As filed with the Securities and Exchange Commission on December ___, 2000.
Registration No. 333-_________
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U. S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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BAYLOR INDUSTRIES, INC.
----------------------------------------------
(Exact name of registrant as specified in its charter)
NEVADA 2834 76-0639842
------------------------------- ----------------- ------------------
(State or other Jurisdiction of (Primary Standard I.R.S. Employer
Incorporation or Organization) Industrial Identification No.)
Classification
Number
14601 Bellaire Blvd.
Suite 338, Houston, TX 77083
----------------------------------------------
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices and principal place of business)
Candace J. Sherman
Chief Executive Officer
14601 Bellaire Blvd., Suite 338
Houston, TX 77083
(281) 564-6418
---------------------------------------------------------
(Name, address, including zip code, and telephone number, including
area code, of agent for service)
Copies to:
Thomas C. Cook, Esq.
Thomas C. Cook & Associates, Ltd.
3110 S. Valley View Suite #106
Las Vegas, Nevada 89102
(702) 876-5941
Approximate date of proposed commencement of sale to the public: As soon as
practicable after the Registration Statement becomes effective.
If any of the securities being registered on this form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities
Act of 1933, check the following box. /X/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier registration statement for
the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration 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,
please check the following box. [ ]
1
<PAGE>
CALCULATION OF REGISTRATION FEE
-------------------------------------
========================================================================
TITLE OF EACH PROPOSED
CLASS OF PROPOSED MAXIMUM
SECURITIES AMOUNT OFFERING AGGREGATE AMOUNT OF
TO BE TO BE PRICE PER OFFERING REGISTRATION
REGISTERED RESISTERED SHARE(1) PRICE(1) FEE(2)
[S] [C] [C] [C] [C]
Common stock
$0.001 par value 3,000,000 $0.025
TOTAL 3,000,000 N/A $75,000 $19.80
========================================================================
(1) Estimated solely for the purpose of computing the amount of the
registration fee pursuant to Rule 457 (o) under the Securities Act of 1933
(the "Securities Act").
(2) Paid herein by electronic transfer
The registrant hereby amends the Registration Statement on such date
or dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Acts of 1933 or until the Registration Statement shall become
effective on such date as the Securities and Exchange Commission, acting
pursuant to said Section 8(a), may determine.
PROSPECTUS Subject to Completion; Dated January ______, 2001
The information in this prospectus is subject to completion or amendment.
We may not sell these securities until the registration statement filed with
the Securities and Exchange Commission becomes effective. This prospectus
shall not constitute an offer to sell or the solicitation of an offer to buy
nor shall there be any sale of these securities in any state in which an offer,
solicitation or sale would be unlawful prior to registration or qualification
under the securities laws of that state.
2
<PAGE>
BAYLOR INDUSTRIES, INC.
PROSPECTUS
This is an initial public offering of up to 3,000,000 shares of our common
stock. we will be selling our shares on a "best efforts" basis. The shares
will be sold by our officers and directors. No one has agreed to buy any of
our shares, and there is no assurance that any sales will be made. Even if
not all, or very few, of the 3,000,000 shares are sold, we will not refund any
payments for the shares. There is no minimum amount of shares we must sell
and no money raised from the sale of our stock will go into escrow, trust or
another similar arrangement. The offering will remain open until June 30,
2001, unless we decide to cease selling efforts prior to this date
Prior to this offering there has been no public market for the trading of
the shares, and it is possible that no such market will develop or trading
will commence for a substantial period of time after the closing of this
offering. We expect one or more brokers to trade our shares and to apply for
the approval of the shares for quotation on the NASDAQ Bulletin Board, but
there is no assurance that we will be able to secure such listing. The price
of the shares has been determined solely by us, and does not bear any direct
relationship to our assets, operations, book value or other established
criteria of value.
------------------------
INVESTING IN THE COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. YOU SHOULD
CONSIDER CAREFULLY THE RISK FACTORS CONTAINED IN THIS PROSPECTUS BEGINNING ON
PAGE 6.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF
THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
========================================================================
SHARES PRICE TO SELLING PROCEEDS TO
OFFERED PUBLIC(1) COMMISSIONS(2) COMPANY(3)
<S> <C> <C> <C> <C>
Per share
Max. Share Amount 3,000,000 $0.025 $ 0.00 $ 75,000
=========================================================================
</TABLE>
(1) Does not include offering costs, including filing, printing, legal,
accounting, transfer agent fees estimated at $4,000.
(2) We are offering for sale 3,000,000 shares of common stock, at a
purchase price of $0.025 per share. The shares shall be sold
exclusively by our sole officer and director according
to the safe harbor provisions of Rule 3a4(1) of the Securities
Exchange Act of 1934.
Under SEC Rule 3a51-1(d) under the Exchange Act, the securities we are
offering constitute penny stocks, and as such, certain sales
restrictions apply to these securities. Up to 80% of the offering may
be purchased by our officer/director and current shareholder or any of
her affiliates or associates. No public market currently exists for
our common stock. No public market may ever develop. Even if a market
develops, you may not be able to sell your shares.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF
THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
The date of this prospectus is December __, 2000
3
<PAGE>
YOU SHOULD RELY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. WE HAVE
NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION DIFFERENT FROM THAT
CONTAINED IN THIS PROSPECTUS. WE ARE OFFERING TO SELL, AND SEEKING OFFERS TO
BUY, SHARES OF COMMON STOCK ONLY IN JURISDICTIONS WHERE OFFERS AND SALES ARE
PERMITTED. THE INFORMATION CONTAINED IN THIS PROSPECTUS IS ACCURATE ONLY AS OF
THE DATE OF THIS PROSPECTUS, REGARDLESS OF THE TIME OF DELIVERY OF THIS
PROSPECTUS OR OF ANY SALE OF THE COMMON STOCK.
TABLE OF CONTENTS
-----------------
Our Company...........................................................5
SUMMARY...............................................................5
RISK FACTORS..........................................................6
MANAGEMENT DISCUSSION AND ANALYSIS OR PLAN OF OPERATION..............11
USE OF PROCEEDS......................................................12
DILUTION.............................................................14
BUSINESS.............................................................15
MANAGEMENT...........................................................22
INDEMNIFICATION .....................................................24
PLAN OF DISTRIBUTION/SELLING SECURITY HOLDERS........................26
SHARES ELIGIBLE FOR FUTURE SALE......................................26
PRINCIPAL SHAREHOLDER................................................26
DESCRIPTION OF SECURITIES ...........................................27
THE OFFERING.........................................................28
LEGAL PROCEEDINGS....................................................28
LEGAL MATTERS........................................................28
FINANCIAL STATEMENTS.................................................30
4
<PAGE>
PROSPECTUS SUMMARY
------------------
Because this is only a summary, it does not contain all the information that
may be important to you. You should read the entire prospectus, specially
"Risk Factors," beginning on Page 6, and the Consolidated Financial Statements
and Notes, before deciding to invest in our common stock.
OUR COMPANY
Baylor Industries, Inc., is a startup company that plans to market, develop
and contract to manufacture generic prescription pharmaceutical products. We
hope to develop a generic pharmaceutical product, using an FDA-approved
contract laboratory and contract manufacturing facilities. We hope to obtain
an Abbreviated New Drug Application (ANDA) for our generic pharmaceutical
product. We have limited ourselves to the development of one product;
however, this does not preclude us from seeking other product opportunities.
Our executive offices are located at 14601 Bellaire Blvd., Suite 338,
Houston, TX 77083. Our phone number is (281) 564-6418. We were incorporated
in
March 1999 under the laws of the State of Nevada.
SUMMARY
We are selling 3,000,000 shares of our common stock. We are not registering
for sale any of the shares held by our current stockholder. We have a fixed
price of$0.025 per share for the common stock we are selling in this offering.
Our principal executive offices are located at: 14601 Bellaire Blvd., Suite
338, Houston, TX 77083. Our telephone number is (281)564-6418
The Offering
------------
Common stock offered for sale We are offering up to 3,000,000
shares of our common stock.
Offering Price to the public $0.025 per share
Number of shares outstanding
prior to the offering 2,000,000 shares (1)
Number of shares to be
outstanding after the offering 5,000,000 shares (2)
Terms of the offering There is no minimum offering.
Accordingly, as we sell shares of
common stock, we will use the proceeds
for our activities. The offering will
remain open until June 30, 2001, unless
we decide to cease selling efforts prior
to this date.
Use of proceeds. We intend to use the net proceeds of this
offering primarily for research and product
development, analytical research and
general corporate purposes.
Plan of distribution. This is a direct participation with no
minimum offering. We have not accepted
commitments from prospective purchasers
of our shares. The shares will be offered
and sold by our principal executive officer
director, although we may retain the
services of one or more NASD registered
broker-dealers as selling agent(s) to
effect offers and sales on our behalf.
We have not retained a registered broker-
dealer as of the date of this filing.
(1) Such figure is based on the number of shares we had outstanding as of
December 19, 2000
(2) Such figure assumes that all of the shares being offered herein are sold.
5
<PAGE>
RISK FACTORS
------------
An investment in our common stock is speculative in nature and involves a
high degree of risk. You should carefully consider the following risks and
the other information contained in this prospectus before investing in the
common stock offered hereby. The price of our common stock could decline due
to any of these risks, and you could lose all or part of your investment. You
also should refer to the other information included in this prospectus,
including the financial statements and related notes thereto. In addition,
the risks described below are not the only ones facing us. We have described
only the risks we consider material. However, there may be additional risks
that we view as not material or of which we are not presently aware.
If any of the events described below were to occur, our business,
prospects, financial condition or results of operations or cash flow could be
materially adversely affected. When we say that something could or will have
a material adverse effect on it, we mean that it could or will have one or more
of these effects.
Special note regarding forward-looking statements
This prospectus may contain certain forward-looking statements and
information relating to us that are based on beliefs and its principals as
well as assumptions made by and information currently available to them.
These statements include, among other things, the discussions of our business
strategy and expectations concerning our market position, future operations,
expansion opportunities, and profitability. When used in these documents,
the words "anticipate," "feel," "believe," "estimate," "expect," "plan," and
"intend" and similar expressions, as they relate to us or our principals, are
intended to identify forward-looking statements. Such statements reflect the
current view of respecting future events and are subject to certain risks,
uncertainties, and assumptions, including the meaningful and important risks
and uncertainties noted, particularly those related to our operations, results
of operations, and growth strategy, liquidity, competitive factors and pricing
pressures, changes in legal and regulatory requirements, general economic
conditions, and other factors described in this prospectus.
