UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SIXTH AMENDED
FORM SB-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Kinship Systems, Inc.
----------------------
(Name of small business issuer in its charter)
Utah 7371 87-0648148
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(State of jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or Classification Code Number) Identification No.)
organization)
22 East 100 South, Suite 400, Salt Lake City, Utah 84111 (801) 521-8636
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(Address and telephone number of principal executive offices)
22 East 100 South, Suite 400, Salt Lake City, Utah 84111
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(Address of principal place of business or intended principal place of business)
Mr. Andrew Limpert 22 East 100 South, Suite 400, Salt Lake City, Utah 84111
(801) 521-8636
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(Name, address and telephone number of agent for service)
Approximate date of proposed sale to the public: January 1, 2001.
If this Form is filed to register additional securities for an offering pursuant
to rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ] Not currently applicable.
If this Form is a post-effective amendment filed pursuant to Rule 4629(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] Not currently applicable.
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] Not currently applicable.
If delivery of the prospectus is expected to be made pursuant to Rule 434, check
the following box. [ ] Not applicable.
<TABLE>
<CAPTION>
============================================================================================================
Title of each class Dollar amount Proposed Proposed Amount of
of securities to be to be registered maximum maximum registration fee
registered offering price aggregate offering
per share price
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<S> <C> <C> <C> <C>
Common voting Max: $200,000 $1.00/share $200,000 $53.00
stock
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</TABLE>
(i)
<PAGE>
PROSPECTUS
KINSHIP SYSTEMS, INC.
22 East 100 South, Suite 400
Salt Lake City, Utah 84111
(801) 521-8636
Offering of the common voting stock of Kinship Systems, Inc. Minimum
offering of 100,000 shares, maximum offering of 200,000 shares, both at
$1.00/share. Kinship reserves the right to close the offering at any amount
between the minimum or maximum offering during the offering term of one-hundred
and twenty days (120) from the date appearing on this prospectus cover page.
Kinship will place all subscription proceeds into a segregated
subscription account until the minimum offering is sold or the offering is
closed. Upon the closing of the subscription account the proceeds will be
promptly returned to investors if the minimum offering is not sold; or employed
by Kinship if, at least, the minimum is sold.
Kinship has only one class of stock, 50,000,000 common voting stock, of
which 1,270,000 are presently issued and outstanding with up to an additional
200,000 to be issued by this offering.
Kinship is a start-up enterprise which was incorporated on February 1,
2000 with minimum capital to engage in its initial intended business activities
of distributing specific business computer software. See description of business
in this prospectus. Kinship has no historical operating history or revenues to
date.
THIS IS A HIGH RISK OFFERING. SEE RISK FACTORS AT PAGE 3.
This offering is intended as a self underwriting. That is, the stock will be
sold by Kinship management without the employment of any underwriters or other
commissioned sales agents. Should Kinship be unsuccessful at completing its self
underwriting, it may amend the prospectus to indicate commissions to be paid.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE UNITED STATES
SECURITIES AND EXCHANGE COMMISSION; NOR BY ANY STATE OR FOREIGN SECURITIES
REGULATORY AGENCY; NOR HAS THE COMMISSION OR ANY OTHER SECURITIES REGULATORY
AGENCY PASSED UPON THE ACCURACY OR ADEQUACY OF THE PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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.
<TABLE>
<CAPTION>
=======================================================================================================================
Description of Estimated Cost of Estimated Net Net Proceeds as a
Securities Offered Offering Proceeds of Offering Percentage of
Offering Price
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<S> <C> <C> <C> <C>
Minimum 100,000 shares $20,000 $80,000 80%
Offering @ 1.00/share
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Maximum 200,000 shares $20,000 $180,000 90%
Offering @ $1.00/share
=======================================================================================================================
Table of Significant Parties and Offering Notes on following pages
Date of this Prospectus: January 1, 2001 Offering Termination Date: April 30, 2001
</TABLE>
(ii)
<PAGE>
Table of Significant Parties
<TABLE>
<CAPTION>
Officers and Directors:
========================================================================================================================
Name Position Residential Address Business Address
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<S> <C> <C> <C>
Mr. Terry Deru Director, CEO 1236 East 991 South 22 East 100 South,
President, Secretary Fruit Height, Utah Suite 400, Salt Lake
84037 City, Utah 84111
Mr. Andrew Limpert Director, Treasurer 8395 South Park Hurst 22 East 100 South,
CFO, Accounting Officer Circle, Sandy, Utah Suite 400, Salt Lake
84094 City, Utah 84111
Mr. Robert Hunter Director 875 East 8475 South, 9677 South 700 East,
Sandy, Utah 84094 Suite A, Sandy,
Utah 84070
Mr. David Collier Vice President 1120 East 750 South, 1120 East 750 South,
Layton, Utah 84041 Layton, Utah 84041
========================================================================================================================
</TABLE>
Five Percent or Greater Shareholders; Promotors; Underwriters; Legal Counsel;
and Affilliates:
<TABLE>
<CAPTION>
=============================================================================================================================
Name1 Relationship2 Current Per Cent Residential Business Address
Stock Held Address
(Rounded)
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<S> <C> <C> <C> <C>
Mr. Terry Deru Director/Officer 49% See above See above
Mr. Andrew Limpert Director/Officer 49% See above See above
Mr. Robert Hunter Director 1% See above See above
Mr. David Collier Officer 1% See above See above
Mr. Julian Jensen Attorney 0% 1453 Ute Drive 311 S. State #380
Salt Lake City, Salt Lake City,
Utah 84108 Utah 84111
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</TABLE>
1 The only shareholders, at present, are the officers and directors
as listed.
2 Kinship does not have any 5% shareholders, affiliates, underwriters
or promotors-other than current officers or directors. Legal
counsel is not a shareholder and is not deemed by management to be
affiliated.
See Biographical Information on Management under the Management Section.
(iii)
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
ITEM
NUMBER DESCRIPTION PAGE
------ ----------- ----
<S> <C> <C>
1 Summary Information.............................................................. 1
2 Risk Factors and Dilution........................................................ 3
3 Plan of Distribution............................................................. 5
4 Use of Proceeds to Issuer........................................................ 8
5 Description of Business.......................................................... 10
6 Description of Property.......................................................... 13
6 Management's Discussion and Analysis of Financial
Condition.................................................................... 14
7 Directors, Executive Officer & Significant Employees............................. 15
8 Remuneration of Directors & Officers............................................. 16
9 Security Ownership of Management & Certain
Security Holders........................................................... 18
10 Interest of Management & Others in Certain Transactions.......................... 18
11 Securities Being Offered......................................................... 19
12 Experts.......................................................................... 20
13 Legal Proceedings................................................................ 20
14 Changes in a Disagreement with Accountants....................................... 20
15 Indemnity of Officers and Directors.............................................. 20
</TABLE>
EXHIBITS
--------
Audited Financial Statements to the period ending July 31, 2000.
(iv)
<PAGE>
SUMMARY OF THE OFFERING
-----------------------
Terms of Offering: This is a minimum/maximum offering. We, as your management,
will only determine that the offering has been subscribed and
closed when a minimum of $100,000 of gross proceeds has been
received within the offering term of one-hundred and twenty
days (120/days) from the date appearing on the face of this
prospectus. Based upon an effective date of January 1, 2001
this would mean an outside offering date of April 30, 2001.
All funds received up to the minimum offering will be held in
a segregated subscription account by the company, until or
unless the minimum offering is reached within the
subscription term. If the minimum offering is not reached
within this subscription term, all proceeds will be promptly
returned to the investors in this offering without interest
or deduction for costs. We may close the offering at any time
after the minimum offering is sold within the offering term.
