As filed with the Securities and Exchange Commission on December 29, 2000
Registration No. 333 -_______
================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
__________________
POSTERALLEY.COM, INC.
------------------------------
(Name of small business issuer in its charter)
Colorado 5999 84-1509950
-------------------- ----------------- ---------------------------
(State or jurisdiction of (Primary Standard (I.R.S. Employer
incorporation or organization) Industrial Identification No.)
Classification Code
Number)
------------------
650 South Cherry Street, Suite #310
Denver, Colorado 80246; (303) 629-9751
------------------------------------------------
(Address and telephone number of principal executive offices)
650 South Cherry Street, Suite #310
Denver, Colorado 80246; (303) 629-9751
-------------------------------------------------------
(Address of principal place of business or intended principal place of business)
Scott M. Thornock
650 South Cherry Street, Suite #310
Denver, Colorado 80246; (303) 629-9751
-------------------------------------------------------
(Name, address and telephone number of agent for service)
Please send copies of all correspondence to:
PATRICIA CUDD, ESQ.
Cudd & Associates
1120 Lincoln Street, Suite #1507
Denver, Colorado 80203
Telephone: (303) 861-7273
<PAGE>
Approximate date of proposed sale to the public:
As soon as practicable after the Registration Statement becomes effective.
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ] __________________________
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] __________________________
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] __________________________
If delivery of the prospectus is expected to be made pursuant to Rule 434, check
the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Proposed Proposed
Title of Each Dollar Maximum Maximum Amount of
Class of Securities Amount to Offering Price Aggregate* Registration
to Be Registered Be Registered Per Share* Offering Price Fee
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock,
$.0001 par value $85,000 $ .50 $50,000 $100.00
---------------------------------------------------------------------------------------
TOTAL $50,000 $100.00
---------------------------------------------------------------------------------------
</TABLE>
*Estimated solely for the purpose of calculating the registration fee pursuant
to Rule 457(o).
The registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment that specifically states that this 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 Commission, acting pursuant to said Section
8(a), may determine.
<PAGE>
POSTERALLEY.COM, INC.
------------------
Cross Reference Sheet Pursuant to Rule 404 (c)
Showing Location in Prospectus of Information
Required by Items of Form SB-2
Item Heading or
Number Caption Location in Prospectus
------ ---------------------------------------- ----------------------
1. Front of Registration Statement and Outside
Front Cover of Prospectus.................. Facing Page;
Cross-Reference Sheet;
Outside Front Cover Page
2. Inside Front and Outside Back Cover Pages
of Prospectus.............................. Inside Front Cover Page;
Outside Back Cover Page
3. Summary Information and Risk Factors....... Prospectus Summary; Risk
Factors
4. Use of Proceeds............................ Prospectus Summary; Use
of Proceeds
5. Determination of Offering Price........... Outside Front Cover Page;
Inside Back Cover Page;
Risk Factors; Plan of
Offering
6. Dilution.................................. Dilution
7. Selling Security Holders.................. Principal Shareholders;
Selling Shareholders
8. Plan of Distribution ..................... Facing Page;
Cross-Reference Sheet;
Outside Front Cover Page;
Prospectus Summary;
Plan of Offering
9. Legal Proceedings.......................... Business - Legal
Proceedings
10. Directors, Executive Officers, Promoters and
Control Persons............................ Management - Directors
and Executive Officers
11. Security Ownership of Certain Beneficial
Owners and Management...................... Principal Shareholders;
Selling Shareholders
<PAGE>
12. Description of Securities.................. Prospectus Summary;
Description of Securities
- Description of Capital
Stock - Description of
Common Stock
13. Interest of Named Experts and Counsel...... Experts
14. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities................................ Inapplicable
15. Organization Within Last Five Years........ Plan of Operation
16. Description of Business.................... Business
17. Management's Discussion and Analysis or
Plan of Operation.......................... Facing Page; Cross -
Reference Sheet; Outside
Front Cover Page; Plan of
Operation
18. Description of Property.................... Business - Facilities
19. Certain Relationships and Related
Transactions............................... Certain Transactions
20. Management's Discussion and Analysis or
Plan of Operation.......................... Facing Page; Cross -
Reference Sheet; Outside
Front Cover Page; Plan of
Operation
21. Executive Compensation..................... Management - Executive
Compensation
22. Financial Statements....................... Financial Statements
23. Changes in and Disagreements With
Accountants on Accounting and Financial
Disclosure................................. Inapplicable
<PAGE>
Preliminary Prospectus Dated December __, 2000
SUBJECT TO COMPLETION
The information in this preliminary prospectus is not complete and may be
changed. We may complete or amend this preliminary prospectus without notice.
These securities may not be sold until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
601,200 Shares of Common Stock
POSTERALLEY.COM, INC.
This prospectus relates to an aggregate of 601,200 shares of common
stock of Posteralley.com, Inc. ("Posteralley.com"), offered at $.50 per share.
Of these shares of common stock, 501,200 shares are being offered by
shareholders who paid $.25 per share sold in Posteralley.com's offering of
common stock completed in June 2000 pursuant to Rule 504 of Regulation D under
the Securities Act of 1933, as amended (the "Securities Act"). The holders of
these 501,200 shares of common stock are hereinafter referred to, collectively,
as the "Selling Shareholders." There is no public market for the common stock
and no assurance that a public market will develop by reason of this offering.
(See "Risk Factors" on pages 4 to 12.)
Neither the Securities and Exchange Commission nor any state regulatory
authority has approved or disapproved of these securities, endorsed the merits
of this offering or determined that this prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.
<TABLE>
<CAPTION>
==============================================================================================
Price Selling Proceeds to
to Public Commissions(1) Posteralley.com(2)
==============================================================================================
<S> <C> <C> <C>
Per Share $ .50 $-0- $ .50
----------------------------------------------------------------------------------------------
Total Minimum (50,000 shares) (3) $ 25,000 $-0- $ 25,000
----------------------------------------------------------------------------------------------
Total Maximum (100,000 shares) (3) $ 50,000 $-0- $ 50,000
==============================================================================================
</TABLE>
NOTES:
(1) We will offer the shares of common stock directly to the public through
our executive officers and directors. We will not pay any selling commissions or
other compensation on sales of shares of common stock by our executive officers
and directors.
(2) Does not reflect expenses of the offering estimated not to exceed
$20,500. As of December 11, 2000, $7,178 of such expenses had not been paid and,
accordingly, that portion of the estimated offering expenses will be paid out of
the proceeds of this offering.
(3) Our executive officers and directors will offer the shares of common
stock on a "$25,000 minimum - $50,000 maximum" basis. There is no assurance that
any or all of the shares of common stock will be sold. We will transmit all
proceeds from subscriptions to purchase the first 50,000 shares of common stock
by noon of the next business day following receipt to an escrow account at
Citywide Banks, N.A., 8101 East Belleview Avenue, Denver, Colorado 80237.
Subscribers have no right to the return of their funds during the term of the
escrow period. If we do not receive subscriptions for at least 50,000 shares of
common stock within 90 days from the date of this prospectus (unless we extend
the offering for up to an additional 90 days), we will refund the escrowed funds
promptly to subscribers, without deduction or interest. After we have received
proceeds from the sale of 50,000 shares of common stock, we may continue the
offering without any escrow or refund provisions until all 100,000
<PAGE>
shares of common stock are sold, the expiration of 90 days from the date of this
prospectus (unless extended as described above) or until we elect to terminate
the offering, whichever occurs first.
The date of this prospectus is __________, 2000.
PROSPECTUS SUMMARY
The Company
We are a small online retailer and broker of fine art posters, including,
among others, vintage antique, product advertising, travel, sporting event,
movie and theater memorabilia and commemorative posters. We were organized on
July 19, 1999, and are in the early stage of development. Our total sales were
$3,258 for the period from inception through September 30, 2000, and our net
loss was $(33,874) for the same period. Our offices are located at 650 South
Cherry Street, Suite #310, Denver, Colorado 80246. Our telephone and facsimile
numbers are (303) 629-9751 and (303) 322-0036, respectively, and our web site is
located at http://www.posteralley.com. Information set forth on our web site
does not constitute part of this prospectus.
Our objective is to become a leading online retailer/broker of fine art
posters. Key elements of our strategy include the following:
- Offering the broadest possible selection of posters available to our
customers at competitive prices;
- Delivering superior customer service and promoting repeat purchases through
continuous enhancement of our technology, web site functionality and
inventory;
- Fostering consumer trust and satisfaction through services including
appraisal, authentication and money-back guarantee;
- Continuing to maintain our relationship with Nicklebys.com, Inc., and
developing relationships with other companies that can help grow our
business.
The Offering
<TABLE>
<CAPTION>
<S> <C>
Shares of Common Stock Offered by Posteralley.com ...... 100,000 shares of common stock
Shares of Common Stock Offered by Selling
Shareholders.............................................501,200 shares of common stock
</TABLE>
Selected Financial Information
We only recently began marketing and brokering originals and reproductions
of fine art posters via the Internet. No assurance can be given that we will
ever realize profits from our business.
-2-
<PAGE>
<TABLE>
<CAPTION>
Summary Balance Sheet Data:
--------------------------
As of As of
September 30, 2000 September 30, 1999
------------------ ------------------
<S> <C> <C>
Working Capital $ 58,635 $ (3,340)
Total Assets $ 90,395 $ 8,160
Total Liabilities $ 3,813 $ 11,500
Total Shareholders' Equity (Deficit) $ 86,582 $ (3,340)
</TABLE>
<TABLE>
Summary Operating Data:
----------------------
Year Inception (July 19, 1999)
Ended Septem- through September 30
ber 30, 2000 ----------------------
1999 2000
---------------- ----------- ----------
<S> <C> <C> <C>
Total Sales $ 3,258 $ -0- $ 3,258
Net Loss $ (29,492) $ (4,382) $ (33,874)
Basic Loss Per Common Share $ * $ *
Basic Weighted Average
Common Shares Outstanding 3,949,067 3,764,784
------------------
</TABLE>
*Less than $.01 per share.
RISK FACTORS
The purchase of the shares of common stock being offered hereby is
speculative and involves a high degree of risk. Before making an investment
decision, prospective investors should carefully consider, along with other
matters referred to herein, the following risk factors inherent in and affecting
our business and this offering:
Risk Factors Related to Our Business
We Are a Development-Stage Company with Limited Prior Business Operations.
Our company is an online retailer in the early development stage. We have only
limited operating history on which you can base an evaluation of our business
and prospects. Our efforts, since inception, have been allocated primarily to
organizational activities; developing a business plan; providing interim
funding; obtaining a limited number of fine art posters; and establishing a web
site on the Internet. In order to establish ourselves as a going concern, we are
dependent upon the anticipated proceeds of this offering, the receipt of
additional funds from other sources to continue business operations and/or the
achievement of profitable operations. You should be aware of the increased
risks, uncertainties, difficulties and expenses we face as an
-3-
<PAGE>
online retailer with limited operating history in a new and rapidly evolving
market. We cannot be certain that our business strategy will be successful.
We Have Realized Very Limited Revenue and No Earnings. We only began
selling fine art posters online in July 2000 and have yet to achieve meaningful
revenue. We realized a net loss of $(29,492), $(4,382) and $(33,874) for the
year ended September 30, 2000, the period from inception (July 19, 1999) through
September 30, 1999, and the period from inception through September 30, 2000,
respectively. There can be no assurance that we will achieve profitable
operations in the future from the online sale and brokerage of originals and
reproductions of fine art posters. Our ability to increase the level of our
revenues will be dependent on a number of factors, including the following:
- Our ability to keep our web site operational;
- Our ability to expand our inventory of fine art posters;
- The success of brand building and marketing campaigns;
- The continued increase in the use of the Internet and the growth of
electronic commerce;
- Consumer confidence in the security of transactions on our web site;
- Our ability to upgrade and develop our systems and infrastructure to
accommodate growth;
- The availability and reasonable cost of advertising in traditional media and
on other web sites; and
- Favorable general economic conditions specific to the Internet and electronic
commerce industries.
Our success in the business of selling and brokering fine art posters
online is dependent upon our achieving profitable operations or obtaining
additional financing to enable us to fully implement our business plan. We
cannot be certain that we will be able to obtain additional debt and/or equity
financing from this or other securities offerings or otherwise. During the
development stage of our operations, the revenues generated from operations can
be expected to be insufficient to cover expenses.
We Expect Significant Increases in Our Costs and Expenses to Result in
Continuing Losses for at Least the Next Year. We have a history of losses and we
have not achieved profitability. We cannot be certain that we will obtain enough
customer traffic or a high enough volume of purchases to generate sufficient
revenue and achieve profitability. We believe that we will continue to incur
operating and net losses for at least the next year, and possibly longer, and
that the rate at which we incur these losses will increase significantly from
current levels. We intend to increase our costs and expenses substantially as we
obtain additional inventory; increase our sales and marketing activities;
increase our general and administrative functions to support our growing
operations; and further develop our Internet web site. We may find that these
-4-
<PAGE>
efforts will be more expensive than we currently anticipate or that these
efforts may not result in proportional increases in our revenues, which would
further increase our losses.
We Have Limited Assets and Working Capital and Minimal Shareholders'
Equity. As of September 30, 2000, we had total assets of $90,395, including
$62,448 in cash, $26,606 in inventory (at cost), and equipment (less accumulated
depreciation) of $1,341. Our working capital and total shareholders' equity as
of September 30, 2000, were $58,635 and $86,582, respectively. Accordingly, we
have only very limited assets, including working capital, and financial
resources. Messrs. Scott M. Thornock and Bruce A. Capra, our executive officers
and directors, contributed services valued by them at $324, and $36,
respectively, in consideration for 3,240,000 shares and 360,000 shares of common
stock, respectively, received by each. In addition, we issued 182,000 shares of
common stock to Cudd & Associates in consideration for legal services valued at
$182. Messrs. Thornock and Capra together loaned Posteralley.com a total of
$14,500, all of which amount has been repaid. In addition, we received an
aggregate of $125,300 from a private placement of 501,200 shares of common
stock. After this offering, which, if completed, will yield net proceeds of a
minimum of $17,822 and a maximum of $42,822, our working capital may be
dissipated by current liabilities. We cannot be certain that our financial
condition will improve. We believe that the proceeds of this offering, together
with revenue from operation, will be sufficient to implement our business plan
on a limited scale over the next year. However, we do not expect to continue in
operation, without an infusion of capital, after the expiration of one year from
the closing of this offering. In order to obtain additional equity financing, we
may be required to dilute the interest of existing shareholders or forego a
substantial interest in our revenues, if any.
We Will Need to Raise Additional Funds and These Funds May Not Be Available
to Us When We Need Them. Based on our current projections, we will need to raise
funds after the expiration of one year from the closing of this offering through
the issuance of equity, equity-related or debt securities in addition to the
funds we are raising in this offering. We cannot be certain that additional
capital will be available to us on favorable terms when required, or at all. If
this additional financing is not available to us, we may need to dramatically
change our business plan, sell or merge our business or face bankruptcy. In
addition, our issuance of equity or equity-related securities will dilute the
ownership interest of existing shareholders and our issuance of debt securities
could increase the risk or perceived risk of our company. Any of these actions
could cause our stock price to fall.
We May Not Succeed in Establishing the Posteralley.com Brand, Which Would
Adversely Affect Customer Acceptance and Our Revenues. The online market for
fine art, including fine art posters, is in the early stage and competitive in
nature. We may lose the opportunity to build a critical mass of customers if we
do not establish our brand quickly. Promoting and positioning our brand will
depend largely on the success of our marketing efforts and our ability to
provide consistent, high quality customer experiences. To promote our brand, we
will incur substantial expense in our advertising efforts on radio and in
magazines and other forms of traditional media, together with advertising on web
sites that we believe our customers are likely to visit. We will also incur
substantial expense in our efforts to enter into strategic alliances with online
and more traditional companies that we believe will promote our brand and drive
customers to our web site. Ultimately, we will also need to expend funds to
attract and train customer service personnel and to develop content to help
build our brand and attract
-5-
<PAGE>
customers to our web site. We will incur additional losses if these brand
promotion activities do not yield increased revenues.
We Depend on Our Ability to Build and Maintain Relationships with Our
Suppliers to Obtain Sufficient Quantities of Quality Merchandise on Acceptable
Commercial Terms. Our business strategy depends on providing a large selection
of high-quality posters that, in turn, depends on our ability to build or
maintain relationships with our two current suppliers, for which we sell posters
on consignment, and other suppliers. Our arrangements with these suppliers and
potential arrangements or contracts with other suppliers do not guarantee the
availability of merchandise, establish guaranteed prices or provide for the
continuation of particular pricing practices. Our current suppliers may not
continue to consign products to us on current terms or at all, and we may not be
able to establish new suppliers to ensure delivery of products in a timely
manner or on terms acceptable to us. We are also dependent on suppliers for
assuring the quality of products supplied to us because, in some instances, we
ship posters directly to our customers. If the quality of products supplied to
us falls below our customers' expectations, we may lose customers. In addition,
supply contracts will not restrict suppliers from selling products to our online
competitors or to retailers other than online retailers, which could limit our
ability to supply the quantity of products requested by our customers. We are
also subject to the risks our suppliers face, including employee strikes and
inclement weather. Our failure to deliver a large selection of high-quality fine
art posters to our customers in a timely and accurate manner, and at acceptable
prices, would harm our reputation, the Posteralley.com brand and our results of
operations.
Our Systems and Operations, and Those of Our Suppliers and Shippers,
Are Vulnerable to Natural Disasters and Other Unexpected Problems. Substantially
all of our computer and communications hardware is located at our facility in
Denver, Colorado, and our systems infrastructure is hosted at a facility in
Denver, Colorado. Our systems and operations are vulnerable to damage or
interruption from fire, flood, power loss, telecommunications failure and
similar events. In addition, our servers are vulnerable to computer viruses,
physical or electronic break-ins and similar disruptions, which could lead to
interruptions, delays, loss of data or the inability to accept and fulfill
customer orders. We do not currently have fully redundant systems or a formal
disaster recovery plan and do not carry business interruption insurance to
compensate for losses that may occur. Our suppliers also face these risks. We
also depend on the efficient operation of Internet connections from customers to
our systems. These connections, in turn, depend on the efficient operation of
web browsers, Internet service providers and Internet backbone service
providers, all of which have had periodic operational problems or experienced
outages. Any system delays, failure or loss of data, whatever the cause, could
reduce customer satisfaction with our applications and services and harm our
sales.