WE WERE INCORPORATED ON MARCH 29, 2000, AND WE HAVE A SHORT OPERATING HISTORY
BY WHICH YOU CAN EVALUATE OUR BUSINESS AND PROSPECTS.
-----------------------------------------------------------------------
We cannot assure you that we will ever become or remain profitable. Our
future profitability will depend on whether or not we can obtain approval
from the Food and Drug Administration (AFDA@) to market a generic
pharmaceutical product. We expect to continue to incur losses if and until
we can obtain FDA approval to market a generic pharmaceutical product. Our
operating expenses are expected to continue to increase significantly in
connection with our proposed activities, specifically in the areas of product
development, research, filing applications to the FDA, and producing the
final generic pharmaceutical product. We cannot be certain that we will be
able to accurately predict our revenues, particularly due to the general
uncertainty of obtaining FDA approval and whether or not other companies will
come to the market first with the same generic pharmaceutical product.
6
<PAGE>
WE NEED TO RAISE A MINIMUM OF $75,000 IN PROCEEDS OF THIS OFFERING OR WE WILL
NOT BE ABLE TO CONTINUE AS A GOING CONCERN, IN WHICH CASE YOU MAY LOSE YOUR
ENTIRE INVESTMENT.
-----------------------------------------------------------------------------
Our independent certified public accountants have pointed out that we have
a negative working capital such that our ability to continue as a going
concern is dependent upon obtaining additional capital and financing for our
planned operations. If we do not raise a minimum of $75,000 from this
offering, then you may lose your entire investment. We can give no assurance
that even if obtain proceeds from this offering that we will be able to meet
our cash requirements from these sources. If our capital requirements or cash
flow vary significantly from our current estimates or if unforeseen
circumstances occur, we may require additional financing sooner than we
currently anticipate. Our failure to raise these funds may:
o restrict our growth;
o limit our development of new products or improvements to
existing products and services;
o limit our ability to take advantage of future opportunities;
o lessen our ability to compete; and
o limit our ability to continue operations.
We can give no assurance that additional financing will be available to us, if
needed, or that it will be available on terms acceptable to us. In addition,
any sale of our equity securities may involve substantial dilution to our
then-existing shareholders..
THERE ARE MANY ASPECTS OF OUR BUSINESS PLAN THAT ARE OUTSIDE OUR DIRECT
CONTROL.
-----------------------------------------------------------------------
There are many steps that need to be followed before we can begin to realize
any revenues. We must find a suitable pharmaceutical product on which the
innovator patent has expired. We must arrange to manufacture a generic
version of that product with a manufacturer who has a history of FDA
approvals and who must also set up and implement studies that will pass the
FDA's regulatory tests to ensure that the generic product is as effective as
its brand-name counterpart. We must then find a distributor to make
sure that our generic product gets to the consumer in a timely manner and that
our products are reasonably priced alternatives to the brand name counterpart.
MANAGEMENT AND AFFILIATES OWN ENOUGH SHARES TO CONTROL SHAREHOLDER VOTE
-----------------------------------------------------------------------
Our executive officers, directors, affiliates and entities controlled by them,
own approximately all of the outstanding shares of common stock. As a
result, these executive officers and directors will control matters that
require stockholder approval such as election of directors, approval of a
corporate merger, increasing or decreasing the number of authorized shares,
adopting corporate benefit plans, effecting a stock split, amending our
certificate of incorporation or other material corporate actions.
SINCE WE HAVE NOT PAID ANY DIVIDENDS ON OUR COMMON STOCK AND DO NOT INTEND TO
DO SO IN THE FORESEEABLE FUTURE, A PURCHASER IN THIS OFFERING WILL ONLY REALIZE
AN ECONOMIC GAIN ON HIS OR HER INVESTMENT FROM AN APPRECIATION, IF ANY, IN THE
MARKET PRICE OF OUR COMMON STOCK.
We have never paid, and have no intentions in the foreseeable future to
pay, any cash dividends on our common stock. Therefore an investor in this
offering, in all likelihood, will only realize a profit on his investment if
the market price of our common stock increases in value.
7
<PAGE>
THE APPLICATION OF THE "PENNY STOCK REGULATION" COULD ADVERSELY AFFECT THE
MARKET PRICE OF OUR COMMON STOCK
Our securities may be deemed a penny stock. Penny stocks generally are
equity securities with a price of less than $5.00 per share other than
securities registered on certain national securities exchanges or quoted on
the NASDAQ Stock Market, provided that current price and volume information
with respect to transactions in such securities is provided by the exchange
or system. Our securities may be subject to "penny stock rules" that impose
additional sales practice requirements on broker-dealers who sell such
securities to persons other than established customers and accredited investors
(generally those with assets in excess of $1,000,000 or annual income exceeding
$200,000 or $300,000 together with their spouse). For transactions covered by
these rules, the broker-dealer must make a special suitability determination
for the purchase of such securities and have received the purchaser's written
consent to the transaction prior to the purchase. Additionally, for any
transaction involving a penny stock, unless exempt, the "penny stock rules"
require the delivery, prior to the transaction, of a disclosure schedule
prescribed by the Commission relating to the penny stock market. The broker-
dealer also must disclose the commissions payable to both the broker-dealer
and the registered representative and current quotations for the securities.
Finally, monthly statements must be sent disclosing recent price information
on the limited market in penny stocks. Consequently, the "penny stock rules"
may restrict the ability of broker-dealers to sell our securities and may
have the effect of reducing the level of trading activity of our common stock
in the secondary market. The foregoing required penny stock restrictions will
not apply to our securities if such securities maintain a market price of $5.00
or greater. We can give no assurance that the price of our securities will
reach or maintain such a level.
WE MAY NOT FIND A SUITABLE PHARMACEUTICAL PRODUCT TO MARKET.
------------------------------------------------------------
The first step necessary in our business plan is finding a pharmaceutical
product on which the innovator patent has expired. We have not yet selected
this product, though we are pursuing a particular product which seems to us to
be an ideal one. However, we may be mistaken in this impression and ultimately
discover that it is not appropriate for our purposes which would necessitate
beginning our search from scratch--or our positive assessment of its chances
may prove to be faulty. In either case, we have no guarantees that we will be
able to arrange for its effective manufacture and distribution.
WE MAY NOT BE ABLE TO FIND A MANUFACTURER TO PRODUCE OUR GENERIC
PHARMACEUTICAL PRODUCTS.
-----------------------------------------------------------------
Our business plan calls for us to find a manufacturer of pharmaceutical
products upon whose expertise we will rely to produce our generic
alternative. It is also necessary that we choose a manufacturing facility
with pharmaceutical experience and a track record of working with the FDA.
We can give no assurance that we will find a manufacturer with whom we can
come to an acceptable arrangement.
THE LOSS OF OUR ONLY EMPLOYEE AND ONLY OFFICER MAY ADVERSELY AFFECT OUR
GROWTH OBJECTIVES.
Our success in achieving our growth objectives depends upon the efforts
of Ms. Sherman, our President. The loss of services of this individual
may have a material adverse effect on our business, financial condition and
results of operations. We can give no assurance that we will be able to
maintain and achieve our growth objectives should we lose this individuals'
services.
8
<PAGE>
WE MAY NOT BE ABLE TO GET AN "ANDA" FROM THE FDA WHICH COULD HAVE A
POTENTIALLY DISASTROUS EFFECT.
-------------------------------------------------------------------
generally, before pharmaceutical companies are authorized to sell generic
products, the FDA requires that they perform a series of studies and publish
the results of their studies. At that time, the FDA may issue an Abbreviated
New Drug Application (ANDA), which allows the company to market a product.
If the product fails these studies, the entire project and all funding can be
lost. If we are unable to pass the necessary studies required by the FDA, we
may be unable to fund additional studies and would, consequently, have a
material adverse affect on our business operations.
MANY OF OUR COMPETITORS ARE LARGER AND HAVE GREATER FINANCIAL AND OTHER
RESOURCES THAN WE DO WHICH COULD MAKE IT DIFFICULT FOR US TO COMPETE WITH
THEM
----------------------------------------------------------------------------
In relation to our competitors, we are and will continue to be an
insignificant participant in the business of marketing generic pharmaceutical
products after the brand-name versions of those products are no longer
covered by their innovator patents. Companies with an established operating
history and with significant funding exist that may make it difficult or
impossible for us to achieve our business objectives. Many of our competitors
have significantly greater financial resources, technical expertise and
managerial capabilities than we and, consequently, will put us at a
competitive disadvantage in identifying suitable pharmaceutical products and
successfully consummating a deal to outsource the manufacturing and
distribution of our generic products. Also, we will potentially be competing
with a large number of other small pharmaceutical concerns seeking to go into
production on products like those we are seeking to acquire.
GOVERNMENT REGULATION MAY AFFECT OUR ABILITY TO MAKE A PROFIT.
--------------------------------------------------------------
The Food and Drug Administration (FDA) as stated has a number of laws and
regulations that regulate the manufacture of generic pharmaceuticals. We are
well aware of these regulations and have set our plans accordingly. However
we can give no assurance that at some point in the future, new regulations or
tougher standards may be imposed by the federal or any of the various state
governments These laws and regulations could decrease the profitability or
the demand for our products, increase our costs and have a material adverse
affect on our results of operation.
WE MAY UNINTENTIONALLY INFRINGE ON THE PROPRIETARY RIGHTS OF OTHERS.
--------------------------------------------------------------------
We may be subject to claims alleging that we have infringed on the
proprietary rights of others. These claims could result in significant
damages. Even if any of these claims ultimately prove to be without merit,
the time and costs associated with defending such claims could harm our
business.
THERE IS NO CURRENT TRADING MARKET FOR BAYLOR'S SECURITIES AND, IF A TRADING
MARKET DOES NOT DEVELOP, PURCHASERS OF ITS SECURITIES MAY HAVE DIFFICULTY
SELLING THEIR SHARES.
----------------------------------------------------------------------------
There is currently no established public trading market for our securities. A
trading market in our securities may never develop or, if developed, it may
not be able to be sustained. We intend to apply for admission to quotation
of its securities on the NASD OTC Bulletin Board and, if and when qualified,
it intends to apply for admission to quotation on the Nasdaq SmallCap Market.
