File Number:
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
DIGITAL CAPITAL.COM, INC.
-------------------------
(Name of small business
issuer in its charter)
Delaware 6770 98-0221256
----------------------- ---------------------------- -------------------
(State of incorporation (Primary Standard Industrial (I.R.S. Employer
or jurisdiction Classification Code Number) Identification No.)
of organization)
38253 View Place PO Box 1229 Squamish, British Columbia (604) 892-1032
-------------------------------------------------------------------------------
(Address and telephone number of principal executive offices)
38253 View Place PO Box 1229 Squamish, British Columbia (604) 892-1032
--------------------------------------------------------------------------------
(Address of principal place of business or
intended principal place of business)
Roger Fidler, Esq., 163 South St., Hackensack New Jersey 07601 (201) 457-1221
--------------------------------------------------------------------------------
(Name, address, and telephone number of agent for service)
Approximate date of proposed sale to the public: as soon as practicable
after the effective date of the registration statement and date of the
prospectus.
The registrant hereby amends the registration statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that the registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933, as amended, or until the registration statement
shall become effective on such date as the Securities and Exchange Commission,
acting pursuant to said Section 8(a), may determine.
<PAGE>
CALCULATION OF REGISTRATION FEE
Title of Each Class of Amount Proposed Proposed Amount of
Securities Being Being Maximum Maximum Registration
Registered Registered Offering Aggregate Fee
Price Per Offering
Unit (1) Price(1)
--------------------------------------------------------------------------------
Shares of Common Stock
Contained in Units 1,000,000 $ 0.05 $ 50,000 $ 13.20
"A" Warrants 1,000,000 0 0 0
Shares of Common Stock
Underlying "A" Warrants 1,000,000 .05 50,000 13.20
"B" Warrants 1,000,000 0 0 0
Shares of Common Stock
Underlying "B" Warrants 1,000,000 .10 100,000 26.40
"C" Warrants 1,000,000 0 0 0
Shares of Common Stock
Underlying "C" Warrants 1,000,000 .50 500,000 132.00
"D" Warrants 1,000,000 0 0 0
Shares of Common Stock
Underlying "D" Warrants 1,000,000 1.00 1,000,000 264.00
"E" Warrants 1,000,000 0 0 0
Shares of Common Stock
Underlying "E" Warrants 1,000,000 2.00 2,000,000 528.00
----------- ----------
TOTAL $3,700,000 $ 976.80
(1) Estimated for purposes of computing the registration fee pursuant to Rule
457.
<PAGE>
Cross Reference Sheet
Showing the Location In Prospectus of
Information Required by Items of Form SB-2
Part I. Information Required in Prospectus
Item
No. Required Item Location or Caption
---- ------------- --------------------
1. Front of Registration Statement
and Outside Front Cover of
Prospectus Front of Registration
Statement and Outside
Front Cover of Prospectus
2. Inside Front and Outside Back
Cover Pages of Prospectus Inside Front Cover Page
of Prospectus and Outside
Front Cover Page of
Prospectus
3. Summary Information and Risk
Factors Prospectus Summary;
High Risk Factors
4. Use of Proceeds Use of Proceeds
5. Determination of Offering
Price Prospectus Summary -
Determination of Offering
Price; High Risk Factors
6. Dilution Dilution
7. Selling Security Holders Not Applicable
8. Plan of Distribution Plan of Distribution
9. Legal Proceedings Litigation
10. Directors, Executive Officers,
Promoters and Control Persons Management
11. Security Ownership of Certain
Beneficial Owners and Management Princiapl Stockholders
12. Description of Securities Description of Securities
13. Interest of Named Experts and
Counsel Legal Opinions; Experts
14. Disclosure of Commission Position
on Indemnification for Securities
Act Liabilities Statement as to
Indemnification
15. Organization Within Last
Five Years Management; Certain
Transactions
16. Description of Business Proposed Business
<PAGE>
17. Management's Discussion and
and Analysis or Plan of
Operation Prosed Business -
Plan of Operation
18. Description of Property Proposed Business
19. Certain Relationships and Related
Transactions Certain Transactions
20. Market for Common Stock and
Related Stockholder Matters Prospectus Summary;
Market for Registrant's
Common Stock and Related
Stockholders Matters;
High Risk Factors
21. Executive Compensation Remuneration
22. Financial Statements Financial Statements
23. Changes in and Disagreements
with Accountants on Accounting
and Financial Disclosure Not Applicable
<PAGE>
PROSPECTUS
Initial Public Offering
DIGITAL CAPITAL.COM, INC.
(A Delaware Corporation)
1,000,000 Units Offered at $0.05 per Unit
Digital Capital.com, Inc. offers for sale, on a best efforts all-or-none
basis, 1,000,000 units at a purchase price of $0.05 per unit. Each unit consists
of one share of common stock, and one "A", one "B", one "C", one "D" and one "E"
two-year redeemable common stock purchase warrant. We are selling the units on a
"best-efforts, all or none basis" for a period of 90 days. We will not use an
underwriter or securities dealer. If the entire amount of the offering is not
sold within the offering period, investors' funds will be promptly returned
without interest or deduction.
We are making the offering in compliance with Rule 419 of Regulation C to
the Securities Act of 1933. Pursuant to Rule 419, the proceeds of the offering
as well as the securities purchased will be placed in an escrow account. If the
entire amount of the offering is sold, none of the securities, and only 10% of
the funds, may be removed from escrow until a business combination has been
negotiated and our stockholders have reconfirmed the offering, including the
terms and conditions of the business combination. Our officers, directors,
current stockholder and any of their affiliates or associates may purchase up
to 50% of the offering including units, if needed, to close the offering. Prior
to the offering, no public market has existed in our securities. We cannot
guarantee that a trading market in the units or in the shares of common stock or
warrants which constitute the units will ever develop.
These securities have not been approved or disapproved by the Securities
---------------------------------------------------------------------------
and Exchange Commission nor has the Commission passed upon the accuracy or
--------------------------------------------------------------------------------
adequacy of the prospectus. Any representation to the contrary is a criminal
--------------------------------------------------------------------------------
offense.
---------
These securities are highly speculative, involve a high degree of risk and
----------------------------------------------------------------------------
should be purchased only by persons who can afford to lose their entire
--------------------------------------------------------------------------------
investment. See "Risk Factors" commencing page 4 for special risks concerning us
--------------------------------------------------------------------------------
and the offering.
-----------------
All investors' checks or money orders should be made payable to "The First
National Bank of Litchfield" as Escrow Agent for Digital Capital.com, Inc."
Underwriting
Price to Discounts and Proceeds to the
Public Commissions the Company
--------------------------------------------------------------------------------
Per Unit $ 0.05 $ 0 $ 0.05
TOTAL $ 50,000.00 $ 0 $ 50,000.00
------------------
The date of the Prospectus is , 2000.
<PAGE>
TABLE OF CONTENTS
Page
----
Prospectus Summary.............................................
The Company..................................................
The Offering.................................................
Summary Financial Information..................................
Risk Factors...................................................
Dilution.......................................................
Use of Proceeds................................................
Capitalization.................................................
Proposed Business..............................................
History and organization..................................
Plan of operation.........................................
Business combinations.....................................
Offering conducted in compliance with Rule 419
to the Securities Act...................................
Regulation................................................
Employees.................................................
Facilities................................................
Year 2000 issues..........................................
Management.....................................................
Information...............................................
Conflicts of interest.....................................
Remuneration..............................................
Management involvement....................................
Management control........................................
Statement as to Indemnification................................
Market for our Common Stock....................................
Certain Transactions...........................................
Principal Stockholders.........................................
Beneficial ownership......................................
Prior blank check company involvement.....................
Description of Securities......................................
Common stock..............................................
Preferred stock...........................................
Redeemable common stock purchase warrants.................
Reports to stockholders...................................
Dividends.................................................
Transfer agent............................................
Plan of Distribution...........................................
Conduct of the offering...................................
Method of subscribing.....................................
Expiration date...........................................
Expiration Date...........................................
Litigation.....................................................
Legal Opinions.................................................
Experts........................................................
Further Information............................................
Financial Statements...........................................
2
<PAGE>
PROSPECTUS SUMMARY
The Company
-----------
We are a Delaware corporation organized on March 22, 2000 to acquire a
business. Although our management presently has no understandings with any
potential target business, we believe that we will be an attractive combination
candidate as we have liquid assets, nominal liabilities, the potential of
raising additional funds through warrant exercise and flexibility in
structuring. We do not intend to invest or trade in securities as our primary
business or pursue any business which would render us an "investment company"
under the Investment Company Act of 1940.
We have limited our activities to selling shares of our common stock in
connection with our organization and the preparation of the registration
statement and the prospectus for our initial public offering. We intend to limit
our activities following the offering to searching for and acquiring a business.
We maintain our office at 38253 View Place PO Box 1229 Squamish, British
Columbia, Canada. Our telephone number is (604) 892-1032
The Offering
------------
We have registered the units to be sold in the offering in New York. We
will not sell units to any investor in a state other than New York unless the
units are registered or qualified in such state. Purchasers in this offering and
in any subsequent trading market must be residents of states in which our
securities are registered or qualified.
Securities offered............................................... 1,000,000
units
Common Stock outstanding
prior to the offering............................................ 2,500,000
shares
Common Stock to be
outstanding after the offering................................... 3,500,000
shares
Warrants outstanding
prior to the offering............................................ 0
warrants
Warrants to be
outstanding after the offering................................... 5,000,000
warrants
We will realize net proceeds of $50,000 from the exercise of the "A"
warrant, $100,000 from the "B" warrant, $200,000 from the "C" Warrant,
$1,000,000 from the "D" warrant and $2,000,000 from the "E" warrant. These
proceeds will be added to our working capital after we acquire a target company.
3
<PAGE>
SUMMARY FINANCIAL INFORMATION
The following is a summary of our financial information and is qualified in
its entirety by our audited financial statements.