We Face the Risk of Systems Interruptions and Capacity Constraints on
Our Web Site, Possibly Resulting in Losses of Revenue, Erosion of Customer Trust
and Adverse Publicity. The availability, reliability and satisfactory
performance of our web site, network infrastructure and transaction processing
systems are critical to our reputation and our ability to attract and retain
customers and to maintain adequate customer service. Any future systems
interruption that results in the unavailability of our web site or reduced order
fulfillment could result in negative publicity and reduce the volume of posters
sold and the attractiveness of our web site, which could negatively affect our
revenues. We may experience temporary system interruptions in the future for a
-6-
<PAGE>
variety of reasons, including power failures, software bugs and an overwhelming
number of visitors trying to reach our web site during sales or promotions. We
may not be able to correct a problem in a timely manner because of our
dependence on outside consultants for the implementation of certain aspects of
our system. Because some of the reasons for a systems interruption may be
outside our control, we also may not be able to remedy the problem quickly or at
all. To the extent that customer traffic grows substantially, we will need to
expand the capacity of our systems to accommodate a larger number of visitors.
Any inability to scale our systems may cause unanticipated system disruptions,
slower response times, degradation in levels of customer service, impaired
quality and speed of order fulfillment or delays in reporting accurate financial
information. We are not certain that we will be able to project the rate or
timing of increases, if any, in the use of our web site accurately or in a
timely manner to permit us to effectively upgrade and expand our
transaction-processing systems or to integrate smoothly any newly developed or
purchased modules with our existing systems.
We Rely on the Services of Management, Whose Knowledge of Our Business Is
Important to Our Continued Growth and Ultimate Success in the Market, But Whose
Time Commitment Is Limited. Except for Messrs. Scott M. Thornock,
President/Treasurer and a director of Posteralley.com, and Bruce A. Capra, our
Secretary and a company director, each of whom devotes approximately 15% of his
time and effort to Posteralley.com, we have no personnel whatsoever. For the
foreseeable future, we have no plans to employ any other personnel. Accordingly,
we rely upon the continued service and performance of our executive officers and
directors, who are expected to receive no monetary compensation for the
foreseeable future. Our future success depends on our retention of Messrs.
Thornock and Capra, neither of whom is bound by an employment agreement. As a
result, either individual could leave with little or no prior notice. If we lost
the services of either Messrs. Thornock or Capra, our business could be
seriously harmed. We do not have "key person" life insurance policies covering
either individual.
We Must Enter into Strategic Relationships to Help Promote Our Web Site
and, if We Fail to Develop, Maintain or Enhance These Relationships, We May Not
Be Able to Attract and Retain Customers, Build Our Posteralley.com Brand and
Enhance Our Sales and Marketing Capabilities. We believe that our ability to
attract customers, facilitate broad market acceptance of our products and the
Posteralley.com brand and enhance our sales and marketing capabilities depends
on our ability to develop and maintain strategic relationships with
Nicklebys.com, Inc. ("Nicklebys.com"), Denver, Colorado, an online auctioneer of
fine art, antiques and collectibles, and other art web sites and portals and
other web sites that can drive customer traffic to our web site. If we are
unsuccessful in developing or maintaining these relationships, or if such
relationships do not assist us in attracting or retaining customers, it may be
difficult to grow our business. Our relationship with Nicklebys.com commenced in
January 2000 and, accordingly, we have little historical experience on which to
evaluate its impact.
-7-
<PAGE>
Our Executive Officers and Directors Have Direct Conflicts of Interest as a
Result of Their Positions with Nicklebys.com and Otherwise. Both Messrs. Scott
M. Thornock and Bruce A. Capra, our executive officers, directors, founders and
controlling shareholders, serve in those positions with Nicklebys.com, whose
online auction business includes a very limited number of fine art posters.
Additionally, both Messrs. Thornock and Capra are personal collectors of fine
art, antiques and collectibles, including a variety of fine art posters. Because
of the activities of Messrs. Thornock and Capra on behalf of Nicklebys and for
their own accounts in the art business, both individuals may be subject to
direct conflicts of interest and the corporate opportunities doctrine with
respect to business opportunities that come to their attention.
We Have a Limited Number of Products for Sale. Our products are presently
limited, generally, to fine art posters obtained from two wholesalers for sale
on consignment and a limited number of originals and reproductions of fine art
posters recently purchased with proceeds from our recently completed private
placement of common stock. Further, while we have allocated $5,000 (28.1%) and
$10,000 (23.4%) of the minimum and the maximum net proceeds, respectively,
anticipated to be received from this offering for the purchase of posters, such
funding will only permit us to acquire a limited number of fine art posters of
minimal value. Because of the limited capital available to us from this
offering, we will likely be partially dependent for product, for the foreseeable
future, upon posters obtained on consignment from our two current suppliers and
the personal collections of Messrs. Thornock and Capra, our executive officers,
directors and principal shareholders, and others. There can be no assurance that
we will achieve profitable operations with the limited number of fine art
posters able to be purchased with the limited proceeds anticipated from this
offering and our recently completed private placement and the posters consigned
to us.
The Success of Our Business Depends on Attracting and Retaining a Large
Number of Potential Customers. While we believe, we are not certain, that the
usage of the Internet as our primary marketing device, will enable us to develop
a customer base more quickly and cost-effectively than the employment of
traditional marketing methods involving a gallery, a sales staff, advertising
and/or other traditional methods. As a development-stage company that recently
established our Internet site featuring approximately thirty fine art posters
for sale at any one time, we lack recognition in the market. Our success depends
on attracting a large number of potential customers that traditionally shop in
retail stores, and persuading them to shop on our web site. Our success is also
dependent on ensuring that these customers remain our loyal long-term customers.
In addition to persuading customers to purchase our products on the Internet, we
cannot be certain that our customers will accept our online solution over those
offered by our competitors. If we fail to persuade customers to shop online or
our competitors are more successful in achieving sales, then our revenues will
suffer. Furthermore, we may be required to incur significantly higher and more
sustained advertising and promotional expenditures than we currently anticipate
to attract online shoppers to our web site and to convert these shoppers to
purchasing customers. As a result, we may not be able to achieve profitability
when we expect, or at all.
Competition from Traditional and Online Retailers May Result in Price
Reductions and Decreased Demand for Our Products. The secondary market for
originals and reproductions of fine art posters is intensely competitive.
Competition is expected to intensify in the future, which may result in price
-8-
<PAGE>
reductions, fewer customer orders, reduced gross margins and loss of market
share. We currently or potentially compete with a variety of companies located
both inside and outside the United States engaged in brokering and/or dealing in
fine art posters of every character and kind. Many of these companies are
established and have significantly greater financial, technical, marketing and
other resources. Additionally, many of such organizations have proven operating
histories, which we lack. These companies include artists, art galleries, art
and/or antique brokers and dealers, antique stores, auction houses, liquidation
companies and online stores that sell fine art posters. We are aware of a
limited number of other companies, including Nickleby's.com, Inc. (on a very
limited basis), that are presently retailing online, via auction or otherwise,
fine art, antiques and/or collectibles, including fine art posters. We believe
that there will be an increasing number of online retailers of the fine art
posters of the types being offered by us and, in the instance of certain
reproductions, identical to the reproductions we offer. While we expect to
compete on the basis of our reputation among customers as a quality provider of
products and, to a lesser extent, on the basis of price, we are not certain that
this strategy will be successful. Additionally, we, like Nicklebys.com but
unlike many other competitors, will guarantee the authenticity of each poster
and will furnish the purchaser with a written appraisal at the time of purchase.
We hope, to the extent practicable, to minimize our weaknesses, including, among
others, our undercapitalization, cash shortage, limitations with respect to
personnel, technological, financial and other resources and lack of a customer
base and market recognition, through our focus on the Internet; which eliminates
the need for a retail facility and a sizeable marketing staff. However, our
opportunity to obtain wholesale and other larger customers may also be limited
by our financial resources and other assets.
We May Be Unable to Adequately Protect or Enforce Our Intellectual Property
Rights. We rely on a combination of trademark, trade secret and copyright law to
protect our intellectual property. These laws afford only limited protection.
Despite our efforts to protect our proprietary rights, unauthorized persons may
attempt to copy aspects of our web site, including the look and feel of our web
site, posters that we sell, product organization, product information and sales
mechanics or to obtain and use information that we regard as proprietary, such
as the technology used to operate our web site and our content. We have not
filed an application to secure registration for our trademark,
"Posteralley.com," in the United States or any other country. Any encroachment
upon our proprietary information, the unauthorized use of our trademark, the use
of a similar name by a competing company or a lawsuit initiated against us for
our infringement upon another company's proprietary information or improper use
of their trademark, may affect our ability to create brand name recognition,
cause customer confusion and/or have a detrimental effect on our business.
Litigation or proceedings before the U.S.Patent and Trademark Office may
be necessary in the future to enforce our intellectual property rights, to
protect our trade secrets and domain name and to determine the validity and
scope of the proprietary rights of others. Any litigation or adverse proceeding
could result in substantial costs and diversion of resources and could seriously
harm our business and operating results. Finally, if we sell fine art posters
internationally, the laws of many countries do not protect our proprietary
rights to as great an extent as do the laws of the United States.
-9-
<PAGE>
Third parties may also claim infringement by us with respect to past,
current or future technologies. We expect that participants in our markets will
be increasingly subject to infringement claims as the number of services and
competitors in our industry segment grows. Any claim, whether meritorious or
not, could be time-consuming, result in costly litigation, cause service upgrade
delays or require us to enter into royalty or licensing agreements. These
royalty or licensing agreements might not be available on terms acceptable to us
or at all.
Risks Related to Internet Commerce
We Depend on Continued Use of the Internet, and if the Use of the Internet
Does Not Develop as We Anticipate, Our Sales May Not Grow. Our future revenues
and profits, if any, substantially depend upon the widespread acceptance and use
of the Internet as an effective medium of business and communication by our
target customers. Rapid growth in the use of and interest in the Internet has
occurred only recently. As a result, acceptance and use may not continue to
develop at historical rates, and a sufficiently broad base of consumers may not
adopt, and continue to use, the Internet and other online services as a medium
of commerce. In addition, the Internet may not be accepted as a viable long-term
commercial marketplace for a number of reasons, including potentially inadequate
development of the necessary network infrastructure or delayed development of
enabling technologies and performance improvements. Our success will depend, in
large part, upon third parties maintaining the Internet infrastructure to
provide a reliable network backbone with the speed, data capacity, security and
hardware necessary for reliable Internet access and services.
Our Success Depends on the Willingness of Consumers to Purchase Posters
Over the Internet Instead of Through Traditional Retailers. The online market
for fine art, including posters, is in its infancy. If this market does not gain
widespread acceptance, our business may fail. Demand and market acceptance for
recently introduced services and products on the Internet are subject to a high
level of uncertainty, and there are few proven services and products. Our
success will depend on our ability to engage consumers who have historically
purchased fine art through traditional retailers. In order for us to be
successful, many of these consumers must be willing to employ new ways of buying
fine art. In addition, a substantial proportion of the consumers who use our web
site may be using our service because it is new and different rather than
because they believe it is a desirable way to purchase fine art. Such consumers
may use our service only once or twice and then return to more familiar means of
purchasing these products.
Our Reputation Could Be Harmed if We Fail to Prevent Online Commerce
Security Breaches. A significant barrier to online commerce and communications
is the secure transmission of confidential information over public networks, and
our failure to prevent security breaches could harm our business. Currently, a
significant number of our users authorize us to bill their credit card accounts
directly for all products sold by us. We rely on encryption and authentication
technology licensed from third parties to provide the security and
authentication technology to effect secure transmission of confidential
information, including customer credit card numbers. Advances in computer
capabilities, new discoveries in the field of cryptography or other developments
may result in a compromise or breach of the technology used by us to protect
customer transaction data. Any compromise of our security could harm our
reputation and expose us to a risk of loss or litigation and possible liability
and, therefore, harm our business. In addition, a person who is able to
-10-
<PAGE>
circumvent our security measures could misappropriate proprietary information or
cause interruptions in our operations. We may need to expend significant
resources to protect against security breaches or to address problems caused by
breaches.
We Must Respond to Rapid Technological Changes to Better Serve Our
Customers and Meet Their Expectations. As the Internet and online commerce
industry evolve, we must license leading technologies useful in our business,
enhance our existing services, develop new services and technology that address
the increasingly sophisticated and varied needs of our prospective customers and
respond to technological advances and emerging industry standards and practices
on a cost-effective and timely basis. We may not be able to successfully
implement new technologies or adapt our web site, proprietary technology and
transaction-processing systems to customer requirements or emerging industry
standards. If we are unable to do so it could adversely impact our ability to
build the Posteralley.com brand and attract and retain customers.
Governmental Regulation of the Internet and Data Transmission Over the
Internet May Negatively Affect Our Customers and Result in a Decrease in Demand
for Our Products, Which Would Cause a Decline in Our Sales. Laws and regulations
directly applicable to communications or commerce over the Internet are becoming
more prevalent. The most recent session of the U.S. Congress resulted in
Internet laws regarding children's privacy, copyrights, taxation and the
transmission of sexually explicit material. The law of the Internet, however,
remains largely unsettled, even in areas where there has been some legislative
action. It may take years to determine whether and how existing laws such as
those governing privacy, libel and taxation apply to web sites such as ours. The
delays that these governmental processes entail may cause order cancellations or
postponements of product purchases by our customers, which would seriously harm
our business. The rapid growth and development of the market for online commerce
may prompt calls for more stringent consumer protection laws that may impose
additional burdens on companies conducting business online. The adoption or
modification of laws or regulations relating to the Internet business could
result in a decrease in demand for our products, which would cause a decline in
our revenues.
Risk Factors Related to This Offering
Our Management Will Continue to Control Posteralley.com. Messrs. Scott M.
Thornock and Bruce A. Capra, our President/Treasurer and Secretary,
respectively, and owners, together, of an aggregate of 3,600,000 shares (84.1%)
of our issued and outstanding common stock, are parents and controlling persons
of Posteralley.com because of their positions and share ownership. Even
following the completion of this offering, Messrs. Thornock and Capra will
together own 82.1% to 83.1% of our issued and outstanding shares of common
stock. Therefore, either management, together, or Mr. Thornock, individually,
will be able to determine the outcome of all matters requiring approval by our
shareholders, including the election of directors and the approval of mergers or
other business combination transactions. See "Principal Shareholders" for a
description of management's share ownership relative to other shareholders and
"Management" for background on Messrs. Thornock and Capra.
-11-
<PAGE>
There Is No Public Market for Our Common Stock and the Offering Price
Is Arbitrary. There is no public market for the common stock and there is no
assurance that a public market will develop as a result of this offering or, if
developed, that it will be sustained. Many brokerage firms may not effect
transactions in the securities and many lending institutions may not permit
their use as collateral for loans. The common stock will be traded, if at all,
in the "pink sheets" maintained by members of the National Association of
Securities Dealers, Inc., and possibly on the electronic Bulletin Board. We will
not satisfy the requirements either for being quoted on the National Association
of Securities Dealers' Automated Quotations System ("NASDAQ") or for listing on
any national securities exchange. Accordingly, until we qualify for NASDAQ or
listing on an exchange, any trading market that may develop for the common stock
is not expected to qualify as an "established trading market" as that term is
defined in Securities and Exchange Commission regulations, and is expected to be
substantially illiquid. We have arbitrarily established the offering price of
the common stock and it should not be considered to bear any relationship to our
assets, book value or net worth and should not be considered to be an indication
of our value.
Our Stock Price Will Fluctuate After This Offering Which May Result in
Substantial Losses for Investors. The offering price for the shares of common
stock being offered hereby was arbitrarily selected and the trading price will
fluctuate after this offering once trading commences, if ever. The fluctuation
of the stock price could result in substantial losses for investors. The market
price of our common stock may fluctuate significantly in response to a number of
factors, some of which will be beyond our control. These factors include:
- Quarterly variations in operating results;
- Announcements by us or our competitors of new product and service offerings,
significant contracts, acquisitions or strategic relationships;
- Publicity about our company, our products and services, our competitors or
e-commerce in general;
- Additions or departures of key personnel;
- Any future sales of our common stock; and
- Stock market price and volume fluctuations of publicly-traded companies in
general and Internet-related companies in particular.
The trading prices of Internet-related and e-commerce companies have been
especially volatile and many are at or near historical lows. Investors may be
unable to resell their shares of common stock at or above the offering price.
Further, we may be the target of securities class action litigation brought
against us as a result of volatility in our stock price. Securities litigation
could result in substantial costs and divert management's attention and
resources, which could seriously harm our business and operating results.
The Proceeds of This Offering May be Inadequate to Sustain Our Continued
Operation. The minimum and maximum net proceeds of this offering are $25,000 and
$50,000, respectively, and, therefore, are sufficient to conduct only a limited
-12-
<PAGE>
amount of activity. Particularly if only the minimum number of shares of common
stock being offered hereby is sold, our continued operation will be dependent on
our ability to generate operating revenue or procure additional financing. There
is no assurance that any such revenue will be generated or that any such
additional financing can be obtained on terms favorable to us.
A Total of 601,200 Shares, or 13.7%, of Our Total Outstanding Shares After
the Offering Will Be Immediately Resaleable Without Restriction and a Total of
3,782,000 Shares, or 86.3%, of Our Total Outstanding Shares After the Offering
Are Restricted from Immediate Resale, But May Be Sold into the Market Pursuant
to Rule 144. A total of 501,200 shares and 100,000 shares being offered by our
current shareholders as Selling Shareholders and Posteralley.com, respectively,
in this offering will be available for resale immediately after the
effectiveness of this offering. The balance of 3,782,000 shares of common stock
held by our current shareholders, including an aggregate of 3,600,000 shares
held by our executive officers and directors, became eligible for resale
pursuant to Rule 144 commencing in July 2000. Sales of a substantial number of
shares of our common stock could cause our stock price to fall. In addition, the
sale of these shares could impair our ability to raise capital through the sale
of additional stock. After this offering, we will have 4,383,200 shares of
common stock outstanding, including 501,200 shares and 100,000 shares that the
Selling Shareholders and Posteralley.com are selling in this offering, which may
be resold immediately in the public market. The remaining 3,782,000 shares are
eligible for resale in the public market pursuant to Rule 144.
New Shareholders Will Incur Substantial Dilution of Approximately $.47 Per
Share as a Result of This Offering. The current shareholders of Posteralley.com
have acquired their shares of common stock at an average cost of approximately
$.03 per share, which is substantially less than the price of $.50 per share to
be paid by the investors in this offering. Accordingly, the offering price is
substantially higher than the book value per share of our outstanding common
stock. As a result, an investor who acquires shares of common stock in this
offering will incur immediate substantial dilution of approximately $.03 per
share. See "Dilution" for a more detailed description of how new shareholders
will incur dilution.
DETERMINATION OF OFFERING PRICE
There is no established public market for the common stock being offered
hereby. We have arbitrarily established the offering price of the common stock
and it should not be considered to bear any relationship to our assets, book
value or net worth and should not be considered to be an indication of the value
of Posteralley.com.
ADDITIONAL INFORMATION
We have not authorized any person to give any information or to make any
representations other than those contained in this prospectus. You should not
rely on any information or representations not contained herein, if given or
made, as having been authorized by Posteralley.com. This prospectus does not
constitute an offer or solicitation in any jurisdiction in which such offer or
solicitation would be unlawful. The delivery of this prospectus shall not, under
-13-
<PAGE>
any circumstances, create any implication that there has been no change in our
affairs since the date hereof.
