As filed with the Securities and Exchange Commission on May 5, 2000
Registration No. 333-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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Form SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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Sunrise Software Systems, Inc.
(Name of small business issuer in our charter)
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Texas 6770 75-2589397
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(State of jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
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753 Bandit Trail
Fort Worth, Texas 76180
(817) 577-4726
(Address, including zip code, and telephone number,
including area code, of registrant's
principal executive offices)
Bonita S. Clifton, President
753 Bandit Trail
Fort Worth, Texas 76180
(817) 577-4726
(Address, including zip code, and telephone number, including area
code, of registrant's principal executive offices and name, address
and telephone number of agent for service)
Copies of Communications to:
Kevin S. Woltjen, P.C.
900 Jackson Street, Suite 600
Dallas, Texas 75202
Telephone: 214-712-5673
Facsimile: 214-712-5674
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this registration statement.
If this Prospectus is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, please check the
following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering. [ ]
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If this Prospectus 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 Prospectus 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. [ ]
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
Title of each class of securities Amount of Proposed Amount of
to be registered securities to be maximum registration
registered at aggregate fee
$0.10 per share offering price
- -------------------------------------------- ----------------------- ------------------------- ----------------------
<S> <C> <C> <C>
Common stock, no par value, 1,000,000 $100,000 26.40
per share
============================================ ======================= ========================= ======================
</TABLE>
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant will file a
further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
SUBJECT TO COMPLETION DATED ______________, 2000
Prospectus
1,000,000 SHARES
SUNRISE SOFTWARE SYSTEMS, INC.
COMMON STOCK
The information in this Prospectus is not complete and may be changed. 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.
The delivery of this Prospectus or a sale of the mentioned securities shall not
create an implication that there has been any change in the information in this
Prospectus. If a material change does occur, however, this Prospectus will be
amended or supplemented accordingly for all existing shareholders and
prospective investors.
Our common stock has never been traded or been quoted over-the-counter or on any
exchange.
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We were incorporated as Sunrise Software Systems, Inc. to design and develop
computer software to assist specialized professionals and businesses in
operating their businesses more efficiently. We are no longer actively involved
in the design and development of computer software and have had limited
operations to date. We are therefore a blank check company as defined in Rule
419 of Regulation C as promulgated by the Securities and Exchange Commission
under the Securities Act of 1933, as amended.
This Prospectus relates to our offer and sale of a maximum of 1,000,000 shares
of our common stock, no par value. Because we are a blank check company, this
offering is subject to the provisions of Rule 419. Accordingly, the offering
proceeds and the securities purchased by investors, less 10% of the deposited
funds which will be delivered to us as permitted by Rule 419, will be held in an
escrow account subject to the satisfaction of the provisions of Rule 419.
The funds and securities deposited into the escrow account may not be released
until an acquisition meeting certain specified criteria has been made and a
sufficient number of investors reconfirm their investment accordingly. Pursuant
to Rule 419, a new prospectus or Re-Offer Prospectus describing the acquisition
candidate and its business and including audited financial statements, will be
delivered to all investors prior to consummation of an acquisition. Unless a
sufficient number of investors (sufficient in number to permit an acquisition of
a business or asset having a value of 80% of the maximum offering proceeds)
elect to remain investors, all investors will be entitled to the return of a
pro-rata portion of the deposited funds (and any interest earned or dividends
paid thereon) and none of the deposited securities will be issued to investors.
If a sufficient number of investors elect to remain investors, the acquisition
described in the Re-Offer Prospectus will be consummated; however, we must
return the pro-rata portion of the deposited funds (and any interest earned or
dividends paid thereon) to any investor who does not elect to remain an
investor. In the event an acquisition is not consummated within 18 months of the
effective date of the Registration Statement of which this Prospectus is a part,
the deposited funds (and any interest earned or dividends paid thereon) will be
returned to investors.
See "Investors' Rights and Substantive Protection under Rule 419."
These securities are highly speculative, involve a high degree of risk and
immediate substantial dilution. See "Risk Factors" beginning on page 12. Neither
the Securities and Exchange Commission nor any state securities commission has
approved or disapproved these securities or determined if this Prospectus is
truthful or complete. Any representation to the contrary is a criminal offense.
The Shares are being offered directly by us on a best efforts basis. See
"Distribution of Securities." All offers and sales of Shares shall be effected
only by our officers and directors who are not required to register as
broker/dealers and each is permitted to offer securities under applicable local
law. See "Risk Factors."
PROHIBITION AGAINST SELLING DEPOSITED SECURITIES
No public trading market for the common stock exists. Rule 15g-8 under the
Exchange Act makes it unlawful for any person to sell or offer to sell the
securities deposited in an escrow account (or any interest in or related to the
deposited securities). Thus, investors are prohibited
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from making any arrangements to sell the deposited securities until they are
released from the escrow account. Additionally, no shares of the common stock
can be effected during the term of the Rule 419 escrow.
We have no present plans, proposals, arrangements or understandings with any
person with regard to the development of a trading marking for the common stock
offered hereby. Management does not intend to undertake any efforts to cause a
market to develop in the common stock until such time as we have successfully
implemented our business plan described herein. There can be no assurance that
any trading market in the Shares will develop hereafter, or if it does develop,
that it will be sustained.
The public offering price has been arbitrarily determined by us and bears no
relationship to our assets, prospective earnings, book value or any other
recognized criteria of value. This offering will be conducted by us without the
use of a professional underwriter or securities dealer. See "Risk Factors" and
"Distribution of Securities."
STATE SECURITIES REGULATION
This Prospectus does not constitute an offer to sell or a solicitation of any
offer to buy any of these securities in a jurisdiction where it is unlawful to
make such an offer or solicitation in such jurisdiction.
We intend to offer and sell shares only in the states of Colorado, Minnesota,
North Dakota and Texas, to the extent and pursuant to their respective
registration requirements or limited offering exemptions. The shares are offered
by us subject to prior sale, acceptance of an offer to purchase, withdrawal,
cancellation or modification of the offer, without notice. We reserve the right
to reject any offer in whole or in part, for the purchase of any of the shares
offered hereby.
In order to subscribe for Shares, a Subscription Application and a check made
payable to Charter Escrow as escrow agent, must be submitted to us at 753 Bandit
Trail, Fort Worth, Texas 76180.
AVAILABLE INFORMATION
We intend to furnish to our stockholders annual reports containing financial
statements audited and reported upon by our independent public accounting firm
and intend to make available quarterly reports for the first three quarters of
each fiscal year containing unaudited financial information.
We have filed with the Securities and Exchange Commission (the "Commission") a
Registration Statement on Form SB-2 (the "Registration Statement") under the
Securities Act with respect to the Shares. This Prospectus does not contain all
of the information set forth in the Registration Statement, certain parts of
which are omitted in accordance with the rules and regulations of the
Commission. For further information with respect to us and this offering,
reference is made to the Registration Statement, including the exhibits filed
therewith, which may be examined at the Commission's principal office 450 Fifth
Street, N.W., Washington, D. C. 20549, where copies may be obtained upon payment
of the fees prescribed by the Commission. Descriptions
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contained in this Prospectus as to the contents of any contract or other
documents filed as an exhibit to the Registration Statement are not necessarily
complete and each such description is qualified by reference to such contract or
document. We will provide without charge to each person who receives a
Prospectus, upon written request of such person, a copy of any of the
information that is incorporated by reference in the Prospectus.
All offerees and subscribers will be asked to acknowledge in the subscription
agreement that they have read this Prospectus carefully and thoroughly, they
were given the opportunity to obtain additional information; and they did so to
their satisfaction.
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TABLE OF CONTENTS
PROSPECTUS SUMMARY.............................................................8
ABOUT OUR COMPANY..............................................................8
INVESTORS' RIGHTS AND SUBSTANTIVE PROTECTION UNDER RULE 419...................10
RISK FACTORS..................................................................12
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS ............................21
USE OF PROCEEDS...............................................................22
MARKET PRICE FOR OUR COMMON STOCK.............................................22
DIVIDENDS.....................................................................23
BUSINESS......................................................................23
MANAGEMENT'S DISCUSSION AND ANALYSIS AND RESULTS OF OPERATION.................25
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE..........................................................27
MANAGEMENT....................................................................27
EXECUTIVE COMPENSATION........................................................28
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS................................29
PRINCIPAL STOCKHOLDERS........................................................30
PLAN OF DISTRIBUTION..........................................................31
DESCRIPTION OF SECURITIES.....................................................31
LEGAL MATTERS.................................................................32
EXPERTS.......................................................................32
WHERE YOU CAN FIND MORE INFORMATION...........................................32
TRANSFER AGENT AND ESCROW AGENT...............................................33
FINANCIAL STATEMENTS..........................................................33
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS...................................34
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS...................34
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION....................34
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.....................35
ITEM 27. EXHIBITS....................................................35
ITEM 28. UNDERTAKINGS................................................36
SIGNATURES....................................................................38
POWER OF ATTORNEY.............................................................38
INDEX TO EXHIBITS.............................................................39
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PROSPECTUS SUMMARY
This summary contains basic information about us and the offering. Because it is
a summary, it does not contain all the information that you should consider
before investing. You should read the entire Prospectus carefully, including the
risk factors beginning on page 12 and our financial statements and the notes to
those statements appearing elsewhere in this Prospectus and the information
under "Selected Financial Data" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations." Except as otherwise required by
the context, references in this Prospectus to "we," "our" and "us" refer to
Sunrise Software Systems, Inc.
ABOUT OUR COMPANY
Sunrise Software Systems, Inc., a Texas corporation, was incorporated under the
laws of the State of Texas on March 10, 1995 to engage in the design and
development of computer software focusing on the needs of professional writers,
various collectors, entertainers and restaurant owners. Due to lack of
profitability, we are no longer actively involved in the design and development
of computer software and are a development stage company that has no specific
business plan or purpose or has indicated that its business plan is to engage in
a merger or acquisition with an unidentified company or companies, or other
entity or person.
We intend to effect a merger, exchange of capital stock, asset acquisition or
other similar business combination or acquisition with a business entity which
has not yet been identified. Other than general corporate activities, including
but not limited to the negotiation and consummation of a business combination,
we will not engage in any substantive commercial business immediately following
this blank check offering until such time as we have effected a business
combination.
We have no plan, proposal, agreement, understanding or arrangement to acquire or
merge with any specific business or company. We have not identified any specific
business or company for investigation and evaluation.
Our executive offices are located at 753 Bandit Trail, Fort Worth, Texas 76180,
and our telephone number is (817) 577-4726.
The Offering
The offering is being conducted as a blank check offering in accordance with
Rule 419. A maximum of 1,000,000 Shares are being offered for sale hereby at a
price of $0.10 per Share. The Shares are being offered on a best efforts basis.
To subscribe for Shares, a Subscription Application and a check made payable to
Charter Escrow as escrow agent, should be forwarded to us at 753 Bandit Trail,
Fort Worth, Texas 76180. All offers and sales of Shares will be only to
residents of the states of Colorado, Minnesota, North Dakota, and Texas, if the
shares are registered, or exempt from registration, in such states. Offers and
sales of shares shall be effected only by our officers and directors who are not
required to register as broker/dealers and are permitted to offer securities
under applicable local law. No one shall receive any
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compensation for services in connection with the sales of Shares. Our officers
and directors may, but are not obligated to, purchase shares in this offering.
There are 2,776,200 shares of common stock issued and outstanding. Upon
completion of this offering, there will be 3,776,200 shares of Common Stock
issued and outstanding.
At the completion of this offering, our present shareholder(s) will own
approximately 73% of the then outstanding shares if the maximum number of Shares
is sold and assuming they do not acquire any Shares in the offering.
We may, in our sole discretion, terminate the offering at any time prior to the
sale of the maximum number of shares.
Rule 419
We are conducting the offering as a blank check offering subject to Rule 419.
Under Rule 419, securities sold by us and funds paid for such securities, will
be deposited and held in a Rule 419 escrow until an acquisition meeting specific
criteria is completed. Before the acquisition can be completed and before the
deposited funds and deposited securities can be released from escrow, we are
required to amend the registration statement of which this Prospectus is part,
with a post-effective amendment, and, within the 5 days after the effective date
thereof, furnish investors with this post-effective amendment containing the
terms of a reconfirmation offer (the "Reconfirmation Offer") and information
regarding the proposed acquisition candidate and its business, including audited
financial statements.
Pursuant to Rule 419, an investor must have no fewer than 20 and no more than 45
business days from the effective date of the post-effective amendment to decide
to reconfirm his investment and remain an investor or alternatively, require the
return of his investment (plus any interest earned or dividends paid thereon),
less any amounts delivered to us as permitted under Rule 419. Any investor not
making any decision within said 45 day period will automatically have his
investment funds returned within 5 business days. Rule 419 further provides that
if we do not complete an acquisition meeting the specified criteria within 18
months of the effective date, all of the deposited funds (and any interest
earned or dividends paid thereon) in the Rule 419 escrow must be returned to
investors within 5 business days. If the offering period is extended to its
limit (180 days), we will have only 12 months in which to consummate a merger or
acquisition.
Determination of Offering Price
The offering price of $0.10 per Share has been arbitrarily determined by us.
This price bears no relation to our assets, book value, or any other customary
investment criteria, including our prior operating history. Among the factors
considered by us in determining the offering price were estimates of our
business potential, our limited financial resources, the amount of dilution to
public investors and the general conditions of the securities market.