From March 22, 2000
to April 30, 2000
-----------------------
Statement of Income Data:
Net Sales $ 0
Net profit (Loss) $ (33)
Net Loss Per Share $ 0.00
Shares Outstanding at 04/30/00 2,500,000
Pro-Forma
As of After
April 30, 2000 Offering
----------------- ---------------
Balance Sheet Data
Working Capital $ 9,441 $ 50,000*
Total Assets $ 24,967 $ 49,967
Long Term Debt $ 0 $ 0
Total Liabilities $ 500 $ 0
Common stock $ 2,500 $ 3,500
Additional paid in capital $ 22,500 $ 46,500
Deficit accumulated during
development stage $ (33) $ (33)
Total Shareholders' Equity $ 24,967 $ 49,967
------------------------------------
* Assumes net proceeds of $50,000. Offering expenses aggregating $25,000 are
being paid from funds raised in the initial sale of 2,500,000 shares of our
common stock for $25,000.
RISK FACTORS
The securities we are offering are highly speculative in nature and involve
an extremely high degree of risk. They should be purchased only by persons who
can afford to lose their entire investment.
Our President will remain our majority stockholder after the offering.
---------------------------------------------------------------------
Shawn Pedersen, our President and sole stockholder, will own 71.4% of our
outstanding common stock after the offering is completed and would therefore
continue to retain control. In addition, he may purchase up to 50% of the units
in the offering. He intends to continue present management to find a target
company.
After the conclusion of an acquisition, the management of the target company
----------------------------------------------------------------------------
will probably assume management of our company.
-----------------------------------------------
Upon the successful completion of a business combination, we anticipate
that we will have to issue to the owners of the acquired company authorized but
unissued common stock representing a majority of the issued and outstanding
shares of our common stock. Therefore, we anticipate that the consummation of a
business combination will result in a change of control and the resignation or
removal of our present officers and directors. If our management changes, we can
provide no assurance of the experience or qualification of the new management in
the operation of the acquired business.
4
<PAGE>
Investors will not have access to their funds after the consummation of the
---------------------------------------------------------------------------
offering for a period of up to 18 months.
-----------------------------------------
Commencing upon the sale of the units, investor' funds, reduced by 10% for
expenses as permitted by Rule 419, will remain in escrow, in an interest -
bearing account. Although investors may exercise their warrants during the
escrow period, both the cash exercise price and the shares of common stock
underlying the warrants must be kept in escrow until the acquisition is
reconfirmed. In that event, investors will receive their securities and we will
withdraw investor funds from escrow.
Investors will have no right to their invested funds or purchased
securities for up to 18 months from the date of the prospectus. No transfer of
the escrowed securities can be permitted other than by will, the laws of
intestacy, or pursuant to a qualified domestic relations order, or pursuant to
the Employee Retirement Income Security Act.
Investors will be offered the return, with interest, of their funds held in
escrow only if
+ they vote against reconfirmation of the acquisition of the target business;
or
+ we are unable to locate a target business within 18 months from the date of
the prospectus.
Our officers and directors are engaged in outside business activities.
---------------------------------------------------------------------
Our directors and officers are engaged in outside business activities, and
the amount of time they will devote to our business is anticipated to be only
about 5 to 20 hours each per week.
Our management's conflicts of interest may adversely affect our investors.
--------------------------------------------------------------------------
A conflict of interest may arise between our management's personal
pecuniary interest and its fiduciary duty to investors.
To aid the resolution of such conflicts, we have adopted three procedures:
+ in the confirmation offer to our stockholders to vote upon a business
combination with an affiliated entity, stockholders who also hold
securities of the affiliated entity will be required to vote their shares
of our stock in the same proportion as non-affiliated stockholders;
+ we will not acquire any company in which more than a majority of its
capital is beneficially owned by any or a combination of our officers,
directors, promoters, affiliates or associates; and
+ our officers and directors will disclose to us any target businesses which
come to their attention in their capacity as an officer or director or
otherwise.
Such procedures have been orally agreed to with our management and, where
appropriate, will be incorporated in any acquisition agreement with a target
company in which any of our affiliates has an interest.
5
<PAGE>
We anticipate making one acquisition and investors will take the risk of the
----------------------------------------------------------------------------
quality of the new management and economic fluctuations in the chosen
------------------------------------------------------------------------
industry.
---------
In the event we are successful in acquiring a suitable business, we will,
in all likelihood, be required to issue our common stock in an acquisition or
merger transaction so that the owners of the acquired business would own a
majority of our common stock. Thus, we do not believe that we will be able to
negotiate more than one business combination. Our lack of diversification will
subject us to the quality of the new management and to economic fluctuation
within a particular industry in which the target company conducts business.
We may redeem our warrants for nominal consideration and warrantholders may be
------------------------------------------------------------------------------
unable to sell or exercise them.
--------------------------------
We may redeem the warrants for $.001 each upon 30 days' prior notice, if
the closing bid price of our common stock for any twenty consecutive trading
days ending within ten days of the notice of redemption exceeds the exercise
price of any class of warrant by $.50. If there is no current registration
statement or if the warrants and underlying shares are not registered in the
state of residence of the warrantholder, the warrants may not be exercised and
would expire worthless or would have to be redeemed for nominal consideration.
The proceeds of the offering may be insufficient to provide financing to the
----------------------------------------------------------------------------
acquired company.
-----------------
While we presently anticipate that we will be able to locate and consummate
a suitable business combination, if we determine that a business combination
requires additional funds, we may seek additional financing through loans,
issuance of additional securities or through other financing arrangements. We
have not negotiated any such financial arrangement, and we can give no
assurances that such additional financing will be available or, if available,
that such additional financing will be on acceptable terms. We can offer no
assurance that any or all of the warrants will be exercised.
DILUTION
Our net tangible book value as of April 30, 2000 was $9,441. Our net
tangible book value per share was $0.004. Net tangible book value represents our
net tangible assets which are our total tangible assets less our total
liabilities. The public offering price per unit (each unit containing one share
of common stock) is $0.050 represents both gross and net proceeds per share as
all expenses of the offering are being paid from funds in our treasury. The pro
forma net tangible book value after the offering will be $50,000. The pro forma
net tangible book value per share after the offering will be $0.014 per share.
The shares (contained in the units) purchased by investors in the offering will
be diluted $0.036 or 72%. As of April 30, 2000, there were 2,500,000 shares of
our common stock outstanding. Dilution represents the difference between the
public offering price and the net pro forma tangible book value per share
immediately following the completion of the public offering.
6
<PAGE>
The following table illustrates the dilution which will be experienced by
investors in the offering:
Public offering price per unit (containing one share) ........... $ 0.050
Net tangible book value per share before offering................ $ 0.004
Pro-forma net tangible book value per share after offering....... $ 0.014
Pro-forma increase per share attributable to offered shares...... $ 0.010
Pro-forma dilution to public investors........................... $ 0.036
The following table sets forth, as of the date of the prospectus, the
percentage of equity to be purchased by the public investors compared to the
percentage of equity to be owned by the present stockholders, and the
comparative amounts paid for the units (each unit containing one share) by the
public investors as compared to the total consideration paid by our present
stockholders.
Approximate Approximate
Percentage Percentage
Public Shares Total Shares Total Total
Stockholder Purchased Outstanding Consideration Consideration
-------------------------------------------------------------------------------
New Investors 1,000,000 28.6% $ 50,000 66.7%
Existing
Shareholders 2,500,000* 71.4% $ 25,500 33.3%
-------------
* We sold 2,500,000 shares of common stock prior to the offering at $.01 per
share. These shares are not being registered.
USE OF PROCEEDS
Both gross and net proceeds of the offering will be $50,000 as all costs
associated with the offering have been or will be paid from funds presently in
our treasury. Pursuant to Rule 15c2-4 under the Securities Exchange Act of 1934,
all offering proceeds must be placed in escrow until all of the units are sold.
Pursuant to Rule 419, after all of the units are sold, we may and intend to have
$5,000, representing 10% of the escrowed funds, released to us. All funds held
in escrow at the time a business combination is consummated will be released to
the combined entity which will have full discretion over the use of the funds.
In the event we need in excess of $5,000 to find a suitable business entity, our
management has agreed to advance any additional funds required. Neither we nor
the combined entity will repay our management for any such advances.
The funds in escrow will be released for use by the acquired company upon
the consummation of a buinsess combination and the reconfirmation less any
amounts returned to infvestors who did not reconfirm their investment.
Percentage
of net proceeds
Amount of the offering
-----------------------------------------
Escrowed funds pending
business combination $45,000 90%
Upon the consummation of a business combination, we anticipate that our
management will change. Our present management anticipates that the escrowed
funds will be used by the post-merger management at its sole discretion. Under
no circumstances, will funds, when released from escrow after consummation of an
acquisition, be received by our present management. This policy is based upon an
oral agreement with our management. Our management is unaware of any
circumstances under which such policy through its own initiative may be changed.
We do not intend to hire consultants to locate and consummate the acquisition of
a target company.
7
<PAGE>
Our present management will not make any loans from the $5,000 (10% of the
escrowed funds), nor will our present management borrow funds using either our
working capital or escrowed funds as security. This policy is based upon an oral
agreement with our management. Our management is unaware of any circumstances
under which such policy through its own initiative, may be changed.
Offering proceeds will be placed in escrow at The First National Bank of
Litchfield, Litchfield, Connecticut, pending consummation of a business
combination and reconfirmation by investors, in either a certificate of deposit,
interest bearing savings account or in short term government securities.
The following table sets forth our capitalization as of April 30, 2000, and
pro forma as adjusted to give effect to the net proceeds from the sale of
1,000,000 units in the offering.
April 30, 2000
----------------------------
Pro-forma
Actual As Adjusted
------ -----------
Long-term debt $ 0 $ 0
Stockholders' equity:
Common stock, $.001 par value;
authorized 50,000,000 shares,
issued and outstanding
2,500,000 shares; $ 2,500 $ 3,500
Preferred stock, $.001 par value;
authorized 5,000,000 shares,
issued and outstanding -0-.