We have filed a Registration Statement on Form SB-2 under the Securities
Act of 1933, as amended, with respect to the shares of common stock offered
hereby with the U.S. Securities and Exchange Commission (the "Commission") in
Washington, D.C. This Prospectus does not contain all of the information
included in the Registration Statement. For further information regarding both
Posteralley.com and the shares of common stock offered hereby, reference is made
to the Registration Statement, including all exhibits thereto, which may be
inspected at the Commission's Washington, D.C., office, 450 Fifth Street, N.W.,
Washington, D.C. 20549. Copies may be obtained from the Public Reference Room
upon request and payment of the prescribed fee. The public may obtain
information on the operation of the Public Reference Room by calling the
Commission at 1-800-SEC-0330. The Commission maintains an Internet site that
contains reports, proxy and information statements, and other information
regarding issuers that file electronically with the Commission. The address of
the site is http://www.sec.gov.
We intend to furnish our shareholders, after the close of each fiscal year,
an annual report that will contain financial statements that will be examined by
independent public accountants and a report thereon, with an opinion expressed,
by our independent public accountants. We may furnish to shareholders unaudited
quarterly or semi-annual reports. In addition, we will file any reports required
by the U.S. Securities and Exchange Commission; which reports are public
documents.
The offering of shares of common stock by us is subject to approval of
certain legal matters by Cudd & Associates, counsel for Posteralley.com. We may
not modify the terms of the offering described herein without amending the
registration statement of which this prospectus is a part.
DILUTION
The following table, which assumes the completion of this offering by the
sale of a minimum of 50,000, to a maximum of 100,000, shares of common stock for
proceeds of a minimum of $25,000 to a maximum of $50,000, illustrates the per
share dilution. The table takes into account the estimated unpaid expenses of
the offering in the amount of $7,178.
-14-
<PAGE>
<TABLE>
<CAPTION>
Minimum Maximum
Per Share Dilution
<S> <C> <C>
Initial public offering price per share.................................... $ .50 $ .50
Net tangible book value per share as of September 30, 2000 (1).........$ .02 $ .02
Increase in net tangible book value per share attributable to new
investors............................................................$ .01 $ .01
Net tangible book value per share after offering........................... $ .03 $ .03
Dilution per share to new investors (2).................................... $ .47 $ .47
--------------------------
*Less than $.01.
</TABLE>
(1) "Net tangible book value per share" is equivalent to the total assets of
Posteralley.com, less its total liabilities and intangible assets, divided
by the number of shares of its common stock currently issued and
outstanding.
(2) "Dilution" is the difference between the public offering price and the net
tangible book value of the shares of Posteralley.com's common stock
immediately after the offering and is the result of the lower book value of
the shares of common stock outstanding prior to the offering, the public
offering price and the unpaid expenses payable in connection with the
offering. Dilution will be increased by the amount of Posteralley.com's
operating losses for the period from October 1, 2000, to the closing date
of the offering being made hereby.
The following table illustrates the comparative number of shares of common
stock purchased from Posteralley.com, the total consideration paid and the
average price per share paid for the existing shareholders and by the new
investors at both the minimum and the maximum number of shares of common stock
sold at the offering price of $.50 per share.
<TABLE>
<CAPTION>
Minimum Maximum
--------- ----------
Comparative Number of Shares of Common Stock Purchased,
Total Consideration Paid and Average Price Per Share Paid
---------------------------------------------------------
<S> <C> <C>
Number of shares purchased by existing shareholders.......................... 4,283,200 4,283,000
Number of shares purchased by new investors.................................. 50,000 100,000
Total consideration paid by existing shareholders $ 125,842* $ 125,842*
Total consideration paid by new investors....................................$ 25,000 $ 50,000
Average price per share paid by existing shareholder........................ $ .03 $ .03
Average price per share paid by new investors............................... $ .50 $ .50
------------------
</TABLE>
-15-
<PAGE>
*Includes services performed by each of the executive officers of
Posteralley.com valued at a total of $360 ($.0001 per share), and legal services
performed by counsel valued at $182 ($.001 per share), in connection with the
organization of Posteralley.com.
USE OF PROCEEDS
We estimate that the net proceeds available to us upon completion of
this offering will be $17,822, in the event of the minimum offering, and
$42,822, in the event of the maximum offering, after deducting the estimated
unpaid expenses of the offering in the amount of $7,178. We expect to apply and
allocate the net proceeds of the offering during the following year in
substantially the manner set forth below.
<TABLE>
<CAPTION>
Application of Net Proceeds Minimum Per Cent Maximum Per Cent
--------------------------- ------- -------- --------- ---------
General and Administrative
<S> <C> <C> <C> <C>
Expenses $ 5,000 28.06% $10,000 23.35%
Acquisition of Poster Inventory (1) 5,000 28.06% 10,000 23.35%
Marketing of Posteralley.com (2) 4,000 22.43% 8,000 18.68%
Purchase of Computer
Equipment (3) -0- 0.0% 5,000 11.68%
Working Capital 3,822 21.45% 5,322 12.43%
Enhancement of Internet
Web Site (3) -0- 0.0% 2,500 5.84%
Accounting Fees -0- 0.0% 1,500 3.50%
Transfer Agent Fees -0- 0.0% 500 1.17%
------ ------ ----- -----
TOTAL NET PROCEEDS $17,822 100.0% $42,822 100.00%
------------------
</TABLE>
(1) See "BUSINESS - Obtaining on Consignment and Acquisition of Originals and
Reproductions of Fine Art Posters."
(2) See "BUSINESS - Marketing of Posteralley.com."
(3) See "BUSINESS - General."
-16-
<PAGE>
There is no commitment by any person to purchase any or all of the shares
of common stock offered hereby and, therefore, there can be no assurance that
the offering will be totally subscribed for the sale of at least the minimum
50,000 shares of common stock being offered. We are of the opinion that the
proceeds from the offering will satisfy our cash requirements for at least the
next year and that it will not be necessary, during that period, to raise
additional funds to meet the expenditures required for operating our business.
However, the proceeds of this offering that will be available to us for
operating expenses are limited, in the case of the minimum offering especially.
Because of this and our inability to specifically define our business plan at
this time, management is incapable of predicting with any degree of specificity
the nature or the amount of operating expenses that we will incur in the
one-year period following the closing of this offering. The offering proceeds
are expected to be inadequate to fully implement our proposed business plan.
Accordingly, it is anticipated that our continued operation after the expiration
of one year will be dependent upon our ability to obtain additional equity
and/or debt financing, the availability of which cannot be assured. Our
operations have been funded to date out of proceeds received from the sale of
shares of common stock in an offering conducted under Regulation D of Rule 504
under the Securities Act. In the event that we fail to achieve profitable
operations in the future, we propose to obtain additional funding through
offerings in addition to this offering and/or through loans or other financing
arrangements. No such arrangements exist as of the date hereof and there can be
no assurance that additional funds may be obtained in the future.
Pending expenditure of the proceeds of the offering substantially in the
manner described above, we will make temporary investments in interest-bearing
savings accounts, certificates of deposit, United States government obligations
and/or money market instruments. We intend to take appropriate measures to
insure that we do not inadvertently become an investment company subject to the
requirements of the Investment Company Act of 1940. Accordingly, the investments
that we will be capable of making using the proceeds of this offering will be
limited in nature and with respect to the term of the investment.
BUSINESS
General
We were organized on July 19, 1999, and are in the early stage of
development. In July 1999, we commenced operations in the online retailing and
brokerage of originals and reproductions of fine art posters, including, but not
limited to, vintage antique, product advertising, travel, sporting event, movie
and theater memorabilia and commemorative posters. Our total sales were $3,258
for the period from inception through September 30, 2000, and our net loss was
$(33,874) for the same period. Our offices are located at 650 South Cherry
Street, Suite #310, Denver, Colorado 80246. Our telephone and facsimile numbers
are (303) 629-9751 and (303) 629-9756, respectively, and our web site is located
at http://www.posteralley.com. Information set forth on our web site does not
constitute part of this prospectus.
Our objective is to become a leading online retailer/broker of fine art
posters. Key elements of our strategy include the following:
-17-
<PAGE>
- Offering the broadest possible selection of posters available to our
customers at competitive prices;
- Delivering superior customer service and promoting repeat purchases through
continuous enhancement of our technology, web site functionality and inventory;
- Fostering consumer trust and satisfaction through services including
appraisal, authentication and money-back guarantee; and
- Continuing to maintain our relationship with Nicklebys.com, Inc., and
developing relationships with other companies that can help grow our business.
The bulk of our products are fine art posters obtained for sale on
consignment from two wholesalers, including I. Brewster & Company and Club of
American Collectors of Fine Arts, Inc. In addition, we also market a limited
inventory of originals and reproductions of fine art posters and original,
antique fine art paintings recently purchased with proceeds received from our
offering of common stock pursuant to Rule 504 of Regulation D under the 1933 Act
completed in June 2000. We have allocated the sums of $5,000 (28.1%) and $10,000
(23.4%) of the minimum and the maximum net proceeds, respectively, expected,
without assurance, to be received from this offering for the acquisition of
originals and reproductions of fine art posters and to make reproductions of
certain of the original posters purchased. However, because the funds
anticipated to be received from this offering that will be available to us for
the purchase and/or reproduction of fine art posters are very limited, the
number and/or quality of posters that we will be able to purchase with such
funds will also be limited.
Messrs. Scott M. Thornock and Bruce A. Capra, our two executive officers,
directors and controlling shareholders, have, personally, and, in the case of
Mr. Capra, professionally, in excess of twenty years of experience in dealing in
all types of fine art, antiques and collectibles, including fine art posters.
Both Messrs. Thornock and Capra are executive officers, directors, founders and
controlling shareholders of Nicklebys.com, an online auctioneer of fine art,
antiques and collectibles that has realized approximately $631,807 in gross
revenue (unaudited) from online auctions, live auctions and retail sales during
the period from inception (January 13, 1999) through December 31, 1999. Despite
its limited operating history, Nicklebys.com was recognized in the November 1999
edition of Yahoo! Internet Life Magazine with the Gold Medal Award for the best
art auction site on the worldwide web. In order to become employed full time by
Nicklebys.com, Mr. Capra, our Secretary, resigned on February 1, 1999, as the
General Manager and the Director of Sales, Marketing and Advertising for
American Design Ltd., an Aurora, Colorado, company with eight retail outlets
that realized gross sales of approximately $12,000,000 from the publication,
auction and marketing of fine art during its most recent fiscal year.
Additionally, Mr. Capra owned and managed Nickleby's Auction Gallery, Ltd.
("Nickleby's"), Arvada, Colorado, an auction liquidation company specializing in
fine art, antiques and collectibles, from 1992 until the acquisition of
Nickleby's by Nicklebys.com in February 1999.
Because of the contacts developed by Messrs. Thornock and Capra as a result
of investing in, marketing, selling, trading and/or brokering many types of
artworks, antiques and collectibles for many years, we do not expect to have any
difficulty in obtaining quality fine art posters.
-18-
<PAGE>
Neither individual presently contemplates the formation of, or affiliation or
association with, any company, other than Nicklebys.com and Posteralley.com,
whose business plan would contemplate or involve the online sale of fine art,
antiques or collectibles, including fine art posters. Further, with the
formation of Posteralley.com, Nicklebys.com intends to diminish and ultimately
abandon its present limited activities involving fine art posters.
Inventory and Consigned Posters
Our web site on the Internet features only fine art posters, including, but
not limited to, vintage antique, product advertising, travel, sporting event,
movie and theater memorabilia and commemorative posters. In addition, we are
marketing a limited inventory of original, antique fine art paintings recently
purchased with a small amount of proceeds received from our recently completed
private offering of common stock. As of the date hereof, our web site features
approximately 56 fine art posters, including approximately 35 original, antique
French posters, approximately 14 contemporary fine art posters, approximately
seven reproductions of antique fine art posters and five original, antique fine
art paintings, including three oils on canvas and two watercolors. If we achieve
profitable operations, which is not assured, or otherwise obtain funding in
addition to that anticipated from this offering, we intend to purchase
additional inventory of originals and/or reproductions of fine art posters with
a portion of such funds. The sources for our inventory are expected to include,
among others, estates, private parties, collectors and original collections.
Additionally, both Messrs. Thornock and Capra may place originals and
reproductions of fine art posters from their own personal collections on
consignment with Posteralley.com to be sold online. We can expect to receive a
commission in the amount of 10% to 50% of the sale price of all fine art posters
sold for the account of Mr. Thornock, Mr. Capra or Nicklebys.com.
The bulk of fine art posters featured on our web site have been obtained
from two unaffiliated companies, including I. Brewster & Company ("I. Brewster")
and Club of American Collectors of Fine Arts, Inc. ("Club of American
Collectors"), for sale on consignment. Both I. Brewster and Club of American
Collectors have been in business for approximately forty years and Club of
American Collectors is the largest United States importer of French advertising
posters. Each company is itself capable of satisfying our requirements for
posters for the foreseeable future. Our consigned inventory of original fine art
posters includes, primarily, product advertising posters for products such as
liquor, ink, bicycles, chocolates, etc. The seven antique poster reproductions
are of fine art images by Louis Icart and Maxfield Parrish. The various posters
and reproductions consigned by I. Brewster and Club of American Collectors have
a retail value in a range from $35 to $25,000. Because of our arrangements with
I. Brewster and Club of American Collectors to sell these items on consignment,
we have no cost of sales until we consummate a sale. Despite our plans to
purchase additional inventory of originals and/or reproductions of fine art
posters with a portion of any additional capital obtained from profitable
operations or otherwise, we expect, for the foreseeable future, to be partially
dependent for product upon fine art posters consigned to us by I. Brewster, Club
of American Collectors or others.
-19-
<PAGE>
Online Retailing of Posters
As a small online retailer of posters, we are dedicated to serving the
poster enthusiast with a wide variety of fine art posters featured on our web
site located at http://www.posteralley.com, expert information and superior
customer service. We seek to exceed the more limited selections of posters, if
any, offered by art galleries, art and/or antique brokers and dealers, antique
stores, auction houses and others. We strive to provide customers with a
convenient, one-stop stopping experience by providing an organized, logical and
customer-friendly Internet site designed in an attractive manner so as to
capture and maintain the interest of most visitors. The web site includes a high
resolution photograph of each poster or painting together with a picture and a
biography of the artist, if relevant and available. Payment arrangements can be
made using credit cards and escrow accounts. We have implemented security
measures, including but not limited to layering, locking and encryption, in
order to secure, to our best ability as of the date hereof, the commercial
transactions conducted on our web site. Detailed instructions are available on
our site to enable the purchaser to consummate the purchase transaction with as
much ease and simplicity as is possible. We expect to compete on the basis of
our reputation among customers as a quality provider of products that are "100%
money-back guaranteed, curated and appraised" and, to a lesser extent, on the
basis of price. We receive, on average, a listing fee in the amount of
approximately 20% of each item sold on consignment for management or others.
We attract and retain customers by emphasizing the following key factors:
Extensive Product Selection Enables One-Stop-Shopping.
-----------------------------------------------------
We provide consumers with one-stop-shopping for their fine art poster needs,
with delivery direct to their door. Our broad selection of fine art posters
transcends the limited selection, if any, of art galleries, art and/or antique
brokers and dealers, antique stores, auction houses and others. Our online
business model enables us to aggregate a diverse product selection that is not
generally found in a single retail outlet and dynamically change our product mix
to meet consumer needs and interests.
Expert Information.
-------------------
Accompanying each poster featured on the web site is a detailed description of
the type of poster and, among other things, its dimensions, price and
availability and a description of the event, if any, commemorated by the poster.
In this manner, we tightly integrate broad product selection with highly
relevant content, providing consumers with the information they need to make
informed purchase decisions.
Superior Shopping Experience.
-----------------------------
We believe that we provide an intuitive, easy-to-use web site, offering
extensive product selection supported by tightly integrated, relevant resource
information. Each product presentation is supported by a high resolution
photograph of the poster available for sale on our web site.
Quality Customer Service.
-------------------------
The typical online shopping experience begins with the search for products that
meet specific needs, including the online ordering process and extends through
product delivery and post-purchase support. We believe that the ability to
accurately fulfill orders, ship products quickly to a customer's door or
efficiently handle customer inquiries is as important to customer satisfaction
as product selection. While we will not have the financial resources as a result
of this offering to employ any customer service personnel, we intend to develop
our own in-house customer service operation in the future.
-20-
<PAGE>
Money-Back Guarantee and Guarantee of Authenticity.
--------------------------------------------------------
Unlike other competitors, most of whose inventory is limited exclusively or
primarily to items offered on consignment, we guarantee the authenticity of each
fine art poster we sell with a written appraisal of the value of the item at the
time of purchase. Mr. Capra is a certified personal property appraiser and a
member of the Certified Appraisers Guild of America, and examines each item sold
to ensure its authenticity and provide a written appraisal of value.
Furthermore, we provide each customer with a thirty-day guarantee permitting the
return of the poster within thirty days if the customer is not satisfied with
its genuineness or authenticity.
The Internet and Electronic Commerce
The Internet has become an increasingly significant medium for
communication, exchange of information and commerce. We believe this increased
usage is because of a number of factors, including a large installed base of
personal computers, advances in the speed of personal computers and modems,
easier and less expensive access to the Internet, improvements in network
security, infrastructure and bandwidth, a wider range of online offerings and
growing consumer awareness of the benefits of online shopping. However, there
are many risks associated with the conduct of business on the Internet,
including, among others, security, viruses and fraud. While hacking is a serious
threat to electronic commerce companies such as Posteralley.com, the greatest
threat to the security of our business transactions on the Internet is expected
to arise from our own employees. Posteralley.com, like most other online
retailers, intends to continuously implement a wide range of hardware security
measures to offer network protection and business continuity. Nevertheless, it
is generally known that few companies have implemented the security measures
available utilizing current technology, including, among others, file encryption
for stored information, public key cryptography, telecommunication encryption
and digital signatures/sender authentication. Many development-stage companies,
like Posteralley.com, lack the capital and/or customer demand to warrant the
investment in electronic security protective applications and technologies.
Further, while many companies have a formal security policy, nearly all are
believed to be far from adequate and very few companies educate all members of
staff, conduct risk analysis on a regular basis and regularly assess their
software for security flaws.
With the wide range of security flaws inherent in the Internet, we can be
expected to be at a serious disadvantage, as compared to our competitors,
especially with regard to electronic commercial transactions, if we fail to
protect or minimize the risks to Posteralley.com from security threats. While
the Internet represents a new and highly lucrative market, we expect to be
challenged by the necessity to become fully aware of new technologies so that we
can manage the risks associated with conducting transactions over the web.