If for any reason our common stock is not listed on the NASD OTC Bulletin
Board or a public trading market does not otherwise develop, purchasers of the
shares may have difficulty selling their common stock should they desire to do
so. Various factors, such as our operating results, changes in laws, rules or
regulations, general market fluctuations, changes in financial estimates by
securities analysts and other factors may have a significant impact on the
market price of our securities.
9
<PAGE>
WE MAY, IN THE FUTURE, ISSUE ADDITIONAL SHARES OF OUR COMMON STOCK WHICH WOULD
REDUCE INVESTORS PERCENT OF OWNERSHIP AND MAY DILUTE OUR SHARE VALUE.
Our Certificate of Incorporation authorizes the issuance of 20,000,000
shares of common stock, par value $0.001 per share. The future issuance of all
or part of our remaining authorized common stock may result in substantial
dilution in the percentage of our common stock held by our then existing
shareholders. We may value any common or preferred stock issued in the
future on an arbitrary basis. The issuance of common stock for future services
or acquisitions or other corporate actions may have the effect of diluting the
value of the shares held by our investors, and might have an adverse effect on
any trading market for our common stock.
IN THE FUTURE, THE AUTHORIZATION OF OUR PREFERRED STOCK MAY HAVE AN ADVERSE
EFFECT ON THE RIGHTS OF HOLDERS OF OUR COMMON STOCK.
We may, without further action or vote by our shareholders, designate
and issue shares of our preferred stock. The terms of any series of
preferred stock, which may include priority claims to assets and dividends
and special voting rights, could adversely affect the rights of holders of the
common stock and thereby reduce the value of the common stock. The designation
and issuance of preferred stock favorable to current management or shareholders
could make the possible takeover of us or the removal of our management more
difficult and discharge hostile bids for control of us which bids might have
provided shareholders with premiums for their shares.
OUR OFFICERS AND DIRECTORS HAVE LIMITED LIABILITY AND HAVE INDEMNITY RIGHTS
Our Certificate of Incorporation and By-Laws provide that we may indemnify
our officers and directors against losses sustained or liabilities incurred
which arise from any transaction in that officer's or director's respective
managerial capacity unless that officer or director violates a duty of loyalty,
did not act in good faith, engaged in intentional misconduct or knowingly
violated the law, approved an improper dividend, or derived an improper benefit
from the transaction.
DIVIDEND POLICY
We have not paid any dividends on our common stock, nor do we anticipate
paying any in the foreseeable future. The Board of Directors intends to
follow a policy of using retaining earnings, if any, to finance the growth
of the company. The declaration and payment of dividends in the future will
be determined by the Board of Directors in light of conditions then existing,
including the company's earnings, financial condition, capital requirements
and other factors.
10
<PAGE>
MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Baylor was formed on March 29, 2000, through November 30, 2000, the company
has been inactive. We have yet to generate any revenues and have no expenses,
as we will remain inactive until this offering is approved.
REVENUES
We have yet to generate any revenues, and we do not expect to generate any
revenues until we can obtain an FDA-approved generic pharmaceutical product.
LIQUIDITY AND CAPITAL RESOURCES
In March, 2000, we issued 2,000,000 shares of its common stock to our
founder, for $2,000 in cash. We have not issued any additional stock.
The following table sets forth our capitalization as of November 30, 2000,
and pro-forma as adjusted to give close to the sale of 3,000,000 shares
in our offering.
<TABLE>
<CAPTION>
Capitalization
As Adjusted
Actual after Offering
------ --------------
<S> <C> <C>
Long-term debt
Stockholders' equity:
Common stock, $.001 par value; - -
authorized 20,000,000 shares,
issued and outstanding
2,000,000 shares 2,000 5,000
Additional paid-in capital 0 72,000
Deficit accumulated during the
development period (0) (0)
Total stockholders equity 2,000 77,000
Total Capitalization 2,000 77,000
</TABLE>
11
<PAGE>
USE OF PROCEEDS
Our success is entirely dependent on our ability to sell the shares in this
offering The gross proceeds of this offering will be $75,000.
We have discretion over how to use a significant portion of the net proceeds
of this offering. We cannot assure investors that our use of the net proceeds
will not vary substantially due to unforeseen factors. The proceeds, if any,
will be used to pay the following expenses:
<TABLE>
<CAPTION>
The following table sets forth the intended use of proceeds, if any, from this
offering:
<S> <C>
Less: Offering Expenses
Proceeds from Offering $ 75,000
Commissions & Finders Fees $ 0
Legal and Accounting $ 3,500
Copying and Advertising $ 480
Transfer Agent Fees $ 500
Organizational $ 1,520
TOTAL OFFERING EXPENSES $ 6,000
Net Proceeds From Offering $ 69,000
Use of Proceeds
Process Development $ 30,000
Biobatch Manufacturer $ 20,000
Stability Testing $ 5,000
General Working Capital $ 14,000
Total Use of All Proceeds $ 69,000
</TABLE>
(1) Offering costs include filing, printing, legal, accounting,
transfer agent fees.
There will be no compensation paid or due or owing to any officer or
director.
We will use the business office of our president, rent free, until such
time as we select and begin to market our generic pharmaceutical product.
The foregoing represents our best estimate of the allocation of the net
proceeds of this offering based upon the current status of our business. We
based this estimate on assumptions, including expected research costs and
services can be completed and introduced without unanticipated delays or
costs. If any of these factors change, we may find it necessary to
reallocate a portion of the proceeds within the above-described categories
or use portions of the proceeds for other purposes. Our estimates may prove
to be inaccurate. New programs or activities may be undertaken which will
require considerable additional expenditures, or unforeseen expenses may
occur.
If our plans change or our assumptions prove to be inaccurate, we may need
to seek additional financing sooner than currently anticipated or curtail
our operations. We may need to raise additional funds in the future in order
to fund more aggressive brand promotions and more rapid expansion, to
develop newer or enhanced products or services, to fund acquisitions, to
respond to competitive pressures, or to acquire complementary businesses,
technologies or services. The proceeds of this offering may not be
sufficient to fund our proposed expansion and additional financing may not
become available if needed.
12
<PAGE>
No portion of the proceeds of the offering will be paid to our sole
officer/director and/or her affiliates or associates. If this capital is
insufficient, we may seek to obtain additional financing through
offerings of equity and/or debt securities or by borrowing. It is unlikely,
however, that we will seek loan financing as the costs of our operations are
negligible and we do not expect to incur any significant additional costs.
If, however, we are able to raise only the minimum amount of $40,000 and no
additional funds are secured, then we face the risk that we might be
under-funded and any investment might be substantially at risk. In the event
of a business failure, we would repay any loan undertaken by us in lump sum
upon receipt of final payment from any proceeds we would derive from the sale
of our company to a merger candidate.
Working Capital
---------------
Upon consummation of the offering, we believe that we will have sufficient
working capital to pay expenses related to (1) the offering, (2) the
identification, manufacture, and distribution of a generic pharmaceutical
product, and (3) our general administrative expenses over the next 18 month
period. We believe this is the case because of our minimal operating expenses
and the fact that our sole officer, the president, will receive no salary,
wages, commissions or the like in connection with any services rendered for
the benefit of our company. Working capital is expected to include incidental
expenses related to the marketing of our generic products as well as
incidental operational expenses like basic office supplies.
Other Arrangements
------------------
We have no agreement or understanding, express or implied, with any officer,
director, or promoter, employee for compensation for services. We have no plan,
agreement, or understanding, express or implied, with any officer, director, or
promoter, or their affiliates or associates, regarding the issuance to such
persons of any of our shares authorized and unissued common stock. The
existing officer/director reserves the right to acquire units in this offering.
We have neither made nor contemplated any advances to our officer/director or
promoters, or any of their affiliates or associates.
Except for reimbursement of offering costs and expenses incurred by our
officer/director on company matters described above, no portion of the net
proceeds of the offering may be paid to our officer/director, our promoters,
or their affiliates or associates, directly or indirectly, as consultant
fees, officer salaries, director fees, purchase of their shares, or other
payments. No portion of the net proceeds will be used to make loans to any
person. We will not borrow funds and use the proceeds from them to make
payments to our officer/director, our promoters, or their affiliates or
associates.
We have no agreement or understanding with any consultant or advisor to
provide services, although the possibility exists management may find it
to be beneficial to retain the services of such a consultant. In no
circumstances will we retain the services of any consultant who is also an
officer/director, or a promoter,, or their affiliates and associates.
Compensation to a consultant may take various forms, including one time cash
payments, payments based on a percentage of revenues or product sales volume,
payments involving issuance of our securities or any combination of these or
other compensation arrangements.
13
<PAGE>
DILUTION
The difference between the initial public offering price per share and the
net tangible book value per share of common stock after this offering
constitutes the dilution to investors in this offering. Net tangible book
value per share is determined by dividing total tangible assets less total
liabilities by the number of outstanding shares of common stock. Dilution
arises mainly from the arbitrary decision by us as to the offering price per
share. Dilution of the value of the shares purchased by the public in this
offering will also be due, in part, to the lower book value of the shares
presently outstanding, and in part, to expenses incurred in connection with
the public offering.
Net tangible book value is equal to the net tangible assets of the company
The net tangible assets of the company are equal to the total assets less the
total liabilities and intangible assets. (See "Financial Statements.")
As of November 30, 2000, we had an unaudited net tangible book value
of $2,000. The net tangible book value deficit is equal to the total
tangible assets less the total liabilities. The net tangible book value
per share of common stock is approximately $0.001
The information below sets forth the dilution to persons purchasing shares
in this offering without taking into account any changes in our net tangible
book value after November 30, 2000, except the sale of the maximum number of
shares offered at the public offering price and receipt of the net proceeds
from that sale.
<TABLE>
<CAPTION>
DILUTION
Nov. 30, 2000 3,000,000 shares sold
------------- ---------------------
<S> <C> <C>
Public offering price per share n/a $0.025
Net tangible book value $0.001 n/a
per share of common stock
before the offering
Pro forma net tangible n\a $0.015
book value per share
of common stock after the offering
Increase to net tangible n\a $0.014
book value per share
attributable to purchase of
common stock by new investors
Dilution to new investor n\a $0.015
</TABLE>
14
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
PRINCIPAL PRODUCTS AND PRINCIPAL MARKETS
We are a developmental stage company. We hope to
develop a generic pharmaceutical product, using contract laboratory and
manufacturing facilities. For the time being, we have limited itself
to the development of one product; however, this does not preclude us
from seeking other product opportunities once it has the resources to
pursue multiple products. We plan to target a low volume pharmaceutical
product on which the U.S. patent has recently expired. Generally
speaking, low volume pharmaceutical products are not as quickly brought to
the market as generic products by the larger generic pharmaceutical drug
facilities because the cost to produce a low volume generic product
outweighs its return on investment. We believe we can minimize the cost
to produce generic pharmaceutical products by outsourcing the steps necessary
to obtain FDA approval.
