As filed with the Securities and Exchange Commission on _____ , 2000
Registration No.
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C., 20549
-----------------------
POWERNOMICS ENTERPRISE CORPORATION
AMENDMENT NO. 4 TO
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
POWERNOMICS ENTERPRISE CORPORATION
(Name of Small Business Issuer in its charter)
Delaware 23-3023043
-------- ----------
(State of Jurisdiction) (I.R.S. Employee (Primary Standard Industrial
Identification No.) Classification Code Number
PowerNomics Enterprise Corporation
200 Highpoint Drive, Suite 215
Chalfont, Pennsylvania 18914
(215)822-1561
--------------------------------------------------------------------
(Address and telephone number of principal executive offices
and principal place of business)
W. Thomas Lomax
200 Highpoint Drive, Suite 215
Chalfont, Pennsylvania 18914
215-822-1561
--------------------------------------------------------------------
(Name, address and telephone number of agent for service)
Approximate date of proposed sale to the public: As soon as practicable after
the effective date of this Registration Statement.
Copies of all communications to:
Joel Schonfeld, Esq.
Andrea I. Weinstein, Esq.
Schonfeld & Weinstein, L.L.P.
63 Wall Street, Suite 1801
New York, New York 10005
(212) 344-1600/Fax: (212) 480-0717
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 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to Section 8(a), may
determine.
1
<PAGE>
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
Title of Each Amount Being Proposed Maximum Proposed Amount of
Class of Registered Offering Maximum Registration
Securities Price per Share Offering Aggregate Fee
Price (1)
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, 2,500,000 $8.00 $20,000,000 $5,280
par value $.0001
per share
Total
<FN>
(1) Estimated solely for the purpose of calculating the amount of the registration
fee pursuant to 457.
</FN>
</TABLE>
2
<PAGE>
Cross Reference Sheet
Showing the Location In Prospectus of
Information Required by items of Form SB-2
<TABLE>
<CAPTION>
Part I Information Required in Prospectus Item No.
------ ---------------------------------- --------
<S> <C> <C>
1. Front of Registration Statement Front of Registration
and Outside Front Cover of Statement and outside
Prospectus front cover of Prospectus
2. Inside Front and Outside Back Inside Front Cover Page
Cover Pages of Prospectus of Prospectus and Outside Front
cover Page of Prospectus
3. Summary Information and Risk Prospectus Summary;
Factors High Risks Factors
4. Use of Proceeds Use of Proceeds
5. Determination of Offering Price Prospectus Summary-
Determination of Offering Price;
High Risk Factors
6. Dilution Dilution
7. Selling Security Holders Not Applicable
8. Plan of Distribution Plan of Distribution
9. Legal Proceedings Legal Proceedings
10. Directors, executive Officers, Management
Promoters and Control Persons
11. Security Ownership of Certain Principal Stockholders
Beneficial Owners and Management
3
<PAGE>
Part I Information Required in Prospectus Caption in Prospectus
------ ---------------------------------- ---------------------
12. Description of Securities Description of Securities
13. Interest of Named Experts and Legal Opinions; Experts
Counsel
14. Disclosure of Commission Position Statement as to Indemnification for
on Indemnification Securities Act Liabilities
15. Organization Within Last Management, Certain
Five Years Transactions
16. Description of Business Business
17. Management's Discussion and Management's Discussion
and Analysis or Plan of and Analysis
Operation
18. Description of Property Property
19. Certain Relationships and Related Not Applicable
Transactions
20. Market for Common Stock and Prospectus Summary
Related Stockholder Matters Market for Registrant's
Common Stock and Related
Stockholders Matters;
Shares Eligible for
Future Sale.
21. Executive Compensation Executive Compensation
22. Financial Statements Financials Statements
23. Changes in and Disagreements Not Applicable
with Accountants on Accounting
and Financial Disclosure
</TABLE>
4
<PAGE>
A MINIMUM OFFERING OF 250,000 SHARES OF
COMMON STOCK AND A MAXIMUM OFFERING OF
2,500,000 SHARES OF COMMON STOCK
POWERNOMICS ENTERPRISE CORPORATION
PowerNomics Enterprise Corporation, a Delaware corporation is offering a minimum
of 250,000 and a maximum of 2,500,000 shares of common stock, $.0001 par value.
PowerNomics Enterprise Corporation may be referred to as "PEC," "we" or "us."
Prior to this offering, there has been no public market for the securities, and
there can be no assurance that such a market will develop or be sustained.
Pending the sale of the minimum offering, all subscription proceeds shall be
deposited in an interest bearing escrow account at Fleet Bank. If the minimum
offering is not subscribed by the close of business on the date ninety (90) days
from the date hereof or an additional sixty (60) days thereafter if extended by
PEC, all proceeds received from subscribers, with accrued interest, will be
promptly refunded in full without deduction therefrom.
We urge you to read the "Risk Factors" section beginning on page
_____ along with this prospectus before you make your investment decision.
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 this prospectus. Any representation to the
contrary is a criminal offense.
Per Share Total Total
Minimum Maximum
Offering Offering
-------- -------- --------
Initial public
offering price $ 8.00 $2,000,000 $20,000,000
Underwriting discount
and commissions $ 0 $ 0 $ 0
Proceeds $ 8.00 $2,000,000 $20,000,000
The shares are being offered by PEC. However, we retain the right to employ
various registered broker/dealers to sell a portion of this offering.
The information in this prospectus is not complete and may be changed. We 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.
PowerNomics Enterprise Corporation
The date of this prospectus is __________________.
This offering will terminate on ______________, but may be extended for an
additional sixty days at PEC's option.
5
<PAGE>
TABLE OF CONTENTS PAGE
----------------- ----
Prospectus Summary
Risks Factors
Use of Proceeds
Capitalization
Dilution
Management's Discussion and Analysis of Financial Condition
Business
Management
Principal Shareholders
Description of Securities
Shares Eligible for Future Sale
Underwriting
Legal Matters
Experts
Index to Financial Statements
6
<PAGE>
PROSPECTUS SUMMARY
Powernomics Enterprise Corporation
PEC is a development stage company which intends to engage in the business
of aquaculture through the use of patented technology. PEC intends to propagate,
cultivate and market certain fish and seafood in a controlled environment. PEC
has entered into an agreement to purchase the assets of an existing aquaculture
facility located in Hurlock, Maryland. PEC intends to build additional
facilities in urban areas throughout the United States. Our next two additional
facilities will be located in Inglewood, California and Detroit, Michigan.
The principal executive offices of PowerNomics are located at 200 Highpoint
Drive, Suite 215, Chalfont, Pennsylvania 18914. Our phone number is
(215)822-1561.
PEC is a development stage company which is engaged in the business of
aquaculture. Aquaculture is a form of agriculture involving the propagation,
cultivation and marketing of aquatic animals and plants in a controlled
environment. We plan to produce fish and seafood in indoor facilities located in
urban areas. We intend to market our fish under the brand name of "EverFresh."
Our goal is to develop facilities which offer live, whole-on-ice fish, and
frozen seafood products to urban markets.
PEC intends to utilize existing patented recirculating indoor fish tank
technology. This recirculating system allows fish to be grown and sold on a
year-round basis, regardless of external conditions. Pursuant to an agreement
between Richard Sheriff, an officer and shareholder of PEC, PEC has the
exclusive rights to use such technology.
Within the next five years, PEC intends to build and/or acquire existing or
new aquaculture plants in the following target locations: Hurlock, Maryland;
Inglewood, California; and Detroit, Michigan. PEC has entered into an agreement
to purchase the assets of an aquaculture facility located in Hurlock, Maryland.
PEC intends to locate facilities in urban areas, which would also allow PEC to
help revitalize such areas.
We have minimum revenues, and have net losses of $172,386 as of October 31,
2000. We expect our operating expenses to increase over the next 12 months,
especially sales, marketing and promotion expenses. We anticipate that we will
incur net losses in the foreseeable future.
PEC is considered to be in unsound financial condition. Only people who can
afford to lose their entire investments should invest in this offering.
Our Opportunity
Fish has become a staple of most diets, and consumption of fish is
increasing. According to a recent issue of Time magazine, 1/6 of the world's
population relies on fish as their primary source of protein, with the numbers
expected to rise. The National Fisheries Institute has noted that in 1998
Americans consumed approximately 15 pounds of seafood per year, an increase of
2.5 pounds from 1980.
We believe that we have an opportunity to produce fish, from fingerlings to
full size, to help service the growing demand for fish. We intend to provide
fish to wholesalers, retailers and end users.
Our Strategy
PEC seeks to position itself as a provider of top quality fish. In
particular, we plan to:
o build and/or acquire three aquaculture facilities with the maximum
proceeds of this offering;
o market our proposed "EverFresh" brand of seafood;
o contract with wholesalers, retailers and processors to purchase our fish.
We are exploring marketing opportunities and strategic relationships,
and expect to do so on a continuing basis.
Plan of Distribution
We are offering our common stock on a "best efforts, all or nothing"
basis as to the first 250,000 shares and on a best efforts basis as to an
additional 2,250,000 shares. This is a self-underwriting; we do not have
agreements with any underwriters for the sale of our common stock, although we
may enter into such agreements at a later date.
The Offering
Securities Offered
250,000 shares of common stock in the minimum offering.
2,250,000 shares of common stock in the maximum offering.
Shares outstanding
10,000,000 shares of common stock outstanding before the offering.
10,250,000 shares of common stock outstanding after the minimum offering.
12,500,000 shares of common stock outstanding after the maximum offering.
----------
The shares are being offered at $8.00.
Risk Factors
The securities offered hereby are highly speculative and involve a high
degree of risk. Carefully review and consider the factors set forth under "Risk
Factors" as well as all other information contained herein.
Use of Proceeds
The net proceeds from this offering, estimated to be approximately
$2,000,000 in the minimum offering and $20,000,000 in the maximum offering, will
be used to acquire the assets of an existing aquaculture facility in Hurlock,
Maryland, to develop additional aquaculture facilities, develop sales and
marketing activity, and for working capital and general corporate purposes. For
more information, please refer to "Use of Proceeds" on page .
7
<PAGE>
RISK FACTORS
-- We have limited operating history; we anticipate future losses.
PEC was incorporated on November 18, 1999 pursuant to the laws of the State
of Delaware. To date, PEC has generated no revenues. We have been financing our
operatons through a line of credit from Kemet Investment Limited Partnership.
Since incorporating, we have devoted our efforts to acquire certain aquaculture
technology and a site for our premier aquaculture plant.
As of October 31, 2000, PEC had a net operating loss of $172,386 and we
anticipate that we will incur net losses in the foreseeable future. The extent
of these losses will be dependent, in part, on our ability to acquire and build
aquaculture plants, generate sales revenues, and to offer products at
competitive prices. We expect our operating expenses to increase over the next
twelve months, especially in the areas of sales and marketing and promotion,
and, as a result, we will need to commence operations and generate revenue, and
to offer products at competitive prices if profitability is to be achieved.
-- We depend on key personnel, the loss of whom could result in less
effective management of PEC.
Our success will be substantially dependent on the performance of our
executive officers, Dr. Claud Anderson (President), W. Thomas Lomax (Secretary
and Vice-President), as well as Richard Sheriff, Manager of National Operations,
and on the marketing and aquaculture personnel we intend to hire. The loss of
the services of any of our executive officers would result in a search for other
qualified management which could take time away from operating our business it
could thus effect our financial condition. Competition for senior management,
experienced sales and marketing personnel, qualified aquaculture engineers and
other employees is intense, and there can be no assurance that we will be
successful in attracting and retaining such personnel. Our failure to
successfully manage our personnel requirements would have a material adverse
effect on our business, by expending both financial and management resources on
a search for personnel. It could also adversely effect our operations through
decreased production. We have entered into an employment agreement with Richard
Sheriff.
<PAGE>
-- Some of the members of our management team are not experienced in
running an aquaculture business.
While all members of our management team have business experience, only
Richard Sheriff, Manager of National Operations, has experience running an
aquaculture business. As a result, PEC will be dependent on Mr. Sheriff's
knowledge and experience. The loss of Mr. Sheriff's services could force PEC to
search for another individual with aquaculture experience. There is no guarantee
PEC could find and/or employ such a person. Failure to adequately replace Mr.
Sheriff could result in decreased fish production or less efficient operations.
-- The share price has been arbitrarily determined and may not reflect what
price the stock trades at in the aftermarket.
Prior to this offering, there has been no public market for our common stock or
other securities. The initial offering price has been arbitrarily determined by
PEC, and bears no relationship whatsoever to our assets, earnings, book value or
any other objective standard of value. When purchasing the shares in this
offering, investors should consider the lack of operating history of PEC, the
proceeds to be raised by the offering, the amount of capital to be contributed
by the public in proportion to the amount of stock to be retained by present
stockholders, our relative requirements, and the current market conditions in
the over-the-counter market.
-- Resale of our securities may be difficult.
There can be no assurance that an active trading market for PEC common stock
will develop, or be sustained if developed following the closing of the
offering. As a result, if resale is difficult or the liquidity of the stock
suffers, investors may not be able to sell the shares when they would like or
obtain the price for the stock that they desire.
8
<PAGE>
-- Sales of shares of our "restricted" stock may have a depressive effect
on the price of our common stock in the future.
