<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
LIONHEART.WS, INC.
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(Name of small business
issuer in its charter)
<TABLE>
<CAPTION>
California 6770 33-0906462
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<S> <C> <C>
(State of incorporation (Primary Standard Industrial (I.R.S. Employer
or jurisdiction Classification Code Number) Identification No.)
of organization)
</TABLE>
3665 Ruffin Road, Suite 225,
San Diego, California 92123
Telephone (858) 571-8431
Facsimile (858) 571-8497
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(Address and telephone number of principal executive offices)
3665 Ruffin Road, Suite 225,
San Diego, California 92123
Telephone (858) 571-8431
Facsimile (858) 571-8497
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(Address of principal place of business or
intended principal place of business)
Kennan E. Kaeder
Attorney at Law
110 West "C" Street, Suite 1904
San Diego, Ca 92101
Phone: (619) 232-6545
Facsimile (619) 236-8182
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(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 the registration statement and date of the
prospectus.
The registrant hereby amends the registration statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that the registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933, as amended, or until the registration statement
shall become effective on such date as the Securities and Exchange Commission,
acting pursuant to said Section 8(a), may determine.
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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Title of each class Amount to be Proposed maximum Proposed maximum Amount of
of securities to be registered offering price per aggregate offering registration fee
registered share price
<S> <C> <C> <C> <C>
Common 1,000,000 $0.10 $100,000 $26.40
</TABLE>
<PAGE>
Cross Reference Sheet
Showing the Location In Prospectus of
Information Required by Items of Form SB-2
Part I. Information Required in Prospectus
<TABLE>
<CAPTION>
Item No. Required Item Location or Caption
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<S> <C> <C>
1. Front of Registration Statement and Front of Registration Statement and
Outside Front Cover of Prospectus Outside Front Cover of Prospectus
2. Inside and Outside Back Cover Pages of Inside Front Cover Page of Prospectus and
Prospectus Outside Front Cover Page of Prospectus
3. Summary Information and Risk Factors Prospectus Summary: Risk Factors
4. Use of Proceeds Use of Proceeds
5. Determination of Offering Price Prospectus Summary: Determination of
Offering Price
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 Beneficial Principal Stockholders
Owners and Management
12. Description of Securities Description of Securities
13. Interest of Named Experts and Counsel Legal Matters; Experts
14. Disclosure of Commission Position on Statement as to Indemnification
Indemnification for Securities Act Liabilities
15. Organization Within Last Five Years Management; Certain Transactions
16. Description of Business Proposed Business
17. Management's Discussion or Plan of Operation Proposed Business-Plan of Operation
18. Description of Property Proposed Business
19. Certain Relationships and Related Transactions Certain Transactions
20. Market for Common Stock and Related Prospectus Summary; Market for Our Common
Stockholder Matters Stock; Risk Factors
21. Executive Compensation Remuneration
22. Financial Statements Financial Statements
23. Changes in and Disagreements with Accountants Not Applicable
on Accounting and Financial Disclosures
</TABLE>
<PAGE>
PROSPECTUS
Initial Public Offering
LIONHEART.WS, INC.
(A California Corporation)
1,000,000 Shares Offered at $0.10 per Share
Lionheart.ws, Inc. offers for sale, on a best efforts all-or-none basis,
1,000,000 shares at a purchase price of $0.10 per unit. We are selling the
shares on a "best-efforts, all or none basis" for a period of 90 days. We will
not use an underwriter or securities dealer. If the entire amount of the
offering is not sold within the offering period, investors' funds will be
promptly returned without interest or deduction.
We are making the offering in compliance with Rule 419 of Regulation C to
the Securities Act of 1933. Pursuant to Rule 419, the proceeds of the offering
as well as the securities purchased will be placed in an escrow account. If the
entire amount of the offering is sold, none of the securities, and only 10% of
the funds, may be removed from escrow until a business combination has been
negotiated and our stockholders have reconfirmed the offering, including the
terms and conditions of the business combination. Our officers, directors,
current stockholder and any of their affiliates or associates may purchase up to
50% of the offering, if needed, to close the offering. Prior to the offering, no
public market has existed in our securities. We cannot guarantee that a trading
market in the shares or in the shares of common stock or warrants which
constitute the shares will ever develop.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
THESE SECURITIES ARE HIGHLY SPECULATIVE, INVOLVE A HIGH DEGREE OF RISK
AND SHOULD BE PURCHASED ONLY BY PERSONS WHO CAN AFFORD TO LOSE THEIR ENTIRE
INVESTMENT. SEE "RISK FACTORS" COMMENCING PAGE 4 FOR SPECIAL RISKS CONCERNING
US AND THE OFFERING.
All investors' checks or money orders should be made payable to
"San Diego National Bank on behalf of Lionheart.ws, Inc."
Underwriting
<TABLE>
<CAPTION>
Price To Public Discounts and Proceeds To The
Commissions Company
<S> <C> <C> <C>
Per Share $0.10 $0 $0.10
Total $100,000.00 $0 $100,000.00
</TABLE>
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The date of the Prospectus is ,2000.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
Prospectus Summary..................................................................
The Company.......................................................................
The Offering......................................................................
Summary Financial Information.......................................................
Risk Factors........................................................................
Dilution............................................................................
Use of Proceeds.....................................................................
Capitalization......................................................................
Proposed Business...................................................................
History and organization.......................................................
Plan of operation..............................................................
Business combinations..........................................................
Offering conducted in compliance with Rule 419 to the Securities Act...........
Regulation.....................................................................
Employees......................................................................
Facilities.....................................................................
Year 2000 issues...............................................................
Management..........................................................................
Information....................................................................
Conflicts of interest..........................................................
Remuneration...................................................................
Management involvement.........................................................
Management control.............................................................
Statement as to Indemnification.....................................................
Market for our Common Stock.........................................................
Certain Transactions................................................................
Principal Stockholders..............................................................
Beneficial ownership...........................................................
Prior blank check company involvement..........................................
Description of Securities...........................................................
Common stock...................................................................
Preferred stock................................................................
Redeemable common stock purchase warrants......................................
Reports to stockholders........................................................
Dividends......................................................................
Transfer agent.................................................................
Plan of Distribution................................................................
Conduct of the offering........................................................
Method of subscribing..........................................................
Expiration date................................................................
Expiration Date................................................................
Litigation..........................................................................
Legal Opinions......................................................................
Experts.............................................................................
Further Information.................................................................
Financial Statements................................................................
</TABLE>
2
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PROSPECTUS SUMMARY
THE COMPANY
We are a California corporation organized on April 13, 2000 to acquire a
business. Although our management presently has no understandings with any
potential target business, we believe that we will be an attractive combination
candidate as we have nominal liabilities. We do not intend to invest or trade in
securities as our primary business or pursue any business which would render us
an "investment company" under the Investment Company Act of 1940.
We have limited our activities to selling shares of our common stock in
connection with our organization and the preparation of the registration
statement and the prospectus for our initial public offering. We intend to limit
our activities following the offering to searching for and acquiring a business.
We maintain our office at 4275 Executive Square, La Jolla, California,
92037. Our phone number is (858) 546-2807.
THE OFFERING
We will not sell our shares to any investor in a state unless the shares
are registered or qualified in such state or the sale of our shares is exempt
from registration or qualification. In addition, we may sell shares to investors
who reside in foreign countries. In that event, we will register or qualify the
sale of our shares in such country unless an exemption from registration or
qualification is available. We intend to offer our securities to residents of
the Province of British Columbia, Canada where the sale to fewer than 50
residents is exempt from registration.
<TABLE>
<S> <C>
Securities offered........................................... 1,000,000 shares
Common Stock outstanding prior to the offering............... 10,000,000 shares
Common Stock to be outstanding after the offering............ 11,000,000 shares
</TABLE>
We will realize net proceeds of $100,000.00 from the sale of the shares
registered pursuant to this Registration Statement. These proceeds will be added
to our working capital after we acquire a target company.
3
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SUMMARY FINANCIAL INFORMATION
The following is a summary of our financial information and is qualified in
its entirety by our audited financial statements.