PLAN OF OPERATION
As of July 31, 2000, we had developed a business plan, and established what
steps need to be taken to achieve the results set forth in this plan.
Our goal is to obtain an ANDA (Abbreviated New Drug Application) from the FDA
to produce and market a pharmaceutical product where the patent on the brand
name product has expired, and then to market its generic version. The FDA
requires one holder (a primary contact) of the ANDA. We need to consider
whether or not the contract manufacturer will submit the submission package to
the FDA in order to hold the ANDA for that product. If this to be the case,
we would need to enter into a contract with the contract manufacturer to be
the exclusive distributor of the product. At this time, we are still in the
process of identifying contract facilities to undertake this work. Since this
is a lengthy process, we believe it premature to determine the actual holder
of the ANDA for this product.
Generic products generally sell at 1/3 the price of brand name products;
however profit margins are higher for generic products since the companies do
not carry the overhead of research, administration, marketing, manufacturing
plants, and equipment.
As stated above, we are currently evaluating a particular low-volume product
on which the innovator=s patent has already expired. Until this evaluation is
complete, we consider it to be proprietary information. In any event, because
of the amount of time it takes to obtain FDA approval to market new generic
products, it will be twelve to eighteen months before Baylor can expect to
generate any revenues.
The target product has no known generic competition at this time. Upon its
release, we hope to capture the current market by achieving an additional one
percent of market share for each month it is on the market. Our plan for
business success is thus based on relatively modest goals which, despite all
the obstacles posed by regulatory agencies and possible competitors, makes it
eminently achievable. Though this is of course no guarantee, it also bodes
well for our ultimate success.
There are a finite number of end customers of generic pharmaceutical
products. If there are multiple generic pharmaceutical products on the market
for the same type of product, these products share the total market sales in
the marketplace. Generally speaking, the first generic product to enter the
marketplace, captures a significant share of the market. Price and
distribution are also major factors in determining which generic product is
used over a similar product.
Before companies are authorized to sell generic products, the FDA requires
that they perform a series of studies and publish the results of their tests.
At that time, the FDA will issue an Abbreviated New Drug Application (ANDA),
which allows the company to market a product. If the product fails these
studies, the entire project and all funding can be lost. It should be pointed
out that if we cannot pass the necessary studies required by the FDA, it
would find itself unable to fund additional studies. This could place the
our future at great risk, to the point that we would not have enough funds to
continue in business.
15
<PAGE>
STATUS OF PRODUCTS AND SERVICES
We have a limited operating history. We were organized under the laws of the
State of Nevada on March 29, 2000, and have no revenues from operations or
meaningful assets. Activities to date have been limited primarily to
organization, initial capitalization, finding an appropriate operating
facility in, Nevada, and commencing with initial operational plans.
The pharmaceutical business has consistently grown in gross profit and
revenues. According to the U.S. Department of Commerce, in 1997 there
were 1,356 pharmaceutical manufacturers in the U.S. who sold $74.2
billion in pharmaceutical products. Generic products accounted for 50
percent of the unit volume and approximately 30 percent of the total
dollar volume.
When a generic pharmaceutical product enters the marketplace, it is
generally priced at 1/3 less than the brand name product. As multiple
generics enter the marketplace, additional price reductions usually take
place. Frequently, the price of the brand name product does not drop.
The company manufacturing and selling the brand name product actually
cannot afford to cut the price, since they are burdened with the costs
of research, marketing, and administration, as well as manufacturing
facility and equipment costs. Additionally, once FDA approval is
obtained, the brand name companies cannot make claims of superiority for
their product, since the FDA clearly states they are the same.
There are very few generic pharmaceutical companies who target the lower
volume brand name products that have outlasted their patents. The larger
generic pharmaceutical manufacturers, like Zenith, Schein, and Major
Pharmaceuticals, generally produce and market generic pharmaceutical
products for which the total (generic and innovator) product sales
exceed $40 million. They need to target the larger volume product to pay
their overhead and expenses. Our goal is to identify these smaller volume
products and then to find a contract manufacturer who can adhere to FDA
guidelines to replicate them. The advantage for Baylor, if this can be
accomplished, is that there is very little overhead.
Additionally, there are contract manufacturers who will help defray the
additional funding needs for a percentage of the volume generated by the
generic product. If a firm contract can be established with a contract
manufacturer, we will consider negotiating a risk-sharing agreement based
on the amount of funding available relative to the expected return on the
investment. (If such negotiations do take place, one of the factors to be
negotiated must necessarily be to determine which entity actually holds the
ANDA.) The holder of the ANDA is the primary contact with the FDA should it
have any concerns with the product. At this time, however, Baylor has no
such agreements in place.
THE PHARMACEUTICAL MARKET
There are a number of pharmaceutical products with expired patents that
have no generic counterpart in the marketplace. This information is a
matter of public record. Under the Drug Price Competition and Patent
Term Restoration Act (1984 Amendments), the FDA is required to make
publicly available a list of approved drug products with monthly
supplements. The FDA also publishes through its own website a list of
prescription pharmaceutical products and the dates their patents expire.
The FDA also publishes newly approved generic products, and states
whether or not the generic product is equivalent to the brand name
product.
Once a product is approved by the FDA, the owner of the product usually
begins the process of distribution for its generic equivalent. Depending
on the nature of the product, the distribution chain normally begins
with drug wholesalers. The drug wholesalers distribute to retail
pharmacies, chains, hospitals, the Federal Government, and most managed
health care organizations.
16
<PAGE>
MANAGED HEALTH CARE
Many managed health care organizations and State Medicaid programs
mandate that generic products be used when they become available. This
gives a marketing edge to the first generic products on the market. If
multiple generics become available for the same brand name product,
price becomes the driving factor in choosing one generic product over
another. Thus the pharmacy market is commodity-driven. Some HMOs require
that a competing generic product be priced twenty (20) percent lower
than an equivalent product in order to justify the administrative costs
to switch from one product to another.
APPROVAL PROCESS
The Food and Drug Administration (FDA), Center for Drug Evaluation and
Research under the Federal Food, Drug, and Cosmetic Act (the Act),
approves drug products on the basis of safety and effectiveness.
The main criterion in the approval process for a pharmaceutical product
requires that the product be the subject of an application with an
effective approval that has not been withdrawn for reasons of safety or
efficacy. Additionally, the FDA gives the nod to the marketing of
approved multi-source prescription generic drug products.
To contain drug costs, virtually every state in the United States has
adopted laws and/or regulations that encourage the substitution of drug
products. These state laws generally require either that substitution be
limited to drugs on a specific list (the positive formulary approach) or
that it be permitted for all drugs except those prohibited by a
particular list (the negative formulary approach). Because of the number
of requests in the late 1970s for FDA assistance in preparing both
positive and negative formularies, the FDA was inundated by requests
that would meet the needs of each state on an individual basis.
Thus, the FDA recognized that providing a single list based on common
criteria would be preferable to evaluating drug products on the basis of
differing definitions and criteria in the various state laws. As a
result, on May 31, 1978, the Commissioner of Food and Drugs sent a
letter to officials of each state declaring the FDA's intent to provide
a list of all prescription drug products approved by the FDA for safety
and effectiveness, along with its determinations of therapeutic
equivalencies for multi-source prescription products.
The list was distributed as a proposal in January 1979. It included only
the prescription drug products then being marketed that had been
approved by the FDA through New Drug Applications (NDAs), Abbreviated
New Drug Applications (ANDAs), or Abbreviated Antibiotic Applications
(AADAs) under the provisions of Sections 505 or 507 of the Act. The
therapeutic equivalence evaluations in the list reflect the FDA's
application of specific criteria to the approved multi-source
prescription drug products on the list.
A complete discussion of the background and basis of the FDA's
therapeutic equivalence evaluation policy was published in the Federal
Register on January 12, 1979 (44 FR 2932). The final rule, which
includes the FDA's responses to the public comments on the proposal, was
published in the Federal Register on October 31, 1980 (45 FR 72582). The
first publication in October 1980 of the final version of the list
incorporated appropriate corrections and additions. Each subsequent
edition has included the new approvals and made appropriate changes in
data.
On September 24, 1984, President Reagan signed into law the Drug Price
Competition and Patent Term Restoration Act (1984 Amendments). The 1984
Amendments require that the FDA, among other things, make publicly
available a list of approved drug products with monthly supplements. The
publication of these Approved Drug Products including the therapeutic
equivalence evaluations with the monthly Cumulative Supplements satisfy
this requirement.
17
<PAGE>
According to the FDA, drug products are considered to be pharmaceutical
equivalents if they contain the same active ingredient(s), are of the
same dosage form, and are identical in strength or concentration and
route of administration. Pharmaceutically equivalent drug products are
formulated to contain the same amount of active ingredient in the same
dosage form and must meet the same or a compendia of other applicable
standards (i.e., strength, quality, purity, and identity), but they may
differ in characteristics such as shape, scoring configuration,
packaging, excipients (including colors, flavors, preservatives),
expiration time, and, within certain limits, labeling.
Drug products are considered pharmaceutical alternatives if they contain
the same therapeutic moiety, but are different salts, esters, or
complexes of that moiety, or are different dosage forms or strengths.
Data are generally not available for the FDA to make the determination
of tablet to capsule bioequivalence. Different dosage forms and
strengths within a product line by a single manufacturer are thus
pharmaceutical alternatives, as are extended-release products when
compared with immediate-release or standard-release formulations of the
same active ingredient.
Drug products are considered to be therapeutic equivalents only if they
are pharmaceutical equivalents and if they can be expected to have the
same clinical effect when administered to patients under the conditions
specified in the labeling.
The FDA classifies as therapeutically equivalent those products that
meet the following general criteria: (1) they are approved as safe and
effective; (2) they are pharmaceutical equivalents in that they (a)
contain identical amounts of the same active drug ingredient in the same
dosage form and route of administration, and (b) meet compendia or other
applicable standards of strength, quality, purity, and identity;
(3) they are bioequivalent in that (a) they do not present a known or
potential bio-equivalence problem, and they meet an acceptable in vitro
standard, or (b) if they do present such known or potential problem,
they are shown to meet an appropriate bioequivalence standard; (4) they
are adequately labeled; (5) they are manufactured in compliance with
Current Good Manufacturing Practice regulations.