Additional paid-in capital $ 22,500 $ 46,500(1)
Deficit accumulated during
the development period $ (33) $ (33)
---------- -----------
Total stockholders' equity $ 24,967 $ 49,967
---------- -----------
Total capitalization $ 24,967 $ 49,967
========== ===========
-------------------------
* Assumes net proceeds of $50,000. Offering expenses aggregating $25,000 are
being paid from funds raised in the initial sale of 2,500,000 shares of our
common stock for $25,000.
8
<PAGE>
PROPOSED BUSINESS
History and Organization
------------------------
We were organized under the laws of the State of Delaware on December 7,
1999. Since our inception, we have been engaged in organizational efforts and
obtaining initial financing.
Plan of Operation
-----------------
We were organized as a vehicle to seek, investigate and acquire a target
company or business which desires to employ our funds and the potential funds
from the exercise of our warrants in its business or to seek the perceived
advantages of a publicly-held corporation. Our principal business objective will
be to seek long-term growth potential through the acquisition of a business
rather than immediate, short-term earnings. We will not restrict our search to
any specific business, industry or geographical location and, thus, may acquire
any type of business.
We do not currently engage in any business activities which provide cash
flow. The costs of identifying, investigating and analyzing business
combinations will be paid with money in our treasury. Investors will most likely
not have the opportunity to participate in any of these decisions. We are
sometimes referred to as a "blank check" company because investors will entrust
their investment monies to our management without having a chance to analyze the
ultimate use to which their money may be put. Although substantially all of the
proceeds of the offering are intended to be used to effect a business
combination, the proceeds are not otherwise designated for any specific
purposes. Investors will have an opportunity to evaluate the specific merits or
risks of only the business combination our management decides to enter into.
Cost overruns will be funded through our founding stockholder's voluntary
contribution of capital.
We may seek a business which has recently commenced operations, is a
developing company in need of additional funds for expansion, is seeking to
develop a new product or service, or is an established business which may be
experiencing financial or operating difficulties and is in need of additional
capital. In the alternative, a business combination may involve the combination
with a company which does not need substantial additional capital, but which
desires to establish a public trading market for its shares while avoiding the
time delays, significant expense, loss of voting control and compliance with
various Federal and State securities laws which would occur in a public
offering.
Our officers and directors intend, on a frequent basis, to consult with
business associates and leads from business journals to locate a suitable target
business. They intend to review business plans, study financial statements and
visit the operations center of businesses which they feel may be suitable
acquisitions. None of our officers or directors have had any preliminary contact
or discussions with any representative of any other entity regarding a business
combination.
9
<PAGE>
Accordingly, any target business that is selected may be a financially week
company or an entity in its early stage of development or growth, including
entities without established records of sales or earnings. In that event, we
will be subject to numerous risks inherent in its business and operations. In
addition, we may affect a business combination with an entity in an industry
characterized by a high level of risk, and, although our management will
endeavor to evaluate the risks inherent in a particular target business, there
can be no assurance that we will properly identify all significant
risks.
Our management anticipates that it may be able to effect only one business
combination, due primarily to our limited financing, and the dilution of
interest for present and prospective stockholders, which is likely to occur as a
result of our management's plan to offer a controlling interest to a target
business in order to achieve a tax-free reorganization. This lack of
diversification should be considered a substantial risk in investing in us
because it will not permit us to offset potential losses from one venture
against gains from another.
We anticipate that the selection of a business combination will be complex
and extremely risky. Because of general economic conditions, rapid technological
advances being made in some industries and shortages of available capital, our
management believes that there are numerous firms seeking even the limited
additional capital which we will have and/or the benefits of a publicly traded
corporation. Such perceived benefits of a publicly traded corporation may
include facilitating or improving the terms on which additional equity financing
may be obtained, providing liquidity for the principals of a business, creating
a means for providing incentive stock options or similar benefits to key
employees, providing liquidity (subject to restrictions of applicable statutes)
for all stockholders and other benefits. Potentially available business
combinations 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.
Evaluation of business combinations
-----------------------------------
We do not intend to advertise or promote ourselves to potential target
businesses. Instead, our management intends actively to search for potential
target businesses among its colleagues and associates, through capital wanted
advertising in business publications and on the Internet and other similar
sources. In the unlikely event our management decides to advertise in a business
publication to attract a target business, our management will assume the cost of
such advertising.
Our officers and directors will analyze or supervise the analysis of
business combinations. None of our officers and directors is a professional
business analyst. Our management has not divided duties among its members. In
analyzing prospective business combinations, our management will consider such
matters as the following:
10
<PAGE>
+ available technical, financial, and managerial resources,
+ working capital and other financial requirements,
+ history of operations, if any,
+ nature of present and expected competition,
+ the quality and experience of management services which may be available
and the depth of that management,
+ the potential for further research or development,
+ specific risk factors not now foreseeable but which then may be anticipated
to impact on our proposed activities,
+ the potential for growth or expansion,
+ the potential for profit,
+ the recognition or acceptance of products or services and
+ name identification and other relevant factors.
As a part of the the investigation, our officers and directors will meet
personally with management and key personnel, 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 our limited financial
resources and management expertise.
Since we will be subject to Section 13 or 15 (d) of the Securities Exchange
Act, we will be required to furnish information about the acquisition, including
audited financial statements for the target company, covering one, two or three
years depending upon the relative size of the acquisition. Consequently,
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 Securities Exchange Act are applicable. In the
event our obligation to file periodic reports is suspended under Section 15(d)
of that act, we intend voluntarily to file such reports.
We anticipate that any business combination will present certain risks. We
may not be able adequately to identify many of these risks prior to selection.
Our investors must, therefore, depend on the ability of our management to
identify and evaluate these risks. We anticipate that the principals of some of
the combinations which will be available to us were unable to develop a going
concern or that such business is in its development stage in that it has not
generated significant revenues from its principal business activity. The risk
exists that even after the consummation of such a business combination and the
related expenditure of our funds, and proceeds, if any, from warrant exercise,
the combined enterprise will still be unable to become a going concern or
advance beyond the development stage. Many of the potential business
combinations may involve new and untested products, processes, or market
strategies. We may assume such risks although they may adversely impact on our
stockholders because we consider the potential rewards to outweigh them.
11
<PAGE>
Business Combinations
---------------------
In implementing a structure for a particular business acquisition, we may
become a party to a merger, consolidation, reorganization, joint venture, or
licensing agreement with another corporation or entity. We may alternatively
purchase stock or assets of an existing business.
Any merger or acquisition can be expected to have a significant dilutive
effect on the percentage of shares held by our existing stockholder and
purchasers in the offering. The target business we consider will, in all
probability, have significantly more assets than we do. Therefore, in all
likelihood, our management will offer a controlling interest in our company to
the owners of the target business. While the actual terms of a transaction to
which we may be a party cannot be predicted, we expect that the parties to the
business transaction will find it desirable to avoid the creation of a taxable
event and thereby structure the acquisition in a so-called "tax-free"
reorganization under Sections 368(a)(1) or 351 of the Internal Revenue Code. In
order to obtain tax-free treatment under the Internal Revenue Code, the owners
of the acquired business may need to own 80% or more of the voting stock of the
surviving entity. As a result, our stockholder and investors in the offering,
would retain 20% or less of the issued and outstanding shares of the surviving
entity, which would result in significant dilution in percentage of the entity
after the combination and may also result in a reduction in the net tangible
book value per share of our investors. In addition, a majority or all of our
directors and officers will probably, as part of the terms of the acquisition
transaction, resign.
Our management will not 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 business combination, unless such a purchase is demanded by the
principals of the target company as a condition to a merger or acquisition. Our
officers and directors have agreed to this restriction which is based on an oral
understanding between members of our management. Members of our management are
unaware of any circumstances under which such policy, through their own
initiative, may be changed.
The issuance of substantial additional securities and their potential sale
into any trading market which may develop in our common stock may have a
depressive effect on our future trading market.
The structure of the business combination will depend on, among other
factors:
+ the nature of the target business,
+ our needs and desires and the needs and desires of those persons
controlling the target business,
+ the management of the target business and
+ our relative negotiating strength compared to the strength of the persons
controlling the target business.
12
<PAGE>
If at any time prior to the completion of the offering, we enter
negotiations with a possible acquisition candidate and such a transaction
becomes probable, we will suspend the offering and file an amendment to the
registration statement which will include financial statements, including
balance sheets, statements of cash flow and stockholders' equity, of the
proposed target.
We will not purchase the assets of any company of which a majority of the
outstanding capital stock is beneficially owned by one or more or our officers,
directors, promoters or affiliates or associates. Furthermore, we intend to
adopt a procedure whereby a special meeting of our stockholders will be called
to vote upon a business combination with an affiliated entity, and stockholders
who also hold securities of such affiliated entity will be required to vote8
their shares of stock in the same proportion as our publicly held shares are
voted. Our officers and directors have not approached and have not been
approached by any person or entity with regard to any proposed business venture
which desires to be acquired by us. We will evaluate all possible business
combinations brought to us. If the business combination is brought to us by any
of our promoters, management, or their affiliates or associates, disclosure as
to this fact will be included in the post-effective amendment to the
registration statement, thereby allowing the public investors the opportunity to
evaluate the business combination before voting to reconfirm their investment.
We have adopted a policy that we will not pay a finder's fee to any member
of management for locating a merger or acquisition candidate. No member of
management intends to or may seek and negotiate for the payment of finder's
fees. In the event there is a finder's fee, it will be paid at the direction of
the successor management after a change in management control resulting from a
business combination. Our policy regarding finder's fees is based on an oral
agreement among management. Our management is unaware of any circumstances under
which such policy through their own initiative may be changed.
We will remain an insignificant player among the firms which engage in
business combinations. Many established venture capital and financial concerns
have significantly greater financial and personnel resources and technical
expertise than we will. In view of our combined limited financial resources and
limited management availability, we will continue to be at a significant
competitive disadvantage compared to most of our competitors. Also, we will be
competing with a number of other small, blank check public and shell companies.