From April 13, 2000 to June 30, 2000
-----------------------
<TABLE>
<S> <C>
Statement of Income Data:
Net Sales $ 0
Net profit (Loss) $ (26,521)
Net Loss Per Share $ 0.016
Shares Outstanding at 06/30/00 10,000,000
As of June 30, 2000
-------------------
Balance Sheet Data
Working Capital $ (9,166)
Total Assets $ 15,994
Long Term Debt $ 0
Total Liabilities $ 25,160
Common stock $ 25,900
Additional paid in capital $ 1,355
Deficit accumulated during
development stage $ (26,521)
Total Shareholders' Equity(Deficit) $ (9,166)
</TABLE>
RISK FACTORS
The securities we are offering are highly speculative in nature and involve
an extremely high degree of risk. They should be purchased only by persons who
can afford to lose their entire investment.
OUR PRESIDENT WILL REMAIN OUR MAJORITY STOCKHOLDER AFTER THE OFFERING.
Sheldon Silverman, our President and sole stockholder, will own 90.09% of
our outstanding common stock after the offering is completed and would therefore
continue to retain control. In addition, he may purchase up to 50% of the shares
in the offering. He intends to continue present management to find a target
company.
4
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AFTER THE CONCLUSION OF AN ACQUISITION, THE MANAGEMENT OF THE TARGET
COMPANY WILL PROBABLY ASSUME MANAGEMENT OF OUR COMPANY.
Upon the successful completion of a business combination, we anticipate
that we will have to issue to the owners of the acquired company authorized but
unissued common stock representing a majority of the issued and outstanding
shares of our common stock. Therefore, we anticipate that the consummation of a
business combination will result in a change of control and the resignation or
removal of our present officers and directors. If our management changes, we can
provide no assurance of the experience or qualification of the new management in
the operation of the acquired business.
INVESTORS WILL NOT HAVE ACCESS TO THEIR FUNDS AFTER THE CONSUMMATION
OF THE OFFERING FOR A PERIOD OF UP TO 18 MONTHS.
Commencing upon the sale of the shares, investor' funds, reduced by 10% for
expenses as permitted by Rule 419, will remain in escrow, in an interest bearing
account. Although investors may exercise their warrants during the escrow
period, both the cash exercise price and the shares of common stock underlying
the warrants must be kept in escrow until the acquisition is reconfirmed. In
that event, investors will receive their securities and we will withdraw
investor funds from escrow.
Investors will have no right to their invested funds or purchased
securities for up to 18 months from the date of the prospectus. No transfer of
the escrowed securities can be permitted other than by will, the laws of
intestacy, or pursuant to a qualified domestic relations order, or pursuant to
the Employee Retirement Income Security Act.
Investors will be offered the return, with interest, of their funds held in
escrow only if
+ they vote against reconfirmation of the acquisition of the target business;
or
+ we are unable to locate a target business within 18 months from the date of
the prospectus.
OUR OFFICERS AND DIRECTORS ARE ENGAGED IN OUTSIDE BUSINESS ACTIVITIES.
Our directors and officers are engaged in outside business activities, and
the amount of time they will devote to our business is anticipated to be only
about 5 to 20 hours each per week.
5
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OUR MANAGEMENT'S CONFLICTS OF INTEREST MAY ADVERSELY AFFECT OUR INVESTORS.
A conflict of interest may arise between our management's personal
pecuniary interest and its fiduciary duty to investors.
To aid the resolution of such conflicts, we have adopted three procedures:
+ in the confirmation offer to our stockholders to vote upon a business
combination with an affiliated entity, stockholders who also hold
securities of the affiliated entity will be required to vote their shares
of our stock in the same proportion as non-affiliated stockholders;
+ we will not acquire any company in which more than a majority of its
capital is beneficially owned by any or a combination of our officers,
directors, promoters, affiliates or associates; and
+ our officers and directors will disclose to us any target businesses which
come to their attention in their capacity as an officer or director or
otherwise.
Such procedures have been orally agreed to with our management and, where
appropriate, will be incorporated in any acquisition agreement with a target
company in which any of our affiliates has an interest.
WE ANTICIPATE MAKING ONE ACQUISITION AND INVESTORS WILL TAKE THE RISK OF THE
QUALITY OF THE NEW MANAGEMENT AND ECONOMIC FLUCTUATIONS IN THE CHOSEN
INDUSTRY.
In the event we are successful in acquiring a suitable business, we will,
in all likelihood, be required to issue our common stock in an acquisition or
merger transaction so that the owners of the acquired business would own a
majority of our common stock. Thus, we do not believe that we will be able to
negotiate more than one business combination. Our lack of diversification will
subject us to the quality of the new management and to economic fluctuation
within a particular industry in which the target company conducts business.
6
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IF WE ACQUIRE A TARGET COMPANY WHICH IS DOMICILED IN A FOREIGN COUNTRY, WE WILL
BE FACED WITH ADDITIONAL RISKS.
Although we have not identified the target business we will acquire nor its
geographical location, we may acquire a target business which is domicled in a
foreign country. In that event, we will be faced with additional risks
including, but not limited to, the following:
+ Accounting. The accounting standards of the foreign country may differ from
United States accounting standards as expressed in GAAP and FASB rules and
it may be difficult, if not impossible, to convert them.
+ Currency exchange. The income of the foreign company may be denominated in
a currency which may fluctuate in comparison to the United States dollar
thus making income predictions unreliable and causing periodic swings in
revenues and profits.
+ Repatriation of profits. Many countries restrict the repatriation of
profits to another country. Thus, it is possible that profits, if any, will
have to be reinvested in the country of domicile.
+ Nationalization. Foreign countries, from time to time, nationalize
industries or companies within certain industries, for reasons including
but not limited to national security and intellectual property rights.
+ Labor shortages and working rules. Certain countries are experiencing
extreme shortages of highly skilled, particularly computer literate,
employees. The foreign acquisition may not be able to hire local citizens
to fill positions and may not be able to obtain permits for workers from
other countries who have the requisite skills. Certain countries mandate
maximum working hours and minimum annual vacations and have established
restrictions on layoffs and firing. These and other policies affecting the
workforce may make foreign operations difficult to manage and uneconomic.
+ Stability. Business operations in certain companies are adversely affected
by unwieldy governmental bureacracies, corruption, labor unrest and similar
problems which hamper the success of business operations.
THE PROCEEDS OF THE OFFERING MAY BE INSUFFICIENT TO PROVIDE FINANCING TO THE
ACQUIRED COMPANY.
While we presently anticipate that we will be able to locate and consummate
a suitable business combination, if we determine that a business combination
requires additional funds, we may seek additional financing through loans,
issuance of additional securities or through other financing arrangements. We
have not negotiated any such financial arrangement, and we can give no
assurances that such additional financing will be available or, if available,
that such additional financing will be on acceptable terms.
7
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DILUTION
Our net book value as of June 30, 2000 was $(9,166.00) Our net book value
per share was ($0.0009). Net book value represents our net tangible assets which
are our total tangible assets less our total liabilities. The public offering
price per share is $0.10 represents both gross and net proceeds per share as all
expenses of the offering are being paid from funds in our treasury. The pro
forma net book value after the offering will be $0.008. The pro forma net book
value per share after the offering will be $0.0089 per share. The shares
purchased by investors in the offering will be diluted $0.092 or 92%. As of June
30, 2000, there were 10,000,000 shares of our common stock outstanding. Dilution
represents the difference between the public offering price and the net pro
forma book value per share immediately following the completion of the public
offering.
The following table illustrates the dilution which will be experienced by
investors in the offering:
<TABLE>
<S> <C>
Public offering price per share.................................................... $ 0.10
Net book value per share before offering............................................($0.0009)
Pro-forma net book value per share after offering................................. $0.008
Pro-forma increase per share attributable to offered shares........................ $0.089
Pro-forma dilution to public investors..............................................($0.092)
</TABLE>
The following table sets forth, as of the date of the prospectus, the
percentage of equity to be purchased by the public investors compared to the
percentage of equity to be owned by the present stockholders, and the
comparative amounts paid for the shares by the public investors as compared to
the total consideration paid by our present stockholders.
<TABLE>
<CAPTION>
Approximate Approximate
Percentage Percentage
Public Shares Total Shares Total Total
Stockholder Purchased Outstanding Consideration Consideration
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<S> <C> <C> <C> <C>
New Investors 1,000,000 9.01 $ 100,000 79.4%
Existing
Shareholders 10,000,000* 90.09% $ 25,900 20.06%
</TABLE>
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* We sold 10,000,000 shares of common stock prior to the offering at $.002
per share. These shares are not being registered.