However, if the maximum offering of $200,000 is reached, the
offering will be closed when and if such amount is obtained
within the offering term. There is neither an obligation or
prohibition placed upon officers, directors, affiliates or
any related party buying shares to satisfy either the minimum
or maximum offering. Further, there is no dollar limit on the
amount of securities in this offering that may be purchased
by the persons affiliated with Kinship. Any shares purchased
by Kinship affiliates will be restricted stock and must be
held for investment purposes. All proceeds received after the
minimum offering will be paid directly to Kinship and may be
used for the anticipated company purposes as received.
Kinship is selling 100,000 (min.) to 200,000 (max.) of its
common voting stock in this Offering at $1.00/share. There is
no minimum subscription amount.
No allowances are made for the payment of commissions as we
intend to sell the offering through our own management,
self-underwriting, without the payment of any third party
commission or fees. Should we not be successful in selling
the offering, we may elect to amend this registration
statement and prospectus to provide for the payment of
commissions to any licensed third party underwriter or
broker, at which time the amount of commissions would be
described in the forepart of the prospectus. See section on
Terms of the Offering.
The State of Utah, in which the shares of this offering are
intended to be primarily or exclusively sold, has required as
a condition of registration in such jurisdiction that the
control shares held by Mr. Limpert (49%) and Mr. Deru (49%)
be deemed promotional shares and held pursuant to a share
"lock-in" agreement for a period of up to four years. This
agreement is more fully described under "Terms of the
Offering" and a copy of which has been filed with this
registration statement.
1
<PAGE>
Business: We, to date, have not engaged in any active business purpose.
We have recently entered into a Product Distribution
Agreement with ProSource Software for the distribution and
marketing rights to what we believe is a unique proprietary
computer software used in vehicular accident reconstruction
and analysis. The contract essentially provides for a
discount purchase right to the technology by Kinship on a
geographic exclusive basis for an initial two year term.
Kinship, if the supplier is not able to satisfy demand, may
also arrange for third party manufacturing of the technology.
This contract is more fully explained under the Business
Section.
Use of Proceeds: Kinship intends to primarily use offering proceeds for
marketing the software. However, each of you should
understand that we have broad discretion, in the exercise of
sound business judgment, to alter or amend the specific use
of proceeds applicable. See Use of Proceeds Section.
Control & You should also understand that even in the event of the sale
Ownership: of the maximum offering, you and other shareholders
purchasing pursuant to this registration will hold only a
minority interest in Kinship and that the original founders
and shareholders will continue to maintain a majority
sharehold interest. See Risk Factors and Terms of the
Offering.
Offering Price: The offering price for shares in this registration have been
arbitrarily set by us and do not purport, in any way, to
reflect the actual value of Kinship or its assets. See
section on Terms of the Offering.
Cost of Offering: We have estimated the cost of this offering to be
approximately $20,000 which amount should include
registration fees, printing, legal, accounting and
distribution costs.
No Commissions: No allowances are made for the payment of commissions as we
intend to sell the offering through our own management
without the payment of any third party commission or fees.
Should we not be successful in selling the offering, we may
elect to amend this registration statement and prospectus to
provide for the payment of commissions to any licensed third
party underwriter or broker, at which time the amount of
commissions would be described in the forepart of the
prospectus. See Section on Terms of the Offering.
2
<PAGE>
RISK FACTORS
------------
The following constitutes what we believe to be the significant risk
factors in this offering. Each investor should read the entire prospectus, as
these risk factors may be discussed or illuminated by other sections.
1- The assets in which you are acquiring an interest by investing may
only be short term, as Kinship only has a contract right to market the software
for a two year period. The current products of Kinship are not only unproven,
but are distributed by Kinship only pursuant to a two year distribution
contract. As a result, there is no assurance the company can continue to market
its licensed products beyond this initial two year term, or that it will be able
to have any business purpose beyond this term.
2- The auditors for Kinship have stated a reservation that Kinship may
not be a going business concern. This opinion states a risk to you that the
company may not be able to continue and your entire investment may be at risk.
In note 5 to the July 31, 2000 Financial Statements for Kinship, its independent
auditors have expressed a reservation that the company may not be able to
continue as a going business concern due to a lack of operating history and
revenues.
3- There exists risks which may be adverse to your investment in
Kinship and the company due to the close personal relationship between the owner
of ProSource and a principal of Kinship. A principal of Kinship, Mr. Andrew
Limpert, is the son of the owner of the software supplier to the company,
ProSource Software. This means, potentially, that any contract or transaction
between Kinship and ProSource may not be "arms length," that is the risk exists
that Kinship may suffer from potential insider treatment or special treatment to
ProSource by Kinship. See Section on Related Party Transactions.
4- You must recognize a risk as an investor in this offering that
Kinship will have only a limited amount of capital resources after this offering
to attempt to meet its business purposes. We have intentionally limited the
amount of money to be raised in this offering to help in efforts to close this
offering as a self-underwriting by potential contacts of management and without
the need to employ third party underwriters or broker dealers. As a result, the
amount of capital being raised is marginal and may not be adequate to fully or
sufficiently fund the business plan or complete one or more of the stated
objectives of Kinship. Further, Kinship has no alternative financing plan.
5- We have very broad discretion to determine the specific application
of proceeds of this offering which may pose a risk to the nature of your
intended investment. Management's broad discretion in the use of proceeds may
pose a risk to investors in that they may not be investing in exactly the type
of offering or terms of offering described if management uses the proceeds of
this offering other than generally outlined in the Use of Proceeds or
Description of Business.
6- Current Shareholders will continue to control Kinship after this
offering. Even in the event that the maximum amount is sold in this offering,
the original shareholders in Kinship prior to this offering will continue to
hold the majority of the shares and will control the future of Kinship in such
important matters as type of business, compensation to management and control of
the corporation's Board of Directors.
7- You may not be able to trade your Kinship shares, because there are
no public markets on which Kinship stock trades. As of the time of the
anticipated effective date of this registration statement, there will not exist
3
<PAGE>
any publicly traded market for Kinship's shares. Even after the completion of
this offering, as a minimum or maximum offering, there can be no assurance that
a publicly traded market will develop for the shares being sold to you in this
offering. If we are not able to develop a public trading market for the shares,
there may be limited liquidity of the shares and you may be forced to hold such
shares for an indefinite period of time and to then rely upon the uncertain
prospects of "private"sales of your securities in order to have any type of a
marketability or "exit strategy."
8- You should recognize a risk that there is no objective standard for
the value of your shares as Management set the offering price without reference
to any valuation formula. The offering price of the shares being sold in this
offering were arbitrarily set by us and do not reflect any intrinsic value of
Kinship or its shares.
9- If you invest, your shares will be worth less after the offering
than what you paid for them. Because various of the initial shares in this
corporation were issued to founders or other affiliated parties for minimal
capitalization and intangibles, such as concepts, entrepreneurship and other
factors not involving hard assets or cash, you, as a post organization investor
in this offering, will suffer a "dilution" in value of the shares you purchase
in this offering - that is the reduction in value of your shares after the
offering compared to the price of the shares being purchased in the offering.
See Dilution Section.
10- Each investor faces a risk of loss of their investment, because the
Kinship products and potential markets are unproven. The concepts and products
described in this offering have traditionally been associated with a limited
market. There is no assurance that we will be successful in profitably marketing
the intended services and products either to this limited market or beyond this
limited market. See Description of Business and Markets.
11- There is an investment risk which may adversely affect the value of
your investment to the extent that Kinship will only have a limited exclusive
market. That is, Kinship has no assurance it can exclusively market its sole
licensed technology outside the initial license area of Arizona, California,
Idaho, Nevada and Utah and may be required to compete with other licensees
outside this market area. We are obtaining exclusive geographic rights to the
technology. This means the licensor or owner of the software directly, or
through one or more third parties, may compete with us in other geographic areas
not included in our distribution contract.