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INVESTORS' RIGHTS AND SUBSTANTIVE PROTECTION UNDER RULE 419
Pursuant to Rule 419, the deposited funds, after deduction of 10% of the
offering proceeds which will be delivered to us, and the deposited securities
are to be deposited into and held in the Rule 419 Escrow Account ("Escrow"). The
Escrow is governed by an agreement which contains certain terms and provisions
specified by the Rule 419. Under Rule 419, the deposited funds and deposited
securities will be released to us and to the investors, respectively, only after
we have:
(1) Executed an agreement for the consummation of a business combination
meeting certain prescribed criteria; and
(2) Filed a post-effective amendment to this Registration Statement which
includes the terms of a Reconfirmation Offer, and other prescribed
information regarding the acquired business including audited financial
statements; and
(3) Conducted the Reconfirmation Offer in accordance with the provisions of
Rule 419 and the requisite number of investors (sufficient in number to
permit an acquisition of a business or asset having a value of 80% of
the maximum offering proceeds) have elected to remain stockholders. In
the event, the foregoing conditions are satisfied we will submit a
signed representation to the escrow agent that the requirements of Rule
419 have been satisfied and that the business combination has been (or
is being) consummated. The escrow agent can then release the deposited
funds and deposited securities.
Accordingly, we have entered into an escrow agreement which provides, among
other things, that:
(1) All funds raised in the offering be deposited into the Rule 419 Escrow
maintained by the escrow agent, Charter Escrow, promptly upon receipt
of such funds. The deposited funds and interest or dividends thereon,
if any, are to be held for the sole benefit of the investors, except
for the 10% we will receive, and shall only be invested in bank
deposits, in money market mutual funds or federal government securities
or securities for which the principal or interest is guaranteed by the
federal government.
(2) All Shares and any other securities issued during the escrow period,
with respect to such Shares, including securities issued with respect
to stock splits, stock dividends or similar rights, are to be deposited
directly into the Rule 419 Escrow promptly upon issuance. The identity
of the investors are to be included on the stock certificates or other
documents evidencing the deposited securities. The deposited securities
held in the Rule 419 Escrow are to remain as issued and deposited and
are to be held for the sole benefit of the investors who retain the
voting rights, if any, with respect to the deposited securities held in
their names. The deposited securities held in the Rule 419 Escrow may
not be transferred, disposed of nor any interest created therein other
than by will or the laws of descent and distribution, or pursuant to a
court order issued in conjunction with or as part of a divorce
judgment.
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Prescribed Acquisition Criteria
Rule 419 requires that we must execute an agreement to acquire an acquisition
candidate(s) meeting specified criteria before the deposited funds and the
deposited securities be released. The agreement(s) must provide for the
acquisition(s) of a business(es) or assets for which the fair value of the
business or net assets represents at least 80% of the maximum offering proceeds,
but excluding underwriting commissions, underwriting expenses, dealer allowances
payable to non-affiliates and amounts permitted to be delivered to us. The
agreement(s) must include, as a condition precedent to their consummation, a
requirement that a sufficient number of investors confirm their investment so as
to permit consummation of a business combination satisfying the criteria of Rule
419.
Post Effective Amendment
Once the agreement governing a business combination meeting the above criteria
has been executed, we must update the registration statement with a
post-effective amendment. The post-effective amendment must contain information
required by the applicable registration form concerning the acquired business
including our financial statements and the acquired business as required
thereby, the results of this offering, and the use of the funds disbursed from
the Rule 419 Escrow. The post-effective amendment must also include the terms of
the Reconfirmation Offer. The Reconfirmation Offer must include certain
prescribed conditions which must be satisfied before the deposited funds and
deposited securities can be released from the Escrow.
Reconfirmation Offer
The Reconfirmation Offer must commence within five (5) business days after the
effective date of the post-effective amendment. The Reconfirmation Offer must
provide:
(1) A copy of the prospectus contained in the post-effective amendment
which must be sent to each investor whose securities are held in the
Rule 419 Escrow within 5 business days after the effective date of the
post-effective amendment.
(2) Each investor with no fewer than 20 and no more than 45 business days
from the effective date of the post-effective amendment to notify us in
writing that the investor elects to remain an investor.
(3) That the pro-rata portion of the deposited funds (and any related
interest or dividends) held in Escrow on such investor's behalf be
returned to the investor within 5 business days by first class mail or
other equally prompt means if we do not receive written notification
from an investor within 45 business days following the effective date.
(4) That the business combination may be consummated only if a sufficient
number of investors (sufficient in number to permit an acquisition of a
business or asset having a value of 80% of the maximum offering
proceeds) elect to reconfirm their investment.
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(5) That if a business combination is not consummated within 18 months
after the effective date of the initial registration statement, the
deposited funds and any related interest or dividends held in the Rule
419 Escrow be returned to all investors on a pro- rata basis within 5
business days by first class mail or other equally prompt means and the
Deposited Securities will be returned to us.
Release of Deposited Securities and Deposited Funds
The deposited funds may be released to us and the shares released to investors
after:
(a) we have executed an agreement for a business combination for
which the fair value of the business represents at least 80%
of the maximum offering proceeds and have filed the required
post-effective amendment;
(b) the post-effective amendment has been declared effective, the mandated
Reconfirmation Offer having the conditions prescribed by Rule 419 has
been completed and we have satisfied all of the prescribed conditions
of the Reconfirmation Offer;
(c) a sufficient number of investors (sufficient in number to permit an
acquisition of a business or asset having a value of 80% of the maximum
offering proceeds) have reconfirmed their investments; and
(d) the business combination described in paragraph (a) above has been
consummated.
If an investor elects not to reconfirm an investment, his subscription amount
(less any amount permitted to be and actually delivered to us) plus any interest
earned thereon will be returned to such investor. If a business combination is
not consummated within 18 months of the date of the Prospectus, his subscription
amount (less any amount permitted to be and actually delivered to us) together
with interest earned thereon will be returned to each investor in accordance
with his subscription agreement.
RISK FACTORS
An investment in our common stock is highly speculative and involves a high
degree of risk. Therefore, you should carefully consider all of the risk factors
discussed below, as well as the other information contained in this document.
You should not invest in our common stock unless you can afford to lose your
entire investment and you are not dependent on the funds you are investing. The
following risk factors are interrelated and, consequently, investors should
treat such risk factors as a whole.
Risk Factors Specific To Our Operations
Our Limited Operating History Can Provide No Assurances of Future Success.
We were incorporated to engage in the design and development of software for
specialized professionals and businesses. We are no longer involved in the
design and development of
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software and have had limited operations to date. As a result, we are in the
early formative and development stage. Potential investors should be aware of
the difficulties normally encountered by a new enterprise. There is nothing at
this time upon which to base an assumption that our business plan will prove
successful, and there is no assurance that we will be able to operate
profitably. We have limited resources and have had no revenues to date.
No Agreement for a Business Combination or Other Transaction Exists and There
Can Be No Assurance That We Will Find One.
We have no arrangement, agreement or understanding with respect to engaging in a
merger with, joint venture or acquisition of a private entity. There can be no
assurance we will be successful in identifying and evaluating suitable business
opportunities or in concluding a business combination. Management has not
identified any particular industry or specific business within an industry for
evaluations.
The Speculative Nature of Our Proposed Operations makes an Evaluation of Us Very
Difficult.
The success of our proposed plan of operation will depend to a great extent on
the operations, financial condition and management of the identified business
opportunity. While management intends to seek business combinations with
entities having established operating histories, there can be no assurance that
we will be successful in locating candidates meeting such criteria. In the event
we complete a business combination, of which there can be no assurance, the
success of our operations may be dependent upon management of the successor firm
or venture partner firm and numerous other factors beyond our control.
We Have Not Identified the Existence of Demand for Public Merger or Acquisition
Candidates, Which Precludes Assurances That Our Business Will Succeed.
We have not identified that a market exists for companies seeking to merge or
acquire unidentified business entities. We have neither conducted nor received
from others any results of market research concerning the feasibility of a
business combination with an unidentified business. Therefore, management has no
assurance that market demand exists for an acquisition or merger.
Competition for Business Opportunities and Combinations May Be Fierce and
Prevent the Execution of Our Merger/Acquisition Goals.
We are and will continue to be an insignificant participant in the business of
seeking mergers with, joint ventures with and acquisitions of small private
entities. A large number of established and well-financed entities, including
venture capital firms, are active in mergers and acquisitions of companies which
may be desirable target candidates for us. Nearly all such entities have
significantly greater financial resources, technical expertise and managerial
capabilities than us and, consequently, we will be at a competitive disadvantage
in identifying possible business opportunities and successfully completing a
business combination. Moreover, we will also
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compete in seeking merger or acquisition candidates with numerous other small
public companies.
Management's Discretionary Use of Proceeds Prevents a Meaningful Review of the
Usages of Funds We Seek to Raise from this Offering.
Although substantially all of the net proceeds of this offering are intended
generally to be applied toward effecting a business combination, such proceeds
are not otherwise being designated for any more particular purposes.
Accordingly, prospective investors will invest in us without an opportunity to
evaluate the specific merits or risks of any one or more business combinations.
There can be no assurance that determinations ultimately made by us relating to
the specific allocation of the net proceeds of this offering will permit us to
achieve our business objectives.
As We May Merge With Operations in Foreign Countries, a Meaningful Review of
Operational Risks Abroad Is Not Possible.
Our business plan is to seek to acquire or merge with potential businesses that
may, in the opinion of Management, warrant our involvement. Management's
discretion is unrestricted, and we may participate in any business whatsoever
that may in the opinion of Management meet the business objectives discussed
herein. Therefore, we may effectuate a Business Combination with another
business outside the United States. We have not limited the scope of our search
to a particular region or country. Accordingly, to the extent that the acquired
business may be located or operate in a foreign jurisdiction, our operations may
be adversely affected to the extent of the existence of unstable economic,
social and/or political conditions in such foreign regions and countries.
Our Proposed Operations, Even if Successful, Will Likely Result in Engaging in a
Business Combination With Only One Business Opportunity, Which Will Prevent
Diversification of Risk.
Our proposed operations, even if successful, will likely result in engaging in a
business combination with only one business entity. Our activities will be
limited to those of the business entity with which we merge or acquire. Our
inability to diversify our activities into a number of areas may subject us to
economic fluctuations within a particular business or industry and therefore
increase the risks associated with our operations.
We Are Highly Dependent on Our Executive Officers, the Loss of Any of Whom Could
Have an Adverse Impact on Our Future Operations.
We are largely dependent upon the personal efforts of Bonita S. Clifton and
David Clifton for the successful implementation of our business plan and the
execution of our planned merger and/or acquisition operations. The loss of
either of these persons could have a material adverse effect upon our business
and prospects. We do not presently have key-man life insurance upon the life of
any of our officers, directors or key personnel.
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General Liability Exposure.
We do not carry a general liability insurance policy.
Casualty Loss Exposure.
We do not possess any property casualty insurance for our office facility
located at the home of our President, Bonita S. Clifton, though she maintains
homeowners insurance on the property.
Although a Change of Control May Occur, We Do Not Know Who Will Assume Control.
In the event that we effect a business combination by issuing additional common
stock, our present stockholders may no longer have control. The successful
completion of this transaction could result in a change in our control due to
the issuance of a large percentage of our authorized but unissued securities or
the sale by the present stockholders of all or a portion of their stock or a
combination thereof. Although we have no present plans, understandings or
arrangements with respect to any business combination, the successful completion
of such a transaction could result in a change in our control. This could result
from the issuance of a large percentage of our authorized securities or the sale
by the present stockholders of all or a portion of their stock or a combination
thereof. Any change in control may also result in the resignation or removal of
our present officers and directors. Since we do not know who may acquire
control, we cannot present possible managerial replacements or risks associated
with them.
To the Extent the IRS or State Tax Authorities Ultimately Prevail in
Recharacterizing the Tax Treatment of a Business Combination, There May Be
Adverse Tax Consequences to Us, the Acquired Business and their Respective
Stockholders.
As a general rule, federal and state tax laws and regulations have a significant
impact upon the structuring of business combinations. We will evaluate the
possible tax consequences of any prospective business combination and endeavor
to structure a business combination to achieve the most favorable tax treatment
to us, the acquired business and their respective stockholders. There can be no
assurance, however, that the Internal Revenue Service or appropriate state tax
authorities will ultimately assent to our tax treatment of a consummated
business combination.
We Will Be Required to Satisfy Reporting Requirements, Including Unaudited
Financial Statements, Which May Delay, Hinder or Preclude Acquisition.
We intend to become subject to Section 13 of the Securities Exchange Act of
1934, which requires disclosure of certain information about significant
acquisitions, including financial statements for the company acquired. Any
potential business opportunity must provide audited financial statements for
review before we will evaluate it as a merger or acquisition candidate. The time
and additional costs that may be incurred to prepare such information may
significantly delay or essentially preclude consummation of an otherwise
desirable acquisition. Acquisition prospects that do not have or are unable to
obtain the required information may become disinterested in us as a result of
these requirements.
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Our Capital Requirements May Require Additional Financing Which May Not Be
Available.
We anticipate having sufficient working capital to satisfy our operating expense
for a period of at least 18 months. However, no assurance may be given that the
proceeds from the offering will be sufficient to allow us to realize our goals
and engage in a business venture chosen by our management. If our cash resources
prove to be insufficient, we may be required to seek additional debt or equity
financing to fund the costs of continuing operations until we achieve positive
cash flow. We have no current commitments or arrangements for additional
financing and there can be no assurance that any additional debt or equity
financing will be available to us on acceptable terms, or at all.
We May Acquire a Business With Obligations Requiring Additional Financing.
An acquired business may already have previously incurred debt or equity
financing which it may not be able to satisfy. Such an entity would require an
infusion of capital we might not be able to satisfy.
The Possible Need To Finance an Acquired Business May Severely Impair Our
Operations.
As we have not identified any prospective acquired business candidates, it is
possible that we may engage in a business combination with an entity which
requires additional financing. To the extent we engage in a business combination
with an entity requiring additional financing, such additional financing (which
could be derived from the public or private offering of other securities or from
the acquisition of debt through conventional bank financing), may not be
available, due to, among other things, this acquired entity having insufficient
(i) credit or operating history; (ii) income stream; (iii) profit level; (iv)
asset base eligible to be collateralized; or (v) market for its securities.
We Do Not Face Limits in Pursuing Debt Financing Options.