Offering Conducted in Compliance with Rule 419 to the Securities Act
--------------------------------------------------------------------
We are a blank check development stage company. Our sole business purpose
is to merge with or acquire a presently unidentified company or business.
Consequently, the offering is being conducted in compliance with Rule 419. The
securities purchased by investors and the funds received in the offering will be
deposited to and held in an escrow account, except for 10% of the funds which we
may withdraw, until an acquisition is completed. Before the acquisition can be
completed, the remainder of the investors' funds can be released to us and
certificates representing the securities can be released to the investors, we
are required to update the registration statement with a post-effective
amendment, and, within the five days after its effective date, we are required
to furnish investors with a prospectus.
13
<PAGE>
The prospectus, which is part of the post-effective amendment, will contain
the terms of a reconfirmation offer and information regarding the acquisition
candidate and its business, including the terms and conditions of the
acquisition agreement and audited financial statements of the acquisition
candidate. Investors must have no fewer than 20 and no more than 45 business
days from the effective date of the post-effective amendment to decide to
reconfirm their investment and remain an investor or, alternatively, to require
the return of their funds, including interest, from escrow. If we do not
complete an acquisition meeting specified criteria within 18 months of the date
of the prospectus, all of the funds in the escrow account must be returned
promptly to investors, plus interest. Thus, if the offering period is extended
to its limit, we will have only 15 months in which to consummate a merger or
acquisition.
Deposit of Securities
----------------------
The certificates representing the investors' securities will be released
from escrow to investors only after we have met the following three conditions.
+ We must execute an agreement for the acquisition of a target company.
+ We must successfully complete a reconfirmation offering to our investors.
+ We must consummate the acquisition.
Accordingly, we have entered into an escrow agreement with The First
National Bank of Litchfield which provides that:
+ All securities issued in connection with the offering and any other
securities issued with respect to such securities, including securities
issued with respect to stock splits, stock dividends or similar rights are
to be deposited directly into the escrow account promptly upon issuance.
The identity of the investors are to be included on the stock certificates
or other documents evidencing the securities. The securities held in the
escrow account are to remain as issued and deposited and are to be held for
the sole benefit of the investors who retain the voting rights with respect
to the securities held in their names. The securities held in the escrow
account may not be transferred, disposed of nor any interest created
therein other than by will or the laws of descent and distribution, or
pursuant to a qualified domestic relations order
+ Warrants which are part of the units held in the escrow account may be
exercised in accordance with their terms provided, however, the shares of
our common stock received upon exercise together with any cash or other
consideration paid in connection with the exercise, are to be promptly
deposited into the escrow account.
Prescribed acquisition criteria.
--------------------------------
Rule 419 requires that before the deposited securities can be released we
must first execute an agreement to acquire a business. The agreement must
provide for the acquisition of a business or assets for which the fair value of
the business represents at least 80% of the maximum offering proceeds, including
funds received or to be received from the exercise of warrants.
14
<PAGE>
Post-effective amendment
------------------------
Once the acquisition agreement has been executed, Rule 419 requires us to
update the registration statement with a post-effective amendment. The
post-effective amendment must contain information about:
+ the proposed acquisition candidate and its business, including audited
financial statements; the results of the offering; and
+ the use of the funds disbursed from the escrow account. The post-effective
amendment must also include the terms of the reconfirmation offering.
Reconfirmation offering
-----------------------
The reconfirmation offer must commence within five business days after the
effective date of the post-effective amendment and must include the following
conditions:
+ the prospectus contained in the post-effective amendment will be sent to
each investor whose securities are held in the escrow account within five
business days after the effective date of the post-effective amendment;
+ each investor will have no fewer than 20, and no more than 45, business
days from the effective date of the post-effective amendment to notify us
in writing that he or she elects to remain an investor;
+ if we do not receive written notification from any investor within 45
business days following the effective date, the investors' escrowed
securities will be returned to us and the investor's escrowed funds to the
investor;
+ unless investors representing 80% of the maximum offering proceeds elect to
remain investors, the acquisition of the target business would be
prevented, deposited securities held in escrow will be returned to us and
the funds to the investors; and
+ if a consummated acquisition has not occurred within 18 months from the
date of this prospectus, the deposited securities held in the escrow
account will be returned to us and the funds to the investors.
Release of deposited securities
-------------------------------
The desposited securities may be released to investors after:
+ the escrow agent has received a signed representation from us and any other
evidence acceptable by the escrow agent that:
We have executed an agreement for the acquisition of a business for
which the value of the business represents at least 80% of the maximum
offering proceeds and we have filed the required post-effective
amendment; and
the post-effective amendment has been declared effective; the
reconfirmation offer has been completed; and we have satisfied all of
the prescribed conditions of the reconfirmation offer.
+ the acquisition of the business with the fair value of at least 80% of the
maximum proceeds has been consummated.
15
<PAGE>
Regulation
----------
The Investment Company Act defines an "investment company" as an issuer
which is or holds itself out as being engaged primarily in the business of
investing, reinvesting or trading of securities. While we do not intend to
engage in such activities, we could become subject to regulations under the
Investment Company Act in the event we obtain or continue to hold a minority
interest in a number of enterprises. We could be expected to incur significant
registration and compliance costs if required to register under the Investment
Company Act. Accordingly, our management will continue to review our activities
from time to time with a view toward reducing the likelihood we could be
classified as an investment company.
Employees
---------
We presently have no employees. Our President/Treasurer and our Secretary
are engaged in outside business activities and they anticipate that they each
will devote to the our business only between 5 and 20 hours per week until the
acquisition of a successful business opportunity has been consummated.
Facilities
----------
We are presently using the office of our President, Shawn Pedersen, at no
cost, as our office, an arrangement which we expect to continue until the
completion of the offering. We presently do not own any equipment, and do not
intend to purchase or lease any equipment prior to or upon completion of the
offering.
Year 2000 Issues
----------------
We currently have no operations and do not own or lease any equipment. As a
consequence, we do not anticipate incurring any expense or difficulties with
regard to Year 2000 issues. Management-owned computer and telecommunications
equipment has functioned into the year 2000 without interruption and our
management does not anticipate to suffer year 2000 problems in the future.
MANAGEMENT
Information
-----------
Our officers and directors and further information concerning them are as
follows:
Name Age Position
----------------- --- --------------------
Shawn Pedersen * 36 President, Treasurer
38253 View Place and a Director
PO Box 1229
Squamish,
British Columbia V0N 3G0
Canada
Enzo Milia 35 Secretary and a
PO Box 3534 Director
1022 Wenda Place
Garibaldi, Highlands
British Columbia V0N 1T0
Canada
--------------------
* May be deemed our "Promoter" as that term is defined under the Securities
Act.
16
<PAGE>
Shawn Pedersen is currently a partner in Sea to Sky Ford Sales Ltd. and is
responsible for a staff of 24 employees. From 1981 to 1996, Mr. Pedersen was
employed at the Zephyr Automotive Group, one of the largest automotive groups in
British Columbia, Canada. Mr. Pederson progressed from billing clerk, service
writer, special projects manager, controller, to general manager of that
company.
Mr. Pedersen graduated from the University of British Columbia with a
Bachelor in Physical Education, and a minor in Business Administration. Mr.
Pedersen has also completed the third year of a Certified General Accountants
Program.
Enzo Milia served as Director of Operations, Vice President and President
for Trend Colleges Canada Ltd. from 1986 to 1997. Mr. Milia was responsible for
the overall financial mangement of Trend Colleges which has an enrollment of
1,000 students. Mr. Milia presently serves as controller/partner for Sea to Sky
Ford Sales Ltd.
Mr. Milia has completed the fifth level of a Certified General Accountants
Program, along with a diploma in computer accounting from MTC College of
Business.
Conflicts of interest
---------------------
No member of our management is currently affiliated or associated with any
blank check company. Our management does not currently intend to promote other
blank check entities. However, our management may become involved with the
promotion of other blank check companies in the future. A potential conflict of
interest may occur in the event of such involvement. Additionally, a member of
our management may be a stockholder in an acquired business. Pursuant to an oral
agreement with the members of our management, our management will introduce all
potential acquisitions to us and in the event of the acquisition of a business
in our stockholder, or an affiliate, is an owner, the shares of the affiliated
stockholder will be voted in the same proportion as shares of non-affiliated
investors.
Remuneration
------------
None of our officers or directors has received or will receive any cash
remuneration. No remuneration of any nature has been or will be paid for
services rendered by a director in such capacity. Our management does not intend
to receive any compensation from the owners of the acquired business. We cannot
predict the remuneration to be awarded management after
consummation of the acquisition.
Management involvement
----------------------
We have conducted no business as of yet, aside from raising initial funding
associated with our offering. After the closing of the offering, our management
intends to contact business associates and acquaintances to search for target
businesses and then will consider and negotiate with target businesses until an
acquisition agreement is entered into.
17
<PAGE>
Management control
------------------
Our management may not divest themselves of ownership of our shares of
common stock prior to the consummation of an acquisition or merger. This policy
is based on an unwritten agreement among management. Management is not aware of
any circumstances under which such policy, through their own initiative, may be
changed.
STATEMENT AS TO INDEMNIFICATION
Section 145 of the Delaware General Corporation Law provides for
indemnification of our officers, directors, employees and agents. Under Article
XI of our by-laws, we will indemnify and hold harmless to the fullest extent
authorized by the Delaware General Corporation Law, any of our directors,
officers, agents or employees, against all expense, liability and loss
reasonably incurred or suffered by such person in connection with activities on
our behalf. We have provided complete disclosure of relevant sections of our
certificate of incorporation and by-laws is provided in Part II of the
registration statement. This information can also be examined as described in
"Further Information."
We have been informed that, in the opinion of the Commission,
indemnification for liabilities arising under the Securities Act, which may be
permitted to our directors, officers or control persons pursuant to our
certificate of incorporation and by-laws is against the public policy as
expressed in the Securities Act and is, therefore, unenforceable.