8
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USE OF PROCEEDS
Both gross and net proceeds of the offering will be $100,000 as all costs
associated with the offering have been or will be paid from funds presently in
our treasury. Pursuant to Rule 15c2-4 under the Securities Exchange Act of 1934,
all offering proceeds must be placed in escrow until all of the shares are sold.
Pursuant to Rule 419, after all of the shares are sold, we may and intend to
have $10,000, representing 10% of the escrowed funds, released to us. All funds
held in escrow at the time a business combination is consummated will be
released to the combined entity which will have full discretion over the use of
the funds. In the event we need in excess of $10,000 to find a suitable business
entity, our management has agreed to advance any additional funds required.
Neither we nor the combined entity will repay our management for any such
advances.
The funds in escrow will be released for use by the acquired company upon
the consummation of a business combination and the reconfirmation less any
amounts returned to investors who did not reconfirm their investment.
<TABLE>
<CAPTION>
Percentage
of net proceeds
Amount of the offering
---------------------------------------------
<S> <C> <C>
Escrowed funds pending
business combination $90,000 90%
</TABLE>
Upon the consummation of a business combination, we anticipate that our
management will change. Our present management anticipates that the escrowed
funds will be used by the post-merger management at its sole discretion. Under
no circumstances, will funds, when released from escrow after consummation of an
acquisition, be received by our present management. This policy is based upon an
oral agreement with our management. Our management is unaware of any
circumstances under which such policy through its own initiative may be changed.
We do not intend to hire consultants to locate and consummate the acquisition of
a target company.
Our present management will not make any loans from the $10,000 (10% of the
escrowed funds), nor will our present management borrow funds using either our
working capital or escrowed funds as security. This policy is based upon an oral
agreement with our management. Our management is unaware of any circumstances
under which such policy through its own initiative, may be changed.
Offering proceeds will be placed in escrow at San Diego National Bank in
San Diego, California, an insured depository institution, pending
consummation of a business combination and reconfirmation by investors, in
either a certificate of deposit, interest bearing bank account or in short
term government securities.
9
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CAPITALIZATION
The following table sets forth our capitalization as of June 30, 2000.
<TABLE>
<CAPTION>
June 30, 2000
---------------
<S> <C>
Long-term debt $ 0
Stockholders' equity:
Common stock, no par value;
authorized 100,000,000 shares,
issued and outstanding
10,000,000 shares; $ 25,900
Preferred stock, no par value;
authorized 10,000,000 shares,
issued and outstanding -0-
Additional paid-in capital $ 1,355
Deficit accumulated during
the development period $(26,521)
--------
Total stockholders' equity $ ( 9,166)
--------
Total capitalization $ ( 9,166)
========
</TABLE>
PROPOSED BUSINESS
HISTORY AND ORGANIZATION
We were organized under the laws of the State of California on April
13, 2000. Since our inception, we have been engaged in organizational efforts
and obtaining initial financing.
PLAN OF OPERATION
We were organized as a vehicle to seek, investigate and acquire a
target company or business which desires to employ our funds in its business or
to seek the perceived advantages of a publicly-held corporation. Our principal
business objective will be to seek long-term
10
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growth potential through the acquisition of a business rather than immediate,
short-term earnings. We will not restrict our search to any specific
business, industry or geographical location and, thus, may acquire any type
of business.
We do not currently engage in any business activities which provide cash
flow. The costs of identifying, investigating and analyzing business
combinations will be paid with money in our treasury. Investors will most likely
not have the opportunity to participate in any of these decisions. We are
sometimes referred to as a "blank check" company because investors will entrust
their investment monies to our management without having a chance to analyze the
ultimate use to which their money may be put. Although substantially all of the
proceeds of the offering are intended to be used to effect a business
combination, the proceeds are not otherwise designated for any specific
purposes. Investors will have an opportunity to evaluate the specific merits or
risks of only the business combination our management decides to enter into.
Cost overruns will be funded through our founding stockholder's voluntary
contribution of capital.
We may seek a business which has recently commenced operations, is a
developing company in need of additional funds for expansion, is seeking to
develop a new product or service, or is an established business which may be
experiencing financial or operating difficulties and is in need of additional
capital. In the alternative, a business combination may involve the combination
with a company which does not need substantial additional capital, but which
desires to establish a public trading market for its shares while avoiding the
time delays, significant expense, loss of voting control and compliance with
various Federal and State securities laws which would occur in a public
offering.
Our officers and directors intend, on a frequent basis, to consult with
business associates and leads from business journals to locate a suitable target
business. They intend to review business plans, study financial statements and
visit the operations center of businesses which they feel may be suitable
acquisitions. None of our officers or directors have had any preliminary contact
or discussions with any representative of any other entity regarding a business
combination.
Accordingly, any target business that is selected may be a financially
week company or an entity in its early stage of development or growth, including
entities without established records of sales or earnings. In that event, we
will be subject to numerous risks inherent in its business and operations. In
addition, we may affect a business combination with an entity in an industry
characterized by a high level of risk, and, although our management will
endeavor to evaluate the risks inherent in a particular target business, there
can be no assurance that we will properly identify all significant risks.
We may acquire a business domiciled in a foreign country. In that event, we
will ensure that the acquisition is made in conformance with the business,
securities and tax statutes and regulations of that country.
11
<PAGE>
Our management anticipates that it may be able to effect only one
business combination, due primarily to our limited financing, and the dilution
of` interest for present and prospective stockholders, which is likely to occur
as a result of our management's plan to offer a controlling interest to a target
business in order to achieve a tax-free reorganization. This lack of
diversification should be considered a substantial risk in investing in us
because it will not permit us to offset potential losses from one venture
against gains from another.
We anticipate that the selection of a business combination will be
complex and extremely risky. Because of general economic conditions, rapid
technological advances being made in some industries and shortages of available
capital, our management believes that there are numerous firms seeking even the
limited additional capital which we will have and/or the benefits of a publicly
traded corporation. Such perceived benefits of a publicly traded corporation may
include facilitating or improving the terms on which additional equity financing
may be obtained, providing liquidity for the principals of a business, creating
a means for providing incentive stock options or similar benefits to key
employees, providing liquidity (subject to restrictions of applicable statutes)
for all stockholders and other benefits. Potentially available business
combinations may occur in many different industries and at various stages of
development, all of which will make the task of comparative investigation and
analysis of such business opportunities extremely difficult and complex.
EVALUATION OF BUSINESS COMBINATIONS
We do not intend to advertise or promote ourselves to potential target
businesses. Instead, our management intends actively to search for potential
target businesses among its colleagues and associates, through capital wanted
advertising in business publications and on the Internet and other similar
sources. In the unlikely event our management decides to advertise in a business
publication to attract a target business, our management will assume the cost of
such advertising.
Our officers and directors will analyze or supervise the analysis of
business combinations. None of our officers and directors is a professional
business analyst. Our management has not divided duties among its members. In
analyzing prospective business combinations, our management will consider such
matters as the following:
+ available technical, financial, and managerial resources,
+ working capital and other financial requirements,
+ history of operations, if any,
+ nature of present and expected competition,
+ the quality and experience of management services which may be available
12
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and the depth of that management,
+ the potential for further research or development,
+ specific risk factors not now foreseeable but which then may be anticipated
to impact on our proposed activities,
+ the potential for growth or expansion,
+ the potential for profit,
+ the recognition or acceptance of products or services and
+ name identification and other relevant factors.
As a part of the investigation, our officers and directors will meet
personally with management and key personnel, visit and inspect material
facilities, obtain independent analysis or verification of certain information
provided, check references of management and key personnel, and take other
reasonable investigative measures, to the extent of our limited financial
resources and management expertise.
Since we will be subject to Section 13 or 15 (d) of the Securities
Exchange Act, we will be required to furnish information about the acquisition,
including audited financial statements for the target company, covering one, two
or three years depending upon the relative size of the acquisition.
Consequently, acquisition prospects that do not have or are unable to obtain the
required audited statements may not be appropriate for acquisition so long as
the reporting requirements of the Securities Exchange Act are applicable. In the
event our obligation to file periodic reports is suspended under Section 15(d)
of that act, we intend voluntarily to file such reports.
We anticipate that any business combination will present certain risks.