There are currently no limitations on our ability to borrow funds to effect a
business combination or finance the operations of any acquired business. The
amount and nature of any attempted borrowings by us will depend on numerous
factors, including our capital requirements, our perceived ability to meet debt
services on any such borrowings, and then-prevailing conditions in the financial
markets as well as general economic conditions. There can be no assurance that
debt financing, if required or otherwise sought, will be available on terms
deemed to be commercially acceptable or in our best interest.
Our Cash Position May Not Support Any Debt Financing Obligations.
To the extent that debt financing ultimately proves to be available, any
borrowings may subject us to various risks traditionally associated with
incurring of indebtedness, including a risk of default, foreclosure,
acceleration of indebtedness, interest rate fluctuations, demand for payment at
times of low cash reserves, and the possible need to seek other financing to
satisfy previous financing requirements.
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The Possible Issuance of Additional Shares May Reduce the Ownership and Voting
Power of the Other Stockholders and May Result in a Change of Our Control.
Our Articles of Incorporation authorize the issuance of 100,000,000 shares of
common stock and 50,000,000 shares of Preferred Stock. Upon the sale of the
maximum number of Shares offered hereby, approximately 97% of our authorized
shares of common stock will remain unissued. Our Board of Directors has the
power to issue any or all of such additional shares without stockholder
approval. We presently anticipate that we may choose to issue a substantial
amount of such shares to acquire business interests or other types of property
in the future. Although we presently have no commitments, contracts or
intentions to issue any additional shares, we may issue shares for the purpose
of raising additional capital. Potential investors should be aware that any such
stock issuances may result in a reduction of the book value or market price, if
any, of the then outstanding shares. If we issue additional shares, such
issuance will reduce the proportionate ownership and voting power of the other
stockholders. Also, any new issuance of shares may result in a change of our
control.
We May Be Deemed to Be Subject to Investment Company Act Considerations Which
May Result in Additional Regulatory Restrictions and Costly Obligations.
The regulatory scope of the Investment Company Act of 1940, as amended, which
was enacted principally for the purpose of regulating vehicles for pooled
investments in securities, extends generally to companies engaged primarily in
the business of investing, reinvesting, owning, holding or trading in
securities. The Investment Company Act may, however, also be deemed to be
applicable to a company which does not intend to be characterized as an
investment company but which, nevertheless, engages in activities which may be
deemed to be within the definitional scope of certain provisions of the
Investment Company Act.
There can be no assurance that we will not be deemed to be an investment
company, especially during the period prior to a business combination, although
we intend to take all measures possible to avoid such classification. In the
event we are deemed to be an investment company, we may become subject to
certain restrictions relating to our activities, including restrictions on the
nature of our investments and the issuance of securities. In addition, the
Investment Company Act imposes certain requirements on companies deemed to be
within its regulatory scope, including registration as an investment company,
adoption of a specific form of corporate structure and compliance with certain
burdensome reporting, record keeping, voting, proxy, disclosure and other rules
and regulations. In the event we are characterized as an investment company, our
failure to satisfy regulatory requirements, whether on a timely basis or at all,
would, under certain circumstances, have a material adverse affect on us. We
intend to take all measures possible to avoid such characterization.
Risk Factors Associated with Companies Attempting Blank Check Offerings.
Blank Check Offerings Have Several Disadvantages.
We may enter into a business combination with an entity that desires to
establish a public trading market for its shares. A business entity may attempt
to avoid what it deems to be adverse
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consequences of undertaking its own public offering by seeking a business
combination with us. Such consequences may include, but are not limited to, time
delays of the registration process, significant expenses to be incurred in such
an offering, loss of voting control to public shareholders and the inability or
unwillingness to comply with various federal and state securities laws enacted
for the protection of investors. These securities laws primarily relate to
provisions regarding the registration of securities which require full
disclosure of our business, management and financial statements.
Rule 419 Imposes a Variety of Restrictions Which May Deter or Prevent Outside
Interest in Our Business.
We hope to conduct a blank check offering pursuant to the terms of Rule 419.
Rule 419 contains a variety of restrictions upon our use of any proceeds we may
receive from the intended offering. Rule 419 generally requires that the
securities to be issued and the funds received in a blank check offering be
deposited and held in an escrow account until an acquisition meeting specified
criteria is completed. Before the acquisition can be completed and before the
funds and securities can be released, the blank check company is required to
update the registration statement with a post-effective amendment. Within 5
business days after the effective date of any such post-effective amendment, we
are required to furnish investors with the Prospectus produced thereby
containing information, including audited financial statements, regarding the
proposed acquisition candidate and its business. Investors then have no fewer
than 20 and no more than 45 days from the effective date of the post-effective
amendment to decide to remain an investor or require the return of their
investment funds. Any investor not making any decision within said 45 day period
is to automatically receive a return of his investment funds within 5 business
days. Unless investors sufficient in number to permit an acquisition of a
business or asset having a value of 80% of the maximum offering proceeds elect
to remain investors, the consummation of an acquisition of or merger with a
target business would be prevented, all of the deposited funds in the escrow
must be returned to all investors and none of the securities will be issued.
Consequently, notwithstanding the fact that investors of a majority of the
proceeds raised may be in favor of a prospective business combination, such
investors may nevertheless have to accept the return of their investment in
accordance with Rule 419, if investors representing more than 20% of the
proceeds raised do not reconfirm their investment.
Rule 419 further provides that if we do not complete a qualified acquisition
within 18 months of the effectiveness of our initial registration statement, all
of the deposited funds in the Rule 419 Escrow must be returned to investors.
Risks Associated with an Investment in This Offering.
The Offering Price Was Arbitrarily Determined.
We have arbitrarily determined the offering price. It therefore may not
necessarily bear any relationship to established valuation criteria such as
assets, book value or prospective earnings. Factors we considered included our
lack of operating history, the proceeds to be raised by the offering, the amount
of capital to be contributed by the public in proportion to the amount of stock
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to be retained by present stockholders, and the current market conditions in the
over-the-counter market.
We Have Not Declared and Do Not Intend to Declare Dividends.
Any investor who purchases our common stock should not anticipate receiving any
dividends on the common stock at any time in the foreseeable future. Payment of
dividends is within the absolute discretion of our board of directors. We have
not paid dividends nor, by reason of our contemplated financial requirements, do
we anticipate paying any dividends upon our common stock at any time in the
future.
The Return of Total Subscription Proceeds Is Not Guaranteed.
Rule 10b-9 of the Exchange Act provides for a guaranteed return of proceeds in
contingent offerings when a certain minimum number of securities offered is not
sold. This offering does not qualify as a contingent offering because the
securities in this offering are being offered on a best efforts basis. The
rights of the subscribers to a return of the subscription proceeds (together
with interest thereto) will be governed by Rule 419, which allows for 10% of the
proceeds to be released to us. Accordingly, if we file a post-effective
amendment with respect to the Reconfirmation Offer, it is possible that if
enough investors (sufficient in number to permit an acquisition of a business or
asset having a value of 80% of the maximum offering proceeds) reconfirm their
investment, to the extent that there are subscribers who do not reconfirm their
investment, we may effect the Acquisition with less than the maximum number of
Shares being distributed to the Stockholders and less than the full amount of
the offering proceeds being released to us. This may adversely affect our
ability to realize our goals.
No Secondary Market May Ever Exist for Shares of Our Stock and Investors in this
Offering May Be Forced to Hold the Shares Indefinitely.
No public trading market for our common stock has ever existed. There can be no
assurance that an active trading market will develop or that purchasers of the
shares will be able to resell their securities at prices equal to or greater
than the respective initial public offering prices. Any future market price of
the shares may be affected significantly by factors such as announcements by us
or our competitors, variations in our results of operations, and market
conditions. Movements in prices of other stocks may also affect the market price
in general. As a result of these factors, purchasers of the shares offered
hereby may not be able to liquidate an investment in the shares readily or at
all.
We May Sell Shares Pursuant to State Exemptions, Which May Not Facilitate
Secondary Trading.
We intend to attempt to register the securities offered hereby with at least the
states of Colorado, Minnesota, North Dakota and Texas. The securities registered
hereunder have not been registered for resale under the blue sky laws of any
state, the holders of such shares and persons who desire to purchase them in any
trading market that might develop in the future should be aware that there may
be significant state blue sky restrictions upon new investors to purchase the
securities
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which could reduce the size of the potential market. Some states attempt to
restrict the trading or resale of blind-pool or blank-check securities.
Accordingly, investors should consider any potential secondary market for our
securities to be very limited and speculative.
Any Future Trading Market in Our Common Stock May Be Diminished by Sales of
Shares Which Cannot Currently Be Sold Without Registration.
Of the 100,000,000 shares of our common stock authorized for issuance, there are
presently 2,776,200 shares issued and outstanding. All of these are restricted
securities as that term is defined under the Act, and in the future may be sold
in compliance with Rule 144 of the Act, or pursuant to a Registration Statement
filed under the Act. Investors should be aware that sales of our common stock
under Rule 144, or made pursuant to a Registration Statement filed under the
Act, may have a depressive effect on any future market price of our securities
which may develop.
Our Common Stock May Be Subject to the Penny Stock Reform Act. This May Impair
the Development or Continuance of a Trading Market of Our Common Stock.
Congress enacted the Penny Stock Reform Act of 1990 to counter fraudulent
practices common in penny stock transactions. Rule 3a51-1 of the Securities
Exchange Act of 1934 defines a penny stock as an equity security that is not,
among other things: (a) a reported security (i.e., listed on certain national
securities exchanges); (b) a security registered or approved for registration
and traded on a national securities exchange that meets certain guidelines,
where the trade is effected through the facilities of that national exchange;
(c) a security listed on the NASDAQ National Market System; (d) a security of an
issuer that meets certain minimum certified financial requirements (net tangible
assets in excess of $2,000,000 (if the issuer has been continuously operating
for more than three years) or $5,000,000 (if the issuer has been continuously
operating for less than three years), or average revenue of at least $6,000,000
for the last three years); or (e) a security with a price of at least $5.00 per
share for the transaction in question or that has a bid quotation (as defined in
the Rule) of at least $5.00 per share. Under Rule 3a51-1, our common stock falls
within the definition of a penny stock.
Before brokers and/or dealers may effect a Penny Stock transaction, they are
required by the Act to provide investors with written disclosure documents
containing information on various aspects of markets for penny stocks as well as
specific information about the penny stock and the transaction involving the
purchase and sale of that stock (e.g., price quotes and broker/dealer and
associated person compensation). Subsequent to the transaction, the broker is
required to deliver monthly or quarterly statements containing specific
information about the penny stock. Because our common stock does not satisfy any
of the Penny Stock exceptions, and it is not expected to in the near future,
these added disclosure requirements will most likely negatively affect the
ability of purchasers herein to sell our common stock in the secondary market,
if any develops. You should seek outside advice before buying any stock.
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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Some of the statements under "Prospectus Summary," "Risk Factors," "Management's
Discussion and Analysis and Results of Operations," "Business" and elsewhere in
this Prospectus constitute forward-looking statements. These statements involve
known and unknown risks, uncertainties and other factors that may cause our, or
our industry's, actual results, levels of activity, performance or achievements
to be materially different from any future results, levels of activity,
performance or achievements expressed or implied by such forward-looking
statements. Such factors include those listed under "Risk Factors" and elsewhere
in this Prospectus.
This Prospectus should be read in conjunction with the financial statements and
notes thereto appearing elsewhere herein. Except for historical information
contained herein, certain statements herein are forward-looking statements that
are made pursuant to the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995. These statements relate to future events or to
our future financial performance. In some cases, you can identify forward-
looking statements by terminology such as "may," "will," "should," "expects,"
"plans," "anticipates," "believes," "estimates," "predicts," "potential" or
"continue" or the negative of such terms or other comparable terminology. These
statements are only predictions. Actual events or results may differ materially.
In evaluating these statements, you should specifically consider various
factors, including the risks outlined under "Risk Factors." These factors may
cause our actual results to differ materially from any forward-looking
statement.
Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, levels of
activity, performance or achievements. Moreover, neither we nor any other person
assumes responsibility for the accuracy and completeness of such statements. We
are under no duty to update any of the forward-looking statements after the date
of this Prospectus to conform such statements to actual results.
USE OF PROCEEDS
The proceeds of the offering, after the release to us of an amount equal to 10%
(up to an aggregate of $10,000 if the maximum number of Shares is sold), will
remain deposited in the Rule 419 escrow account pending (i) consummation of an
acquisition satisfying Rule 419, including reconfirmation by investors and
delivery to investors of a Reoffer Prospectus or (ii) the lapse of 18 months
from the date of this Prospectus. Consequently, after delivery to us of 10% of
the proceeds, as permitted by Rule 419, the net amount to be maintained in
escrow is $90,000 if the maximum number of Shares is sold, plus any interest
earned or dividends paid thereon. We will use 10% of the proceeds released to
pay for expenses with respect to the offer and sale of Shares.
We intend to apply the deposited funds, if and when available, to pay the costs
and expenses incurred in attempting to effect a business combination, including
selecting and evaluating an business entities, structuring and consummating a
business combination and preparing and filing a post-effective amendment
detailing the Reconfirmation Offer pursuant to Rule 419. Rule
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419 requires that the fair market value of any acquired business be equal to at
least 80% of the maximum offering proceeds.
To date, we have incurred organizational costs of approximately $10,000 and
expect to incur filing, EDGAR compliance, legal and accounting expenses relating
to the offering estimated at $37,278. Ten (10%) percent of the offering proceeds
prior to the payment of such expenses ($10,000 if the maximum number of Shares
is sold) may be delivered to us as permitted by Rule 419, and will be used to
offset these expenses. We anticipate incurring additional expenses of
approximately $10,000 to effectuate a business combination (as hereinafter
defined) and to prepare a post-effective amendment to the registration
statement.
MARKET PRICE FOR OUR COMMON STOCK
Our common stock has never been traded or quoted over-the-counter or on any
other exchange and there has never been a trading market for our common stock.
