Bell received $12,500.00, surrendered his stock, and the
remaining shareholders retained their stock.. Mr. Bell is not active in the
merged entity. Mr. Bell has announced his attention not to participate in other
shell companies prior to a merger or acquisition for the Company and therefore
has no conflict of interest related thereto. There are no other promoters,
management, affiliates or associates involved.
Sources of Business Opportunities
The Company intends to use various sources in its search for potential
business opportunities including its officer and director, consultants, special
advisors, securities broker-dealers, venture capitalists, member of the
financial community and others who may present management with unsolicited
proposals. Because of the Company's limited capital, it may not be able to
retain on a fee basis professional firms specializing in business acquisitions
and reorganizations. The Company will most likely have to rely on outside
sources, not otherwise associated with the Company, that will accept their
compensation only after the Company has finalized a successful acquisition or
merger. Management will not use any specific criteria in hiring a consultant or
finder but will select generally from any such available resource. The Company
will rely upon the expertise and contacts of such persons, will use notices in
written publications and personal contacts to find merger and acquisition
candidates, the exact number of such contacts dependent upon the skill and
industriousness of the participants and the conditions of the marketplace. To
date no notices, advertisements or other information has been provided and
management is unable to provide or
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further describe such data at this time. None of the participants in the process
will have any past business relationship with management. To date the Company
has not engaged nor entered into any definitive agreements nor understandings
regarding retention of any consultant to assist the Company in its search for
business opportunities, nor is management presently in a position to actively
seek or retain any prospective consultants for these purposes since such
activity will only be undertaken after the effective date of this registration
statement and completion of the comment period with the Securities and Exchange
Commission. Payment of other compensation or repayment of loans to or
expenditures of officers, directors, affiliates or lending institutions may be
funded from the revenues, assets, or debt or equity securities of an acquisition
or merger candidate although such payments will not be required. Under these
circumstances such compensation or loan repayment if required gives priority
payment to such persons and may adversely impact the value attributable to the
stock of the remaining shareholders.
The Company does not intend to restrict its search to any specific kind of
industry or business. The Company may investigate and ultimately acquire a
venture that is in its preliminary or development stage, is already in
operation, or in various stages of its corporate existence and development.
Management cannot predict at this time the status or nature of any venture in
which the Company may participate. A potential venture might need additional
capital or merely desire to have its shares publicly traded. The most likely
scenario for a possible business arrangement would involve the acquisition of,
or merger with, an operating business that does not need additional capital, but
which merely desires to establish a public trading market for its shares.
Management believes that the Company could provide a potential public vehicle
for a private entity interested in becoming a publicly held corporation without
the time and expense typically associated with an initial public offering. Under
these circumstances such compensation or loan repayment if required gives
priority payment to such persons and may adversely impact the value attributable
to the stock of the remaining shareholders. Payment of other compensation or
repayment of loans of officers, directors, affiliates or lending institutions
may be funded from the revenues, assets, or debt or equity securities of an
acquisition or merger candidates although such payments will not be required.
The Company will not pay consultants, finders fees or other acquisition
related compensation to its legal counsel (except for bonafide legal services)
or any officers, directors, affiliates or associates. The Company will not
require the making of these payments to be a term of a merger or acquisition.
Evaluation
Once the Company has identified a particular entity as a potential
acquisition or merger candidate, management will seek to determine whether
acquisition or merger is warranted or whether further investigation is
necessary. Such determination will generally be based on management's knowledge
and experience, (limited solely to working history - See "Item 5. Directors,
Executive Officers, etc.") or with the assistance of outside advisors and
consultants evaluating the preliminary information available to them. Management
may elect to engage outside independent consultants to perform preliminary
analysis of potential business opportunities. However, because of the Company's
limited capital it may not have the necessary funds for a complete and
exhaustive investigation of any particular opportunity and the consequences of
such may result in a missed opportunity for shareholders or result in a
combination that if fully investigated would not have been undertaken.
Management will not devote full time to finding a merger candidate, will
continue to
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engage in outside unrelated activities, and anticipates devoting no more than an
average of five (5) hours weekly to such undertaking.
In evaluating such potential business opportunities, the Company will
consider, to the extent relevant to the specific opportunity, several factors
including potential benefits to the Company and its shareholders; working
capital, financial requirements and availability of additional financing;
history of operation, if any; nature of present and expected competition;
quality and experience of management; need for further research, development or
exploration; potential for growth and expansion; potential for profits; and
other factors deemed relevant to the specific opportunity.
Because the Company has not located or identified any specific business
opportunity as of the date hereof, there are certain unidentified risks that
cannot be adequately expressed prior to the identification of a specific
business opportunity. There can be no assurance following consummation of any
acquisition or merger that the business venture will develop into a going
concern or, if the business is already operating, that it will continue to
operate successfully. Many of the potential business opportunities available to
the Company may involve new and untested products, processes or market
strategies which may not ultimately prove successful.
The terms of the sale of any and all shares held by officers, directors,
management or associates will be afforded all other shareholders absent consent
of all shareholders.
Form of Potential Acquisition or Merger
Presently the Company cannot predict the manner in which it might
participate in a prospective business opportunity. Each separate potential
opportunity will be reviewed and, upon the basis of that review, a suitable
legal structure or method of participation will be chosen. The particular manner
in which the Company participates in a specific business opportunity will depend
upon the nature of that opportunity, the respective needs and desires of the
Company and management of the opportunity, and the relative negotiating strength
of the parties involved. Actual participation in a business venture may take the
form of an asset purchase, lease, joint venture, license, partnership, stock
purchase, reorganization, merger or consolidation. The Company may act directly
or indirectly through an interest in a partnership, corporation, or other form
of organization, however, the Company does not intend to participate in
opportunities through the purchase of minority stock positions.