12- The value of your investment is diminished, because a significant
portion of offering proceeds are being used to pay offering costs. The cost of
the offering constitutes a substantial portion of the proceeds of this offering,
up to 20% in the event only the minimum offering is sold. As a result, you
should understand that much of the proceeds being raised will be used to pay the
cost of this offering, rather than being employed for actual business purposes.
We anticipated this consequence as a result of our efforts to maintain a limited
offering size. However, there remains a risk that a relatively high portion of
the proceeds of the offering will be used to pay costs rather than direct
business development. See Use of Proceeds, Description of Business and Terms of
the Offering sections.
13- You face an investment risk in this offering, because Management
lacks experience in managing a public company. Your investment could be
diminished or placed at risks by management's inexperience in complying with the
complex reporting and compliance requirements placed upon public companies by
federal and states securities regulatory agencies. We have limited experience in
business activities and no experience in the management of a public company. You
will be relying upon management to be able to manage a public company, complete
4
<PAGE>
the reporting requirements and to learn and discharge the other responsibilities
incident to the operation of a publicly held reporting company if this offering
is successfully closed.
14- In any start-up you have a greater risk of loss of your investment
than purchasing shares in a seasoned company. As a start-up company, there may
be some cost overruns and other problems that are not disclosed or anticipated
by this offering and which may impede the return of investment or the continued
commercial operations of Kinship.
DILUTION
--------
Dilution is a term which normally defines the reduction in value per
share which occurs to the investor in certain offerings compared to the purchase
price of those shares. By way of specific illustration, an investor in this
offering is paying $1.00 per share. It is estimated that the net worth per share
after the completion of the maximum offering will only be $.14. Therefore, each
investor in this offering will suffer an immediate dilution to his investment of
$.86 per share or 86 % in the maximum offering; and $.92 per share or 92 % in
the minimum offering. These dilution factors are illustrated in the following
graphical representations:
<TABLE>
<CAPTION>
Minimum offering Maximum Offering
---------------- ----------------
<S> <C> <C> <C> <C> <C>
Value Subscription Value share after Value Subscription Value share
$1.00/share offering $1.00/share after offering
100% $ .08/share 100% $.14 /share
(Rounded) (Rounded)
Dilution Dilution
Dilution 92% Dilution 86%
</TABLE>
(GRAPH OMITTED)
In this offering dilution primarily arises because the original
founders and affiliated parties who organized the corporation took shares for
entrepreneurial effort and concepts, but with the transfer of minimal cash. As a
result, after the initial funding, there was not any significant accountable net
worth in the company. You, as an investor, will contribute essentially all of
the working capital, but which contribution is divided not only by shares sold
in this offering, but also among those issued to the original shareholders thus
resulting in the dilution described above.
PLAN OF DISTRIBUTION AND TERMS OF THE OFFERING
----------------------------------------------
As noted previously, Kinship does not intend to employ the services of
any underwriter or other broker/dealer to place or sell its securities. Kinship
believes it can place the limited amount of securities being offered by this
registration through the efforts of Mr. Limpert who will not be paid any
consideration, commission or other compensation for the selling and placement
efforts. Consequently, no provisions for commissions have been provided for in
this prospectus. Should management determine, at any time, that it is necessary
to sell this offering through the use of commissions to an underwriter,
management will reserve the right to amend the registration and prospectus to
reflect any such commission arrangements and to continue with the offering in
accordance with all other terms and provisions.
5
<PAGE>
Of current management, it is anticipated that Mr. Limpert will be
solely responsible for the efforts to sell the Kinship stock pursuant to this
offering to various business contacts and acquaintances through delivery of the
prospectus. No assurance of his success can be given and he will only engage in
these efforts, part-time, as he elects. He will engage in such activities on his
own time without compensation. Obviously, there is an indirect benefit to
management, as principal shareholders, if the shares are sold in this offering
as the management shareholders would most likely realize an increase in the
value of their shares and potentially an active market for their shares.
Mr. Limpert and Mr. Deru will continue working full-time as financial
and retirement planners at their affiliated firm of Belsen Getty, LLC.
Mr. Limpert and Mr. Deru have committed to devote such time as
necessary in addition to their employment with Belsen Getty to implement the
business plan described by this offering. Each have also undertaken to reduce
their self employed hours at Belsen Getty, as and if necessary, for such
management and start-up activities required by Kinship. Both are optimistic that
during the projected start-up phase of operations for an estimated six months,
Mr. Limpert and Mr. Deru can implement the business plan by a weekly expenditure
of approximately fifteen hours each, though no warranty or assurance of this
estimate can be given. Kinship anticipates that if projections are met after the
initial start-up period that it should be in a position to hire a part-time or
full-time field manager for sales and marketing activities to be paid on a
commission, or commission plus salary basis, exclusively from anticipated
revenues.
The costs of this offering are estimated at $20,000, and include legal,
accounting, filing or permit fees, printing and related distribution costs.
These amounts are estimates but are believed reasonably accurate for the
intended size of the offering. As noted under the Risk Factors and Use of
Proceeds Sections, payment of these estimated offering costs will expend a
significant portion of both the minimum or maximum offering, this will limit the
amount of net proceeds available for actual business purposes.
Proceeds of the offering, up to the minimum offering, will be placed in
a segregated subscription account under control of Kinship and will not be
employed for any business purposes of the company until or unless the minimum
offering is sold within the offering term of 120 days from the date appearing on
the face of this prospectus. If the minimum offering is not fully sold and
collected within such minimum period, then the offering will be terminated and
all proceeds will be returned without deduction for costs or addition of any
interest. Kinship will obtain an address from each subscriber and will return
all proceeds within ten days of the termination of the offering to that address.
Any interest earned on the subscription account will be employed by Kinship to
pay for anticipated offering costs and return of subscription proceeds to
investors.
In the event of the close of the minimum offering, Kinship will employ
proceeds of this offering upon receipt and the subscription account will no
longer be employed.
Kinship reserves the right to close the offering at any time within the
offering term of 120 days when the minimum offering has been sold, even if less
than the maximum offering has been sold. Factors which may influence Kinship's
decision to close the offering would be the effort required to continue sales
and the rate at which subscriptions were obtained up to the minimum offering. In
all events, the company will not sell more than the maximum offering and will
close the offering at any time that the maximum amount has been sold. The Use of
Proceeds section reflects Kinship's best present estimate of the use of proceeds
in the event of either the minimum or maximum offering. The offering may be
6
<PAGE>
closed at some point between the minimum and maximum and the use of proceeds
will be adjusted accordingly, though no assurance is given or represented that
such adjustment will be exactly pro rata to the percentage difference between
the minimum and maximum offering.
It is intended the offering will be sold primarily to citizens of the
State of Utah and that the offering will qualify in Utah as a registration by
coordination. That is, Kinship will be deemed to be qualified as a registered
offering in Utah upon clearance of this registration with the SEC, subject to
the share lock-up provision described below. If the offering is offered or sold
in other jurisdictions, the offering must be registered or qualified under the
applicable state law of that jurisdiction. Kinship does not intend to register
this offering in any other jurisdiction for sale unless such registration can
primarily be achieved by coordination without the necessity of any merit or
substantial additional disclosure requirements. However, should Kinship elect to
sell in any jurisdiction that imposes any additional disclosure requirements,
they will be included in this offering as a supplemental disclosure.