MARKET FOR OUR COMMON STOCK
Prior to the date of the prospectus, no trading market for our common stock
has existed. Pursuant to the requirements of Rule 15g-8 of the Securities
Exchange Act, a trading market will not develop either prior to or after the
effectiveness of the registration statement while certificates representing the
shares of common stock and warrants which constitute the units remain in escrow.
Stock and warrant certificates must remain in escrow until the consummation of a
business combination and its confirmation by our investors pursuant to Rule 419.
Shawn Pedersen, our President, is our sole holder of our common stock which
was purchased in reliance upon an exemption from registration contained in
Section 4(2) of the Securities Act. He is a sophisticated investor. He will own
71.4% of our outstanding shares upon completion of the offering and will own a
greater percentage of our outstanding shares if he chooses to purchase units. We
can offer no assurance that a trading market will develop upon the consummation
of a business combination and the subsequent release of the stock and warrant
certificates from escrow. To date, neither we nor anyone acting on our behalf
have entered into any discussions, preliminary or otherwise, with any market
maker concerning the participation of a market maker in the future trading
market, if any, for our common stock.
Our present management does not anticipate that it will undertake by itself
or through consultants discussions with market makers prior to the execution of
an acquisition agreement. Our management expects that discussions in this area
will ultimately be initiated by the parties controlling the business which we
acquire who may or may not employ consultants to obtain market makers.
18
<PAGE>
We have not issued any options or warrants to purchase, or securities
convertible into, our common equity. The 2,500,000 shares of our common stock
currently outstanding are "restricted securities" as that term is defined in the
Securities Act. Pursuant to Rule 144 of the Securities Act, the holder of the
restricted securities may each sell during any three month period, after
February 9, 2001, an amount equal to the greater of one percent of our issued
and outstanding common stock or one week's trading volume. Therefore, if we sell
all the units being offered, Mr. Mirkovic may sell no less than 35,000 shares
(1% of 3,500,000 shares) during any three month period. A recent letter from the
Commission's Division of Small Business to the NASD stated that Rule 144 was not
available to holders of shares in a reporting company which merges with a
non-reporting company. In our management's opinion, the letter does not apply to
the shares held by Mr. Mirkovic. However, in the event Rule 144 is not available
to him, Mr. Mirkovic intends to register the sale of his shares with the
Commission.
CERTAIN TRANSACTIONS
We were incorporated in the State of Delaware on March 22, 2000. On April
10, 2000, we sold 2,500,000 shares of our common stock to our President, Shawn
Pedersen, at $.01 per share, for a total cash consideration of $25,000.
PRINCIPAL STOCKHOLDERS
Beneficial ownership.
---------------------
The table on the following page sets forth certain information regarding
the beneficial ownership of our common stock as of the date of the prospectus,
and as adjusted to reflect the sale of the units in the offering, by (i) each
person who is known by us to own beneficially more than 5% of our outstanding
Common Stock; (ii) each of our officers and directors; and (iii) all of our
directors and officers as a group.
Name/Address Shares of Percent of Percent of
Beneficial Common Stock Class Owned Class Owned
Owner Beneficially Before After
Offering Owned Offering Offering
--------------------------------------------------------------------------------
Shawn Pedersen(1) 2,500,000 100.0% 71.4%
38235 View Place
PO Box 1229
Squamish, British Columbia
V0N 3G0 Canada
Enzo Milia 0 0.0% 0.0%
PO Box 3534
1022 Wenda Place
Garibaldi, Highlands
British Columbia
V0N 1T0 Canada
Total Officers 2,500,000 100.0% 71.4%
and Directors
(2 Persons)
--------------------------
* May be deemed a "Promoter" as that term is defined under the Securities
Act.
19
<PAGE>
The current stockholder has not received or will receive any extra or
special benefits that were not shared equally by all holders of shares of our
common stock.
Prior blank check companies involvement
---------------------------------------
None of our officers or directors, nor our founder, promoter or principal
stockholder have been involved as a principal of a blank check company.
DESCRIPTION OF SECURITIES
Common stock
------------
We are authorized to issue 50,000,000 shares of common stock, $.001 par
value per share, of which 2,500,000 shares are issued and outstanding. Each
outstanding share of common stock is entitled to one vote, either in person or
by proxy, on all matters that may be voted upon by its holder at meetings of
stockholders.
Holders of our common stock
+ have equal ratable rights to dividends from funds legally available
therefor, if declared by our board of directors;
+ are entitled to share ratably in all of our assets available for
distribution to holders of common stock upon our liquidation, dissolution
or winding up;
+ do not have preemptive, subscription or conversion rights, or redemption or
sinking fund provisions; and
+ are entitled to one non-cumulative vote per share on all matters on which
stockholders may vote at all meetings of our stockholders.
All shares of our common stock which are part of the units, or which
underlie the warrants, will be fully paid and non-assessable when issued,
with no personal liability attaching to ownership. Holders of shares of our
common stock do not have cumulative voting rights, which means that the holders
of more than 50% of outstanding shares voting for the election of directors can
elect all of our directors if they so choose and, in such event, the holders of
the remaining shares will not be able to elect any of our directors. At the
completion of the offering, the present officers and directors and present
stockholder will beneficially own at least 71.4% of the outstanding shares of
our common stock and a greater percentage of shares if they purchase units in
the offering. Accordingly, after completion of the offering, our present
stockholder will be in a position to control all of our affairs.
Preferred stock
---------------
We may issue up to 5,000,000 shares of our preferred stock from time to
time in one or more series. As of the date of the prospectus, no shares of
preferred stock have been issued. Our board of directors, without further
approval of our stockholder, is authorized to fix the dividend rights and
terms, conversion rights, voting rights, redemption rights, liquidation
preferences and other rights and restrictions relating to any series. Issuances
of additional shares of preferred stock, while providing flexibility in
connection with possible financings, acquisitions and other corporate purposes,
could, among other things, adversely affect the voting power of the holders of
our other securities and may, under certain circumstances, have the effect of
deterring hostile takeovers or delaying changes in control or management.
20
<PAGE>
Redeemable common stock purchase warrants
-----------------------------------------
The warrants which are part of the units shall be exercisable for a period
of two years commencing from the date of the prospectus. Each warrant entitles
the holder to purchase one share of our common stock. The "A" Warrants are
exercisable at $.05; the "B" Warrants at $.10; the "C" Warrants are $.50; the
"D" Warrants at $1.00 and the "E" Warrants at $2.00. The common stock underlying
the warrants will, upon exercise of the warrants, be validly issued, fully paid
and non-assessable. The warrants will be subject to redemption, at any time, for
$0.001 per warrant, upon 30 days' prior written notice, if the closing bid price
of our common stock, as reported by the market on which the common stock trades,
exceeds the exercise price of the warrant by $.50 per share for any 20
consecutive trading days ending within ten days prior to the date of the notice
of redemption.
The warrants can only be exercised when there is a current effective
registration statement covering the underlying shares of common stock. If we do
not obtain or are unable to maintain a current effective registration statement,
warrantholders will be unable to exercise them and they may become valueless.
Moreover, if the shares of common stock underlying the warrants are not
registered or qualified for sale in the state in which a warrantholder resides,
such holder might not be permitted to exercise any warrants.
We will deliver warrant certificates representing five warrants for each
unit purchased immediately upon their release from escrow. Warrantholders may
exchange their warrant certificates for new certificates of different
denominations, and may exercise or transfer their warrants. Warrantholders may
sell their warrants if a market exists rather than exercise them. However, we
can offer no assurance that a market will develop or continue in the warrants.
If we are unable to qualify the shares underlying the warrants for sale in
certain states, holders of the warrants in those states will have no choice but
either to sell their warrants or allow them to expire.
Warrantholders may exercise their warrants by surrendering the warrant
certificate, with the form of election properly completed and executed, together
with payment of the exercise price, to us or the warrant agent. Warrants may be
exercised in whole or from time to time in part. If less than all of the
warrants evidenced by a warrant certificate are exercised, a new warrant
certificate will be issued for the number of unexercised warrants.
Warrantholders are protected against dilution of the equity interest
represented by the underlying shares of common stock upon the occurrence of
certain events, including issuance of stock dividends. If we merge, reorganize
or are acquired in such a way as to terminate the warrants, they may be
exercised immediately prior to such action. In the event of liquidation,
dissolution or winding up, warrantholders are not entitled to participate in our
assets.
For the life of the warrants, holders are given the opportunity to profit
from a rise in the market price of our common stock. The exercise of the
warrants will result in the dilution of the then book value of our common stock
and would result in a dilution of the percentage ownership of existing
stockholders. The terms upon which we may obtain additional capital may be
adversely affected through the period in which the warrants remain exercisable.
Warrantholders may be expected to exercise them at a time when we would, in all
likelihood, be able to obtain equity capital on terms more favorable than the
exercise price of the warrants.
21
<PAGE>
In the event that we call the warrants for redemption, warrantholders may
not be able to exercise their warrants if we have not updated the prospectus in
accordance with the requirements of the Securities Act or the warrants have not
been qualified for sale under the laws of the state where the warrantholder
resides. In addition, a call for redemption could force the warrantholder to
accept the redemption price, which, in the event of an increase in the price of
the stock, would be substantially less than the difference between the exercise
price and the market value.
Future financing
----------------
In the event the proceeds of the offering are not sufficient to enable us
successfully to fund a business combination, we may seek additional financing.
At this time, we believe that the proceeds of the offering and the possibility
for additional funding through warrant exercise will be sufficient and therefore
do not expect to issue any additional securities before we consummate a business
combination. However, we may issue additional securities, incur debt or procure
other types of financing if needed. We have not entered into any agreements,
plans or proposals for such financing and at present have no plans to do so. We
will not use the escrowed funds as collateral or security for any loan. Further,
the escrowed funds will not be used to pay back any loan incurred by us. If we
require additional financing, there is no guarantee that financing will be
available to us or, if available, that such financing will be on acceptable
terms acceptable.