Because of the Company's current status and recent inactive status for the
prior four (4) years, and its concomitant lack of assets and relevant operating
history, it is likely that any potential merger or acquisition with another
operating business will require substantial dilution to the Company's existing
shareholders interests. There will probably be a change in control of the
Company, with the incoming owners of the targeted merger or acquisition
candidate taking over control of the Company. Management has not established any
guidelines as to the amount of control it will offer to prospective business
opportunity candidates, since this issue will depend to a large degree on the
economic strength and desirability of each candidate, and the corresponding
relative bargaining power of the parties. However, management will endeavor to
negotiate the best possible terms for the benefit of the Company's shareholders
as the case arises. Management may actively negotiate or otherwise consent to
the purchase of any portion of their common stock as a condition to, or in
connection with, a proposed merger or acquisition. In such an event, existing
shareholders
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may not be afforded an opportunity to approve or consent to any particular stock
buy-out transaction. However the terms of the sale of shares held by present
management of the Company will be extended equally to all other current
shareholders.
Management does not have any plans to borrow funds to compensate any
persons, consultants, or promoters in conjunction with its efforts to find and
acquire or merge with another business opportunity. Management does not have any
plans to borrow funds to pay compensation to any prospective business
opportunity, or shareholders, management, creditors, or other potential parties
to the acquisition or merger. In either case, it is unlikely that the Company
would be able to borrow significant funds for such purposes from any
conventional lending sources. In all probability, a public sale of the Company's
securities would also be unfeasible, and management does not contemplate any
form of new public offering at this time. In the event that the Company does
need to raise capital, it would most likely have to rely on the private sale of
its securities. Such a private sale would be limited to persons exempt under the
Commissions's Regulation D or other rule, or provision for exemption, if any
applies. However, no private sales are contemplated by the Company's management
at this time. If a private sale of the Company's securities is deemed
appropriate in the future, management will endeavor to acquire funds on the best
terms available to the Company. However, there can be no assurance that the
Company will be able to obtain funding when and if needed, or that such funding,
if available, can be obtained on terms reasonable or acceptable to the Company.
The Company does not anticipate using Regulation S promulgated under the
Securities Act of 1933 to raise any funds any time within the next year, subject
only to its potential applicability after consummation of a merger or
acquisition in the event the acquired or newly merged company elected to use
such fund-raising option to acquire funds for the Company.
In the event of a successful acquisition or merger, a finder's fee, in the
form of cash or securities of the Company, may be paid to persons instrumental
in facilitating the transaction. The Company has not established any criteria or
limits for the determination of a finder's fee, although most likely an
appropriate finder's fee will be negotiated between the parties, including the
potential business opportunity candidate, based upon economic considerations and
reasonable value as estimated and mutually agreed upon at that time. A finder's
fee would only be payable upon completion of the proposed acquisition or merger
in the normal case, and management does not contemplate any other arrangement at
this time. Current management has not in the past used any particular
consultants, advisors or finders. Management has not actively undertaken a
search for, nor retention of, any finder's fee arrangement with any person. It
is possible that a potential merger or acquisition candidate would have its own
finder's fee arrangement, or other similar business brokerage or investment
banking arrangement, whereupon the terms may be governed by a pre- existing
contract; in such case, the Company may be limited in its ability to affect the
terms of compensation. Management cannot predict any other terms of a finder's
fee arrangement at this time. If such a fee arrangement was proposed directors
would negotiate the best terms available to the Company so as not to compromise
the fiduciary duties of the representative in the proposed transaction.
Management does not contemplate that the Company would acquire or merge
with a business entity in which any officer or director of the Company has an
interest. Any such related party transaction, however remote, would be submitted
for approval to the Board of Directors and the proposed transaction would be
submitted to the shareholders for prior approval in an appropriate manner. Thus
any such transaction would be approved only by the shareholders. The Company
will
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not obtain an independent appraisal of the value of the target if this
transaction involves a related party transaction. The Company's management has
not had any contact, discussions, or other understandings regarding any
particular business opportunity at this time, regardless of any potential
conflict of interest issues. Accordingly, the potential conflict of interest is
merely a remote theoretical possibility at this time.
Management (Kevin L. Bell) was sole Officer and Director of Lucid Concepts,
Inc. which was structured as a shell. A merger with that company was effected on
December 31, 1999. Mr. Bell received $12,500.00, surrendered his stock, and the
remaining shareholders retained their stock.. Mr. Bell is not active in the
merged entity. Mr. Bell has announced his attention not to participate in other
shell companies prior to a merger or acquisition for the Company and therefore
has no conflict of interest related thereto. There are no other promoters,
management, affiliates or associates involved.
Possible Blank Check Company Status
While the Company may be deemed a "shell" company at this time, it does not
constitute a "blank check" company under pertinent securities law standards.
Accordingly, the Company is not subject to securities regulations imposed upon
companies deemed to be "blank check companies." If the Company were to file a
registration statement under Securities Act of 1933 and, at such time, priced
its shares at less than $5.00 per share and continued to have no specific
business plan, it would then be classified as a blank check company.
If in the future the Company were to become a blank check company, adverse
consequences could attach to the Company. Such consequences can include, but are
not limited to, time delays of the registration process for required filings
under Rule 419 of the Act, significant expenses to be incurred in such an
offering, and the additional steps required to comply with various federal and
state laws enacted for the protection of investors.
Many states (excluding Florida where the Company is incorporated) have
statutes, rules and regulations limiting the sale of securities of "blank check"
companies (as opposed to shell companies where such rules do not apply) in their
respective jurisdictions. Management does not intend to undertake any efforts to
cause a market to develop in the companies securities or to undertake any such
offering of the Company's securities, either debt or equity, until such time as
the Company has successfully implemented its business plan described herein. In
the event the Company undertakes the filing of a registration statement under
circumstances that classifies it as a blank check company the provisions of Rule
419 and other applicable provisions will be complied with.