The concept of therapeutic equivalence applies only to drug products
containing the same active ingredients and does not encompass a
comparison of different therapeutic agents used for the same condition.
The FDA considers drug products to be therapeutically equivalent if they
meet the criteria outlined above, even though they may differ in certain
other characteristics such as shape, scoring configuration, packaging,
excipients (including colors, flavors, preservatives), expiration time
and minor aspects of labeling (e.g., the presence of specific
pharmacokinetic information).
The FDA believes that products classified as therapeutically equivalent
can be substituted with the full expectation that the substituted
product will produce the same clinical effect and safety profile as the
prescribed product.
The term bioavailability describes the rate and extent to which the
active drug ingredient or therapeutic ingredient is absorbed from a drug
product and becomes available at the site of drug action.
18
<PAGE>
This term bioequivalent drug products describes pharmaceutically
equivalent products that display comparable bioavailability when studied
under similar experimental conditions. Section 505 (j)(7)(B) of the Act
describes conditions under which a test and reference listed drug shall
be considered bioequivalent:
a) The rate and extent of absorption of the test drug do not show a
significant difference from the rate and extent of absorption of
the reference drug when administered at the same molar dose of the
therapeutic ingredient under similar experimental conditions in
either a single dose or multiple doses;
b) The extent of absorption of the test drug does not show a
significant difference from the extent of absorption of the
reference drug when administered at the same molar dose of the
therapeutic ingredient under similar experimental conditions in
either a single dose or multiple doses and the difference from the
reference drug in the rate of absorption of the drug is
intentional, is reflected in its proposed labeling, is not
essential to the attainment of effective body drug concentrations
on chronic use, and is considered medically insignificant for the
drug. Where these above methods are not applicable (e.g., for
topically applied products intended for local rather than systemic
effect), other in vivo tests of bioequivalence may be appropriate.
Bioequivalence may sometimes be demonstrated using an in vitro
bioequivalence standard, especially when such an in vitro test has been
correlated with human in vivo bioavailability data or in other
situations through comparative clinical trials or pharmacodynamic
studies.
STATISTICAL CRITERIA FOR BIOEQUIVALENCE
The FDA requires under the Drug Price Competition and Patent Term
Restoration Act of 1984, that companies seeking approval to market a
generic drug must submit data demonstrating that the drug product is
bioequivalent to the pioneer (innovator) drug product. A major premise
underlying the 1984 law is that bioequivalent products are
therapeutically equivalent and, therefore, interchangeable.
The standard bioequivalence study is conducted in a crossover fashion in
a small number of volunteers, usually with 12 to 24 healthy normal male
adults. Single doses of the test and reference drugs are administered
and blood or plasma levels of the drug are measured over time.
Characteristics of these concentration-time curves, such as the area
under the curve (AUC) and the peak blood or plasma concentration (C
max), are examined by statistical procedures.
Bioequivalence of different formulations of the same drug substance
involves equivalence with respect to the rate and extent of drug
absorption. Two formulations whose rate and extent of absorption differ
by 20% or less are generally considered bioequivalent. The use of the
20% rule is based on a medical decision that, for most drugs, a 20%
difference in the concentration of the active ingredient in blood will
not be clinically significant.
In order to verify, for a particular pharmacokinetic parameter, that the
-/+ 20% rule is satisfied, two one-sided statistical tests are carried
out using the data from the bioequivalence study. One test is used to
verify that the average response for the generic product is no more than
20% below that for the innovator product; the other test is used to
verify that the average response for the generic product is no more than
20% above that for the innovator product. The current practice is to
carry out the two one-sided tests at the 0.05 level of significance.
Computationally, the two one-sided tests are carried out by computing a
90% confidence interval. For approval of abbreviated new drug
applications (ANDA's), in most cases, the generic manufacturer must show
that a 90 percent confidence interval of the difference between the mean
response (usually AUC and max) of its product and that of the innovator
is within the limits -/+ 20 percent of the innovator mean. If the true
difference between the products is near 20 percent of the innovator
mean, the confidence limit will likely be outside the acceptable range
and the product will fail the bioequivalence test. Thus, an approved
generic product is likely to differ from that of the innovator by far
less than this quantity.
19
<PAGE>
The current practice of carrying out two one-sided tests at the 0.05
level of significance ensures that if the two products truly differ by
as much or more than is allowed by the equivalence criteria (usually
+/-20 percent of the innovator product average for the bioequivalence
parameter, such as AUC or Cmax) there is no more than a 5 percent chance
that they will be approved as equivalent. This reflects the fact that
the primary concern from the regulatory point of view is the protection
of the patient against the acceptance of bioequivalence if it does not
hold true. The results of a bioequivalence study must usually be
acceptable for more than one pharmacokinetic parameter. As such, a
generic product that truly differs by 20 percent or more from the
innovator product with respect to one or more pharmacokinetic
parameters, would actually have less than a 5 percent chance of being
approved. Therefore, the Company must be able to duplicate the innovator
product and then demonstrate to the FDA that their product can meet
these criteria.
RAW MATERIALS AND SUPPLIERS
The raw materials needed to produce a generic are of major concern.
Although the patents of many innovator companies expire, they are the
sole manufacturers of the raw materials needed to make the generic
counterparts. In a sense, they can prevent a generic product from
entering the market place by controlling the raw materials needed to
produce it. Therefore, the first criteria, Baylor Industries, Inc.,
utilizes in selecting a generic product, is to determine the
availability of the raw materials needed to produce it. As long as these
raw materials are widely available, we will proceed to evaluate
whether or not it can be produced as a generic product. This company
research to identify pharmaceutical raw materials should be considered
proprietary information.
We do not intend for Baylor to manufacture any pharmaceutical products.
Rather, we intend to license to, or enter into strategic alliances with,
larger pharmaceutical and veterinary companies that are equipped to
manufacture those products that we plan to seek to develop and market.
CUSTOMERS
Once an acceptable generic pharmaceutical product has been found and the
arrangements for its manufacture have been completed, we plan to
distribute its product into the marketplace through drug wholesalers,
chain pharmacies and state Medicaid programs. (As of November 30, 2000, no
sales revenues have been generated by Baylor In addition, we
do not expect to generate any sales revenues in the foreseeable future.)
It should be noted that the ten (10) largest drug wholesalers service
and distribute to approximately eighty (80) percent of the entire
pharmaceutical business in the U.S. Therefore, once a drug receives FDA
approval, distribution becomes the next concern of a pharmaceutical
company. With limited resources, we believe that it will take a good deal
of time and effort to obtain product distribution of a generic
pharmaceutical. This could adversely affect our sales results.
20
<PAGE>
PATENTS, TRADEMARKS, LICENSES, FRANCHISES, CONCESSIONS, ROYALTY
AGREEMENTS, OR LABOR CONTRACTS
None
REGULATION
The pharmaceutical industry is tightly regulated by the FDA, DEA, state
governments, and state Boards of Pharmacy. Under Section 510(h) of the
Federal Food, Drug, and Cosmetic Act, every drug establishment
registered with the FDA must be inspected at least once every two (2)
years to determine if the drugs it markets are produced in conformance
with current Good Manufacturing Practices (GMP). Copies of the
inspection reports generated by the FDA District conducting the
inspection or any other inspections conducted are available from the
offices of the local Districts pursuant to the Freedom of Information
regulations. These reports are also available from: National
Technical Information Service, 5285 Port Royal Road, Springfield, VA
22161.
For this reason, we plan to use sub-contractors who are in good standing
with the FDA. If we hope to win FDA approval of a generic drug, it makes
sense to use FDA approved facilities. When the FDA inspectors review the
submission package from Baylor, they will quickly ascertain whether or not
the facilities used for testing and manufacture have a history of FDA
approval. We feel that using non-approved FDA sub-contractors would only
delay the approval process.
EFFECT OF EXISTING OR PROBABLE GOVERNMENT REGULATIONS
Although we plan on obtaining all required federal and state permits,
licenses, FDA registrations and bonds to operate our facilities, there can
be no assurance that the our operations and profitability will not be
subject to more restrictive regulation or increased taxation by federal,
state, or local agencies.
RESEARCH AND DEVELOPMENT ACTIVITIES
We believe that we can minimize the cost to produce generic pharmaceutical
products by out-sourcing the steps necessary to obtain Food and Drug
Administration (FDA) approval.
As we have stated, the goal of Baylor Industries, Inc., is to obtain an
ANDA (Abbreviated New Drug Application) from the FDA to produce a
generic pharmaceutical product for which the patent on the brand name
product has expired, and then to market it. The FDA requires one holder
(a primary contact) of the ANDA. We need to consider whether or not the
contract manufacturer will submit the submission package to the FDA, and
be the holder of the ANDA for this product. If this becomes the case,
we would need to enter into a contract with the contract manufacturer to
be the exclusive distributor of this product. At this time, we are still
in the process of identifying contract facilities to undertake this
work. Since this is a lengthy process, we believe it is premature to
determine who will be the actual holder of the ANDA for this product.
Thus far, we have identified a generic pharmaceutical product for which
the innovator patent has recently expired. We plan to investigate the
steps necessary to obtain an ANDA for this product. In December, 1998,
we signed a confidentiality agreement with a large pharmaceutical
contract manufacturer to pursue this initiative. In addition, we have
received from the FDA, under the Freedom of Information Act, the
innovator Drug Filings for its first targeted generic drug product. If
we can obtain an ANDA from the FDA to market generic drugs, it will need
additional funding to cover the costs of manufacturing, inventories,
distribution, warehousing, sales, administration and marketing. Without
FDA approval, we cannot justify these expenses, however, as it is a
developmental company without any approved product(s).
21
<PAGE>
EMPLOYEES
We currently have one (1) employee: our president. All of the research
and development will be subcontracted to outside laboratories and a
manufacturing facility. This subcontracting will be coordinated by our
president. If we can obtain an ANDA from the FDA for a generic
pharmaceutical product, at that time we will either consider adding
more employees, or selling its rights to market the product to another
company.
FACILITIES
Our corporate offices are located in Houston, provided by our president
rent-free. While our current arrangement is adequate for the near term,
we plan to begin looking for new space in the next year that will support
our potential growth.
