U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 3 TO
FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
JPAL, INC.,
(Exact name of registrant as specified in its charter)
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<S> <C> <C>
Nevada 7389 33-0851302
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or Classification Code Number) Identification No.)
organization)
513 Calle Amigo, San Clemente, California 92673
(Address of registrant's principal executive offices) (Zip Code)
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(949) 637-3763
(Registrant's Telephone Number, Including Area Code)
Thomas E. Stepp, Jr.
Stepp & Beauchamp LLP
1301 Dove Street, Suite 460
Newport Beach, California 92660
949.660.9700
Facsimile 949.660.9010
(Name, Address and Telephone Number of Agent for Service)
Approximate date of proposed sale to the public: From time to time after this
registration statement becomes effective.
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ] _______
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] _______
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] _______
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
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CALCULATION OF REGISTRATION FEE
============================ ================ ================ =================== ============
Proposed
Title of each class Amount maximum Proposed maximum Amount of
of securities to be offering price aggregate registration
to be registered registered per share offering price fee
---------------------------- ---------------- ---------------- ------------------- ------------
<S> <C> <C> <C> <C>
Common Stock, $.001 par 3,797,469 $0.25 $949,367.00 $264.00
value
============================ ================ ================ =================== ============
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The offering price of $0.25 per share for the selling security holders was used
for the purpose of calculating the registration fee pursuant to Rule 457 of
Regulation C.
The registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933, as amended, or until this registration statement shall
become effective on such date as the Commission, acting pursuant to said Section
8(a), may determine.
1
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Preliminary Prospectus
JPAL, Inc.,
a Nevada corporation
3,797,469 Shares of Common Stock
This prospectus relates to 3,797,469 shares of common stock of JPAL, Inc., a
Nevada corporation, which are issued and outstanding shares of our common stock,
acquired by the selling security holders in private placement transactions which
were exempt from the registration and prospectus delivery requirements of the
Securities Act of 1933. The selling security holders may offer and sell the
shares at $0.25 per share for a period not to exceed two years from the date of
this prospectus. There currently is no market for our common stock, and we have
not applied for listing or quotation on any public market.
See "Risk Factors" on Pages 5 to 6 for factors to be considered before investing
in the shares of our common stock.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of the prospectus. Any representation to the contrary is a
criminal offense.
The information in this prospectus is not complete and may be changed. The
selling security holders may not sell these securities until the registration
statement filed with the Securities and Exchange Commission is effective. This
prospectus is not an offer to sell these securities and it is not soliciting an
offer to buy these securities in any state where the offer or sale is not
permitted.
The date of this prospectus is January 9, 2001.
Subject to completion.
2
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TABLE OF CONTENTS
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Prospectus Summary .....................................................................................4
Risk Factors............................................................................................5
Use of Proceeds.........................................................................................6
Determination of Offering Price.........................................................................7
Dilution....... ........................................................................................7
Selling Security Holders................................................................................7
Plan of Distribution....................................................................................8
Legal Proceedings.......................................................................................9
Directors, Executive Officers, Promoters and Control Persons............................................9
Security Ownership of Certain Beneficial Owners and Management.........................................10
Description of Securities..............................................................................11
Interest of Named Experts and Counsel..................................................................11
Disclosure of Commission Position on Indemnification for Securities Act Liabilities....................12
Organization Within Last Five Years....................................................................12
Description of Business................................................................................12
Management' Discussion and Analysis of Financial Condition and Results of Operations...................16
Description of Property................................................................................19
Certain Relationships and Related Transactions.................... ....................................19
Market for Common Equity and Related Stockholder Matters...............................................20
Executive Compensation ................................................................................21
Financial Statements...................................................................................21
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure...................21
Legal Matters..........................................................................................22
Experts................................................................................................22
Additional Information.................................................................................22
Indemnification of Directors and Officers..............................................................22
Other Expenses of Issuance and Distribution............................................................23
Recent Sales of Unregistered Securities................................................................23
Exhibits...............................................................................................24
Undertakings...........................................................................................24
Signatures ...........................................................................................26
Power of Attorney......................................................................................27
</TABLE>
3
<PAGE>
Prospectus Summary
Our Business: Our principal business address is 513 Calle
Amigo, San Clemente, California 92673; our
telephone number (949) 637-3763.
We are an Internet based provider of vacation
rental properties and services. We were
originally formed to provide vacation rental
properties and services for the Year 2000 New
Year's Eve celebration in Las Vegas. We are
currently redesigning our website to provide a
wide range of services to both vacationers and
property owners. Our primary source of revenue
has been property rental fees, which are charged
to the property owners as a percentage of the
vacationers' total rental price, and we
anticipate that those fees will continue to be
our primary source of revenue, although we
intend to attempt to generate additional revenue
sources such as Internet advertising. In order
to effectuate our business plan during the next
three to six months, we need to complete the
redevelopment of our website.
Our State of Organization: We were incorporated in Nevada on March 31,
1999.
Number of Shares Being The selling security holders want to sell
Offered: 3,797,469 shares of our common stock. The
offered shares were acquired by the selling
security holders in private placement
transactions, which were exempt from the
registration and prospectus delivery
requirements of the Securities Act of 1933. The
selling security holders may offer and sell the
shares at $0.25 per share for a period not to
exceed two years from the date of this
prospectus. We are registering all of the shares
of common stock owned by our officers and
directors.
The shares of common stock being offered by the
selling security holders have not been
registered or qualified for sale under the
securities laws of any state as of the date of
this prospectus. Unless those shares are so
registered or qualified, they must be sold in a
"brokers' transactions" as specified by the
provisions of Section 4(4) of the Securities Act
of 1933 or in transactions directly with a
"market maker," as that term is defined by the
provisions of Section 3(a)(38) of the Securities
Exchange Act of 1934. Brokers or dealers
effecting transactions in the shares of our
common stock should confirm the registration or
qualification thereof under the securities laws
of the states or other jurisdictions in which
transactions occur or the existence of any
exemption from such registration or
qualification.
Number of Shares 3,797,469 shares of our common stock are issued
Outstanding After the and outstanding. We have no other securities
Offering: issued.
Estimated use of We will not receive any of the proceeds from the
proceeds: sale of those shares being offered.
4
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RISK FACTORS
In addition to the other information in this prospectus, the following risk
factors should be considered carefully in evaluating our business before
purchasing any of our shares of common stock. A purchase of our common stock is
speculative in nature and involves a lot of risks. No purchase of our common
stock should be made by any person who is not in a position to lose the entire
amount of his investment.
Because we are a new company with losses since our formation and we anticipate
that we will lose money in the foreseeable future, we may not be able to achieve
profitable operations.
We were incorporated in March 1999, and we began operations immediately
thereafter. As of September 30, 2000, our losses since inception were
approximately $27,548. We were originally formed to provide vacation rental
properties and services for the Year 2000 New Year's Eve celebration in Las
Vegas. We generated revenues of approximately $6,793 through December 31, 1999.
We intend to redesign our website to provide a wide range of services to both
vacationers and property owners. We have only generated revenues of
approximately $3,122 in our current fiscal year. Our prospects must be
considered speculative, considering the risks, expenses, and difficulties
frequently encountered in the establishment of a new business, specifically the
risks inherent in the development of electronic commerce. We cannot guaranty
that unanticipated technical or other problems will not occur which would result
in material delays in future product and service commercialization or that our
efforts will result in successful product and service commercialization. We
cannot guaranty that we will be able to achieve profitable operations.
Our ability to succeed is uncertain because we currently have limited revenues
and minimal marketing activities due to the lack of revenues.
We generated revenues of approximately $6,793 through December 31, 1999, and we
intend to redesign our website to provide a wide range of services to both
vacationers and property owners. We have only generated revenues of
approximately $3,122 in our current fiscal year. Our marketing activities are
significantly limited and, to fund more sophisticated marketing activities, we
need to generate revenues.
Our ability to generate revenues and achieve market acceptance is uncertain
because our business is based on an untested business plan, which may never be
accepted by potential customers.
Providing online vacation rental properties and services is a relatively new
business. Our failure to market our online vacation rental services successfully
so as to achieve market acceptance could significantly affect our ability to
succeed which will affect potential investors' ability to sell their shares of
common stock. In addition, our inability to generate revenues may cause
potential investors to lose all or some of their investment. We cannot guaranty
that our online vacation rental properties and services will generate revenues
or achieve market acceptance.
We anticipate that we will need to raise additional capital to complete our
website redevelopment and market our website. Our failure to raise additional
capital will significantly limit our proposed marketing activities and we may be
forced to cease operations.
To complete our development and market our website, we will be required to raise
additional funds. We believe that we may be able to acquire additional financing
at commercially reasonable rates. We cannot guaranty that we will be able to
obtain additional financing at commercially reasonable rates. We anticipate that
we will spend a lot of funds on the marketing and promotion of our website. The
minimum amount necessary to complete our current website redevelopment is
approximately $10,000. Our failure to obtain additional funds would
significantly limit or eliminate our ability to fund our sales and marketing
activities. This would have a material adverse effect on our ability to continue
our operation and compete with other providers.
We anticipate that we may seek additional funding through public or private
sales of our securities. That could include equity securities, or through
commercial or private financing arrangements. Adequate funds may not be
available when needed or on terms acceptable to us. In the event that we are not
able to obtain additional funding on a timely basis, we
5
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may be required to limit any proposed operations or eliminate certain or all of
our marketing programs, either of which could have a material adverse effect on
our results of operations.
Our officers and directors are engaged in other activities that could have
conflicts of interest with us. Therefore, our officers and directors may not
devote sufficient time to our affairs.
The persons serving as our officers and directors have existing responsibilities
and may have additional responsibilities to provide management and services to
other entities. As a result, conflicts of interest between us and the other
activities of those entities may occur from time to time, in that our officers
and directors shall have conflicts of interest in allocating time, services, and
functions between the other business ventures in which they may be or become
involved and our affairs.
In addition to serving as our president, secretary and a director, Ryan A. Neely
is the secretary and a director of MVD, Inc. a Delaware corporation and a
provider of digital entertainment products. Mr. Neely currently devotes
approximately half of his time to MVD, Inc. We do not believe that we have any
conflicts of interest with the business or industry of MVD, Inc., other than Mr.
Neely's duty to provide management and services.
In addition to serving as our treasurer and a director, Jason J. Ortega has been
a branch manager for Enterprise Rent-a-Car Company since 1994. Mr. Ortega is
responsible for the day-to-day operations as well as the management of all
employees at his branch. Mr. Ortega currently devotes a significant portion of
his time to Enterprise Rent-a-Car Company. We do not believe that we have any
conflicts of interest with the business or industry of Enterprise Rent-a-Car
Company, other than Mr. Ortega's duty to provide management and services.
We are registering all of the shares of common stock owned by our officers and
directors. Our officers and directors may sell all of their shares as soon as
possible, which could significantly decrease the price of our common stock and
reduce our officers' and directors' desire to see us succeed.
All of the stock owned by our officers and directors will be registered by the
registration statement of which this prospectus is a part. Our officers and
directors may sell some or all of their shares immediately after they are
registered. In the event that our officers and directors sell some or all of
their shares, the price of our common stock could decrease significantly. Also,
a conflict of interest will occur between our officers' and directors' duties to
us and their personal interests in selling their shares. We cannot assure you
that the officers and directors will not sell some or all of their shares as
soon as they are registered.