Rights of Shareholders
The Company amended its Articles of Incorporation on December 14, 1999, to
expressly provide that the Board of Directors is authorized to enter into on
behalf of the corporation and to bind the corporation without shareholder
approval, any and all acts approving the terms and conditions of a merger and/or
a share exchange, and shareholders affected thereby, shall not be entitled to
dissenters rights with respect thereto under any applicable statutory dissenters
rights provision. This provision expressly eliminates shareholder participation
in the merger and/or share exchange contemplated by the Company and expressly
eliminates any shareholders dissenters rights.
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The Company does not intend to provide its shareholders with complete disclosure
documentation including audited finance statements concerning a target company
and its business prior to any mergers or acquisitions.
Competition
Because the Company has not identified any potential acquisition or merger
candidate, it is unable to evaluate the type and extent of its likely
competition. The Company is aware that there are several other public companies
with only nominal assets that are also searching for operating businesses and
other business opportunities as potential acquisition or merger candidates. The
Company will be in direct competition with these other public companies in its
search for business opportunities and, due to the Company's limited funds, it
may be difficult to successfully compete with these other companies.
Employees
As of the date hereof, the Company does not have any employees and has no
plans for retaining employees until such time as the Company's business warrants
the expense, or until the Company successfully acquires or merges with an
operating business. The Company may find it necessary to periodically hire
part-time clerical help on an as-needed basis.
Facilities
The Company is currently using at no cost to the Company, as its principal
place of business offices of its legal counsel (provided at no cost), located in
Palm Beach, Florida. Although the Company has no written agreement and pays no
rent for the use of this facility, it is contemplated that at such future time
as an acquisition or merger transaction may be completed, the Company will
secure commercial office space from which it will conduct its business. Until
such an acquisition or merger, the Company lacks any basis for determining the
kinds of office space or other facilities necessary for its future business. The
Company has no current plans to secure such commercial office space. It is also
possible that a merger or acquisition candidate would have adequate existing
facilities upon completion of such a transaction, and the Company's principal
offices may be transferred to such existing facilities.
Industry Segments
No information is presented regarding industry segments. The Company is
presently a development stage company seeking a potential acquisition of or
merger with a yet to be identified business opportunity. Reference is made to
the statements of income included herein in response to part F/S of this Form
10-SB for a report of the Company's operating history for the past two fiscal
years.
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Item 2. Management's Discussion and Analysis or Plan of Operation
The Company is considered a development stage company with limited assets
or capital, and with no operations or income since 1996. The costs and expenses
associated with the preparation and filing of this registration statement and
other operations of the Company have been paid for by a shareholder,
specifically Kevin L. Bell (see Item 4, Security Ownership of Certain Beneficial
Owners and Management, Kevin L. Bell is the controlling shareholder). Mr. Bell
has agreed to pay future costs associated with filing future reports under
Exchange Act of 1934 if the Company is unable to do so. It is anticipated that
the Company will require only nominal capital to maintain the corporate
viability of the Company and any additional needed funds will most likely be
provided by the Company's existing shareholders or its sole officer and director
in the immediate future. Current shareholders have not agreed upon the terms and
conditions of future financing and such undertaking will be subject to future
negotiations, except for the express commitment of Mr. Bell to fund required 34
Act filings. Repayment of any such funding will also be subject to such
negotiations. However, unless the Company is able to facilitate an acquisition
of or merger with an operating business or is able to obtain significant outside
financing, there is substantial doubt about its ability to continue as a going
concern.
In the opinion of management, inflation has not and will not have a
material effect on the operations of the Company until such time as the Company
successfully completes an acquisition or merger. At that time, management will
evaluate the possible effects of inflation on the Company as it relates to its
business and operations following a successful acquisition or merger.
Management plans may but do not currently provide for experts to secure a
successful acquisition or merger partner so that it will be able to continue as
a going concern. In the event such efforts are unsuccessful, contingent plans
have been arranged to provide that the current Director of the Company is to
fund required future filings under the 34 Act, and existing shareholders have
expressed an interest in additional funding if necessary to continue the Company
as a going concern.
Plan of Operation
During the next twelve months, the Company will actively seek out and
investigate possible business opportunities with the intent to acquire or merge
with one or more business ventures. In its search for business opportunities,
management will follow the procedures outlined in Item 1 above. Because the
Company has limited funds, it may be necessary for the sole officer and director
to either advance funds to the Company or to accrue expenses until such time as
a successful business consolidation can be made. The Company will not make it a
condition that the target company must repay funds advanced by its officers and
directors. Management intends to hold expenses to a minimum and to obtain
services on a contingency basis when possible. Further, the Company's directors
will defer any compensation until such time as an acquisition or merger can be
accomplished and will strive to have the business opportunity provide their
remuneration. However, if the Company engages outside advisors or consultants in
its search for business opportunities, it may be necessary for the Company to
attempt to raise additional funds. As of the date hereof, the Company has not
made any arrangements or definitive agreements to use outside advisors or
consultants or to raise any capital. In the event the Company does need to raise
capital most likely the only method available to the Company would be the
private sale of its securities. Because of the nature of the Company as a
development stage company, it is unlikely that it could make a public sale of
securities or be able to borrow any significant sum from either a commercial
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or private lender. There can be no assurance that the Company will able to
obtain additional funding when and if needed, or that such funding, if
available, can be obtained on terms acceptable to the Company.
The Company does not intend to use any employees, with the possible
exception of part-time clerical assistance on an as-needed basis. Outside
advisors or consultants will be used only if they can be obtained for minimal
cost or on a deferred payment basis. Management is convinced that it will be
able to operate in this manner and to continue its search for business
opportunities during the next twelve months.
Item 3. Description of Property
The information required by this Item 3 is not applicable to this Form
10-SB due to the fact that the Company does not own or control any material
property. There are no preliminary agreements or understandings with respect to
office facilities in the future.