Another disadvantage to our conducting business on the Internet is the lack of
physical representation enabling customers to inspect our merchandise in advance
of placing an order and obtaining customer services from personnel with whom
they are unable to interact in person. It is likely that, because we will limit
our marketing activities to the Internet, we will be unable to generate business
from the type of customer unable to develop a comfort level in the absence of
physical representation and will likely be required to deal with dissatisfied
customers believing that the poster ordered differs in its physical appearance
from the photographic image viewed on the Internet. Despite the above-described
and other risks of online retailing, we intend to employ this method of
displaying and retailing fine art posters exclusively because of the
significantly reduced cost to us of eliminating the need for a retail facility
and a sizeable marketing staff.
-22-
<PAGE>
Marketing
Our marketing strategy is designed to attract customers most likely to shop
online, convert browsers to buyers, meet or exceed customer expectations, drive
repeat purchases and build enduring brand equity. In order to implement this
strategy, we intend to implement an integrated marketing campaign that includes
the following:
Advertising. We will design our advertising to build brand equity, create
awareness and generate initial purchases of fine art posters sold on our web
site. Depending on the availability of funds, we intend to use a mix of
broadcast media, including local newspapers, trade journals, periodicals, local
radio in the top markets with online shoppers, outdoor advertising, online
banners, text links, e-mail newsletters and mailings of brochures to, among
others, interior designers, retail purchasers and past participants in live
auctions hosted by Nicklebys.com and others.
Nicklebys.com. There is a link to our web site on Nicklebys.com's home page
located on the Internet at http://www.nicklebys.com. Our marketing agreement
with Nicklebys.com provides for Nicklebys.com to receive a referral fee of $.22
per web site "hit" or "click-through" generated by a new visitor to our web site
as a result of the link to the site on Nicklebys.com's web page. Because Messrs.
Thornock and Capra, our executive officers, directors and controlling
shareholders, also serve as executive officers, directors and controlling
shareholders of Nicklebys.com, the marketing agreement between Posteralley.com
and Nicklebys.com cannot be considered to be an arm's-length transaction. While
we believe that this marketing agreement will assist Posteralley.com to develop
a customer base, it is not possible to predict the amount of revenue that
Posteralley.com may realize from this arrangement.
Fulfillment and Distribution
We currently fulfill all customer orders from our facilities in Denver,
Colorado. We receive posters from our suppliers or on consignment. Our two
executive officers and directors pick products to fill customer orders. We
presently manually update product availability on our web site. We pack the
items on location at our offices and then deliver them to UPS, the United States
Postal Service or other shipping trucks for distribution to consumers anywhere
in the United States. We are committed to shipping accurate orders, efficiently
and effectively. Our management brings to Posteralley.com its expertise in
fulfillment and distribution developed as a result of experience with
Nicklebys.com. We intend to establish a distribution center in warehouse space
separate from our offices at such time, if ever, as the demand for our fine art
posters increases sufficiently.
Customer Service
We believe that a high level of customer service and support is critical to
retaining and expanding our customer base. No portion of the proceeds of this
offering has been allocated for the employment of any customer support
personnel. Accordingly, we expect to be dependent upon the proceeds, if any, to
-22-
<PAGE>
be received from future equity and/or debt financing for this purpose. Our two
management members are available via telephone, generally, from 8:00 a.m. to
5:00 p.m., Mountain time, Monday to Friday, and can also be reached by e-mail or
facsimile. Presently, we provide by e-mail order and shipping confirmation (with
tracking numbers), notification of customers regarding out-of-stock situations
and, for those orders, frequent updating of customers on order status.
We are dedicated to customer satisfaction. We deliver on this commitment in
a number of ways, including:
- Product guarantee, including a written appraisal of the value of the item
at the time of purchase and a 30-day refund if the shipment is not
satisfactory;
- Customer service guarantee of a one business day response time for all
inquiries;
- Privacy guarantee to use personal information exclusively to process orders
and not to sell, trade or rent such information to other companies; and
- Security guarantee ensuring protection of personal information and
compensation to consumers for the amount of their liability, up to $50, in
the unlikely event of unauthorized interception and use of their credit
card.
Technology and Network Operations
We have implemented services and systems for site management, searching and
customer interaction. Our system has been custom-designed and written for
performance, reliability and scalability using software applications for:
- Displaying poster merchandise in an organized, logical and
customer-friendly way;
- Accepting, verifying, organizing and managing customer orders;
- Notifying and updating customers of order status; and
- Managing shipment of products.
These systems and services employ a combination of our own proprietary
technologies and commercially available, licensed technologies. Our proprietary
technologies are embodied in software that is exclusively owned and implemented
by Posteralley.com. We have a non-exclusive license to use a shopping cart
commerce application, which has been customized for us. This commerce
application is integrated with our custom software, enabling a fully automated
order fulfillment process. We realize many benefits from the integration of
these systems, including:
- Tracking customer orders through the entire supply chain in real-time;
- Making rapid changes to processes such as a change in shipping policy; and
-23-
<PAGE>
- Efficiently expanding our infrastructure.
Our operating system is RedHat Linux 6.2 with kernel 2.2.16 and our
software platform and architecture is integrated with Apache/1.3.12 Ben-SSL/1.41
(Unix) mod_perl/1.24 web software and database software mSQL v2.0.11. Our
production system is located at or offices in Denver, Colorado, and provides
24-hour engineering and monitoring support. We address the goals of performance,
reliability and scalability. Our objective is to have fast download times and
make use of caching and load balancing at the web server and application level
for optimal performance. We outsource development work to outside consultants.
Our web site is up and running 24 hours a day, seven days a week. We anticipate
that we will continue to devote significant resources to product development in
the future as we add new features and functionality to our web site.
Competition
The secondary market for originals and reproductions of fine art posters is
intensely competitive. Competition is expected to intensify in the future, which
may result in price reductions, fewer customer orders, reduced gross margins and
loss of market share. We currently or potentially compete with a variety of
companies located both inside and outside the United States engaged in brokering
and/or dealing in fine art posters of every character and kind. Many of our
current and potential traditional store-based competitors have longer operating
histories, larger customer or user bases, greater brand recognition and
significantly greater financial, marketing and other resources than we do. These
companies include artists, art galleries, art and/or antique brokers and
dealers, antique stores, auction houses and liquidation companies. Many of these
current and potential competitors can devote substantially more resources to web
site and systems development than we can. In addition, larger, more
well-established and financed entities may acquire, invest in or form joint
ventures with online competitors as the use of the Internet and other online
services increases. We are aware of a limited number of other companies,
including Nickleby's.com (on a very limited basis), that are presently retailing
fine art, antiques and/or collectibles, including fine art posters, online. We
believe that there will be an increasing number of online retailers of the fine
art posters of the types being offered by us and, in the instance of certain
reproductions, identical to the reproductions we offer. Some of our competitors
may be able to secure posters from suppliers on more favorable terms, fulfill
customer orders more efficiently and adopt more aggressive pricing or inventory
availability policies than we can. Traditional store-based retailers also enable
customers to see and feel products in a manner that is not possible over the
Internet.
We believe that the following are principal competitive factors in our
market:
- web site recognition;
- inventory selection;
- streamlined shopping experience;
- reliability and speed of order shipment;
-24-
<PAGE>
- customer service;
- speed and accessibility of web site;
- convenience; and
- price.
While we expect to compete on the basis of our reputation among customers
as a quality provider of products and, to a lesser extent, on the basis of
price, we are not certain that this strategy will be successful. Additionally,
we, like Nicklebys.com but unlike many other competitors, will guarantee the
authenticity of each poster and will furnish the purchaser with a written
appraisal at the time of purchase. We hope, to the extent practicable, to
minimize our weaknesses, including, among others, our undercapitalization, cash
shortage, limitations with respect to personnel, technological, financial and
other resources and lack of a customer base and market recognition, through our
focus on the Internet; which eliminates the need for a retail facility and a
sizeable marketing staff. However, our opportunity to obtain wholesale and other
larger customers may also be limited by our financial resources and other
assets.
Intellectual Property
We rely on a combination of trademark, trade secret and copyright laws to
protect our intellectual property. These afford only limited protection. Despite
our efforts to protect our proprietary rights, unauthorized persons may attempt
to copy aspects of our web site, including the look and feel of our web site,
posters that we sell, product organization, product information and sales
mechanics or to obtain and use information that we regard as proprietary, such
as the technology used to operate our web site and our content. We have not
filed an application to secure registration for our trademarks, such as
"Posteralley.com.," in the United States or any other country. Any encroachment
upon our proprietary information, the unauthorized use of our trademark, the use
of a similar name by a competing company or a lawsuit initiated against us for
the infringement upon another company's proprietary information or improper use
of their trademark, may affect our ability to create brand name recognition,
cause customer confusion and/or have a detrimental effect on our business.
Litigation or proceedings before the U.S. Patent and Trademark Office may be
necessary in the future to enforce our intellectual property rights, to protect
our trade secrets and domain name and to determine the validity and scope of the
proprietary rights of others. Any litigation or adverse proceeding could result
in substantial costs and diversion of resources and could seriously harm our
business and operating results. Finally, if we operate internationally, the laws
of many countries do not protect our proprietary rights to as great an extent as
do the laws of the United States.
Government Regulation
We are not currently subject to direct federal, state or local regulation
other than regulations applicable to businesses generally or directly applicable
to retailing or electronic commerce. However, as the Internet becomes
increasingly popular, it is possible that a number of laws and regulations may
be adopted with respect to the Internet. These laws may cover issues such as
-25-
<PAGE>
user privacy, freedom of expression, pricing, content and quality of products
and services, taxation, advertising, intellectual property rights and security
of information. Furthermore, the growth of electronic commerce may prompt demand
for more stringent consumer protection laws. Several states have proposed
legislation to limit the uses of personal user information gathered online or
require online services to establish privacy policies. The Federal Trade
Commission has also initiated action against at least one online service
regarding the manner in which personal information is collected from users and
provided to third persons and has proposed regulations restricting the
collection and use of information from minors online. We do not currently
provide individual personal information regarding our users to third persons and
we currently do not identify registered users by age. However, the adoption of
additional privacy or consumer protection laws could create uncertainty in usage
of the Internet and reduce the demand for our products and services or require
us to redesign our web site.
We are not certain how our business may be affected by the application of
existing laws governing issues such as property ownership, copyrights,
encryption and other intellectual property issues, taxation, libel, obscenity,
qualification to do business and personal privacy. The vast majority of these
laws were adopted prior to the advent of the Internet. As a result, they do not
contemplate or address the unique issues of the Internet and related
technologies. Changes in laws intended to address these issues could create
uncertainty in the Internet marketplace. This uncertainty could reduce demand
for our posters, increase the cost of doing business as a result of litigation
costs and/or increase service delivery costs.
Employees and Consultants
Posteralley.com has had no full-time employees since its organization.
Messrs. Scott M. Thornock and Bruce A. Capra, the President/Treasurer and the
Secretary, respectively, and directors of Posteralley.com, have served as our
only part-time employees through the date hereof. No cash compensation has been
awarded to, earned by or paid to either individual for all services rendered in
all capacities to Posteralley.com since our organization on July 19, 1999.
However, on July 19, 1999, we issued and sold to Messrs. Thornock and Capra
3,240,000 shares, and 360,000 shares, of common stock, respectively, in
consideration for the performance of services by each individual in connection
with the organization of Posteralley.com valued at $324 and $36, respectively
($.0001 per share). Commencing January 1, 2001, we will pay Mr. Thornock a
salary of $18,000 per annum. We anticipate that at such time, if ever, as our
financial position permits, Messrs. Thornock and Capra and any other executive
officers of Posteralley.com will receive reasonable salaries and other
appropriate compensation, such as bonuses, coverage under medical and/or life
insurance benefits plans and participation in stock option and/or other profit
sharing or pension plans. Additionally, directors, including Messrs. Thornock,
Capra and/or others, may receive fees for their attendance at meetings of the
Board of Directors. Further, we may pay consulting fees to unaffiliated persons
who perform services for us, although we have no present plans to do so and no
such fees have been paid as of the date hereof.
-26-
<PAGE>
Facilities
We maintain our offices, pursuant to a verbal arrangement, rent-free at
the business offices of Paragon Real Estate & Development, L.L.C., an affiliated
company of which Mr. Scott M. Thornock, the President/Treasurer, a director and
an approximate 74.8% shareholder of Posteralley.com, is the sole owner and
managing member, located at 650 South Cherry Street, Suite #310, Denver,
Colorado 80246. We anticipate the continued utilization of these facilities on a
rent-free basis until such time, if ever, as we obtain sufficient funding from
debt and/or equity financing in addition to this offering and/or generate a
level of earnings sufficient to enable us to pay rent for our present offices or
obtain office space from an unaffiliated third party. The office space has been
valued at $250 per month based on the market rate in the local area and is
included in the accompanying financial statements of Posteralley.com as rent
expense with a corresponding credit to contributed capital. Our telephone and
facsimile numbers are (303) 629-9751 and (303) 322-0036, respectively.
Legal Proceedings
From time to time, we may be involved in litigation relating to claims
arising out of our ordinary course of business. As of the date hereof, we know
of no legal proceedings to which Posteralley.com is a party or to which any of
the property of Posteralley.com is the subject, which are pending, threatened or
contemplated or any unsatisfied judgments against Posteralley.com.
PLAN OF OPERATION
Plan of Operation
-----------------
Since shortly after our inception, we have operated a web site on the
Internet located at http://www.Posteralley.com from which we retail and broker
fine art posters, including, but not limited to, vintage antique, product
advertising, travel, sporting event, movie and theatre memorabilia and
commemorative posters. We have generated only minimal sales and a net loss from
this business through the date hereof. For the year ended September 30, 2000,
and for the periods from inception (July 19, 1999) through September 30, 2000,
and 1999, we realized total sales of $3,258, $3,258 and $-0-, respectively, and
a net loss of $(29,492), $(33,874) and $(4,382), respectively, which is less
than $(.01) per share.
We expect, for the foreseeable future, to be partially dependent for our
products upon fine art posters consigned to us by I. Brewster & Company, Club of
American Collectors or others. However, we intend to increase our limited
inventory of originals and reproductions of fine art posters. The sums of $5,000
and $10,000 anticipated to be received from the minimum and the maximum offering
proceeds, respectively, have been allocated for this purpose. We have plans to
expand our marketing efforts in order to obtain a larger customer base. Funds in
the amounts of $4,000 and $8,000 anticipated to be received from the minimum and
the maximum offering, respectively, have been allocated for these marketing
efforts, including traditional marketing, such as advertising on the radio and
in newspapers, and Internet marketing, including enhancing our web site, placing
banners on other web sites and distributing e-mails promoting Posteralley.com.
We do not intend to hire any employees in the foreseeable future. We intend to
purchase $5,000 of computer equipment only in the event of the maximum offering.
-27-
<PAGE>
The implementation of these plans is dependent upon our ability to
raise additional capital from equity and/or debt financing and/or achieve
profitable operations. We believe that the revenue generated from our business
will not be sufficient to finance all future activities and that it will be
necessary to raise additional funds through equity and/or debt financing after
the expiration of one year after this offering as we do not expect to be able to
satisfy our cash requirements following the expiration of this period. We do not
believe that it will be necessary to raise additional funds within the next
year. However, we may need to raise additional funds prior to the expiration of
such period if, for example, we pursue business or technology acquisitions or
experience operating losses that exceed our current expectations. Although we
intend to explore all available alternatives for debt and/or equity financing,
including, but not limited to, private and public securities offerings, there
can be no assurance that we will be able to generate additional capital for
expansion and/or other purposes. In the event that only limited additional
financing is received, we expect our opportunities in the secondary market for
fine art posters to be limited. Further, even if we succeed in obtaining the
level of funding necessary to increase revenue through the expenditure of
additional funds for marketing, advertising and/or promotion in order to obtain
a sizable customer base and, in turn, purchase additional inventory and enhance
our web site, this will not ensure the realization by us of profits from
operations.
Milestones
----------
In order to become fully-operational and profitable, we must expand our
fine art poster inventory, thoroughly market the "Posteralley.com" brand name
and our services as a provider of quality and authentic fine art posters and
enhance our web site so that it is considered the premier web site in the poster
industry. We are currently in the process of pursuing these steps with the funds
raised during our recent offering of common stock completed in June 2000. Funds
generated from this offering will be used for the above-described purposes in
addition to purchasing inventory and computer equipment and enhancing our web
site. We have already begun selling fine art posters and have received limited
revenues of $3,258 through September 30, 2000.
Financial Condition, Capital Resources and Liquidity
----------------------------------------------------
As of September 30, 2000, we had minimal total assets in the amount of
$90,395, including $62,448 in cash, inventory valued at cost of $26,606 and
equipment (less accumulated depreciation) of $1,341, and total liabilities of
$3,813. As of September 30, 1999, we had minimal total assets, including cash of
$3,260 and prepaid expenses of $4,900 and total liabilities of $11,500. As a
result of our having minimal assets and a deficit accumulated during the
development stage of $(33,874) and $(4,382) as of September 30, 2000, and 1999,
respectively, our total shareholders' equity (deficit) as of September 30, 2000,
and 1999, was $86,582 and $(3,340), respectively. There can be no assurance that
our financial condition will improve.
Until the successful completion of our offering of common stock in June
2000 for gross proceeds of $125,300, we were funded exclusively with loans from
Messrs. Scott M. Thornock and Bruce A. Capra, our two executive officers,
directors and principal shareholders. Messrs. Thornock and Capra loaned an
aggregate of $11,000 and $3,500, respectively, to Posteralley.com during the
period from July 27, 1999, through March 3, 2000; which loans were evidenced by
unsecured Promissory Notes dated November 1, 1999, with each of Messrs. Thornock
-28-
<PAGE>
and Capra, as the holders, in the principal amounts of $9,500 and $3,500,
respectively, bearing interest at the rate of 8% per annum, due November 1,
2000, and an unsecured Promissory Note dated March 3, 2000, with Mr. Thornock,
as the holder, in the principal amount of $1,500, bearing interest at the rate
of 8% per annum, due November 1, 2000. On May 31, 2000, Posteralley.com repaid
the $14,500 principal balance of all of the outstanding promissory notes
together with accrued interest totaling $825 out of the proceeds of its offering
of common stock completed in June 2000. Additionally, during September 2000, Mr.
Thornock paid expenses on behalf of Posteralley.com totaling $375.
MANAGEMENT
Directors and Executive Officers
Set forth below are the names, ages, positions with Posteralley.com and
business experience of the directors and executive officers of Posteralley.com.
Name Age Title
------------------- --- ---------------------------------
Scott M. Thornnock* 41 President, Treasurer and Director
Bruce A. Capra* 46 Secretary and Director
-------------------
*The above-named persons may be deemed to be our "parents" and "promoters,"
as those terms are defined in the General Rules and Regulations under the
Securities Act of 1933, as amended.