Information in this prospectus contains "forward looking statements" which can
be identified by the use of forward-looking words such as "believes",
"estimates", "could", "possibly", "probably", "anticipates", "estimates",
"projects", "expects", "may", "will", or "should" or other variations or similar
words. No assurances can be given that the future results anticipated by the
forward-looking statements will be achieved. The following matters constitute
cautionary statements identifying important factors with respect to those
forward-looking statements, including certain risks and uncertainties that could
cause actual results to vary materially from the future results anticipated by
those forward-looking statements. Among the key factors that have a direct
bearing on our results of operations are the effects of various governmental
regulations, the fluctuation of our direct costs and the costs and effectiveness
of our operating strategy. Other factors could also cause actual results to vary
materially from the future results anticipated by those forward-looking
statements.
Use of Proceeds
We will not receive any proceeds from the sale of shares of our common stock
being offered by the selling security holders.
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Determination of Offering Price
Factors Used to Determine Share Price. The offering price of the shares being
offered by the selling security holders has no relationship to any established
criteria of value, such as book value or earnings per share. Additionally,
because we have no significant operating history and have not generated any
revenues to date, the price of our common stock is not based on past earnings,
nor is the price of the shares of our common stock indicative of current market
value for the assets owned by us. No valuation or appraisal has been prepared
for our business and potential business expansion.
Dilution
The shares offered for sale by the selling security holders are already
outstanding and, therefore, do not contribute to dilution.
Selling Security Holders
The following table sets forth the number of shares, which may be offered for
sale from time to time by the selling security holders. The shares offered for
sale constitute all of the shares known to us to be beneficially owned by the
selling security holders. None of the selling security holders has held any
position or office with us, except as specified in the following table. Other
than the relationships described below, none of the selling security holders had
or have any material relationship with us. Thomas E. Stepp, Jr.; Richard Reincke
and Michael J. Muellerleile are employees of Stepp & Beauchamp LLP, which serves
as our legal counsel.
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=========================== ========================== ============================= ==========================
Name of Selling Security Amount of Shares of Amount of Shares of Common Amount of Shares of
Holder Common Stock Owned by Stock to be Offered by the Common Stock Owned by
Selling Security Holder Selling Security Holder Selling Security Holder
Before the Offering After the Offering is
Complete
--------------------------- -------------------------- ----------------------------- --------------------------
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Ryan A. Neely, President,
Secretary and a director 1,100,000 1,100,000 0
--------------------------- -------------------------- ----------------------------- --------------------------
Jason Ortega, Treasurer
and a director 50,000 50,000 0
--------------------------- -------------------------- ----------------------------- --------------------------
Thomas E. Stepp, Jr. 265,823 265,823 0
--------------------------- -------------------------- ----------------------------- --------------------------
Richard Reincke 265,823 265,823 0
--------------------------- -------------------------- ----------------------------- --------------------------
Michael Muellerleile 265,823 265,823 0
--------------------------- -------------------------- ----------------------------- --------------------------
Judy Buehlman, former
officer and director 400,000 400,000 0
--------------------------- -------------------------- ----------------------------- --------------------------
Patti Tipton, former
officer and director 400,000 400,000 0
--------------------------- -------------------------- ----------------------------- --------------------------
Sean and Janna Connelly,
former officers 100,000 100,000 0
--------------------------- -------------------------- ----------------------------- --------------------------
Scott J. Sherman 50,000 50,000 0
--------------------------- -------------------------- ----------------------------- --------------------------
Michelle M. Mirrotto 50,000 50,000 0
--------------------------- -------------------------- ----------------------------- --------------------------
Tim Neely 50,000 50,000 0
--------------------------- -------------------------- ----------------------------- --------------------------
Donald J. Preihs 50,000 50,000 0
--------------------------- -------------------------- ----------------------------- --------------------------
Sharareh Frouzesh 50,000 50,000 0
--------------------------- -------------------------- ----------------------------- --------------------------
JR Sterling 50,000 50,000 0
--------------------------- -------------------------- ----------------------------- --------------------------
Paul W. Fournier 50,000 50,000 0
--------------------------- -------------------------- ----------------------------- --------------------------
Jeffrey M. Hoss 50,000 50,000 0
--------------------------- -------------------------- ----------------------------- --------------------------
Kamal John Shukur 50,000 50,000 0
--------------------------- -------------------------- ----------------------------- --------------------------
A. V. Neely 50,000 50,000 0
--------------------------- -------------------------- ----------------------------- --------------------------
Susan Hennessy 50,000 50,000 0
--------------------------- -------------------------- ----------------------------- --------------------------
Kyle Holtzhauzen 50,000 50,000 0
--------------------------- -------------------------- ----------------------------- --------------------------
Shawn G. Peterson 50,000 50,000 0
=========================== ========================== ============================= ==========================
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=========================== ========================== ============================= ==========================
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Eric Peterson 50,000 50,000 0
--------------------------- -------------------------- ----------------------------- --------------------------
Sonny Martinez 50,000 50,000 0
--------------------------- -------------------------- ----------------------------- --------------------------
Karl Hoshor 50,000 50,000 0
--------------------------- -------------------------- ----------------------------- --------------------------
Nicole Clark 50,000 50,000 0
--------------------------- -------------------------- ----------------------------- --------------------------
Thomas J. Slosson 50,000 50,000 0
--------------------------- -------------------------- ----------------------------- --------------------------
Jerry A. Cardenas 50,000 50,000 0
=========================== ========================== ============================= ==========================
</TABLE>
Plan of Distribution
The selling security holders may offer and sell shares of common stock at a
price of $0.25 per share for a period not to exceed two years from the date of
this prospectus. The shares will not be sold in an underwritten public offering.
The shares of common stock being offered by the selling security holders have
not been registered or qualified for sale under the securities laws of any state
as of the date of this prospectus. Unless those shares are so registered or
qualified, they must be sold in a "brokers' transactions" as specified by the
provisions of Section 4(4) of the Securities Act of 1933 or in transactions
directly with a "market maker," as that term is defined by the provisions of
Section 3(a)(38) of the Securities Exchange Act of 1934. Brokers or dealers
effecting transactions in the shares of our common stock should confirm the
registration or qualification thereof under the securities laws of the states or
other jurisdictions in which transactions occur or the existence of any
exemption from such registration or qualification.
Brokers and dealers engaged by selling security holders may arrange for other
brokers or dealers to participate. Brokers or dealers may receive commissions or
discounts from selling security holders, or, if any such broker-dealer acts as
agent for the purchaser of such shares, from such purchaser, in amounts to be
negotiated. Broker-dealers may agree with the selling security holders to sell a
specified number of such shares at $0.25 price per share, and, to the extent
such broker-dealer is unable to do so acting as agent for a selling security
holder, to purchase as principal any unsold shares at the price required to
fulfill the broker-dealer commitment to such selling security holder. In the
event that a broker-dealer is added as a formal participant to the marketing
effort of the selling security holders, we will file a post effective amendment
to disclose such event.
The selling security holders and any broker-dealers participating in the
distributions of the shares may be deemed to be "underwriters" within the
meaning of Section 2(11) of the Securities Act of 1933. Any profit on the sale
of shares by the selling security holders and any commissions or discounts given
to any such broker-dealer may be deemed to be underwriting commissions or
discounts. The shares may also be sold pursuant to Rule 144 under the Securities
Act of 1933 beginning one year after the shares were issued.
We have filed the registration statement, of which this prospectus forms a part,
with respect to the sale of the shares by the selling security holders. There
can be no assurance that the selling security holders will sell any or all of
the offered shares.
Under the Securities Exchange Act of 1934 and the regulations thereunder, any
person engaged in a distribution of the shares of our common stock offered by
this prospectus may not simultaneously engage in market making activities with
respect to our common stock during the applicable "cooling off" periods prior to
the commencement of such distribution. Also, the selling security holders are
subject to applicable provisions which limit the timing of purchases and sales
of our common stock by the selling security holders.
We have informed the selling security holders that, during such time as they may
be engaged in a distribution of any of the shares we are registering by this
registration statement, they are required to comply with Regulation M. In
general, Regulation M precludes any selling security holder, any affiliated
purchasers and any broker-dealer or other person who participates in a
distribution from bidding for or purchasing, or attempting to induce any person
to bid for or purchase, any security which is the subject of the distribution
until the entire distribution is complete. Regulation M defines a "distribution"
as an offering of securities that is distinguished from ordinary trading
activities by the magnitude of the offering and the presence of special selling
efforts and selling methods. Regulation M also defines a "distribution
participant" as an underwriter, prospective underwriter, broker, dealer, or
other person who has agreed to participate or who is participating in a
distribution.
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Regulation M prohibits any bids or purchases made in order to stabilize the
price of a security in connection with the distribution of that security, except
as specifically permitted by Rule 104 of Regulation M. These stabilizing
transactions may cause the price of our common stock to be more than it would
otherwise be in the absence of these transactions. We have informed the selling
security holders that stabilizing transactions permitted by Regulation M allow
bids to purchase our common stock if the stabilizing bids do not exceed a
specified maximum. Regulation M specifically prohibits stabilizing that is the
result of fraudulent, manipulative, or deceptive practices. Selling security
holders and distribution participants are required to consult with their own
legal counsel to ensure compliance with Regulation M.
Legal Proceedings
There are no legal actions pending against us nor are any legal actions
contemplated by us at this time.
Directors, Executive Officers, Promoters and Control Persons
Executive Officers and Directors. We are dependent on the efforts and abilities
of certain of our senior management. The interruption of the services of key
management could have a material adverse effect on our operations, profits and
future development, if suitable replacements are not promptly obtained. We
anticipate that we will enter into employment agreements with each of our key
executives. We cannot guaranty that each executive will remain with us during or
after the term of his or her employment agreement. In addition, our success
depends, in part, upon our ability to attract and retain other talented
personnel. Although we believe that our relations with our personnel are good
and that we will continue to be successful in attracting and retaining qualified
personnel, we cannot guaranty that we will be able to continue to do so. Our
officers and directors will hold office until their resignations or removal.
Our directors and principal executive officers are as specified on the following
table:
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Name Age Position
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Ryan A. Neely 29 President, Secretary and a Director
--------------------------- ---------- --------------------------------------------------------
Jason J. Ortega 28 Treasurer and a Director
=========================== ========== ========================================================
</TABLE>
Ryan A. Neely. Mr. Neely is our president, secretary and a director since March
2000. Mr. Neely manages all aspects of our operations, including web development
and marketing and sales of our products. Mr. Neely currently devotes
approximately twenty hours per week. From May 1999 to September 1999, Mr. Neely
worked as a sales account manager for Unified Research Laboratories, Inc., which
was recently acquired by Symantec Corporation. Unified Research Laboratories,
Inc. is a developer of Internet content-control software and web filtering
technologies. From August 1998 to May 1999, Mr. Neely was the co-founder of
Filtering Associates, a manufacturer representative for several Internet
content-control companies. From 1996 to August 1998, Mr. Neely worked for Log-On
Data Corp., Inc., a California corporation, as a regional sales manager where he
was responsible for all enterprise sales. Mr. Neely is the secretary and a
director of MVD, Inc. a Delaware corporation and a provider of digital
entertainment products. Mr. Neely has not been a director of any other reporting
company.