Item 4. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth information, to the best knowledge of the
Company as of March 1, 2000, with respect to each person known by the Company to
own beneficially more than 5% of the Company's outstanding common stock, each
director of the Company and all directors and officers of the Company as a
group.
Name of Address of Amount and Nature of
Beneficial Owner Beneficial Ownership Percent of Class
---------------------------------- --------------------- -----------------
Kevin L. Bell 5,000,000 83.6%
222 Lakeview Avenue, PMB 160-183
West Palm Beach, FL 33401
All Executive Officers and
Directors as a Group (one person) 5,000,000 83.6%
Item 5. Directors, Executive Officers, Promoters and Control Persons, Compliance
with Section 16(a) of the Exchange Act.
The director and executive officer of the Company and his respective age is
as follows:
Name Age Position
-------------- ---- ----------------------------
Kevin L. Bell 33 President, Secretary, Treasurer, and Director,
All directors hold office until the next annual meeting of stockholders and
until their successors have been duly elected and qualified. There are no
agreements with respect to the
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election of directors. The Company has not compensated its directors for service
on the Board of Directors or any committee thereof. As of the date hereof, no
director has accrued any expenses or compensation. Officers are appointed
annually by the Board of Directors and each executive officer serves at the
discretion of the Board of Directors. The Company does not have any standing
committees at this time.
No director, or officer, or promoter of the Company has, within the past
five years, filed any bankruptcy petition, been convicted in or been the subject
of any pending criminal proceedings, or is any such person the subject or any
order, judgment or decree involving the violation of any state or federal
securities laws.
The business experience of the person listed above during the past five
years is as follows:
Mr. Kevin L. Bell, 33 years old, has been a Director of the Company since
December 15, 1999. Mr. Bell served in the United States Navy from 1978 to 1986,
during which time he also attended Chicago's Community College in 1979. From
1984 to 1988 Mr. Bell worked as an undercover private investigator, specializing
in retail theft, insurance fraud, and performed some work for the State
Department in New York City. While still in New York City, Mr. Bell worked for
an electrical supply house (Local 3 Electrical Union) until his relocation to
the Atlanta, Georgia area in 1989. There Mr. Bell worked as an electrician from
1989 to 1991 as well as working for Dugan's (an Atlanta based restaurant) as an
electrician until 1997. Also during 1990 to 1991 he worked as an in-house
electrician for the Georgia Baptist Medical Center. From 1997 to present Mr.
Bell works for Engineered Life Safety Systems as Vice President of Operations.
Mr. Bell obtained a MCSE Certification (Microsoft Engineering Certified) and an
A+ certification (Microsoft Certified Hardware Technician).
Kevin L. Bell may be deemed a "promoter" of the Company and is the only
promoter known to the Company.
There are no agreements or understandings for any officer or director to
resign at the request of another person and the sole officer and director is not
acting on behalf of or at the direction of any other person. There are no other
arrangements, agreements or understandings between nonmanagement shareholders,
legal counsel, former shareholders, and management, under which former
shareholders, legal counsel or nonmanagement shareholders may directly or
indirectly participate in or influence the management of the affairs of the
Company, except in rendering legal advise or as shareholders exercising their
voting rights, including the right to continue to elect directors.
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's executive officers and directors and persons who own more than 10%
of a registered class of the Company's equity securities, to file with the
Securities and Exchange Commission (hereinafter referred to as the "Commission")
initial statements of beneficial ownership, reports of changes in ownership and
annual reports concerning their ownership, of Common Stock and other equity
securities of the Company on Forms 3, 4, and 5, respectively. Executive
officers, directors and greater than 10% shareholders are required by Commission
regulations to furnish the Company with
12
<PAGE>
copies of all Section 16(a) reports they file. To the Company's knowledge, Mr.
Bell comprising all of the Company's executive officers, directors and greater
than 10% beneficial owners of its common Stock, have complied with Section 16(a)
filing requirements applicable to them during the Company's most recent fiscal
year.
Item 6. Executive Compensation
The Company has not had a bonus, profit sharing, or deferred compensation
plan for the benefit of its employees, officers or directors. The Company has
not paid any salaries or other compensation to its officers, directors or
employees for the years ended 1995 through 1998, nor at any time during 1999.
Further, the Company has not entered into an employment agreement with any of
its officers, directors or any other persons and no such agreements are
anticipated in the immediate future. It is intended that the Company's director
will defer any compensation until such time as an acquisition or merger can be
accomplished and will strive to have the business opportunity provide their
remuneration. As of the date hereof, no person has accrued any compensation from
the Company.
Item 7. Certain Relationships and Related Transactions
In December 1999, Mr. Kevin L. Bell acquired from the principal controlling
shareholder, Alexis Mandelbaum, a total of 5,000,000 shares of Common Stock of
the Company in exchange for a commitment to arrange to pay the costs of the
continued operations of the corporation and bringing its books and records up to
date.
In addition Mr. Bell has paid for part of the cost and expenses associated
with the filing of this Form 10-SB and other operations of the Company.
At the current time, the Company has no provision to issue any additional
securities to management, promoters or their respective affiliates or
associates. At such time as the Board of Directors adopts an employee stock
option or pension plan, any issuance would be in accordance with the terms
thereof and proper approval. Although the Company has a very large amount of
authorized but unissued Common Stock and Preferred Stock which may be issued
without further shareholder approval or notice, the Company intends to reserve
such stock for the Rule 506 offerings for acquisitions.
During the Company's last two fiscal years, there have not been any other
transactions between the Company and any officer, director, nominee for election
as director, or any shareholder owning greater than five percent (5%) of the
Company's outstanding shares, nor any member of the above referenced
individuals' immediate family.