Reports to stockholders
-----------------------
We intend to furnish our stockholders with annual reports containing
audited financial statements as soon as practicable after the end of each fiscal
year. Our fiscal year ends on December 31st.
Dividends
---------
We have only been recently organized, have no earnings and have paid no
dividends to date. Since we were formed as a blank check company with our only
intended business to search and acquire an appropriate business combination, we
do not anticipate having earnings or paying dividends at least until a business
combination is reconfirmed by our stockholders. However, we can give no
assurance that after we consummate a business combination, we will have earnings
or issue dividends.
Transfer agent
--------------
We have appointed Olde Monmouth Stock Transfer Co., Inc., 77 Memorial
Parkway, Suite 101, Atlantic Highlands, New Jersey 07716 as transfer agent for
our shares of common stock and warrants.
22
<PAGE>
PLAN OF DISTRIBUTION
Conduct of the offering
-----------------------
We hereby offer the right to subscribe for 1,000,000 units at $.05 per unit
on an "best efforts, all or none basis." We will not compensate any person in
connection with the offer and sale of the units.
Our President, Shawn Pedersen, shall distribute prospectuses related to the
offering. We estimate that he will distribute approximately 40 to 50
prospectuses, limited to acquaintances, friends and business associates.
Dejan Mirkovic shall conduct the offering of the units. Although Mr.
Mirkovic is an "associated person" as that term is defined in Rule 3a4-1 under
the Securities Exchange Act, he will not be deemed to be a broker because:
+ he will not be subject to a statutory disqualification as defined in
Section 3(a)(39) of the Securities Exchange Act at the time of his
participation in the sale of our securities;
+ he will not be compensated in connection with the sale of the units;
+ he will be not an associated person of a broker or dealer at the time of
the sale of our securities; and
+ he shall restrict his participation to the following activities:
(a) preparing written communications or delivering them through the mails
or other means that does not involve his oral solicitation of a
potential purchaser;
(b) responding to inquiries of potential purchasers in communications
initiated by potential purchasers, provided however, that the content
of each response is limited to information contained in the
registration statement; or
(c) performing ministerial and clerical work involved in effecting any
transaction.
As of the date of the prospectus, we have not retained a broker to sell the
units. In the event we retain a broker who may be deemed an underwriter, we will
file an amendment to the registration statement with the Commission. However, we
have no present intention of using a broker.
We will not approach, directly or indirectly, a market maker or take any
steps to request or encourage a market in our securities prior to an acquisition
of a business opportunity and confirmation by our stockholders of the
acquisition. We have not conducted any preliminary discussions or entered into
any understandings with any market maker regarding a future trading market in
our securities, nor do we have any plans to engage in any discussions. We do not
intend to use consultants to obtain market makers. No member of our management,
no promoter or anyone acting at their direction will recommend, encourage or
advise investors to open brokerage accounts with any broker-dealer which makes a
market in the units, shares or warrants. Our investors shall make their own
decisions regarding whether to hold or sell their securities. We shall not
exercise any influence over investors' decisions.
23
<PAGE>
Method of subscribing
---------------------
Persons may subscribe for units by filling in and signing the subscription
agreement and delivering it to us prior to the expiration date. Subscribers must
pay $0.05 per unit in cash or by check, bank draft or postal express money order
payable in United States dollars to "The First National Bank of Litchfield as
Escrow Agent for Digital Capital.com, Inc." The offering is being made on a
"best efforts, all or none basis." Thus, unless all 1,000,000 units are sold,
none will be sold.
Our officers, directors, current stockholder and any of their affiliates or
associates may purchase up to 50% of the units. Such purchases may be made in
order to close this "all or none" offering. Units purchased by the our officers,
directors and stockholder will be acquired for investment purposes and not with
a view toward distribution.
Expiration date
---------------
The offering will end the earlier of the receipt of subscriptions for
1,000,000 units or 90 days from the date of the prospectus.
WHERE YOU CAN FIND MORE INFORMATION
We have not previously been required to comply with the reporting
requirements of the Securities Exchange Act. We have filed with the Commission a
registration statement on Form SB-2 to register the shares of our common stock
and warrants constituting the units and the shares of common stock underlying
the warrants. The prospectus is part of the registration statement, and, as
permitted by the Commission's rules, does not contain all of the information in
the registration statement. For further information about us and the securities
offered under the prospectus, you may refer to the registration statement and to
the exhibits and schedules filed as a part of the registration statement. You
can review the registration statement and its exhibits at public reference
facilities maintained by the Commission at Judiciary Plaza, Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549 and at the regional offices of the
Commission at 7 World Trade Center, Suite 1300, New York, New York 10048 and
Citicorp Center, Suite 1400, 500 West Madison Street, Chicago, Illinois 60661.
You may call the Commission at 1-800-SEC-0330 for further information. The
registration statement is also available electronically on the World Wide Web at
http://www.sec.gov.
You can also call or write us at any time with any questions you may have.
We would be pleased to speak with you about any aspect of our business and the
offering.
LEGAL PROCEEDINGS
We not a party to nor are we aware of any existing, pending or threatened
lawsuits or other legal actions.
LEGAL MATTERS
Roger Fidler, Esq., 163 South St., Hackensack New Jersey 07601, is passing
upon the validity of the shares of common stock and the warrants constituting
the units offered by the prospectus and the shares of common stock underlying
the warrants.
FINANCIAL STATEMENTS
The following are our financial statements, with independent auditor's
report, for the period from inception, March 22, 2000, to April 30, 2000.
24
<PAGE>
REPORT OF INDEPENDENT AUDITOR
To The Board of Directors and Shareholders
of Digital Capital.com, Inc. (a development stage company)
I have audited the accompanying balance sheet of Digital Capital.com, Inc.
(a development stage company) as April 30, 2000, and the related statements of
operations, changes in stockholders' equity, and cash flows for the period from
inception, March 22, 2000, through April 30, 2000. These financial statements
are the responsibility of the Company's management. My responsibility is to
express an opinion on these financial statements based on my 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 and significant estimates made 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 Digital Capital.com, Inc. (a
development stage company) as of April 30, 2000, and the related statements of
operations, changes in stockholders' equity, and cash flows for the period from
inception, March 21, 2000, through April 30, 2000 in conformity with generally
accepted accounting principles.
The accompanying financial statements have been prepared assuming that
Digital Capital.com, Inc. (a development stage company) will continue as a going
concern. As more fully described in Note 2, the Company is a blank check company
that is dependent upon the success of management to successfully complete a self
underwriting and locate and acquire a business and may require additional
capital to enter into any business combination. These conditions raise
substantial doubt about the Company's ability to continue as a going concern.
Management's plans as to these matters are described in Note 2. The financial
statements do not include any adjustments to reflect the possible effects on the
recoverability and classification of assets or the amounts and classifications
of liabilities that may result from the possible inability of Digital
Capital.com, Inc. (a development stage company) to continue as a going concern.
/s/Thomas Monahan
----------------------------
THOMAS MONAHAN
Certified Public Accountant
Paterson, New Jersey
May 25, 2000
F-1
<PAGE>
DIGITAL CAPITAL.COM, INC.
(A development stage company)
BALANCE SHEET
APRIL 30, 2000
ASSETS
Current assets
Cash $ 9,441
------
Total current assets 9,441
Other assets
Organization costs, Net 526
Deferred offering costs 15,000
----------
Total other assets 15,526
----------
Total $ 24,967
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Commitments and contingencies $ -0-
STOCKHOLDERS' EQUITY
Preferred stock, $.001 par value;
5,000,000 shares authorized;
-0- shares issued and outstanding
Common stock, $.001 par value;
50,000,000 shares authorized;
2,500,000 shares issued and outstanding $ 2,500
Additional paid-in capital 22,500
Deficit accumulated during the
development stage (33)
-----------
Total stockholders equity $ 24,967
-----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 24,967
===========
See notes to financial statements.
F-2
<PAGE>
DIGITAL CAPITAL.COM, INC.
(A development stage company)
STATEMENT OF OPERATIONS
FOR THE PERIOD FROM INCEPTION, MARCH 22, 2000, TO APRIL 30, 2000
Income $ 0
Costs of goods sold 0
------
Gross profit 0
Operations:
General and administrative 33
Amortization 0
------
Total costs 33
Net profit (loss) $ (33)
=======
PER SHARE AMOUNTS:
Net profit (loss) per common
share outstanding - basic $ 0.00
=======
SHARES OF COMMON STOCK OUTSTANDING 2,500,000
==========
See notes to financial statements.
F-3
<PAGE>
DIGITAL CAPITAL.COM, INC.
(A development stage company)
STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM MARCH 22, 2000 (INCEPTION) THROUGH APRIL 30, 2000
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (33)
Item not affecting cash flow from operations:
Amortization -0-
---------
NET CASH USED IN OPERATING ACTIVITIES (33)
CASH FLOWS FROM INVESTING ACTIVITY:
Deferred offering costs (15,000)
Organization costs 526
---------
CASH USED IN INVESTING ACTIVITIES (15,526)
CASH FLOWS FROM FINANCING ACTIVITY:
Sales of common stock 25,000
---------
TOTAL CASH FLOWS FROM FINANCING ACTIVITIES 25,000
Increase (decrease) in cash 9,441
Cash balance beginning of period -0-
---------
CASH, end of period $ 9,441
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest $ -
Cash paid for income taxes $ -
See notes to financial statements.
F-4
<PAGE>
DIGITAL CAPITAL.COM, INC.
(A development stage company)
STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Deficit
accumulated
Additional during
Preferred Preferred Common Common paid in development
stock stock stock stock capital stage Total
(shares) ($) (shares) ($) ($) ($) ($)
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Sale of 2,500,000
shares of
common stock 0 $ 0 2,500,000 $ 2,500 $ 22,500 $ 25,000
Net profit (loss) $ ( 33) (33)
------------------------------------------------------------------------------------------------------
Balance
April 30, 2000 0 $ 0 2,500,000 $ 2,500 $ 22,500 $ (33) $ 24,967
</TABLE>
See notes to financial statements.