Jason J. Ortega. Mr. Ortega is our treasurer, and a director. Mr. Ortega, our
principal financial officer, currently manages our finances and subsequent to
the completion of our current website redevelopment, Mr. Ortega will market our
website, products and services. Mr. Ortega currently devotes approximately ten
hours per week, but anticipates that he will devote significantly more hours
when we complete the redevelopment of our website. In addition to serving as our
treasurer and a director, Mr. Ortega has been a branch manager for Enterprise
Rent-a-Car Company since 1994. Mr. Ortega is responsible for the day-to-day
operations as well as the management of all employees at his branch. Mr. Ortega
currently devotes a significant portion of his time to Enterprise Rent-a-Car
Company. Mr. Ortega earned his Bachelor of Science degree in Kinesiology from
California State University, Chico in 1994. Mr. Ortega has not been a director
of any other reporting company. Mr. Ortega has not been a director of any other
reporting company.
9
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There is no family relationship between any of our officers or directors. There
are no orders, judgments, or decrees of any governmental agency or
administrator, or of any court of competent jurisdiction, revoking or suspending
for cause any license, permit or other authority to engage in the securities
business or in the sale of a particular security or temporarily or permanently
restraining any of our officers or directors from engaging in or continuing any
conduct, practice or employment in connection with the purchase or sale of
securities, or convicting such person of any felony or misdemeanor involving a
security, or any aspect of the securities business or of theft or of any felony.
Nor are any of the officers or directors of any corporation or entity affiliated
with us so enjoined.
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information regarding the beneficial
ownership of our common stock as of January 9, 2001 by each person or entity
known by us to be the beneficial owner of more than 5% of the outstanding shares
of common stock, each of our directors and named executive officers, and all of
our directors and executive officers as a group. Thomas E. Stepp, Jr.; Richard
Reincke and Michael J. Muellerleile are employees of Stepp & Beauchamp LLP,
which serves as our legal counsel.
<TABLE>
<CAPTION>
Title of Class Name and Address of Amount and Nature of Percent of Class
Beneficial Owner Beneficial Owner
--------------------- ----------------------------- ----------------------------- ---------------------
<S> <C> <C> <C>
Common Stock Judy Buehlman 400,000 shares 10.53%
P.O. Box 4641,
Blue Jay, California 92317
Common Stock Patty Tipton 400,000 shares 10.53%
P.O. Box 4641,
Blue Jay, California 92317
Common Stock Thomas E. Stepp, Jr., 265,823 shares 7.00%
1301 Dove Street, Suite
460, Newport Beach, CA 92660
Common Stock Richard Reincke, 265,823 shares 7.00%
1301 Dove Street, Suite
460, Newport Beach, CA 92660
Common Stock Michael Muellerleile, 265,823 shares 7.00%
1301 Dove Street, Suite
460, Newport Beach, CA 92660
Common Stock Ryan A. Neely, 1,100,000 shares President, 28.97%
513 Calle Amigo, Secretary, Director
San Clemente, CA 92673
Common Stock Jason J. Ortega, 50,000 shares, Treasurer, 1.32%
513 Calle Amigo, Director
San Clemente, CA 92673
Common Stock All directors and named 30.29%
executive officers as a group
</TABLE>
Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or investment
power with respect to securities. In accordance with Securities and Exchange
Commission rules, shares of our common stock which may be acquired upon exercise
of stock options or warrants
10
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which are currently exercisable or which become exercisable within 60 days of
the date of the table are deemed beneficially owned by the optionees. Subject to
community property laws, where applicable, the persons or entities named in the
table above have sole voting and investment power with respect to all shares of
our common stock indicated as beneficially owned by them.
Our directors, officers and principal, greater than 5%, security holders, taken
as a group, together with their affiliates, beneficially own, in the aggregate,
approximately 72.35% of our outstanding shares of common stock. Certain
principal security holders are our directors or executive officers. Such
concentrated control of the company may adversely affect the price of our common
stock. These security holders may also be able to exert significant influence,
or even control, matters requiring approval by our security holders, including
the election of directors. In addition, certain provisions of Nevada law could
have the effect of making it more difficult or more expensive for a third party
to acquire, or of discouraging a third party from attempting to acquire, control
of us.
Changes in Control. Our management is not aware of any arrangements which may
result in "changes in control" as that term is defined by the provisions of Item
403(c) of Regulation S-B.
Description of Securities
We were originally authorized to issue 2,000 shares of $.01 par value common
stock. On April 6, 2000, we filed Amended and Restated Articles of Incorporation
with the Nevada Secretary of State to authorize 50,000,000 shares of $.001 par
value common stock and 5,000,000 shares of $.001 par value preferred stock. As
of January 9, 2001, 3,797,469 shares of our common stock were issued and
outstanding and no shares of our preferred stock are issued and outstanding.
Each shareholder of our common stock is entitled to a pro rata share of cash
distributions made to shareholders, including dividend payments. The holders of
our common stock are entitled to one vote for each share of record on all
matters to be voted on by shareholders. There is no cumulative voting with
respect to the election of our directors or any other matter. Therefore, the
holders of more than 50% of the shares voted for the election of those directors
can elect all of the directors. The holders of our common stock are entitled to
receive dividends when, as and if declared by our Board of Directors from funds
legally available therefore. Cash dividends are at the sole discretion of our
Board of Directors. In the event of our liquidation, dissolution or winding up,
the holders of common stock are entitled to share ratably in all assets
remaining available for distribution to them after payment of our liabilities
and after provision has been made for each class of stock, if any, having any
preference in relation to our common stock. Holders of shares of our common
stock have no conversion, preemptive or other subscription rights, and there are
no redemption provisions applicable to our common stock.
Dividend Policy. We have never declared or paid a cash dividend on our capital
stock. We do not expect to pay cash dividends on our common stock in the
foreseeable future. We currently intend to retain our earnings, if any, for use
in our business. Any dividends declared in the future will be at the discretion
of our board of directors and subject to any restrictions that may be imposed by
our lenders.
Interest of Named Experts and Counsel
No "expert" or our "counsel" was hired on a contingent basis, or will receive a
direct or indirect interest in us, except as specified below, or was a promoter,
underwriter, voting trustee, director, officer, or employee of the company, at
any time prior to the filing of this registration statement.
Thomas E. Stepp, Jr., Richard Reincke and Michael J. Muellerleile, are employees
of Stepp & Beauchamp LLP, which serves as our legal counsel. Thomas E. Stepp,
Jr. owns 265,823 shares of our common stock. Richard Reincke owns 265,823 shares
of our common stock. Michael J. Muellerleile owns 265,823 shares of our common
stock.
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Disclosure of Commission Position on Indemnification for Securities Act
Liabilities
Article Ten of our Amended and Restated Articles of Incorporation provides,
among other things, that our directors shall not be personally liable to us or
our shareholders for monetary damages for breach of fiduciary duty as a
director, except for liability
o for any breach of such director's duty of loyalty to us or our
security holders;
o for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
o liability for unlawful payments of dividends or unlawful stock
purchase or redemption by us; or
o for any transaction from which such director derived any improper
personal benefit.
Accordingly, our directors may have no liability to our shareholders for any
mistakes or errors of judgment or for any act of omission, unless the act or
omission involves intentional misconduct, fraud, or a knowing violation of law
or results in unlawful distributions to our shareholders.
Indemnification Agreements. We will enter into indemnification agreements with
each of our executive officers. We will agree to indemnify each such person for
all expenses and liabilities, including criminal monetary judgments, penalties
and fines, incurred by such person in connection with any criminal or civil
action brought or threatened against such person by reason of such person being
or having been our officer or director or employee. In order to be entitled to
indemnification by us, such person must have acted in good faith and in a manner
such person believed to be in our best interests. With respect to criminal
actions, such person must have had no reasonable cause to believe his or her
conduct was unlawful.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to our directors, officers and controlling persons
pursuant to the foregoing provisions, or otherwise, we have been advised that in
the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in that act and is, therefore, unenforceable.
Organization Within Last Five Years
Transactions with Promoters. Judy Buehlman, Patty Tipton, Sean Connelly and
Janna Connelly were our promoters. In April 1999, we issued 100 shares of our
$.01 par value common stock to Judy Buehlman, Patty Tipton, Sean Connelly and
Janna Connelly in exchange for their services relating to founding and
organizing the business. Those services provided to were valued at $900.
Description of Business
Our Background. JPAL, Inc. was incorporated pursuant to the laws of the State of
Nevada on March 31, 1999. On April 6, 2000, we filed Amended and Restated
Articles of Incorporation with the Secretary of State of Nevada to amend and
restate Articles of Incorporation in their entirety and specifically to
authorize 50,000,000 shares of $.001 par value common stock.
Our Business. We are an Internet based provider of vacation rental properties
and services. We were originally formed to provide vacation rental properties
and services for the Year 2000 New Year's Eve celebration in Las Vegas. We
generated revenues of approximately $6,793 through December 31, 1999. We have
only generated revenues of $3,122 in our current fiscal year.
For vacationers, we advertise on our website privately owned rental properties,
which offer the convenience and accommodations of a condominium or home, while
providing many of the amenities and services of a hotel, generally at a lower
cost per person. We believe that vacation condominium and home rentals generally
offer greater space and convenience than resort hotel rooms, including separate
living, sleeping and eating quarters.
For property owners, we offer marketing and rental services. Our primary source
of revenue has been property rental fees, which are charged to the property
owners as a percentage of the vacationers' total rental price, and we anticipate
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that those fees will continue to be our primary source of revenue, although we
intend to attempt to generate additional revenue sources such as Internet
advertising.
In order to effectuate our business plan during the next three to six months, we
need to complete the redevelopment of our website. Upon completion of our
website redevelopment, we intend to raise capital to fund our proposed marketing
activities. If we are unable to raise sufficient capital necessary to market our
website, we believe that our officers and directors who are also principal
shareholders of the company will contribute funds to pay for our expenses.
Therefore, we have not contemplated any plan of liquidation in the event that we
do not generate further revenues or raise capital.
Our Website www.jpalco.com. Our current website allows consumers to search
through all of our vacation condominium and home rentals in Las Vegas and access
detailed property information including photographs and floor plans. Our primary
source of revenue is property rental fees, which are charged to the property
owners as a percentage of the vacationer's total rental rate. Fee percentages
for vacation condominiums and homes range from approximately 3% to over 40% of
rental rates depending on the market and the type of services provided to the
property owner.
Internet Advertising. We anticipate that we will be able to generate advertising
revenues from companies which have complementary products such as airlines and
travel agents and desire to advertise our on website. The Internet is emerging
as an attractive method for advertisers, due to the growth in the number of
Internet users, the amount of time Internet users spend on the Internet, the
increase in electronic commerce, the interactive nature of the Internet, the
Internet's global reach, the ability to reach targeted audiences and a variety
of other factors. Many of the largest advertisers in traditional media,
including consumer products companies, automobile manufacturers and others, have
increased their use of Internet advertising. We believe that larger companies
will begin to allocate significant portions of their total advertising budgets
for Internet advertising. We believe that significant revenues can be generated
from online advertising, initially from small business service providers and
product vendors and, as use of our website increases, from advertisers, such as
consumer products companies.
Future Website and Products. We are currently redesigning our website to provide
a wide range of services to both vacationers and property owners. Our
redeveloped website will continue to allow consumers to search through all of
our vacation condominium and home rentals and access detailed property
information including photographs and floor plans. Our redeveloped website will
also allow users to obtain local market information as well as information about
special offers and promotions. As we generate revenues, we anticipate that we
will expand our website to include specialized concierge-type services such as
arranging golf tee times, purchasing ski lift tickets and making restaurant
reservations.