Kevin L. Bell may be deemed to be a "promoter" of the Company as that term
is defined under the Rules and Regulations promulgated under the Act.
13
<PAGE>
Item 8. Description of Securities
Common Stock
The Company is authorized to issue 50,000,000 shares of common stock, par
value $.0001, of which 6,000,000 shares are issued and outstanding as of the
date hereof. All shares of common stock have equal rights and privileges with
respect to voting, liquidation and dividend rights. Each share of Common Stock
entitles the holder thereof to (i) one non-cumulative vote for each share held
of record on all matters submitted to a vote of the stockholders; (ii) to
participate equally and to receive any and all such dividends as may be declared
by the Board of Directors out of funds legally available therefor; and (iii) to
participate pro rata in any distribution of assets available for distribution
upon liquidation of the Company. Stockholders of the Company have no pre-emptive
rights to acquire additional shares of Common Stock or any other securities. The
Common Stock is not subject to redemption and carries no subscription or
conversion rights. All outstanding shares of common stock are fully paid and
non-assessable.
Preferred Stock
Shares of Preferred Stock may be issued from time to time in one or more
series as may be determined by the Board of Directors. The Company is authorized
to issue 10,000,000 shares of preferred stock, no par value. The voting powers
and preferences, the relative rights of each such series and the qualifications,
limitations and restrictions thereof shall be established by the Board of
Directors, except that no holder of Preferred Stock shall have preemptive
rights. At the present time no terms, conditions, limitations or preferences
have been established. The Company has no shares of Preferred Stock outstanding,
and the Board of Directors has no plan to issue any shares of preferred Stock
for the foreseeable future unless the issuance thereof shall be in the best
interests of the Company.
Certain Provision of Florida Law
Section 607.0902 of the Florida Business Corporation Act prohibits the
voting of shares in a publicly-held Florida corporation that are acquired in a
"control share acquisition" unless the holders of a majority of the
corporation's voting shares (exclusive of shares held by officers of the
corporation, inside directors or the acquiring party) approve the granting of
voting rights as to the shares acquired in the control share acquisition or
unless the acquisition is approved by the corporation's board of directors,
unless the corporation's articles of incorporation or bylaws specifically state
that this section does not apply. A "control share acquisition" is defined as an
acquisition that immediately thereafter entitles the acquiring party to vote in
the election of directors within each of the following ranges of voting power;
(i) one-fifth or more, but less than one-third of such voting power; (ii)
one-third or ore, but less than a majority of such voting power; and, (iii) more
than a majority of such voting power. The Amended Articles of Incorporation of
the Company specifically state that Section 607.0902 does not apply to
control-share acquisitions of shares of the Company.
14
<PAGE>
Part II
Item 1. Market For Common Equity and Other Shareholder Matters.
No shares of the Company's common stock have previously been registered
with the Securities and Exchange Commission (the "Commission") or any state
securities agency or authority. The Company intends to make application to the
NASD for the Company's shares to be quoted on the OTC Bulletin Board. The
application to the NASD will be made during the Commission comment period for
this Form 10-SB or immediately thereafter. The Company's application to the NASD
will consist of current corporate information, financial statements and other
documents as required by Rule 15c211 of the Securities Exchange Act of 1934, as
amended. Inclusion on the OTC Bulletin Board permits price quotation for the
Company's shares to be published by such service.
The Company is not aware of any existing trading market for its common
stock. The Company's common stock has never traded in a public market. There are
no plans, proposals, arrangements or understandings with any person(s) with
regard to the development of a trading market in any of the Company's
securities.
If and when the Company's common stock is traded in the over-the-counter
market, most likely the shares will be subject to the provisions of Section
15(g) and Rule 15g-9 of the Securities Exchange Act of 1934, as amended (the
Exchange Act"), commonly referred to as the "penny stock" rule. Section 15(g)
sets forth certain requirements for transactions in penny stocks and Rule
15g9(d)(1) incorporates the definition of penny stock as that used in Rule
3a51-1 of the Exchange Act.
The Commission generally defines penny stock to be any equity security that
has a market price less than $5.00 per share, subject to certain exceptions.
Rule 3a51-1 provides that any equity security is considered to be a penny stock
unless that security is: registered and traded on a national securities exchange
meeting specified criteria set by the Commission; authorized for quotation on
The NASDAQ Stock Market; issued by a registered investment company; excluded
from the definition on the basis of price (at least $5.00 per share) or the
issuer's net tangible assets; or exempted from the definition by the Commission.
If the Company's shares are deemed to be a penny stock, trading in the shares
will be subject to additional sales practice requirements on broker- dealers who
sell penny stocks to persons other than established customers and accredited
investors, generally persons with assets in excess of $1,000,000 or annual
income exceeding $200,000, or $300,000 together with their spouse.
For transactions covered by these rules, broker-dealers must make a special
suitability determination for the purchase of such securities and must have
received the purchaser's written consent to the transaction prior to the
purchase. Additionally, for any transaction involving a penny stock, unless
exempt, the rules require the delivery, prior to the first transaction, of a
risk disclosure document relating to the penny stock market. A broker-dealer
also must disclose the commissions payable to both the broker-dealer and the
registered representative, and current quotations for the securities. Finally,
the monthly statements must be sent disclosing recent price information for the
15
<PAGE>
penny stocks held in the account and information on the limited market in penny
stocks. Consequently, these rules may restrict the ability of broker dealers to
trade and/or maintain a market in the Company's common stock and may affect the
ability of shareholders to sell their shares.
As of July 24, 2000, there were 26 holders of record of the Company's
common stock.