Upon completion of the maximum offering, PEC will have outstanding
12,500,000 shares of common stock. Of the 12,500,000 issued and outstanding
shares of our common stock, approximately 10,000,000 shares may be deemed
"restricted shares." The restricted shares were issued by PEC in private
transactions in reliance upon one or more exemptions contained in the Securities
Act of 1933. Restricted securities may, in the future, be sold in compliance
with Rule 144 under the Securities Act. All 10,000,000 shares were issued to
affiliates of PEC. Pursuant to Rule 144, these shares will be available for sale
in February 2002. However, the current shareholders have entered into a 4-year
lock-up agreement pursuant to which their stock may not be sold until two years
from the date of this offering with 2 1/2% of their securities released each
quarter for the two years thereafter.
Sales of our common stock by certain of our present stockholders under Rule
144 may, in the future, have a depressive effect on the price of our common
stock in any market which may develop for such shares.
-- Our management will have broad discretion to allocate offering proceeds
and may not invest the proceeds in ways in which investors agree.
Although PEC has generally provided for the use of the proceeds from this
offering, as of the date of this prospectus, we cannot specify with certainty
the amount of the net proceeds of the offering which will be allocated for each
purpose. Accordingly, PEC's management will have broad discretion in the
application of the net proceeds. Holders of PEC securities may not agree with
our allocation of the proceeds of this offering.
-- We may need, and may be unable to obtain, additional financing.
We anticipate that if this entire offering is sold we will have sufficient
capital to meet our needs for working capital and capital expenditures for at
least the next 12 months. After 12 months we may need to raise additional funds
through a private or public offering of our securities in order to fund our
operations while we build our revenue base. If we raise additional funds through
the issuance of equity or convertible debt securities, the new holders may have
preferences or privileges senior to those of the rights of PEC's securities.
There can be no assurance that additional capital will be available or available
on acceptable terms. PEC may not be able to fund its future operations, promote
our products as we desire, take advantage of unanticipated acquisition
opportunities, develop or enhance services or respond to competitive pressures.
Any such inability could adversely effect the quantity of sea food production,
limit our expansion decrease our income or otherwise have a material adverse
effect on our business, results of operations and financial condition.
As a result of our need for financing, including the proceeds of this
offering, our auditors have added a going concern consideration in their
independent report.
-- Inside shareholders will continue to control PEC after this offering.
Prior to this offering, inside shareholders, including management of PEC,
owned 100% of outstanding PEC common stock. If the maximum offering is sold,
inside shareholders will own 80.0%, and if only the minimum offering is sold,
insiders will own 97.6% of the outstanding PEC common stock. As a result, these
insiders will continue to control the company, and will continue to be able to
elect all of PEC's directors, appoint its officers and control PEC's affairs and
operations. PEC's articles of incorporation do not provide for cumulative
voting.
9
<PAGE>
-- We are offering securities in a best efforts offering which means that
we cannot guarantee that even the minimum offering be sold.
Under the terms of the offering, PEC is offering common stock on a "best
efforts, all or nothing" basis as to the first 250,000 shares and best efforts
as to the additional 2,250,000 shares.
In the "best efforts, all or nothing" portion of this offering, PEC will
attempt to sell the minimum offering of 250,000 shares. Until PEC sells the
first 250,000 shares, all investors' proceeds will be held in escrow.
No commitment exists by anyone to purchase all or any part of the shares
offered hereby. Consequently, there is no assurance that the minimum offering
will be sold, and subscribers' funds may be escrowed for as long as 150 days and
then returned with interest thereon, in the event the minimum offering is not
sold within the offering period. Investors, therefore, will not have the use of
any funds paid for the purchase of PEC common stock during the subscription
period. In the event PEC is unable to sell the minimum offering within the
offering period or the extended offering period if the offering period is
extended, the offering will be withdrawn.
-- This offering involves immediate substantial dilution from the offering
price.
Subsequent to this offering, the net tangible book value of the
company's common stock offered hereby will be substantially less than the price
at which we are offering the common stock to investors. If the minimum number of
shares is sold, the pro forma net tangible book value of PEC's shares will be
$2,097,967. Accordingly, investors will sustain an immediate dilution of their
investment of $7.80 per share. Dilution of their investment may decrease the
value of such investments.
-- PEC is subject to intense competition from other companies engaged in
the production and sales of seafood.
Our competition will be other indoor fish raising facilities. We believe
that there are several other indoor seafood factories which, like PEC, utilize
indoor, recirculating tanks. Most of our competitors are companies which have
substantially greater financial, marketing and other resources than PEC. Many of
PEC's competitors will have brand names better known than PEC's "EverFresh"
brand.
10
<PAGE>
-- PEC is engaged in a business which could expose it to possible claims
for injury resulting from the contamination of its products.
PEC has product liability and general liability insurance which it considers
adequate. There can, however, be no assurance that claims will not arise in the
future or that PEC will be able to maintain an adequate level of insurance
coverage. In the event of such claims, PEC may be forced to expend sums of money
in its defense which could materially effect PEC.
-- We may be unable to manage our growth
Our business plan requires significant expansion of our operations to address
potential market opportunities. We intend to acquire and develop two aquaculture
facilities in the near future. We expect this growth to place a significant
strain on our management, operational and financial resources and systems. To
manage our growth, we must implement, improve and effectively use our
operational, management marketing and financial systems and train and manage our
new and existing employees. We cannot guarantee that we will be able to manage
effectively the expansion of our operations or that our personal systems,
procedures and controls will be adequate to meet our anticipated future
operations.
-- We are a development stage company.
PEC is a development stage company and will have to generate capital and revenue
to continue operations. We plan to raise additional funds through the issuance
of equity securities, although we can not guarantee that we will successfully be
able to do so. Failure to raise additional funds will have a material adverse
effect on PEC.
-- We have been financing our operations primaily through a line of credit
with Kemet Investment Limited Partnership, a shareholder of PEC.
For the period ended October 31, 2000, Kemet converted $352,000 principal and
$12,898.67 interest into a capital contribution. Effective December 31, 2000,
Kemet converted an additional $145,000 principal debt into a capital
contribution. Kemet received no additional shares for such conversions. PEC may
continue to borrow money from Kemet; Kemet's failure to convert further debt
will result in increased debt for PEC. Further, failure to raise funds through
alternate means will leave PEC dependent on Kemet and may have a material
adverse effect on PEC.
USE OF PROCEEDS
The proceeds that we will receive from the sale of the minimum offering are
estimated to be are $2,000,000 and the maximum offering net proceeds are
estimated to be $20,000,000.
We intend to apply these net proceeds as follows:
<TABLE>
<CAPTION>
Minimum Offering Maximum Offering
---------------- ----------------
<S> <C> <C> <C>
Amount % of Proceeds Amount % of Proceeds
------------- ------------- ------------- -------------
Sales and Marketing $ 545,000 27.3% $ 500,000 2.5%
Purchase of assets of Aquaculture
facility located in Hurlock,
Maryland $ 755,000 37.8% $ 900,000 4.5%
Building Expenses of facility
in Detroit, Michigan $ 0 $ 4,000,000 20%
Building of facility in
Inglewood, California $ 0 $ 4,800,000 24%
Equipment $ 400,000 20% $ 6,000,000 30%
Working Capital (including $ 300,000 15% $ 1,800,000 9%
rent, payroll and office express)
Ponds $ 0 $ 200,000 1%
Total $ 2,000,000 100% $20,000,000 100%
</TABLE>
11
<PAGE>
CAPITALIZATION
The following tables sets forth the capitalization at October 31, 2000 on an
actual basis and as adjusted to give effect to the sale of 250,000 shares of
common stock at an initial public offering price of $8.00 per share. This table
should be read in conjunction with the financial statements and related notes
included elsewhere in this prospectus.
<TABLE>
<CAPTION>
POWERNOMICS
CAPITALIZATION TABLE - FORM SB-2
OCTOBER 31, 2000
------------------------------------------------------------------------------------------------------------------
Actual Plus: Minimum
(unaudited) Net Offering,
Proceeds as Adjusted
<S> <C> <C> <C>
Total Debt $ 887,400 $ 887,400
--------------------------------------------- ------------------
Common Stock 1,000 25 1,025
Paid-in Capital 365,899 1,999,975 2,365,874
Accumulated Deficit (193,932) (193,932)
--------------------------------------------- ------------------
Total Equity 172,967 2,000,000 2,172,967
--------------------------------------------- ------------------
Total Capitalization $1,060,367 $ 2,000,000 $ 3,060,367
========== =========== ===========
---------------------------------------------------------------------------------------------------------------------------------
Net proceeds per "Use of Proceeds" table $ 2,000,000
Shares to be issued 250,000
Par value for the shares, at $.0001 $ 25
Net increase to paid in capital $ 1,999,975
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
12
<PAGE>
DILUTION
At October 31, 2000, PEC had a net tangible book value of $97,967 or
approximately ($0.01) per share of common stock. Net tangible book value per
share is equal to PEC's tangible assets less its total liabilities, divided by
the number of shares of common stock outstanding on such date. After giving
effect to the sale of 250,000 shares of common stock and the receipt of the
estimated proceeds, assuming an initial offering price of $8.00, the proforma
net tangible book value at October 31, 2000 would have been $2,097,967 or $0.20
per share of common stock.
This represents an immediate increase in net tangible book value of $.20 per
share of common stock to the existing shareholders an immediate dilution of
$7.80 per share of common stock to new investors.
The following illustrates the per share dilution:
--Assumed initial offering price $8.00
--Net tangible book value per share before offering $0.01
--Increase per share attributable to new investors in this offering $0.19
--Net tangible book value after offering $0.20
--Dilution per share to new investors $7.80.
<TABLE>
<CAPTION>
------------------
DILUTION TABLE COMPUTATION: Shares:
<S> <C>
October 31, 2000 shareholders' deficit $172,967 10,000,000
------------------
Deferred offering costs (75,000)
------------------
Tangible book value $ 97,967
==================
Tangible book value per share $0.01
==================
Tangible book value after minimum offering $2,097,967
==================
Tangible book value per share $0.20
==================
Increase per share from new investors $0.19
==================
Dilution per share to new investors $7.80
==================
</TABLE>
The following table sets forth the dilution on a proforma basis as of October
31, 2000 including the offering.
<TABLE>
<CAPTION>
Shares
purchased
Number % Total
consideration
Amount % Average Price
Per Share
<S> <C> <C> <C> <C> <C>
Existing
Shareholders 10,000,000 97.6% $ 366,899 15.5% $ 0.0367
New
Investors 250,000 2.4% $2,000,000 84.5% $ 8.00
minimum
Total 10,250,000 100% $2,366,899 100%
</TABLE>
13
<PAGE>
PLAN OF DISTRIBUTION
PEC is offering the right to subscribe to up to 2,500,000 shares of common
stock at $8.00 per share.
PEC proposes to offer the shares directly on a "best efforts, all or none basis"
as to the first 250,000 shares and a best efforts basis as to the remaining
2,250,000 shares. While PEC reserves the right to sell its securities through
registered broker-dealers, it has no commitments to do so. In the event
registered broker-dealer are engaged PEC contemplates paying a commission of 10%
of securities sold by such broker-dealers.
As of the date of this prospectus, no broker has been retained by the company in
connection with the sale of securities being offered hereby. In the event a
broker who may be deemed an underwriter is retained by PEC, an amendment to
PEC's registration statement will be filed with the Securities and Exchange
Commission.
There is no minimum or maximum purchase requirement. Subscription proceeds
received by PEC shall be placed in an escrow account with Fleet Bank until the
minimum offering is achieved, after which proceeds shall be released directly to
PEC. If the minimum offering is not sold by the end of the offering period, or
extended offering period if so extended, all escrowed proceeds shall be returned
to investors.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION
The following discussion and analysis provides information that we
believe is relevant to an assessment and understanding of our results of
operations and financial condition for the five months ended April 30, 2000. The
following discussion should be read in conjunction with the Financial Statements
and related Notes appearing elsewhere in this prospectus.
Overview
PEC is a company formed to engage in the business of aquaculture.
Aquaculture is a form of agriculture that involves the propagation, cultivation,
and marketing of aquatic animals and plants in a controlled environment. PEC
intends to produce fish and seafood in indoor facilities.
Pursuant to an asset purchase agreement, PEC has purchased the assets
of an aquaculture facility located in Hurlock, Maryland. The purchase price is
$950,000, of which PEC has paid $195,000. The balance of $755,000 is due March
31, 2001. PEC took possession of this facility on May 1, 2000, but will vacate
such premises if the balance of the purchase price is not paid. PEC intends to
acquire and/or build two additional facilities within the next five years.
Since incorporating on November 18, 1999, we have devoted substantially all of
our resources to raising our initial capitalization, negotiating the purchase of
aquaculture technology, and the pending purchase of the assets of an existing
aquaculture facility located in Hurlock, Maryland. From inception through April
30, 2000 we raised total equity capital of $2,000 and accrued debts of $207,987.
For the quarter ended October 31, 2000, Kemet Investment Limited Partnership
converted $352,000 principal debt and $12,898.67 interest into a capital
contribution to the company. As of December 31, 2000, Kemet converted an
additional $145,000 into a capital contribution to PEC. As of December 31, 2000,
PEC has recognized revenue of $10,195. In July 2000, PEC purchased striped Bass
and Red Drum fingerlings. We expect to harvest these fish between February and
May 2001, respectively. In May 2000, PEC purchased Blue Gill fingerlings born in
March 2000. We began to harvest the Blue Gill in November 2000, and will
continue to do so through February 2001. We expect to operate at a loss for the
first six to twelve months following the commencement of sales as we incur
increasing levels of expense to support growth.
We believe that an initial operating loss will not be indicative of future
performance for the following reasons, among others:
The receipt of the proceeds of this offering and their use to fund our
anticipated growth will materially change expense levels and are expected to
support substantial increases in the volume of Sales.