Pursuant to the requirements of Rule 15g-8 of the Exchange Act, a trading market
will not develop prior to or after the effectiveness of this Prospectus or while
the deposited securities remain in the Rule 419 Escrow. The deposited securities
under this offering will remain in the Rule 419 Escrow until, among other
things, our consummation of a business combination pursuant to the requirements
of Rule 419. There can be no assurance that a trading market will develop if a
business combination is consummated and the deposited securities from the Rule
419 Escrow are subsequently released.
DIVIDENDS
We have never declared any cash dividends on our common stock. The payment of
dividends is within the discretion of the board of directors. We currently
intend to retain future earnings, if any, to fund the development and growth of
our business and do not anticipate paying any dividends in the foreseeable
future.
BUSINESS
We were incorporated in Texas on March 10, 1995, under the name Sunrise Software
Systems, Inc. Our initial business plan and operations consisted of the design
and development of computer software programs focusing on the needs of
professional writers, various collectors, entertainers and restaurant owners. As
we only generated sales of approximately $16,000 from inception through December
31, 1998, we discontinued our sales efforts in late 1998.
Our main business focus is to engage in a merger, exchange of capital stock,
asset acquisition or other similar business combination or acquisition with a
business entity which as of yet has not been identified. Other than general
corporate activities, including the negotiation and consummation of a business
combination, we will not engage in any substantive commercial business until
such time as we have effected a business combination.
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We have not yet identified a prospective acquired business. There is no
assurance we will be able to negotiate a business combination on terms favorable
to us. We have not established a specific length of operating history or a
specified level of earnings, assets, net worth or other criteria which we will
require a target business opportunity to have achieved, and without which we
would not consider a business combination in any form with such business
opportunity. Accordingly, we may enter into a business combination with a
business opportunity having no significant operating history, losses, limited or
no potential for earnings, limited assets, negative net worth or other negative
characteristics. There can be no assurance that an investment in the securities
offered hereby will not ultimately prove to be less favorable to investors in
this offering than a direct investment, if such opportunity were available, in
an acquired business.
Because this offering and our merger and acquisition goals form the basis of our
operations, our adherence to and satisfaction of the restrictions applicable to
blank check offerings is essential to our business. These restrictions may make
raising funds in this offering difficult and may make locating an entity with
which to merge or acquire also more difficult.
If we are successful in raising funds in this offering consistent with Rule 419,
we believe we can effect a merger or acquisition with a business entity.
The Rule 419 restrictions generally require that securities to be issued and the
funds received be deposited and held in an escrow account until an acquisition
meeting specified criteria is completed. Before the acquisition can be completed
and before the funds and securities can be released, we are required to update
this registration statement with a post-effective amendment within 5 business
days after the effective date of any such post-effective amendment, furnish
investors with such post-effective amendment, including audited financial
statements regarding the proposed acquisition candidate and its business.
We must provide investors with at least 20 and no more than 45 days from the
effective date of the post-effective amendment to decide to remain an investor
or require the return of their investment funds. Any investor not making any
decision within said 45 day period or deciding against such investment shall
automatically receive a return of his investment funds within 5 business days.
Unless a sufficient number of investors (enough to permit an acquisition of a
business or asset having a value of 80% of the maximum offering proceeds) elect
to remain investors, all investors will be entitled to the return of a pro-rata
portion of the deposited funds (and any interest earned or dividends paid
thereon) and none of the deposited securities will be issued to investors.
Consequently, notwithstanding the fact that a majority of investors may be in
favor of a prospective business combination, such investors may nevertheless
have to accept the return of their investment in accordance with Rule 419, if
more than 20% of the Rule 419 investors do not reconfirm their investment.
Although not considered likely, officers and directors could acquire, on the
same terms and conditions as other investors, up to 20% of the shares; if they
were to do so, of the remaining unaffiliated stockholders, only those holding
20% in value of the shares offered would be required to vote in favor of a
proposed acquisition.
Rule 419 further provides that if we do not complete an acquisition meeting
specified criteria within 18 months of the effectiveness of this registration
statement of which this Prospectus is a part thereof, all of the monies raised
and held in escrow must be returned to investors.
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Office Facilities
The nominal amount of office space required by our current state of operations
is provided rent- free from the home of our president, Bonita S. Clifton,
located at 753 Bandit Trail, Fort Worth, Texas 76180. We currently have no
property.
In the event a merger or acquisition is effected, which cannot be assured, we
expect to relocate to the office of the acquired business, which may have leased
and/or owned office space. Such office space may be subject to various types of
ownership limitations, such as mortgages or liens.
Employees
We currently have no employees. In the event we merge with or acquire a business
entity, any such acquired business may or may not have our own employees.
MANAGEMENT'S DISCUSSION AND ANALYSIS AND RESULTS OF OPERATION
Our business focus is to acquire or merge with a business entity that will allow
us to generate revenues and earn profit. Management's discretion is unrestricted
on deciding which entity to merge with or acquire, and we may participate in any
business. In seeking to attain our business objectives, we will not restrict our
search to any particular industry. We may investigate businesses of any kind or
nature, including those in finance, technology, manufacturing, service, research
and development, communications, insurance, brokerage and transportation.
Management may also seek to become involved with other development stage
companies or companies that could be categorized as financially troubled. At the
present time, we have not chosen the particular area of business in which we
propose to engage and have not conducted any market studies with respect to any
business, property or industry. We have not limited the scope of our search to a
particular region, and therefore may effectuate a business combination with
another business outside the United States.
We do not intend to utilize any notices or advertisements in our search for
business opportunities. We anticipate making contact with business prospects
primarily through the efforts of our directors and officers, who may meet
personally with management and key personnel of combination prospects, visit and
inspect such prospects' facilities, assets, products and services, and undertake
such further reasonable investigation as management deems appropriate, in
consideration of our limited financial resources. However, all of our officers
and directors are engaged full-time in other activities and therefore will
devote only a minimal amount of time to our business. The lack of full-time
management may have a materially adverse effect upon our business. At present,
we have no employees. Even upon completion of the offering, our present
intention is to avoid paying personnel except those whose services are required
to satisfy Commission requirements, part-time secretarial and clerical help, and
management and employees of any acquired business that we may acquire. It is
contemplated that after the offering is consummated, management will spend such
time in conducting our affairs as may be necessary, including but not limited to
our efforts in connection with seeking out potential target companies and
consummating a business combination. At this time, we cannot speculate as to the
specific amount of time that will be spent by management in conducting our
affairs.
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We will not restrict our search for a merger or acquisition candidate to those
referred by our officers or directors. We anticipate that certain acquired
business candidates may be brought to our attention from various unaffiliated
sources, including securities broker/dealers, investment bankers, venture
capitalists, bankers, other members of the financial community, and affiliated
sources. While we do not presently anticipate engaging the services of
professional firms that specialize in business acquisitions on any formal basis,
in the event we do, we would consider paying a finder's fee or other
compensation.
As a development stage company, we have not realized a profit for any fiscal
period nor achieved profitability, and expect to continue to incur operating
losses for the foreseeable future. This lack of profitability results in our
inability to assure that we will achieve profitability in the future or if
profitability is achieved, that it can be sustained at a level sufficient to
enable us to continue our operations and expansion. We recognize that as a
result of our limited financial, managerial or other resources, the number of
suitable potential businesses that may otherwise be available will be extremely
limited.
Evaluation Criteria
We propose to internally analyze potential business opportunities. Management is
comprised of individuals of varying business experiences, and management will
rely on their own business judgment in formulating decisions as to the types of
businesses that we may acquire or in which we may participate. It is possible
that management will not possess business experience or expertise in the area in
which a sought business entity engages.
Management anticipates that the selection of a business entity will be complex
and risky because of the competition for such business opportunities among all
segments of the financial community. The nature of our search for an acquired
business requires maximum flexibility inasmuch as we may be required to consider
various factors and divergent circumstances which may preclude meaningful direct
comparison among the various business enterprises, products or services
investigated. Investors should recognize that the possible lack of
diversification among our acquisition candidates may not permit us to offset
potential losses from one venture against profits from another. This should be
considered a negative factor affecting any decision to purchase the shares. We
will have virtually unrestricted flexibility in identifying and selecting a
prospective acquired business, but in evaluating a prospective acquired business
and determining the fair market value thereof, we will consider as many
traditional business attributes as feasible.
Although it is anticipated that locating and investigating specific business
proposals will take at least several months, the time this process may take
cannot be assured. However, if we don't effect a merger or acquisition within 18
months, we will have to return any proceeds we generate from this offering. The
time and costs required to select and evaluate an acquired business candidate
(including conducting a due diligence review) and to structure and consummate
the business combination (including negotiating relevant agreements and
preparing requisite documents for filing pursuant to applicable securities laws
and state corporate laws) cannot presently be ascertained with any degree of
certainty.
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Form and Structure of Acquisition
The methods and forms which we may utilize to effect a business combination
include, for example, various types of mergers, acquisitions, consolidations,
asset purchases and may also involve third party transactions with subsidiaries.
The likelihood of any merger or acquisition involving the issuance of our common
stock is considered by management to be high. To the extent we issue shares of
our common stock in connection with an acquisition, our existing shareholders
will experience a dilution of their ownership interest. Additionally, a change
in our control may occur. The actual form and structure of a business
combination may be also dependent upon numerous other factors pertaining to the
acquired business and its stockholders as well as potential tax and accounting
treatments afforded the business combination. We have no commitments as of the
date of this Prospectus to issue any shares of common stock.
If our securities are issued as part of an acquisition, we cannot predict
whether such securities will be issued in reliance upon exemptions from
registration under applicable federal or state securities laws or will be
registered for public distribution. Although we believe public registration of
securities will not be involved in a business combination, if registration of
securities is required, substantial cost may be incurred and time delays
encountered.
Management of Growth
If we are successful in effecting a business combination, we may experience
significant growth in the number of our employees and the scope of our operating
and financial systems. This growth may result in new and increased
responsibilities for both existing and new management personnel. Our success
depends largely on the ability of our managers to operate effectively, and the
ability of the management of the acquired business to maintain its current
operations. There can be no assurance that our management or the acquired
business' management will be sufficient to manage any future growth in our
business or that we will be able to implement in whole or in part our expansion
program, and any failure to do so could have a material adverse effect on our
operating results.
Cost and Expenses
As we are unable to predict what type of acquisition candidate may be found or
introduced, we cannot accurately project or give any assurance regarding
management's ability to implement new business operations, control our
development, operating costs and expenses. Consequently, even if we are
successful in effecting a business combination (of which there can be no
assurance), if management is not able to adequately control costs and expenses,
such new business operations may not generate any profit or may result in
operating losses.
Results of Operations
We did not engage in operations for the fiscal year ending December 31, 1999 and
therefore realized no cash flow. Other than general corporate activities, our
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current operations consist of the search for a merger or acquisition candidate.
Aside from our officers and directors, we do not have any full or part time
employees.
There were no revenues from operations for the fiscal year ending December 31,
1999 as compared to $1,200 in revenues for the fiscal year ending December 31,
1998. The costs and expenses for the fiscal year ending December 31, 1999
totaled $122 as compared to $707 in total costs and expenses incurred for the
fiscal year ending December 31, 1998. The total loss for the fiscal year ending
December 31, 1999 was $122, while the total loss for the fiscal year ending
December 31, 1998 was $493. The decrease in revenue and costs and expenses is
attributable to the discontinuation of our operations in order to attempt to
locate a merger or acquisition candidate.
While we generated no revenues for the period ending March 31, 2000, we incurred
expenses totaling $4,477, creating a total loss of $4,477.
Capital Resources And Liquidity
During the fiscal year ending December 31, 1999 we generated a total of $8,500
from shareholder loans as compared to $493 from shareholder loans during the
fiscal year ending December 31, 1998.
Clifton Investment Group, Inc., co-owned by Bonita Clifton and David Clifton,
loaned $20,000 to us on December 7, 1999. This loan is evidenced by a
non-recourse promissory note. For more information on Bonita Clifton and David
Clifton, please see "Certain Relationships and Related Transactions."
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
We appointed Clyde Bailey, P.C. as our independent auditor on February 8, 2000.
We have never retained any other independent auditor or accountant.
MANAGEMENT
Current Directors, Executive Officers and Key Employees.
All of our directors serve one year terms and are reappointed annually. Our
directors receive no compensation for serving or for attending meetings. The
following table sets forth certain information about our directors and executive
officers.
Bonita Clifton, age 42, has been our president and a director since our
inception. She has been self-employed since September of 1985 as an author of
fiction, although she devotes less than full time to such occupation. Mrs.
Clifton has an Associates of Applied Science Degree in
27
<PAGE>
Business from Blair College in Colorado Springs, Colorado. She is the wife of
David Clifton, our chief financial officer and secretary.
David R. Clifton, age 40, has been our chief financial officer and secretary
since inception. Mr. Clifton was a professional stockbroker for fifteen years
until 1999. Since August 1999, he has been a small business financial consultant
for Clifton Investment Group, Inc., which he co-owns with Bonita Clifton. He is
a NASD member and holds Series 7 and 24 licenses, which are currently inactive.
He intends to pursue an upper management position with another brokerage firm in
the near future. He is the husband of Bonita Clifton, our president and
director.
Robert A. Sears, age 32, has been a director since inception and was our chief
executive officer from inception until December 1999. Mr. Sears is an
independent software developer who maintains and writes extensive reporting
systems for the Environmental Protection Agency in Annapolis, Maryland. He has
technical experience in several programming languages, such as FoxPro, ORACLE,
SQR Report Writer and Visual Basic. He graduated from Anne Arundel Community
College with a degree in Electronic Data Processing.
Board of Directors
Directors are elected to serve until the next annual meeting of stockholders and
until their successors have been elected and have qualified. Officers are
appointed to serve until the meeting of the Board of Directors following the
next annual meeting of stockholders and until their successors have been elected
and have qualified.
EXECUTIVE COMPENSATION
The following tables set forth information with respect to the compensation
received by our chief executive officer since inception. No compensation in
excess of $100,000 has ever been awarded to, earned by, or paid to any executive
officer or director during any year since our inception.