F-5
<PAGE>
DIGITAL CAPITAL.COM, INC.
(A development stage company)
NOTES TO FINANCIAL STATEMENTS
FOR THE PERIOD FROM MARCH 22, 2000 (INCEPTION) THROUGH APRIL 30, 2000
NOTE 1 - ORGANIZATION AND DESCRIPTION OF THE COMPANY
Digital Capital.com, Inc. (the "Company"), was organized in Delaware on
March 22, 2000 and is authorized to issue 50,000,000 shares of common stock,
$0.001 par value each and 5,000,000 shares of preferred stock, $0.001 par value
each.
The Company is a "blank check" company which plans to search for a suitable
business to merge with or acquire. Operations since incorporation have consisted
primarily of obtaining capital contributions by the initial investor and
activities regarding the registration of the offering with the Securities and
Exchange Commission.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying financial statements have been prepared on a going concern
basis which contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business. The Company is a blank check
company that is dependent upon the success of management to successfully
complete a self underwriting and locate a potential business to acquire and may
require additional capital to enter into any business combination. These
conditions raise substantial doubt about the Company's ability to continue as a
going concern. The Company is dependent upon its ability to have positive cash
flows from operations to sustain any business activity. The Company's future
capital requirements will depend on numerous factors including, but not limited
to, continued progress in completing its self underwritten offering, finding a
business to acquire, completing the process of acquiring a business and
obtaining the needed investment capital and working capital to engage in
profitable operations. The Company plans to engage in such financing efforts on
a continuing basis.
The financial statements presented consist of the balance sheet of the
Company as at April 30, 2000 and the related statements of operations and cash
flows and stockholders' equity for period from inception, March 22, 2000, to
April 30, 2000.
Fiscal Year
The fiscal year of the Company is the calendar year.
Deferred Offering Costs
Deferred offering costs, incurred in anticipation of the Company filing a
registration statement pursuant to Rule 419 under the Securities Act of 1933, as
amended, are being deferred until the registration is effective.
Organization Costs, Net
Organization costs are being amortized over a period of 60 months.
Accumulated amortization as of April 30, 2000, was $-0-.
F-6
<PAGE>
Income Taxes
The Company accounts for income taxes in accordance with the Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes," which
requires the recognition of deferred tax liabilities and assets at currently
enacted tax rates for the expected future tax consequences of events that have
been included in the financial statements or tax returns. A valuation allowance
is recognized to reduce the net deferred tax asset to an amount that is more
likely than not to be realized. The tax provision shown on the accompanying
statement of operations is zero since the deferred tax asset generated from the
net operating loss is offset in its entirety by a valuation allowance. State
minimum taxes will be expensed as incurred.
Cash and Cash Equivalents
Cash and cash equivalents, if any, include all highly liquid debt
instruments with an original maturity of three months or less at the date of
purchase.
Fair Value of Financial Instruments
Cash, accounts payable and other current liabilities are recorded in the
financial statements at cost, which approximates fair market value because of
the short-term maturity of those instruments.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that effect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Significant Concentration of Credit Risk
At April 30, 2000, the Company has a concentration of its credit risk by
maintaining deposits in one bank. The maximum loss that could have resulted from
this risk totaled $-0- which represents the excess of the deposit liabilities
reported by the banks over the amounts that would have been covered by the
insurance.
NOTE 3 - STOCKHOLDERS' EQUITY
Common Stock
For the period from inception, March 22, 2000, to April 30, 2000, the
Company sold an aggregate of 2,500,000 shares of common stock to its president
for an aggregate consideration of $25,000 or $0.01 per share.
Preferred Stock
Up to 5,000,000 shares of preferred stock may be issued from time to time
in one or more series. The Company's board of directors, without further
stockholder approval, is authorized to fix the dividend rights and terms,
conversion rights, voting rights, redemption rights, liquidation preferences and
other rights and restrictions relating to any such series. Issuances of
additional shares of preferred stock, while providing flexibility in connection
with possible financings, acquisitions and other corporate purposes, could,
among other things adversely affect the voting power of the holders of other
securities and may, under certain circumstances, have the effect of deterring
hostile takeovers or delaying changes in control or management.
The number of shares of preferred stock outstanding at April 30, 2000 is
-0-.
F-7
<PAGE>
NOTE 4 - RULE 419 REQUIREMENTS
Rule 419 requires that offering proceeds be deposited into an escrow or
trust account (the "Deposited Funds" and "Deposited Securities", respectively)
governed by an agreement which contains certain terms and provisions specified
by that rule. The Company may receive 10% of the escrowed funds for working
capital. The remaining Deposited Funds and the Deposited Securities will be
released to the Company and to the investors, respectively, only after the
Company has met the following three basic conditions. First, the Company must
execute an agreement for an acquisition meeting certain prescribed criteria.
Second, the Company must file a post-effective amendment to its registration
statement which includes the terms of a reconfirmation offer that must contain
conditions prescribed by Rule 419. The post-effective amendment must also
contain information regarding the acquisition candidate and its business,
including audited financial statements. The agreement must include, as a
condition precedent to its consummation, a requirement that the number of
investors who contributed at least 80% of the offering proceeds must elect to
reconfirm their investments. Third, the Company must conduct the reconfirmation
offer and satisfy all of the prescribed conditions. The post-effective amendment
must also include the terms of the reconfirmation offer mandated by Rule 419.
After the Company submits a signed representation to the escrow agent that the
requirements of Rule 419 have been met and after the acquisition is consummated,
the escrow agent can release the Deposited Funds and Deposited Securities.
Investors who do not reconfirm their investments will receive the return of a
pro rata portion thereof; and in the event investors representing less than 80%
of the Deposited Funds reconfirm their investments, the Deposited Funds will be
returned to all the investors on a pro rata basis.
NOTE 5 - GAIN (LOSS) PER SHARE OF COMMON STOCK
Net gain (loss) per share of common stock outstanding, as shown on the
statement of operations, is based on the number of shares outstanding at each
balance sheet date. Weighted average shares outstanding was not computed since
it would not be meaningful in the circumstances, as all shares issued during the
period from incorporation through April 30, 2000 were for initial capital.
Therefore, the total shares outstanding at the end of each period was deemed to
be the most relevant number of shares to use for purposes of this disclosure.
For future periods, the Company will utilize the treasury stock method for
computing earnings per share, and will compute a weighted average number of
shares outstanding once additional shares of stock are issued to new
stockholders. Under the treasury stock method, the dilutive effect of
outstanding stock options and other convertible securities for determining
primary earnings per share is computed using the average market price during the
fiscal period, whereas the dilutive effect of outstanding stock options and
convertible securities for determining fully diluted earnings per share is
computed using the market price as of the end of the fiscal period, if greater
than the average market price.
F-8
<PAGE>
NOTE 6 - RELATED PARTY TRANSACTIONS
Office Facilities
Rental of office space and use of office, computer and telecommunications
equipment are provided by the President of the Company on a rent free basis.
NOTE 7 - PROPOSED OFFERING
The Company intends to prepare and file a registration statement with the
Securities and Exchange Commission pursuant to Rule 419 (see Note 4). The
offering, on a "best efforts all-or-none basis" will consist of 1,000,000 units
at $.05 per unit or an aggregate offering price of $50,000. Each unit will
consist of one share of common stock and five redeemable common stock purchase
warrants. Each warrant is exercisable into one share of common stock for a
period of two years from the effective date of a registration statement relating
to the underlying shares of common stock, the "A" Warrant at $.05, the "B"
Warrant at $.10, the "C" Warrant at $.50, the "D" Warrant at $1.00 and the "E"
Warrant at $2.00. The warrants are redeemable at any time, upon thirty day's
written notice, in the event the average closing price of the common stock is at
least $.50 greater than the exercise price of any given warrant for a period of
twenty consecutive trading days ending within ten days prior to the notice of
redemption.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of Directors and Officers
The Delaware General Corporation Law provides for the indemnification of
the officers, directors and corporate employees and agents of Digital
Capital.com, Inc. (the "Registrant") under certain circumstances as follows:
INDEMNIFICATION OF OFFICERS, DIRECTORS, EMPLOYEES AND AGENTS; INSURANCE.
(a) A corporation may indemnify any person who was or is a party or is
threatened to be made a party to 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 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), 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, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or 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 and in a
manner which 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 that his conduct was unlawful.
(b) A corporation may 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 and 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 to the corporation unless and only to the extent that the Court of
Chancery or 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
the circumstance of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Court of Chancery or such court shall deem
proper.
(c) To the extent that a director, officer, employee or agent of a
corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in subsections (a) and (b) of this
section, 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.
25
<PAGE>
(d) Any indemnification under subsections (a) and (b) of this section
(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 director,
officer, employee or agent is proper in the circumstances because he has met the
applicable standard of conduct set forth in subsections (a) and (b) of this
section. Such determination shall be made (1) 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 (2) if such a quorum is not obtainable, or, even
if obtainable a quorum of disinterested directors so directs, by independent
legal counsel in a written opinion, or (3) by the stockholders.
(e) Expenses incurred by an officer or director in defending any civil,
criminal, administrative or investigative action, suit or proceeding may be paid
by the corporation in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of such director to
repay such amount if it shall ultimately be determined that he is not entitled
to be indemnified by the corporation as authorized in this section. Such
expenses including attorneys' fees incurred by other employees and agents may be
so paid upon such terms and conditions, if any, as the board of directors deems
appropriate.
(f) The indemnification and advancement expenses provided by, or granted
pursuant to, the other subsections of this section shall not be deemed exclusive
of any other rights to which those seeking indemnification or advancement
expenses may be entitled under any bylaw, agreement, vote of stockholders or
disinterested directors or otherwise, both as to action in his official capacity
and as to action in another capacity while holding such office.
(g) A corporation shall have 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 section.