General
Our directors are elected to hold office until the next annual meeting of
shareholders and until their respective successors have been elected and
qualified. Our executive officers are elected by the Board of Directors and hold
office until resignation or removal by the Board of Directors. Messrs. Thornock
and Capra are each expected to devote approximately 15% of their time to the
business and affairs of Posteralley.com. Set forth below under "Business
Experience" is a description of the business experience of Messrs. Thornock and
Capra. Except as otherwise indicated below, all organizations with which each
executive officer and director is or has been previously employed, affiliated or
otherwise associated, are not affiliated with us.
Family Relationships
There is no family relationship between Mr. Scott M. Thornock, our
President/Treasurer and a director of Posteralley.com, and Mr. Bruce A. Capra,
our Secretary and a company director.
Business Experience
Scott M. Thornock has approximately fifteen years of experience in the real
estate development business. He has served as the President, the Treasurer and a
-29-
<PAGE>
director of Posteralley.com since its inception on July 19, 1999. Mr. Thornock
has served as the President, the Chief Financial Officer, the Secretary and a
director of Nicklebys.com, Inc., a publicly-held, Denver, Colorado, corporation
engaged in the marketing and sale of fine art, antiques and collectibles via the
company's auction web site on the Internet, live auctions and retail sales,
since that company's inception on January 13, 1999. Since August 27, 1999, Mr.
Thornock has served as the Secretary/Treasurer of Celebrity Sports Network,
Inc., a privately-held, Littleton, Colorado, company engaged in the promotion of
professional athletes as motivational speakers via the Internet and the
sponsorship of motivational seminars, which is seeking to raise capital
publicly. He served as a director of Perseus Art Group, Inc. ("PAG"), a public
Colorado corporation, from the date of PAG's inception on June 26, 1998, until
his resignation on May 12, 1999, and as the Vice President, the Chief Financial
Officer and the Secretary of PAG from June 30, 1998, until his resignation from
these positions on May 12, 1999. Mr. Thornock served as the President, the Chief
Executive Officer, the Treasurer and a director of Triad Development Corp., a
publicly-held Colorado corporation, from the date of its inception on October
31, 1997, through the date of his resignation on April 2, 1999. He served as the
President, the Chief Executive Officer, the Treasurer, the Chief Financial
Officer and a director of Perfection Development Corporation from April 18,
1997, the date of the organization of the company, through October 2, 1998, on
which date he resigned as an executive officer and director. Mr. Thornock served
as the Vice President, the Chief Financial Officer, the Secretary and a director
of Thor Management Group, Inc., from the date of that company's inception on
January 9, 1998, through June 19, 1998, on which date he resigned his positions
as an executive officer and director of the company. He served as the President,
the Chief Executive Officer and a director of Pegasus Development Group, Inc., a
publicly-held Colorado corporation, from the date of its organization on
December 23, 1996, through October 22, 1997, on which date Mr. Thornock resigned
as executive officer and director of the company. He has been the sole owner and
managing member of Paragon Real Estate and Development, L.L.C. ("Paragon Real
Estate and Development"), a Denver, Colorado-based residential real estate
development, brokerage and business consulting firm that has performed
administrative supervision, financial management and other services for, among
others, thirty-five Colorado limited liability companies of which Mr. Thornock
has been the founder, the manager and a member, since he founded the company in
February 1996. These thirty-five limited liability companies, including Paragon
Development I-IV, L.L.C., Paragon Development VI-XII, L.L.C., Paragon
Development XIV-XXXV, L.L.C., 32-5, L.L.C., and Paragon Investment Group, I,
L.L.C., have raised capital from time-to-time over the past approximately five
years for the purposes of acquiring, developing, constructing and/or brokering
multi-family, residential properties located in Denver, Boulder, Longmont and
Vail, Colorado. Twenty of these companies are operating currently. Mr. Thornock
has held a real estate brokers license in the State of Colorado since December
1995. He received a Bachelor of Arts degree in history and a Masters degree in
business management from the University of Colorado, Boulder, Colorado, in 1982
and 1994, respectively.
Bruce A. Capra has served as the Secretary and a director of
Posteralley.com since its inception on July 19, 1999. Since its inception on
January 13, 1999, he has served as the Chairman of the Board of Directors and
the Chief Executive Officer of Nicklebys.com, Inc., a publicly-held, Denver,
Colorado, corporation engaged in the marketing and sale of fine art, antiques
and collectibles via auction on the Internet, live auctions and retail sales. He
was employed, from 1988 until his resignation on February 1999, as the General
Manager and the Director of Sales, Marketing and Advertising for American
Design, Ltd. ("American Design"), an Aurora, Colorado, corporation specializing
-30-
<PAGE>
in the publication of fine art that has eleven retail outlets located in
California, Colorado and New Mexico. American Design, which is today recognized
as one of the largest wholesale fine art publishing firms in the United States,
realized gross revenues of approximately $12,000,000 during its most recent
fiscal year. Mr. Capra served as the President, the Chief Executive Officer and
a director of Perseus Art Group, Inc., a publicly-held Colorado corporation,
from June 26, 1998, until his resignation from these positions with PAG on May
12, 1999. He was the founder and served as the President, a director and the
sole owner of Nickleby's Auction Gallery Ltd., Arvada, Colorado, an auction
liquidation company specializing in fine art, antiques and collectibles, from
1992 through January 15, 1999, on which date Nicklebys.com purchased all of the
outstanding common stock of Nickleby's. Mr. Capra founded and served as the
President, from 1981 until the sale of the business in 1988, of Image Tech Inc.,
Denver, Colorado, a fine art serigraph printing company specializing in printing
and publishing fine art and commercial signage and, during Mr. Capra's tenure,
printed limited edition fine art prints for internationally known artists such
as Andy Warhol, Roy Liechtenstein, Earl Biss and others. Prior to that time,
from 1979 through 1982, he owned and operated The Mushroom Gallery, Ltd.,
an art gallery located in Denver, Colorado. Mr. Capra attended Missouri Auction
School in 1988 and is a licensed auctioneer in the states of California,
Colorado, Nevada and Texas. He is also a certified personal property appraiser
and a member of the Certified Appraisers Guild of America.
Executive Compensation
Messrs. Scott M. Thornock and Bruce A. Capra, our President/Treasurer and
Secretary, respectively, have served as part-time employees of Posteralley.com
since its inception. No cash compensation has been awarded to, earned by or paid
to either individual for all services rendered in all capacities to
Posteralley.com since its inception on July 19, 1999. For the foreseeable
future, neither Mr. Thornock nor Mr. Capra will receive any compensation in any
form for their services rendered in all capacities to Posteralley.com. In this
connection, no portion of the proceeds of this offering has been allocated for
the payment of management or other salaries over the period of one year
following the closing of this offering. However, on July 19, 1999, we issued and
sold to Messrs. Thornock and Capra 3,240,000 shares, and 360,000 shares,
respectively, of common stock (a total of 3,600,000 shares) for services
performed in organizing Posteralley.com valued at $324 and $36, respectively
($.0001 per share). Commencing January 1, 2001, we will pay Mr. Thornock a
salary of $18,000 per annum. We anticipate that, at such time, if ever, as our
financial position permits, Messrs. Thornock and Capra and any other executive
officers and/or directors of Posteralley.com will receive reasonable salaries
and other appropriate compensation, such as bonuses, coverage under medical
and/or life insurance benefits plans and participation in stock option and/or
other profit sharing or pension plans, for services as executive officers of
Posteralley.com. Neither Mr. Thornock nor Mr. Capra holds any option to purchase
any securities of Posteralley.com. The executive officers and directors of
Posteralley.com plan to devote only such time to our business and affairs that
each deems necessary.
Posteralley.com does not provide its officers or employees with pension,
stock appreciation rights, long-term incentive or other plans and has no
intention of implementing any such plans for the foreseeable future. In the
future, we may offer stock options to employees, non-employee members of the
Board of Directors and/or consultants; however, no such options have been
-31-
<PAGE>
granted as of the date hereof. It is possible that in the future we may
establish various executive incentive programs and other benefits, including
reimbursement for expenses incurred in connection with Posteralley.com's
operations, company automobiles and life and health insurance, for our executive
officers and directors, but none has yet been granted. The provisions of such
plans and benefits will be at the discretion of our Board of Directors.
Under Colorado law and pursuant to our Articles of Incorporation, we may
indemnify our officers and directors for various expenses and damages resulting
from their acting in such capacity and as directors of a subsidiary. Insofar as
indemnification for liabilities arising under the Securities Act of 1933, as
amended, may be permitted to officers or directors of Posteralley.com pursuant
to those provisions, we have been informed by our counsel that, in the opinion
of the U.S. Securities and Exchange Commission, such indemnification is against
public policy as expressed in the Securities Act, and is therefore
unenforceable.
Compensation of Directors
Our directors receive no compensation pursuant to any standard arrangement
for their services as directors.
Employment Agreements
We have no employment agreements with Mr. Scott M. Thornock, the
President/Treasurer and a director of Posteralley.com, or Mr. Bruce A. Capra,
the Secretary and a director of the company. We may enter into employment
agreements with the foregoing and/or future executive officers of
Posteralley.com after the completion of this offering.
Indemnification
Our Articles of Incorporation include provisions to indemnify our officers
and directors and other persons against expenses, judgments, fines and amounts
paid in settlement in connection with threatened, pending or completed suits or
proceedings against such persons by reason of serving or having served as
officers, directors or in other capacities, except in relation to matters with
respect to which such persons shall be determined not to have acted in good
faith and in the best interests of Posteralley.com. With respect to matters as
to which our officers, directors and others are determined to be liable for
misconduct or negligence, including gross negligence, in the performance of
their duties to Posteralley.com, our Articles of Incorporation provide for
indemnification only to the extent that the court in which the action or suit is
brought determines that such person is fairly and reasonably entitled to
indemnification for such expenses that the court deems proper. Insofar as
indemnification for liabilities arising under the Securities Act may be
permitted to officers, directors or persons controlling us pursuant to the
foregoing, we have been informed that, in the opinion of the Securities and
Exchange Commission, such indemnification is against public policy as expressed
in the Securities Act, and is therefore unenforceable.
-32-
<PAGE>
Conflicts of Interest
Our officers and directors are subject to the doctrine of corporate
opportunities insofar as business opportunities in which we have expressed an
interest as evidenced by resolutions appearing in our records and Minutes from
time to time. All business opportunities within such designated areas of
interest that come to the attention of the officers and directors of
Posteralley.com are required to be promptly disclosed and made available to us.
Any officer or director may avail himself of any such opportunity only after the
opportunity has been considered and rejected by Posteralley.com or is determined
by the Board of Directors to be beyond the scope of our area of interest.
However, any officer or director is not prohibited from maintaining a business
existing prior to the time that it is designated as an area of interest to which
the corporate opportunity doctrine applies.
Both Messrs. Scott M. Thornock and Bruce A. Capra, who serve as the
President/Treasurer and Secretary, respectively, and both of the directors and
controlling shareholders of Posteralley.com, serve as executive officers,
directors, founders and controlling shareholders of Nicklebys.com, a
publicly-held, online auctioneer of fine art, antiques and collectibles,
including a very limited number of fine art posters. Additionally, both Messrs.
Thornock and Capra are personal collectors of fine art, antiques and
collectibles, including a variety of fine art posters. Because of the activities
of Messrs. Thornock and Capra on behalf of Nicklebys.com and for their own
accounts in the art business, both individuals may be subject to direct
conflicts of interest and the corporate opportunities doctrine with respect to
business opportunities that come to their attention. Mr. Thornock is the sole
owner and managing member of Paragon Real Estate and Development, L.L.C., a
Denver, Colorado-based residential real estate development, brokerage and
business consulting firm that performs administrative supervision, financial
management and other services for, among others, thirty-five Colorado limited
liability companies of which Mr. Thornock is the founder, the manager and a
member. Mr. Thornock is also the Vice President and a director of a
closely-held, Colorado corporation that develops, constructs and remodels single
and multi-family residences located in the Denver metropolitan area. Because of
these and potential future associations and activities and because of the
limited amount of time that Messrs. Thornock and Capra are able to devote to
Posteralley.com, there are existing and potential conflicts of interest in their
acting as our executive officers and directors.
In minutes, we have adopted a policy that any contracts or other
transactions with directors, officers and entities of which they are also
directors or officers, or in which they have a financial interest, will be
approved by a majority of the disinterested members of the Board of Directors or
will be fair and reasonable to us, but that no such transactions by
Posteralley.com shall be affected or invalidated solely because of such
relationship or interest of directors or officers. In addition, common or
interested directors may be counted in determining the presence of a quorum at a
meeting of the Board of Directors or a committee thereof that approves such a
transaction. Our policy with respect to conflicts of interest involving
directors, officers and their affiliates is consistent with Colorado law
regarding the fiduciary duty of such persons to a corporation and its
shareholders when engaged in interested transactions with the corporation.
Generally, subject to the "business judgment rule," pursuant to which courts
hesitate to interfere with the internal management of a corporation provided a
fairly minimal degree of care has been exercised by the management in carrying
out its responsibilities, directors, officers, controlling shareholders and
other affiliates of a corporation owe duties of care and loyalty to the
corporation that override their own self-interests in dealings with the
-33-
<PAGE>
corporation. Transactions between Posteralley.com and an affiliated party, if
approved by a disinterested majority of the directors or by the shareholders, or
if deemed to be fair to us, would be enforceable, valid obligations of
Posteralley.com.
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information regarding the ownership
of our common stock as of the date of this prospectus and as adjusted to reflect
the sale of the shares of common stock offered hereby, by each shareholder known
by us to be the beneficial owner of more than 5% of our outstanding shares of
common stock, each director and executive officer and all executive officers and
directors as a group. Each shareholder has sole voting and investment power with
respect to the shares he beneficially owns.
<TABLE>
<CAPTION>
Shares Percent of Class
Name and Address of Beneficially Before After Offering
Beneficial Owner Owned (1) Offering Minimum Maximum
-------------------------------- ------------- -------- ------- -------
<S> <C> <C> <C> <C> <C>
Scott M. Thornock (2) 3,240,000 75.64% 74.77% 73.92%
650 South Cherry Street
Suite #310
Denver, Colorado 80246
Bruce A. Capra (2) 360,000 8.41% 8.31% 8.21%
6343 Umber Circle
Golden, Colorado 80403
All Directors and Executive
Officers of Posteralley.com 3,600,000 84.05% 83.08% 82.13%
as a Group (Two Persons)
---------------------------
</TABLE>
(1) Based upon 4,283,200 shares of our common stock issued and outstanding as
of the date hereof.
(2) Executive officer and member of the Board of Directors of Posteralley.com.
SELLING SHAREHOLDERS
The following table indicates the name of each Selling Shareholder, any
material relationship he, she or it has had to the Company within the last three
years, the number and percentage of shares of common stock owned by the Selling
Shareholder prior to this offering, the number of shares being offered for sale
by the Selling Shareholder and the number of shares of common stock and the
percentage of the total shares of common stock outstanding that will be held if
all shares offered are sold.
-34-
<PAGE>
<TABLE>
<CAPTION>
Shares Shares Shares
Selling Shareholders Owned Owned Owned
and Relationship Prior to Being After
Warrantholders to Company Offering Per Cent Offered Offering Per Cent
----------------------- ---------- -------- -------- ------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Daniel R. Albright N/A 4,000 .09 4,000 -0- 0.00
Lucy Barnett N/A 400 .01 400 -0- 0.00
Rick Carollo N/A 400 .01 400 -0- 0.00
Rick Clark N/A 400 .01 400 -0- 0.00
James J. Delutes N/A 16,000 .37 16,000 -0- 0.00
Robert W. Donnelly N/A 10,000 .23 10,000 -0- 0.00
Pamela Duckworth N/A 400 .01 400 -0- 0.00
Kirk Eberl N/A 20,000 .47 20,000 -0- 0.00
Richard M. Engeman N/A 12,000 .28 12,000 -0- 0.00
David H. Engleberg N/A 10,000 .23 10,000 -0- 0.00
J. Peter Garthwaite N/A 40,000 .93 40,000 -0- 0.00
Douglas Granger N/A 20,000 .47 20,000 -0- 0.00
James B. Keech N/A 20,000 .47 20,000 -0- 0.00
James T. Kelly N/A 1,000 .02 1,000 -0- 0.00
Ross W. King N/A 20,000 .47 20,000 -0- 0.00
Paul Kummer N/A 400 .01 400 -0- 0.00
Douglas A. Lacy N/A 40,000 .93 40,000 -0- 0.00
Jeffery Lee N/A 8,000 .19 8,000 -0- 0.00
Jessica Lee N/A 8,000 .19 8,000 -0- 0.00
Cheryl Lucas N/A 400 .01 400 -0- 0.00
Stephen M. McKay N/A 12,000 .28 12,000 -0- 0.00
Gordon K. Mizuhara N/A 8,000 .19 8,000 -0- 0.00
-35-
<PAGE>
William E. Moore N/A 8,000 .19 8,000 -0- 0.00
Paul G. Muransky N/A 8,000 .19 8,000 -0- 0.00
Rick Neitenbach N/A 10,000 .23 10,000 -0- 0.00
David Nelson N/A 6,000 .14 6,000 -0- 0.00
Matthew Nicholas N/A 12,000 .28 12,000 -0- 0.00
Daniel A. Nye N/A 40,000 .93 40,000 -0- 0.00
Bradley Parker N/A 20,000 .47 20,000 -0- 0.00
David R. Preston N/A 1,000 .02 1,000 -0- 0.00
Quantum Machinery
Sales, Inc. N/A 4,000 .09 4,000 -0- 0.00
Robert J. Ross N/A 20,000 .47 20,000 -0- 0.00
Bradley A. Scott N/A 400 .01 400 -0- 0.00
Brent Smith N/A 20,000 .47 20,000 -0- 0.00
Mike Smith N/A 400 .01 400 -0- 0.00
Perry St. Laurence N/A 8,000 .19 8,000 -0- 0.00
Art Tanner N/A 1,000 .02 1,000 -0- 0.00
Connie Tanner N/A 5,800 .14 5,800 -0- 0.00
Jeanne Tanner N/A 1,000 .02 1,000 -0- 0.00
Mark Tanner N/A 400 .01 400 -0- 0.00
Mark Tellinger N/A 4,000 .09 4,000 -0- 0.00
Diana Thornock N/A 4,000 .09 4,000 -0- 0.00
Roana Thornock N/A 400 .01 400 -0- 0.00
Amy Towner N/A 400 .01 400 -0- 0.00
Clifton R. Venerable N/A 16,000 .37 16,000 -0- 0.00
C. Edward Venerable N/A 2,000 .05 2,000 -0- 0.00
Richard Volpe N/A 1,000 .02 1,000 -0- 0.00
-36-
<PAGE>
John Wallrath N/A 4,000 .09 4,000 -0- 0.00
Karl White N/A 8,000 .19 8,000 -0- 0.00
Chris Zueger N/A 12,000 .28 12,000 -0- 0.00
Darren J. Zueger N/A 4,000 .09 4,000 -0- 0.00
Paul J. Zueger N/A 20,000 .47 20,000 -0- 0.00
Plan of Distribution
--------------------
</TABLE>
The shares of common stock may be offered and sold from time to time by the
Selling Shareholders or by pledgees, donees, transferees or other successors in
interest. The Selling Shareholders will act independently of Posteralley.com in
making determinations with respect to the timing, manner and size of each offer
or sale. Such sales may be made on the over-the-counter market or otherwise at
prices and at terms then prevailing or at prices related to the then current
market prices, or in negotiated transactions.