Also, as previously noted, the company has not secured a commitment to
list or trade the securities being registered through any broker/dealer and
there is no present assurance that a public market will exist for the securities
even in the event of a successful completion of this offering. Each prospective
investor should consider the potential lack of a public market as a significant
risk factor. Management will work to obtain the listing of the securities after
this offering by one or more broker/dealers, but can give no warranty or
assurance that they will be successful in such efforts.
No shares of current management or original shareholders are being
registered pursuant to this offering and no intent or obligation exists by
Kinship to currently register issued shares in any manner.
The State of Utah, Division of Securities, has imposed as a requirement
of the effectiveness of this registration in Utah that the two principal
shareholders, Mr. Deru and Mr. Limpert, agree not to transfer, sell or pledge
their "promotional" shares, except in limited circumstances, for a period
extending up to four years under a lock-in agreement between these shareholders
and Kinship. Each hold 49% of the presently issued and outstanding shares which
are being deemed to be promotional shares. The essential terms of this agreement
as promulgated by the National Association of State Securities Administrators is
outlined below, a copy of the agreement has been filed as an exhibit to this
registration:
1. The outside date of the agreement is four years from December 15,
2000;
2. After two years, each shareholder may sell his pro rated part of 2
1/2% of the subject promotional shares in each quarter, with any remaining
shares to be sold at the end of the base four year term;
3. At anytime after one year from the close of this offering if Kinship
has aggregated gross revenues of $500,000 or more, and the current audited
financials do not contain a reservation that Kinship is a going concern, the
shareholders under the agreement may begin to sell their pro rated part of 2
1/2% of the subject promotional shares in each quarter while such conditions are
extant;
4. In the event of merger, consolidation, liquidation or a like
transaction, the promotional shareholders only get back their pro rata share of
any consideration paid based upon cost basis until all shareholders purchasing
in this or any subsequent offering are paid back in full; thereafter, each may
share pro rata to actual shares held;
7
<PAGE>
5. The holders of the promotional shares may transfer to family members
by gift or estate distribution, but such shares will remain subject to this
agreement. Such shares are also subject to this agreement incident to a merger,
consolidation, transfer of assets, liquidation or like transaction;
6. Voting rights remain with the holder, but the certificates will bear
a legend.
USE OF PROCEEDS
---------------
We have set-out in the following tabular format the intended use of
proceeds based upon the sale of either the minimum or maximum offering. As
previously advised, each prospective investor should be aware that the offering
may be closed at some point between the minimum and maximum offering and there
would be some allocation of the use of proceeds between the two tables, though
management is under no requirement to exactly complete a mathematical pro ration
on the use of proceeds.
You are advised that management may alter or change the use of proceeds
in the exercise of sound business discretion after the completion of the
offering and the following should constitute only an outline of the present
intended use of proceeds.
We believe that the following Use of Proceeds is consistent with our
subsequently described "Business Plan and Objectives" and we have no intention
of departing in any event from the general marketing of the products or services
of Kinship as described. However, if significantly more proceeds are used in one
or more facets of operations than generally outlined below, we undertake to
inform our investors by notifying each investor within sixty days after the
close of the initial six months of operations following the close of their
offering of the actual allocation and expenditure of proceeds.
While changes in expenditures cannot be fully anticipated, if they
occur at all, it is possible we may expend more on overhead expenses as outlined
below if management still felt the basic marketing plan and products were sound
but simply needed to be carried a little further than originally projected. In
like manner, actual marketing costs may be greater that projected.
<TABLE>
<CAPTION>
Minimum Offering:
-------------------------------------------------------------------------------------------------------------
General Description of Intended Expenditure Dollar Amount Percentage of
Offering
(Rounded)
-------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1. Estimated costs of offering $20,000 20%
-------------------------------------------------------------------------------------------------------------
2. Overhead expenses (six months) $25,000 25%
-------------------------------------------------------------------------------------------------------------
3. Funds committed to acquiring and marketing $30,000 30%
the "software technology"
-------------------------------------------------------------------------------------------------------------
4. Funds reserved for securities compliance work $7,000 7%
-------------------------------------------------------------------------------------------------------------
5. Working capital reserves $18,000 18%
-------------------------------------------------------------------------------------------------------------
Totals $100,000 100%
-------------------------------------------------------------------------------------------------------------
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
Maximum Offering:
-------------------------------------------------------------------------------------------------------------
General Description of Intended Expenditure Dollar Amount Percentage of
Offering
(Rounded)
-------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1. Estimated costs of offering $20,000 10%
-------------------------------------------------------------------------------------------------------------
2. Overhead expenses (six months) $25,000 13%
-------------------------------------------------------------------------------------------------------------
3. Funds committed to acquiring and marketing $100,000 50%
the "software technology"
-------------------------------------------------------------------------------------------------------------
4. Funds reserved for securities compliance work $8,000 4%
-------------------------------------------------------------------------------------------------------------
5. Working capital reserves $47,000 23%
-------------------------------------------------------------------------------------------------------------
Totals $200,000 100%
-------------------------------------------------------------------------------------------------------------
</TABLE>
Kinship has reserved and allocated approximately $25,000 of the net
proceeds of the Offering for operational costs. The operational allocations are
allocated to cover the minimum costs of operations of Kinship for an estimated
period of six months. Kinship believes that it should obtain self sustaining
operations, if at all, within a period of six months. Included within the
operational allocation would be payment of rent, utilities, and other overhead;
as well as a base salary stipend of $1,000/monthly for the present Chief
Executive Officer of the Company for his services on an as needed basis. It is
not anticipated that there will be any full time salaried officers or employees
during this initial start-up phase, unless revenues are generated sufficient to
justify payment of salaries to other employees through those revenues. The total
amount of salary allocated for the initial six month period to the Chief
Executive Officer will not exceed $6,000. It should be understood this is a
reduced stipend from the base salary proposed for the CEO and he has agreed to
accept this as a minimal allocation from proceeds during the start-up phase.
It is anticipated that revenues will be sufficient to cover operating
expenses after the first six months of operation, though no assurance or
warranty of this projection can be made. We may elect to use additional offering
proceeds for continuing operations beyond the six month term in the exercise of
sound business discretion. In all events, the use of proceeds of the offering to
pay operational costs will necessarily reduce the amount of proceeds of the
offering available for actual product marketing and distribution. Each
prospective investor should understand that there is a risk factor in investing
in a start-up entity that may use substantial offering proceeds for operational
costs when the company does not have sufficient revenues to pay for such costs.
There is no assurance that any of the estimated use of proceeds for the
specific business purposes outlined above will be sufficient to adequately fund
the costs of operation and start up of the various business operations.
We reserve the right to explore supplemental financing, through either
private placements or loans, should the proceeds of this offering not prove
adequate to complete our business purposes. No warranties or assurances have
been made or represented in any manner that Kinship would be successful in
securing alternative financing and no prospective investors should invest with
the expectation that such alternative funding is available.
9
<PAGE>
As noted above, Kinship has allocated $30,000 in the event of the
minimum offering and approximately $100,000 in the maximum offering towards the
direct distribution and marketing efforts for the "software technology"
consisting of the unique proprietary software. It is intended that Kinship will
primarily use these proceeds to attempt to acquire and retain various
distributors on a commission basis for the product, as well as direct marketing
efforts through direct conventional and e-mail mailings and other selective
Internet marketing efforts. At the present, Kinship is completing an internal
business plan as to an allocation of these anticipated proceeds between a
website, catalog advertising and direct mailing to various companies or
individuals who may be prospective distributors of the intended product line. A
final allocation of proceeds between these various advertising mediums has not
been determined, but it is generally anticipated that from all proceeds used for
marketing, approximately15% will be earmarked for the Website; 15% for catalog;
and 70% for initial direct mailing efforts.