MANAGEMENT
EXECUTIVE OFFICER AND DIRECTOR
The following table sets forth certain information with respect to
our director and executive officer
<TABLE>
<CAPTION>
Name Age Position
--------------------------- ----------- -------------------------------
<S> <C> <C>
Candace J. Sherman 51 President, Director
</TABLE>
CANDACE J. SHERMAN, PRESIDENT & CEO, has served in this capacity since
the inception of Baylor Industries, Inc. Born January 18, 1949, Ms.
Sherman, a member of Phi Beta Kappa, holds degrees from the University
of North Carolina at Greensboro and Houston Baptist University in
Texas, the latter a Master's Degree in Education. She has been a
teacher with the Houston Independent School District for the past 25
years and has been named Teacher of the Year at her school. She is
currently devoted to continuing her teaching career while also focused
on the continuing development of Baylor. This is her first endeavor to
produce and market a generic pharmaceutical product. She has resides at
11411 Dunlap, Houston, Texas 77035.
DIRECTOR COMPENSATION
Directors shall receive no cash compensation for their services to
Baylor as directors, but are reimbursed for expenses actually incurred
in connection with attending meetings of the Board of Directors.
22
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth all compensation awarded to, earned by,
or paid for services rendered to us in all capacities for the period
ended November 30, 2000.
Summary Compensation Table
Long-Term Compensation Awards
<TABLE>
<CAPTION>
Name and Principal Position -- Annual Compensation
--------------------------- --------------------
2000
----
Number of Shares
Underlying
Position Salary Bonus Options (#)
-------- -------- ----------------------
<S> <C> <C> <C> <C>
Candace J. Sherman, President None None None
</TABLE>
DIRECTOR COMPENSATION
None
EMPLOYMENT AGREEMENTS
We do not have any written employment agreements.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of November 30, 2000, the beneficial
ownership of our 2,000,000 outstanding shares of common stock by (1) the only
persons who own of record or are known to own, beneficially, more than 5% of
our common stock; (2) each director and executive officer of the Company; and
(3) all directors and officers as a group.
<TABLE>
<CAPTION>
Percent of Percent of
Ownership Ownership
Number of Before the After Full
Name Position Shares Offering Offering
---- -------- --------- ---------- ------------
<S> <C> <C> <C> <C>
Candace Sherman(1) CEO/Director 2,000,000 100.00% 40%
-----------------------------------------
All officers and directors
as a group (1 person) 2,000,000 100.00% 40%
</TABLE>
(1) Candace Sherman, 14601 Bellaire Blvd., Suite 338, Houston, TX 77083
23
<PAGE>
INDEMNIFICATION
Subsection 1 of Section 78.037 of the Nevada Revised Statutes (the "Nevada
Law") empowers a corporation to eliminate or limit the personal liability of
a director or officer to the corporation or its stockholders for damages for
breach of fiduciary duty as a director or officer, but such a provision must
not eliminate or limit the liability of a director or officer for (a) acts or
omissions which involve intentional misconduct, fraud or a knowing violation
of law or (b) the payment of distributions in violation of Section 78.300 of
the Nevada Law.
Our articles of incorporation limit the personal liability of our directors and
officers for damages for breach of fiduciary duty in a manner identical in
scope to that permitted under the Nevada Law. Our articles of incorporation
also provide that any repeal or modification of that provision shall apply
prospectively only.
Subsection 1 of Section 78.7502 of the Nevada Law empowers a corporation
to indemnify any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (other than an action
by or in the right of the corporation) by reason of the fact that he or she is
or was a director, officer, employee or agent of the corporation or is or was
serving at the request of the corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise (an "Indemnified Party"), against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by the Indemnified Party in connection with such action, suit or
proceeding if the Indemnified Party acted in good faith and in a manner the
Indemnified Party reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceedings, had no reasonable cause to believe the Indemnified Party's conduct
was unlawful.
Subsection 2 of Section 78.7502 of the Nevada Law empowers a corporation
to indemnify any Indemnified Party who was or is a party or is threatened to be
made a party to any threatened, pending or completed action or suit by or in
the right of the corporation to procure a judgment in its favor by reason of
the fact that such person acted in the capacity of an Indemnified Party against
expenses, including amounts paid in settlement and attorneys' fees actually and
reasonably incurred by the Indemnified Party in connection with the defense or
settlement of such action or suit if the Indemnified Party acted under
standards similar to those set forth above, except that no indemnification may
be made in respect of any claim, issue or matter as to which the Indemnified
Party shall have been adjudged to be liable to the corporation or for amounts
paid in settlement to the corporation unless and only to the extent that the
court in which such action or suit was brought determines upon application that
in view of all the circumstances the Indemnified Party is fairly and reasonably
entitled to indemnity for such expenses as the court deems
proper.
Section 78.7502 of the Nevada Law further provides that to the extent an
Indemnified Party has been successful on the merits or otherwise in the defense
of any action, suit or proceeding referred to in subsection (1) or (2)
described above or in the defense of any claim, issue or matter therein, the
corporation shall indemnify the Indemnified Party against expenses (including
attorneys' fees) actually and reasonably incurred by the Indemnified Party in
connection therewith.
Subsection 1 of Section 78.751 of the Nevada Law provides that any
discretionary indemnification under Section 78.7502 of the Nevada Law, unless
ordered by a court or advanced pursuant to Subsection 2 of Section 78.751, may
be made by a corporation only as authorized in the specific case upon a
determination that indemnification of the Indemnified Person is proper in the
circumstances. Such determination must be made (a) by the stockholders, (b) by
the board of directors of the corporation by majority vote of a quorum
consisting of directors who were not parties to the action, suit or proceeding,
(c) if a majority vote of a quorum of such disinterested directors so orders,
by independent legal counsel in a written opinion, or (d) by independent legal
counsel in a written opinion if a quorum of such disinterested directors cannot
be obtained.
24
<PAGE>
Subsection 2 of Section 78.751 of the Nevada Law provides that a
corporation's articles of incorporation or bylaws or an agreement made by the
corporation may require the corporation to pay as incurred and in advance of
the final disposition of a criminal or civil action, suit or proceeding, the
expenses of officers and directors in defending such action, suit or proceeding
upon receipt by the corporation of an undertaking by or on behalf of the
officer or director to repay the amount if it is ultimately determined by a
court that he is not entitled to be indemnified by the corporation. Said
Subsection 2 further provides that the provisions of that Subsection 2 do not
affect any rights to advancement of expenses to which corporate personnel
other than officers and directors may be entitled under contract or otherwise
by law.
Subsection 3 of Section 78.751 of the Nevada Law provides that
indemnification and advancement of expenses authorized in or ordered by a
court pursuant to said Section 78.751 does not exclude any other rights to
which the Indemnified Party may be entitled under the articles of incorporation
or any by-law, agreement, vote of stockholders or disinterested directors or
otherwise, for either an action in his official capacity or in another capacity
while holding his office. However, indemnification, unless ordered by a court
pursuant to Section 78.7502 or for the advancement of expenses under Subsection
2 of Section 78.751 of the Nevada Law, may not be made to or on behalf of any
director or officer of the corporation if a final adjudication establishes that
his or her acts or omissions involved intentional misconduct, fraud or a
knowing violation of the law and was material to the cause of action.
Additionally, the scope of such indemnification and advancement of expenses
shall continue as to an Indemnified Party who has ceased to hold one of the
positions specified above, and shall inure to the benefit of his or her heirs,
executors and administrators.
Section 78.752 of the Nevada Law empowers a corporation to purchase and
maintain insurance or make other financial arrangements on behalf of an
Indemnified Party for any liability asserted against such person and
liabilities and expenses incurred by such person in his or her capacity as an
Indemnified Party or arising out of such person's status as an Indemnified
Party whether or not the corporation has the authority to indemnify such
person against such liability and expenses.
Our bylaws provide for indemnification of Indemnified Parties substantially
identical in scope to that permitted under the Nevada Law. Such bylaws provide
that the expenses of our directors and officers incurred in defending any
action, suit or proceeding, whether civil, criminal, administrative or
investigative, must be paid by us as they are incurred and in advance of the
final disposition of the action, suit or proceeding, upon receipt of an
undertaking by or on behalf of such director or officer to repay all amounts
so advanced if it is ultimately determined by a court of competent jurisdiction
that the director or officer is not entitled to be indemnified by us.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to our directors and officers, and to persons controlling
our company pursuant to the foregoing provisions, we have been informed that
in the opinion of the Securities and Exchange Commission, such indemnification
is against public policy as expressed in the Securities Act and is therefore
unenforceable.
25
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
We are currently using facilities provided to us by our president on a rent
free basis.
PLAN OF DISTRIBUTION/SELLING SECURITY HOLDERS
We will sell the shares ourselves and do not plan to use underwriters or pay
any commissions. We will be selling our shares in a direct participation
offering and no one has agreed to buy any of our shares. There is no minimum
amount of shares we must sell.
We are not registering or reselling shares from our stockholder. These
shares will remain restricted.
We are offering 3,000,000 shares at the purchase price of $0.025 per share on
a "best efforts basis." The shares will be offered and sold only to residents
in the states of Texas and Nevada. We have no arrangements or agreements,
verbal or written, with any underwriters to help underwrite this offering.
Our sole officer/director, will not receive any compensation or commissions
with respect to such offers and sales.
This offering is intended to be made solely by the delivery of this
Prospectus and the accompanying subscription application to prospective
investors. Our officer/director will not participate in the making of
this offering other than by the delivery of this Prospectus or by
responding to inquiries by prospective purchasers. Her responses will be
limited to the information contained in the Registration Statement of
which this Prospectus is a part.
We will pay our own legal and accounting fees and other expenses
incurred in connection with the offering. However, we reserve the right
to use broker-dealer(s) in the sale of these securities We will amend
the registration statement via post-effective amendment if in fact we do
require the services of a broker-dealer and if or when the broker-dealer
sells a portion of the offering. Prior to the involvement of the
broker-dealer, we will secure a no objection position from the NASD.
Our officer/director and the principals of our counsel may purchase
shares on the same terms and conditions as all other investors.
Prior to this offering, there has been no public market for the common
stock underlying the units. The offering price of $0.025 per share was
arbitrarily determined by Baylor and bears no relationship to any
recognized criteria of value, nor is it indicative of the market price
for the common stock after this offering. We make no representations as
to any objectively determinable value of the shares. The proceeds
received under this offering will be deposited in an interest bearing
account with Bank of America.