(h) For purposes of this Section, references to "the corporation" shall
include, in addition to the resulting corporation, any constituent corporation
(including any constituent of a constituent) absorbed in a consolidation or
merger which, if its separate existence had continued, would have had power and
authority to indemnify its directors, officers and employees or agents so that
any person who is or was a director, officer, employee or agent of such
constituent corporation, or is or was serving at the request of such constituent
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, shall stand in the same
position under this section with respect to the resulting or surviving
corporation as he would have with respect to such constituent corporation as he
would have with respect to such constituent corporation if its separate
existence had continued.
(i) For purposes of this section, references to "other enterprises" shall
include employee benefit plans; references to "fines" shall include any excise
taxes assessed on a person with respect to an employee benefit plan; and
references to "serving at the request of the corporation" shall include any
service as a director, officer, employee or agent of the corporation which
imposes duties on, or involves services by, such director, officer, employee, or
agent with respect to an employee benefit plan, its participants, or
beneficiaries; and a person who acted in good faith and in a manner he
reasonably believed to be in the interest of the participants and beneficiaries
of an employee benefit plan shall be deemed to have acted in a manner "not
opposed to the best interests of the corporation" as referred to in this
section.
26
<PAGE>
(j) The indemnification and advancement of expenses provided by, or granted
pursuant to, this section shall, unless otherwise provided when authorized or
ratified, continue as to a person who has ceased to be a director, officer,
employee or agent and shall inure to the benefit of the heirs, executors, and
administrators of such person.
Articles Ninth and Tenth of the Registrant's certificate of incorporate
provide as follows:
NINTH:
The personal liability of the directors of the Corporation is hereby
eliminated to the fullest extent permitted by the provisions of paragraph (7) of
subsection (b) of Section 102 of the Delaware General Corporation Law, as the
same may be amended and supplemented.
TENTH:
The Corporation shall, to the fullest extent permitted by the provisions of
Section 145 of the Delaware General Corporation Law, as the same may be amended
and supplemented, indemnify any and all persons whom it shall have power to
indemnify under said section from and against any and all of the expenses,
liabilities or other matters referred to in or covered by said section, and the
indemnification provided for herein shall not be deemed exclusive of any other
rights to which those indemnified may be entitled under any by-law, agreement,
vote of stockholders 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 a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
Article XII of the Registrant's by-laws provides as follows:
ARTICLE XII - INDEMNIFICATION OF DIRECTORS AND OFFICERS
1. INDEMNIFICATION. The corporation shall indemnify any person who was or is a
party or is threatened to be made a party to any 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 such person is or
was a director, trustee, officer, employee or agent of the corporation, or
is or was serving at the request of the corporation as a director, trustee,
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 such person in connection with such action, suit or
proceeding if such person acted in good faith and in a manner such person
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 no
reasonable cause to believe such person's conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its
equivalent, shall not, by itself, create a presumption that the person did
not act in good faith and in a manner which the person reasonably believed
to be in or not opposed to the best interest of the corporation, and with
respect to any criminal action or proceeding, had reasonable cause to
believe that such person's conduct was lawful.
27
<PAGE>
2. DERIVATIVE ACTION. 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 the corporation's favor by reason of the fact that such person
is or was a director, trustee, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, trustee, officer, employee or agent of any other 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 such person in connection
with such action, suit or proceeding if such person acted in good faith and
in a manner such person reasonably believed to be in or not opposed to the
best interests of the corporation; provided, however, 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 gross
negligence or willful misconduct in the performance of such person's 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 circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses as such court shall deem proper.
The termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its
equivalent, shall not, by itself, create a presumption that the person did
not act in good faith and in a manner which the person reasonably believed
to be in or not opposed to the best interest of the corporation.
3. SUCCESSFUL DEFENSE. To the extent that a director, trustee, officer,
employee or agent of the corporation has been successful, on the merits or
otherwise, in whole or in part, in defense of any action, suit or
proceeding referred to in paragraphs 1 and 2 above, or in defense of any
claim, issue or matter therein, such person shall be indemnified against
expenses (including attorneys' fees) actually and reasonably incurred by
such person in connection therewith.
4. AUTHORIZATION. Any indemnification under paragraph 1 and 2 above (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
director, trustee, officer, employee or agent is proper in the
circumstances because such person has met the applicable standard of
conduct set forth in paragraph 1 and 2 above. Such determination shall be
made (a) 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, (b) by independent legal counsel (selected by one or more of
the directors, whether or not a quorum and whether or not disinterested) in
a written opinion, or (c) by the stockholders. Anyone making such a
determination under this paragraph 4 may determine that a person has met
the standards therein set forth as to some claims, issues or matters but
not as to others, and may reasonably prorate amounts to be paid as
indemnification.
5. ADVANCES. Expenses incurred in defending civil or criminal actions, suits
or proceedings shall be paid by the corporation, at any time or from time
to time in advance of the final disposition of such action, suit or
proceeding as authorized in the manner provided in paragraph 4 above upon
receipt of an undertaking by or on behalf of the director, trustee,
officer, employee or agent to repay such amount unless it shall ultimately
be determined by the corporation that the payment of expenses is authorized
in this Section.
28
<PAGE>
6. NONEXCLUSIVITY. The indemnification provided in this Section shall not be
deemed exclusive of any other rights to which those indemnified may be
entitled under any law, by-law, agreement, vote of stockholders or
disinterested director or otherwise, both as to action in such person's
official capacity and as to action in another capacity while holding such
office, and shall continue as to a person who has ceased to be a director,
trustee, officer, employee or agent and shall insure to the benefit of the
heirs, executors, and administrators of such a person.
7. INSURANCE. The Corporation shall have the power to purchase and maintain
insurance on behalf of any person who is or was a director, trustee,
officer, employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, trustee, officer, employee or
agent of any corporation, partnership, joint venture, trust or other
enterprise, against any liability assessed against such person in any such
capacity or arising out of such person's status as such, whether or not the
corporation would have the power to indemnify such person against such
liability.
8. "CORPORATION" DEFINED. For purpose of this action, references to the
"corporation" shall include, in addition to the corporation, any
constituent corporation (including any constituent of a constituent)
absorbed in a consolidation or merger which, if its separate existence had
continued, would have had the power and authority to indemnify its
directors, trustees, officers, employees or agents, so that any person who
is or was a director, trustee, officer, employee or agent of such of
constituent corporation will be considered as if such person was a
director, trustee, officer, employee or agent of the corporation.
Item 25. Expenses of Issuance and Distribution
The other expenses payable by the Registrant in connection with the
issuance and distribution of the securities being registered are estimated as
follows:
Escrow Fee $ 600.00
Securities and Exchange Commission Registration Fee 1,000.00
Legal Fees and Consulting Fees 15,000.00
Accounting Fees 5,000.00
Printing and Engraving 1,000.00
Blue Sky Qualification Fees and Expenses 1,000.00
Transfer Agent Fee 1,000.00
Miscellaneous 400.00
---------
TOTAL $ 25,000.00
Item 26. Recent Sales of Unregistered Securities
The registrant issued 2,500,000 shares of common stock on April 13, 2000 to
its President for cash consideration of $.01 per share for an aggregate
investment of $25,000. The registrant sold these shares of common stock under
the exemption from registration provided by Section 4(2) of the Securities Act.
No securities have been issued for services.
Neither the registrant nor any person acting on its behalf offered or sold
the securities by means of any form of general solicitation or general
advertising. No services were performed by any purchaser as consideration for
the shares issued.
29
<PAGE>
The purchaser represented in writing that he acquired the securities for
his own account. A legend was placed on the stock certificates stating that the
securities have not been registered under the Securities Act and cannot be sold
or otherwise transferred without an effective registration or an exemption
therefrom.
EXHIBITS
Item 27.
3.1 Certificate of Incorporation
3.2 By-Laws
4.1 Specimen Certificate of Common Stock
4.2 Form of Warrant
4.3 Form of Warrant Agreement
4.4 Form of Escrow Agreement
5.1 Opinion of Counsel
23.1 Accountant's Consent to Use Opinion dated May 31, 2000
23.2 Counsel's Consent to Use Opinion
27 Financial Data Schedule
---------------------
30
<PAGE>
Item 28.
UNDERTAKINGS
The Registrant undertakes:
(1) To file, during any period in which offers or sales are being made,
post-effective amendment to this registration statement (the "Registration
Statement"):
(i) To include any prospectus required by Section 10 (a) (3) of the
Securities Act of 1933 (the "Securities Act");
(ii) To reflect in the prospectus any facts or events arising after the
Effective Date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the Registration Statement;
(iii)To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or
any material change to such information in this registration
statement, including (but not limited to) the addition of an
underwriter;
(2) That, for the purpose of determining any liability under the Securities
Act, each such post-effective amendment shall be treated as a new
registration statement of the securities offered, and the offering of the
securities at that time to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of
the offering.
(4) To deposit into the Escrow Account at the closing, certificates in such
denominations and registered in such names as required by the Company to
permit prompt delivery to each purchaser upon release of such securities
from the Escrow Account in accordance with Rule 419 of Regulation C under
the Securities Act. Pursuant to Rule 419, these certificates shall be
deposited into an escrow account, not to be released until a business
combination is consummated.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to any provisions contained in its Certificate of
Incorporation, or by-laws, or otherwise, the Registrant has been advised that in
the opinion of the Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
31
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form SB-2 and authorized the registration
statement to be signed on its behalf by the undersigned, in the City of
Barnaby, Province of British Columbia, Canada, on May 31, 2000.
DIGITAL CAPITAL.COM, INC.
By: /s/Shawn Pedersen
---------------------------
Shawn Pedersen, President
In accordance with the requirements of the Securities Act of 1933, the
registration statement was signed by the following persons in the capacities and
on the dates stated.
/s/Shawn Pedersen
------------------------------- Dated: May 31, 2000
Shawn Pedersen
President, Treasurer, Director
/s/Enzo Milia
------------------------------- Dated: May 31, 2000
Enzo Milia
Secretary, Director
32
<PAGE>