DESCRIPTION OF BUSINESS
-----------------------
Our discussion and analysis of the Business and subsequent discussion of
Financial Conditions may contain forward-looking statements that involve risks
and uncertainties. The statements contained in the prospectus are not purely
historical but are forward-looking statements including, without limitations,
statements regarding Kinship's expectations, beliefs, estimates, intentions, and
strategies about the future. Words such as, "anticipates," "expects," "intends,"
"plans," "believes, "seeks," "estimates," or variations of such words and
similar expressions are intended to identify such forward-looking statements,
but their absence does not mean the statement is not forward-looking. These
statements are not guarantees of future performance and are subject to certain
risks, uncertainties, and assumptions that are difficult to predict; therefore,
actual results may differ materially from those expressed or forecasted in any
such forward-looking statements as a result of certain factors.
GENERAL AND HISTORICAL
Kinship Systems, Inc. was incorporated in the State of Utah on February
1, 2000 under the initial name of Kinship Communications, Inc. The name was
subsequently changed, due to availability, as of March 2, 2000 to Kinship
Systems, Inc. Because no business, other than organizational matters, were
conducted under the Kinship Communications name, Kinship does not deem the name
to have any significance and has referred to itself for the purposes of this
prospectus as Kinship Systems, Inc.
On May 4, 2000, Kinship entered into a product distribution agreement
with ProSource Software, a Utah Proprietorship ("ProSource"). ProSource will be
the supplier for specific computer software developed and marketed by ProSource
primarily for software programs designed for vehicle accident analysis and
reconstruction, Exhibit "F". This is a limited industry in which various
accident reconstruction experts, as well as various traffic and law enforcement
agencies, attempt to analyze data related to accident reconstruction. The
primary purpose of this type of analysis is to provide for liability and damage
consultation and services related to litigation which may arise out of vehicle
accidents. ProSource prior to and after the negotiation of this Distribution
Agreement was and is owned by the father of Mr. Andrew Limpert, a principal of
Kinship, which raises certain issues and risks of insider transactions and
favorable treatment. See Risk Factors and Related Party Transactions.
The technology is also used by various police departments in accessing
liability or fault in a traffic accident situation. Because of the limited scope
10
<PAGE>
of the software it is considered a "specialty item" which would have interest
primarily to insurance companies, potential litigants and their legal counsel,
as well as various police and transportation departments.
The principal software for which Kinship is obtaining a distribution
right is known as the "Larm 2"(TM). Larm is an acronym for linear and rotational
momentum. This software is used for various vehicle accident diagram programs
and analysis as to speed, direction, vector analysis and potential physical
damages caused by various hypothetical accident configurations. The other
software is known as the "Accident Avoidance Analysis"(TM) (AAA) which is
primarily used to analyze various speed and distances factors related to
accident reconstruction work. This software is also employed to determine under
what conditions of speed and distance an accident scenario may have been
avoided.
The specific terms of the marketing agreement between Kinship and
ProSource Software provides that Kinship would have the exclusive marketing
rights to this software in the states of Arizona, California, Idaho, Nevada and
Utah. After January 1, 2001, Kinship may elect to designate fourteen additional
states within the United States as exclusive marketing areas. ProSource would
sell the software, manuals and advertising material for this software configured
for either single, network or lan users at a 45% discount to the lowest
prevailing market price employed by ProSource or the lowest actual or determined
price by Kinship, whichever is less. It would be anticipated that Kinship would
then resell the product at a 45% markup within the exclusively designated
geographic areas. The initial term of the agreement is for 2 years.
Kinship intends to use direct mailing, e-mailing, trade print
advertising and Web Site sales as the primary marketing tools for this product,
though no assurance or warranty of successful marketing efforts can be made.
After the termination of the initial 2 year term of the agreement, the
parties may renegotiate a continuation of the contract as mutually agreed upon.
There is no obligation or warranty that either Kinship or ProSource will
continue with the marketing of the software or other software products from
ProSource after the termination of the initial 2 year term.
A particular risk factor exists if Kinship is very successful in its
marketing of the product; the supplier may be inclined not to renew the
distribution contract in anticipation of assuming the market share developed by
Kinship. Upon a cursory market review, Kinship is not aware of alternative or
competing software programs such that there would not presently appear to be any
alternative software product which it could sell or distribute.
The contract also provides that if ProSource is, at any time, unable to
adequately supply software, manuals or other components of the software product
to be marketed, then Kinship may, at its own cost and expense, obtain third
party production of these materials and resell the materials at its current
prevailing market price.
A copy of the distribution agreement with addendum between the supplier
and Kinship is attached and incorporated as Exhibit "E" to this registration
statement, but is not included in the prospectus delivered to you. Any potential
investor desiring to review this contract prior to investing may obtain a copy
by requesting the document from Kinship.
The present business of Kinship is too new for Kinship to make any
reasonable projections as to gross revenues, net profits, if any, or even the
number of units which must be sold by Kinship to obtain profitability. Further,
Kinship is not able to make any present estimates or projections as to
geographic areas, markets or specific customers to which most of the products
may be sold.
11
<PAGE>
Kinship's plan of operation for the next twelve month period generally
follows the use of proceeds and commentary to that section. That is, Kinship
anticipates it can function with part-time participation of its three management
figures until anticipated revenues would allow it to hire a full- time manager
and other employees after a projected six month start-up period. Kinship
anticipates, but again cannot warrant, that it should realize net profits after
approximately six to twelve months of operations. Kinship has reserved an
interim stipend of $1,000/month for which Mr. Deru has agreed to devote such
time as required to the start-up of the company for the first six months of
operation. Kinship does not believe adequate data exists to make revenue or
income projections beyond these rudimentary start-up estimates.
Upon preliminary analysis, and because of the specialty scope of the
software, Kinship is not aware of any competitive software or companies, though
it acknowledges the relative ease of entry into this market sector. Kinship
would also note that various insurance companies and police forces use similar
internally created software for this type of analysis, which private software
while not competitive reduces the demand for the company's technology.
It is anticipated that market analysis will subsequently be available
and can be disclosed to shareholders in Kinship as Kinship generates such data
from anticipated sales and revenues.
No assurance or warranty can be given that Kinship will be successful in
any manner in the marketing or distribution of the product.
SPECIFIC BUSINESS PLAN AND PROJECTIONS
Kinship reasonably believes that it should be able to determine within a
period of six months whether its operations will ever be self sustaining from
revenues. We have attempted to discuss various alternatives for Kinship in the
next section, "Management's Discussion and Analysis of Financial Condition," if
we are not accurate in this six month projection. No assurance of this
projection can be made or implied in any manner.
To date, we have been engaged in formation of the corporate entity,
collateral efforts to secure a contract with ProSource for the distribution
rights and efforts, and to complete this registration on a federal level and in
the State of Utah. Immediately prior to your and receiving this prospectus, we
were primarily engaged as management in completing testing and licensings in
Utah to act as issuer/agents and to complete the federal and state registration
of these securities.
In the event the offering is closed our specific business plan related
to commencing operations with the proceeds of this offering will involve:
o Initial direct mailing to likely end users of the product of an
advertising solicitation flyer describing the product, pricing,
warranties and testimonials of current users and ordering
instructions. We are currently compiling a mailing list from
telephone directories and online sources. The design and printing
of this advertising flyer and cost of mailing will be paid from
proceeds and is anticipated to be completed within 45 days after
the close of the offering.
o Initial funding for catalogue advertising of the products in an
anticipated catalogue of software programs sent to law enforcement
12
<PAGE>
sources and independent automobile underwriters. Kinship
anticipates searching for such catalogue candidates online and by
independent marketing agents to be paid for by offering proceeds.