SHARES ELIGIBLE FOR FUTURE SALE
Of the shares outstanding after the offering, the 3,000,000 shares sold in
this offering, will have been registered with the SEC under the Securities
Act of 1933 and will be eligible for resale without registration under the
Securities Act except if they were acquired by our directors, executive
officers or other affiliates. There are no warrants, options or preferred
shares outstanding.
Our director, executive officer, and persons or entities that they control
will be able to sell shares of stock without violating the limitations of
Rule 144 under the Securities Act. The remaining 2,000,000 outstanding
shares may only be sold under Rule 144. Under Rule 144, directors, executive
officers, and persons or entities that they control or who control them may
sell shares of common stock in any three-month period in an amount limited to
the greater of 1% of our outstanding shares of common stock or the average
weekly trading volume in our common stock during the four calendar weeks
preceding a sale. Sales under Rule 144 also must be made without violating
the manner-of-sale provisions, notice requirements and the availability of
current public information about us.
26
<PAGE>
Before the offering, no public trading market for our common stock existed.
We cannot predict what effect, if any, that sales of shares or the
availability of shares for sale will have on the prevailing market
price of our common stock after completion of the offering. Nevertheless,
sales of substantial amounts of common stock in the public market could have
an adverse effect on prevailing market prices.
DESCRIPTION OF SECURITIES
Common Stock
We are authorized to issue 20,000,000 shares of common stock, $.001 par
value per share. The holders of the common stock are entitled to one vote per
each share held and have the sole right and power to vote on all matters on
which a vote of stockholders is taken. Voting rights are non-cumulative. The
holders of shares of our common stock are entitled to receive dividends when,
as and if declared by our board of directors, out of funds legally available
therefore and to share pro-rata in any distribution to stockholders. We
anticipate that any earnings will be retained for use in our business for the
foreseeable future. Upon our liquidation, dissolution, or winding up, the
holders of our common stock are entitled to receive the net assets held by us
after distributions to the creditors. The holders of our common stock do not
have any preemptive right to subscribe for or purchase any shares of any class
of our stock. The outstanding shares of our common stock and the shares
offered hereby will not be subject to further call or redemption and will be
fully paid and non-assessable.
Preferred Stock
Our Board of Directors has the authority to cause us to issue without any
further vote or action by our stockholders, up to 5,000,000 shares of
preferred stock, in one or more series, and to designate the number of shares
constituting any series, and to fix the rights, preferences, privileges and
restrictions thereof, including dividend rights, voting rights, rights and
terms of redemption, redemption price or prices and liquidation preferences of
such series. The issuance of preferred stock may have the effect of delaying,
deferring or preventing a change in control of our company without further
action by our stockholders. The issuance of preferred stock with voting and
conversion rights may adversely affect the voting power of the holders of
common stock, including the loss of voting control. No preferred stock is
outstanding as of the date hereof.
Transfer Agent and Registrar
Our Transfer Agent and Registrar is Shelley Godfrey, Pacific Stock Transfer
Company, 5844 S. Pecos, Suite D, Las Vegas, Nevada 89120 (702) 361-3033.
27
<PAGE>
THE OFFERING
We are selling 3,000,000 shares of our common stock. None of our
stockholders are selling any of their shares.
No public trading market for the common stock exists, and one may never
exist. We hope to have our common stock prices listed on the bulletin
board maintained by the National Association of Securities Dealers. The
development of a public trading market depends upon the existence of willing
buyers and sellers, which is not within our control or that of any market
maker. We do not currently have a market maker. Market makers are not
required to maintain a continuous two-sided market and are free to withdraw
firm quotations at any time.
PENNY STOCK
The Securities and Exchange Commission has adopted Rule 15g-9 which
established the definition of a "penny stock," for the purposes
relevant to Baylor, Inc., as any equity security that has a market
price of less than $5.00 per share or with an exercise price of less
than $5.00 per share, subject to certain exceptions. For any
transaction involving a penny stock, unless exempt, the rules require:
(1) that a broker or dealer approve a person's account for transactions
in penny stocks; and (2) the broker or dealer receive from the
investor a written agreement to the transaction, setting forth the
identity and quantity of the penny stock to be purchased. In order to
approve a person's account for transactions in penny stocks, the broker
or dealer must (1) obtain financial information and the investment
experience objectives of the person; and (2) make a reasonable
determination that the transactions in penny stocks are suitable for
that person and the person has sufficient knowledge and experience in
financial matters to be capable of evaluating the risks of transactions
in penny stocks. The broker or dealer must also deliver, prior to any
transaction in a penny stock, a disclosure schedule prepared by the
Commission relating to the penny stock market, which, in highlight
form, (1) sets forth the basis on which the broker or dealer made the
suitability determination; and (2) that the broker or dealer received
a signed, written agreement from the investor prior to the transaction.
Disclosure also has to be made about the risks of investing in penny
stocks in both public offerings and in secondary trading and about the
commissions payable to both the broker-dealer and the registered
representative, current quotations for the securities and the rights
and remedies available to an investor in cases of fraud in penny stock
transactions. Finally, monthly statements have to be sent disclosing
recent price information for the penny stock held in the account and
information on the limited market in penny stocks.
LEGAL PROCEEDINGS
We are not a party to any litigation and management has no knowledge of any
threatened or pending litigation against it.
LEGAL MATTERS
The validity of the shares offered hereby is being passed upon for the
Company by Thomas C. Cook, Esq., Las Vegas, Nevada.
EXPERTS
The financial statements as of November 30, 2000 appearing in this prospectus
and registration statement have been audited by G. Brad Beckstead, CPA,
independent certified public accountants, as set forth in their report
thereon appearing elsewhere herein and in the registration statement, and are
included in reliance upon such report given upon the authority of such firm
as experts in accounting and auditing.
28
<PAGE>
ADDITIONAL INFORMATION
We have not previously been subject to the reporting requirements of the
Securities Exchange Act of 1934, as amended. The Company has filed with the
Securities and Exchange Commission a registration statement on Form SB-2
under the Securities Act with respect to the securities being offered. This
prospectus, filed as a part of the registration statement, does not contain
certain information contained in or annexed as exhibits to the registration
statements. Reference is made to exhibits to the registration statement for
the complete text. For further information with respect to the Company and
the securities hereby offered, reference is made to the registration
statement and to the exhibits filed as part of it, which may be inspected
and copied at the public reference facilities of the commission in Washington
D.C., and at the Commission's regional offices at:
* 500 West Madison Street, Chicago, IL 60604;
* 7 World Trade Center, New York, NY 10048;
* and 5757 Wilshire Boulevard, Los Angeles, CA 90034;
* and copies of such material can be obtained from the Public Reference
Section of the Commission, 450 5th Street, N.W., Washington, D.C. 20549, at
prescribed rates and are available on the World Wide Web at:
http://www.sec.gov.
You can also call or write us at any time with any questions you may have.
We would be pleased to speak with you about any aspect of this offering.
29
<PAGE>
FINANCIAL STATEMENTS
INDEX TO FINANCIAL STATEMENTS
-----------------------------
<TABLE>
PAGE #
<S> <C>
INDEPENDENT AUDITORS REPORT F-1
BALANCE SHEET F-2
INCOME STATEMENT F-3
STATEMENT OF STOCKHOLDERS' EQUITY F-4
STATEMENT OF CASH FLOWS F-5
FOOTNOTES F-6-8
</TABLE>
30
<PAGE>
PART F/S
Financial Statements
31
<PAGE>
Baylor Industries, Inc.
(A Development Stage Company)
Balance Sheet
as of
November 30, 2000
And
Statements of Income
Stockholders' Equity, and
Cash Flows
for the period
March 29, 2000 (Inception)
To November 30, 2000
<PAGE>
G. BRAD BECKSTEAD
Certified Public Accountant
330 E. Warm Springs
Las Vegas, NV 89119
702.528.1984
425.928.2877 (efax)
INDEPENDENT AUDITOR'S REPORT
December 6, 2000
Board of Directors
Baylor Industries, Inc.
Las Vegas, NV
I have audited the Balance Sheet of Baylor Industries, Inc.(the "Company")
(A Development Stage Company), as of November 30, 2000, and the related
Statements of Operations, Stockholders' Equity, and Cash Flows for the
period March 29, 1999 (Date of Inception) to November 30, 2000. These
financial statements are the responsibility of the Company's management.
My responsibility is to express an opinion on these financial statements
based on my audit.
I conducted my audit in accordance with generally accepted auditing
standards. Those standards require that I plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statement presentation. 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.
In my opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Baylor Industries, Inc.,
(A Development Stage Company), as of November 30, 2000, in conformity
with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming the
Company will continue as a going concern. As discussed in Note 5 to
the financial statements, the Company has had limited operations and
have not commenced planned principal operations. This raises
substantial doubt about its ability to continue as a going concern.
Management's plan in regard to these matters are also described in
Note 5. The financial statements do not include any adjustments that
might result from the outcome of this uncertainty.
/s/ G. Brad Beckstead
----------------------
G. Brad Beckstead, CPA
F-1
<PAGE>
Baylor Industries, Inc.
(A Development Stage Company)
Balance Sheet
November 30, 2000
<TABLE>
<CAPTION>
BALANCE SHEET
2000
----
<S> <C>
ASSETS $ 2,000
--------
Total Assets $ 2,000
========
Liabilities and Stockholders' Equity
Common stock, $0.001 par value,
20,000,000 shares authorized;
2,000,000 shares issued and
outstanding at 11/30/00 2,000
Deficit accumulated during development stage (0)
--------
Total Stockholders' Equity 2,000
--------
Total Liabilities and Stockholders' Equity $ 2,000
========
</TABLE>
See accompanying "Independent Auditor's Report"
F-2
<PAGE>
Baylor Industries, Inc.
(A Development Stage Company)
Income Statement
For the period
March 29, 2000 (Date of Inception) to
November 30, 2000
<TABLE>
<CAPTION>
INCOME STATEMENT
<S> <C>
Revenue $ -0-
General and administrative expenses (0)
__________
Net loss $ (0)
==========
Weighted average number of
common shares outstanding 2,000,000
Net loss per share $ -0-
==========
</TABLE>
See accompanying "Independent Auditor's Report"
F-3
<PAGE>
Baylor Industries, Inc.