We anticipate rapid increases in the volume of sales, although we can
not so guarantee. According to the September 1999 issue of Seafood Business
Magazine, sales of farm raised seafood increased by almost 70% from 1998 to
1999. We intend to take advantage of such increase. We have not entered into any
sales agreements. However, after speaking with PEC president, Claud Anderson,
The Florida Black Business Investment Board stated in a letter dated July 20,
2000 that it was interested in becoming a purchaser, distributor and retailer of
PEC products.
Although we expect substantial growth in both revenues and expenses, we
anticipate that increases in expenses will occur more rapidly than corresponding
increases in revenues. Also, while we are committed, at least in the short term,
to substantial increases in expenses, we cannot guarantee that revenues will
increase correspondingly. We expect that for the next year, we will follow a
strategy of establishing market share by making expenditures for marketing and
infrastructure development that may exceed current revenues.
Twelve month projections
Our estimated revenues for the next 12 months are $292,500, based on
sales of 130,000 pounds of fish at an average price of $2.25 per pound. We
estimate operating expenses for the next 12 months to be $202,000. Our estimated
overhead expenses are $1,100,000 for twelve months. Based on these figures, we
anticipate losses of $1,080,000 for the next twelve months.
Results of Operations. For the five months ended April 30, 2000, we had $0
in revenues, and incurred total expenses of $21,546. Expenses consisted of
professional fees, payroll, related obligations, and accounts payable.
Liquidity and Capital Resources. Through April 30, 2000, we funded our
operations primarily through the sale of common stock and a $142,000 loan from
Kemet Investments Ltd. Partnership, a shareholder of PEC. This loan was
initially non-interest bearing and due on demand. On May 9, 2000 a formal line
of credit agreement was entered into between PEC and Kemet, with the following
terms:
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Credit available of $500,000; 10% fixed rate interest, payable
quarterly, maturing May 1, 2005; and secured by substantially all of the assets
of PEC. The $142,000 loan was transferred to the line of credit on May 9, 2000.
On July 10, 2000, this line of credit was increased to $1,000,000. As of July
31, 2000, there was $237,000 outstanding on this line of credit. From inception
through April 30, 2000, we raised $2,000 from sales of common stock for cash. As
of April 30, 2000, we had a total of $142,000 of outstanding notes payable and
$65,987 of other obligations. Cash and cash equivalents were $100,051. Effective
October 31, 2000, this line of credit was increased to $2,000,000. As of October
31, 2000, Kemet converted $352,000 debt and $12,898.67 interest into a capital
contribution to PEC and as a result, PEC was relieved of the obligation to
repay. Effective December 31, 2000, Kemet converted $145,000 principal debt into
a capital contribution. Kemet did not receive any additional shares for such
contributions.
We believe that the minimum offering proceeds and the increased line of
credit will be sufficient to allow PEC to operate for six to twelve months. We
believe that the maximum offering proceeds and the line of credit combined with
anticipated sales revenue will allow PEC to operate for the next 12 to 18
months. In the event PEC is successful in selling the maximum offering it
intends to allocate $6,000,000 of the offering proceeds to equipment including
257 recirculating tanks and equipment ancillary to the tanks. Such tanks are
related to the expansion of the Hurlock, Maryland facility and the two new
facilities in Inglewood, California and Detroit, Michigan. Each tank, including
the ancillary equipment, costs approximately $25,000. PEC intends to subsidize
this expenditure by accessing its $2,000,000 line of credit. We do not expect to
have to raise additional funds in the next 12 months. We have described the
effect of this offering on our capital resources and our anticipated uses of
those resources under "Use of Proceeds" on page --------.
Six months ended October 31, 2000
For the three months ended October 31, 2000, PEC had revenue of $10,195
and a net loss of $172,386. Cost of goods sold were $19,811, and operating
expenses were $53,225. At October 31, 2000, total current assets were $110,005,
and total current liabilities were $887,400.
BUSINESS
Forward looking statements
The discussion in this prospectus contains certain forward-looking
statements. The outcome of events described in such forward-looking statements
is subject to risks and uncertainties. PEC's actual results may differ
materially from those discussed in such forward-looking statements. Factors that
may cause or contribute to such differences include those discussed in "Risk
Factors," "Management's Discussion and Analysis" and "Business" as well as those
discussed elsewhere in this prospectus.
General
PEC intends to build, own and operate indoor fish growth facilities
within distressed urban areas under the brand name of "EverFresh" seafood. PEC's
goal is to develop facilities which offer live, whole-on-ice fin fish, and
frozen seafood products to urban markets. PEC intends that each location will
have the ability to raise, process, warehouse and distribute its products to
both wholesalers and retailers. Through an agreement with Richard Sheriff, PEC's
Manager of National Operations, PEC seeks to utilize existing patented
recirculating indoor fish tank technology. Market size for certain fish is as
follows:
Fish Market size
---- -----------
-- Yellow Perch .2-.25 lbs.
-- Blue Gill .5-.75 lbs.
-- Striped Bass 1.25-1.5 lbs.
-- Red Drum 1.5-2 lbs.
-- Tilapia 1.25-1.5 lbs.
PEC intends to purchase fingerlings of all these breeds of fish.
PEC's licensed technology includes a "fish culturing system," which is
comprised of a water purification unit using opposed water flows, and a water
purification unit using only compressed air to power the system. Because fish
are cold-blooded, their body temperature is controlled by the water temperature
in which they live. In the Northeast, water temperature can fluctuate from just
over 30 degrees in the winter to over 90 degrees in the summer. Neither extreme
is conducive to fish growth. PEC's fish culturing system keeps the water between
70 degrees and 80 degrees all year and controlls the light to provide for 16
hours of light and 8 hours of darkness.
Recirculation Tanks
The indoor recirculating tank is basically a three component system.
-- The first component is the rectangular shaped fiberglass tank (8' wide
x 40' long x 4' deep). It holds 10,000 gallons of water.
-- The second component is the filtration system (8' wide x 10' long). It
holds 2,000 gallons of water.
-- The final component is the air supply system. This component furnishes
the energy and oxygenates the water for the fish.
The recirculation process works as follows: The air supply system makes
the water in the tanks flow in opposing directions, from each side toward the
middle. As fecal matter is excreted from the fish, it is entrained in the water
flow and forced to the bottom of the tank, pushed towards the sides and
discharged out through small holes into a pipe going to the filtration unit. The
filtration unit removes any fecal matter or uneaten food. This unit also has
nitrofying bacteria in it to break down the ammonia that is also excreted from
the fish. At this point the water is returned back to the tank from the sides in
toward the middle of the tank. The recirculation process is now complete and it
repeats itself about 1.5 times per hour. The purchase price of each tank is
$25,000.
Richard Sheriff, Manager of National Operations, filed a patent
application with the United States Patent and Trademark Office for this
technology. This patent was granted on May 23, 2000. On March 1, 2000, Mr.
Sheriff entered into an agreement with PEC, pursuant to which PEC has the
exclusive right to use this technology. The term of this agreement is 104 years,
with the exclusivity lasting for the later of two years or 260 recirculation
tanks. This agreement will benefit PEC in that it guarantees PEC tanks at a set
price for two years. PEC did not pay Mr. Sheriff anything under this agreement.
PEC will pay Mr. Sheriff for tanks it orders.
PEC's technological advantage
PEC seeks to capitalize on substantial market opportunities by
exploiting technological advantages that it believes are unique to its system of
aquaculture. A controlled environment such as the one created in the
recirculating system permits fish to be grown and sold on a year-round basis
regardless of external conditions. Production factors such as temperature, water
quality, and fish health can be checked daily, and modified with minimal effort,
if necessary. PEC believes the operating costs of PEC's indoor aquaculture will
be competitive with conventional farm operations and other seafood suppliers.
While there are other companies utilizing systems which use
recirculated water, recycled water or aerating devices, PEC believes its
technology is unique in its use of opposed water flow and a water purification
system which is powered only by compressed air. Further, the opposing flow of
water enables waste to be removed continuously. PEC believes higher energy and
investment costs that are needed to build and maintain indoor facilities will be
offset by the following:
o higher production capacity
o predictable supplies and expenses;
o lower mortality rates; and
o the enhancement of cash-flow resulting from year round seafood
production.
Additionally, PEC believes its tanks are unique in that they are not
interconnected. Separated tanks will allow PEC to change the fish or conditions
in one tank without effecting the others. Problems, likewise, will be limited to
a single tank at a time.
PEC's Marketing plan
PEC seeks to focus sales on the African American and Asian American
Communities. The company intends to sell live fish to the African American and
Asian-American market. It intends to sell whole fish on ice to processing plants
and filleted frozen fish to stores and restaurants. The key strategy for PEC's
penetration of various fish markets is based on generating orders prior to
raising the fish. This will serve to lock in sales and mitigate the uncertainty
associated with perishable inventories.
PEC's Five Year Strategy
PEC's five year strategy is to build and acquire existing and/or new
aquaculture plants in the following target locations: Hurlock, Maryland,
Inglewood, California, and Detroit, Michigan. PEC expects that each of the new
plants will have approximately 120 indoor recirculating tanks.
Richard Sheriff, the designer, builder and owner of patented indoor
recirculating technology, has
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entered into an employment agreement with PEC pursuant to which he will build
indoor tanks for PEC. Mr. Sheriff has entered into an agreement with PEC
pursuant to which PEC has the exclusive use of his patented technology. PEC
intends to utilize this patented technology at all of its future locations. PEC
has entered into an agreement with Mr. Sheriff and his partners, the current
owners of an existing aquaculture facility located in Hurlock, Maryland to
purchase the assets of such facility for a total purchase price of $950,000. On
May 1, 2000, PEC made a deposit of $95,000 to purchase the assets of the
Hurlock, Maryland plant. On December 15, 2000, PEC and the owners of the Hurlock
facility entered into an agreement for PEC to pay an additional $100,000 by
December 31, 2000 with the balance of $755,000 due March 31, 2001. PEC took
possession of the Hurlock facility on May 1, 2000.
PEC intends to expand the Hurlock facility from 13 tanks to 50 tanks.
Currently, the Hurlock facility has the capacity to produce 60,000 pounds of
fish annually, with each tank producing approximately 4,500 pounds of fish
annually. We expect this amount to increase to 180,000 after expansion.
PEC estimates that all three plants will have the ability to produce a
total of 1,500,000 pounds of fish annually, with approximately 600,000 pounds
produced at each of the Inglewood, California, and Detroit, Michigan facility
respectively.
Hurlock, Maryland
-----------------
PEC has entered into an agreement with the owners of an existing
aquaculture facility located in Hurlock, Maryland to purchase the assets of such
facility. According to the terms of this agreement, PEC took possession of the
Hurlock facility on May 1, 2000 upon payment of $95,000 (10% of the total
purchase price). On December 15, 2000, PEC and the owners of theHurlock facility
entered into an agreement for PEC to pay an additional $100,000 by December 31,
2000 with the balance of $755,000 due March 31, 2001. One of the owners of this
facility was Richard Sheriff, PEC's Manager of National Operations. This
facility currently consists of a 10,000 square foot building and thirteen tanks.
PEC intends to expand the building to 30,000 square feet and purchase an
additional 37 tanks. PEC believes these 50 tanks could produce approximately
180,000 pounds of fin fish annually. PEC also intends to purchase 100 acres of
nearby farm land and convert it into between 35 and 40 fingerling ponds, in
which PEC could raise several different species of fish. PEC believes that these
fingerling ponds will produce fingerlings in excess of those intended to be
produced at the Hurlock facility. It therefore intends to supply its other
future facilities with fingerlings raised in these ponds.
The Hurlock facility currently has the current capacity to produce
approximately 60,000 pounds of fish annually.
Effective October 31, 2000, Kemet increased the line of credit to
$2,000,000. Effective October 31, 2000, Kemet converted $352,000 in principal
debt and $12,898.67 in interest into a capital contribution. Effective December
31, 2000, Kemet converted an additional $145,000 principal debt into a capital
contribution. Kemet received no additional shares for these conversions.
Inglewood, California
---------------------
PEC intends to locate its second aquaculture facility in Inglewood,
California. PEC has located a three and half acre site on which it intends to
build an aquaculture facility, which facility would house a processing plant for
filleting, breading and packaging fish and other seafood for fresh and frozen
food markets, as well as a small retail fish outlet and restaurant for walk-in
customers. In October, 1999, Dr. Claud Anderson, President of PEC, entered into
an Exclusive Negotiation Agreement with the Inglewood Redevelopment Agency for
development of a site located within the Century Redevelopment Project Area. On
October 18, 1999, the Inglewood Redevelopment Agency extended the Exclusive
Negotiation Agreement until January 7, 2000. The company believes this site will
still be available by the time PEC has completed its preliminary site
development plans.
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On February 22, 2000, PEC entered into a contract with Terry Hayes and
Associates to conduct an Environmental Impact study for the proposed Inglewood
facility. The results of this study have been submitted to the City of Inglewood
for its approval.
On March 23, 2000, PEC retained RAW International to prepare a Site
Development Plan for the proposed location for the Inglewood facility. PEC has
completed and submitted land disposition agreements with the City of Inglewood.
Additionally, PEC has compiled and submitted loan applications with several
banks to assist in funding the proposed facility.
Detroit, Michigan
-----------------
PEC intends to locate its third aquaculture facility in Detroit, Michigan.
Since February 2000, officers of PEC have been meeting with municipal
administrators to survey available land for the construction of an aquaculture
plant in the Detroit Metropolitan Area.