The Selling Shareholders may sell shares of common stock in any of the
following ways: (i) through dealers; (ii) through agents; or (iii) directly to
one or more purchasers. The distribution of the shares of common stock may be
effected from time to time in one or more transactions (which may involve
crosses or block transactions) in the over-the-counter market. Any such
transaction may be effected at market prices prevailing at the time of sale, at
prices related to such prevailing market prices, at negotiated prices or at
fixed prices. The Selling Shareholders may effect such transactions by selling
shares of common stock to or through broker-dealers, and such broker-dealers may
receive compensation in the form of discounts, concessions or commissions from
Selling Shareholders and/or commissions from purchasers of shares of common
stock for whom they may act as agent. The Selling Shareholders and any
broker-dealers or agents that participate in the distribution of common stock by
them might be deemed to be underwriters and any discounts, commissions or
concessions received by any such broker-dealers or agents might be deemed to be
underwriting discounts and commissions under the Securities Act.
In offering the shares of common stock, the Selling Shareholders and any
broker-dealers and any other participating broker-dealers that execute sales for
the Selling Shareholders may be deemed to be "underwriters" within the meaning
of the Securities Act in connection with such sales, and any profits realized by
the Selling Shareholders and the compensation of such broker-dealers may be
deemed to be underwriting discounts and commissions. In addition, any shares of
common stock covered by this prospectus which qualify for sale pursuant to Rule
144 may be sold under Rule 144 rather than pursuant to this prospectus.
Rule 10b-2 under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), prohibits persons who are participating in or financially
interested in a distribution of securities from making payments to another
person for the solicitation of a third party to purchase the securities that are
the subject of the distribution, except that Rule 10b-2 does not apply, among
other exceptions, to brokerage transactions not involving the solicitation of
customer orders. Rule 10b-6 under the Exchange Act prohibits participants in a
-37-
<PAGE>
distribution from bidding for or purchasing, for an account in which the
participant has a beneficial interest, any of the securities that are the
subject of the distribution. Rule 10b-7 governs bids and purchases made in order
to stabilize the price of a security in connection with a distribution of the
security.
The public offering of the common stock by the Selling Shareholders will
terminate on the date on which all shares of common stock offered hereby have
been sold by the Selling Shareholders, or on such earlier date on which
Posteralley.com files a post-effective amendment that de-registers all shares of
common stock then remaining unsold.
Posteralley.com will pay certain expenses incidental to the offering and
sale of the shares of common stock to the public estimated to be approximately
$20,500. Posteralley.com will not pay for, among other expenses, selling
expenses, underwriting discounts or fees and expenses of counsel for the Selling
Shareholders.
To the extent required at the time a particular offer of common stock by
the Selling Shareholders is made, a supplement to this prospectus will be
distributed that will set forth the number of shares of common stock being
offered and the terms of the offering, including the name or names of any
underwriters, dealers, brokers or agents, the purchase price paid by any
underwriter for shares of common stock purchased from the Selling Shareholders,
any discounts, commissions and other items constituting compensation from the
Selling Shareholders and any discounts, commissions or concessions allowed or
re-allowed to dealers, including the proposed selling price to the public.
Posteralley.com will not receive any of the proceeds from the sale of
shares of common stock by the Selling Shareholders.
CERTAIN TRANSACTIONS
On July 19, 1999, we issued and sold 3,240,000 shares, and 360,000 shares,
of common stock (a total of 3,600,000 shares of common stock) to Messrs. Scott
M. Thornock and Bruce A. Capra, respectively, in consideration for services
performed by each individual in connection with our organization valued at $324
and $36, respectively (a total of $360), at the rate of $.0001 per share.
Messrs. Thornock and Capra serve as both of our executive officers and directors
and together own of record and beneficially 3,600,000 shares, representing
approximately 84.1% of the total number of issued and outstanding shares, of our
common stock as of the date hereof.
Messrs. Thornock and Capra loaned an aggregate of $11,000 and $3,500,
respectively, to Posteralley.com during the period from July 27, 1999, through
March 3, 2000; which loans were evidenced by unsecured Promissory Notes dated
November 1, 1999, with each of Messrs. Thornock and Capra, as the holders, in
the principal amounts of $9,500 and $3,500, respectively, bearing interest at
the rate of 8% per annum, due November 1, 2000, and an unsecured Promissory Note
dated March 3 2000, with Mr. Thornock, as the holder, in the principal amount of
$1,500, bearing interest at the rate of 8% per annum, due November 1, 2000. On
May 31, 2000, we repaid the $14,500 principal balance of all of the outstanding
promissory notes together with accrued interest totaling $825 out of the
proceeds of our offering of common stock completed in June 2000.
-38-
<PAGE>
Since October 1, 1999, we have maintained our offices rent-free at the
business offices of Paragon Real Estate & Development, L.L.C., an affiliated
company of which Mr. Scott M. Thornock, the President/Treasurer, a director and
an approximate 75.6% shareholder of Posteralley.com, is the sole owner and
operating manager, located at 650 South Cherry Street, Suite #310, Denver,
Colorado 80246, since October 2000 and, prior to that time, at 1422 Delgany
Street, Suite #12, Denver, Colorado 80202. The $250 per month value of the
office space provided by Paragon Real Estate & Development, L.L.C., is included
in Posteralley.com's Financial Statements that commence on page F-1 hereof as
rent expense with a corresponding credit to contributed capital.
During September 2000, Mr. Thornock paid expenses on behalf of
Posteralley.com totaling $375; which sum is reflected in the accompanying
Financial Statements as due to officer.
Because of their present management positions with, organizational efforts
on behalf of and percentage share ownership in Posteralley.com, Messrs. Thornock
and Capra may be deemed to be our "parents" and "promoters," as those terms are
defined in the Securities Act of 1933, as amended, and the applicable Rules and
Regulations thereunder. Because of the above-described relationships,
transactions between and among Posteralley.com and Messrs. Thornock and Capra,
such as our sale of common stock to each of them as described hereinabove,
should not be considered to have occurred at arm's-length.
On July 26, 1999, we issued and sold 182,000 shares, representing
approximately 4.3% of the aggregate number of issued and outstanding shares, of
our common stock, to Cudd & Associates, 1120 Lincoln Street, Suite #1507,
Denver, Colorado 80203, the sole proprietorship owned by Patricia Cudd, Esq.,
that has acted as our counsel since our inception on July 19, 1999. Cudd &
Associates received said shares of common stock in consideration for the
performance of certain legal services in connection with our organization valued
at $182 ($.001 per share).
PLAN OF OFFERING
We are offering to the public, through our executive officers and directors
pursuant to the exemption for an associated person of an issuer of securities
deemed not to be a broker pursuant to Regulation section 240.3a4-1 under the
Securities Exchange Act of 1934, as amended, 100,000 shares of common stock on a
"$25,000 minimum - $50,000 maximum" basis at a purchase price of $.50 per share.
This offering is a self-underwritten offering and, accordingly, is not being
conducted by a broker-dealer that is a member of, and subject to the Conduct
Rules regarding securities distributions promulgated by, the National
Association of Securities Dealers, Inc. (the "NASD"). Accordingly, investors in
the shares of common stock being offered hereby will not be afforded the
protections of certain of the NASD Conduct Rules applicable only to
broker-dealers that are members of the NASD. We will use our best efforts to
find purchasers for the shares offered hereby within a period of 90 days from
the date of the prospectus, subject to an extension for an additional period not
to exceed 90 days. If we are unable to sell at least 100,000 shares of common
stock within the offering period, then the offering will terminate and we will
promptly refund all funds to the subscribers in full, without interest or
deduction for expenses relating to the offering.
-39-
<PAGE>
We will promptly transmit all funds received during the offering period,
pursuant to the terms of the fund escrow agreement dated December 11, 2000, to
Citywide Banks, N.A., 8101 East Belleview Avenue, Denver, Colorado 80237. The
funds maintained in escrow will not be subject to our creditors or expended for
the expenses of this offering. Until such time as the funds have been released
from escrow and the shares of common stock delivered to the purchasers thereof,
such purchasers, if any, will be deemed subscribers for the shares of common
stock, and not our shareholders. The funds in escrow will be held for the
benefit of those subscribers until released to the purchasers of shares of
common stock; who will not receive stock certificates unless and until the funds
are released from escrow. During the escrow period, subscribers will have no
right to demand the return of their subscriptions.
After 50,000 shares of common stock have been sold, the offering will
continue, but without any refund or escrow provisions, until all 100,000 shares
of common stock offered are sold, until 90 days (or 180 days if the offering
period is extended) from the date of this prospectus or until we terminate the
offering, whichever event shall occur first. There are no arrangements for the
refund of the proceeds that may be received from the sale of any shares of
common stock in addition to the first 50,000 shares sold. We may terminate the
offering at any time prior to the closing if the sale, payment for or delivery
of the common stock is rendered impractical or inadvisable for any reason.
DESCRIPTION OF SECURITIES
Description of Capital Stock
----------------------------
Our authorized capital stock consists of 30,000,000 shares of common stock
and 3,000,000 shares of preferred stock.
Description of Common Stock
---------------------------
All shares of common stock have equal voting rights and, when validly
issued and outstanding, are entitled to one vote per share in all matters to be
voted upon by shareholders. The shares of common stock have no preemptive,
subscription, conversion or redemption rights and may be issued only as
fully-paid and nonassessable shares. Cumulative voting in the election of
directors is not permitted; which means that the holders of a majority of the
issued and outstanding shares of common stock represented at any meeting at
which a quorum is present will be able to elect the entire Board of Directors if
they so choose. In such event, the holders of the remaining shares of common
stock will not be able to elect any directors. In the event of our liquidation,
each shareholder is entitled to receive a proportionate share of our assets
available for distribution to shareholders after the payment of liabilities and
after distribution in full of preferential amounts, if any, to be distributed to
holders of the preferred stock. All shares of our common stock issued and
outstanding are fully-paid and nonassessable.
Dividend Policy.
-----------------
Holders of shares of common stock are entitled to share pro rata in
dividends and distributions with respect to the common stock when, as and if
-40-
<PAGE>
declared by the Board of Directors out of funds legally available therefor,
after requirements with respect to preferential dividends on, and other matters
relating to, the preferred stock, if any, have been met. We have not paid any
dividends on our common stock and intend to retain earnings, if any, to finance
the development and expansion of our business. Future dividend policy is subject
to the discretion of the Board of Directors and will depend upon a number of
factors, including our future earnings, capital requirements and financial
condition.
Transfer Agent and Registrar.
----------------------------
The transfer agent and registrar for our common stock is Corporate Stock
Transfer, Inc., 3200 Cherry Creek Drive South, Suite #430, Denver, Colorado
80209.
Description of Preferred Stock
------------------------------
Shares of preferred stock may be issued from time to time in one or more
series as may be determined by the Board of Directors. The voting powers and
preferences, the relative rights of each such series and the qualifications,
limitations and restrictions thereof shall be established by the Board of
Directors, except that no holder of preferred stock shall have preemptive
rights. We have no shares of preferred stock outstanding, and the Board of
Directors has no plan to issue any shares of preferred stock for the foreseeable
future unless the issuance thereof shall be in our best interests.
LEGAL MATTERS
Cudd & Associates, 1120 Lincoln Street, Suite #1507, Denver, Colorado
80203, will pass upon certain legal matters in connection with the validity of
the issuance of the shares of common stock.
EXPERTS
Cordovano and Harvey, P.C., independent certified public accountant, has
audited the Financial Statements of Posteralley.com, for the periods and to the
extent set forth in its report, which are included herein in reliance upon the
authority of said firm as experts in accounting and auditing.
-41-
<PAGE>
POSTERALLEY.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
Index to Financial Statements
<TABLE>
<CAPTION>
Page
----
<S> <C>
Independent auditors' report....................................................F-2
Balance sheets, September 30, 2000 and 1999.....................................F-3
Statements of operations, for the year ended September 30, 2000, from
July 19, 1999 (inception) through September 30, 1999, and from
July 19, 1999 (inception) through September 30, 2000.......................F-4
Statement of shareholders' equity (deficit), from July 19, 1999 (inception)
through September 30, 2000.................................................F-5
Statements of cash flows, for the year ended September 30, 2000, from
July 19, 1999 (inception) through September 30, 1999, and from
July 19, 1999 (inception) through September 30, 2000.......................F-6
Summary of significant accounting policies......................................F-7
Notes to financial statements...................................................F-9
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders
Posteralley.com, Inc.
We have audited the balance sheets of Posteralley.com, Inc. (a development stage
company) as of September 30, 2000 and 1999, and the related statements of
operations, shareholders' equity (deficit), and cash flows for the year ended
September 30, 2000, from July 19, 1999 (inception) through September 30, 1999
and from July 19, 1999 (inception) through September 30, 2000. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Posteralley.com, Inc. as of
September 30, 2000 and 1999, and the results of its operations and its cash
flows for the year ended September 30, 2000, from July 19, 1999 (inception)
through September 30, 1999 and from July 19, 1999 (inception) through September
30, 2000, in conformity with generally accepted accounting principles.
Cordovano and Harvey, P.C.
Denver, Colorado
October 27, 2000
F-2
<PAGE>
POSTERALLEY.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
Balance Sheets
<TABLE>
<CAPTION>
September 30,
2000 1999
Assets
<S> <C> <C>
Cash.........................................................................$ 62,448 $ 3,260
Prepaid expenses............................................................. - 4,900
Inventory, at cost........................................................... 26,606 -
Equipment, less accumulated depreciatio
of $145 and $-0-, respectively........................................... 1,341 -
---------- ---------
$ 90,395 $ 8,160
========== =========
Liabilities and shareholders' equity (deficit)
Liabilities:
Accounts payable........................................................$ 50 $ -
Accrued expenses........................................................ 3,388 1,500
Due to officer (Note B)................................................. 375 -
Notes payable to officers (Note B)...................................... - 10,000
---------- --------
Total liabilities 3,813 11,500
---------- --------
Commitment (Note D).......................................................... - -
Shareholders' equity (deficit) (Notes B and D):
Preferred stock, $.001 par value; 3,000,000 shares authorized;
-0- and -0- shares issued and outstanding, respectively............... - -
Common stock, $.0001 par value; 30,000,000 shares authorized;
4,283,200 and 3,782,000 shares issued and outstanding,
respectively.......................................................... 428 378
Additional paid-in capital.............................................. 120,028 664
Deficit accumulated during development stage............................ (33,874) (4,382)
---------- --------
Total shareholders' equity (deficit) 86,582 (3,340)
---------- --------
$ 90,395 $ 8,160
========== ========
</TABLE>
See accompanying summary of significant accounting policies and
notes to the financial statements.
F-3
<PAGE>
POSTERALLEY.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
Statements of Operations
<TABLE>
<CAPTION>
For The
Year Ended July 19, 1999 (Inception)
September 30, through September 30,
2000 1999 2000
Sales:
<S> <C> <C> <C>
Sales, related parties (Note B)...................................$ 1,128 $ - $ 1,128
Sales, other...................................................... 2,130 - 2,130
----------- ------ --------
Total sales 3,258 - 3,258
Cost of goods sold................................................... (2,585) - (2,585)
----------- ------ --------
Gross profit 673 - 673
Operating expenses:
Stock-based compensation (Note B)............................... - 542 542
Web site development costs...................................... 3,275 900 4,175
Professional fees............................................... 17,673 1,500 19,173
Contributed rent (Note B)....................................... 3,000 500 3,500
Travel.......................................................... 1,959 858 2,817
Depreciation.................................................... 145 - 145
Other........................................................... 4,055 82 4,137
----------- -------- --------
Total operating expenses (30,107) (4,382) (34,489)
----------- -------- --------
Operating loss (29,434) (4,382) (33,816)
Interest income...................................................... 767 - 767
Interest expense (Note B)............................................ (825) - (825)
----------- -------- --------
Net loss before income taxes (29,492) (4,382) (33,874)
Income taxes (Note C)................................................ - - -
----------- -------- --------
Net loss $ (29,492) $ (4,382) $ (33,874)
=========== ======== =========
Basic loss per common share.......................................... $ * $ *
=========== ==========
Basic weighted average common shares outstanding..................... 3,949,067 3,764,784
=========== ==========
</TABLE>
* Less than $.01 per share
See accompanying summary of significant accounting policies and
notes to the financial statements.
F-4
<PAGE>
(A DEVELOPMENT STAGE COMPANY)
Statement of Shareholders' Equity (Deficit)
July 19, 1999 (inception) through September 30, 2000
<TABLE>
<CAPTION>
Additional Deferred
Preferred stock Common Stock Paid-In Offering
Shares Par Value Shares Par Value Capital Costs
-------------------- ---------------------- ------------- --------
<S> <C> <C> <C> <C> <C> <C>
July 19, 1999, shares issued to founders for
services related to organizing the Company,
valued at the fair value of the services
($.0001/share) (Note B)........................ - $ - 3,600,000 $ 36 $ - $ -
July 26, 1999, shares issued to attorney for
services related to organizing the Company,
valued at the fair value of the services
($.001/share) (Note D)......................... - - 182,000 18 164 -
Office space contributed by an officer (Note B)... - - - - 500 -
Net loss for the period ended September 30, 1999.. - - - - - -
----- ------ ---------- ------- --------- ------
Balance, September 30, 1999 - - 3,782,000 378 664 -
Offering costs deferred........................... - - - - - (8,886)
June 1, 2000, sale of common stock pursuant to
a private placement, less offering costs of
$8,886 ($.25/share) (Note D)................... - - 501,200 50 116,364 8,886
Office space contributed by an affiliate (Note B). - - - - 3,000 -
Net loss for the year ended September 30, 2000.... - - - - - -
----- ------ ---------- -------- ---------- -----
Balance, September 30, 2000 - $ - 4,283,200 $ 428 $ 120,028 $ -
===== ====== ========== ======== ========== =====
</TABLE>
<TABLE>
<CAPTION>
Deficit
Accumulated
During the
Development
Stage Total
------------ -----
<S> <C> <C>
July 19, 1999, shares issued to founders for
services related to organizing the Company,
valued at the fair value of the services
($.0001/share) (Note B)........................ $ - $ 360
July 26, 1999, shares issued to attorney for
services related to organizing the Company,
valued at the fair value of the services
($.001/share) (Note D)......................... - 182
Office space contributed by an officer (Note B)... - 500
Net loss for the period ended September 30, 1999.. (4,382) (4,382)
-------- -------
Balance, September 30, 1999 (4,382) (3,340)
Offering costs deferred........................... - (8,886)
June 1, 2000, sale of common stock pursuant to
a private placement, less offering costs of
$8,886 ($.25/share) (Note D)................... - 125,300
Office space contributed by an affiliate (Note B). - 3,000
Net loss for the year ended September 30, 2000.... (29,492) (29,492)
---------- --------
Balance, September 30, 2000 $ (33,874) $ 86,582
========= ========
</TABLE>
See accompanying summary of significant accounting policies and
notes to the financial statements.