We anticipate that the site will be developed to feature an on-line booking
system which will allow vacationers to check availability and make reservations
directly on-line. We plan to launch a number of important web site related
initiatives, including:
o virtual tours including interior and exterior views of a
representative sample of our condominium and home rental properties;
o search engine enhancements that will allow simultaneous searches
across multiple resort locations; and
o improved booking features.
Our primary source of revenue will continue to be property rental fees, which
are charged to the property owners as a percentage of the vacationer's total
rental rate. We believe that our proposed services, which are designed to
enhance rental income for property owners, will provide us with a competitive
advantage in attracting additional high quality condominiums and homes in our
markets.
If we generate significant revenues in the next twelve months, we intend to
develop our website to provide multiple location real estate listings for
condominiums and homes located in our resort locations for customers interested
in buying or selling a vacation home.
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Our Target Markets and Marketing Strategy. We believe that our primary target
market will consist of owners of private home and condominiums that desire to
promote the rental of their rental properties. We believe that many owners of
private home and condominiums desire to rent their properties without being
responsible for the advertising and promotion of their own properties.
We will market and promote our website on the Internet. Our marketing strategy
is to promote our services and products and attract businesses to our website.
Our marketing initiatives include:
o utilizing direct response print advertisements placed primarily in
small business, entrepreneurial, and financially-oriented magazines
and special interest magazines;
o links to industry focused websites;
o advertising by television, radio, banners, affiliated marketing and
direct mail;
o presence at industry tradeshows; and,
o entering into affiliate marketing relationships with website providers
to increase our access to Internet business consumers.
Growth Strategy. Our objective is to become a dominant provider of Internet
vacation rentals. Our strategy is to continue providing clients with exceptional
service and developing comprehensive and updated listings vacation rentals. Key
elements of our strategy include:
o create global awareness of our products and services;
o continue and expand our website;
o increase the number of Internet users to our website;
o increase our relationships with clients;
o provide additional services for businesses and consumers; and
o pursue relationships with joint venture candidates which will support
our development. We currently do not have plans, agreements,
understandings or arrangements to engage in joint ventures.
Our Industry. The vacation rental and property management industry is highly
fragmented, with an estimated 3,000 vacation rental and property management
companies in the United States. We believe this fragmented market presents a
significant opportunity for a company offering a branded, national network of
high quality vacation condominiums and homes with superior levels of customer
service.
Our Competition. The vacation rental and property management industry is highly
competitive and has low barriers to entry. The industry has two distinct
customer groups: vacation property renters and vacation property owners. We
believe that the principal competitive factors in attracting vacation property
renters are:
o market share and visibility;
o quality, cost and breadth of services and properties provided; and
o long-term customer relationships.
The principal competitive factors in attracting vacation property owners are the
ability to generate higher rental income and to provide comprehensive management
services at competitive prices. We compete for vacationers and property owners
primarily with approximately 3,500 vacation rental and property management
companies that typically operate in a limited geographic area. Some of our
competitors are affiliated with the owners or operators of resorts in which such
competitors provide their services. Certain of these smaller competitors may
have lower overhead cost structures and may be able to provide their services at
lower rates.
We also compete for vacationers with large hotel and resort companies. Many of
these competitors have greater financial resources than we have, enabling them
to finance acquisition and development opportunities, to pay higher prices for
the same opportunities or to develop and support their own operations. In
addition, many of these companies can offer vacationers services not provided by
vacation rental and property management companies, and they may have greater
name recognition among vacationers. These companies might be willing to
sacrifice profitability to capture a
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<PAGE>
greater portion of the market for vacationers or pay higher prices than we would
for the same acquisition opportunities. Consequently, we may encounter
significant competition in our efforts to achieve our internal growth
objectives.
We also compete directly with other companies and businesses that have developed
and are in the process of developing online vacation rental services which are
functionally equivalent or similar to our proposed online vacation rental
services. We expect that these competitors who have developed similar websites
will market those websites to our target customers, which will significantly
affect our ability to compete. Many of these competitors have greater financial
resources and can afford to spend more resources than we can to market their
websites. We cannot guaranty that we will succeed in marketing our websites and
generating revenues. We cannot guaranty that our competitors will not succeed in
marketing their websites and generating revenues.
Patents and Proprietary Rights. Our success depends in part upon our ability to
preserve our trade secrets and operate without infringing the proprietary rights
of other parties. However, we rely on certain proprietary technologies, trade
secrets, and know-how that are not patentable. We own the Internet domain name
"www.jpalco.com." Under current domain name registration practices, no one else
can obtain an identical domain name, but someone might obtain a similar name, or
the identical name with a different suffix, such as ".org", or with a country
designation. The regulation of domain names in the United States and in foreign
countries is subject to change, and we could be unable to prevent third parties
from acquiring domain names that infringe or otherwise decrease the value of our
domain names.
Our Research and Development. We are not currently conducting any research and
development activities. We do not anticipate conducting such activities in the
near future. If we generate significant revenues, we may expand our product line
by entering into relationships with third parties who have the expertise and
capabilities to develop software which will enhance our product offerings. For
example, we believe that our website can be developed to provide multiple
listing services for condominiums and homes located in our resort locations for
customers interested in buying or selling a vacation home. Rather than develop
the software ourselves, we anticipate that we would attempt to purchase or
license the software from companies that already developed such software. We
currently do not have plans, agreements, understandings or arrangements for such
activities.
Government Regulation. There is currently only a small body of laws and
regulations directly applicable to access to or commerce on the Internet.
However, due to the increasing popularity and use of the Internet, it is
possible that a number of laws and regulations may be adopted at the
international, federal, state and local levels with respect to the Internet,
covering issues such as user privacy, freedom of expression, pricing,
characteristics and quality of products and services, taxation, advertising,
intellectual property rights, information security and the convergence of
traditional telecommunications services with Internet communications. Moreover,
a number of laws and regulations have been proposed and are currently being
considered by federal, state and foreign legislatures with respect to these
issues. The nature of any new laws and regulations and the manner in which
existing and new laws and regulations may be interpreted and enforced cannot be
fully determined.
In addition, there is substantial uncertainty as to the applicability to the
Internet of existing laws governing issues such as property ownership,
copyrights and other intellectual property issues, taxation, libel, obscenity
and personal privacy. The vast majority of these laws was adopted prior to the
advent of the Internet and, as a result, did not contemplate the unique issues
and environment of the Internet. Future developments in the law might decrease
the growth of the Internet, impose taxes or other costly technical requirements,
create uncertainty in the market or in some other manner have an adverse effect
on the Internet. These developments could, in turn, have a material adverse
effect on our business, prospects, financial condition and results of
operations.
We provide our services through data transmissions over public telephone lines
and other facilities provided by telecommunications companies. These
transmissions are subject to regulation by the Federal Communications
Commission, state public utility commissions and foreign governmental
authorities. However, we are not subject to direct regulation by the Federal
Communications Commission or any other governmental agency, other than
regulations applicable to businesses generally. Nevertheless, as Internet
services and telecommunications services converge or the services we offer
expand, there may be increased regulation of our business, including regulation
by agencies having jurisdiction over telecommunications services. Additionally,
existing telecommunications regulations
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<PAGE>
affect our business through regulation of the prices we pay for transmission
services, and through regulation of competition in the telecommunications
industry.
The Federal Communications Commission has ruled that calls to Internet service
providers are jurisdictionally interstate and that Internet service providers
should not pay access charges applicable to telecommunications carriers. Several
telecommunications carriers are advocating that the Federal Communications
Commission regulate the Internet in the same manner as other telecommunications
services by imposing access fees on Internet service providers. The Federal
Communications Commission is examining inter-carrier compensation for calls to
Internet service providers, which could affect Internet service providers' costs
and consequently substantially increase the costs of communicating via the
Internet. This increase in costs could slow the growth of Internet use and
thereby decrease the demand for our services.
Employees. As of January 9, 2001, we have two part time employees. We anticipate
that we will not hire any employees in the next six months, unless we generate
significant revenues. We believe our future success depends in large part upon
the continued service of our key senior management personnel and our ability to
attract and retain managerial personnel.
Facilities. Our executive, administrative and operating offices are located at
513 Calle Amigo, San Clemente, California and are provided to us, at no charge,
by Ryan A. Neely.
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Summary Financial Information. The summary financial information set forth below
is derived from the more detailed financial statements appearing elsewhere in
this Form SB-2. We have prepared our financial statements contained in this Form
SB-2 in accordance with generally accepted accounting principles in the United
States. All information should be considered in conjunction with our
consolidated financial statements and the notes contained elsewhere in this Form
SB-2.
<TABLE>
<CAPTION>
=============================== ==================== ===================
Income Statement September 30, 2000 December 31, 1999
------------------------------- -------------------- -------------------
<S> <C> <C>
------------------------------- -------------------- -------------------
Revenue 3,122 6,793
------------------------------- -------------------- -------------------
Gross Profit (Loss) (11,126) (16,422)
------------------------------- -------------------- -------------------
Net Income (Loss) (11,126) (16,422)
------------------------------- -------------------- -------------------
Net Income (Loss) Per Share (0.00) (0.00)
=============================== ==================== ===================
<CAPTION>
=============================== ==================== ====================
Balance Sheet September 30, 2000 December 31, 1999
------------------------------- -------------------- --------------------
<S> <C> <C>
------------------------------- -------------------- --------------------
Total Assets 6,449 3,557
------------------------------- -------------------- --------------------
Total Liabilities 0.00 844
------------------------------- -------------------- --------------------
Shareholders' Equity 6,449 2,713
=============================== ==================== ====================
</TABLE>
Period from March 31, 1999, our date of formation, through December 31, 1999.
Liquidity and Capital Resources. We had cash of $884.00 as of December 31, 1999.
Our total assets were approximately $3,557 and our total liabilities were
approximately $844 as of December 31, 1999. Our former officer and director and
current principal shareholder, Judy Buehlman, paid a significant portion of our
expenses from inception through December 31, 1999.
Results of Operations.
Revenue. For the period of March 31, 1999, our date of formation, through
December 31, 1999, we generated revenues of approximately $6,793 with 100% of
those revenues being generated from operations relating to our
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vacation rental properties and services for the Year 2000 New Year's Eve
celebration in Las Vegas. We are currently modifying our website to provide a
wide range of services to both vacationers and property owners. Therefore, we
anticipate that revenues in our current fiscal year will decrease significantly
due to these website redevelopment activities.
Operating Expenses. For the period ended December 31, 1999, operating expenses
totaled $22,835. Approximately 35% of those expenses were related to marketing
and promotion of our website and approximately 25% to the establishment of our
business. Our former officer and director and current principal shareholder,
Judy Buehlman, paid approximately $16,422 of our operating expenses from
inception through December 31, 1999. Website development expenses totaled $2,600
for the period ended December 31, 2000, with all of those fees being paid to
Sean Connelly, one of our shareholders and a former officer. Judy Buehlman and
Sean Connelly also received stock in exchange for their services relating to
founding and organizing the business.
For the Nine Month Period Ended September 30, 2000.
Liquidity and Capital Resources. We had cash of $760 as of September 30, 2000.
Our total assets were approximately $6,449 and our total liabilities were
approximately $0 as of September 30, 2000. Our president, secretary, director
and principal shareholder, Ryan A. Neely, has paid our expenses since March
2000. We anticipate that Mr. Neely will continue to pay our expenses in the
event that we do not generate revenues or obtain additional working capital.
Results of Operations.