<TABLE>
Annual Compensation
- ---------------------------------------------------------------------------
<CAPTION>
Name and Other Annual
Principal Position Year Salary ($) Bonus ($) Compensation ($)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Robert Sears, Chief 1995 - 0- -0- -0-
Executive Officer
- -------------------------------------------------------------------------------------------------------------------
Robert Sears, Chief 1996 - 0- - 0- - 0-
Executive Officer
- -------------------------------------------------------------------------------------------------------------------
Robert Sears, Chief 1997 - 0- - 0- - 0-
Executive Officer
- -------------------------------------------------------------------------------------------------------------------
Robert Sears, Chief 1998 - 0- - 0- - 0-
Executive Officer
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
28
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Robert Sears, Chief 1999 - 0- - 0- - 0-
Executive Officer through
12-16-99
- -------------------------------------------------------------------------------------------------------------------
Bonita S. Clifton, 12-16-99 - 0- - 0- - 0-
President through
4-30-00
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
Long Term Compensation
- ------------------------------------------------------
<CAPTION>
Awards Payouts
- ------------------------------------------------------
Restricted Securities LTIP All Other
Name and Principal Stock Underlying Payouts Compensation
Position Year Award(s)($) Options/ ($) ($)
SARs(#)
- ------------------------------------------- -----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Robert Sears, Chief 1995 - 0- -0- -0- -0-
Executive Officer
- ------------------------------------------- -----------------------------------------------------------------------
Robert Sears, Chief 1996 - 0- - 0- - 0- - 0-
Executive Officer
- ------------------------------------------- -----------------------------------------------------------------------
Robert Sears, Chief 1997 - 0- - 0- - 0- - 0-
Executive Officer
- ------------------------------------------- -----------------------------------------------------------------------
Robert Sears, Chief 1998 - 0- - 0- - 0- - 0-
Executive Officer
- ------------------------------------------- -----------------------------------------------------------------------
Robert Sears, Chief 1999 - 0- - 0- - 0- - 0-
Executive Officer through
12-16-99
- ------------------------------------------- -----------------------------------------------------------------------
Bonita S. Clifton, 12-16-99 - 0- - 0- - 0- - 0-
President through
4-30-00
- ------------------------------------------- -----------------------------------------------------------------------
</TABLE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Our president, Bonita Clifton is married to David Clifton, our chief financial
officer and secretary.
On December 7, 1999, Clifton Investment Group, Inc. loaned us $20,000. This is a
nonrecourse loan evidenced by a promissory note executed on the same date. The
promissory note bears interest at 10% per annum and must be repaid by us by
December 7, 2001. Clifton Investment Group, Inc. is jointly owned by Bonita
Clifton and David Clifton.
On September 9, 1999, John P. Andrews sold 25,000 shares of our common stock to
David R. Clifton pursuant to exemptions from registration, including, but not
limited to, Rule 504 of Regulation D under the Securities Act of 1933.
29
<PAGE>
David Clifton is our primary source of contacts for our search for a business
combination. Any merger candidate he may locate, or transaction he may
recommend, is subject to the approval of the board of directors and, depending
on the transaction's structure, possibly our shareholders.
It is possible that persons associated with management may refer a prospective
merger or acquisition candidate to us. Whoever locates an entity with which we
may merge or acquire will likely be compensated for their referral in the form
of a finder's fee or other consideration normally paid in like transactions.
However, no such amount has been established but is expected to be determined by
us and the acquired business. Until a merger or acquisition candidate is located
and a mutually agreed upon transaction is structured, the amount and type of
compensation any finders, including our officers and directors, may receive will
remain subject to negotiation.
No officer, director, or affiliate has or proposes to have any direct or
indirect material interest in any asset proposed to be acquired through security
holdings, contracts, options, or otherwise, although we are not precluding
potential acquired businesses in which an officer, director, or affiliate may
have such an interest.
Although management has no current plans to cause us to do so, it is possible
that we may enter into an agreement with an acquisition candidate requiring the
sale of all or a portion of our common stock held by our current stockholders to
the acquisition candidate or principals thereof, or to other individuals or
business entities; requiring some other form of payment to our current
stockholders; or requiring the future employment of specified officers and
payment of salaries to them. It is likely that any sale of securities by our
current stockholders to an acquisition candidate would be at a price
substantially higher than that originally paid by such stockholders. Any payment
to current stockholders in the context of an acquisition of our common stock
would be determined entirely by the largely unforeseeable terms of a future
agreement with an unidentified business entity.
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information concerning ownership of each
entity known to be the beneficial owner of more than five percent (5%) of our
common stock, as well as the ownership of our directors and the shares held by
our officers and directors as a group as of April 21, 2000. The notes
accompanying the information in the table below are necessary for a complete
understanding of the figures provided.
Name and Address of Number of Shares
Beneficial Owner Beneficially Owned Percent of Class
---------------- ------------------ ----------------
Bonita Clifton 1,575,000(1) 56.7%
753 Bandit Trail
Fort Worth, Texas 76180
30
<PAGE>
David Clifton 1,575,000(2) 56.7%
753 Bandit Trail
Fort Worth, Texas 76180
Robert Sears 1,200,000 43.2%
1276 Log Canoe Ct.
Annapolis, Maryland 21403
Officers and Directors as a Group 2,775,000 99.9%
---------------------------------
(1) Includes 375,000 shares beneficially owned by David Clifton, husband of
Bonita Clifton. Bonita Clifton disclaims beneficial ownership of these shares.
(2) Includes 1,200,000 shares beneficially owned by Bonita Clifton, wife of
David Clifton. David Clifton disclaims beneficial ownership of these shares.
PLAN OF DISTRIBUTION
We will sell a maximum of 1,000,000 Shares to the public on a best efforts
basis. There can be no assurance that any of these Shares will be sold. The
gross proceeds to us will be $100,000.00 if all the Shares offered are sold. No
commissions or other fees will be paid, directly or indirectly, by us, or any of
our principals, to any person or firm in connection with solicitation of sales
of the shares. We will pay the costs incurred in connection with the offering
(see "Use of Proceeds").
The shares may be sold or distributed from time to time by our officers and
directors to purchasers directly. All shares we sell and all proceeds tendered
for such shares will be deposited into an escrow account with Charter Escrow.
Only upon the satisfaction of the terms of Rule 419 will any proceeds be
released either to us, if we successfully effect a business combination and
receive sufficient reconfirmation from investors, or back to investors if we do
not satisfy the Rule 419 acquisition requirements in a timely manner.
DESCRIPTION OF SECURITIES
The following is a summary description of our capital stock and certain
provisions of our Articles of Incorporation and Bylaws, copies of which have
been incorporated by reference as exhibits to the registration statement of
which this Prospectus forms a part. The following discussion is qualified in its
entirety by reference to such exhibits.
Our common stock has never traded or been quoted over-the-counter or on any
exchange. However, we intend to have our common stock listed on the NASD OTC
Bulletin Board.
We are authorized to issue 100,000,000 shares of common stock, no par value, and
50,000,000 shares of preferred stock, no par value.
31
<PAGE>
The holders of our common stock are entitled to one vote for each share held of
record on all matters submitted to a vote of stockholders. Holders of our common
stock have no preemptive rights and no right to convert our common stock into
any other securities. There are no redemption or sinking fund provisions
applicable to our common stock.
On January 31, 2000, the Board of Directors and holders of a majority of the
outstanding shares of Common Stock approved a 3-for-1 forward stock split of our
common stock increasing the number of shares of common stock issued and
outstanding from 925,400 to 2,776,200.
Record Holders
As of May 3, 2000, there were 2,776,200 shares of common stock, no par value,
issued and outstanding, held of record by four (4) stockholders.
LEGAL MATTERS
The validity of the shares of common stock offered in this Prospectus has been
passed upon for us by Kevin S. Woltjen, P.C., 900 Jackson Street, Suite 600,
Dallas, Texas 75202, 214-712- 5673.
EXPERTS
Audited financial statements of our operations appearing in this Prospectus and
registration statement have been audited by Clyde Bailey, P.C., independent
auditors, as set forth in their reports thereon, appearing elsewhere herein and
are included in reliance upon such report given on the authority of such firm as
experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We have filed a registration statement on Form SB-2 with the Securities and
Exchange Commission to register the shares of our common stock to be sold by the
selling stockholders. This Prospectus is part of that registration statement
and, as permitted by the Commission's rules, does not contain all of the
information set forth in the registration statement. For further information
with respect to us or our common stock, you may refer to the registration
statement and to the exhibits and schedules filed as part of the registration
statement. You can review a copy of the registration statement and its exhibits
and schedules at the Public Reference Room by calling the Commission at
1-800-SEC-0330, on the Commission's Electronic Data Gathering Analysis and
Retrieval, or EDGAR, system, or on the Commission's website at
http://www.sec.gov. You should note that statements contained in this Prospectus
that refer to the contents of any contract or other document are not necessarily
complete. Such statements are qualified by reference to the copy of such
contract or other document filed as an exhibit to the registration statement.
32
<PAGE>
TRANSFER AGENT AND ESCROW AGENT
The transfer agent and registrar for the common stock is Signature Stock
Transfer, Inc. which is located at 14675 Midway Road, Suite 221, Dallas, Texas
75244. Their phone number is (972) 788-4193.
The escrow agent for the Rule 419 escrow account is Charter Escrow, 3300 Oak
Lawn Avenue, Suite 500, P.O. Box 190669, Dallas, Texas 75219, telephone number
(214) 526-8383.
FINANCIAL STATEMENTS
Our audited balance sheets from inception through December 31, 1999, the related
audited statements of operations, stockholders' equity and cash flows for the
fiscal years ended December 31, 1999, and unaudited financial information for
the first quarter ended March 31, 2000, as prepared by Clyde Bailey, P.C., are
attached hereto as Pages F-1 through F-12 and incorporated herein by this
reference.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
33
<PAGE>
[Letterhead of Clyde Baily P.C.]
Board of Directors
Sunrise Software Systems, Inc.
INDEPENDENT AUDITOR'S REPORT
I have audited the accompanying balance sheet of Sunrise Software Systems, Inc.
(Company) as of December 31, 1999 and 1998 and the related statement of
operations, statement of stockholders' equity, and the statement of cash flows
for the year ended December 31, 1999, 1998, and from inception to December 31,
1999. These financial statements are the responsibility of the Company's
management. My responsibility is to express an opinion on these statements based
on my audit.
I conducted my audit in accordance with generally accepted auditing standards.
Those standards require that I plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
I believe that my audit provides a reasonable basis for my opinion.
The Company is a development stage enterprise, as defined in Financial
Accounting Standards Board No. 7. The Company is devoting all of its present
efforts in securing and establishing a new business, and its planned principal
operations have not commenced, and, accordingly, no revenue has been derived
during the organizational period.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. The Company has no viable operations
to date and little or no tangible assets. This is further explained in the Note
4.
In my opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of the Company as of December 31, 1999
and the results of its operations for the year then ended in conformity with
generally accepted accounting principles.
/s/ Clyde Bailey
Certified Public Accountant
San Antonio, Texas
February 8, 2000
<PAGE>
Sunrise Software Systems, Inc
(A Development Stage Enterprise)
Balance Sheet
As of December 31, 1999
ASSETS
Current Assets:
Cash $ 8,378
Total Current Assets $ 8,378
----------------
Other Assets:
Deposits 10,000
----------------
Total Other Assets 10,000
----------------
Total Assets $ 18,378
================
LIABILITIES
Current Liabilities: $ -
Total Current Liabilities -
Long-Term Liabilities
Shareholder Loan 21,029
21,029
----------------
Total Liabilities 21,029
STOCKHOLDERS' EQUITY
Common Stock -
1,000,000 authorized shares, without par value
925,400 shares issued and outstanding
Additional Paid-in-Capital 1,000
Accumulated Deficit (3,651)
----------------
Total Stockholders' Equity (2,651)
Total Liabilities and
Stockholders' Equity $ 18,378
================
F-1
<PAGE>
<TABLE>
Sunrise Software Systems, Inc.
(A Development Stage Enterprise)
Statement of Operations
<CAPTION>
For the Year Ended From Inception
December 31 to December 31
Revenues: 1999 1998 1999
- ---------
---------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues $ - $ 1,200 $ 16,123
Total Revenues - 1,200 16,123
Expenses:
Consulting Expenses 122 707 19,774
---------------------------------------------------------------------------
Total Expenses 122 707 19,774
---------------------------------------------------------------------------
Net Loss from Operations (122) 493 (3,651)
Provision for Income Taxes:
Income Tax Benefit -0- -0- -0-
---------------------------------------------------------------------------
Net Income (Loss) $ (122) $ 493 $ (3,651)
===========================================================================
Basic and Diluted Earnings per Common Share Nil Nil Nil
Weighted Average number of Common Shares 925,400 925,400 925,400
used in per share calculations
===========================================================================
</TABLE>
F-2
<PAGE>
<TABLE>
Sunrise Software Systems, Inc.
(A Development Stage Enterprise)
Statement of Stockholders' Equity
As of December 31, 1999
<CAPTION>
No Par Paid-In Accumulated Stockholders'
Shares Value Capital Deficit Equity
------ ----------- -------- -------- ------
<S> <C> <C> <C> <C> <C>
Balance January 1, 1998 925,400 $ - $ 1,000 $ (4,022) $ (3,022)
Net Income (Loss) 493 493
----------------------------------------------------------------------------------------------------
Balance, December 31, 1998 925,400 - 1,000 (3,529) (2,529)
Net Income (Loss) (122) (122)
----------------------------------- ---------------------------------------- -----------------------
Balance December 31, 1999 925,400 $ - $ 1,000 $ (3,651) $ (2,651)
============== ============= =============== =============== ===============
</TABLE>
F-3
<PAGE>
<TABLE>
Sunrise Software Systems, Inc.