On May 1, 2000 PEC sent a letter to the Mayor and City Administrator of
Detroit, expressing an interest in purchasing a particular site for our third
facility. PEC plans to build a facility identical to its proposed Inglewood
facility with processing and cold storage capacity for producing a variety of
seafood. Such facility would have the capacity to produce approximately one
million pounds of seafood annually. PEC believes the location of the Detroit
facility would attract seafood buyers and processors from across the Canadian
border.
Products
PEC intends to grow and sell seafood which is raised under hygienic,
environmentally controlled conditions. These fish will be raised in accordance
with Hazard Analysis Critical Control Point (HACCP) standards. We expect that
our EverFresh Seafood will be fresher than the millions of pounds of uninspected
fish that enters the country and contaminated wild catches. According to the
September 1998 issue of Seafood Business Magazine, in 1997, the FDA inspected
only 2.4% of the more than 3.2 billion pounds of seafood imports from over 135
countries. A September 1999 report issued of by the U.S.E.P.A. Office of Water
stated that as of December 1998, 40 states had issued 1,931 fish advisories for
mercury. These advisories inform the public that concentrates of mercury have
been found in local fish at levels of public health concern.
Based on the company's research, PEC has begun to raise four different
species of fin fish at the Hurlock facility. These species include Tilapia,
Yellow Perch, Blue Gill and Striped Bass. As the requests and demand changes,
the company will change and grow other types of fish in the tanks.
Competition
PEC's direct competition will be other indoor, fish raising facilities.
PEC believes that there are several other indoor seafood factories which, like
PEC, use opposing flow and/or recirculating technology. One is in South
Central Pennsylvania, and one in Ohio. There are currently approximately 85
tanks in the U.S. which utilize this technology. Other competitors are indoor
fish raising facilities utilizing other technologies. PEC believes other indoor
tanks used to raise fish are not as state of the art as the opposing flow,
recirculating, non-connected tanks which PEC will use. The advantage the company
will have is that if there is a problem in one of the tanks, it is limited to
the fish in that tank. With some of the competitors, if there is a problem in
one of their tanks, all of the tanks and fish are affected.
PEC's indirect competition will be fish farms and imports. However, the
fish farms run the risk of extinction, due to environmental hazards, such as
pollution and over fishing. Any seafood that is imported is inherently in
danger, in that the fish is not as fresh by the time it reaches state side.
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Positioning
It is our intention to position PEC in the marketplace as a company
that grows and sells some of the safest and freshest seafood in America. The
company hopes it will gain a competitive advantage in the marketplace by having
a wide variety of seafood to sell. PEC expects to be able to raise almost any
kind of seafood and change what is being raised in the tanks, based on demand.
Most of PEC's competition does not have the ability to change the
type of fish they are raising, based on demand. Many of our competitors raise
their fish in outdoor ponds. Each outdoor pond is able to house either warm
water fish or cold water fish. If, for example, the demand changes from warm
water fish to cold water fish, such competitors can not so change without losing
the fish that are then growing. Most of PEC's competitors that raise fish
indoors grow them in interconnected tanks. Because the tanks are interconnected,
if one tank is changed from cold water to warm water, all the other tanks must
change, as well. PEC's tanks are not interconnected. As a result, PEC is able to
change one or more tanks from cold water to warm water with greater ease than
its competitors.
Most of our competitors raise their product in outdoor farms, which
subjects them to changing weather conditions, pollution and bird droppings.
Other competitors who might raise their fish indoors typically use tanks that
are inter-connected. The problem with these inter-connected tanks is that if
there is a problem in one tank, such as a bacterial infection or a disease, all
of the tanks get infected and they could lose the entire building of fish. PEC's
competitive advantage is that the patented recirculating indoor fish tank
technology that we use has each tank operating separately. The temperature of
these tanks will be controlled and maintained at an optimum point for fish
growth (approximately 70-80 degrees).
The recirculating technology, which the company will use, provides for
operating conditions where careful monitoring can be accomplished to ensure
optimum production conditions and a high quality product. Temperature, water
quality, fish health and other production factors can be checked daily and
changed as necessary, to increase growth rates and reduce mortality. This
technology also simplifies harvesting and allows for year round production.
Pricing
Our product will be priced competitively, within the seafood industry.
The added value is established when the customers look at the quality of the
fish. PEC will be selling healthier fish, raised in a controlled environment.
Below is a table based on current industry prices:
TYPE PRICE/POUND
---- -----------
Tilapia $ 3.00
Striped Bass $ 5.50
Yellow Perch $ 2.75
Blue Gill $ 1.75
Customers
PEC intends to have several primary customers.
-- Live Tilapia Fish Market
PEC believes there is a large unfulfilled demand for live Tilapia within the
Asian American market.
-- Fish processors
PEC intends to service the demand of other processors, by providing them with
whole fish on ice.
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-- Stores and Restaurants
PEC intends to service stores, restaurants and institutions with fresh and
frozen seafood product. PEC has already commenced discussions with different
restaurants and supermarkets in California in an attempt to determine whether or
not they would be interested in purchasing PEC products, and to determine
o the types of fish they buy;
o whether they purchase whole fish on ice, live fish or filleted;
o the price they paid for various products. PEC has not entered into
any agreements or understandings to date.
Aquaculture Industry
According to an article in the December 6, 1999 issue of Time magazine,
the author and oceanographer Peter Benchley states that of the worldwide
population of 6 billion people, over 1 billion rely on fish as their main source
of protein. And according to Trusts' Environment program, a program which aims
to protect policies and practices that protect marine ecosystems, the demand for
fish is certain to rise as the global population grows by a projected 3.2
billion people in the next fifty years. The Trust's Environment program is a
part of PEW Charitable Trusts. PEW Charitable Trusts is a private philantropic
organization supporting nonprofit activities of the arts and culture, education,
the environment, health and human services public policy and religion.
International aquaculture
According to the North Central Regional Aquaculture Centers,
aquaculture products can be an answer to the growing problem of world dietary
animal protein shortages. For every pound of fish meat, a fish must convert 1.5
pounds of fish food. Fish converts feed into meat approximately two times more
efficiently than chickens and five times more efficiently that beef cattle. Feed
conversion rates of fish are higher than other common commercial livestock
because
-- Fish can utilize foods that are less useable by most land animals; -- Fish
require less energy from their foods; and -- Fish can use an entire pond, top to
bottom, for living space, while terrestrial animals are confined to the ground.
Supply and demand for fish
Dramatic increases in fish demand are outstripping available and future
fish stocks. According to the United Nations Food and Agriculture Organization,
16% of the world's fisheries are "over fished," another 6% are depleted, and a
remarkable 44% are "fully exploited," which means 44% is either totally
exhausted or can not be accessed due to government regulations. In addition to
the problem of over fishing, industrial pollution and run-off will further
shrink the amount of available freshwater that can be used to grow food fish.
The environmental and pollution issues which fish farms face coupled with the
increasing demand for seafood positions PEC to take advantage of these trends
within the industry. PEC intends to address this demand through vertical
integration; the company will raise the fish, process the fish, store, freeze
and distribute the fish. The indoor recirculating technology that PEC intends to
employ will yield a higher quality product than that found in outdoor
aquaculture systems.
The U.S. Aquaculture Industry
In the United States the seafood industry generates approximately $46
billion annually. However, of all the seafood consumed in the United States,
less that 10% is harvested in the United States. Although the U.S. has the
largest per capita consumption (15 pounds) of seafood and has more than doubled
its own fish farm productions in the last 15 years, it still produces only 1% of
the world's seafood. This has caused a $6 billion trade deficit in the United
States. This deficit and the nation's consumer demands can only be met if
aquaculture production increases greatly. According to the Joint Subcommittee
on Aquaculture, a consensus is developing that only a dramatic increase in
aquaculture can supply increased demand for seafood. Worldwide seafood demand is
projected to increase over 60% as their world population grows. With stable or
declining capture fisheries harvests, aquaculture production would have to
increase five-fold from present levels to supply the global demand for seafood.
To this end, the U.S. Department of Commerce recently announced a new policy to
boost aquaculture. They propose to (1) increase the value of aquaculture
production from nearly $900 million to $5 billion a year; (2) increase jobs in
aquaculture from 180,000 to 600,000; (3)develop aquaculture technologies and
methods to improve production and safeguard the environment; and (4) increase
annual exports of United States aquaculture goods and services from $500,000 to
$2.5 billion.
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The Executive Summary of the Joint Subcommittee on Aquaculture (JSA)
has stated that development of the U.S. aquaculture industry has great potential
for immediate and long term benefit to the nation. Global demand for seafood is
projected to increase 70% in the next 30 years, while harvests from traditional
fisheries are stable or declining. A consensus is growing that a dramatic
increase in aquaculture is needed to supply future seafood needs.
The American aquaculture industry is comprised of fish farms throughout the
country. The fish that does not come from American fish farms are imported. Our
intended seafood factories will move aquaculture from Third world nations and
the rural areas of America, into urban areas where there are large
African-American communities. We believe this will allow African-Americans to
participate in an industry where they are heavy consumers. Noted fish culture
specialists have stated that seafood can answer the growing problem of world
dietary animal shortages. Fish convert feed into flesh about two times more
efficiently than chickens and five to ten times more efficiently than beef
cattle. Feed conversion rates of fish are higher than other common commercial
livestock because: (a) a fish can utilize foods that are less usable by most
animals, and (b) they require less energy from their foods.
In the United States, market outlets such as restaurants, supermarkets,
hotels, and fresh fish markets, are increasingly purchasing and marketing
quantities of seafood products to satisfy market demands.
According to the October 1998 issue of Seafood Business Magazine,
beginning with the year 2000, there will be a world wide shortage of 20 million
tons of seafood annually, and by the year 2010, there will be a 40 million ton
shortage. Although approximately 43 percent of the worlds remaining seafood is
around America, the United States' fisheries and fish farms cannot supply the
demand. Further, the U.S. is losing most of our fisheries because of
over-fishing and the undercutting of prices by fish farms located in South
America and other third world nations. Nearly 73 percent of the United States
seafood is coming in from fish farms outside of the United States. California is
importing approximately 94 percent of its seafood. We believe our proposed
seafood factories will help meet the increasing demands, as well as provide
safe, healthy seafood that will be produced in this nation's distressed urban
cities.
According to the National Fisheries Institute, an organization which
serves as an advocate for the interest of the fish and seafood industry, when
queried as to how to eat healthy, experts at respected health organizations have
advised eating fish at least twice weekly. Dr. Alexander Leaf, a heart disease
researcher at Harvard Medical School, has stated that the habit of regularly
eating small amounts of omega-3 fatty acids found in some species of fish has a
beneficial effect on heart disease. Experts at the National Fisheries Institute
have noted that some species can even reduce the possibilities of heart
diseases, lower blood pressure, improve kidney function and reduce possibilities
of other dietary related health problems.
The National Fisheries Institute has also stated that on average, in
1998, Americans ate about 15 pounds of seafood per year, an increase from 12.5
pounds per year in 1980.
A recent article, published in The Atlantic Monthly calls fish farming
a rapidly emerging industry stating that within the next fifty years, fish
farming may change us from hunters and gatherers on the seas into marine
pastoralists.
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Production Process
PEC intends to raise, grow, and sell seafood. The company intends to
produce between 500,000 and 600,000 fish, per factory and grow them to market
size in a controlled sanitary environment.
Plant Locations
PEC intends to place its facilities in urban communities in an attempt
to begin making strides toward revitalizing these areas. PEC believes such areas
will provide it with a large pool of potential employees, while bringing to such
areas, a source of economic growth. In addition to generating revenue, PEC's
goal is to create employment opportunities and ownership opportunities for
people who have not been given many opportunities.
Employees
From February 1, 2000 to April 30, 2000, two executive officers
worked on a part time basis for PEC. Their part time salaries accrued for that
period. Both Dr. Claud Anderson and W. Thomas Lomax became full time employees
on May 1, 2000. Our future success will depend, in part, on our ability to
continue to attract, retain and motivate highly qualified personnel, for whom
competition is intense. From time to time, we also employ independent
contractors to support our research and development, marketing, sales and
support and administrative organization. Our employees are not covered by any
collective bargaining agreement, and we have never experienced a work stoppage.
We believe that our relations with our employees are good.
Facilities
Our headquarters are currently located in Chalfont, Pennsylvania. We are
currently sharing the offices of the Lomax Companies, of which Dr. Walter Lomax,
Chairman of PEC and W. Thomas Lomax, Vice President and Secretary of PEC, are
principals, at no cost to the company.
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MANAGEMENT
Executive Officers, Directors and Key Employees
The executive officers, directors and key employees of PEC and their
respective ages as of April 30, 2000, are as follows:
Name Age Position
---- --- --------
Walter P. Lomax, Jr.,M.D. 67 Chairman of the Board
Claud Anderson, Ed.D. 64 President, Director
W. Thomas Lomax 39 Vice President, Secretary,
Treasurer, Director
Paige S. Anderson 31 Vice President, Director
Richard Sheriff 43 Manager of National- Operations
Michael D. Traina 29 Director
Leonard Miller 66 Director
Walter P. Lomax, Jr., M.D., has been Chairman of the Board of Directors of PEC
since November 18, 1999. Dr. Lomax was a practicing physician from 1958 to 1990,
during which time he grew his solo practice to six medical centers and twenty
two physicians throughout Philadelphia. Since 1990 he has founded or co-founded
several other companies. Since 1990 he has served as chairman of the Lomax
Companies, a health care management company, and vice-chairman of AmeriChoice
Corporation, a healthcare management organization. Dr. Lomax is also the father
of W. Thomas Lomax an officer and director for PEC.