F-5
<PAGE>
POSTERALLEY.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
Statements of Cash Flows
<TABLE>
<CAPTION>
For The
Year Ended July 19, 1999 (Inception)
September 30, through September 30,
2000 1999 2000
-------------- --------------------------
Cash flows from operating activities:
<S> <C> <C> <C>
Net loss........................................................$ (29,492) $ (4,382) $ (33,874)
Transactions not requiring cash:
Depreciation................................................. 145 - 145
Common stock issued for services............................. - 542 542
Office space contributed by an officer (Note B).............. - 500 500
Office space contributed by an affiliate (Note B)............ 3,000 - 3,000
Changes in operating assets and operating liabilities:
Accounts receivable, prepaids and inventory............... (26,606) (4,900) (31,506)
Accounts payable and accrued expenses..................... 2,313 1,500 3,813
----------- --------- ---------
Net cash used in operating activities................................ (50,640) (6,740) (57,380)
----------- --------- ---------
Cash flows from investing activities:
Equipment purchases............................................. (1,486) - (1,486)
----------- --------- ---------
Net cash used in investing activities................................ (1,486) - (1,486)
----------- --------- ---------
Cash flows from financing activities:
Proceeds from issuance of debt (Note B)......................... 4,500 10,000 14,500
Repayment of debt (Note B)...................................... (14,500) - (14,500)
Proceeds from sale of stock (Note D)............................ 125,300 - 125,300
Payments for offering costs..................................... (3,986) - (3,986)
----------- --------- ---------
Net cash provided by financing activities............................ 111,314 10,000 121,314
----------- --------- ---------
Net change in cash 59,188 3,260 62,448
Cash, beginning of period............................................ 3,260 - -
----------- --------- ---------
Cash, end of period $ 62,448 $ 3,260 $ 62,448
=========== ========= =========
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest........................................................ $ 825 $ - $ -
======== ======== ========
Income taxes.................................................... $ - $ - $ -
======== ======== ========
</TABLE>
See accompanying summary of significant accounting policies
and notes to the financial statements.
F-6
<PAGE>
POSTERALLEY.COM, INC.
(A Development Stage Company)
Summary of Significant Accounting Policies
Development stage company
Posteralley.com, Inc. (the "Company") is in the development stage in accordance
with Financial Accounting Standards Board Statements of Financial Accounting
Standards (SFAS) No. 7 "Accounting and Reporting by Development Stage
Enterprises".
Use of estimates
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets, liabilities, and
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.
Cash equivalents
For the purposes of the statement of cash flows, the Company considers all
highly liquid debt instruments purchased with an original maturity of three
months or less to be cash equivalents.
Inventory
Inventory consists of fine art posters and paintings and is stated at the lower
of cost or market. Cost is determined using the specific identification method.
Equipment and depreciation
Equipment is stated at cost. Equipment is depreciated over its estimated useful
life using the straight-line method.
Upon retirement or disposition of the furniture and equipment, the cost and
accumulated depreciation are removed from the accounts and any resulting gain or
loss is reflected in operations. Repairs and maintenance are charged to expense
as incurred and expenditures for additions and improvements are capitalized.
Deferred offering costs
The Company incurred legal and accounting fees related to the preparation of an
offering memorandum during the periods presented (see Note D for details of the
offering). Costs associated with the offering were deducted from the gross
proceeds at its conclusion.
Internet and web site development
The Company expenses all internal and external costs incurred to develop
internal-use computer software. As a development stage company, management has
determined there is no assurance that the web site will provide substantive
service potential to the Company.
F-7
<PAGE>
POSTERALLEY.COM, INC.
(A Development Stage Company)
Summary of Significant Accounting Policies
Income taxes
Income taxes are provided for the tax effects of transactions reported in the
financial statements and consist of taxes currently due plus deferred taxes
related primarily to differences between the recorded book basis and the tax
basis of assets and liabilities for financial and income tax reporting. The
deferred tax assets and liabilities represent the future tax return consequences
of those differences, which will either be taxable or deductible when the assets
and liabilities are recovered or settled. Deferred taxes are also recognized for
operating losses that are available to offset future taxable income and tax
credits that are available to offset future federal income taxes.
Earnings (loss) per share
The Company reports earnings (loss) per share using a dual presentation of basic
and diluted earnings per share. Basic earnings (loss) per share exclude the
impact of common stock equivalents. Diluted earnings (loss) per share utilize
the average market price per share when applying the treasury stock method in
determining common stock equivalents. However, the Company has a simple capital
structure for the period presented and, therefore, there is no variance between
the basic and diluted earnings (loss) per share.
Year-end
The Company has adopted a fiscal year-end of September 30.
Fair value of financial instruments
SFAS 107, "Disclosure About Fair Value of Financial Instruments," requires
certain disclosures regarding the fair value of financial instruments. The
Company has determined, based on available market information and appropriate
valuation methodologies, the fair values of its financial instruments
approximate carrying values. The carrying amounts of cash, accounts payable, and
other current liabilities approximate fair value due to the short-term maturity
of the instruments.
Stock-based compensation
SFAS No. 123, "Accounting for Stock-Based Compensation" was issued in October
1995. This accounting standard permits the use of either a "fair value based
method" or the "intrinsic value method" defined in Accounting Principles Board
Opinion 25, "Accounting for Stock Issued to Employees" (APB 25) to account for
stock-based compensation arrangements.
Companies that elect to use the method provided in APB 25 are required to
disclose pro forma net income and pro forma earnings per share information that
would have resulted from the use of the fair value based method. The Company
adopted SFAS No. 123 during the period ended September 30, 1999; however, the
Company has elected to continue to determine the value of stock-based
compensation arrangements with employees under the provisions of APB 25. No pro
forma disclosures have been included with the accompanying financial statements
as there was no pro forma effect to the Company's net loss or loss per share.
F-8
<PAGE>
POSTERALLEY.COM, INC.
(A Development Stage Company)
Notes to Financial Statements
Note A: Background
The Company was incorporated under the laws of Colorado on July 19, 1999.
The Company plans to engage in the business of acquiring, marketing,
selling, trading and brokering originals and reproductions of fine art
posters and paintings via an Internet web site. Through May of 2000, the
Company's principal activities since inception consisted of organizational
matters, the sale and issuance of shares of its $.0001 par value common
stock, and the development of its web site. Until May 31, 2000, the
Company's inventory was limited to posters for sale on consignment. During
the period from June 1, 2000 through September 30, 2000, the Company began
acquiring its inventory.
Note B: Related party transactions
An officer contributed office space to the Company from July 19, 1999
(inception) through September 30, 1999. The office space was valued at $250
per month based on the market rate in the local area and is included in the
accompanying financial statements as rent expense with a corresponding
credit to contributed capital.
An affiliate contributed office space to the Company for the year ended
September 30, 2000. The office space was valued at $250 per month based on
the market rate in the local area and is included in the accompanying
financial statements as rent expense with a corresponding credit to
contributed capital.
On July 27, 1999, two officers made non-interes bearing working capital
advances to the Company totaling $10,000. Effective October 31, 1999, the
advances were converted to promissory notes. During January and March of
2000, the officers loaned the Company an additional $4,500 in exchange for
promissory notes. On May 31, 2000, the Company repaid the notes and related
accrued interest totaling $825. The promissory notes consisted of the
following at September 30, 2000 and 1999:
September 30,
2000 1999
------- --------
Note payalbe to officer, interest rate at
8.00 percent, maturity on November 1, 2000,
unsecured...................................... $ - $ 8,000
Note payable to officer, interest rate at
8.00 percent, maturity on November 1, 2000,
unsecured...................................... $ - $ 2,000
-------- -------
$ - $10,000
======== =======
Interest expense totaled $825, $-0- and $825 for the year ended September
30, 2000, for the period ended September 30, 1999 and from July 19, 1999
(inception) through September 30, 2000, respectively.
F-9
<PAGE>
POSTERALLEY.COM, INC.
(A Development Stage Company)
Notes to Financial Statements
On July 19, 1999, the Board of Directors approved the issuance of 3,600,000
shares of the Company's $.0001 par value restricted common stock to two
officers/directors of the Company in exchange for services related to the
organization of the Company. The value of the transaction could not
objectively measured as the services were rendered by related parties. The
transaction was recorded at a nominal value of $360 ($.0001 per share) as
there was no market price for the Company's common stock on the date of
issuance. Stock-based compensation expense of $360 was recognized in the
accompanying financial statements for the period ended September 30, 1999.
These shares are "restricted securities" and may be sold only in compliance
with Rule 144 of the Securities Act of 1933, as amended.
During September of 2000, an officer paid expenses on behalf of the Company
totaling $375. The Company repaid the balance in October of 2000. The $375
is included in the accompanying financial statements as due to officer.
During the nine months ended September 30, 2000, the Company realized sales
totaling $1,128 to shareholders of the Company. The $1,128 is included in
the accompanying financial statements as sales, related parties.
Note C: Income taxes
A reconciliation of the U.S. statutory federal income tax rate to the
effective rate is as follows:
Setpember 30,
2000 1999
------ ------
U.S. federal statutory graduated rate............. 15.00% 15.00%
State income tax rate,
net of federal benefit.......................... 4.04% 4.04%
Offering costs.................................... 0.95% 21.28%
Net operating loss for which no tax
benefit is currently available.................. -19.99% -40.32%
--------- --------
0.00% 0.00%
========= ========
At September 30, 2000, deferred taxes consisted of a net tax asset of
$8,140, due to operating loss carryforwards of $42,759, which was fully
allowed for, in the valuation allowance of $8,140. The valuation allowance
offsets the net deferred tax asset for which there is no assurance of
recovery. The changes in the valuation allowance for the year ended
September 30, 2000 and from July 19, 1999 (inception) through September 30,
1999 were $6,373 and $1,767, respectively. Net operating loss carryforwards
will expire through 2020.
F-10
<PAGE>
POSTERALLEY.COM, INC.
(A Development Stage Company)
Notes to Financial Statements
The valuation allowance will be evaluated at the end of each year,
considering positive and negative evidence about whether the asset will be
realized. At that time, the allowance will either be increased or reduced;
reduction could result in the complete elimination of the allowance if
positive evidence indicates that the value of the deferred tax asset is no
longer impaired and the allowance is no longer required.
Note D: Shareholders' equity (deficit)
On July 26, 1999, the Company issued 182,000 shares of its restricted
common stock to an attorney in exchange for legal services related to the
organization of the Company. The shares were valued at the fair value of
the services. On the transaction date, the Company's common stock had no
reliable fair value. Stock-based compensation expense of $182 was
recognized in the accompanying financial statements for the period ended
September 30, 1999. These shares are "restricted securities" and may be
sold only in compliance with Rule 144 of the Securities Act of 1933, as
amended.
During May and June of 2000, the Company conducted a private placement
offering of 500,000 shares of its $.0001 par value common stock for $.25
per share pursuant to an exemption from registration claimed under Rule 504
of Regulation D of the Securities Act of 1933, as amended. The Company
closed the offering after selling 501,200 shares. The Company received net
proceeds of $116,414 after deducting offering costs totaling $8,886.
The Company is committed to use the net proceeds from the offering
approximately as follows:
Application of Allocated
Net Proceeds Amount
---------------------------------------------------- ------------
Working capital..................................... $ 41,914
Acquisition of poster inventory..................... 24,000
Marketing........................................... 22,000
Purchase of computer equipment...................... 14,000
Filing Form 10-SB with the Securities
and Exchange Commission.......................... 8,000
Enhancement of Internet web site.................... 6,500
-----------
$ 116,414
F-11
<PAGE>
(OUTSIDE BACK COVER PAGE OF PROSPECTUS)
TABLE OF CONTENTS POSTERALLEY.COM, INC.
Item Page
PROSPECTUS SUMMARY................................... 2
The Company........................................ 2
The Offering....................................... 2 601,200 Shares of
Selected Financial Information..................... 2 Common Stock
__________________
RISK FACTORS......................................... 3
Risk Factors Related to Our Business................. 3
We Are a Development-Stage Company
with Limited Prior Business Operations............... 3
We Have Realized Very Little Revenue
and No Earnings...................................... 3
We Expect Significant Increases in Our
Costs and Expenses to Result in Continuing
Losses for at Least the Next Year.................... 4
We Have Limited Assets and Working
Capital and Minimal Shareholders' Equity............. 4
We Will Need to Raise Additional Funds
and These Funds May Not Be Available to
Us When We Need Them................................. 4
We May Not Succeed in Establishing the
Posteralley.com Brand, Which Would
Adversely Affect Customer Acceptance and
Our Revenues......................................... 5
We Depend on Our Ability to Build and
Maintain Relationships with Our Suppliers
to Obtain Sufficient Quantities of Quality
Merchandise on Acceptable Commercial
Terms................................................ 5
Our Systems and Operations, and Those of
Our Suppliers and Shippers, Are Vulnerable
To Natural Disasters and Other Unexpected
Problems............................................. 5
We Face the Risk of Systems Interruptions
and Capacity Constraints on Our Web Site,
Possibly Resulting in Losses of Revenue,
Erosion of Customer Trust and Adverse
Publicity............................................ 6
We Rely on the Services of Management,
Whose Knowledge of Our Business Is
Important to Our Continued Growth and
-42-
<PAGE>
Ultimate Success in the Market, But Whose
Time Commitment Is Limited........................... 6
We Must Enter into Strategic Relationships
To Help Promote Our Web Site and, if We
Fail to Develop, Maintain or Enhance These
Relationships, We May Not Be Able to
Attract and Retain Customers, Build our
Posteralley.com Brand and Enhance Our
Sales and Marketing Capabilities..................... 6
Our Executive Officers and Directors Have
Direct Conflicts of Interest as a Result of
Their Positions with Nicklebys.com and
Otherwise............................................ 7
We Have a Limited Number of Products
for Sale............................................. 7
The Success of Our Business Depends on
Attracting and Retaining a Large Number of
Potential Customers.................................. 7
Competition from Traditional and
Online Retailers May Result in Price
Reductions and Decreased Demand for Our
Products............................................. 7
We May Be Unable to Adequately Protect
Or Enforce Our Intellectual Property
Rights............................................... 8
Risks Related to Internet Commerce................... 8
We Depend on Continued Use of the
Internet, and if the Use of the Internet Does
Not Develop as We Anticipate, Our Sales
May Not Grow......................................... 8
Our Success Depends on the Willingness
of Consumers to Purchase Posters over the
Internet Instead of Through Traditional
Retailers............................................ 9
Our Reputation Could Be Harmed if We
Fail to Prevent Online Commerce Security
Breaches............................................. 9
We Must Respond to Rapid Technological
Changes to Bettter Serve Our Customers and
Meet Their Expectations.............................. 9
Governmental Regulation of the Internet
and Data Transmission Over the Internet
May Negatively Affect Our Customers and
Result in a Decrease in Demand for Our
Products, Which Would Cause a Decline in
Our Sales............................................ 9
-43-
<PAGE>
Risk Factors Related to This Offering................ 10
Our Management Will Continue to Control
Posteralley.com...................................... 10
There Is No Public Market for Our
Common Stock and the Offering Price is
Arbitrary............................................ 10
Our Stock Price Will Fluctuate After This
Offering Which May Result in Substantial
Losses for Investors................................. 10
The Proceeds of This Offering May be
Inadequate to Sustain Our Continued
Operation............................................ 11
A Total of 601,200 Shares, or 13.7%, of
Our Total Outstanding Shares After the
Offering Will Be Immediately Resaleable
Without Restriction and a Total of 3,782,000
Shares, or 86.3%, of Our Total
Outstanding Shares After the Offering
Are Restricted from Immediate Resale, But
May Be Sold into the Market Pursuant to
Rule 144............................................. 11
New Shareholders Will Incur Substantial
Dilution of Approximately $.47 Per Share as
a Result of This Offering............................ 11
DETERMINATION OF OFFERING
PRICE................................................ 11
ADDITIONAL INFORMATION............................... 12
DILUTION............................................. 12
USE OF PROCEEDS...................................... 14
BUSINESS............................................. 15
General............................................ 15
Inventory and Consigned Posters.................... 16
Online Retailing of Posters........................ 17
The Internet and Electronic Commerce............... 18
Marketing.......................................... 19
Fulfillment and Distribution....................... 19
Customer Service................................... 19
Technology and Network Operations.................. 20
Competition........................................ 21
Intellectual Property.............................. 22
Government Regulation.............................. 22
-44-
<PAGE>
Employees and Consultants.......................... 23
Facilities......................................... 23
Legal Proceedings.................................. 23
PLAN OF OPERATION.................................... 23
MANAGEMENT........................................... 25
Directors and Executive Officers................... 25
General............................................ 25
Family Relationships............................... 25
Business Experience................................ 26
Executive Compensation............................. 27
Compensation of Directors.......................... 28
Employment Agreements.............................. 28
Indemnification.................................... 28
Conflicts of Interest.............................. 28
PRINCIPAL SHAREHOLDERS............................... 29
SELLING SHAREHOLDERS................................. 30
CERTAIN TRANSACTIONS................................. 33
PLAN OF OFFERING..................................... 34
DESCRIPTION OF SECURITIES............................ 35
Description of Capital Stock....................... 35 __________________
Description of Common Stock........................ 35
Dividend Policy.................................... 35
Transfer Agent and Registrar....................... 35 PROSPECTUS
Description of Preferred Stock..................... 35 __________________
LEGAL MATTERS........................................ 36
EXPERTS.............................................. 36
Until __________ __, 2001 (90 days after the date this prospectus), all dealers
that effect transactions in these securities, whether or not participating in
this offering, may be required to deliver a prospectus. This is in addition to
the dealers' obligation to deliver a prospectus when acting as underwriters and
with respect to their unsold allotments or subscriptions.
<PAGE>
PART II - INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of Directors and Officers.
Article VII of our Articles of Incorporation includes provisions to
indemnify our officers and directors and other persons against expenses,
judgments, fines and amounts paid in settlement in connection with threatened,
pending or completed suits or proceedings against such persons by reason of
serving or having served as officers, director or in other capacities, except in
relation to matters with respect to which such persons shall be determined not
to have acted in good faith and in our best interests. Insofar as
indemnification for liabilities arising under the Securities Act of 1933, as
amended, may be permitted to our officers, directors or controlling persons
pursuant to the foregoing, we have been informed that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Securities Act of 1933, as amended, and is therefore
unenforceable.