We anticipate employing one to two catalogue advertisements in the
event of the minimum offering and three to four in the event of
the maximum offering to be paid from offering proceeds. It is
anticipated this advertising will be completed within 60-90 days
after the close of the offering.
o Initial funding for a basic web site containing the Kinship logo,
product description and ordering instructions. The design would be
contracted through an independent web designer and will attempt to
incorporate links to probable users. It is anticipated this site
will be completed within 60-90 days after the offering.
o Purchase of sufficient product inventories to satisfy initial
anticipated orders. Beyond the initial estimated 100 units, the
company anticipates funding subsequent inventory orders from order
receipts.
NUMBER OF PERSONS EMPLOYED
At present, only Mr. Terry Deru will act as a part-time officer of
Kinship during the initial start-up phase. Mr. David Collier as the Vice
President, and Mr. Andrew Limpert as the Secretary/Treasurer will serve Kinship
part-time on an as needed basis during the initial organizational period. These
individuals have agreed to receive subsequently determined stock options and
rights as deferred compensation for their part-time service during this initial
phase, as Kinship will not have sufficient proceeds to pay a salary to these
individuals. It is believed that the individuals will devote such time as may be
necessary to discharge various obligations in those capacities as well as their
service on the Board of Directors where applicable.
Mr. Deru, acting as the part-time President, will be responsible for all
of the day to day administrative duties for Kinship including necessary clerical
and administrative functions until such time as anticipated revenues would allow
for the hiring of any support personnel. Mr. Deru will receive a cost of living
stipend from offering proceeds up to $6,000 at $1,000 per month during the
initial six months of operations.
If subsequent revenues would justify the hiring of various personnel,
Kinship would intend to hire management, clerical and marketing personnel to
assist in the operation of the company, including the distribution of the
product. As noted earlier, it is anticipated, though not warranted, that such
personnel may be hired after the initial six months depending upon the revenues
generated from Kinship's operations.
ENVIRONMENTAL COMPLIANCE
It is not anticipated that the general products or services to be
supplied by Kinship will have significant or particular environmental compliance
requirements or regulations.
DESCRIPTION OF PROPERTY
-----------------------
Kinship currently operates a combined limited assembly and
administrative office/plant from leased space located at 22 East 100 South,
Suite 400, Salt Lake City, Utah 84111. This property consists of approximately
800 square feet which is currently retained on a one year sublease from Belsen
Getty with gross rental payments of $200.00 per month with the present lease
13
<PAGE>
term expiring on March 31st of 2001, but with the right of renewal for three
more years on a to be negotiated basis. Each investor should note that the
office/assembly space utilized by Kinship is within the facilities of Belsen
Getty which also employs Mr. Limpert and Mr. Deru. The 800 square feet consists
of a segregated office within the Belsen Getty facilities. Upon completion of
this offering it is anticipated Kinship will obtain its own telephone line.
The present facilities are believed adequate for the initial operation
of Kinship through the expenditure of the anticipated proceeds of this offering.
Thereafter, if the products are being successfully marketed and demand increases
beyond an estimated one hundred units per month of sales, the present facilities
would have to be expanded or other facilities acquired to meet demand. The
administrative offices consists of approximately one fourth of the lease area
and are considered adequate for the start-up period.
Total monthly costs of operation of the physical facilities including
rents, all utilities and other office expenses, except salaries, are estimated
to be approximately $250.00 per month at the present time.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
-----------------------------------------------------------
As noted previously, Kinship is a start-up entity without prior
operating history, revenues or income. No assurance or warranty can be made that
Kinship will be successful in its anticipated business operations and the nature
of a start-up entity is that it poses significant risk factors as to whether any
investor will receive back a return of investment, or whether they will lose
their entire investment.
LIQUIDITY
The initial capital of Kinship was $25,000 of which approximately $59
was expended through April, 2000. It is anticipated that all initial capital
will be expended in paying costs related to this registration.
The accountants have noted in their notes to the financial statements,
Note 5, that because Kinship has no operating history and limited
capitalization, the auditors must reserve opinion as to whether the company may
continue as a "going concern."
We have also expressed in the Risk Factors, and other sections of this
registration, some concern that the capitalization sought to be raised by this
offering may be too limited to adequately fund the intended business activities.
We believe Kinship must take this risk based upon its inability to obtain an
underwritten offering for greater capital. As a result, it must limit the amount
of capital being raised to that which reasonably can be anticipated through
management's efforts. We believe, but cannot warrant, that such capital should
be adequate to move Kinship to a point where revenues are generated by Kinship's
licensed software, if the product proves to be commercially viable.
Investors in this offering are assuming a risk as to both viability of
the product as a commercially marketable technology, as well as the normal risk
inherent in a start-up entity with limited capitalization.
Because no revenues have been generated to date, there does not exist
any standard methodology to break down factors as to what sectors or clients, if
any, may generate revenues, actual profit margins. Further we do not presently
14
<PAGE>
know costs of operation and other standard accounting and financial
measurements. The lack of such financial standards and measurements must be
considered as an additional risk factor to investors in this type of offering.
There is also a concern that actual costs of operation may substantially
exceed the projections used by Kinship in preparing the Use of Proceeds Section
in which event Kinship may have to spend more of the net proceeds of this
offering to sustain minimal operations and devote less to product development
and marketing.
CAPITAL RESOURCES
Should the anticipated proceeds of this offering not be sufficient to
fund the projected activities of Kinship, Kinship does not have any alternative
financing commitments. Kinship may attempt to raise additional funding by some
form of private placement; however, no assurance of such financing or the
success of any alternative financing can be made. In all events, Kinship has no
alternative financing commitments, including any institutional or private loan
commitments, or loan or financing commitments by officers or directors. If it
appears that the projection of revenues to sustain operations cannot be met in
the projected six months, then Kinship can most likely continue for a limited
time and will employ any capital, as available, if we believe sustained
operations can be obtained. Otherwise, Kinship would be forced to liquidate and
terminate operations or seek alternative business opportunities and/or
financing. No projections of such future financing alternatives, or the
feasibility of such alternatives, can be made at this time.
RESULTS OF OPERATIONS
As previously noted, Kinship has had no prior operations and all
activities to date have been limited to start-up activities, including
registration and capital formation. As generally discussed under the Business
Section, we believe that through an expenditure of the capital being raised,
Kinship will be able to determine within six months if the product can be
commercially marketed, though no warranty or assurance of this projection can be
given.
DIRECTORS, EXECUTIVE OFFICERS AND SIGNIFICANT EMPLOYEES
-------------------------------------------------------
Following this table is a brief biographical description for each of the
management principals with a brief description of their business experience and
present relationship to Kinship, together with all required relevant disclosures
for the past five years. Following the biographical information for the
directors and officers is a remuneration table showing current compensation and
following this table a security ownership table showing security ownership of
the principal officers and directors and those holding ten percent (10%) or more
of the issued and outstanding stock.
15
<PAGE>
--------------------------------------------------------------------------------
NAME POSITION CURRENT TERM OF
OFFICE
--------------------------------------------------------------------------------
Mr. Terry Deru Director/CEO/ President Appointed in
Chairman of the Board Organizational Minutes
(Part-time) - February, 2000. Will
serve as director
until first annual
meeting, not yet set.
Will serve as an
officer without
term/contract pursuant
to leave of the Board
of Directors.
--------------------------------------------------------------------------------
Mr. Andrew Limpert Director/Treasurer/Secretary Appointed in
CFO/Accounting Officer Organizational Minutes
(As needed) - February, 2000. Will
serve as Director
until first annual
meeting, not yet set.
Will serve as an
officer without
term/contract pursuant
to leave of the Board
of Directors Appointed
in Organizational
Minutes - February,
2000.