Revenue. For the nine month period ending September 30, 2000, we have generated
revenues of approximately $3,122 with 100% of those revenues being generated
from operations relating to our vacation rental properties and services in Las
Vegas. Our revenues have decreased significantly because we are currently
redeveloping our website and we have not conducted any marketing activities.
Therefore, we do not expect that we will generate any significant revenues in
our current fiscal year.
Operating Expenses. For the nine month period ended September 30, 2000,
operating expenses totaled $13,801. Approximately $9,663 or 70% of those
expenses relate to professional fees for legal and accounting services. We
anticipate that we will continue to incur significant professional fees for
legal and accounting services. Website development expenses totaled $1,500 for
the nine months ended September 30, 2000, with all of those fees being paid to
Judy Buehlman, a current shareholder and formerly one of our officers and
directors. We anticipate that we will continue to incur significant expenses
related to the redevelopment of our website.
Our Plan of Operation for the Next Twelve Months. Our plan of operation is
materially dependent on our ability to complete the redevelopment of our website
so that we can generate more revenues. If we are able to complete the
redevelopment of our website and generate significant revenues, we anticipate
that those revenues will be used to market our website and provide us with
working capital and pay our legal and accounting fees for the next twelve
months. If we generate those revenues, then we expect that our expenses for the
next twelve months will be approximately $50,000. If we are unable to generate
revenues, then we anticipate that our expenses for the next twelve months will
be limited to the day-to-day expenditures necessary to conduct business such as
administrative expenses, which includes costs to maintain our telephone and
website. Although it is difficult to quantify the day-to-day expenses, we
believe that such expenses will be no more that $200 per month. Our president,
director and principal shareholder, Ryan A. Neely, has paid our expenses since
joining us in March 2000. Our belief that Mr. Neely will pay our expenses is
based on the fact that Mr. Neely has a significant equity interest in us. We
believe that Mr. Neely will continue to pay our expenses as long as he maintains
a significant equity interest in us.
In the opinion of management, available funds will satisfy our working capital
requirements through February 2001. Our forecast for the period for which our
financial resources will be adequate to support our operations involves risks
and uncertainties and actual results could fail as a result of a number of
factors. We anticipate that we may need to raise additional capital to develop
and conduct our operations. Such additional capital may be raised through public
or private financing as well as borrowings and other sources. There can be no
assurance that additional funding will be
17
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available on favorable terms, if at all. If adequate funds are not available, we
believe that our officers and directors will contribute funds to pay for our
expenses. Therefore, we have not contemplated any plan of liquidation in the
event that we do not generate revenues.
Our ability to raise additional capital in the next twelve months through the
sale of our stock may be harmed by competing resales of our common stock by the
selling security holders. The price of our common stock could fall if the
selling security holders sell substantial amounts of our common stock. These
sales would make it more difficult for us to sell equity or equity-related
securities in the future at a time and price that we deem appropriate because
the selling security holders may offer to sell their shares of common stock to
potential investors for less than we do. Moreover, potential investors may not
be interested in purchasing shares of our common stock if the selling security
holders are selling their shares of common stock.
Our objective is to complete the redevelopment of our website in the next three
to six months. In September 2000, we paid $1,500 for web development services to
Judy Buehlman, a current shareholder and formerly, one of our officers and
directors. During the next three to six months, we anticipate that we will need
to spend funds to continue the redevelopment of our website. However, our
ability to continue to develop our website is dependent on Mr. Neely's continued
contribution of funds to pay those expenses.
If we complete the redevelopment of our website, then we anticipate that we will
begin to generate revenues so that we can further market our website. However,
we may not be able to generate revenues to market our website effectively. Our
failure to market our website will harm our business and financial performance.
If we are unable to generate revenues, we anticipate that our marketing
activities will be very limited. In addition, our ability to generate revenues
through our website depends on continued growth in the use of the Internet and
in the acceptance and volume of commerce transactions on the Internet.
We are not currently conducting any research and development activities, other
than the redevelopment of our website. We do not anticipate conducting any other
such activities in the next twelve months. We do not anticipate that we will
purchase or sell any significant equipment in the next six to twelve months
unless we generate significant revenues.
We do not anticipate that we will hire any employees in the next six to twelve
months, unless we generate significant revenues. We believe our future success
depends in large part upon the continued service of our key personnel.
Website Security. Our proposed computer infrastructure may suffer security
breaches. Any such breaches could jeopardize confidential information
transmitted over the Internet, cause interruptions in our operations or cause us
to have liability to third parties. We intend to rely on technology that is
designed to facilitate the secure transmission of confidential information. Our
computer infrastructure is potentially vulnerable to physical or electronic
computer break-ins, viruses and similar disruptive problems. A party who is able
to circumvent our proposed security measures could misappropriate proprietary
information, jeopardize the confidential nature of information transmitted over
the Internet or cause interruptions in our operations. Concerns over the
security of Internet transactions and the privacy of users could also inhibit
the growth of the Internet in general, particularly as a means of conducting
commercial transactions. To the extent that our activities involve the storage
and transmission of proprietary information, including personal financial
information, security breaches could expose us to a risk of financial loss,
litigation and other liabilities. We do not have insurance to protect us against
these losses. Any security breach would have a material adverse effect on our
business, results of operations and financial condition.
Technological Change. Rapid technological changes may render our technology
obsolete or decrease the competitiveness of our services. To become competitive
in the online travel industry, we must enhance and improve the functionality and
features of our websites. The Internet and the online commerce industry are
rapidly changing. In particular, the online travel industry is characterized by
increasingly complex systems and infrastructures. If competitors introduce new
services with new technologies, or if new industry standards and practices
emerge, our websites and proprietary technology and systems may become obsolete.
Our future success will depend on our ability to do the following:
o enhance our existing services;
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o develop and license new services and technologies that address the
increasingly sophisticated and varied needs of our prospective
customers and suppliers;
o respond to technological advances and emerging industry standards and
practices on a cost-effective and timely basis.
Developing our websites and other proprietary technology entails significant
technical and business risks. We may use new technologies ineffectively or we
may fail to adapt our websites, transaction-processing systems and network
infrastructure to customer requirements or emerging industry standards. If we
face material delays in introducing new services, products and enhancements, our
customers and suppliers may forego the use of our services and use those of our
competitors.
Description of Property
Property held by Us. As of the date specified in the following table, we held
the following property:
<TABLE>
<CAPTION>
================================ ======================= ======================
Property September 30, 2000 December 31, 1999
-------------------------------- ----------------------- ----------------------
<S> <C> <C>
Cash $760.00 $884.00
-------------------------------- ----------------------- ----------------------
Property and Equipment, net $2,226.00 $2,673.00
================================ ======================= ======================
</TABLE>
Our Facilities. Our facilities are located at 513 Calle Amigo, San Clemente,
California 92673. The facilities are provided, at no charge, by Ryan A. Neely,
our president, secretary and a director. We do not have a written lease or
sublease agreement and Mr. Neely does not expect to be paid or reimbursed for
providing office facilities.
Certain Relationships and Related Transactions
Conflicts Related to Other Business Activities. The persons serving as our
officers and directors have existing responsibilities and, in the future, may
have additional responsibilities, to provide management and services to other
entities in addition to us. As a result, conflicts of interest between us and
the other entities may occur from time to time.
In addition to serving as our president, secretary and a director, Mr. Neely is
the secretary and a director of MVD, Inc. a Delaware corporation and a provider
of digital entertainment products. Mr. Neely currently devotes approximately
half of his time to MVD, Inc. We do not believe that we have any conflicts of
interest with the business or industry of MVD, Inc., other than Mr. Neely's duty
to provide management and services.
In addition to serving as our treasurer and a director, Mr. Ortega has been a
branch manager for Enterprise Rent-a-Car Company since 1994. Mr. Ortega is
responsible for the day-to-day operations as well as the management of all
employees at his branch. Mr. Ortega currently devotes a significant portion of
his time to Enterprise Rent-a-Car Company. We do not believe that we have any
conflicts of interest with the business or industry of Enterprise Rent-a-Car
Company, other than Mr. Ortega's duty to provide management and services.
We will attempt to resolve any such conflicts of interest in our favor. Our
officers and directors are accountable to us and our shareholders as
fiduciaries, which requires that such officers and directors exercise good faith
and integrity in handling our affairs. A shareholder may be able to institute
legal action on our behalf or on behalf of that shareholder and all other
similarly situated shareholders to recover damages or for other relief in cases
of the resolution of conflicts in any manner prejudicial to us.
Related Party Transactions.
Ryan A. Neely, our president, secretary and director, currently provides office
space to us at no charge. In addition, during the period ended September 30,
2000, Mr. Neely has paid for various goods and services relating to our
operations. These expenses have been included in the results of operations for
the period and recorded as additional paid-in capital stockholders' equity.
19
<PAGE>
During the period ended September 30, 2000, we paid fees for web-consulting
services totaling $1,500 to Judy Buehlman, a current shareholder and formerly,
one of our officers and directors. Additionally, in 1999, we paid $2,600 to Sean
Connelly, one of our shareholders, for web development and maintenance services.
Judy Buehlman, Patty Tipton and Sean and Janna Connelly, our former officers and
directors, were issued 100 shares of our common stock in exchange for their
services relating to founding and organizing the business, which were valued at
$900. In addition, during the period ended December 31, 1999, Judy Buehlman, our
former officer and director and current principal shareholder, paid for various
goods and services relating to our operations including travel, entertainment,
trade shows and transportation costs. These expenses have been included in the
results of operations for the period and recorded as additional paid-in capital
stockholders' equity.
On August 1, 2000, we issued 797,469 shares of our common stock to Thomas E.
Stepp, Jr., Richard Reincke and Michael Muellerleile, in exchange for legal
services provided to us, which were valued at $797.
Market for Common Equity and Related Stockholder Matters
Reports to Security Holders. Our securities are not listed for trading on any
exchange or quotation service. We are not required to comply with the timely
disclosure policies of any exchange or quotation service. The requirements to
which we would be subject if our securities were so listed typically include the
timely disclosure of a material change or fact with respect to our affairs and
the making of required filings. Although we are not required to deliver an
annual report to security holders, we intend to provide an annual report to our
security holders, which will include audited financial statements.
There are no outstanding options or warrants to purchase, or securities
convertible into, shares of our common stock. There are no outstanding shares of
our common stock that could be sold pursuant to Rule 144 pursuant to the
Securities Act of 1933 or that we have agreed to register under the Securities
Act of 1933 for sale by security holders. The approximate number of holders of
record of our common stock is twenty-seven.
There have been no cash dividends declared on our common stock. Dividends are
declared at the sole discretion of our Board of Directors.
There is no public market for shares of our common stock. We cannot guaranty
that an active public market will develop or be sustained. Therefore, investors
may not be able to find purchasers for their shares of our common stock. Should
there develop a significant market for our shares, the market price for those
shares may be significantly affected by such factors as our financial results
and introduction of new products and services. Factors such as announcements of
new or enhanced products by us or our competitors and quarter-to-quarter
variations in our results of operations, as well as market conditions in the
high technology sector may have a significant impact on the market price of our
shares. Further, the stock market has experienced extreme volatility that has
particularly affected the market prices of stock of many companies and that
often has been unrelated or disproportionate to the operating performance of
those companies.