Claud Anderson, ED.D., has been president and a director of PEC since
incorporation. Since 1998, Anderson has been President of PowerNomics
Corporation of America, a consulting company. Since 1995, he has worked as a
political and economic consultant. Dr. Anderson is the author of three books on
economics, politics and the African American community. He received his Bachelor
of Science and Ed.D from Wayne State University. Dr. Anderson is the father of
Paige S. Anderson, a director of PEC.
W. Thomas Lomax, has been Vice-President, Treasurer, Secretary, and a director
of PEC since November 18, 1999. Since 1994, he has served as Chief Financial
officer of Lomax Health Services, Inc., a healthcare management company located
in Chalfont, Pennsylvania. Mr. Lomax received his Bachelor of Science from
Delaware Valley College, and his Masters in Business Administration from La
Salle University. Mr. Lomax is the son of Walter P. Lomax, Jr., M.D., PEC's
chairman of the Board of Directors.
Paige S. Anderson, has been a Vice President and director of PEC since November
18, 1999. Ms. Anderson has been an associate attorney with Alein, Grup, Strauss,
Harer and Felo since 1997. From 1993-1997 she was an associate attorney with
Brian Cave, L.L.P. Ms. Anderson received her Bachelor of Arts from Brown
University, and her Juris Doctor from Harvard Law School. Ms. Anderson is the
daughter of Claud Anderson, President and a director of PEC.
Richard Sheriff, has been Manager of National Operations for PEC since November
18, 1999. Since 1997, he has been an owner of Del Marva Fisheries in Hurlock,
Maryland. Since 1997, he has served as President of Opposing Flows Technology, a
fabricator of commercial size aquaculture tank systems. From 1989 to 1997, he
was owner and vice president of GMS, a mechanical contractor servicing accounts
in the Baltimore and Washington areas. Mr. Sheriff received his B.S. in
Mechanical Engineering from the University of Maryland.
22
<PAGE>
Michael D. Traina, has been a director of PEC since November 18, 1999. Mr.
Traina was a Bond Salesman for Salomon Brothers from 1994 to 1996. From 1996 to
1997 he served as Chief Executive Officer of Vicen Corp., a mail order vitamin
company. From 1999 to 2000, he served as Chief Executive Officer of Correctional
Healthcare Solutions, Inc. and he has been Chief Executive Officer of Foster
America, a company involved in privatizing foster care throughout the country.
Mr. Traina is graduate of Brown University. He received his Master of Business
Administration from the University of Virginia, Darden School of Business.
Leonard Miller has been a director since December 2000. Mr. Miller has been
regional manager of Primerica Financial Services in Pennsylvania since 1997. He
was a marketing consultant with Paco Engineering and Construction Services firm
from 1995-1997. Mr. Miller graduated from West Chester University in
Pennsylvania, and was a Ford Foundation Scholar at Temple University.
Each of the three officers currently devotes 10-30 hours per month to PEC. These
hours will increase as PEC's business increases. Mr. Sheriff currently devotes
40 hours per week to PEC.
Walter P. Lomax, Jr., M.D., W. Thomas Lomax and Claud Anderson are the founders
of PEC.
Executive compensation
Directors' compensation
Directors will be reimbursed for the expenses they actually incur in attending
board meetings. Directors will not be paid a fee for their service or attendance
at board meetings. To date, directors have received no compensation.
Executive officers' compensation
Dr. Claud Anderson, our President, shall receive an annual salary of
$150,000, W. Thomas Lomax, our Vice President and Secretary, shall receive a
salary of $125,000 per year, and Richard Sheriff, our Manager of National
Operations - Operations, shall receive an annual salary of $50,000. To date,
none of the officers has received a salary.
Officer Year Salary
------- ---- ------
Claud Anderson, 1999 N/A
President 2000 N/A
W. Thomas Lomax 1999 N/A
Vice President, Secretary, 2000 N/A
Treasurer
Principal stockholders
The following table sets forth certain information known to PEC with
respect to beneficial ownership of PEC's common stock as of April 30, 2000, and
as adjusted for the sale of the securities offered by this prospectus; and the
number and percentage of outstanding shares of common stock beneficially owned
by -- each person who beneficially owns more than 5% of the outstanding shares
of our common stock;
-- each of our officers and directors; and
-- all of our officers and directors as a group.
Except as otherwise noted, the persons named in this table, based upon
information provided by these persons, have sole voting and investment power
with respect to all shares of common stock owned by them.
23
<PAGE>
<TABLE>
<CAPTION>
Number of
Name and Address Of Shares % Beneficially Owned % Beneficially Owned After
Beneficial Owner Beneficially Maximum
Owned before Offering
Offering
<S> <C> <C> <C>
Kemet Investment 4,900,000(3) 49% 35%
Limited Partnership(1)
Claud Anderson, Ed.D. 4,900,000(3) 49% 35%
Revocable Trust(2)
Paige S. Anderson (2) 0 0% 0
Michael Traina 0 0% 0
Richard L. Sheriff 200,000(3) 2% 1.4%
Leonard Miller 0 0% 0
All Officers and
Directors as a
Group
(6 persons) 10,000,000 100% 71.4%
------------------
<FN>
(1) Dr. Walter Lomax and W. Thomas Lomax are both partners in the Kemet
Investment Limited Partnership. Dr. Lomax is Chairman of the Board of Directors
of PEC. W. Thomas Lomax is Vice President, Secretary and a director of PEC.
(2) Dr. Claud Anderson is the principal of Claud Anderson, Ed.D Revocable Trust.
Paige S. Anderson is Dr. Claud Anderson's daughter.
(3) Effective December 31, 2000, Kemet Investment Limited Partnership, Claud
Anderson, Ed.D. Revocable Trust and Richard L. Sheriff entered into a lock-up
agreement. Pursuant to this lock-up agreement, none of the shares currently held
by these 3 parties may be sold for the first two years following the completion
date of this offering. Beginning two years from the completion date of this
offering, 2 1/2% of these securities may be released each quarter pro-rata among
these 3 shareholders. All remaining shares shall be released from escrow on the
anniversary of the 4th year from the completion date of this offering.
</FN>
</TABLE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On February 1, 2000, PEC issued a total of 10,000,000 shares to three
people for $.0002 per share. Claud Anderson Ed.D. Revocable Trust, was issued
4,900,000 of those shares. Kemet Investment Limited Partnership, of which Dr.
Walter P. Lomax, Chairman of the Board of Directors of PEC, and W. Thomas Lomax,
Vice President, Secretary and a director of PEC, are partners, purchased
4,900,000 shares. Richard Sheriff, a key employee of PEC, was issued 200,000
shares.
As of October 31, 2000, Kemet Investment Trust, which was owed $352,000
principal and $12,898.67 interest by PEC from its existing line of credit,
converted such principal and interest to a capital contribution in PEC.
Effective December 31, 2000, Kemet converted an additional $145,000 in principal
debt to a capital contribution to PEC. PEC received no additional shares for
such contributions.
On May 1, 2000, PEC entered into an agreement to purchase the assets of the
aquaculture facility located in Hurlock, Maryland. According to the terms of
this agreement, PEC took possession of the Hurlock facility on May 1, 2000 upon
payment of $95,000 (10% of the total purchase price). On December 15, 2000, PEC
and the owners of theHurlock facility entered into an agreement for PEC to pay
an additional $100,000 by December 31, 2000 with the balance of $755,000 due
March 31, 2001. In the event PEC does not render full payment, it shall vacate
the premises and return the facility to its former owners. Richard Sheriff,
Manager of National Operations and a shareholder of PEC, is an owner of that
facility. This agreement was the result of arms length bargaining. The terms are
not any more favorable to Mr. Sheriff than if he were an unaffiliated third
party. On February 17, 2000, PEC entered into an employment agreement with Mr.
Sheriff.
On March 1, 2000, PEC entered into an agreement with Mr. Sheriff to allow PEC to
utilize a patent owned by Mr. Sheriff relating to aquaculture tanks.
The transactions were made on terms no less favorable to PEC than those
generally available from unaffiliated third parties and ratified by a majority
of PEC's disinterested, independent directors who had access to PEC's or
independent legal counsel, or at the time the affiliated transactions were
entered into there were less than two such disinterested, independent directors.
All future material affiliated transactions and loans will be made or entered
into on terms that are no less favorable to PEC than those that can be obtained
from unaffiliated third parties and all future material affiliated transactions
and loans, and any forgiveness of loans, must be approved by a majority of the
independent directors who do not have an interest in the transactions and who
have access at PEC's expense, to PEC's or independent legal counsel.
DESCRIPTION OF SECURITIES
As of the date of this prospectus, our authorized capital stock consists of
50,000,000 shares of common stock.
Common Stock
As of October 31, 2000, there were 10,000,000 shares of common stock outstanding
held of record by three shareholders. There will be 12,500,000 shares of common
stock outstanding after giving effect to the sale of 2,500,000 we are offering
in the maximum offering.
Holders of common stock are entitled to one vote per share on all matters
to be voted upon by the shareholders.
There are no dividend, voting or preemption rights for PEC's common
stock.
24
<PAGE>
Transfer Agent and Agent
Continental Stock Transfer, New York, New York, will serve as the Transfer
Agent for the common stock.
Determination of Offering Price
The offering price of the common stock was arbitrarily determined by
PEC. This price bears no relation to our assets, book value, or any other
customary investment criteria, including our prior operating history. Among
factors we considered in determining the offering price were estimates of PEC's
business potential, our financial resources, the amount of equity and control
desired to be retained by the present shareholders, the amount of dilution to
public investors and the general condition of the securities markets.
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering there has been no market for PEC's securities.
Future sales of substantial amounts of common stock or warrants in the public
market could adversely affect market prices prevailing from time to time.
Upon completion of the maximum offering, PEC will have outstanding an
aggregate of 12,500,000 shares of common stock. 2,500,000 of these shares
will be freely tradeable without restriction or further registration under the
Securities Act (except for any shares purchased by "affiliates," as that term
defined in Rule 144 under the Securities Act). The remaining 10,000,000 shares
are shares of restricted stock, as that term is defined in Rule 144 promulgated
under the Securities Act. Restricted stock may be sold in public market only if
registered or if it qualifies for an exemption from registration is available.
Pursuant to the provisions of Rule 144 (including Rule 144(k)), the
shares of restricted stock would be available for sale in the public market as
follows: 140,000 restricted shares would be eligible for sale under Rule 144
upon expiration of the two year holding period applicable to restricted stock
held by affiliates, which expires on February 28, 2002. However, all 10,000,000
shares are being held in escrow pursuant to a lock-up agreement. The terms of
this agreement provide that none of these shares may be sold for 2 years
following completion of this offering; 2 1/2% may be released each quarter for
the next two years, with the balance being released on the 4th anniversary of
completion of this offering.
In general, under Rule 144 as currently in effect, beginning 90 days after
the date of this prospectus, a person (or persons whose shares are
aggregated) who has beneficially owned restricted shares for at least one year
(including the holding period of any prior owner except an affiliate) would be
entitled to sell within any three-month period a number of shares that does not
exceed the greater of: (i) one percent of the number of share of common stock
then outstanding (which will equal approximately 140,000 shares immediately
after this offering); or (ii) the average weekly trading volume of the common
stock during the four calendar weeks preceding the filing of a notice on Form
144 with respect to such sale. Sales under Rule 144 are also subject to certain
manner of sale provisions and notice requirements and to the availability of
current public information about PEC. Under Rule 144(k), a person who is not
deemed to have been an affiliate of PEC at any time during the 90 days preceding
a sale, and who has beneficially owned the shares proposed to be sold for at
least two years (including the holding period of any prior owner except for an
affiliate), is entitled to sell such shares without complying with the manner of
sale, public information, volume limitation or notice provisions of Rule 144.
25
<PAGE>
LEGAL MATTERS
The validity of the securities offered hereby will be passed upon for
PEC by its counsel, Schonfeld & Weinstein, L.L.P., New York, New York.
EXPERTS
The balance sheet of PowerNomics Enterprise Corporation as of April 30,
2000 and the related statements of operations, stockholders' equity and cash
flows for the initial period from November 18, 1999 through April 30, 2000
included in this prospectus, and incorporated by reference in the Registration
Statement, have been audited by Ahearn, Jasco + Company, P.A., independent
auditors, as stated in their report appearing with the financial statements
herein and incorporated by reference in the Registration Statement, and are
included in reliance upon the reports of such firm given upon their authority as
experts in accounting and auditing.
With respect to the unaudited interim financial information for the
period ended October 31, 2000, which is incorporated herein by reference,
Ahearn, Jasco + Company, P.A., independent accountants, have applied limited
procedures in accordance with professional standards for a review of such
information. However, as stated in their reports included and incorporated by
reference herein, they did not audit and they do not express an opinion on that
interim financial information. Accordingly, the degree of reliance on their
reports on such information should be restricted in light of the limited nature
of the review procedures applied. Ahearn, Jasco + Company, P.A. are not subject
to the liability provisions of Section 11 of the Securities Act of 1933 for
their reports on the unaudited interim financial information because those
reports are not "reports" on a "part" of the registration statement prepared or
certified by an accountant within the meaning of Sections 7 and 11 of the Act.
MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL STATEMENTS
The financial statements and other financial information appearing in
this prospectus were prepared by the management of the company, which is
responsible for the integrity and objectivity of this information. The financial
statements have been prepared in conformity with generally accepted accounting
principles consistently applied and therefore include amounts that are based on
information, judgments and management's best estimates.
Management of the company maintains a system of internal accounting
controls and procedures, which management believes is adequate under the
circumstances. The system is intended to provide reasonable assurance, in
relation to reasonable cost, that transactions are executed in accordance with
management's authorization, are recorded properly and accurately, and that
accountability for assets is maintained. These controls are supported by
management's commitment to the integrity of the system.