(A Development Stage Enterprise)
Statement of Cash Flows
<CAPTION>
For the Year Ended From Inception
December 31 to December 31
Cash Flows from Operating Activities: 1999 1998 1999
- -------------------------------------
---------------------------------------------------------------------
<S> <C> <C> <C>>
Net Income (Loss) $ (104) $ 493 $ (3,651)
Changes in operating assets and liabilities:
Deferred Tax Benefit -0- -0- -0-
Deposits (10,000) (10,000)
-------------------------------------------- ----------------------
Total Adjustments (10,000) -0- (10,000)
-------------------------------------------- ----------------------
Net Cash used in Operating Activities (10,104) 493 (13,651)
Cash Flows from Investing Activities:
- -------------------------------------
-------------------------------------------- ----------------------
Net Cash used in Investing Activities - - -
Cash Flows from Financing Activities:
Shareholder Loan 18,500 (493) 21,029
Common Stock 1,000
- - -
-------------------------------------------- ----------------------
Net Cash provided for Financing Activities 18,500 (493) 22,029
Net Increase in Cash 8,378 0 8,378
Cash Balance, Begin Period - - -
-------------------------------------------- ----------------------
Cash Balance, End Period $ 8,378 $ - $ 8,378
================================================ ==================
</TABLE>
F-4
<PAGE>
Sunrise Software Systems, Inc.
Notes to Financial Statements
Note 1 - Summary of Significant Accounting Policies
Organization
Sunrise Software Systems, Inc. ("the Company") was incorporated under the laws
of the State of Texas on March 13, 1995 for the purpose to promote and carry on
any lawful business for which a corporation may be incorporated under the laws
of the State of Texas. The company has a total of 1,000,000 authorized shares
without a stated par value and with 925,400 shares issued and outstanding as of
December 31, 1999. The Company has been had only limited operating revenues or
expenses since inception.
Development Stage Enterprise
The Company is a development stage enterprise, as defined in Financial
Accounting Standards Board No. 7. The Company is devoting all of its present
efforts in securing and establishing a new business, and its planned principal
operations have not commenced, and, accordingly, no revenue has been derived
during the organizational period.
Fixed Assets
The Company has no fixed assets at this time. The Company does hold a copyright
on the title or article "The Write Track" issued in April of 1995. No value has
been assigned to this copyright.
Federal Income Tax
The Company has adopted the provisions of Financial Accounting Standards Board
Statement No. 109, Accounting for Income Taxes. The Company accounts for income
taxes pursuant to the provisions of the Financial Accounting Standards Board
Statement No. 109, "Accounting for Income Taxes", which requires an asset and
liability approach to calculating deferred income taxes. The asset and liability
approach requires the recognition of deferred tax liabilities and assets for the
expected future tax consequences of temporary differences between the carrying
amounts and the tax basis of assets and liabilities.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure on
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.
Accounting Method
The Company's financial statements are prepared using the
accrual method of accounting. Revenues are recognized when earned and expenses
when incurred. Fixed assets are stated at cost. Depreciation and amortization
using the straight-line method for financial reporting purposes and accelerated
methods for income tax purposes.
F-5
<PAGE>
Sunrise Software Systems, Inc.
Notes to Financial Statements
Note 1 - Summary of Significant Accounting Policies (con't)
Earnings per Common Share
The Company adopted Financial Accounting Standards (SFAS) No. 128, "Earnings Per
Share," which simplifies the computation of earnings per share requiring the
restatement of all prior periods.
Basic earnings per share are computed on the basis of the weighted average
number of common shares outstanding during each year.
Diluted earnings per share are computed on the basis of the weighted average
number of common shares and dilutive securities outstanding. Dilutive securities
having an anti-dilutive effect on diluted earnings per share are excluded from
the calculation.
Comprehensive Income
Statement of Financial Accounting Standards (SFAS) No. 130, "Reporting
Comprehensive Income," establishes standards for reporting and display of
comprehensive income, its components and accumulated balances. Comprehensive
income is defined to include all changes in equity except those resulting from
investments by owners and distributions to owners. Among other disclosures, SFAS
No.130 requires that all items that are required to be recognized under current
accounting standards as components of comprehensive income be reported in a
financial statement that is displayed with the same prominence as other
financial statements. The Company does not have any assets requiring disclosure
of comprehensive income.
Segments of an Enterprise and Related Information
Statement of Financial Accounting Standards (SFAS) No. 131, Disclosures about
Segments of an Enterprise and Related Information, supersedes SFAS No. 14,
"Financial Reporting for Segments of a Business Enterprise." SFAS 131
establishes standards for the way that public companies report information about
operating segments in annual financial statements and requires reporting of
selected information about operating segments in interim financial statements
issued to the public. It also establishes standards for disclosures regarding
products and services, geographic areas and major customers. SFAS 131 defines
operating segments as components of a company about which separate financial
information is available that is evaluated regularly by the chief operating
decision maker in deciding how to allocate resources and in assessing
performance. The Company has evaluated this SFAS and does not believe it is
applicable at this time.
Note 2 - Common Stock
In June of 1997, a forward split of close to 10 to 1 was placed into effect
reflecting the total outstanding shares of 900,000 share of common stock to the
principal officers. Accordingly, the accompanying financial statements have been
retroactively restated to reflect the 10-to-1 stock split as if such stock split
occurred as of the Company's date of inception.
F-6
<PAGE>
Sunrise Software Systems, Inc.
Notes to Financial Statements
Note 3 - Related Parties
The Organization has no significant related party transactions and/or
relationships any individuals or entities.
Note 4 - Going Concern
The Company has had no operations to date, has little or no tangible assets or
financial resources, and incurred losses since inception. These losses and lack
of operations raise substantial doubt about the Company's ability to continue as
a going concern.
Note 5 - Income Taxes
Deferred income taxes arise from temporary differences resulting from the
Company's subsidiary utilizing the cash basis of accounting for tax purposes and
the accrual basis for financial reporting purposes. Deferred taxes are
classified as current or non-current, depending on the classification of the
assets and liabilities to which they relate. Deferred taxes arising from timing
differences that are not related to an asset or liability are classified as
current or non-current depending on the periods in which the timing differences
are expected to reverse. The Company's previous principal temporary differences
relate to revenue and expenses accrued for financial purposes, which are not
taxable for financial reporting purposes. The Company's material temporary
differences consist of bad debt expense recorded in the financial statements
that is not deductible for tax purposes and differences in the depreciation
expense calculated for financial statement purposes and tax purposes.
The net deferred tax asset or liability is composed of the following:
From
1999 1998 Inception
---- ---- --------------
Total Deferred Tax Assets $ 18 $ 74 $ 548
Less: Valuation Allowance (18) (74) (548)
------------- --------- ------------
Net Deferred Tax Asset - -
Total Deferred Tax Liabilities - -
------------- --------- ------------
Net Deferred Tax Liability - -
Less Current Portion - -
------------- --------- ------------
Long-Term Portion $ - $ - $
============= ========== ============
Note 5 - Subsequent Events
There were no other material subsequent events that have occurred since the
balance sheet date that warrants disclosure in these financial statements.
F-7
<PAGE>
<TABLE>
Sunrise Software Systems, Inc.
(A Development Stage Enterprise)
Balance Sheet
<CAPTION>
(Unauditied) (Audited)
March 31 December 31
2000 1999
------------- ------------
ASSETS
<S> <C> <C>
Current Assets
Cash in Bank $1,901 $8,378
--------- ----------
Total Current Assets 1,901 8,378
Other Assets
Deposits 20,000 10,000
--------- ----------
Total Fixed Assets 20,000 10,000
Total Assets $21,901 10,378
========= ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts Payable - -
--------- ----------
Total Current Liabilities - -
Non-Current Liabilities
Shareholder Loan 29,029 21,029
--------- ----------
29,029 21,029
--------- ----------
Total Liabilities 29,029 21,029
Commitments and contingencies - -
Stockholders' Equity
Common Stock, 1,000,000,000 Shares
Authorized without par value, 925,400 - -
shares issued and outstanding
Paid In Surplus 1,000 1,000
Accumulated Deficit (8,128) (3,651)
------------ ----------
(7,128) (2,651)
------------ ----------
Total Liabilities and Stockholders'Equity $21,901 18,378
============ ==========
</TABLE>
F-8
<PAGE>
<TABLE>
Sunrise Software Systems, Inc.
(A Development Stage Enterprise)
Consolidated Statement of Operations
<CAPTION>
(Unaudited) (Audited)
For the Three Months From Inception
Ended March 31 to March 31
-----------------------------------------------
2000 1999 2000
<S> <C> <C> <C>
Revenue
Revenue $ - $ - $ 16,123
---------- --------- -----------
Total Revenues - - 16,123
General and Administrative Expenses
Consulting 2,500 - 19,774
Legal and Professional 1,400 - -
Other General and Administrative Expenses 577 - -
---------- --------- -----------
Total General and
Administrative Expenses 4,477 - 19,774
Income (Loss) from continuing
operations before income taxes (4,477) - (3,651)
Provision for Income Taxes
Income Tax Benefit - - -
---------- --------- -----------
Provision for Income Taxes - - -
Net(Loss) $ (4,477) $ - $ (3,651)
========== ========= ===========
Net Loss per share $ 0.005) $ 0.000 $ (0.004)
Weighted Average Number of
Shares Outstanding 925,400 0 925,400
</TABLE>
F-9
<PAGE>
<TABLE>
Sunrise Software Systems, Inc.
(A Development Stage Enterprise)
Consolidated Statement of Cashflows
<CAPTION>
(Unaudited) (Audited)
For the Three Months From Inception
Ended March 31 to March 31
------------- --------- ---------------
2000 1999 2000
------------- ---------- ----------------
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net Loss $ (4,477) - $ (3,651)
Adjustments to Reconcile Excess
Contributions to cash provided from operations:
Deposits (10,000) - (10,000)
---------- ----------- -----------
Total Adjustments (10,000) - (10,000)
Net Cash used in Operating Activities (14,477) - (13,651)
Cash flows from Investing Activities:
Fixed Assets
---------- ----------- -----------
Net Cash used in Investing Activities - -
Cash flows from Financing Activities
Increase in Long-Term Debt 8,000 21,029
Common Stock - 1,000
Paid-In-Capital - - -
---------- ----------- -----------
Net Cash used in Financing Activities 8,000 - 22,029
Net Increase (Decrease) in Cash (6,477) - 8,378
Cash Balance, Begin of Period 8,378 - -
Cash Balance, End of Period $ 1,901 $ - $ 8,378
======== =========== ===========
</TABLE>
F-10
<PAGE>
<TABLE>
Sunrise Software Systems, Inc.
(A Development Stage Enterprise)
Consolidated Statement of Stockholders Equity
<CAPTION>
Common Par Paid-In Retained
Shares Value Capital Earnings Total
---------- ------- ----------- ------------ ----------
<S> <C> <C> <C> <C> <C>
Balance January 1, 2000 925,400 $ 1,000 (3,651) $(2,651)
Net Income (Loss) (4,477) (4,477)
---------- ------- ----------- ------------ ----------
Balance March 31, 2000 925,400 1,000 (8,128) (7,128)
========== ======= =========== ============ ==========
</TABLE>
F-11
<PAGE>
Sunrise Software Systems, Inc.
(A Development Stage Enterprise)
The financial statements included herein have been prepared by the Company,
without audit, pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with the generally
accepted accounting principles have been omitted. However, in the opinion of
management, all adjustments (which include only normal recurring accruals)
necessary to present fairly the financial position and results of operations for
the period presented have been made. The results for interim periods are not
necessarily indicative of trends or of results to be expected for the full year.
These financial statements should be read in conjunction with the financial
statements and notes thereto included in the Company's registration statement on
Form 10SB, as amended.
F-12
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Our Bylaws and certain sections of Texas Revised Statutes provide for
indemnification of the our officers and directors in certain situations where
they might otherwise personally incur liability, judgments, penalties, fines and
expenses in connection with a proceeding or lawsuit to which they might become
parties because of their position with us. To the extent that indemnification
may be related to liability arising under the Securities Act, the Securities and
Exchange Commission takes the position that indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the estimated expenses of this offering, all of
which we will pay:
SEC Registration Fee $26
Blue Sky Fees and Expenses $3,000
Accounting Fees and Expenses $5,000
Legal Fees and Expenses $25,000
Transfer Agent and Registrar Fees and Expenses $1,500
Escrow Agent Expenses $750
Miscellaneous $2,000
------------
Total $37,278
34
<PAGE>
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
On June 10, 1997, we issued the following shares of our common stock, no par
value, to the following individuals pursuant to exemptions from registration,
including, but not limited to, Rule 504 of Regulation D under the Securities Act
of 1933 (the following share quantities reflect our January 2000 3-for-1 stock
split):
Name Amount of Shares Sold
- ---- ---------------------
Bonita S. Clifton 1,198,650
Robert A. Sears 1,198,650
David R. Clifton 299,700
Andrew Marcellino 1,200
On August 11, 1999, we issued 75,000 shares of our common stock to John P.
Andrews pursuant to exemptions from registration, including, but not limited to,
Rule 504.
ITEM 27. EXHIBITS
Number Description
- ---------------------------------------
3.1 Articles of Incorporation.
3.2 By-laws.
5 Opinion of Legality.
10.1 Escrow Agreement executed by and between the Company and Charter
Escrow Company on April 28, 2000.
10.2 Promissory note by and between the Company and David Clifton dated
December 7, 1999.
23.1 Consent of Clyde Bailey, P.C.
23.2 Consent of Kevin S. Woltjen, P.C.
27 Financial Data Schedule.
35
<PAGE>
ITEM 28. UNDERTAKINGS
(A) The undersigned Registrant hereby undertakes:
(1) To 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;
(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
(iii)Include any material information with respect to the
plan of distribution not previously disclosed in the
registration statement or any material change to such
information in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment
shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering therein, and
the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the offering.
(B) Undertaking Required by Regulation S-B, Item 512(e):
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "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 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 our 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.