Penny Stock Regulation. Shares of our common stock will probably be subject to
rules adopted by the Securities and Exchange Commission that regulate
broker-dealer practices in connection with transactions in "penny stocks". Penny
stocks are generally equity securities with a price of less than $5.00, except
for securities registered on certain national securities exchanges or quoted on
the Nasdaq system, provided that current price and volume information with
respect to transactions in those securities is provided by the exchange or
system. The penny stock rules require a broker-dealer, prior to a transaction in
a penny stock not otherwise exempt from those rules, deliver a standardized risk
disclosure document prepared by the Securities and Exchange Commission, which
contains the following:
o a description of the nature and level of risk in the market for penny
stocks in both public offerings and secondary trading;
o a description of the broker's or dealer's duties to the customer and
of the rights and remedies available to the customer with respect to
violation to such duties or other requirements of securities' laws;
20
<PAGE>
o a brief, clear, narrative description of a dealer market, including
"bid" and "ask" prices for penny stocks and the significance of the
spread between the "bid" and "ask" price;
o a toll-free telephone number for inquiries on disciplinary actions;
o definitions of significant terms in the disclosure document or in the
conduct of trading in penny stocks; and
o such other information and is in such form, including language, type,
size and format, as the Securities and Exchange Commission shall
require by rule or regulation.
Prior to effecting any transaction in penny stock, the broker-dealer also must
provide the customer the following:
o the bid and offer quotations for the penny stock;
o the compensation of the broker-dealer and its salesperson in the
transaction;
o the number of shares to which such bid and ask prices apply, or other
comparable information relating to the depth and liquidity of the
market for such stock; and
o monthly account statements showing the market value of each penny
stock held in the customer's account.
In addition, the penny stock rules require that prior to a transaction in a
penny stock not otherwise exempt from those rules, the broker-dealer must make a
special written determination that the penny stock is a suitable investment for
the purchaser and receive the purchaser's written acknowledgment of the receipt
of a risk disclosure statement, a written agreement to transactions involving
penny stocks, and a signed and dated copy of a written suitably statement. These
disclosure requirements may have the effect of reducing the trading activity in
the secondary market for a stock that becomes subject to the penny stock rules.
Holders of shares of our common stock may have difficulty selling those shares
because our common stock will probably be subject to the penny stock rules.
Executive Compensation
Any compensation received by our officers, directors, and management personnel
will be determined from time to time by our Board of Directors. Our officers,
directors, and management personnel will be reimbursed for any out-of-pocket
expenses incurred on our behalf.
During fiscal years 1999 and 2000, our chief executive did not receive any
compensation. As of January 9, 2001, none of our officers or directors has been
paid any compensation. We do not have any plans for our officers or directors to
be paid any compensation in the immediate future.
Compensation of Directors. Our directors who are also our employees receive no
extra compensation for their service on our Board of Directors.
Compensation of Officers. As of January 5, 2001, our officers have received no
compensation for their services provided to us.
Employment Contracts. We anticipate that we may enter into an employment
contract with Ryan A. Neely, although we currently do not have plans,
agreements, understandings or arrangements at this time.
<PAGE>
Financial Statements
JPAL, INC.
FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000
JPAL, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
(Unaudited) (Audited)
------------- ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents (Note 2) $ 760 $ 884
Prepaid expenses 3,463 --
-------- --------
4,223 884
PROPERTY AND EQUIPMENT, net (Notes 2 and 3) 2,226 2,673
-------- --------
Total assets $ 6,449 $ 3,557
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ -- $ 844
-------- --------
Total current liabilities -- 844
-------- --------
COMMITMENTS AND CONTINGENCIES (Note 5) -- --
STOCKHOLDERS' EQUITY
Common stock, $.001 par value;
50,000,000 shares authorized,
3,797,469 and 900,000 shares issued and
outstanding at September 30, 2000 and December
31, 1999, respectively 3,797 900
Additional paid-in capital (Note 5) 30,200 18,235
Accumulated deficit (27,548) (16,422)
-------- --------
Total stockholders' equity 6,449 2,713
-------- --------
Total liabilities and stockholders' equity $ 6,449 $ 3,557
======== ========
</TABLE>
F-1
See accompanying notes to these financial statements
<PAGE>
JPAL, INC.
STATEMENTS OF OPERATIONS
March 31, 1999
Nine Months (Inception)
Ended Through
September 30, December 31,
2000 1999
(Unaudited) (Audited)
------------- --------------
REVENUES $ 3,122 $ 6,793
OPERATING EXPENSES 13,801 22,835
OTHER EXPENSE
Depreciation 447 380
-------- --------
LOSS BEFORE PROVISION FOR INCOME TAXES (11,126) (16,422)
PROVISION FOR INCOME TAXES (Note 4) -- --
-------- --------
NET LOSS $(11,126) $(16,422)
======== ========
BASIC LOSS PER SHARE $ (.00) $ (.00)
======== ========
DILUTIVE LOSS PER SHARE $ (.00) $ (.00)
======== ========
F-2
See accompanying notes to these financial statements
<PAGE>
JPAL, INC.
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common Stock Additional
--------------------------- Paid-In Accumulated
Shares Amount Capital Deficit Total
--------- ----------- ----------- ----------- -----------
(Audited)
-----------------------------------------------
<S> <C> <C> <C> <C> <C>
BALANCE, March 31, 1999
(inception) -- $ -- $ -- $ -- $ --
ISSUANCE OF COMMON STOCK FOR
SERVICES (Note 5) 900,000 900 900
ADDITIONAL PAID-IN CAPITAL, (in
exchange for goods and services
and rent) (Note 5) 18,235 18,235
NET LOSS (16,422) (16,422)
--------- ----------- ----------- ----------- -----------
BALANCE, December 31, 1999 900,000 900 18,235 (16,422) 2,713
(Unaudited)
-----------------------------------------------
ISSUANCE OF COMMON STOCK FOR CASH 2,100,000 2,100 920 3,020
ISSUANCE OF COMMON STOCK FOR
SERVICES (Note 5) 797,469 797 797
ADDITIONAL PAID-IN CAPITAL,
(paid in cash) 9,795 9,795
ADDITIONAL PAID-IN CAPITAL (in
exchange for rent provided by
a stockholder) (Note 5) 1,250 1,250
NET LOSS (11,126) (11,126)
--------- ----------- ----------- ----------- -----------
BALANCE, September 30, 2000 3,797,469 $ 3,797 $ 30,200 $ (27,548) $ 6,449
========= =========== =========== =========== ===========
</TABLE>
F-3
See accompanying notes to these financial statements
<PAGE>
JPAL, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
March 31, 1999
Nine Months (Inception)
Ended Through
September 30, December 31,
2000 1999
(Unaudited) (Audited)
------------- --------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(11,126) $(16,422)
Adjustments to reconcile net loss to net cash provided
by (used in) operating activities
Depreciation 447 380
Services provided in exchange for issuance of common
stock 797 900
Goods and services and rent provided in exchange for
additional paid-in capital 1,250 18,235
Changes in assets and liabilities
Increase in prepaid expenses (3,463) --
Increase (decrease) in accounts payable (844) 844
-------- --------
Net cash provided by (used in) operating activities (12,939) 3,937
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of fixed assets -- (3,053)
-------- --------
Net cash used in investing activities -- (3,053)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common stock 3,020 --
Proceeds from additional paid-in capital 9,795 --
-------- --------
Net cash provided by financing activities 12,815 --
-------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
(124) 884
CASH AND CASH EQUIVALENTS, beginning of period 884 --
-------- --------
CASH AND CASH EQUIVALENTS, end of period $ 760 $ 884
======== ========
</TABLE>
F-4
See accompanying notes to these financial statements
<PAGE>
JPAL, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
March 31, 1999
Nine Months (Inception)
Ended Through
September 30, December 31,
2000 1999
(Unaudited) (Audited)
------------- --------------
<S> <C> <C>
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for interest $ -- $ --
Cash paid during the period for income taxes $ -- $ --
</TABLE>
SUPPLEMENTAL DISCLOSURE OF NON-CASH TRANSACTIONS
During the period ended September 30, 2000, the Company recorded rent expense
of $1,250 and additional paid-in capital of $1,250 for rent provided by a
stockholder.
During the periods ended September 30, 2000 and December 31, 1999, the Company
issued stock in exchange for services provided valued at $797 and $900,
respectively.
During the period ended December 31, 1999, the Company recorded additional
paid-in capital of $18,235, for goods and services and rent paid for and
provided by stockholders.
F-5
See accompanying notes to these financial statements
<PAGE>
JPAL, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2000 AND DECEMBER 31, 1999
NOTE 1 - COMPANY OPERATIONS
JPAL, Inc. (the "Company") was incorporated in the state of Nevada on March
31, 1999 to operate as an Internet based provider of vacation rental properties
and services with an elected December 31st fiscal year end. A majority of the
services are to properties located in Nevada.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies are summarized as follows:
Cash and Cash Equivalents - For purposes of the balance sheets and
statements of cash flows, the Company considers all highly liquid debt
instruments purchased with a maturity of three (3) months or less to be cash
equivalents.
Accounting Estimates - The preparation of financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Property and Equipment - Property and equipment are stated at cost.
Depreciation is computed using the straight-line method over the estimated
useful lives of the assets which range from three to seven years. Repairs and
maintenance to property and equipment are expensed as incurred. When property
and equipment is retired or disposed of, the related costs and accumulated
depreciation are eliminated from the accounts and any gain or loss on such
disposition is reflected in income.
Advertising - Advertising costs are charged to operations when incurred.
Income Taxes - The Company accounts for income taxes in accordance with the
provisions of Statement of Financial Accounting Standards No. 109, "Accounting
for Income Taxes", which requires the recognition of deferred tax assets and
liabilities for the expected future tax consequences of events that have been
included in the financial statements or tax returns. Under this method, deferred
tax assets and liabilities are determined based on the difference between the
financial statement and the tax basis of assets and liabilities using enacted
rates in effect for the periods in which the differences are expected to
reverse. Valuation allowances are established when necessary to reduce deferred
tax assets to the amount expected to be realized.
F-6
<PAGE>
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Start-up Activities - The Company has adopted the provisions of Statement
of Position 98-5, "Reporting Costs of Start-up Activities" ("SOP 98-5"). SOP
98-5 requires that the costs of start-up activities including organization costs
be expensed as incurred.
NOTE 3 - PROPERTY AND EQUIPMENT
Equipment and improvements consist of the following:
Computer $ 1,791
Computer equipment 1,057
Furniture 205
-------
3,053
Less: accumulated depreciation (827)
-------
$ 2,226
=======
NOTE 4 - INCOME TAXES
The Company accounts for income taxes under Statement of Financial
Accounting Standards No. 109 ("SFAS 109"). This statement mandates the liability
method of accounting for deferred income taxes and permits the recognition of
deferred tax assets subject to an ongoing assessment of realizability.
The components of the Company's income tax provision consist of:
<TABLE>
<CAPTION>
March 31, 1999
Nine Months (Inception)
Ended Through
September 30, December 31,
2000 1999
------------- --------------
<S> <C> <C>
Federal taxes (deferred) net operating loss benefit
Change in valuation account $ 1,600 $ (2,500)
(1,600) 2,500
---------- ----------
$ -- $ --
========== ==========
</TABLE>
F-7
<PAGE>
NOTE 4 - INCOME TAXES
Deferred income taxes are provided for timing differences in the
recognition of certain income and expense items for tax and financial statement
purposes. The tax effect of the temporary differences giving rise to the
Company's deferred tax assets and liabilities as of September 30, 2000 and
December 31, 1999 are as follows:
September 30, December 31,
2000 1999
------------- ------------
Deferred income taxes
Net operating loss benefit $ 4,100 $ 2,500
Valuation allowance (4,100) (2,500)
------- -------
$ -- $ --
======= =======
The Company has a federal net operating loss carryforward of approximately
$16,000 that will expire in 2019 and 2020.