The company's financial statements for the initial period ended April
30, 2000 have been audited by Ahearn, Jasco + Company, P.A., independent
certified public accountants, to the extent required by generally accepted
auditing standards. The role of the auditor is to form an independent judgment
as to the fairness with which the statements present the financial condition of
the company and the results of its operations. While the independent accountants
make selective tests of company procedures and controls, it is neither
practicable nor necessary for them to scrutinize all of the company's
transactions. The auditors' report appears with the April 30, 2000 financial
statements. The ultimate responsibility for the company's financial statements
remains with management; the auditors' responsibility is to express their
opinion on the overall financial statement presentation.
The financial statements for the six months ended October 31, 2000 are
the responsibility of management and are unaduited.
ADDITIONAL INFORMATION
PEC has filed with the Commission a Registration Statement on Form SB-2
under the Securities Act of 1933, as amended with respect to the Common stock
offered hereby. This prospectus omits certain information contained in the
registration statement and the exhibits thereto, as permitted by the rules and
regulations of the Commission. For further information with respect to the
company and the securities, reference is hereby made to the Registration
Statement and such exhibits filed as a part thereof, which may be inspected,
without charge, at the Public Reference Section of the Commission at Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549. Copies of all
or any portion of the Registration Statement may be obtained from the Public
Reference Section of the Commission, upon payment of the prescribed fees. The
SEC maintains a World Wide Web site that contains reports, proxy and information
statements and other information regarding registrants that file electronically
with the SEC, including the Registration Statement. The address of the SEC's
World Wide Web site is http://www.sec.gov.
26
<PAGE>
For additional information about PEC, reference is made to contracts and
other documents filed as exhibits to the registration statement.
We are not currently a reporting company under the Securities and Exchange
Act of 1934, and therefore we have not filed any reports with the Securities and
Exchange Commission. Upon completion of this offering we intend to register
under the Securities Act, and will be required to furnish to our security
holders annual reports containing audited reports containing audited financial
statements reported on by independent auditors, and quarterly reports containing
unaudited financial information for the first three quarters of each fiscal
year.
Until, all dealers that effect transaction in the securities whether or not
participating in this offering, may be required to deliver a prospectus. This
is in addition to the dealer's obligation to deliver a prospectus when acting as
underwriters and with respect to their unsold allotment or subscriptions.
27
<PAGE>
POWERNOMICS ENTERPRISE CORPORATION
(A development stage company)
FINANCIAL STATEMENTS
FOR THE PERIOD FROM
NOVEMBER 18, 1999 (date of incorporation)
THROUGH APRIL 30, 2000
AND
INDEPENDENT AUDITORS' REPORT
<PAGE>
POWERNOMICS ENTERPRISE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
TABLE OF CONTENTS
-----------------
PAGE
----
INDEPENDENT AUDITORS' REPORT F-2
----------------------------
FINANCIAL STATEMENTS
--------------------
Balance Sheet F-3
Statement of Operations F-4
Statement of Stockholders' Equity (Deficit) F-5
Statement of Cash Flows F-6
NOTES TO FINANCIAL STATEMENTS F-7 to F-11
-----------------------------
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
----------------------------
To the Board of Directors of
PowerNomics Enterprise Corporation
We have audited the accompanying balance sheet of PowerNomics Enterprise
Corporation (the "Company"), a development stage company, as of April 30, 2000
and the related statements of operations, stockholders' equity (deficit), and
cash flows for the period November 18, 1999 (date of incorporation) through
April 30, 2000. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides 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 PowerNomics Enterprise
Corporation as of April 30, 2000 and the results of its operations and its cash
flows for the period November 18, 1999 (date of incorporation) through April 30,
2000 in conformity with generally accepted accounting principles.
/s/ Ahearn, Jasco + Company, P.A.
---------------------------------
AHEARN, JASCO + COMPANY, P.A.
Certified Public Accountants
Pompano Beach, Florida
May 25, 2000
F-2
<PAGE>
<TABLE>
<CAPTION>
POWERNOMICS ENTERPRISE CORPORATION
(A development stage company)
BALANCE SHEET
APRIL 30, 2000
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
ASSETS
------
CURRENT ASSETS:
<S> <C>
Cash and cash equivalents $ 100,051
Receivable from shareholders 2,000
Prepaid expenses 11,390
---------
TOTAL CURRENT ASSETS 113,441
DEFERRED OFFERING COSTS 75,000
---------
TOTAL $ 188,441
=========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
---------------------------------------------
CURRENT LIABILITY - ACCOUNTS PAYABLE AND ACCRUED EXPENSES $ 65,987
---------
LONG-TERM LIABILITY - NOTE PAYABLE - RELATED ENTITY 142,000
---------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY (DEFICIT):
Common stock, $0.0001 par value; 50,000,000 shares
authorized; 10,000,000 shares issued and outstanding 1,000
Additional paid-in capital 1,000
Deficit accumulated during the development stage (21,546)
---------
STOCKHOLDERS' EQUITY (DEFICIT), NET (19,546)
---------
TOTAL $ 188,441
=========
</TABLE>
See notes to financial statements.
F-3
<PAGE>
<TABLE>
<CAPTION>
POWERNOMICS ENTERPRISE CORPORATION
(A development stage company)
STATEMENT OF OPERATIONS
FROM NOVEMBER 18, 1999 (date of incorporation) THROUGH APRIL 30, 2000
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<S> <C>
REVENUE $ --
GENERAL AND ADMINISTRATIVE EXPENSES 21,546
------------
LOSS BEFORE INCOME TAX PROVISION (21,546)
PROVISION FOR INCOME TAXES --
------------
NET LOSS $ (21,546)
============
PER SHARE AMOUNTS:
Net loss per common share outstanding,
basic and diluted $ (0.0022)
============
TOTAL COMMON SHARES OUTSTANDING
AS OF APRIL 30, 2000 10,000,000
============
</TABLE>
See notes to financial statements.
F-4
<PAGE>
<TABLE>
<CAPTION>
POWERNOMICS ENTERPRISE CORPORATION
(A development stage company)
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
FROM NOVEMBER 18, 1999 (date of incorporation) THROUGH APRIL 30, 2000
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Deficit
Accumulated
Additional during the
Common Paid-in Development
Stock Capital Stage Total
---------------------------------------------
<S> <C> <C> <C> <C>
STOCKHOLDERS' EQUITY, November 18, 1999 $ -- $ -- $ -- $ --
Sale of 10,000,000 shares of common stock 1,000 1,000 -- 2,000
Net loss for the initial period ended
April 30, 2000 -- -- (21,546) (21,546)
-------- -------- -------- --------
STOCKHOLDERS' EQUITY (DEFICIT), April 30, 2000 $ 1,000 $ 1,000 $(21,546) $(19,546)
======== ======== ======== ========
</TABLE>
See notes to financial statements.
F-5
<PAGE>
<TABLE>
<CAPTION>
POWERNOMICS ENTERPRISE CORPORATION
(A development stage company)
STATEMENT OF CASH FLOWS
FROM NOVEMBER 18, 1999 (date of incorporation) THROUGH APRIL 30, 2000
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C>
Net loss $ (21,546) Items not affecting cash flow from operations:
Accounts receivable (2,000)
Prepaid expenses (11,390)
Accrued expenses 15,987
---------
NET CASH USED IN OPERATING ACTIVITIES (18,949)
---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Related party borrowings 142,000
Deferred offering costs paid in cash (25,000)
Sales of common stock 2,000
---------
NET CASH PROVIDED BY FINANCING ACTIVITIES 119,000
---------
CASH BALANCE AS OF APRIL 30, 2000 $ 100,051
=========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest $ --
=========
Cash paid for income taxes $ --
=========
</TABLE>
See notes to financial statements.
F-6
<PAGE>
POWERNOMICS ENTERPRISE CORPORATION
NOTES TO FINANCIAL STATEMENTS
FOR THE PERIOD NOVEMBER 18, 1999 (DATE OF INCORPORATION) THROUGH APRIL 30, 2000
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
---------------------------------------------------
GENERAL
-------
PowerNomics Enterprise Corporation (the "Company") was
incorporated in the State of Delaware on November 18, 1999. The Company is
a development stage enterprise engaged in developing its business plan,
and acquiring assets to begin its business operations. The financial
statements and notes are the representation of the Company's management,
which is responsible for their integrity and objectivity. The accounting
policies of the Company are in accordance with generally accepted
accounting principles and conform to the standards applicable to
development stage companies.
DEVELOPMENT STAGE OPERATIONS, AND GOING CONCERN CONSIDERATIONS
--------------------------------------------------------------
The Company's financial statements have been prepared on a going
concern basis that contemplates the realization of assets and the
settlement of liabilities and commitments in the normal course of
business. The Company is in its development stage. Management recognizes
that the Company must generate capital and revenue resources to enable it
to continue operations. Management is planning to obtain additional
capital through the sale of equity securities. The realization of assets
and satisfaction of liabilities in the normal course of business is
dependent upon the Company obtaining additional equity capital and
ultimately achieving profitable operations. However, no assurances can be
given that the Company will be successful in these activities. Should any
of these events not occur, the accompanying consolidated financial
statements will be materially affected.
USE OF ESTIMATES
----------------
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure 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.
DEFERRED OFFERING COSTS
-----------------------
Deferred offering costs, which were incurred in anticipation of
the Company filing a registration statement for the sale of its common
stock, are being deferred until the stock offering is complete.
ORGANIZATION COSTS AND START-UP EXPENSES
----------------------------------------
In accordance with SOP 98-5, "Reporting on the Costs of Start-up
Activities", organization costs and start-up expenditures are being
expensed as incurred.
FAIR VALUE OF FINANCIAL INSTRUMENTS
-----------------------------------
Cash and accounts payable and accured expenses are reflected in
the financial statements at cost, which approximates fair market value
because of the short-term maturity of those instruments. The note payable,
related entity is reflected at cost; fair value estimation of this
obligation is not practicable due to its unique related party nature.
F-7
<PAGE>
POWERNOMICS ENTERPRISE CORPORATION
NOTES TO FINANCIAL STATEMENTS
FOR THE PERIOD NOVEMBER 18, 1999 (DATE OF INCORPORATION) THROUGH APRIL 30, 2000
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
---------------------------------------------------
INCOME TAXES
------------
The Company accounts for income taxes in accordance with the
Statement of Financial Accounting Standards ("SFAS") No. 109, "Accounting
for Income Taxes." Deferred taxes are provided on a liability method
whereby deferred tax assets are recognized for deductible temporary
differences, operating loss carryforwards, and tax credit carryforwards,
and deferred tax liabilities are recognized for taxable temporary
differences. Temporary differences are the differences between the
reported amounts of assets and liabilities and their tax bases.
Deferred tax assets are reduced by a valuation allowance when, in
the opinion of management, it is more likely than not that some portion or
all of the deferred tax assets will not be realized. Deferred tax assets
and liabilities are adjusted for the effects of changes in tax laws and
rates on the date of enactment. State minimum taxes and franchise taxes
are expensed as paid.
NET LOSS PER SHARE
------------------
The Company follows the provisions of SFAS No. 128, "Earnings per
Share," which requires companies with complex capital structures or common
stock equivalents to present both basic and diluted earnings per share
("EPS") on the face of the income statement. Basic EPS is calculated as
income available to common stockholders divided by the weighted average
number of common shares outstanding during the period. Diluted EPS is
calculated using the "if converted" method for convertible securities and
the treasury stock method for options and warrants as previously
prescribed by Accounting Principles Board of Opinion No. 15, "Earnings per
Share."
CASH AND CASH EQUIVALENTS
-------------------------
Cash and cash equivalents, if any, include all highly liquid debt
instruments with an original maturity of three months or less at the date
of purchase.
STATEMENT OF COMPREHENSIVE INCOME
---------------------------------
A statement of comprehensive income has not been included, per
SFAS No. 130, "Reporting Comprehensive Income", as the Company has no
items of other comprehensive income.
NEW ACCOUNTING PRONOUNCEMENTS
-----------------------------
In June 1998, the FASB issued SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities". Among other provisions, it
requires that entities recognize all derivatives as either assets or
liabilities in the statement of financial position and measure those
instruments at fair value. Gains and losses resulting from changes in the
fair values of those derivatives would be accounted for depending on the
use of the derivative and whether it qualifies for hedge accounting. The
effective date of this standard was delayed via the issuance of SFAS No.
137. The effective date for SFAS No. 133 is now for fiscal years beginning
after June 15, 2000. The Company must adopt this standard no later than
January 1, 2001. The Company does not expect the adoption of this standard
to have a material impact on results of operations, financial position or
cash flows.
F-8
<PAGE>
POWERNOMICS ENTERPRISE CORPORATION
NOTES TO FINANCIAL STATEMENTS
FOR THE PERIOD NOVEMBER 18, 1999 (DATE OF INCORPORATION) THROUGH APRIL 30, 2000
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
NOTE 2 - ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
-------------------------------------------------
Accounts payable and accrued liabilities at April 30, 2000
consist of the following:
Accounts payable $ 3,237
Accrued liabilities:
Legal fees - deferred offering costs 50,000
Payroll and related obligations 3,750
Professional fees 9,000
------------
Total $ 65,987
============
NOTE 3 - NOTE PAYABLE, RELATED ENTITY
-------------------------------------
The Company, from time-to-time through April 30, 2000, received
working capital advances from a shareholder, Kemet Investments Ltd.
Partnership ("Kemet"). These advances totaled $142,000 at April 30, 2000.
These advances were initially non-interest bearing, and due on demand.