(C) Undertaking Required by Regulation S-B, Item 512(f):
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to
36
<PAGE>
Section 13(a) or 15(d) of the Securities Exchange Act of 1934 that is
incorporated by reference in the registration statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at the time shall be deemed to be the initial bona
fide offering thereof.
37
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant has
duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Fort Worth, State of
Texas, on this__4____ day of _May____ 2000.
Sunrise Software Systems, Inc.
By: __/s/ Bonita S. Clifton____
Bonita S. Clifton
Title: President
POWER OF ATTORNEY
The undersigned directors and officers of Sunrise Software Systems, Inc. hereby
constitute and appoint Bonita S. Clifton, with full power to act without the
other and with full power of substitution and resubstitution, our true and
lawful attorney-in-fact with full power to execute in our name and behalf in the
capacities indicated below any and all amendments (including post- effective
amendments and amendments thereto) to this registration statement under the
Securities Act of 1933 and to file the same, with all exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission
and hereby ratify and confirm each and every act and thing that such
attorney-in-fact, or his substitute, shall lawfully do or cause to be done by
virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, this registration
statement has been signed by the following persons in the capacities and on the
dates indicated.
SIGNATURE TITLE DATE
__/s/Bonita Clifton________ President & Director May 4, 2000
Bonita S. Clifton
_/s/David Clifton__________ Chief Financial Officer May 4, 2000
David Clifton & Secretary
_/s/Robert Sears___________ Chief Executive Officer May 4, 2000
Robert Sears
38
<PAGE>
INDEX TO EXHIBITS
Exhibit
Number Description
- ------ -----------
3.1 Articles of Incorporation.
3.2 By-laws.
5 Opinion of Legality.
10.1 Escrow Agreement executed by and between the Company and Charter
Escrow Company on April 28, 2000.
10.2 Promissory note by and between the Company and David Clifton
dated December 7, 1999.
23.1 Consent of Clyde Bailey, P.C.
23.2 Consent of Kevin S. Woltjen, P.C.
27 Financial Data Schedule.
3
Exhibit 3.1
SUNRISE SOFTWARE SYSTEMS, INC.
ARTICLES OF INCORPORATION
ARTICLE ONE
The name of the corporation is Sunrise Software Systems, Inc.
ARTICLE TWO
The period of its duration is perpetual.
ARTICLE THREE
The purpose or purposes for which the corporation is organized are the
transaction of any or all lawful business for which a corporation may be
incorporated under the Texas Business Corporation Act.
ARTICLE FOUR
The aggregate number of shares which the corporation shall have authority to
issue is one million shares at no par value of each.
ARTICLE FIVE
The corporation will not commence business until it has received for the
issuance of its shares consideration of the value of One Thousand Dollars
($1,000.00), consisting of money, labor done, or property actually received.
ARTICLE SIX
The address of its initial registered office is 8080 N. Central Expwy., Ste.
400, Dallas, Texas 75206, and the name of its initial registered agent at such
address is Christian S. Nielsen.
ARTICLE SEVEN
The number of Directors constituting the initial Board of Directors is one, and
the name and address of the person who is to serve as Director until the first
annual meeting of the shareholders or until his successors are elected and
qualified is:
Christian S. Nielsen 8080 N. Central Expwy., Ste. 400
Attorney at Law Dallas, Texas 75206
40
<PAGE>
ARTICLE EIGHT
The name and address of the incorporator is:
Christian S. Nielsen 8080 N. Central Expwy., Ste. 400
Attorney at Law Dallas, Texas 75206
IN WITNESS WHEREOF, the undersigned has executed these Articles of Incorporation
on this the 10th day of March, 1995.
/s/ Christian S. Nielsen
----------------------------------
Christian S. Nielsen
Incorporator
41
CERTIFICATE OF AMENDMENT OF ARTICLES OF INCORPORATION
Sunrise Software Systems, Inc.
Name of Corporation
I, the undersigned, Bonita S. Clifton , do hereby certify:
----------------------------------------------------
That the Board of Directors of Sunrise Software, Inc., a Texas Corporation
("Corporation"), at a meeting duly convened and held on the 25th day of January
2000, adopted a resolution to amend the Corporation's original articles of
incorporation as follows:
Article IV is hereby amended to read as follows:
The aggregate number of shares of common stock which the
corporation shall have authority to issue is one hundred
million shares at no par value.
The number of shares of the Corporation outstanding and entitled to vote on an
amendment to the Articles of Incorporation as of January 25, 2000, were 925,400
and that the said change and amendment has been consented to and approved by a
vote of the stockholders holding at least a majority of the stock outstanding
and entitled to vote thereon.
/s/ Bonita S. Clifton
-------------------------
Bonita S. Clifton, President
State of Texas
County of Dallas
On this 25th day of January, 2000 personally appeared before me, a Notary
Public, Bonita S. Clifton, who acknowledged that she executed the above
document.
---------------------------
Notary Public
Stamp Seal
42
Exhibit 3.2
BYLAWS
OF
SUNRISE SOFTWARE SYSTEMS, INC.
ARTICLE ONE
REGISTERED OFFICE
1.01. The registered office and the principal office for the transaction of
the business of the corporation is located at 900 Jackson Street, Suite 600,
Dallas, Texas 75202. The Board of Directors has full power and authority to
change the principal office from time to time as they deem in the best interest
of the corporation.
1.02. The name of the registered agent at such address is Kevin S. Woltjen,
Attorney at Law.
1.03. The corporation may also have offices at such other places, within or
without the State of Texas, where the corporation if qualified to do business,
as the Board of Directors may from time to time designate, or the business of
the corporation may require.
ARTICLE TWO
SHAREHOLDER'S MEETING
2.01. All meetings of the shareholders shall be held at the principal
office of the corporation, or any other location within or without the State of
Texas, as may be designated for that purpose from time to time by the Board of
Directors.
2.02. The annual meeting of the shareholders shall be held on the day
specified by the corporation's Board of Directors. At such meeting, directors
shall be elected, reports of the affairs of the corporation shall be considered,
and any other business may be transacted which is within the powers of the
shareholders.
2.03. Notice of the meeting, stating the place, day, and hour of the
meeting, and, in case of a special meeting, the purpose or purposes for which
the meeting is called, shall be given in writing to each shareholder entitled to
vote at the meeting at least ten (10), but not more that fifty (50) days, before
the date of the meeting either personally or by mail or other means of written
communication, addressed to the shareholder at his address appearing on the
books of the corporation or given by him to the corporation for the purpose of
notice. Notice of adjourned meetings is not necessary unless the meeting is
adjourned for thirty (30) day or more, in which case notice of the adjourned
meeting shall be given as in the case of any special meeting.
43
<PAGE>
2.04. Special meetings of the shareholders for any purpose or purposes
whatsoever may be called at any time by the President, or by the Board of
Directors, or by any two (2) or more Directors, or by one or more shareholders,
holding no less that one-tenth (1/10) of all the shares entitled to vote at the
meeting.
2.05. A majority of the voting shares constitutes a quorum for the
transaction of business. Business may be continued after the withdrawal of
enough shareholders to leave less than a quorum.
2.06. Each shareholder is entitled to one vote for each share of common
stock held of record. Voting for the election of Directors shall be by voice
unless any shareholder demands a ballot vote before the voting begins. No rights
to cumulative voting shall not be provided.
2.07. Every person entitled to vote or execute consents may do so either in
person or by written proxy executed in writing by the shareholder or his duly
authorized attorney in fact.
2.08. No defect in the calling or noticing of a shareholders' meeting will
affect the validity of any action at the meeting if a quorum was present, and if
each shareholder not present in person or by proxy signs a written waiver of
notice, consent to the holding of the meeting, or approval of the minutes,
either before or after the meeting, and such waivers, consents, or approvals are
filed with the corporate records or made part of the minutes of the meeting.
2.09. Action may be taken by the shareholders without a meeting if a
holders of a of the outstanding shares entitled to vote sign a written consent
to the action and such consent is filed with the Secretary of the corporation.
ARTICLE THREE
DIRECTORS
3.01. The Directors shall act only as a board and an individual Director
shall have no power as such. All corporate powers of the corporation shall be
exercised by, or under the authority of, and the business affairs of the
corporation shall be controlled by, the Board of Directors, subject, however ,
to such limitations as imposed by law, the articles of incorporation, or these
Bylaws, as to action to be authorized or approved by the shareholders. The Board
of Directors may, by contract or otherwise, given general or limited or special
power and authority to the officers and employees of the corporation to transact
the general business, or any special business, of the corporation, and may give
general or special powers of attorney to agents of the corporation to transact
business requiring such authorization.
3.02. The authorized number of Directors of this corporation shall be one
(1). The Directors need not be shareholders of this corporation or residents of
Texas. The number of Directors may be increased or decreased from time to time
by amendment to these Bylaws but no decrease shall have the effect of shortening
the term of any incumbent Director. Any directorship
44
<PAGE>
to be filled by reason of an increase in the number of Directors shall be filled
by election at an annual meeting or at a special meeting of the shareholders.
3.03. The Directors shall be elected annually by the shareholders entitled
to vote, and shall hold office until their respective successors are elected, or
until their death, resignation, or removal.
3.04. Vacancies in the Board of Directors may be filled by the vote of a
majority of the remaining Directors, though less than a quorum, or by a sole
remaining Director. The shareholders may elect a Director at any time to fill
any vacancy not filled by the Directors.
3.05. The entire Board of Directors or any individual Director may be
removed from office with or without cause by vote of the holders of majority of
the shares entitled to vote for directors, at any regular or special meeting of
such shareholders.
3.06. Regular meetings of the Board of Directors shall be held, without
call or notice, immediately following each annual meeting of the shareholders of
this corporation, and at such other times as the Director may determine.
3.07. All meetings of the Board of Directors for shall be held at the
principal office of the corporation or at such place within the State of Texas
as may be designated from time to time by resolution of the Board or by written
consent of all of the members of the Board.
3.08. Special meetings of the Board of Directors for any purpose shall be
called at any time by the President or, if he is absent or unable or refuses to
act, by any Vice President or any two directors. Written notices of the special
meetings, stating the time, and in general terms the purpose or purposes
thereof, shall be mailed or telegraphed or personally delivered to each Director
no later that the day before the day appointed for the meeting.
3.09. A majority of the authorized number of Directors shall be necessary
to constitute a quorum for the transaction of business, except to adjourn as
hereinafter provided. Every act or decision done or made by a majority of the
Directors present shall be regarded as the act of the Board of Directors, unless
a greater number be required by law or by the articles of incorporation.
3.10. Any action required or permitted to be taken by the Board of
Directors may be taken without a meeting, and with the same force and effect as
a unanimous vote of Directors, if all members of the Board shall individually or
collectively consent in writing to such action.
3.11. A quorum of the Directors may adjourn any Directors' meeting to meet
again at a stated day and hour. Notice of the time and place of holding an
adjourned meeting need not be given to absent Directors if the time and place is
fixed at the meeting adjourned. In the
45
<PAGE>
absence of a quorum, a majority of the Directors present at any Directors
meeting, either regular or special, may adjourn from time to time until the time
fixed for the next regular meeting of the Board.
3.12. The President, or, in his absence, any Director selected by the
Directors present, shall preside at meetings of the Board of Directors. The
Secretary of the corporation or in his absence, any person appointed by the
presiding officer, shall act as Secretary of the Board of Directors.
3.13. Directors and members of committees may receive such compensation, if
any, for their services, and such reimbursements for expenses , as may be fixed
or determined by resolution of the Board.
3.14. The Board of Directors may authorize the corporation to pay expenses
incurred by, or to satisfy a judgement or fine rendered or levied against
present or former Directors, officers, or employees of this corporation as
provided by Article 2.02(A)(16) of the Texas Business Corporation Act.
ARTICLE FOUR
OFFICERS
4.01. The officers of the corporation shall be a President, a Secretary,
and such assistants and other officers as the Board of Directors shall from time
to time determine. Any two offices, except President and Secretary, may be held
by one person. All officers shall be elected by and hold office at the pleasure
of the Board of Directors, which shall fix the compensation and tenure of all
officers.
4.02. The officers of the corporation shall have the powers and duties
generally ascribed to the respective offices, and such additional authority or
duty as may from time to time be established by the Board of Directors.
4.03. Any payments made to an officer of the corporation such as, but not
limited to, a salary, commission, bonus, interest, rent, or entertainment
expense incurred by him, which shall be disallowed in whole or in part as a
deductible expense by the Internal Revenue Service, shall be reimbursed by such
officer to the corporation to the full extent of such disallowance. It shall be
the duty of the Directors, as a Board, to enforce payment of each amount
disallowed. In lieu of payment by the officer, subject to the determination of
the Directors, proportionate amounts may be withheld from his future
compensation payments until the amount owed to the corporation has been
recovered.
4.04. Every officer of the corporation who becomes a stockholder shall
obligate himself by written agreement to repay to the corporation any part of
his salary, travel, entertainment expenses, or fringe benefits, or bonus,
interest, and rent, which may be disallowed as a corporate deduction for tax
purposes, and that such written agreement shall be deemed ratified and
46
<PAGE>
adopted by the Board of Directors as of the date hereof.
ARTICLE FIVE
EXECUTION OF INSTRUMENTS
5.01. The Board of Directors may, in its discretion, determine the method
and designate the signatory officer or officers, or other person or persons, to
execute any corporate instrument or document, or to sign the corporate name with
out limitation, except where otherwise provided by law, and such execution or
signature shall be binding upon the corporation.
ARTICLE SIX
ISSUANCE AND TRANSFER OF SHARES
6.01. Certificates for shares of the corporation shall be issued only when
fully paid,
6.02. The corporation shall deliver certificates representing all shares in
which shareholders are entitled, which certificates shall be in such form and
device as the Board of Directors may provide. Each certificate shall bear on its
face the statement that the corporation is organized in Texas, the name in which
it is issued, the number and class of shares and series, and the par value or a
statement that the shares are without par value. The certificates shall be
signed by the President or a Vice President and the Secretary or an Assistant
Secretary, which signatures may be in facsimile if the certificates are to be
countersigned by a transfer agent or registered by a registrar, and the seal of
the corporation shall contain on the faces or backs such recitations or
references as are required by the law.