The Company's tax reporting year end is December 31st. If the Company has a
net operating loss carryforward from operations for the year ended December 31,
2000, it will expire in 2020.
NOTE 5 - RELATED PARTY TRANSACTIONS
The Company is currently utilizing office space provided by the Company's
president (a stockholder). During the period ended September 30, 2000, the
Company has recorded rent expense of $1,250 which represents the Company's pro
rata share of the office space being provided by the Company's president. The
president has waived reimbursement of the allocated rent and has considered it
as additional paid-in capital.
During the period ended September 30, 2000 the Company paid fees for
web-consulting services to a stockholder totaling $1,500. Additionally, during
the period ended December 31, 1999, the Company paid fees to a stockholder
totaling $2,600 for the construction of their website.
During the period ended September 30, 2000, the Company entered into a
consulting agreement for legal services in exchange for 797,469 shares of common
stock which were valued at $797. The services were valued using hourly rates at
estimated fair market value of similar services. During the period ended
December 31, 1999, the Company entered into consulting agreements for advisory
services relating to the initial start-up of the Company. Total fees were $900
for the period ended December 31, 1999 with each consultant receiving a
percentage of ownership in the form of common stock. The services were valued
using hourly rates at estimated fair market value of similar services.
In addition, during the period ended December 31, 1999, one of the
stockholders paid for various goods and services relating to the Company's
operations including travel, entertainment, trade shows and transportation
costs. These expenses have been included in the results of operations for the
corresponding period and recorded as additional paid-in-capital.
F-8
<PAGE>
JPAL, INC.
REPORT AND FINANCIAL STATEMENTS
FOR THE PERIODS MARCH 31, 1999 (INCEPTION)
THROUGH DECEMBER 31, 1999 AND
THE SIX MONTHS ENDED JUNE 30, 2000
F-9
<PAGE>
[LETTERHEAD OF LESLEY, THOMAS, SCHWARZ & POSTMA, INC.]
October 23, 2000
To the Board of Directors and Stockholders of
JPAL, Inc.
We have audited the accompanying balance sheets of JPAL, Inc. as of June
30, 2000 and December 31, 1999, and the related statements of operations,
changes in stockholders' equity, and cash flows for the six months ended June
30, 2000 and the period March 31, 1999 (inception) through December 31, 1999.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of JPAL, Inc. as of June 30,
2000 and December 31, 1999, and the results of its operations and its cash flows
for the six months ended June 30, 2000 and the period March 31, 1999 (inception)
through December 31, 1999 in conformity with generally accepted accounting
principles.
/s/ LESLEY, THOMAS, SCHWARZ & POSTMA, INC.
A Professional Accountancy Corporation
Newport Beach, California
F-10
<PAGE>
JPAL, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
-------- --------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents (Note 2) $ 829 $ 884
PROPERTY AND EQUIPMENT, net (Notes 2 and 3) 2,373 2,673
-------- --------
Total assets $ 3,202 $ 3,557
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 460 $ 844
-------- --------
Total current liabilities 460 844
-------- --------
STOCKHOLDERS' EQUITY
Common stock, $.001 par value;
50,000,000 shares authorized,
900,000 and 3,000,000 shares issued or outstanding at
December 31, 1999 and June 30, 2000, respectively 3,000 900
Additional paid-in capital (Note 5) 19,655 18,235
Accumulated deficit (19,913) (16,422)
-------- --------
Total stockholders' equity 2,742 2,713
-------- --------
Total liabilities and stockholders' equity $ 3,202 $ 3,557
======== ========
</TABLE>
F-11
See accompanying notes to these financial statements
<PAGE>
JPAL, INC.
STATEMENTS OF OPERATIONS
Period
March 31,
1999
Six Months (inception)
Ended Through
June 30, December 31,
2000 1999
---------- ------------
REVENUES $ 1,290 $ 6,793
OPERATING EXPENSES 4,481 22,835
OTHER EXPENSE
Depreciation 300 380
-------- --------
LOSS BEFORE PROVISION FOR INCOME TAXES (3,491) (16,422)
PROVISION FOR INCOME TAXES (Note 4) -- --
-------- --------
NET LOSS $ (3,491) $(16,422)
======== ========
BASIC LOSS PER SHARE $ (.00) $ (.00)
======== ========
DILUTIVE LOSS PER SHARE $ (.00) $ (.00)
======== ========
F-12
See accompanying notes to these financial statements
<PAGE>
JPAL, INC.
STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIT
PERIOD MARCH 31, 1999 (INCEPTION) THROUGH JUNE 30, 2000
<TABLE>
<CAPTION>
Common Stock Additional
--------------------------- Paid-In Accumulated
Shares Amount Capital Deficit Total
--------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
BALANCE, March 31, 1999
(inception) -- $ -- $ -- $ -- $ --
ISSUANCE OF COMMON STOCK FOR
SERVICES (Note 5) 900,000 900 900
ADDITIONAL PAID-IN CAPITAL, (in
exchange for goods and services
and rent) (Note 5) 18,235 18,235
NET LOSS (16,422) (16,422)
--------- ---------- ---------- ---------- ----------
BALANCE, December 31, 1999 900,000 900 18,235 (16,422) 2,713
ISSUANCE OF COMMON STOCK FOR
CASH (Note 5) 2,100,000 2,100 920 3,020
ADDITIONAL PAID-IN CAPITAL, (in
exchange for rent provided by
a stockholder) (Note 5) 500 500
NET LOSS (3,491) (3,491)
--------- ---------- ---------- ---------- ----------
BALANCE, June 30, 2000 3,000,000 $ 3,000 $ 19,655 $ (19,913) $ 2,742
========= ========== ========== ========== ==========
</TABLE>
F-13
See accompanying notes to these financial statements
<PAGE>
JPAL, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Period
March 31,
1999
Six Months (inception)
Ended Through
June 30, December 31,
2000 1999
-------- ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (2,991) $(16,422)
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities
Depreciation 300 380
Services provided in exchange for issuance of common
stock -- 900
Goods and services and rent provided in exchange for
additional paid-in capital 500 18,235
Changes in assets and liabilities
Increase (decrease) in accounts payable (384) 844
-------- --------
Net cash provided by (used in) operating activities (2,575) 3,937
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of fixed assets -- (3,053)
-------- --------
Net cash used in investing activities -- (3,053)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common stock 3,020 --
-------- --------
Net cash provided by financing activities 3,020 --
-------- --------
NET INCREASE IN CASH AND CASH EQUIVALENTS 445 884
CASH AND CASH EQUIVALENTS, beginning of period 884 --
-------- --------
CASH AND CASH EQUIVALENTS, end of period $ 1,329 $ 884
======== ========
</TABLE>
F-14
See accompanying notes to these financial statements
<PAGE>
JPAL, INC.
STATEMENTS OF CASH FLOWS (CONTINUED)
<TABLE>
<CAPTION>
Period
March 31,
1999
Six Months (inception)
Ended Through
June 30, December 31,
2000 1999
---------- ------------
<S> <C> <C>
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for interest $ -- $ --
Cash paid during the period for income taxes $ -- $ --
</TABLE>
SUPPLEMENTAL DISCLOSURE OF NON-CASH TRANSACTIONS
During the period ended June 30, 2000, the Company recorded rent expense of
$500 and additional paid-in capital of $500 for rent provided by a
stockholder.
During the period ended December 31, 1999, the Company issued stock in
exchange for services provided valued at $900.
During the period ended December 31, 1999 the Company recorded additional
paid-in capital of $18,235 for goods and services paid for and provided by a
stockholder.
F-15
See accompanying notes to these financial statements
<PAGE>
JPAL, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2000 AND DECEMBER 31, 1999
NOTE 1 - COMPANY OPERATIONS
JPAL, Inc. (the "Company") was incorporated in the state of Nevada on March
31, 1999 to operate as an internet based provider of vacation rental properties
and services. A majority of the services are to properties located in Nevada.
The Company's tax reporting year end is December 31st.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies are summarized as follows:
Cash and Cash Equivalents - For purposes of the balance sheets and
statements of cash flows, the Company considers all highly liquid debt
instruments purchased with a maturity of three months or less to be cash
equivalents.
Accounting Estimates - The preparation of financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Property and Equipment - Property and equipment are stated at cost.
Depreciation is computed using the straight-line method over the estimated
useful lives of the assets which range from three to seven years. Repairs and
maintenance to property and equipment are expensed as incurred. When property
and equipment is retired or disposed of, the related costs and accumulated
depreciation are eliminated from the accounts and any gain or loss on such
disposition is reflected in income.
Advertising - Advertising costs are charged to operations when incurred.
Income Taxes - The Company accounts for income taxes in accordance with the
provisions of Statement of Financial Accounting Standards No. 109, "Accounting
for Income Taxes", which requires the recognition of deferred tax assets and
liabilities for the expected future tax consequences of events that have been
included in the financial statements or tax returns. Under this method, deferred
tax assets and liabilities are determined based on the difference between the
financial statement and the tax basis of assets and liabilities using enacted
rates in effect for the periods in which the differences are expected to
reverse. Valuation allowances are established when necessary to reduce deferred
tax assets to the amount expected to be realized.
F-16
<PAGE>
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Start-up Activities - The Company has adopted the provisions of Statement
of Position 98-5, "reporting Costs of Start-up Activities" ("SOP 98-5"). SOP
98-5 requires that the costs of start-up activities including organization costs
be expensed as incurred.
NOTE 3 - PROPERTY AND EQUIPMENT
Equipment and improvements consist of the following:
Computer $ 1,791
Computer equipment 1,057
Furniture 205
-------
3,053
Less: accumulated depreciation (680)
-------
$ 2,373
=======
NOTE 4 - INCOME TAXES
The Company accounts for income taxes under Statement of Financial
Accounting Standards No. 109 ("SFAS 109"). This statement mandates the liability
method of accounting for deferred income taxes and permits the recognition of
deferred tax assets subject to an ongoing assessment of realizability.
The components of the Company's income tax provision consist of:
<TABLE>
<CAPTION>
Period
March 31,
1999
Six Months (inception)
Ended Through
June 30, December 31,
2000 1999
---------- ------------
<S> <C> <C>
Federal taxes (deferred) net operating loss benefit $ (500) $(2,500)
Change in valuation account 500 2,500
------- -------
$ -- $ --
======= =======
</TABLE>
F-17
<PAGE>
NOTE 4 - INCOME TAXES (CONTINUED)
Deferred income taxes are provided for timing differences in the
recognition of certain income and expense items for tax and financial statement
purposes. The tax effect of the temporary differences giving rise to the
Company's deferred tax assets and liabilities as of June 30, 2000 and December
31, 1999 are as follows:
June 30, December 31,
2000 1999
------- ------------
Deferred income taxes
Net operating loss benefit $ 3,000 $ 2,500
Valuation allowance (3,000) (2,500)
------- -------
$ -- $ --
======= =======
The Company has a federal net operating loss carryforward of approximately
$16,000 that will expire in 2019.
The Company's tax reporting year end is December 31st. If the Company has a
net operating loss carryforward from operations for the year ended December 31,
2000, it will expire in 2020.