(A Development Stage Company)
Statement of Changes in Stockholders' Equity
For the period
March 29, 1999 (Date of Inception)
to November 30, 2000
<TABLE>
<CAPTION>
CHANGES IN STOCKHOLDERS' EQUITY
Deficit
Accumulated
Common Stock During Total
------------ Development Stockholders'
Shares Amount Stage Equity
<S> <C> <C> <C> <C>
November 30, 2000
Issued
for cash 2,000,000 2,000 2,000
Net Loss,
March 29, 2000
(inception) to
Nov. 30, 2000 (0) (0)
----------------------------------------------------
Balance as of
Nov 30, 2000 2,000,000 $2,000 $ (0) $ 2,000
========= ====== ===== =======
</TABLE>
See accompanying "Independent Auditor's Report"
F-4
<PAGE>
Baylor Industries, Inc.
(A Development Stage Company)
Statement of Cash Flows
For the period
March 29, 1999 (Date of Inception)
to November 30, 2000
<TABLE>
<CAPTION>
STATEMENT OF CASH FLOWS
CASH FLOWS USED BY OPERATING ACTIVITIES
<S> <C>
Net loss (0)
_______
Net cash used by operating activities (0)
_______
CASH FLOWS FROM INVESTING ACTIVITIES
Net cash used by investing activities -0-
_______
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of capital stock 2,000
Net cash provided by financing activities 2,000
______
Beginning cash and equivalents -0-
______
Ending cash and equivalents 2,000
======
NON-CASH TRANSACTIONS
Interest expense -0-
Income taxes -0-
</TABLE>
See accompanying "Independent Auditor's Report"
F-5
<PAGE>
Baylor Industries, Inc.
(A Development Stage Company)
Footnotes
Note 1 - History and organization of the company
Baylor Industies, Inc. was organized March 29, 2000 (Date of Inception)
under the laws of the State of Nevada. The Company has no operations and
in accordance with SFAS #7, the Company is considered a development stage
company. The Company is authorized to issue 20,000,000 shares of $0.001
par value common stock and 5,000,000 of its $0.001 par value preferred stock.
Note 2 - Summary of significant accounting policies
Accounting policies and procedures have not been determined except as
follows:
1. Baylor uses the accrual method of accounting.
2. 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 of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenue
and expenses during the reporting period. Actual results could differ
significantly from those estimates.
3. We maintain a cash balance in a non-interest-bearing bank that currently
does not exceed federally insured limits. For the purpose of the statements
of cash flows, all highly liquid investments with the maturity of three
months or less are considered to be cash equivalents. $30,000 has been
deposited to a Money Market Account, and is considered a cash equivalent as
of November 30, 2000.
4. Earnings per share (EPS) is computed using the weighted average
number of shares of common stock outstanding during the period.
Diluted EPS is computed by dividing net income by the weighted average
shares outstanding, assuming all dilutive potential common shares were
issued. Since the Company has no common shares that are potentially
issuable, such as stock options, convertible preferred stock and
warrants, basic and diluted EPS are the same. The Company had no
dilutive common stock equivalents such as stock options as of November
30, 2000.
5. We have not yet adopted any policy regarding payment of dividends. No
dividends have been paid since inception.
6. We will review our need for a provision for federal income tax after each
operating quarter and each period for which a statement of operations is
issued.
7. Baylor, Inc. has adopted December 31 as its fiscal year end.
F-6
<PAGE>
Baylor Industries, Inc.
(A Development Stage Company)
Footnotes
Note 3 - Income taxes
Income taxes are provided for using the liability method of accounting
in accordance with Statement of Financial Accounting Standards No. 109
(SFAS #109) "Accounting for Income Taxes". A deferred tax asset or
liability is recorded for all temporary differences between financial
and tax reporting. Deferred tax expenses (benefit) results from the
net change during the year of deferred tax assets and liabilities.
There is no provision for income taxes for the year ended December 31,
2000, due to the net loss and no state income tax in Nevada.
Note 4 - Stockholders' Equity
The Company is authorized to issue 20,000,000 shares of its $0.001 par
value common stock and 5,000,000 shares of its $0.001 par value preferred
stock.
On March 29, 2000, the Company issued 2,000,000 shares of its $.001 par
value common stock for cash of $2,000. There have been no other issuances
of common or preferred stock.
Note 5 - Going concern
Our financial statements are prepared using the generally accepted
accounting principles applicable to a going concern, which contemplates the
realization of assets and liquidation of liabilities in the normal course of
business. However, the Company has not commenced its planned principal
operations. Without realization of additional capital, it would be unlikely
for the Company to continue as a going concern.
Note 6 - Related party transactions
We do not lease or rent any property. Office services are provided without
charge by a director. Such costs are immaterial to the financial statements
and, accordingly, have not been reflected therein. Baylor=s officer/director
are involved in other business activities and may, in the future, become
involved in other business opportunities. If a specific business opportunity
becomes available, such persons may face a conflict in selecting between
Baylor and their other business interests. We have not formulated a policy
for the resolution of such conflicts.
Note 7 - Warrants and options
There are no warrants or options outstanding to acquire any additional
shares of common stock.
F-7
<PAGE>
Baylor Industries, Inc.
(A Development Stage Company)
Footnotes
Note 7 - Year 2000 issue
The Year 2000 issue arises because many computerized systems use two
digits rather than four to identify a year. Date-sensitive systems
may recognize the year 2000 as 1900 or some other date, resulting in
errors when information using year 2000 dates is processed. In
addition, similar problems may arise in systems which use certain
dates in 1999 to represent something other than a date. The effects of
the Year 2000 issue may be experienced before, on, or after January 1,
2000, and if not addressed, the impact on operations and financial
reporting may range from minor errors to significant system failure
which could affect an entity's ability to conduct normal business
operations. It is not possible to be certain that all aspects of the
Year 2000 issue affecting the entity, including those related to the
efforts of customers, suppliers, or other third parties will be fully
resolved.
F-8
<PAGE>
PART II - INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Except as set forth in the following part of this document, there is no
charter provision, bylaw, contract, arrangement or statute under which any
officer or director of the registrant is insured or indemnified in any manner
against any liability which he may incur in his capacity as such.
Nevada Law
----------
Pursuant to the provisions of Nevada Revised Statutes 78.751, the Corporation
shall indemnify its directors, officers and employees as follows:
Every director, officer, or employee of the corporation shall be indemnified
by the corporation against all expenses and liabilities, including counsel
fees, reasonably incurred by or imposed upon her/her in connection with any
proceeding to which he/she may be made a party, or in which he/she may become
involved, by reason of being or having been a director, officer, employee or
agent of the corporation or is or was serving at the request of the
corporation as a director, officer, employee or agent of the corporation,
partnership, joint venture, trust or enterprise, or any settlement thereof,
whether or not he/she is a director, officer, employee or agent at the time
such expenses are incurred, except in such cases wherein the director,
officer, employee or agent is adjudged guilty of willful misfeasance or
malfeasance in the performance of his/her duties; provided that in the event
of a settlement the indemnification herein shall apply only when the Board of
Directors approves such settlement and reimbursement as being for the best
interests of the Corporation.
The Corporation shall provide to any person who is or was a director,
officer, employee or agent of the Corporation or is or was serving at the
request of the Corporation as a director, officer, employee or agent of the
corporation, partnership, joint venture, trust or enterprise, the indemnity
against expenses of a suit, litigation or other proceedings which is
specifically permissible under applicable law.
The Securities and Exchange Commission's Policy on Indemnification.
-------------------------------------------------------------------
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to any provisions contained in its Certificate of
Incorporation, or bylaws, or otherwise, the registrant 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 registrant of expenses incurred or
paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities
being registered, the registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether indemnification by it is
against public policy as expressed in the Act and will be governed by the
final adjudication of such issue.
32
<PAGE>
Item 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the expenses in connection with the
issuance and distribution of the securities offered hereby.
<TABLE>
<CAPTION>
<S> <C>
Registration Fee $ 20
Printing Expenses* 480
Legal Fees and Expenses* 2,000
Accounting Fees and Expenses* 1,500
Blue Sky Fees and Expenses* 1,000
Transfer Agent Fees and Expenses* 500
Misc.* 500
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Total $ 6,000
</TABLE>
*Estimated
Item 26. RECENT SALES OF UNREGISTERED SECURITIES.
During the past year, the registrant has sold securities in the manner
set forth below without registration under the Securities Act of 1933
(the "Act").
On or about March 29, 2000, our date of inception, Baylor Industries, Inc.
raised $2,000.00 through the sale of shares of our common stock. The
following table sets forth information regarding that sale which represents
all securities we have sold since our inception:
On March 29, 2000 we sold 2,000,000 shares of our common stock to our founder
and president, Candace J. Sherman for an aggregate of $2,000. Such issuance
was pursuant to Section 4(2) of the Act as a transaction not involving a public
offering.
These shares are "restricted securities," as that term is defined in the
rules and regulations promulgated under the Securities Act of 1933 and
are subject to certain restrictions regarding resale. Certificates
evidencing all of the above-referenced securities have been stamped with
a restrictive legend and will be subject to stop transfer orders.
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Item 27. Exhibits.
---------
The following exhibits are filed as part of this Registration statement
with the Securities and Exchange Commission, following Item 601 of
Regulation S-B.
------------------------------------------------------------------------
EXHIBITS
SEC REFERENCE TITLE OF DOCUMENT LOCATION
NUMBER
------------------------------------------------------------------------
3.1 Articles of Incorporation This filing
------------------------------------------------------------------------
3.2 Bylaws of the Registrant This filing
------------------------------------------------------------------------
5.1 Consent of Thomas C. Cook, Esq. This filing
----------------------------------------------------------------------
23 Consent of counsel is contained
in Exhibit 5.1 This Filing
------------------------------------------------------------------------
23.1 Independent Auditors Consent This Filing
------------------------------------------------------------------------
27.1 Financial Data Schedule This filing
------------------------------------------------------------------------
99.1 Subscription Agreement This filing
------------------------------------------------------------------------
Item 28. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant 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 registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the registrant
will, unless in the opinion of its counsel, the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
questions whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
The undersigned registrant hereby undertakes:
1. To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement.
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
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2. That for the purpose of determining any liability under the Securities
Act of 1935, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered 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.
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements of filing on Form SB-2 and authorized this
registration statement to be signed on its behalf by the undersigned, in the
City of Houston and State of Texas on December 19, 2000.
BAYLOR INDUSTRIES, INC.
-----------------------
(Registrant)
By: /s/ Candace J. Sherman
-----------------------
Candace J. Sherman
President/
principal executive officer/
principal accounting officer
and sole director
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