We may not be able adequately to identify many of these risks prior to
selection. Our investors must, therefore, depend on the ability of our
management to identify and evaluate these risks. We anticipate that the
principals of some of the combinations which will be available to us were unable
to develop a going concern or that such business is in its development stage in
that it has not generated significant revenues from its principal business
activity. The risk exists that even after the consummation of such a business
combination and the related expenditure of our funds, and proceeds, if any, from
warrant exercise, the combined enterprise will still be unable to become a going
concern or advance beyond the development stage. Many of the potential business
combinations may involve new and untested products, processes, or market
strategies. We may assume such risks although they may adversely impact on our
stockholders because we consider the potential rewards to outweigh them.
13
<PAGE>
BUSINESS COMBINATIONS
In implementing a structure for a particular business acquisition, we
may become a party to a merger, consolidation, reorganization, joint venture, or
licensing agreement with another corporation or entity. We may alternatively
purchase stock or assets of an existing business.
Any merger or acquisition can be expected to have a significant
dilutive effect on the percentage of shares held by our existing stockholder and
purchasers in the offering. The target business we consider will, in all
probability, have significantly more assets than we do. Therefore, in all
likelihood, our management will offer a controlling interest in our company to
the owners of the target business. While the actual terms of a transaction to
which we may be a party cannot be predicted, we expect that the parties to the
business transaction will find it desirable to avoid the creation of a taxable
event and thereby structure the acquisition in a so-called "tax-free"
reorganization under Sections 368(a)(1) or 351 of the Internal Revenue Code. In
order to obtain tax-free treatment under the Internal Revenue Code, the owners
of the acquired business may need to own 80% or more of the voting stock of the
surviving entity. As a result, our stockholder and investors in the offering,
would retain 20% or less of the issued and outstanding shares of the surviving
entity, which would result in significant dilution in percentage of the entity
after the combination and may also result in a reduction in the net tangible
book value per share of our investors. In addition, a majority or all of our
directors and officers will probably, as part of the terms of the acquisition
transaction, resign.
Our management will not actively negotiate or otherwise consent to the
purchase of any portion of their common stock as a condition to or in connection
with a proposed business combination, unless such a purchase is demanded by the
principals of the target company as a condition to a merger or acquisition. Our
officers and directors have agreed to this restriction which is based on an oral
understanding between members of our management. Members of our management are
unaware of any circumstances under which such policy, through their own
initiative, may be changed.
The issuance of substantial additional securities and their potential
sale into any trading market which may develop in our common stock may have a
depressive effect on our future trading market.
The structure of the business combination will depend on, among other
factors:
+ the nature of the target business,
+ our needs and desires and the needs and desires of those persons
controlling the target business,
14
<PAGE>
+ the management of the target business and
+ our relative negotiating strength compared to the strength of the persons
controlling the target business.
If at any time prior to the completion of the offering, we enter
negotiations with a possible acquisition candidate and such a transaction
becomes probable, we will suspend the offering and file an amendment to the
registration statement which will include financial statements, including
balance sheets, statements of cash flow and stockholders' equity, of the
proposed target.
We will not purchase the assets of any company of which a majority of
the outstanding capital stock is beneficially owned by one or more or our
officers, directors, promoters or affiliates or associates. Furthermore, we
intend to adopt a procedure whereby a special meeting of our stockholders will
be called to vote upon a business combination with an affiliated entity, and
stockholders who also hold securities of such affiliated entity will be required
to vote their shares of stock in the same proportion as our publicly held shares
are voted. Our officers and directors have not approached and have not been
approached by any person or entity with regard to any proposed business venture
which desires to be acquired by us. We will evaluate all possible business
combinations brought to us. If the business combination is brought to us by any
of our promoters, management, or their affiliates or associates, disclosure as
to this fact will be included in the post-effective amendment to the
registration statement, thereby allowing the public investors the opportunity to
evaluate the business combination before voting to reconfirm their investment.
We have adopted a policy that we will not pay a finder's fee to any
member of management for locating a merger or acquisition candidate. No member
of management intends to or may seek and negotiate for the payment of finder's
fees. In the event there is a finder's fee, it will be paid at the direction of
the successor management after a change in management control resulting from a
business combination. Our policy regarding finder's fees is based on an oral
agreement among management. Our management is unaware of any circumstances under
which such policy through their own initiative may be changed.
We will remain an insignificant player among the firms which engage in
business combinations. Many established venture capital and financial concerns
have significantly greater financial and personnel resources and technical
expertise than we will. In view of our combined limited financial resources and
limited management availability, we will continue to be at a significant
competitive disadvantage compared to most of our competitors. Also, we will be
competing with a number of other small, blank check public and shell companies.
OFFERING CONDUCTED IN COMPLIANCE WITH RULE 419 TO THE SECURITIES ACT
15
<PAGE>
We are a blank check development stage company. Our sole business
purpose is to merge with or acquire a presently unidentified company or
business. Consequently, the offering is being conducted in compliance with Rule
419. The securities purchased by investors and the funds received in the
offering will be deposited to and held in an escrow account, except for 10% of
the funds which we may withdraw, until an acquisition is completed. Before the
acquisition can be completed, the remainder of the investors' funds can be
released to us and certificates representing the securities can be released to
the investors, we are required to update the registration statement with a
post-effective amendment, and, within the five days after its effective date, we
are required to furnish investors with a prospectus.
The prospectus, which is part of the post-effective amendment, will
contain the terms of a reconfirmation offer and information regarding the
acquisition candidate and its business, including the terms and conditions of
the acquisition agreement and audited financial statements of the acquisition
candidate. Investors must have no fewer than 20 and no more than 45 business
days from the effective date of the post-effective amendment to decide to
reconfirm their investment and remain an investor or, alternatively, to require
the return of their funds, including interest, from escrow. If we do not
complete an acquisition meeting specified criteria within 18 months of the date
of the prospectus, all of the funds in the escrow account must be returned
promptly to investors, plus interest. Thus, if the offering period is extended
to its limit, we will have only 15 months in which to consummate a merger or
acquisition.
DEPOSIT OF SECURITIES
The certificates representing the investors' securities will be
released from escrow to investors only after we have met the following three
conditions.
+ We must execute an agreement for the acquisition of a target company.
+ We must successfully complete a reconfirmation offering to our investors.
+ We must consummate the acquisition.
Accordingly, we have entered into an escrow agreement with which
provides that:
+ All securities issued in connection with the offering and any other
securities issued with respect to such securities, including securities
issued with respect to stock splits, stock dividends or similar rights are
to be deposited directly into the escrow account promptly upon issuance.
The identity of the investors are to be included on the stock certificates
or other documents evidencing the securities. The securities held in the
escrow account are to remain as issued and deposited and are to be held for
the sole benefit of the investors who retain the voting rights with respect
16
<PAGE>
to the securities held in their names. The securities held in the escrow
account may not be transferred, disposed of nor any interest created
therein other than by will or the laws of descent and distribution, or
pursuant to a qualified domestic relations order
PRESCRIBED ACQUISITION CRITERIA.
Rule 419 requires that before the deposited securities can be released
we must first execute an agreement to acquire a business. The agreement must
provide for the acquisition of a business or assets for which the fair value of
the business represents at least 80% of the maximum offering proceeds, including
funds received or to be received from the exercise of warrants.
POST-EFFECTIVE AMENDMENT
Once the acquisition agreement has been executed, Rule 419 requires us
to update the registration statement with a post-effective amendment. The
post-effective amendment must contain information about:
+ the proposed acquisition candidate and its business, including audited
financial statements; the results of the offering; and
+ the use of the funds disbursed from the escrow account. The post-effective
amendment must also include the terms of the reconfirmation offering.
RECONFIRMATION OFFERING
The reconfirmation offer must commence within five business days after
the effective date of the post-effective amendment and must include the
following conditions:
+ the prospectus contained in the post-effective amendment will be sent to
each investor whose securities are held in the escrow account within five
business days after the effective date of the post-effective amendment;
+ each investor will have no fewer than 20, and no more than 45, business
days from the effective date of the post-effective amendment to notify us
in writing that he or she elects to remain an investor;
+ if we do not receive written notification from any investor within 45
business days following the effective date, the investors' escrowed
securities will be returned to us and the investor's escrowed funds to the
17
<PAGE>
investor;
+ unless investors representing 80% of the maximum offering proceeds elect to
remain investors, the acquisition of the target business would be
prevented, deposited securities held in escrow will be returned to us and
the funds to the investors; and
+ if a consummated acquisition has not occurred within 18 months from the
date of this prospectus, the deposited securities held in the escrow
account will be returned to us and the funds to the investors.