As of the date hereof, the Company has issued and outstanding 6,000,000
shares of common stock. Of this total, 500,000 shares may be sold or otherwise
transferred without restriction pursuant to the terms of Regulation D, Section
504, and Rule 144 (k) ("Rule 144") of the Securities Act of 1933, as amended
(the "Act") since such shares were originally issued in transactions more than
two (2) years ago. 5,000,000 such shares remain restricted under Rule 144 since
such shares were and are held by an affiliate. The remaining 500,000 shares were
issued subject to Rule 144 and may not be sold and/or transferred without
further registration under the Act or pursuant to an applicable exemption..
Dividend Policy
The Company has not declared or paid cash dividends or made distributions
in the past, and the Company does not anticipate that it will pay cash dividends
or make distributions in the foreseeable future. The Company currently intends
to retain and reinvest future earnings, if any, to finance its operations.
Public Quotation of Stock
The Company has not as of this date, but intends to request in the
immediate future a broker- dealer who has not been identified at this time, to
act as a market maker for the Company's securities. Thus far the Company has not
requested a market maker to submit the Company's Form 10-SB to the National
Association of Securities Dealers and to serve as a market maker for the
Company's Common Stock. The Company anticipates that other market makers may be
requested to participate at a later date. The Company will not use consultants
to obtain market makers. There have been no preliminary discussions between the
Company, or anyone acting on its behalf, and any market maker regarding the
future trading market for the Company. It is anticipated that the market maker
will be contacted prior to an acquisition or merger and only by management of
the Company.
Item 2. Legal Proceedings
The Company is currently not a party to any pending legal proceedings and
no such action by, or to the best of its knowledge, against the Company has been
threatened. The Company was inactive from late 1996 through the date of this
Form 10-SB.
Item 3. Changes in and Disagreements with Accountants
Item 3 is not applicable to this Form 10-SB.
16
<PAGE>
Item 4. Recent Sales of Unregistered Securities
The Company received a total of $12,500.00 from the sale of a total of
500,000 shares of common stock, $.0001 par value per share (the "Common Stock"),
in a self-underwritten offering conducted pursuant to Section 4(2) of the
Securities Act of 1933, as amended (the "Act"), and Rules 505 and 506 of
Regulation D promulgated thereunder. This offering was made in the State of
Florida. The Company undertook the offering of shares of Common Stock in
February 2000, and did not pay any underwriting discounts or commissions.
Item 5. Indemnification of Directors and Officers
Article XI of the Company's Amended Articles of Incorporation contains
provisions providing for the indemnification of directors and officers of the
Company as follows:
(a) The corporation shall indemnify any person who was or is a party,
or is threatened to be made a party, of any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation), by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation, or is otherwise serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement, actually and reasonably
incurred by him in connection with such 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 interests of the corporation, and, with respect to any criminal action
or proceeding, has no reasonable cause to believe his conduct is unlawful. The
termination of any action, suit or proceeding, by judgment, order, settlement,
conviction upon a plea of nolo contendere or its equivalent, shall not of itself
create a presumption that the person did not act in good faith in a manner he
reasonably believed to be in, or not opposed to, the best interests of the
corporation and, with respect to any criminal action or proceeding, had
reasonable cause to believe the action was unlawful.
(b) The corporation shall indemnify any person who was or is a party,
or is threatened to be made a party, to any threatened, pending or completed
action or suit by or in the right of the corporation, to procure a judgment in
its favor by reason of the fact that he is or was a director, officer, employee
or agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against expenses
(including attorneys' fees), actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit, if he acted in
good faith and in a manner he reasonably believed to be in, or not, opposed to,
the best interests of the corporation, except that no indemnification shall be
made in respect of any claim, issue or matter as to which such person shall have
been adjudged to be liable for negligence or misconduct in the performance of
his duty to the corporation, unless, and only to the extent that, the court in
which such action or suit was brought shall determine upon application that,
despite the adjudication of liability, but in view of all circumstances of the
case, such person is fairly and reasonably entitled to indemnification for such
expenses which such court deems proper.
(c) To the extent that a director, officer, employee or agent of the
corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in
<PAGE>
Sections (a) and (b) of this Article, or in defense of any claim, issue or
matter therein, he shall be indemnified against expenses (including attorney's
fees) actually and reasonably incurred by him in connection therewith.
(d) Any indemnification under Section (a) or (b) of this Article
(unless ordered by a court) shall be made by the corporation only as authorized
in the specific case upon a determination that indemnification of the officer,
director and employee or agent is proper in the circumstances, because he has
met the applicable standard of conduct set forth in Section (a) or (b) of this
Article. Such determination shall be made (i) by the Board of Directors by a
majority vote of a quorum consisting of directors who were not parties to such
action, suit or proceeding, or (ii) if such quorum is not obtainable or, even if
obtainable, a quorum of disinterested directors so directs, by independent legal
counsel in a written opinion, or (iii) by the affirmative vote of the holders of
a majority of the shares of stock entitled to vote and represented at a meeting
called for purpose.
(e) Expenses (including attorneys' fees) incurred in defending a civil
or criminal action, suit or proceeding may be paid by the corporation in advance
of the final disposition or such action, suit or proceeding, as authorized in
Section (d) of this Article, upon receipt of an understanding by or on behalf of
the director, officer, employee or agent to repay such amount, unless it shall
ultimately be determined that he is entitled to be indemnified by the
corporation as authorized in this Article.
(f) The Board of Directors may exercise the corporation's power to
purchase and maintain insurance on behalf of any person who is or was a
director, officer, employee, or agent of the corporation, or is or was serving
at the request of the corporation as a director, officer, employee, or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against any liability asserted against him and incurred by him in any such
capacity, or arising out of his status as such, whether or not the corporation
would have the power to indemnify him against such liability under this Article.
(g) The indemnification provided by this Article shall not be deemed
exclusive of any other rights to which those seeking indemnification may be
entitled under these Amended Articles of Incorporation, the Bylaws, agreements,
vote of the shareholders or disinterested directors, or otherwise, both as to
action in his official capacity and as to action in another capacity while
holding such office and shall continue as to person who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of the heirs
and personal representative of such a person.