6.03. No new certificates shall be issued until the former certificate for
the share represented thereby shall have been surrendered and cancelled, except
in the case of lost or destroyed certificates for which the Board of Directors
my order new certificates to be issued upon such terms, conditions, and
guarantees as the Board may see fit to impose, including the filing of
sufficient indemnity.
6.04. Shares of the corporation may be transferred by endorsement by the
signature of the owner, his agent, attorney, or legal representative, and the
delivery of the certificate. The transferee in any transfer of shares shall be
deemed t have full notice of, and to consent to, the bylaws of the corporation
to the same extent as if he had signed a written assent thereto.
47
<PAGE>
ARTICLE SEVEN
RECORDS AND REPORTS
7.01. All books and records provided for by statute shall be open to
inspection by the shareholders from time to time and to the extent expressly
provided by statute, and not otherwise. The Directors may examine such books and
records at all reasonable times.
7.02. The Board of Directors may close the transfer books in their
discretion for a period not exceeding fifty (50) days preceding any meeting,
annual or special, of the shareholders, or the day appointed for the payment or
a dividend.
ARTICLE EIGHT
AMENDMENT OF BYLAWS
8.01. The power to alter, amend, or repeal these bylaws is vested in the
Directors, subject to repeal or change by action of the shareholders.
Adopted by the Board of Directors on January 31, 2000.
/s/ Bonita S. Clifton
-----------------------------------
Bonita S. Clifton, Director
/s/ Robert A. Sears
-----------------------------------
Robert A. Sears, Director
Attest:
/s/ David R. Clifton
------------------------------
David R. Clifton, Secretary
48
Exhibit 10.1
ESCROW AGREEMENT
This Escrow Agreement (this "Agreement") is made and entered into this 2nd
day of May, 2000, by and between Sunrise Software Systems, Inc., a Texas
corporation ("Issuer"), and Charter Escrow Company, Inc., with offices at 3300
Oak Lawn Avenue, Dallas, Texas ("Escrow Agent") (Issuer and Escrow Agent may
hereinafter be referred to as a "Party" or the "Parties").
Premises
WHEREAS, Issuer is a Blank Check Company, as that term is defined by
subsection (a)(2) of Rule 419 ("Rule 419") under the Securities Act of 1933, as
amended (the "Act"), intending to sell its common stock, no par value ("Common
Stock"), pursuant to a registration statement on Form SB-2 ("Form SB-2") under
the Act with the Securities and Exchange Commission ("SEC");
WHEREAS, Issuer desires to utilize Escrow Agent's services under the terms
and conditions herein provided to satisfy the restrictions and requirements
imposed on Issuer's offering by Rule 419.
Agreement
NOW, THEREFORE, based on the foregoing premises and for and in
consideration of the mutual promises and covenants hereinafter set forth, the
Parties hereby agree as follows:
A. Appointment of Escrow Agent. In connection with Issuer's proposed
offering of shares of Common Stock to be conducted after such
shares are registered, Issuer appoints Charter Escrow Company,
Inc. as Escrow Agent in connection with Issuer's Rule 419
offering. In connection with the Rule 419 offering:
1. The Escrow Agent shall receive and hold all shares of Common
Stock issued in connection with the offering pursuant to the
terms set forth in this Agreement and in accordance with
Rule 419; deposit the gross proceeds from the offering
promptly into an escrow account maintained by an "insured
depository institution," or into a separate bank account;
and maintain in good faith and in the regular course of
business the escrow account records of the insured
depository institution, or separate bank account, providing
that the funds in the escrow account are held for the
benefit of the purchasers and showing the name and interest
of each party to the account.
49
<PAGE>
2. The Escrow Agent shall receive compensation of:
a. An Establishment Fee equal of Five Hundred Dollars
($500) upon execution of this Agreement;
b. An Administration Fee equal to 1/4 of 1% of the total
amount of proceeds deposited into the escrow account,
which administration fee shall be payable in arrears on
an annual basis; and
c. The amounts on Exhibit A, Escrow Agent's Schedule of
Fees and Services, for corresponding activities.
B. Duties of Escrow Agent.
1. In connection with the Rule 419 offering, the Escrow Agent
shall:
a. Receive and hold all shares of Common Stock issued in
connection with the offering pursuant to the terms set
forth in this Agreement and in accordance with Rule
419; b. Deposit the gross proceeds from the offering
promptly into an escrow account ("Escrow Account")
maintained by an "insured depository institution," or
into a separate bank account; and
c. Maintain in good faith and in the regular course of
business Escrow Account records of the insured
depository institution, or separate bank account,
providing that the funds in the Escrow Account are held
for the benefit of the purchasers and showing the name
and interest of each party to the account.
2. The Escrow Agent shall be responsible for establishing the
Escrow Account into which the securities to be issued and
the funds to be received in connection with Issuer's
proposed offering shall be deposited and held until an
acquisition meeting the criteria specified in Rule 419 is
completed.
3. The Escrow Agent is not responsible for any act or failure
to act on its part, except in the case of its own willful
misconduct or gross negligence. The Escrow Agent shall not
be liable for any error of judgment or for any act done or
step taken or omitted in good faith, or for any mistake of
fact or law for anything which it may do or refrain from
doing in connection therewith, except for its own willful
misconduct.
50
<PAGE>
4. The Escrow Agent is not a party to or bound by any agreement
pertaining to the transaction or any other agreement between
the Parties, expect this Agreement.
5. In the event of any disagreement between the Parties or any
person resulting in adverse claims or demands being made in
connection with or for any of the amount in escrow, the
Escrow Agent shall be entitled, at its option, to refuse to
comply with any such claim or demand so long as such
disagreement shall continue, and to initiate a legal
proceeding, including but not limited to an impleader
action, to have the dispute resolved. Until resolution of
any such disagreement, Escrow Agent may refuse to deliver or
otherwise dispose of funds until:
a. The rights of the adverse claimant have been finally
adjudicated in the court assuming and having
jurisdiction of the Parties and the amount in escrow;
or
b. The differences shall have been adjusted by agreement
among the affected Parties and the Escrow Agent shall
have been notified thereof in writing signed by the
interested Parties.
6. The duties of the Escrow Agent hereunder are entirely
ministerial, being limited to receiving, holding, and
disbursing the amount in escrow as provided herein. The
Escrow Agent may rely upon and will be protected in acting
upon any paper or other document which may be submitted to
it in connection with its duties hereunder and which is
believed by it to be genuine and to have been signed by the
proper party or parties or their representatives, and shall
have no liability or responsibility with respect to the
form, execution, or validity thereof.
C. Deposit and Investment of Offering Proceeds. The proceeds from
the Issuer's offering will be deposited as follows:
1. All offering proceeds, after deduction of cash paid for
underwriting commissions, underwriting expenses, dealer
allowances, and amounts permitted to be released to the
Issuer pursuant to Rule 419(b)(2)(vi) and Section E(1)
herein, shall be deposited promptly into the Escrow Account.
2. Deposited proceeds shall only be invested in an obligation
that constitutes a "deposit", as that term is defined in
section 3(l) of the Federal Deposit Insurance Act.
51
<PAGE>
3. Interest or dividends earned on the funds, if any, shall be
held in the Escrow Account until the funds are released. If
funds held in the Escrow Account are released to a purchaser
of the securities, the purchasers shall receive interest or
dividends earned, if any, on such funds until the date of
release. If funds held in the Escrow Account are released to
the Issuer, interest or dividends earned on such funds up to
the date of release shall be released to the Issuer.
D. Deposit of Securities.
1. All securities issued in connection with the offering,
whether or not for cash consideration, and any other
securities issued with respect to such securities, including
securities issued with respect to stock splits, stock
dividends, or similar rights, shall be deposited directly
into the Escrow Account promptly upon issuance. The identity
of the purchaser of the securities shall be included on the
stock certificates or other documents evidencing such
securities.
2. Securities held in the Escrow Account are to remain as
issued and deposited and shall be held for the sole benefit
of the purchasers, who shall have voting rights, if any,
with respect to securities held in their names, as provided
by applicable state law. No transfer or other disposition of
securities held in the Escrow Account or any interest
related to such securities shall be permitted other than by
will or the laws of descent and distribution, or pursuant to
a qualified domestic relations order as defined by the
Internal Revenue Code of 1986 [26 U.S.C. 1 et seq.], or the
rules thereunder.
E. Distribution and Release of Deposited Securities and Funds.
1. Ten percent (10%) of the net offering proceeds (after
deducting the maximum finders' fees and expenses allowed)
shall be deducted from the funds held in the Escrow Account
and be released to the Issuer prior to the consummation of a
business combination(s), as provided by Rule 419(b)(2)(vi).
2. The securities held in the Escrow Account shall be delivered
to the purchaser or other registered holder identified on
the deposited securities only at the same time as, or,
after:
a. The Escrow Agent has received a signed representation
from the Issuer that the requirements of paragraphs
(e)(1) and (e)(2) of Rule 419 have been met, including
receipt by Issuer of Rule 419(e)(2)(iii) confirmations
from investors of at least 75% of the proceeds raised;
and
52
<PAGE>
b. Consummation of an acquisition(s) meeting the
requirements of paragraph (e)(2)(iii) of Rule 419.
F. Governing Law. This Agreement shall be governed by, enforced, and
construed under and in accordance with the laws of the State of
Texas. . The below signatures by the authorized representatives
of the Issuer and Escrow Agent witness their respective agreement
to act in accordance with the terms hereof.
Issuer - Sunrise Software Systems, Inc. Escrow Agent - Charter Escrow
Company, Inc.
By: /s/ Bonita S. Clifton By: /s/ David Garner
Bonita S. Clifton, President David Garner, President
53
Exhibit 10.2
Nonrecourse
$ 20,000 Dated: December 7, 1999
--------- -----------------
PROMISSORY NOTE
FOR VALUE RECEIVED, Sunrise Software Systems, Inc., a Texas
corporation ("Maker"), promises to pay to David Clifton, a resident of Texas
("Holder"), or order, Twenty Thousand Dollars ($20,000).
1. Payments. The principal on the obligation represented hereby (the
"Principal") shall be repaid in one lump sum, payable on December 7, 2001, which
date is two (2) years from the date hereof (the "Maturity Date").
2. Interest. This obligation shall bear simple interest which shall be at
the rate of 10% per annum, payable on the Maturity Date.
3. Type and Place of Payments. Payments of principal and interest shall be
made in lawful money of the United States of America to the above-named Holder
or his order at Maker's principal place of business.
4. Prepayment. Advance payment or payments may be made on the principal,
without penalty or forfeiture. There shall be no penalty for any prepayment.
5. Default. Upon the occurrence or during the continuance of any one or
more of the events hereinafter enumerated, Holder or the holder of this Note may
forthwith or at any time thereafter during the continuance of any such event, by
notice in writing to the Maker, declare the unpaid balance of the principal and
interest on the Note to be immediately due and payable, and the principal and
interest shall become and shall be immediately due and payable without
presentation, demand, protest, notice of protest, or other notice of dishonor,
all of which are hereby expressly waived by Maker, such events being as follows:
(a) Default in the payment of the principal
and interest of this Note or any portion thereof when
the same shall become due and payable, whether at
maturity as herein expressed, by acceleration, or
otherwise, unless cured within five (5) days after
notice thereof by Holder or the holder of such Note
to Maker.
(b) Maker shall file a voluntary petition in
bankruptcy or a voluntary petition seeking
reorganization, or shall file an answer admitting the
jurisdiction of the court and any material
allegations of an involuntary petition filed pursuant
to any act of Congress relating to bankruptcy or to
any act purporting to be amendatory thereof, or shall
be adjudicated bankrupt, or shall make an assignment
for the benefit of creditors, or shall apply for or
consent to the appointment of any receiver or trustee
for Maker, or of all or any substantial portion of
its property, or Maker shall make an assignment to an
agent authorized to liquidate any substantial part of
its assets; or
54
<PAGE>
(c) An order shall be entered pursuant to
any act of Congress relating to bankruptcy or to any
act purporting to be amendatory thereof approving an
involuntary petition seeking reorganization of the
Maker, or an order of any court shall be entered
appointing any receiver or trustee of or for Maker,
or any receiver of trustee of all or any substantial
portion of the property of Maker, or a writ or
warrant of attachment or any similar process shall be
issued by any court against all or any substantial
portion of the property of Maker, and such order
approving a petition seeking reorganization or
appointing a receiver or trustee is not vacated or
stayed, or such writ, warrant of attachment, or
similar process is not released or bonded within 60
days after its entry or levy.
6. Attorneys' Fees. If this Note is placed with an attorney for collection,
or if suit be instituted for collection, or if any other remedy permitted by law
is pursued by Holder, because of any default in the terms and conditions herein,
then in such event, the undersigned agrees to pay reasonable attorneys' fees,
costs, and other expenses incurred by Holder in so doing.
7. Construction. This Note shall be governed by and construed in accordance
with the laws of the State of Texas.
8. Security. This Note shall be a nonrecourse obligation of Sunrise
Software Systems, Inc.
Sunrise Software Systems, Inc.
By: /s/ Bonita S. Clifton
--------------------------
Bonita S. Clifton, President
55
CLYDE BAILEY P.C.
- --------------------------------------------------------------------------------
Certified Public Accountant
10924 Vance Jackson #404
San Antonio, Texas 78230
(210) 699-1287(ofc.)
(888) 699-1287 (210) 691-2911 (fax)
Member:
American Institute of CPA's
Texas Society of CPA's
April 28, 2000
I consent to the use, of my report dated February 8, 2000, in the Form
SB2, on the financial statements of Sunrise Software Systems, Inc., dated
December 31, 1999, included herein and to the reference made to me.
Clyde Bailey
56
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