RELEASE OF DEPOSITED SECURITIES
The deposited securities may be released to investors after:
+ the escrow agent has received a signed representation from us and any other
evidence acceptable by the escrow agent that:
We have executed an agreement for the acquisition of a business for
which the value of the business represents at least 80% of the maximum
offering proceeds and we have filed the required post-effective
amendment; and
the post-effective amendment has been declared effective; the
reconfirmation offer has been completed; and we have satisfied all of
the prescribed conditions of the reconfirmation offer.
+ the acquisition of the business with the fair value of at least 80% of the
maximum proceeds has been consummated.
REGULATION
The Investment Company Act defines an "investment company" as an issuer
which is or holds itself out as being engaged primarily in the business of
investing, reinvesting or trading of securities. While we do not intend to
engage in such activities, we could become subject to regulations under the
Investment Company Act in the event we obtain or continue to hold a minority
interest in a number of enterprises. We could be expected to incur significant
registration and compliance costs if required to register under the Investment
Company Act. Accordingly, our management will continue to review our activities
from time to time with a view toward reducing the likelihood we could be
classified as an investment company.
18
<PAGE>
EMPLOYEES
We presently have no employees. Our President/Treasurer and Secretary
is engaged in outside business activities and he anticipates that he will devote
to the our business only between 5 and 20 hours per week until the acquisition
of a successful business opportunity has been consummated.
FACILITIES
We are presently using the office of our President, Sheldon Silverman,
at no cost, as our office, an arrangement which we expect to continue until the
completion of the offering. We presently do not own any equipment, and do not
intend to purchase or lease any equipment prior to or upon completion of the
offering.
YEAR 2000 ISSUES
We currently have no operations and do not own or lease any equipment.
As a consequence, we do not anticipate incurring any expense or difficulties
with regard to Year 2000 issues. Management-owned computer and
telecommunications equipment has functioned into the year 2000 without
interruption and our management does not anticipate to suffer year 2000 problems
in the future.
MANAGEMENT
INFORMATION
Our officer and director and further information concerning him are as
follows:
<TABLE>
<CAPTION>
Name Age Position
----------------- --- --------------------
<S> <C> <C>
Sheldon Silverman (1) 39 President, Treasurer
4275 Executive Square and a Director
La Jolla, California 92037
</TABLE>
--------------------
(1) May be deemed our "Promoter" as that term is defined under the Securities
Act.
Mr. Silverman, age 39, is the sole officer of the company in the
capacity of President, Treasurer and Secretary and the sole member of the Board
of Directors. His achievements
19
<PAGE>
include heading corporate sales and marketing divisions in numerous retail
jewelry and real estate companies.
In April 1996, Mr. Silverman served as President and Chief Executive
Officer of Interactive Processing, Inc., which during his tenure was a publicly
traded company on the National Association Of Securities Dealers
Over-The-Counter Bulletin Board. He has developed corporate relationships with
Sony, Anheuser-Busch, Coca-Cola, Wal-Mart, Home Shopping Network and many
others. Mr. Silverman has been interviewed on CNBC, Florida Money Show and many
radio shows and magazines.
Mr. Silverman is the inventor the Football Sport Remote and TV
Terminator universal remote controls and holds patents in the United States and
Canada. In March 1999, he founded WorldTradeShow.com, Inc. a highly interactive
web portal designed to produce and promote virtual trade shows online. He
assisted the start-up company by designing the business and marketing plan,
along with seeking seed capital to produce the web portal and its database.
CONFLICTS OF INTEREST
No member of our management is currently affiliated or associated with
any blank check company. Our management does not currently intend to promote
other blank check entities. However, our management may become involved with the
promotion of other blank check companies in the future. A potential conflict of
interest may occur in the event of such involvement. Additionally, a member of
our management may be a stockholder in an acquired business. Pursuant to an oral
agreement with the members of our management, our management will introduce all
potential acquisitions to us and in the event of the acquisition of a business
in our stockholder, or an affiliate, is an owner, the shares of the affiliated
stockholder will be voted in the same proportion as shares of non-affiliated
investors.
REMUNERATION
Our officers and director has not received and will not receive any
cash remuneration. No remuneration of any nature has been or will be paid for
services rendered by a director in such capacity. Management does not intend to
receive any compensation from the owners of the acquired business. We cannot
predict the remuneration to be awarded management after consummation of the
acquisition.
MANAGEMENT INVOLVEMENT
We have conducted no business as of yet, aside from raising initial
funding associated with our offering. After the closing of the offering, our
management intends to contact business
20
<PAGE>
associates and acquaintances to search for target businesses and then will
consider and negotiate with target businesses until an acquisition agreement
is entered into.
MANAGEMENT CONTROL
Our management may not divest themselves of ownership of our shares of
common stock prior to the consummation of an acquisition or merger. This policy
is based on an unwritten agreement among management. Management is not aware of
any circumstances under which such policy, through their own initiative, may be
changed.
STATEMENT AS TO INDEMNIFICATION
Section 317 of the California Corporations Code provides for
indemnification of our officers, directors, employees and agents. Under Article
II Section 5 of our by-laws, we will indemnify and hold harmless to the fullest
extent authorized by the California Corporations Code, any of our directors,
officers, agents or employees, against all expense, liability and loss
reasonably incurred or suffered by such person in connection with activities on
our behalf. We have provided complete disclosure of relevant sections of our
certificate of incorporation and by-laws is provided in Part II of the
registration statement. This information can also be examined as described in
"Further Information."
We have been informed that, in the opinion of the Commission,
indemnification for liabilities arising under the Securities Act, which may be
permitted to our directors, officers or control persons pursuant to our
certificate of incorporation and by-laws is against the public policy as
expressed in the Securities Act and is, therefore, unenforceable.
MARKET FOR OUR COMMON STOCK
Prior to the date of the prospectus, no trading market for our
common stock has existed. Pursuant to the requirements of Rule 15g-8 of the
Securities Exchange Act, a trading market will not develop either prior to or
after the effectiveness of the registration statement while certificates
representing the shares of common stock remain in escrow. Stock and warrant
certificates must remain in escrow until the consummation of a business
combination and its confirmation by our investors pursuant to Rule 419.
Sheldon Silverman, our President, is our sole holder of our common
stock which was purchased in reliance upon an exemption from registration
contained in Section 4(2) of the Securities Act. He is a sophisticated investor.
He will own 90.1% of our outstanding shares upon completion of the offering and
will own a greater percentage of our outstanding shares if he chooses to
purchase shares being registered with this offering. We can offer no assurance
that a trading market will develop upon the consummation of a business
combination and the subsequent release of the stock from escrow. To date,
neither we nor anyone acting on our
21
<PAGE>
behalf have entered into any discussions, preliminary or otherwise, with any
market maker concerning the participation of a market maker in the future
trading market, if any, for our common stock.
Our present management does not anticipate that it will undertake by
itself or through consultants discussions with market makers prior to the
execution of an acquisition agreement. Our management expects that discussions
in this area will ultimately be initiated by the parties controlling the
business which we acquire who may or may not employ consultants to obtain market
makers.
We have not issued any options or warrants to purchase, or securities
convertible into, our common equity. The 10,000,000 shares of our common stock
currently outstanding are "restricted securities" as that term is defined in the
Securities Act. In a recent letter from the Commission's Division of Small
Business to the NASD, the Commission stated its position that Rule 144 is
inapplicable to founders of blank check companies who transfer securities either
before or after the reconfirmation of an acquisition. Thus, we must register the
shares of our founding stockholder, in order for him to sell his shares of our
common stock on the public market.
CERTAIN TRANSACTIONS
We were incorporated in the State of Delaware on April 13, 2000 under
the name Lionheart.ws, Inc. On June 1, 2000, we sold 10,000,000 shares of our
common stock to our President, Sheldon Silverman, at $.0026 per share, for a
total cash consideration of $25,900.
PRINCIPAL STOCKHOLDERS
BENEFICIAL OWNERSHIP.