Transfer Agent
The Company is serving as its own transfer agent until it becomes eligible
for quotation with NASD.
PART F/S
Financial Statements and Supplementary Data
The Company's financial statements for the years ended has been examined to
the extent indicated in their reports by Dorra, Shaw, & Dugan, independent
certified accountants, and have
<PAGE>
been prepared in accordance with generally accepted accounting principles and
pursuant to Regulation S-B as promulgated by the Securities and Exchange
Commission and are included herein, on Page F-1 hereof in response to Part F/S
of this Form 10-SB.
ESSENTIAL SYSTEMS.COM, INC.
TABLE OF CONTENTS
Page
Independent Auditors' Report F-1
Balance Sheet F-2
Statement of Operations and Deficit Accumulated
During the Developmental Stage F-3
Statement of Changes in Stockholders' Equity F-4
Statement of Cash Flows F-5
Notes to Financial Statements F-6
<PAGE>
Dorra Shaw & Dugan
Certified Public Accountants
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders
Essentialsystems.Com, Inc.
Palm Beach, Florida
We have audited the accompanying balance sheet of Essentialsystems.Com, Inc. (a
Florida corporation and a development stage company) as of February 29, 2000,
and the related statements of operations, deficit accumulated during the
development stage, cash flows and changes in stockholders' equity for the period
December 1, 1999 to February 29, 2000 and March 15, 1996 (date of inception) to
February 29, 2000. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Essentialsystems.Com, Inc. as
of February 29, 2000 and the results of its operations and its cash flows and
changes in stockholders' equity for the period from December 1, 1999 to February
29, 2000 and March 15, 1996 (date of inception) to February 29, 2000 in
conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As shown in the financial statements,
the Company has incurred net losses since its inception. The Company's financial
position and operating results raise substantial doubt about its ability to
continue as a going concern. Management's plan regarding those matters also are
described in Note D. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
/s/ Dorra Shaw & Dugan
Certified Public Accountants
March 3, 1999
270 South County Road * Palm Beach, FL 33480
Telephone (561) 822-9955 * Fax (561) 832-7580
Website: dsd-cpa.com
F-1
<PAGE>
<TABLE>
<CAPTION>
ESSENTIALSYSTEMS.COM, INC.
(A Development Stage Company)
BALANCE SHEET
February 29, 2000
------------------------------------------------------------------------------- --------------
<S> <C>
ASSETS
Current Assets:
Cash $ 12,500
------------------------------------------------------------------------------- --------------
TOTAL CURRENT ASSETS 12,500
------------------------------------------------------------------------------- --------------
$ 12,500
------------------------------------------------------------------------------- --------------
LIABILITIES
Current Liabilities:
Accrued expenses $ 6,000
------------------------------------------------------------------------------- --------------
TOTAL CURRENT LIABILITIES 6,000
------------------------------------------------------------------------------- --------------
6,000
------------------------------------------------------------------------------- --------------
STOCKHOLDERS' EQUITY
Common stock - $.0001 par value - 50,000,000 shares authorized
6,000,000 shares issued and outstanding 600
Preferred stock - no par value - 10,000,000 shares authorized -
No shares issued and outstanding
Additional paid-in-capital 16,200
Deficit accumulated during the developmental stage (10,300)
------------------------------------------------------------------------------- --------------
TOTAL STOCKHOLDERS' EQUITY 6,500
------------------------------------------------------------------------------- --------------
$ 12,500
------------------------------------------------------------------------------- --------------
</TABLE>
See Accompanying Notes to Financial Statements
F-2
<PAGE>
<TABLE>
<CAPTION>
ESSENTIALSYSTEMS.COM, INC.
(A Development Stage Company)
STATEMENT OF OPERATIONS AND DEFICIT ACCUMULATED DURING THE
DEVELOPMENTAL STAGE
For the period December 1, 1999 to February 29, For the period
March 15, 1996
(date of inception)
2000 to February 29, 2000
------------------------------------------------------------------ ---------- --------------------
<S> <C> <C>
Revenues $ - $ -
------------------------------------------------------------------ ---------- --------------
Operating expenses:
Professional fees 6,000 6,000
Personnel services 1,500 4,000
Office space 300 300
----------------------------------------------------------------- ---------- --------------
Total operating expenses 7,800 10,300
----------------------------------------------------------------- ---------- --------------
Loss before income taxes (7,800) (10,300)
Income taxes -
----------------------------------------------------------------- ---------- --------------
Net loss (7,800) (10,300)
Deficit accumulated during the
development stage - December 1, 1999 $ (2,500) $ -
----------------------------------------------------------------- ---------- --------------
Deficit accumulated during the
development stage - February 29, 2000 $ (10,300) $ (10,300)
----------------------------------------------------------------- ---------- --------------
Net loss per share (0.001)
----------------------------------------------------------------- ----------
Weighted average shares of
common stock 6,000,000
----------------------------------------------------------------- ----------
</TABLE>
See Accompanying Notes to Financial Statements
F-3
<PAGE>
<TABLE>
<CAPTION>
ESSENTIALSYSTEMS.COM, INC.
(A Development Stage Company)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
-----------------------------------------------------------------------------------------------------------------------
Additional
Number of Preferred Common Paid - In Deficit
Shares Stock Stock Capital Accumulated Total
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Beginning balance:
March 15, 1996 $ 3,000,000 $ - $ 300 $ 1,200 $ - $ 1,500
March 15, 1996 - Services 2,500,000 - 250 750 - 1,000
(Date of Inception)
Issuance of Common Stock:
February 25, 2000 500,000 - 50 12,450 - 12,500
Contributed services
and space - - - 1,800 - 1,800
Deficit accumulated during
the development stage - - - - (10,300) (10,300)
----------------------------- ---------------- ---------- ----------- ------------ ---------- -----------
Balance - February 29, 2000 $ 6,000,000 $ - $ 600 $ 16,200 $ (10,300) $ 6,500
----------------------------- ---------------- ---------- ----------- ------------ ---------- -----------
</TABLE>
See Accompanying Notes to Financial Statements
F-4
<PAGE>
<TABLE>
<CAPTION>
ESSENTIALSYSTEMS.COM, INC.