--------------------------------------------------------------------------------
Mr. Robert Hunter Director Will serve as Director
(As needed) until first annual
meeting, not yet set.
Will serve as an
officer without
term/contract pursuant
to leave of the Board
of Directors
--------------------------------------------------------------------------------
Mr. David Collier Vice President Appointed in
(As needed) Organizational Minutes
-February, 2000 as an
officer. Will serve as
an officer without
term/contract pursuant
to leave of the Board
of Directors
--------------------------------------------------------------------------------
BIOGRAPHICALS
MR. TERRY DERU - DIRECTOR , CEO/PRESIDENT, CHAIRMAN OF THE BOARD
Age: 46
Mr. Deru is currently an owner and consultant with Belsen Getty LLC, or
its predecessor form of operation as a corporation, a Salt Lake City, Utah based
financial and retirement planning firm. The firm, or its predecessor, has been a
licensed investment advisory firm with the SEC since 1984 and in Utah since July
of 2000. Mr. Deru is a licensed and certified financial planner, and is
currently seeking a waiver to be qualified in Utah as an Investment Advisor with
Belsen Getty. The licensure of Mr. Deru to provide investment advisory services
in Utah is pending and cannot be warranted. Mr. Deru has been with Belsen Getty
since 1985. Mr. Deru will continue on a part-time affiliation with Belsen Getty
while acting as the part-time officer of the Company. Mr. Deru obtained a B.A.
degree from the University of Utah in Salt Lake City, Utah, in finance in 1977
and an M.B.A. degree from that institution in 1979.
16
<PAGE>
MR. ANDREW LIMPERT - DIRECTOR/SECRETARY/TREASURER/CFO
ACCOUNTING OFFICER
Age: 30
Mr. Limpert has been a financial and retirement planner with the Salt
Lake based firm of Belsen Getty LLC since 1998, but he is not a certified
financial planner. In this capacity he is also presently completing licensing
requirements and testing prescribed by the State of Utah to be an investment
advisor. No assurance of the completion of these requirements can be made. Mr.
Limpert plans to continue his full-time employment with Belsen Getty. Prior to
that position he worked with Pro Source Software of Park City, Utah as a
software sales agent from 1993 to 1998. Mr. Limpert holds a B.S. degree in
finance from the University of Utah, in Salt Lake City, Utah, in 1995 and an
M.B.A from Westminster College of Salt Lake City, Utah in 1998.
MR. ROBERT HUNTER - DIRECTOR
Age :47
Mr. Hunter is a practicing CPA with Hunter & Hashimoto in Sandy, Utah.
He has been affiliated with that firm over the past twelve years. Mr. Hunter
specializes in Tax and Bankruptcy accounting. He will serve on an as needed
basis. He is a 1981 graduate of Brigham Young University in Provo, Utah with a
Master of Accountancy in Federal Taxation.
MR. DAVID COLLIER - VICE PRESIDENT
Age: 31
Mr. Collier most recently served as a sales representative with Bank of
the West where he was responsible for obtaining loan commitments. He has been
affiliated with the Bank from August 1996 to current. Previously Mr. Collier has
worked for Lightspeed Dealer Systems as a sales representative for its software
products from March 1992 to July 1996. In this capacity he gained experience in
a public company as it completed an IPO and in a later merger transaction where
the company was bought out by Bell & Howell Corporation. Mr. Collier is a
graduate of Weber State University in Ogden, Utah with a B.S. Degree in
technical sales.
The following table includes the anticipated three most highly
compensated officers or directors in Kinship. As each investor has been advised,
this is a start up entity in which no salaries have been paid to date. The
following table attempts to set forth the anticipated salaries to be paid from
revenues, if Kinship is successful in this offering. At present, there is no
plan to pay any salary from offering proceeds beyond the initial six month
stipend to Mr. Deru, or to pay other salaries from proceeds. There are no fixed
employment contracts or commitments with current management. The following
tables attempt only to illustrate probable management compensation after the
start-up phase.
Further, it is anticipated that if Kinship is successful in generating
revenues, it will attempt to hire one or more other officers and employees to
supply administrative and marketing services. As a result, the following chart
only includes the current stipend amount to be paid to the president, with
reservation of salaries to other officers pending revenues.
17
<PAGE>
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------
POSITION NAME OF CAPACITY IN WHICH AGGREGATE
INDIVIDUAL OR REMUNERATION WILL REMUNERATION
IDENTITY OF GROUP BE RECEIVED
----------------------------------------------------------------------------------------------------
<S> <C> <C>
All executive officers as a group President $1,000/month-stipend from
and offering proceeds for the
Other Officers president until and unless
sufficient revenues are received
for a period up to six months.
Beginning anticipated salaries
for all full-time officers are not
yet determined and are
contingent upon revenues.
----------------------------------------------------------------------------------------------------
</TABLE>
SHARES OWNED BY MANAGEMENT AND CERTAIN SECURITY HOLDERS
-------------------------------------------------------
The following table includes all shares issued to a director, officer or
5% or greater shareholder. There are no created or issued stock options or other
stock rights in Kinship at the present time:
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------------------
Title or Class Name of Owner Amount Amount Percent of Percent of
owned owned Class Before Class After
before the after the Offering Max.
Offering Offering (Rounded) Offering
(Rounded)
-------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Common Stock Terry Deru 625,000 same 49% 42.6%
-------------------------------------------------------------------------------------------------------------------------------
Common Stock Andrew Limpert 625,000 same 49% 42.6%
-------------------------------------------------------------------------------------------------------------------------------
Common Stock Robert Hunter 10,000 same 1% .6%
-------------------------------------------------------------------------------------------------------------------------------
Common Stock David Collier 10,000 same 1% .6%
-------------------------------------------------------------------------------------------------------------------------------
Common Stock All Officers/Directors
as a Group 1,270,000 same1 100% 86.4%
-------------------------------------------------------------------------------------------------------------------------------
1 Assumes management does not purchase shares in the offering.
</TABLE>
There are no other shareholders which own any of the outstanding stock
prior to the offering. Further, the company has not adopted any form of warrants
or option rights to any person who acquires stock. It is anticipated that in the
event of the successful completion of this offering, the board of directors may
authorize and approve a standard incentive stock option plan.
INTEREST OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS
---------------------------------------------------------
There are certain transactions related to Kinship and this offering
which are not deemed to be "arms-length" transactions. That is, the parties on
both sides of the contract or agreement have substantial relationships or common
interests. All such material transactions are believed to be disclosed in this
section:
18
<PAGE>
1. The Distribution Contract, described earlier in the offering, was not
negotiated or derived between totally disinterested parties. Mr. Limpert, on
behalf of Kinship, had substantial prior involvement and participation with the
supplier, ProSource Software, in the initial development and implementation of
the technology products subject to the Distribution Contract as a prior sale's
agent with ProSource. It is believed that Kinship may not have known about or
have been directed to pursue its current technology products, but for the prior
affiliation of Mr. Limpert with ProSource. Additionally, Mr. Limpert's father,
Rudolf Limpert, was the owner of ProSource prior to negotiating the Distribution
Contract and has recently reacquired such ownership interest. Mr. Andrew Limpert
does not have any ownership interest in ProSource. Mr. Andrew Limpert never had
an ownership interest in ProSource and has no further income interest.
Notwithstanding the foregoing relationships between Mr. Andrew Limpert and Mr.
Rudolf Limpert, we are convinced that terms of the Distribution Contract, as
negotiated with parties unrelated to the Limperts, are typical and consistent
with those that may have been obtained from any third party contractor. However,
each investor in this offering should consider that the terms and provision of
the Distribution Contract as well as continuing business relationships between
ProSource and Kinship may not be the result of an arms- length bargaining
agreement between two totally disinterested parties because of the past or
current relationships between Mr. Andrew Limpert and Mr. Rudolf Limpert.