The table on the following page sets forth certain information
regarding the beneficial ownership of our common stock as of the date of the
prospectus, and as adjusted to reflect the sale of the shares in the offering,
by
(i) each person who is known by us to own beneficially more than 5% of our
outstanding Common Stock;
(ii) each of our officers and directors; and
(iii) all of our directors and officers as a group.
22
<PAGE>
<TABLE>
<CAPTION>
Name/Address Shares of Percent of Percent of
Beneficial Common Stock Class Owned Class Owned
Owner Beneficially Before After
Offering Owned Offering Offering
--------------------------------------------------------------------------------
<S> <C> <C> <C>
Sheldon Silverman* 10,000,000 100.0% 90.09%
4275 Executive Square
La Jolla, Ca 92037
Total Officers 10,000,000 100.0% 90.09%
and Directors
(1 Person)
</TABLE>
--------------------------
* May be deemed a "Promoter" as that term is defined under the Securities Act.
The current stockholder has not received or will receive any extra or
special benefits that were not shared equally by all holders of shares of our
common stock.
PRIOR BLANK CHECK COMPANIES INVOLVEMENT
None of our officers or directors, nor our founder, promoter or
principal stockholder have been involved as a principal of a blank check
company.
DESCRIPTION OF SECURITIES
COMMON STOCK
We are authorized to issue 100,000,000 shares of common stock, no par
value per share, of which 10,000,000 shares are issued and outstanding. Each
outstanding share of common stock is entitled to one vote, either in person or
by proxy, on all matters that may be voted upon by its holder at meetings of
stockholders.
Holders of our common stock
+ have equal ratable rights to dividends from funds legally available
therefor, if declared by our board of directors;
+ are entitled to share ratably in all of our assets available for
distribution to holders of common stock upon our liquidation, dissolution
23
<PAGE>
or winding up;
+ do not have preemptive, subscription or conversion rights, or redemption or
sinking fund provisions; and
+ are entitled to one non-cumulative vote per share on all matters on which
stockholders may vote at all meetings of our stockholders.
All shares of our common stock will be fully paid and non-assessable
when issued, with no personal liability attaching to ownership. Holders of
shares of our common stock do not have cumulative voting rights, which means
that the holders of more than 50% of outstanding shares voting for the election
of directors can elect all of our directors if they so choose and, in such
event, the holders of the remaining shares will not be able to elect any of our
directors. At the completion of the offering, the present officers and directors
and present stockholder will beneficially own at least 90.09% of the outstanding
shares of our common stock and a greater percentage of shares if they purchase
units in the offering. Accordingly, after completion of the offering, our
present stockholder will be in a position to control all of our affairs.
PREFERRED STOCK
We may issue up to 10,000,000 shares of our preferred stock from time to
time in one or more series. As of the date of the prospectus, no shares of
preferred stock have been issued. Our board of directors, without further
approval of our stockholder, is authorized to fix the dividend rights and terms,
conversion rights, voting rights, redemption rights, liquidation preferences and
other rights and restrictions relating to any series. Issuances of additional
shares of preferred stock, while providing flexibility in connection with
possible financings, acquisitions and other corporate purposes, could, among
other things, adversely affect the voting power of the holders of our other
securities and may, under certain circumstances, have the effect of deterring
hostile takeovers or delaying changes in control or management.
FUTURE FINANCING
In the event the proceeds of the offering are not sufficient to enable us
successfully to fund a business combination, we may seek additional financing.
At this time, we believe that the proceeds of the offering and the possibility
will be sufficient and therefore do not expect to issue any additional
securities before we consummate a business combination. However, we may issue
additional securities, incur debt or procure other types of financing if needed.
We have not entered into any agreements, plans or proposals for such financing
and at present have no plans to do so. We will not use the escrowed funds as
collateral or security for any loan. Further, the escrowed funds will not be
used to pay back any loan incurred by us. If we require additional
24
<PAGE>
financing, there is no guarantee that financing will be available to us or,
if available, that such financing will be on acceptable terms acceptable.
REPORTS TO STOCKHOLDERS
We intend to furnish our stockholders with annual reports containing
audited financial statements as soon as practicable after the end of each fiscal
year. Our fiscal year ends on December 31st.
DIVIDENDS
We have only been recently organized, have no earnings and have paid no
dividends to date. Since we were formed as a blank check company with our only
intended business to search and acquire an appropriate business combination, we
do not anticipate having earnings or paying dividends at least until a business
combination is reconfirmed by our stockholders. However, we can give no
assurance that after we consummate a business combination, we will have earnings
or issue dividends.
TRANSFER AGENT
We have appointed Corporate Stock Transfer, Corporate Stock Transfer,
Republic Plaza, 370 17th Street, Suite 2350, Denver, CO 80202-4614 as transfer
agent for our shares of common stock and warrants.
PLAN OF DISTRIBUTION
CONDUCT OF THE OFFERING
We hereby offer the right to subscribe for 1,000,000 shares at $.10 per
share on an "best efforts, all or none basis." We will not compensate any person
in connection with the offer and sale of the shares.
Our President, Sheldon Silverman, shall distribute prospectuses related
to the offering. We estimate that he will distribute approximately 40 to 50
prospectuses, limited to acquaintances, friends and business associates.
Mr. Silverman shall conduct the offering of the shares. Although Mr.
Silverman is an "associated person" as that term is defined in Rule 3a4-1 under
the Securities Exchange Act, he will not be deemed to be a broker because:
25
<PAGE>
+ he will not be subject to a statutory disqualification as defined in
Section 3(a)(39) of the Securities Exchange Act at the time of his
participation in the sale of our securities;
+ he will not be compensated in connection with the sale of the shares;
+ he will be not an associated person of a broker or dealer at the time of
the sale of our securities; and
+ he shall restrict his participation to the following activities:
(a) preparing written communications or delivering them through the mails
or other means that does not involve his oral solicitation of a
potential purchaser;
(b) responding to inquiries of potential purchasers in communications
initiated by potential purchasers, provided however, that the content
of each response is limited to information contained in the
registration statement; or
(c) performing ministerial and clerical work involved in effecting any
transaction.
As of the date of the prospectus, we have not retained a broker to sell
the shares. In the event we retain a broker who may be deemed an underwriter, we
will file an amendment to the registration statement with the Commission.
However, we have no present intention of using a broker.
We will not approach, directly or indirectly, a market maker or take
any steps to request or encourage a market in our securities prior to an
acquisition of a business opportunity and confirmation by our stockholders of
the acquisition. We have not conducted any preliminary discussions or entered
into any understandings with any market maker regarding a future trading
market in our securities, nor do we have any plans to engage in any
discussions. We do not intend to use consultants to obtain market makers. No
member of our management, no promoter or anyone acting at their direction
will recommend, encourage or advise investors to open brokerage accounts with
any broker-dealer which makes a market in the shares. Our investors shall
make their own decisions regarding whether to hold or sell their securities.
We shall not exercise any influence over investors' decisions.
26
<PAGE>
METHOD OF SUBSCRIBING
Persons may subscribe for units by filling in and signing the
subscription agreement and delivering it to us prior to the expiration date.
Subscribers must apy $0.10 per share in cash or by check, bank draft or
postal express money order payable in United States dollars to "San Diego
National Bank Escrow Account on behalf of Lionheart.ws, Inc." The offering is
being made on a "best efforts, all or none basis." Thus, unless all 1,000,000
shares are sold, none will be sold.
Our officer, director, current stockholder and any of his affiliates or
associates may purchase up to 50% of the shares. Such purchases may be made in
order to close this "all or none" offering. Shares purchased by the our officer,
director and stockholder will be acquired for investment purposes and not with a
view toward distribution.
EXPIRATION DATE
The offering will end the earlier of the receipt of subscriptions for
1,000,000 shares or 90 days from the date of the prospectus.
WHERE YOU CAN FIND MORE INFORMATION
We have not previously been required to comply with the reporting
requirements of the Securities Exchange Act. We have filed with the Commission a
registration statement on Form SB-2 to register the shares of our common stock.