(A Development Stage Company)
Statement of Cash Flows
For the period
March 15, 1996
(date of inception)
For the period December 1, 1999 to February 29, 2000 to February 29, 2000
----------------------------------------------------------------------------------------------------
<S> <C> <C>
Operating Activities:
Net loss $ (7,800) $ (10,300)
Adjustments to reconcile net loss to net cash
used by operating activities:
Increase in:
Accrued expenses 6,000 6,000
Issuance of common stock for services 1,800 4,300
------------------------------------------------------- ---------------- ------------------
Net cash provided by operating activities - -
------------------------------------------------------- ---------------- ------------------
Financing activities:
Issuance of Common Stock 12,500 12,500
------------------------------------------------------- ---------------- ------------------
Net cash provided by financing activities 12,500 12,500
------------------------------------------------------- ---------------- ------------------
Net increase in cash 12,500 12,500
------------------------------------------------------- ---------------- ------------------
Cash - February 29, 2000 $ 12,500 $ 12,500
------------------------------------------------------- ---------------- ------------------
</TABLE>
See Accompanying Notes to Financial Statements
F-5
<PAGE>
ESSENTIALSYSTEMS.COM, INC.
NOTES TO FINANCIAL STATEMENTS
Note A - Summary of Significant Accounting Policies:
Organization
Essentialsystems.Com, Inc. (a development stage company) is a Florida
Corporation organized to distribute and sell at wholesale and retail
sophisticated electronic surveillance equipment and devices for security and
other purposes. The Company failed in its attempt to successfully develop its
initial business plan and during December 1996 abandoned its efforts. The
Company was inactive and there were no transactions from August 1996 to the date
of reinstatement by the State of Florida on December 14, 1999 that affect the
balances reflected in the financial statements as of December 1, 1999. In
addition, audited balance sheets for prior periods and the statements of
operations, cash flows and stockholders' equity for the two years ended November
30, 1999 as required by item 310 of regulation S-B are not provided because the
company was dormant.
The Company has a new business plan, which was adopted on or about December 15,
1999, which is to engage in seeking potential operating businesses and business
opportunities with the intent to acquire or merge with such businesses. The
assets of the Company will be used for its expenses of operation to implement
this plan.
Accounting Method
The Company's financial statements are prepared using the accrual method of
accounting. The Company has elected a November 30 year-end.
Start - Up Costs
Start - up and organization costs are being expensed as incurred.
Loss Per Share
The computation of loss per share of common stock is based on the weighted
average number of shares outstanding at the date of the financial statements.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect certain reported amounts and disclosures. Accordingly, actual results
could differ from those estimates.
Note B - Stockholders' Equity:
On March 15, 1996, the Company issued 5,500,000 shares of common stock for
$1,500 cash and the fair market value of services, valued at $1,000, rendered by
its initial stockholders.
F-6
<PAGE>
ESSENTIALSYSTEMS.COM, INC.
NOTES TO FINANCIAL STATEMENTS
Note B - Stockholders' Equity (con't):
On February 25, 2000 the company issued a total 500,000 additional shares of
common stock for the sum of $12,500.
The $6,000 in professional fees includes the costs and expenses of legal and
accounting service associated with the preparation and filing of the
registration statement.
At February 29, 2000, the Company had authorized 50,000,000 shares of $.0001 par
value common stock and had 6,000,000 shares of common stock issued and
outstanding. In addition, the Company authorized 10,000,000 shares of preferred
stock with the specific terms; conditions, limitations and preferences to be
determined by the Board of Directors. None of the preferred stock was issued and
outstanding as of February 29, 2000.
The Company utilizes its legal counsel's office at no charge and the Company's
president is not currently compensated. The Company records the fair value of
these services as an expense and contributed capital at the rate of $100 per
month for office space, and $500 per month for personnel services respectively.
Note C - Income Taxes:
The Company has a net operating loss carry forward of $7,800 that may be offset
against future taxable income. If not used, the carry forward will expire in
2020.
The amount recorded as deferred tax assets, cumulative as of February 29, 2000
is $1,200, which represents the amounts of tax benefits of loss carry-forwards.
The Company has established a valuation allowance for this deferred tax asset of
$1,200, as the Company has no history of profitable operations.
Note D - Going Concern:
The Company's financial statements are prepared using generally accepted
accounting principles applied to a going concern which contemplates the
realization of assets and liquidation of liabilities in the normal course of
business. The Company has incurred losses from its inception through February
29, 2000. It has not established revenues sufficient to cover operating costs
and to allow it to continue as a going concern. Management plans currently
provide for experts to secure a successful acquisition or merger partner so that
it will be able to continue as a going concern. In the event such efforts are
unsuccessful, contingent plans have been arranged to provide that the current
Director of the Company is to fund required future filings under the 34 Act, and
existing shareholders have expressed an interest in additional funding if
necessary to continue the Company as a going concern.
F-7
<PAGE>
Signatures
In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
there unto duly authorized.
essentialsystems.com, Inc.
(Registrant)
Date: December 1, 2000 BY: /s/ KEVIN L. BELL
---------------------------
Kevin L. Bell, President
In accordance with the Exchange Act, this report has been signed below
by the following persons on behalf of the registrant and in the capacities and
on the dates indicated.
Date Signature Title
December 1, 2000 BY:/s/ KEVIN L. BELL
-------------------- President, Secretary,
Kevin L. Bell Treasurer, Director