On May 9, 2000, a formal line-of-credit agreement was entered
into between the Company and Kemet, with the following terms: credit
available of $500,000; 10% fixed rate of interest, payable quarterly;
maturing May 1, 2005; and secured by substantially all assets of the
Company. The advances described above were transferred to the
line-of-credit effective May 9, 2000, and are therefore, in accordance
with the terms of the credit agreement, classified as long-term on the
accompanying balance sheet.
NOTE 4 - STOCKHOLDERS' EQUITY (DEFICIT)
---------------------------------------
The Company was duly organized on November 18, 1999 under the
laws of the State of Delaware, and has authorized stock of 50,000,000
shares of common at $0.0001 par value. In February 2000, the Company
issued 10,000,000 shares through subscription agreements for its common
stock, and obtained working capital loans from a shareholder (see Note 3
above).
The amounts due under the subscription agreements were collected
by the Company in May 2000; consequently, this amount has been presented
as a current asset on the accompanying balance sheet.
F-9
<PAGE>
POWERNOMICS ENTERPRISE CORPORATION
NOTES TO FINANCIAL STATEMENTS
FOR THE PERIOD NOVEMBER 18, 1999 (DATE OF INCORPORATION) THROUGH APRIL 30, 2000
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
NOTE 5 - RELATED PARTY TRANSACTIONS
-----------------------------------
RELATED PARTY PAYABLES
----------------------
Accrued salaries, and amounts due for expenses incurred, are owed
by the Company to various officers and shareholders. The amounts owed
totaled $6,987 at April 30, 2000.
OFFICE FACILITIES
-----------------
Office space is provided by a shareholder of the Company at no
charge. The value of this accommodation to the Company is minimal.
LICENSE AGREEMENT
-----------------
On March 1, 2000, the Company entered into an agreement with a 2%
shareholder to acquire aquaculture tanks. This agreement requires a payment of
$25,000 per unit for the tanks, subject to specified increases in later years.
NOTE 6 - INCOME TAXES
---------------------
A summary of the provision for income taxes for the period ended
April 30, 2000 is as follows:
Currently payable $ --
Deferred benefit 8,550
Less: Valuation allowance (8,550)
--------------
Provision for income taxes $ --
==============
Net deferred tax assets at April 30, 2000 are as follows:
Available net operating loss carryovers $ 4,900
Expenses not currently deductible for taxes 3,650
Less: Valuation allowance (8,550)
--------------
Net deferred tax assets $ -
==============
The Company has used an estimated federal tax rate of 34% and a
net effective state tax rate of 6% for all deferred tax computations.
There are no significant deferred tax liabilities. The Company has
recorded a valuation allowance in accordance with the provisions of SFAS
No. 109 to reflect the estimated amount of deferred tax assets that may
not be realized.
The Company has available tax net operating carryovers ("NOLs")
as of April 30, 2000 of approximately $12,201. The NOL's will expire
beginning in 2020. Certain provisions of the tax law may limit the NOL
carryfowards available for use in any given year in the event of a
significant change in ownership interest.
F-10
<PAGE>
POWERNOMICS ENTERPRISE CORPORATION
NOTES TO FINANCIAL STATEMENTS
FOR THE PERIOD NOVEMBER 18, 1999 (DATE OF INCORPORATION) THROUGH APRIL 30, 2000
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
NOTE 7 - COMMITMENTS AND CONTINGENCIES
--------------------------------------
DEPOSITS FOR SITE PLANS AND ENVIRONMENTAL STUDIES
-------------------------------------------------
The Company has paid certain fees to consultants to complete an
environmental impact study and a site plan for a proposed Company facility
on an identified piece of real estate in Inglewood, California. These fees
are recorded on the accompanying balance sheet as prepaid expenses. The
fees will be reclassified into the cost of the real estate upon the
successful completion of the project, or expensed if the project is
abandoned.
LITIGATION, CLAIMS, AND ASSESSMENTS
-----------------------------------
In the ordinary course of business, the Company is exposed to
various claims, threats, and legal proceedings. In management's opinion,
the outcome of such matters, if any, will not have a material impact upon
the Company's financial position and results of operations.
NOTE 8 - NET LOSS PER COMMON SHARE
----------------------------------
Net loss per common share outstanding, as shown on the statement
of operations, is based on the number of common shares outstanding at the
balance sheet date. Weighted average shares outstanding was not computed
since it would not be meaningful in the circumstances, as all shares
issued during the period from incorporation through April 30, 2000 were
for initial capital and were issued to just three shareholders. The
Company has no common stock equivalents. Therefore, the total shares
outstanding as of April 30, 2000 was deemed to be the most relevant number
of shares to use for purposes of this disclosure.
NOTE 9 - SUBSEQUENT EVENT
-------------------------
On May 1, 2000, the Company entered into an agreement to purchase
certain real estate in Hurlock, Maryland, as well as specified equipment and
furnishings, for $950,000. A cash payment of $95,000 was made on May 1, 2000,
and the balance of $855,000 is due on or before December 31, 2000. The seller of
the assets is an entity that is one-third owned by a 2% shareholder of the
Company.
F-11
<PAGE>
POWERNOMICS ENTERPRISE CORPORATION
FINANCIAL STATEMENTS
FOR THE 6 MONTHS
ENDED OCTOBER 31, 2000
AND
INDEPENDENT ACCOUNTANTS' REVIEW REPORT
TABLE OF CONTENTS PAGE
INDEPENDENT AUDITOR'S REVIEW REPORT
FINANCIAL STATEMENTS
Balance Sheet
Statement of Operations
Statement of Stockholder's Equity (Deficit)
Statement of Cash Flows
NOTES TO FINANCIAL STATEMENTS
<PAGE>
INDEPENDENT ACCOUNTANTS' REVIEW REPORT
--------------------------------------
To the Board of Directors of
Powernomics Enterprise Corporation
We have reviewed the accompanying balance sheet of Powernomics Enterprise
Corporation (the "Company") as of October 31, 2000, and the related statements
of operations, stockholders' equity (deficit), and cash flows for the
three-month and six-month periods then ended. These financial statements are the
responsibility of the management of the Company.
The financial statements for the three-months ended July 31, 2000 (not presented
herein) have been restated to correct an error in the application of an
accounting principle. See note 2(b).
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying October 31, 2000 financial statements for them to be
in conformity with generally accepted accounting principles.
/s/ Ahearn, Jasco + Company, P.A.
AHEARN, JASCO + COMPANY, P.A.
Certified Public Accountants
Pompano Beach, Florida
January 2, 2001
<PAGE>
<TABLE>
<CAPTION>
POWERNOMICS ENTERPRISE CORPORATION
BALANCE SHEETS
OCTOBER 31, 2000 (Unaudited) AND APRIL 30, 2000
=========================================================================================================
October 31, April 30,
2000 2000
----------- ---------
(Unaudited)
ASSETS
------
CURRENT ASSETS:
<S> <C> <C>
Cash and cash equivalents $ 10,426 $ 100,051
Receivable from shareholders - 2,000
Inventory 36,986 -
Prepaid expenses 62,593 11,390
----------- ---------
TOTAL CURRENT ASSETS 110,005 113,441
PROPERTY AND EQUIPMENT, net 875,362 -
DEFERRED OFFERING COSTS 75,000 75,000
----------- ---------
TOTAL $ 1,060,367 $ 188,441
=========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
----------------------------------------------
CURRENT LIABILITIES:
Balance due on an asset purchase $ 801,563 $ - -
Accounts payable and accrued expenses 31,270 65,987
Payable to shareholders 14,487 -
Accrued interest 40,080 -
----------- ---------
TOTAL CURRENT LIABILITIES 887,400 65,987
----------- ---------
LINE OF CREDIT, related entity - 142,000
----------- ---------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY (DEFICIT):
Common stock, $0.0001 par value; 50,000,000 shares
authorized; 10,000,000 shares issued and outstanding 1,000 1,000
Additional paid-in capital 365,899 1,000
Accumulated deficit (193,932) (21,546)
----------- ---------
STOCKHOLDERS' EQUITY (DEFICIT), NET 172,967 (19,546)
----------- ---------
TOTAL $ 1,060,367 $ 188,441
=========== =========
</TABLE>
See notes to financial statements.
1
<PAGE>
<TABLE>
<CAPTION>
POWERNOMICS ENTERPRISE CORPORATION
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED OCTOBER 31, 2000 (Unaudited)
=====================================================================================
<S> <C>
REVENUE $ 10,195
COST OF GOODS SOLD 44,676
----------
GROSS PROFIT (LOSS) (34,481)
OPERATING EXPENSES 84,926
----------
LOSS FROM OPERATIONS (119,407)
INTEREST EXPENSE 52,979
----------
LOSS BEFORE PROVISION FOR INCOME TAXES (172,386)
PROVISION FOR INCOME TAXES -
----------
NET LOSS $ (172,386)
==========
PER SHARE AMOUNTS:
Net loss per common share outstanding, basic and diluted $ (0.0172)
==========
TOTAL COMMON SHARES OUTSTANDING
As of October 31, 2000 10,000,000
==========
</TABLE>
See notes to financial statements.
2
<PAGE>
<TABLE>
<CAPTION>
POWERNOMICS ENTERPRISE CORPORATION
STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED OCTOBER 31, 2000 (Unaudited)
============================================================================================
<S> <C>
REVENUE $ 9,195
COST OF GOODS SOLD 19,811
----------
GROSS PROFIT (LOSS) (10,616)
OPERATING EXPENSES 53,225
----------
LOSS FROM OPERATIONS (63,841)
INTEREST EXPENSE 28,382
----------
LOSS BEFORE PROVISION FOR INCOME TAXES (92,223)
PROVISION FOR INCOME TAXES -
----------
NET LOSS $ (92,223)
==========
PER SHARE AMOUNTS:
Net loss per common share outstanding, basic and diluted $ (0.0092)
==========
TOTAL COMMON SHARES OUTSTANDING
As of October 31, 2000 10,000,000
==========
</TABLE>
See notes to financial statements.
3
<PAGE>
<TABLE>
<CAPTION>
POWERNOMICS ENTERPRISE CORPORATION
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE SIX MONTHS ENDED OCTOBER 31, 2000 (Unaudited)
===================================================================================================================================
Common Stock
------------ Additional
Number of at Paid-in Accumulated Stockholders'
Shares par value Capital Deficit Deficit, net
------ --------- ------- ------- ------------
<S> <C> <C> <C> <C> <C>
Balance, May 1, 2000 10,000,000 $ 1,000 $ 1,000 $ (21,546) $ (19,546)
Capital contributed by a shareholder - - 364,899 - 364,899
Net loss for the six months ended October 31, 2000 - - - (172,386) (172,386)
Balance, October 31, 2000 10,000,000 $ 1,000 $ 365,899 $ (193,932) $ 172,967
</TABLE>
See notes to financial statements.
4
<PAGE>
<TABLE>
<CAPTION>
POWERNOMICS ENTERPRISE CORPORATION
STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED OCTOBER 31, 2000 (Unaudited)
===================================================================================================
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C>
Net loss $ (172,386)
Adjustments to reconcile net loss to net cash
used by operating activities:
Depreciation 24,696
Changes in certain assets and liabilities:
Receivable from shareholders 2,000
Inventory (36,986)
Prepaid expenses (51,203)
Accounts payable and accrued expenses (20,230)
Accrued interest 52,979
----------
NET CASH USED IN OPERATING ACTIVITIES (201,130)
----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (98,495)
----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Related party borrowings on a line of credit 210,000
----------
NET DECREASE IN CASH AND CASH EQUIVALENTS (89,625)
CASH AND CASH EQUIVALENTS, beginning 100,051
----------
CASH AND CASH EQUIVALENTS, ending $ 10,426
========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest $ -
========
Cash paid for income taxes $ -
========
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
During May 2000, the Company partially acquired certain real estate and
equipment by recording a payable due to the seller in the amount of $801,563.
In October 2000, the Company converted the line of credit of $352,000
and related accrued interest of $12,899 into contributed capital.
</TABLE>
See notes to financial statements.
5
<PAGE>
POWERNOMICS ENTERPRISE CORPORATION
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 2000
The accompanying financial statements of Powernomics Enterprise
Corporation (the "Company") have been prepared in accordance with
generally accepted accounting principles for interim financial information
and with the instructions to Form 10-QSB and other applicable regulations
of the Securities and Exchange Commission (SEC). Accordingly, they do not
include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the
opinion of the management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
The financial statements as of and for the period ended October 31, 2000
are unaudited. The financial statements for the period ended October 31,
2000 have been reviewed by an independent public accountant pursuant to
Item 310(b) of Regulation S-B and following applicable standards for
conducting such reviews, and the report of the accountant is included as
part of this filing. The results of operations for the interim periods are
not necessarily indicative of the results of operations for the fiscal
year. These financial statements should be read in conjunction with the
audited financial statements and footnotes for its initial period ended
April 30, 2000 included in the Company's filing on Form SB-2.
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
---------------------------------------------------
GENERAL
-------
Powernomics Enterprise Corporation was incorporated in the State
of Delaware on November 18, 1999. Through the acquisition of certain real
estate in Hurlock, Maryland, in May 2000, as well as specified equipment
and furnishings, the Company is in the business of aquaculture through the
use of patented technology. The Company propagates, cultivates and markets
certain fish and seafood in a controlled environment. Prior to April 2000,
the Company was considered a development stage enterprise engaged in
developing its business plan, and acquiring assets to begin its business
operations. The financial statements and notes are the representation of
the Company's management, which is responsible for their integrity and
objectivity.