The prospectus is part of the registration statement, and, as permitted by the
Commission's rules, does not contain all of the information in the registration
statement. For further information about us and the securities offered under the
prospectus, you may refer to the registration statement and to the exhibits and
schedules filed as a part of the registration statement. You can review the
registration statement and its exhibits at public reference facilities
maintained by the Commission at Judiciary Plaza, Room 1024, 450 Fifth Street,
N.W., Washington, D.C. 20549 and at the regional offices of the Commission at 7
World Trade Center, Suite 1300, New York, New York 10048 and Citicorp Center,
Suite 1400, 500 West Madison Street, Chicago, Illinois 60661. You may call the
Commission at 1-800-SEC-0330 for further information. The registration statement
is also available electronically on the World Wide Web at http://www.sec.gov.
------------------
You can also call or write us at any time with any questions you may
have. We would be pleased to speak with you about any aspect of our business and
the offering.
LEGAL PROCEEDINGS
We not a party to nor are we aware of any existing, pending or threatened
lawsuits or other legal actions.
LEGAL MATTERS
Kennan E. Kaeder, Attorney at Law, 110 West "C" Street, Suite 1904, San
Diego, California 92101 (619)232-6545 is passing upon the validity of the shares
of common stock and the offered by the prospectus.
27
<PAGE>
FINANCIAL STATEMENTS
The following are our financial statements, with independent auditor's
report, for the period from inception, April 13, 200, to June 30, 2000, together
with our reviewed financial statements for the period ending September 30, 2000.
F-1
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors and Shareholder
Lionheart.ws, Inc.
We have audited the accompanying balance sheet of Lionheart.ws, Inc. (a
development stage company) as of June 30, 2000, and the related statement of
operations, shareholders' equity (deficit) and cash flows for the period from
inception (April 13, 2000) to June 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, on a test basis, examination of 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 Lionheart.ws, Inc. as of June
30, 2000, and the results of operations and their cash flows for the period from
inception (April 13, 2000) to June 30, 2000, in conformity with generally
accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 5 to the
financial statements, the Company has incurred losses and an accumulated deficit
and cannot implement their operating plan without raising additional capital,
which raises substantial doubt about its ability to continue as a going concern.
Management's plans regarding those matters are also described in Note 5 and 6.
The financial statements do not include any adjustments that might result from
the outcome of this uncertainty.
SIEGEL - SMITH
Certified Public Accountants
Del Mar, California
July 27, 2000
F-2
<PAGE>
LIONHEART.WS, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
JUNE 30, 2000
ASSETS
<TABLE>
<S> <C>
CURRENT ASSETS:
Cash $ 15,994
------------------
TOTAL CURRENT ASSETS 15,994
------------------
$ 15,994
==================
</TABLE>
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
<TABLE>
<S> <C>
CURRENT LIABILITIES:
Accounts payable $ 140
Accrued liabilities 25,020
------------------
TOTAL CURRENT LIABILITIES 25,160
------------------
COMMITMENTS AND CONTINGENCIES -
SHAREHOLDERS' EQUITY (DEFICIT):
Common Stock, no par value, 100,000,000 shares authorized, 25,900
10,000,000 shares issued and outstanding
Common stock subscription receivable (9,900)
Additional paid in capital 1,355
Accumulated deficit during development stage (26,521)
------------------
TOTAL SHAREHOLDERS' EQUITY (DEFICIT) (9,166)
------------------
$ 15,994
==================
</TABLE>
The accompanying notes are an integral part of these financial statements
F-3
<PAGE>
LIONHEART.WS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF OPERATIONS
INCEPTION (APRIL 13, 2000) TO JUNE 30, 2000
<TABLE>
<S> <C>
REVENUE $ -
EXPENSES:
Research and development 1,355
General and administrative 25,166
-------------------
TOTAL EXPENSES 26,521
-------------------
NET LOSS $ (26,521)
===================
BASIC AND DILUTED NET LOSS PER SHARE $ (0.003)
===================
BASIC AND DILUTED NUMBER OF COMMON
SHARES OUTSTANDING 10,000,000
===================
</TABLE>
The accompanying notes are an integral part of these financial statements
F-4
<PAGE>
LIONHEART.WS, INC.
(A DEVELOPMENT STAGE COMPANY0
STATEMENT OF SHAREHOLDER'S EQUITY (DEFICIT)
FROM INCEPTION (APRIL 13, 2000) TO JUNE 30, 200
<TABLE>
<CAPTION>
COMMON STOCK COMMON STOCK
------------------------------------------------
NUMBER AMOUNT SUBSCRIPTIONS
OF SHARES PER SHARE TOTAL RECEIVABLE
------------------------------------------------ --------------------
<S> <C> <C> <C> <C>
Beginning balance, April 13, 2000 - $ - $ - $ -
Contributed capital - salary (April 30, 2000) - - - -
Contributed capital - salary (May 31, 2000) - - - -
Issuance of common shares for cash and
subscriptions receivable (June 19, 2000) 10,000,000 0.00259 25,900 (9,900)
Contributed capital - salary (June 30, 2000) - - - -
Net loss - - - -
--------------- -------------- --------------------
BALANCE, JUNE 30, 2000 10,000,000 $ 25,900 $ (9,900)
=============== ============== ====================
</TABLE>
<TABLE>
<CAPTION>
DEFICIT
ACCUMULATED
ADDITIONAL DURING THE TOTAL
PAID IN DEVELOPMENT SHAREHOLDERS'
CAPITAL STAGE EQUITY (DEFICIT)
--------------------- -------------------- -------------------
<S> <C> <C> <C>
Beginning balance, April 13, 2000 $ - $ - $ -
Contributed capital - salary (April 30, 2000) 271 - 271
Contributed capital - salary (May 31, 2000) 542 - 542
Issuance of common shares for cash and
subscriptions receivable (June 19, 2000) - - 16,000
Contributed capital - salary (June 30, 2000) 542 - 542
Net loss - (26,521) (26,521)
--------------------- -------------------- -------------------
BALANCE, JUNE 30, 2000 $ 1,355 $ (26,521) $ (9,166)
===================== ==================== ===================
</TABLE>
The accompanying notes are an integral part of these financial statements
F-5
<PAGE>
LIONHEART.WS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS
INCEPTION (APRIL 13, 2000) TO JUNE 30, 2000
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (26,521)
Adjustments to reconcile net income to net cash
provided by operating activities:
Increase in contributed capital - salary 1,355
Increase in accounts payable 140
Increase in accrued liabilities 25,020
----------------
Net used by operating activities (6)
----------------
CASH FLOWS FROM INVESTING ACTIVITIES -
----------------
CASH FLOWS FROM FINANCING ACTIVITES:
Common stock issued for cash 16,000
----------------
Net cash provided by financing activities 16,000
----------------
Net increase in cash 15,994
----------------
CASH, BEGINNING OF THE PERIOD (INCEPTION) -
----------------
CASH, END OF THE PERIOD $ 15,994
================
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Issuance of common stock for
subscriptions receivable $ 9,900
================
SUPPLEMENTAL CASH FLOW DISCLOSURE:
Interest paid $ -
================
Taxes paid $ -
================
</TABLE>
The accompanying notes are an integral part of these financial statements
F-6
<PAGE>
LIONHEART.WS, INC.
(A DEVELOPMENTAL STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2000
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
Lionheart.ws, Inc., a California corporation, was formed on April 13,
2000 to acquire an interest in a business entity that desires to seek
the perceived advantages of a corporation that has securities
registered under the Exchange Act. The Company has not commenced
planned principal operations and, therefore, is considered to be in the
development stage.
FISCAL YEAR
The Company's fiscal year end is December 31.
ACCOUNTING METHOD
The Company records income and expenses on the accrual method.
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 expenses
during the reporting period. Actual results could differ from those
estimates.
INCOME TAXES
The Company reports certain expenses differently for financial and tax
reporting purposes and, accordingly, provides for the related deferred
taxes. Income taxes are accounted for under the liability method in
accordance with SFAS 109, ACCOUNTING FOR INCOME TAXES. The Company has
no material deferred tax assets or liabilities, current or deferred tax
expense, or net operating loss carryforwards for the period reported.
CASH AND CASH EQUIVALENTS
The Company considers all liquid investments with the maturity of three
months or less from the date of purchase that are readily convertible
into cash to be cash equivalents.
RESEARCH AND DEVELOPMENT COSTS
Costs and expenses that can be clearly identified as research and
development are charged to expense as incurred in accordance with SFAS
2, ACCOUNTING FOR RESEARCH AND DEVELOPMENT COSTS. The Company has no
research and development costs for the period reported.