NOTE 5 - RELATED PARTY TRANSACTIONS
The Company is currently utilizing office space provided by the Company's
president (a stockholder). During the period ended June 30, 2000, the Company
has recorded rent expense of $500 which represents the Company's pro rata share
of the office space being provided by the Company's president. The president has
waived reimbursement of the allocated rent and has considered it as additional
paid-in capital.
During the period ended December 31, 1999 the Company paid fees for the
construction of their website to a company owned by a stockholder. The total
amount paid for the period was $2,600.
During the period ended December 31, 1999, the Company entered into
consulting agreements for advisory services relating to the initial start-up of
the Company. Total fees were $900 for the period ended December 31, 1999 with
each consultant receiving a percentage of ownership in the form of common stock.
The services were valued using hourly rates at estimated fair market value of
similar services. In addition, during the period ended December 31, 1999 one of
the stockholders paid for various goods and services relating to the Company's
operations including travel, entertainment, trade shows and transportation
costs. These expenses have been included in the results of operations for the
period and recorded as additional paid-in capital stockholders' equity.
F-18
<PAGE>
Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure
In July 2000, our Board of Directors appointed Lesley, Thomas, Schwarz and
Postma, Inc., independent accountants, to audit our financials statements for
the period from March 31, 1999, our date of formation, through December 31, 1999
and for the six month period ending June 30, 2000.
There have been no disagreements with our accountants since our formation
required to be disclosed pursuant to Item 304 of Regulation S-B.
21
<PAGE>
LEGAL MATTERS
The validity of the issuance of the shares of common stock offered by the
selling security holders has been passed upon by the law firm of Stepp &
Beauchamp LLP, located in Newport Beach, California.
EXPERTS
Our financial statements for the period from March 31, 1999, our date of
formation, through December 31, 1999 and for the six month period ending June
30, 2000 appearing in this prospectus which is part of a registration statement
have been audited by Lesley, Thomas, Schwarz and Postma, Inc. and are included
in reliance upon such reports given upon the authority of Lesley, Thomas,
Schwarz and Postma, Inc. as experts in accounting and auditing.
ADDITIONAL INFORMATION
We have filed a registration statement on Form SB-2 with the Securities and
Exchange Commission pursuant to the Securities Act of 1933 with respect to the
common stock offered by the selling security holders. This prospectus does not
contain all of the information set forth in the registration statement and the
exhibits and schedules to the registration statement. For further information
regarding us and our common stock offered hereby, reference is made to the
registration statement and the exhibits and schedules filed as a part of the
registration statement. Information in this prospectus concerning the contents
of any contract or any other document referred to is not necessarily complete.
Reference is made in each instance to the copy of such contract or document
filed as an exhibit to the registration statement. All of that information is
qualified in all respects by such reference to such exhibit.
When we become a reporting company with the Securities and Exchange Commission,
we will be required to file reports and other information with the Securities
and Exchange Commission. This registration statement, complete with its
exhibits, as well as those reports and other information when so filed, may be
inspected at the Securities and Exchange Commission's Public Reference Room at
450 Fifth Street N.W., Washington, D.C. 20549. For further information on the
operation of the Public Reference Room, please call the Securities and Exchange
Commission at 1-800-SEC-0330. The Securities and Exchange Commission also
maintains an Internet site that contains reports, proxy and information
statements, and other information regarding issuers that file electronically
with the Securities and Exchange Commission. This registration statement,
complete with its exhibits, is available on the website of the Securities and
Exchange Commission. The address of that site is http://www.sec.gov.
PART II - INFORMATION NOT REQUIRED IN PROSPECTUS
Indemnification of Directors and Officers
Article Ten of our Amended and Restated Articles of Incorporation provides,
among other things, that our officers or directors shall not be personally
liable to us or our shareholders for monetary damages for breach of fiduciary
duty as an officer or director, except for liability
o for any breach of such officer's or director's duty of loyalty to us
or our security holders;
o for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
o liability for unlawful payments of dividends or unlawful stock
purchase or redemption by us; or
o for any transaction from which such officer or director derived any
improper personal benefit.
Accordingly, our officers or directors may have no liability to our shareholders
for any mistakes or errors of judgment or for any act of omission, unless such
act or omission involves intentional misconduct, fraud, or a knowing violation
of law or results in unlawful distributions to our shareholders.
Indemnification Agreements. We anticipate that we will enter into
indemnification agreements with each of our executive officers pursuant to which
we will agree to indemnify each such person for all expenses and liabilities,
including criminal monetary judgments, penalties and fines, incurred by such
person in connection with any criminal or
22
<PAGE>
civil action brought or threatened against such person by reason of such person
being or having been our officer or director or employee. In order to be
entitled to indemnification by us, such person must have acted in good faith and
in a manner such person believed to be in our best interests and, with respect
to criminal actions, such person must have had no reasonable cause to believe
his or her conduct was unlawful.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to our directors, officers and controlling persons
pursuant to the foregoing provisions, or otherwise, we have 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.
Other Expenses of Issuance and Distribution
We will pay all expenses in connection with the registration and sale of the
common stock by the selling security holders. The estimated expenses of issuance
and distribution are set forth below.
<TABLE>
<CAPTION>
================================= ================ =============
<S> <C> <C>
Registration Fees Approximately $264.00
--------------------------------- ---------------- -------------
Transfer Agent Fees Approximately $500.00
--------------------------------- ---------------- -------------
Costs of Printing and Engraving Approximately $500.00
--------------------------------- ---------------- -------------
Legal Fees Approximately $5,000.00
--------------------------------- ---------------- -------------
Accounting Fees Approximately $1,500.00
================================= ================ =============
</TABLE>
Recent Sales of Unregistered Securities
There have been no sales of unregistered securities within the last three years,
which would be required to be disclosed pursuant to Item 701 of Regulation S-B,
except for the following:
On August 1, 2000, we issued 797,469 shares of our common stock to Thomas E.
Stepp, Jr., Richard Reincke and Michael Muellerleile, in a transaction which we
believe satisfies the requirements of that certain exemption from the
registration and prospectus delivery requirements of the Securities Act of 1933,
which exemption is specified by the provisions of Section 4(2) of that act and
Rule 506 of Regulation D promulgated pursuant to that act by the Securities and
Exchange Commission. The shares were issued in exchange for legal services
provided to us, which were valued at $797. Thomas E. Stepp, Jr., Richard Reincke
and Michael Muellerleile are sophisticated investors and had access to the type
of information that would normally be included in a registration statement.
On or about May 11, 2000, we issued 2,100,000 shares of our common stock for
$.001 per share. The shares were issued in a transaction which we believe
satisfies the requirements of that certain exemption from the registration and
prospectus delivery requirements of the Securities Act of 1933, which exemption
is specified by the provisions of Section 4(2) of that act and Rule 506 of
Regulation D promulgated pursuant to that act by the Securities and Exchange
Commission. Specifically, the offer was made to "accredited investors", as that
term is defined under applicable federal and state securities laws, and no more
than 35 non-accredited investors. The value of the shares was arbitrarily set by
us and had no relationship to our assets, book value, revenues or other
established criteria of value. There were no commissions paid on the sale of
those shares. The net proceeds to us were $2,100. All twenty-one purchasers of
our common stock were non-accredited investors and were business associates,
personal friends or family members of Ryan A. Neely, our president, secretary
and one of our directors. All non-accredited investors were sophisticated
investors and were provided a private placement memorandum, which contained the
type of information that would normally be included in a registration statement.
In April 1999, we issued 100 shares of our $.01 par value common stock to our
founding shareholders, Judy Buehlman, Patty Tipton, Sean Connelly and Janna
Connelly, in a transaction which we believe satisfies the requirements of that
certain exemption from the registration and prospectus delivery requirements of
the Securities Act of 1933, which is specified by the provisions of Section 4(2)
of that act. Judy Buehlman, Patty Tipton, Sean Connelly and Janna Connelly are
sophisticated investors and had access to the type of information that would
normally be
23
<PAGE>
included in a registration statement. The shares were issued in exchange for
their services relating to founding and organizing the business, which were
valued at $900. On April 6, 2000, we amended and restated our Articles of
Incorporation to authorize 50,000,000 shares of $.001 par value common stock. On
April 15, 2000, our Board of Directors authorized an exchange of those 100
shares of our $.01 par value common stock for 900,000 shares of our $.001 par
value common stock.
Exhibits
Copies of the following documents are filed with this registration
statement, Form SB-2, as exhibits:
Exhibit No.
1. Underwriting Agreement (not applicable)
3.1 Amended and Restated Articles of Incorporation
(Charter Document)*
3.2 Bylaws*
5. Opinion Re: Legality*
8. Opinion Re: Tax Matters (not applicable)
11. Statement Re: Computation of Per Share Earnings**
15. Letter on unaudited interim financial information (not applicable)
23.1 Consent of Auditors
23.2 Consent of Counsel***
24. Power of Attorney is included on the signature page of the
registration statement
* Included in the registration statement on Form SB-2 filed on August 18, 2000.
** Included in Financial Statements
***Included in Exhibit 5
Undertakings
A. Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to our directors, officers and controlling persons
pursuant to the foregoing provisions, or otherwise, we have been advised that in
the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act of 1933 and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities, other than the payment by us of expenses incurred or paid by
our director, officer or controlling person 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, we will, unless in
the opinion of our counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act of 1933 and will be governed by the final adjudication of such issue.
24
<PAGE>
B. We hereby undertake:
(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 specify in the prospectus any facts or events arising after
the effective date of the registration statement, or 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. Notwithstanding the
foregoing, any increase or decrease in volume of securities
offered, if the total dollar value of securities offered would
not exceed that which was registered, and any deviation from the
low or high end of the estimated maximum offering range may be
reflected in the form of prospectus filed with the Securities and
Exchange Commission pursuant to Rule 424(b) (Section 230.424(b)
of Regulation S-B) if, in the aggregate, the changes in volume
and price represent no more than a 20% change in the maximum
aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement;
and
(iii)To include any additional or changed material information with
respect to the plan of distribution not previously disclosed in
the registration statement or any material change to such
information in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering 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.
25
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, as amended,
we certify that we have reasonable grounds to believe that we meet all of the
requirements of filing on Form SB-2 and authorized this registration statement
to be signed on our behalf by the undersigned, in the city of Newport Beach,
California, on January 9, 2001.
JPAL, Inc.,
a Nevada corporation
By: /s/ Ryan A. Neely
------------------------------------
Ryan A. Neely
Its: President, Secretary and Director
In accordance with the requirements of the Securities Act of 1933, this
registration statement was signed on this 9th day of January, 2001, the
following persons in the capacities and on the dates stated:
/s/ Ryan A. Neely January 9, 2001
------------------------------------ ---------------
Ryan A. Neely
President, Secretary, Director
/s/ Jason J. Ortega January 9, 2001
------------------------------------- ---------------
Jason J. Ortega
Treasurer,
Principal financial and accounting officer, Director
26
<PAGE>
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints and hereby
authorizes Ryan A. Neely with the full power of substitution, as
attorney-in-fact, to sign in such person's behalf, individually and in each
capacity stated below, and to file any amendments, including post-effective
amendments to this Registration Statement.
In accordance with the requirements of the Securities Act of 1933, this
Registration Statement was signed by the following persons in the capacities and
on the dates stated.
JPAL, INC.
s/ Ryan A. Neely January 9, 2001
------------------------------------ ---------------
Ryan A. Neely
President, Secretary, Director
/s/ Jason J. Ortega January 9, 2001
------------------------------------ ---------------
Jason J. Ortega
Treasurer, Director
27