GOING CONCERN CONSIDERATIONS
----------------------------
The Company's financial statements have been prepared on a going
concern basis that contemplates the realization of assets and the
settlement of liabilities and commitments in the normal course of
business. Management recognizes that the Company must generate capital and
revenue resources to enable it to continue operations. Management is
planning to obtain additional capital through the sale of equity
securities. The realization of assets and satisfaction of liabilities in
the normal course of business is dependent upon the Company obtaining
additional equity capital and ultimately achieving profitable operations.
However, no assurances can be given that the Company will be successful in
these activities. Should any of these events not occur, the accompanying
financial statements will be materially affected.
REVENUE RECOGNITION, CREDIT RISKS AND CONCENTRATIONS
----------------------------------------------------
Revenue is recognized at the time the fish are shipped. The
Company believes that it does not have an abnormal concentration of credit
risk within any one market or any one geographic area.
INVENTORY
---------
Fish inventories are stated at the lower of cost (first-in,
first-out method) or market. Inventory cost includes the period of time of
raising the fish from purchase to maturity, and includes purchase cost of
the fish, proportionate costs of depreciation of the facility and
equipment, direct labor, food, supplies, and certain overhead.
<PAGE>
POWERNOMICS ENTERPRISE CORPORATION
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 2000
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
---------------------------------------------------------------
PROPERTY AND EQUIPMENT
----------------------
Property and equipment is recorded at acquisition cost and
depreciated using the straight-line method over the estimated useful lives
of the assets. Expenditures for routine maintenance and repairs are
charged to expense as incurred.
NOTE 2 - BALANCE DUE ON AN ASSET PURCHASE
-----------------------------------------
(A) ORIGINATION OF THE OBLIGATION
---------------------------------
On May 1, 2000, the Company acquired certain real estate in
Hurlock, Maryland, as well as specified equipment and furnishings for a
total purchase price of $950,000. As of October 31, 2000, a balance due of
$855,000 was outstanding. Under the terms of the agreement, this balance
is due on December 31, 2000.
The recorded value of the payable has been discounted, as of May
1, 2000, to $801,563 following applicable accounting principles for
non-interest bearing obligations. Accordingly, interest expense of $40,080
has been recorded, at a rate of 10%, for the six months ended October 31,
2000. At the due date of December 31, 2000, the balance of the recorded
principal and accrued interest will total the balance due to the seller of
$855,000.
(B) CORRECTION OF AN ERROR
--------------------------
In the Company's financial statements for the three months ended
July 31, 2000 (as filed with the United States Securities and Exchange
Commission but not presented herein), the above note was not originally
presented on a discounted basis following applicable accounting principles
for non-interest bearing obligations. The result of correcting this error
was to reduce the recorded amount of the payable and the corresponding
asset by $53,437. For the three months ended July 31, 2000, the net loss
was increased by $20,040 from the amount originally reported, and the net
loss per share, both basic and diluted, was increased by $0.002 from the
amount originally reported.
(C) SUBSEQUENT EVENTS
---------------------
On December 15, 2000, the Company and the party owed the $855,000
on December 31, 2000 agreed to the following terms for the payment of the
obligation. The Company will make a $100,000 payment on the obligation on
or before December 31, 2000, and the balance of $755,000 will be converted
into a three-month note bearing interest at prime rate (approximately
9.5%).
NOTE 3 - INCOME TAXES
---------------------
Any deferred tax asset generated by the net loss for the period
is offset in its entirety by an allowance. State minimum and franchise
taxes are expensed when paid.
<PAGE>
POWERNOMICS ENTERPRISE CORPORATION
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 2000
NOTE 4 - NOTE PAYABLE, RELATED ENTITY
-------------------------------------
On May 9, 2000, a line-of-credit agreement was entered into
between the Company and Kemet Investments Ltd. Partnership ("Kemet"),
which is a shareholder, with the following terms: credit available of
$500,000; 10% fixed rate of interest, payable quarterly; maturing May 1,
2005; and secured by substantially all assets of the Company. Prior
advances obtained from Kemet were transferred to the line-of-credit
effective May 9, 2000, and are therefore, in accordance with the terms of
the credit agreement, classified as long-term on the accompanying balance
sheet. Effective October 31, 2000, the available credit was increased to
$2,000,000.
On October 31, 2000, the outstanding amount on the line of credit
totaled $352,000, and accrued interest payable to the shareholder on the
line of credit totaled $12,899. Pursuant to a conversion agreement
effective October 31, 2000, these amounts (totaling $364,899) were
contributed to the capital of the Company, and the Company was relieved of
the obligation to repay.
Kemet did not receive any additional shares of stock in this transaction.
Subsequent to October 31, 2000 and effective as of December 31,
2000, Kemet contributed an additional $145,000 to the capital of the
Company. This amount represented the amount drawn against the credit line
during November and December 2000. Kemet did not receive any additional
shares of stock in this transaction.
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of Directors and Officers
The Delaware General Corporation Law, as amended, provides for the
indemnification of the Company's officers, directors and corporate employees and
agents under certain circumstances as follows:
INDEMNIFICATION OF OFFICERS, DIRECTORS, EMPLOYEES AND AGENTS;
INSURANCE. - (a) A corporation may indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation) by reason of the
fact that he is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
(b) A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the corporation to procure a judgment in its favor by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation and except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the corporation unless and only to the extent that the Court of
Chancery or the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in view of all
the circumstance of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Court of Chancery or such court shall deem
proper.
28
<PAGE>
(c) To the extent that a director, officer, employee or agent of a
corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in subsections (a) and (b) of this
section, or in defense of any claim, issue or matter therein, he shall be
indemnified against expenses (including attorney's fees) actually and reasonably
incurred by him in connection therewith.
(d) Any indemnification under subsections (a) and (b) of this section
(unless ordered by a court) shall be made by the corporation only as authorized
in the specific case upon a determination that indemnification of the director,
officer, employee or agent is proper in the circumstances because he has met the
applicable standard of conduct set forth in subsections (a) and (b) of this
section. Such determination shall be made (1) by the board of directors by a
majority vote of a quorum consisting of directors who were not parties to such
action, suit or proceeding, or (2) if such a quorum is not obtainable, or, even
if obtainable a quorum of disinterested directors so directs, by independent
legal counsel in a written opinion, or (3) by the stockholders.
(e) Expenses incurred by an officer or director in defending any civil,
criminal, administrative or investigative action, suit or proceeding may be paid
by the corporation in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of such director to
repay such amount if it shall ultimately be determined that he is not entitled
to be indemnified by the corporation as authorized in this section. Such
expenses including attorneys' fees incurred by other employees and agents may be
so paid upon such terms and conditions, if any, as the board of directors deems
appropriate.
(f) The indemnification and advancement expenses provided by, or granted
pursuant to, the other subsections of this section shall not be deemed exclusive
of any other rights to which those seeking indemnification or advancement
expenses may be entitled under any bylaw, agreement, vote of stockholders or
disinterested directors or otherwise, both as to action in his official capacity
and as to action in another capacity while holding such office.
(g) A corporation shall have power to purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against him
and incurred by him in any such capacity or arising out of his status as such,
whether or not the corporation would have the power to indemnify him against
such liability under this section.
(h) For purposes of this Section, references to "the corporation" shall
include, in addition to the resulting corporation, any constituent corporation
including those absorbed in a consolidation of merger which, if its separate
existence had continued, would have had power and authority to indemnify its
directors, officers and employees or agents so that any person who is or was a
director, officer, employee or agent of such constituent corporation, or is or
was serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, shall stand in the same position under this section
with respect to the resulting or surviving corporation as he would have with
respect to such constituent corporation if its separate existence had continued.
29
<PAGE>
(i) For purposes of this section, references to "other enterprises" shall
include employee benefit plans; references to "fines" shall include any excise
taxes assessed on a person with respect to an employee benefit plan; and
references to "serving at the request of the corporation" shall include any
service as a director, officer, employee or agent of the corporation which
imposes duties on, or involves services by, such director, officer, employee, or
agent with respect to an employee benefit plan, its participants, or
beneficiaries; and a person who acted in good faith and in a manner he
reasonably believed to be in the interest of the participants and beneficiaries
of an employee benefit plan shall be deemed to have acted in a manner "not
opposed to the best interests of the corporation" as referred to in this
section.
(j) The indemnification and advancement of expenses provided by, or granted
pursuant to, this section shall, unless otherwise provided when authorized or
ratified, continue as to a person who has ceased to be a director, officer,
employee or agent and shall inure to the benefit of the heirs, executors, and
administrators of such person.
Article XI of PEC's by laws provides that PEC will hold harmless and will
indemnify all officers, directors, employees and agents of the Company against
all expense, liability and loss reasonably incurred or suffered by such person
in its connection as such with the Company. PEC shall indemnify any such person
seeking indemnification in connection with a proceeding initiated by such person
(except against the Company) only if such proceeding was authorized by the
Company's Board of Directors.
If a claim under the above paragraph is not paid in full by PEC within 30 days
after a written claim has been received by PEC, the claimant may at anytime
thereafter bring suit against the Company to recover the unpaid amount of the
claim. If the claimant is successful, it is entitled to be paid the expense of
prosecuting such claim, as well.
Notwithstanding any limitations in other sections of the By-laws, PEC will, to
the fullest extent permitted by Section 145 of the General Corporation Law of
Delaware, indemnify any and all persons whom it has the power to indemnify
against any and all of the expense, liabilities and loss, and this
indemnification shall not be deemed exclusive of any other rights to which the
indemnities may be entitled under any By-law, agreement, or otherwise, both as
to action in his/her official capacity and as to action in another capacity
while holding such office, and shall continue as to a person who has ceased to
be a director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such persons.
PEC may, at its own expense, maintain insurance to protect itself and any
director, officer, employee or agent of the Company against any such expense,
liability or loss, whether or not the Company would have the power to indemnify
such person against such expense, liability or loss under the Delaware General
Corporation Law.
30
<PAGE>
Item 25. Expenses of Issuance and Distribution
The other expenses payable by the Registrant in connection with the
issuance and distribution of the securities being registered are estimated as
follows:
Escrow Fee....................................$ 1,000.
Securities and Exchange Commission
Registration Fee.............................$ 5,280.
Legal Fees....................................$ 75,000.
Accounting Fees...............................$ 9,000.
Printing and Engraving....................... $ 1,500.
Blue Sky Qualification Fees and Expenses......$ 5,000.
Miscellaneous.................................$ 2,000.
Transfer Agent Fee............................$ 2,000.
TOTAL...................................................$100,780.
Item 26. Recent Sales of Unregistered Securities
On February 1, 2000, PEC issued a total of 10,000,000 shares of common stock
to three people at $.0002 per share. Kemet Investment Limited Partnership
purchased 4,900,000 shares, Claud Anderson Ed.D Revocable Trust purchased
4,900,000 shares, and Richard L. Sheriff purchased 200,000 shares in this
offering.
This offering was a private offering conducted pursuant to the exemption from
registration contained in Section 4(2) of the Securities Act of 1933. There was
no general solicitation or advertising, and investors did not purchase the
securities with a view toward resale.
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EXHIBITS
Item 27.
3.1 Certificate of Incorporation.*
3.2 By-Laws.*
4.1 Specimen Certificate of Common Stock.*
5.0 Opinion of Counsel.
23.0 Accountant's Consent to Use Opinion.
23.1 Counsel's Consent to Use Opinion.**
99.0 Escrow Agreement.
99.1 Material contracts+
99.2 Forecasted Profit/(Loss) Statement.+
99.3 Fish Growth TimeLine.+
99.4 Letter from Florida Black Business Investment Board.+
99.5 Amendment to Letter of credit.++
99.6 Amendment to Asset Purchase Agreement.
99.7 Agreements to convert Debt into Capital Contribution.
99.8 Note Discount Schedule
99.9 Shareholder Lock-up Agreement.
---------------------------------
* As filed with original registration statement on Form SB2. ** Incorporated
into counsel's opinion.
+ filed with Amendment No. 2 to the registration statement on Form SB-2.
++ filed with Amendment No. 3 to the registration statement on Form SB-2.
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Item 28.
UNDERTAKINGS
The registrant undertakes:
(1) To file, during any period in which offers or sales are being made,
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
Effective Date of the registration statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in the registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement, including
(but not limited to) any addition or deletion of managing underwriter;
(2) That, for the purpose of determining any liability under the Securities Act
of 1933, each such post-effective amendment shall be treated as a new
registration statement of the securities offered, and the offering of the
securities at that time to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of the
offering.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to any provisions contained in its Certificate of
Incorporation, or by-laws, or otherwise, the registrant has been advised that in
the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
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SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form SB-2 and authorized this registration
statement to be signed on its behalf by the undersigned, in the City of
Chalfont, State of Pennsylvania on January 3, 2007.
POWERNOMICS ENTERPRISE CORPORATION
BY: /s/ CLAUD ANDERSON
------------------
Claud Anderson, Ed.D. President
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.
/s/ WALTER P. LOMAX, JR.
------------------------
Walter P. Lomax, Jr., M.D. Dated January 3, 2001
Chairman of the Board
/s/ CLAUD ANDERSON
------------------
Claud Anderson, Ed.D Dated January 3, 2001
President, Director
/S/ W. THOMAS LOMAX
-------------------
W. Thomas Lomax, Dated January 3, 2001
Vice President, Treasurer
Secretary, Director
/s/ PAIGE S. ANDERSON
---------------------
Paige S. Anderson Dated January 3, 2001
Vice President, Director
/S/ MICHAEL D. TRAINA
---------------------
Michael D. Traina Dated January 3, 2001
Director
/S/ LEONARD MILLER
---------------------
Leonard Miller Dated January 3, 2001
Director
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