2. Mr. Limpert and Mr. Deru have had a substantial prior business
relationship and dealings as financial planners and part owners of the Belsen
Getty financial planning firm. As a result, they may bring with them historical
relationships and interests which would not be the same as two totally
disinterested parties being retained as officers and directors of a public
company by unrelated management.
3. Each investor in the offering should consider, even if the total
offering is sold, the prior management group, as described above, will continue
in control and will essentially be in a position to dictate salaries,
distributions, and other interests as to all shareholders. While there is a
general common law or statutory obligation placed upon management of Kinship to
act in the best interest of all shareholders, each investor in this offering
should consider that their minority shareholders status imposes a certain risk
of not being in a position to influence or affect the direction of the company.
SECURITIES BEING OFFERED
------------------------
Kinship's voting common stock is being offered by this prospectus. Of
the Fifty-Million (50,000,000) shares of common stock authorized, $0.001 par,
Kinship presently has issued and outstanding 1,270,000 shares of common stock
and will sell between 100,000 shares of common stock in the minimum offering and
200,000 shares in the maximum offering. If the minimum offering is sold, the
shareholders purchasing in this offering would hold 7.3 % of the issued and
outstanding common stock and in the event of the maximum offering 13.6% of the
issued and outstanding common stock.
In summary of the nature of the securities being offered, each investor
should note as follows:
o Kinship does not have any dividend policy nor has it declared
dividends. It is not anticipated that dividends will be paid for the foreseeable
future by Kinship.
o Each common share has an equal voting right.
o There are no pre-emptive rights or cumulative voting in Kinship.
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o The shares are not subject to any conversion rights or obligations,
nor any redemptive provisions, sinking fund provisions, or liability to call or
assessment.
o It is not believed that any shareholder under Utah law would be
subject to any debts, liabilities or claims made against the company.
o Kinship does not have any warrants, rights or other stock interest or
rights to acquire stock; however, management will most likely institute some
standard management stock option plan if this offering is completed.
EXPERTS
-------
Legal Counsel - Kinship has retained the firm of Jensen, Duffin, Carman,
Dibb & Jackson to act as independent securities counsel. Counsel has passed upon
the eligibility of the Company to file this registration. Counsel has also
passed upon the validity of the shares offered by this registration as being
legally issued, fully paid and non-assessable as sold. The named expert has no
relationship with any member of management or Kinship.
Accountants - Kinship has also retained the firm of Hansen, Barnett and
Maxwell as the independent auditors. The audit report of Hansen, Barnett and
Maxwell are included in reliance upon that firm being an expert in auditing
matters.
LEGAL PROCEEDINGS
-----------------
Kinship is not presently engaged in any legal proceedings as either a
plaintiff or defendant, nor does it know of any material claims.
CHANGES IN OR DISAGREEMENTS WITH ACCOUNTANTS
--------------------------------------------
Neither Kinship nor its management has had any disagreement with, nor
have there been any changes in, the accounting materials prepared by such
independent auditors as attached hereto. The Company has retained the same
auditors since inception.
INDEMNITY OF OFFICERS AND DIRECTORS
-----------------------------------
The By-laws and Articles for Kinship provide indemnity statements for
general indemnities and relief from liability for management. These indemnities,
as well as Utah law, provide for general indemnity, including costs of defense
for officers, directors and agents acting within the normal scope of their duty
and service to Kinship.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the small business issuer pursuant to the foregoing provisions, or
otherwise, the small business issuer has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Act and is, therefore, unenforceable.
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PART II
-------
Item 1. Indemnification of Officers & Directors. Kinship indicates that
it has normal and customary indemnification provisions under its By-laws and
Articles of Incorporation as well as those generally provided by Utah law. It is
believed these provisions would indemnify all officers and directors from any
good faith mistake or omission in the performance of his or her duties including
cost of defense. Such indemnity would not extend to intentionally wrongful acts
including fraud, appropriation, self dealing or patent conflicts of interest.
The Articles and By-Laws are being filed as Exhibit items.
Item 2. Other Expenses of Issuance & Distribution. Kinship does not
know of any accrued or to be accrued expenses of issuance and distribution other
than as outlined in the foregoing prospectus Use of Proceeds section. The
present estimates of offering expenses are incorporated as costs for
registration, including: fees, legal accounting, printing and miscellaneous in
the aggregate amount of $20,000.
Item 3. Undertakings. The undersigned registrant hereby undertakes:
To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by section
10(a)(3) of the Securities Act of 1933. This
includes:
a. For determining liability under the Securities
Act, the issuer will treat each post-effective
amendment as a new registration statement of the
securities offered, and the offering of the
securities at that time to be the initial bona
fide offering.
b. The issuer will file a post-effective amendment
to remove from registration any of the
securities that remain unsold at the end of the
offering.
(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.
(iv) To the extent this issuer requests acceleration of
the effective date of the registration statement
under Rule 461 under the Securities Act, it will
include the following in the appropriate portion of
the prospectus:
Insofar as indemnification for liabilities arising
under the Securities Act of 1933 (the "Act") may be
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permitted to directors, officers and controlling
persons of the small business issuer pursuant to the
foregoing provisions, or otherwise, the small
business issuer has been advised that in the opinion
of the Securities and Exchange Commission such
indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable.
Item 4. Unregistered Securities Issued or Sold Within One Year. Kinship
believes that in the body of this prospectus it has described all shares issued
within the past year from the date of inception of Kinship. In summary of that
disclosure, Kinship represents the only shares issued were to its founders and
principals, Mr. Andrew Limpert, Mr. Terry Deru, Mr. Robert Hunter and Mr. David
Collier. All shares issued to them are the same shares set forth in the chart
showing securities held by management and are deemed exempted transactions under
section 4(2) of the Securities Act of 1933. The shares issued to Mr. Limpert,
Mr. Deru, Mr. Hunter and Mr. Collier were common voting stock of the issuer (its
sole class). Mr. Limpert received 615,000 shares for cash, and 10,000 shares for
the start-up services. Mr. Deru received that same number of shares for similar
consideration. Mr. Hunter and Mr. Collier each received 10,000 shares for
start-up services.
Item 5. Index of Exhibits As Listed under Part III, Item I, Form I-A:
Audited Financial Statements for the period ending July 31, 2000
(Attached to Prospectus)
Exhibit Item 2 - Articles of Incorporation with Amendments and By-Laws
(Previously Filed)
Exhibit Item 4 - Subscription Agreement
(Previously Filed)
Exhibit Item 5 - Distribution Contract
(Previously Filed- Addendum Attached)
Exhibit Item 10a - Auditor's Consent Letter
(Refiled as Updated to December 11, 2000)
Exhibit Item 10b - Attorney Letter in re Legality
(Previously Filed as Amended)
Miscellaneous Exhibits - Specimen Stock Certificate
(Previously filed)
Model Promotional Shares Lock-in Agreements
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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-1 and authorized this registration
statement to be signed on its behalf by the undersigned, in the City of Salt
Lake, State of Utah on December 11, 2000.
(Registrant) Kinship Systems, Inc.
By: /s/ Terry Deru
------------------
Terry Deru
Its 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:
By: /s/ Terry Deru
------------------
Terry Deru
Director, CEO, President
December 11, 2000
-----------------
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:
By: /s/ Andrew Limpert,
-----------------------
Andrew Limpert
Director, Secretary/Treasurer, Chief Financial & Accounting Officer
December 11, 2000
-----------------
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:
By: /s/ Robert Hunter,
----------------------
Robert Hunter
Director
December 11, 2000
-----------------
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