Our Articles of Incorporation provide for (i) the elimination of directors'
liability for monetary damages for certain breaches of their fiduciary duties to
us and our shareholders as permitted by Colorado law; and (ii) permit the
indemnification by us to the fullest extent under Colorado law. At present,
there is no pending litigation or proceeding involving a director or officer of
Posteralley.com as to which indemnification is being sought.
Sections 7-109-101 through 7-109-110 of the Colorado Business Corporation
Act, as amended, provide for the indemnification of the officers, directors and
controlling persons of a corporation as follows:
Section 7-109-101 Definitions. As used in this article:
(1) "Corporation" includes and domestic or foreign entity that is a predecessor
of a corporation by reason of a merger or other transaction in which the
predecessor's existence ceased upon consummation of the transaction.
(2) "Director" means an individual who is or was a director of a corporation or
an individual who, while a director of a corporation, is or was serving at
the corporation's request as a director, an officer, and agent, and
associate, an employee, a fiduciary, a manager, a member, a partner, a
promoter, or a trustee of, or to hold any similar position with, another
domestic or foreign corporation or other person or of an employee benefit
plan. A director is considered to be serving an employee benefit plan at
the corporation's request if the director's duties to the corporation also
impose duties on, or otherwise involve services by, the director to the
plan or to participants in or beneficiaries of the plan. "Director"
includes, unless the context requires otherwise, the estate or personal
representative of a director.
(3) "Expenses" includes counsel fees.
(4) "Liability" means the obligation incurred with respect to a proceeding to
pay a judgment, settlement, penalty, fine, including an excise tax assessed
with respect to an employee benefit plan, or reasonable expenses.
-46-
<PAGE>
(5) "Official capacity" means, when used with respect to a director, the office
of director in a corporation and, when used with respect to a person other
than a director as contemplated in section 7-109-107, the office in a
corporation held by the officer or the employment, fiduciary, or agency
relationship undertaken by the employee, fiduciary, or agent on behalf of
the corporation. "Official capacity" does not include service for any other
domestic or foreign corporation or other person or employee benefit plan.
(6) "Party" includes a person who was, is, or is threatened to be made a named
defendant or respondent in a proceeding.
(7) "Proceeding" means and threatened, pending, or completed action, suit, or
proceeding, whether civil, criminal, administrative, or investigative and
whether formal or informal.
7-109-102. Authority to indemnify directors.
(1) Except as provided in subsection (4) of this section, a corporation may
indemnify a person made a party to a proceeding because the person is or
was a director against liability incurred in the proceeding if:
(a) The person conducted himself or herself in good faith; and
(b) The person reasonably believed:
(I) In the case of conduct in an official capacity with the
corporation, that his or her conduct was in the corporation's
best interest; and
(II) In all other cases, that his or her conduct was at least not
opposed to the corporation's best interests; and
(c) In the case of any criminal proceeding, the person had no reasonable
cause to believe his or her conduct was unlawful.
(2) A director's conduct with respect to an employee benefit plan for a purpose
the director reasonably believed to be in the interests of the participants
in or beneficiaries of the plan is conduct that satisfies the requirement
of subparagraph (II) of paragraph (b) of subsection (1) of this section. A
director's conduct with respect to an employee benefit plan for a purpose
that the director did not reasonably believe to be in the interests of the
participants in or beneficiaries of the plan shall be deemed not to satisfy
the requirements of paragraph (a) of subsection (1) of this section.
(3) The termination of a proceeding by judgment, order, settlement, conviction,
or upon a plea of nolo contendere or its equivalent is not, of itself,
determinative that the director did not meet the standard of conduct
described in this section.
(4) A corporation may not indemnify a director under this section:
-47-
<PAGE>
(a) In connection with any other proceeding by or in the right of the
corporation in which the director was adjudged liable to the
corporation; or
(b) In connection with any other proceeding charging that the director
derived an improper personal benefit, whether or not involving action
in an official capacity, in which proceeding the director was adjudged
liable on the basis that he or she derived an improper personal
benefit.
(5) Indemnification permitted under this section in connection with a
proceeding by or in the right of the corporation is limited to reasonable
expenses incurred in connection with the proceeding.
7-109-103. Mandatory indemnification of directors. Unless limited by its
articles of incorporation, a corporation shall indemnify a person who was wholly
successful, on the merits or otherwise, in the defense of any proceeding to
which the person was a party because the person is or was a director, against
reasonable expenses incurred by him or her in connection with the proceeding.
7-109-104. Advance of expenses to directors.
(1) A corporation may pay for or reimburse the reasonable expenses incurred by
a director who is a party to a proceeding in advance of final disposition
of the proceeding if:
(a) The director furnishes to the corporation a written affirmation of the
director's good faith belief that he or she has met the standard of
conduct described in section 7-109-102;
(b) The director furnishes to the corporation a written undertaking,
executed personally or on the director's behalf, to repay the advance
if it is ultimately determined that he or she did not meet the
standard of conduct; and
(c) A determination is made that the facts then known to those making the
determination would not preclude indemnification under this article.
(2) The undertaking required by paragraph (b) of subsection (1) of this section
shall be an unlimited general obligation of the director but need not be
secured and may be accepted without reference to financial ability to make
repayment.
(3) Determinations and authorizations of payments under this section shall be
made in the manner specified in section 7-109-106.
7-109-105. Court-ordered indemnification of directors.
(1) Unless otherwise provided in the articles of incorporation, a director who
is or was a party to a proceeding may apply for indemnification to the
court conducting the proceeding or to another court of competent
jurisdiction. On receipt of an application, the court, after giving any
notice the court considers necessary, may order indemnification in the
following manner:
-48-
<PAGE>
(a) If it determines that the director is entitled to mandatory
indemnification under section 7-109-103, the court shall order
indemnification, in which case the court shall also order the
corporation to pay the director's reasonable expenses incurred to
obtain court-ordered indemnification.
(b) If it determines that the director is fairly and reasonably entitled
to indemnification in view of all the relevant circumstances, whether
or not the director met the standard of conduct set forth in section
7-109-102 (1) or was adjudged liable in the circumstances described in
section 7-109-102 (4), the court may order such indemnification as the
court deems proper; except that the indemnification with respect to
any proceeding in which liability shall have been adjudged in the
circumstances described in section 7-109-102 (4) is limited to
reasonable expenses incurred in connection with the proceeding and
reasonable expenses incurred to obtain court-ordered indemnification.
7-109-106. Determination and authorization of indemnification of directors.
(1) A corporation may not indemnify a director under section 7-109-102 unless
authorized in the specific case after a determination has been made that
indemnification of the director is permissible in the circumstances because
the director has met the standard of conduct set forth in section
7-109-102. A corporation shall not advance expenses to a director under
section 7-109-104 unless authorized in the specific case after the written
affirmation and undertaking required by section 7-109-104 (1) (a) and (1)
(b) are received and the determination required by section 7-109-104 (1)
(c) has been made.
(2) The determination required by subsection (1) of this section shall be made:
(a) By the board of directors by a majority vote of those present at a
meeting at which a quorum is present, and only those directors not
parties to the proceeding shall be counted in satisfying the quorum;
or
(b) If a quorum cannot be obtained, by a majority vote of a committee of
the board of directors designated by the board of directors, which
committee shall consist of two or more directors not parties to the
proceeding; except that directors who are parties to the proceeding
may participate in the designation of directors for the committee.
(3) If a quorum cannot be obtained as contemplated in paragraph (a) of
subsection (2) of this section, and a committee cannot be established under
paragraph (b) of subsection (2) of this section, or, even if a quorum is
obtained or a committee is designated, if a majority of the directors
constituting such quorum or such committee so directs, the determination
required to be made by subsection (1) of this section shall be made:
-49-
<PAGE>
(a) By independent legal counsel selected by a vote of the board of
directors or the committee in the manner specified in paragraph (a) or
(b) of subsection (2) of this section or, if a quorum of the full
board cannot be obtained and a committee cannot be established, by
independent legal counsel selected by a majority vote of the full
board of directors; or
(b) By the shareholders.
(4) Authorization of indemnification and advance of expenses shall be made in
the same manner as the determination that indemnification or advance of
expenses is permissible; except that, if the determination that
indemnification or advance of expenses is permissible is made by
independent legal counsel, authorization of indemnification and advance of
expenses shall be made by the body that selected such counsel.
7-109-107.1 Indemnification of officers, employees, fiduciaries, and
agents.
(1) Unless otherwise provided in the articles of incorporation:
(a) An officer is entitled to mandatory indemnification under section
7-109-103, and is entitled to apply for court-ordered indemnification
under section 7-109-105, in each case to the same extent as a
director;
(b) A corporation may indemnify and advance expenses to an officer,
employee, fiduciary, or agent of the corporation to the same extent as
to a director; and
(c) A corporation may also indemnify and advance expenses to an officer,
employee, fiduciary, or agent who is not a director to a greater
extent, if not inconsistent with public policy, and if provided for by
its bylaws, general or specific action by its board of directors or
shareholders, or contract.
7-109-108. Insurance. A corporation may purchase and maintain insurance on
behalf of a person who is or was a director, officer, employee, fiduciary, or
agent of the corporation, is or was serving at the request of the corporation as
a director, officer, partner, trustee, employee, fiduciary, or agent of another
domestic or foreign corporation or other person or of an employee benefit plan,
against liability asserted against or incurred by the person in that capacity or
arising from his or her status as a director, officer, employee, fiduciary, or
agent, whether or not the corporation would have power to indemnify the person
against the same liability under section 7-109-102, 7-109-103, or 7-109-107. Any
such insurance may be procured from any insurance company designated by the
board of directors, whether such insurance company is formed under the laws of
this state or any other jurisdiction of the United States or elsewhere,
including any insurance company in which the corporation has an equity or any
other interest through stock ownership or otherwise.
7-109-109. Limitation of indemnification of directors.
-50-
<PAGE>
(1) A provision treating a corporation's indemnification of, or advance of
expenses to, directors that is contained in its articles of incorporation
or bylaws, in a resolution of its shareholders or board of directors, or in
a contract, except an insurance policy, or otherwise, is valid only to the
extent the provision is not inconsistent with sections 7-109-101 to
7-109-108. If the articles of incorporation limit indemnification or
advance of expenses, indemnification and advance of expenses are valid only
to the extent not inconsistent with the articles of incorporation.
(2) Sections 7-109-101 to 7-109-108 do not limit a corporation's power to pay
or reimburse expenses incurred by a director in connection with an
appearance as a witness in a proceeding at a time when he or she has not
been made a named defendant or respondent in the proceeding.
7-109-110. Notice to shareholders of indemnification of director. If a
corporation indemnifies or advances expenses to a director under this article in
connection with a proceeding by or in the right of the corporation, the
corporation shall give written notice of the indemnification or advance to the
shareholders with or before the notice of the next shareholders' meeting. If the
next shareholder action is taken without a meeting at the instigation of the
board of directors, such notice shall be given to the shareholders at or before
the time the first shareholder signs a writing consenting to such action.
Item 25. Other Expenses of Issuance and Distribution.
-------------------------------------------
The following is an itemized statement of the expenses incurred in
connection with this registration statement and the issuance and distribution of
the shares of common stock being registered hereby. All such expenses will be
paid by the Company.
Securities and Exchange Commission registration fee................... $ 100
NASD fee.............................................................. 505
Legal fees and expenses............................................... 15,834
Accounting fees and expenses.......................................... 2,488
Blue sky fees and expenses............................................ 500
Transfer agent fees and expenses...................................... 500
Printing, electronic filing and engraving expenses.................... 500
Miscellaneous expenses................................................ 73
----
TOTAL ................................................... $ 20,500
All of the above items except the Securities and Exchange Commission
registration and NASD fees are estimates.
Item 26. Recent Sales of Unregistered Securities.
----------------------------------------
Since July 19, 1999, the date of our inception, we have sold securities in
transactions summarized in the following subsections (1) and (2).
-51-
<PAGE>
(1)
<TABLE>
<CAPTION>
Number of Shares
Purchaser Date of Sale Consideration of Common Stock Sold
---------------------- ------------ --------------------- --------------------
<S> <C> <C> <C>
Scott M. Thornock 7/19/99 Services valued at $324 3,240,000
Bruce A. Capra 7/19/99 Services valued at $36 360,000
Cudd & Associates 7/26/99 Services valued at $182 182,000
</TABLE>
With respect to the sales described above, we relied upon Section 4(2) of
the Securities Act of 1933, as amended (the "Securities Act"), for transactions
by an issuer not involving any public offering, as an exemption from the
registration requirements of Section 5 of the Securities Act. Messrs. Thornock
and Capra and Ms. Cudd, the sole proprietor of Cudd and Associates, as the
President/Treasurer/director, Secretary/director and legal counsel,
respectively, of Posteralley.com, had access to information enabling them to
evaluate the merits and risks of the transaction on the date of sale.
Furthermore, Ms. Cudd, had a pre-existing personal and business relationship
with Messrs. Thornock and Capra and, by reason of her business and financial
experience, had the capacity to protect her own interests in connection with the
transaction. Messrs. Thornock and Capra and Ms. Cudd represented in writing that
they acquired the securities for investment for their own account and not with a
view to distribution. Stop transfer instructions have been issued to our
transfer agent with respect to the securities, and the transfer agent has been
instructed to issue the certificates representing the securities bearing a
restrictive investment legend. Each purchaser signed a written agreement stating
that the securities will not be sold except by registration under the Securities
Act or pursuant to an exemption therefrom.
(2) During the period from May 8 through June 28, 2000, we issued and sold
an aggregate of 501,200 shares of common stock to a total of fifty-three
persons, all of whom are residents of either the State of California, Colorado
or Illinois, for cash consideration totaling $125,300. With respect to these
sales, we relied upon the exemption from registration with the U.S. Securities
and Exchange Commission provided under Section 3(b) of the Securities Act, and
Rule 504 of Regulation D promulgated thereunder, and upon Section 25102(f) of
the California Corporations Code, as amended, Section 11-51-308(1)(p) of the
Colorado Securities Act, as amended, and Section 4.G. of the Illinois Securities
Law of 1953, as amended. No underwriter was employed in connection with the
offering and sale of the shares. The facts relied upon by us to make the Federal
exemption available include, among others, the following: (i) the aggregate
offering price for the offering of the shares of common stock did not exceed
$1,000,000, less the aggregate offering price for all securities sold within the
twelve months before the start of and during the offering in reliance on any
exemption under Section 3(b) of, or in violation of Section 5(a) of, the 1933
Act; (ii) the required number of manually executed originals and true copies of
Form D were duly and timely filed with the U.S. Securities and Exchange
Commission; (iii) no general solicitation or advertising was conducted by
Posteralley.com in connection with the offering of any of the shares; and (iv)
the fact that we have not been since our inception (a) subject to the reporting
requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as
amended; (b) an "investment company" within the meaning the Investment Company
Act of 1940, as amended; or (c) a development stage company that either has no
specific business plan or purpose or has indicated that our business plan is to
engage in a merger or acquisition with an unidentified company or companies, or
other entity or person.
-52-
<PAGE>
Item 27. Exhibits.
The following Exhibits are filed as part of this registration statement on Form
SB-2.
Item Number Description
(3.1)* Articles of Incorporation of Posteralley.com, Inc.,
filed July 19, 1999.
(3.2)* Bylaws of Posteralley.com, Inc.
(4)* Form of stock certificate.
(5) Opinion and Consent of Cudd & Associates.
(10)* Fund Escrow Agreement.
(23.1)* Consent of Cordovano & Harvey, P.C., independent auditors.
(23.2) Consent of Cudd & Associates (included in Exhibit (5)
hereto).
-----------------------
*Filed herewith.
Item 28. Undertakings.
(a) The undersigned small business issuer will:
(1) File, during any period in which it offers or sells securities, a
post-effective amendment to this registration statement to:
(i) Include any prospectus required by section 10(a)(3) of the
Securities Act of 1933, as amended (the "Securities Act");
(ii) Reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in
the information in the registration statement; and
notwithstanding the foregoing, any increase or decrease in
volume of securities offered (if the total dollar value of
securities offered would not exceed that which was
registered) and any deviation from the low or high end of
the estimated maximum offering range may be reflected in the
form of prospectus filed with the Commission pursuant to
rule 424(b) (ss.230.424(b) of this chapter) if, in the
aggregate, the changes in the volume and price represent no
more than a 20% change in the maximum aggregate offering
price set forth in the "Calculation of Registration Fee"
table in the effective registration statement.
-53-
<PAGE>
(iii)Include any additional or changed material information on
the plan of distribution.
(2) For determining liability under the Securities Act, treat each
post-effective amendment 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.
(3) File a post-effective amendment to remove from registration any
of the securities that remain unsold at the end of the offering.
(e) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling
persons of the small business issuer pursuant to the foregoing
provisions, or otherwise, the small business issuer has been advised
that in the opinion of the Securities and Exchange 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 small business issuer of expenses incurred or paid by a
director, officer or controlling person of the small business issuer
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 small business issuer 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 such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the
final adjudication of such issue.
SIGNATURES
Pursuant to 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 for filing on Form SB-2 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized in the City of Denver, State of Colorado, on December 28, 2000.
Date: December 28, 2000 POSTERALLEY.COM.COM, INC.
By: /s/ Scott M. Thornock
-------------------------
Scott M. Thornock, President and Treasurer
-54-
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Mr. Scott M. Thornock or Mr. Bruce A. Capra, or
either one of them, his true and lawful attorney-in-fact and agent, with full
power of substitution and resubstitution, for him and in his name, place and
stead, in any and all capacities, to sign any and all pre- or post-effective
amendments to this registration statement, and to file the same with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite or necessary to be done in and about the premises,
as fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or either
of them, or their or his substitutes, may lawfully do or cause to be done by
virtue hereof.
In accordance with the requirements of the Securities Act of 1933, this
registration statement was signed by the following persons in the capacities and
on the dates stated.
Date: December 28, 2000
/s/ Scott M. Thornock
-------------------------------------------
Scott M. Thornock, President, Treasurer and
Director (Principal Executive Officer)
Date: December 28, 2000
/s/ Bruce A. Capra
--------------------------------------
Bruce A. Capra, Secretary and Director
-55-
<PAGE>
EXHIBIT INDEX
The following Exhibits are filed as part of this registration statement on
Form SB-2.
Item Number Description
(3.1)* Articles of Incorporation of Posteralley.com, Inc.,
filed July 19, 1999.
(3.2)* Bylaws of Posteralley.com, Inc.
(4)* Form of stock certificate.
(5) Opinion and Consent of Cudd & Associates.
(10)* Fund Escrow Agreement.
(23.1)* Consent of Cordovano & Harvey, P.C., independent auditors.
(23.2) Consent of Cudd & Associates (included in Exhibit (5)
hereto).
------------------
*Filed herewith.
-56-
<PAGE>