F-7
<PAGE>
LONG-LIVED ASSETS
The Company will record potential impairments to its long-lived assets
when there is evidence that events or changes in circumstances have
made recovery of the asset's carrying value unlikely. An impairment
loss would be recognized when the sum of the expected future
undiscounted net cash flows is less than the carrying amount of the
asset. The Company has identified no such impairment losses. All of the
Company's long-lived assets reside in the United States.
ADVERTISING COSTS
Advertising costs will be expensed as incurred. There was no
advertising expense incurred for the period from inception through June
30, 2000.
BASIC AND DILUTED NET LOSS PER SHARE
Basic and Diluted net loss per share of common stock outstanding, as
show on the statement of operations, is based on the number of shares
outstanding at each 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 the
incorporation through June 30, 2000 were for initial capital.
Therefore, the total shares outstanding at the end of each period were
deemed to be the most relevant number of shares to use for purposes of
this disclosure.
For future periods, the Company will utilize the treasury stock method
for computing earnings per share, and will compute a weighted average
number of shares outstanding once additional shares of common stock are
issued to new shareholders. Under the treasury stock method, the
dilutive effect of outstanding stock options and other convertible
securities for determining primary earnings per share is computed using
the average market price during the fiscal period, whereas the dilutive
effect of outstanding stock options and convertible securities for
determining fully diluted earnings per share is computed using the
market price as of the end of the fiscal period, if greater than the
average market price.
REPORTABLE OPERATING SEGMENTS
SFAS 131, SEGMENT INFORMATION, amends the requirements for companies to
report financial and descriptive information about their reportable
operating segments. Operating segments, as defined in SFAS 131, are
components of an enterprise for which separate financial information is
available and is evaluated regularly by a company in deciding how to
allocate resources and in assessing performance. The financial
information is required to be reported on the basis that is used
internally for evaluating segment performance. The Company intends to
operate one business and operating segment.
NEW ACCOUNTING PRONOUNCEMENTS
In February 1998, the Financial Accounting Standards Board issued SFAS
132, EMPLOYERS DISCLOSURES ABOUT PENSION AND OTHER POST RETIREMENT
BENEFITS. This
F-8
<PAGE>
pronouncement revised and standardized, as much as possible, the
disclosure requirements of SFAS 87, EMPLOYERS ACCOUNTING FOR
PENSIONS, SFAS 88, EMPLOYERS ACCOUNTING FOR SETTLEMENTS AND
CURTAILMENTS OF DEFINED BENEFIT PLANS AND FOR TERMINATION BENEFITS
and SFAS 106, EMPLOYERS ACCOUNTING FOR POST RETIREMENT BENEFITS
OTHER THAN PENSIONS. Because the Company has not commenced
operations, adoption of SFAS 132 will have no effect on the
calculation of pension expense, the results of operations or
financial position of the Company. The Company has no post-retirement
benefit plans and, therefore, is not subject to the provisions of
SFAS 132.
In June 1998, the Financial Accounting Standards Board issued SFAS 133,
ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES. This
statement requires companies to record derivatives on the balance sheet
as assets or liabilities, measured at fair value. Gains or losses
resulting from changes in the values of those derivatives would be
accounted for depending on the use of the derivative and whether it
qualifies for hedge accounting. SFAS 133 will be effective for the
Company's year ending December 31, 2001. The Company does not expect
any impact from the adoption of this statement on the Company's
financial position, results of operations or cash flows.
In March 1998, the American Institute of Certified Public Accountants
issued Statement of Position 98-1 (SOP 98-1), ACCOUNTING FOR THE COSTS
OF COMPUTER SOFTWARE DEVELOPED OR OBTAINED FOR INTERNAL USE. SOP 98-1
is effective for financial statements for years beginning after
December 15, 1998. SOP 98-1 provides guidance over accounting for
computer software developed or obtained for internal use including the
requirement to capitalize specific costs and
amortization of such costs. The company intends to implement SOP 98-1
effective at inception (April 13, 2000) and, therefore, anticipates no
impact on the Company's financial position or results of operations.
In April 1998, the American Institute of Certified Public Accountants
issued Statement of Position 98-5 (SOP 98-5), REPORTING ON THE COSTS OF
START-UP ACTIVITIES. SOP 98-5, which is effective for fiscal years
beginning after December 15, 1998, provides guidance on the financial
reporting of start-up costs and organization costs. It requires costs
of start-up activities and organization costs to be expensed as
incurred. As the Company has not yet began operations, all costs
associated with start-up activities will be expensed as incurred.
In December 1998, the Accounting Standards Executive Committee, or
AcSEC, issued SOP 98-9, MODIFICATION OF SOP 97-2, SOFTWARE REVENUE
RECOGNITION, WITH RESPECT TO CERTAIN TRANSACTIONS. SOP 98-9 amends
SOP-97-2 to require that an entity recognize revenues for multiple
element arrangements by means of the "residual method" when (1) there
is vendor-specific objective evidence, or
F-9
<PAGE>
VSOE, of the fair values of all the undelivered elements that are
not accounted for by means of long-term contract accounting, and (2)
VSOE of fair value does not exist for one or more of the delivered
elements, and (3) all revenue recognition criteria of SOP 97-2 and
SOP 98-9 will be effective from the Company's inception. We do not
expect SOP 98-9 to have any effect on our results of operations.
In December 1999, the Staff of the Securities and Exchange Commission
released Staff Accounting Bulletin (SAB) No. 101, REVENUE RECOGNITION,
to provide guidance on the recognition, presentation and disclosure of
revenues in financial statements. Upon commencement of operations, the
Company intends to adopt the revenue recognition practices to conform
to SAB No. 101.
2. SHAREHOLDERS' EQUITY (DEFICIT)
COMMON STOCK
In June 2000, the Company issued 10,000,000 shares of common stock to a
single shareholder for $ 16,000 in cash and $ 9,900 in a common stock
subscription.
ADDITIONAL PAID IN CAPITAL
A shareholder contributes his time and services to the Company, without
charge. The Company records this contribution as additional paid in
capital. Through June 30, 2000, services contributed to and recorded by
the Company was $1,355.
3. COMMITMENTS
The Company has made no material commitments through June 30, 2000.
4. RELATED PARTY
The Company uses the mailing address of the sole shareholder and
director, without charge, as its address of record. There are no
material costs associated with this service through June 30, 2000.
Additionally, a shareholder intends to contribute his time and services
to the Company without charge. The market value of his contribution is
recorded as additional paid in capital. Through June 30, 2000, $1,355
of services was provided and recorded.
5. GOING CONCERN
The accompanying financial statements have been prepared assuming that
the Company will continue as a going concern. This basis of accounting
contemplates the recovery of the Company's assets and the satisfaction
of its liabilities in the normal course of business. Since inception,
the Company has not been engaged in any organizational activities and
has not begun operations. Through June 30, 2000, the Company had
incurred losses of $ 26,521. Successful completion of the Company's
business plan is dependent upon obtaining financing in order to have
the necessary resources to design, develop and launch
F-10
<PAGE>
the web portal. Management believes that if the financing is not
successful, the business plan may be seriously inhibited.
6. SUBSEQUENT EVENTS
The Company intends to prepare and file a registration statement with
the Securities and Exchange Commission pursuant to Rule 419. The
offering, on a "best efforts, all-or-none basis" will consist of
1,000,000 shares at $0.10 per share or an aggregate offering price of
$100,000. Each share will consist of one share of common stock. The
anticipated proceeds from the offering will be used to initiate and
implement the Company's business plan.
In July 2000, the Company collected the entire outstanding balance
related to the common stock subscription receivable of $ 9,900.
7. RULE 419 REQUIREMENTS
Rule 419 requires that offering proceeds be deposited into an escrow or
trust account (the "Deposited Funds" and "Deposited Securities",
respectively) governed by an agreement that contains certain terms and
provisions specified by that rule. The Company may receive 10% of the
escrowed funds for working capital. The remaining deposited funds and
the deposited securities will be released to the Company and to the
investors, respectively, only after the Company has met the following
three basic conditions. First, the Company must execute an agreement
for an acquisition meeting certain prescribed criteria. Second, the
Company must file a post-effective amendment to its registration
statement that includes the terms of a reconfirmation offer that must
contain conditions prescribed by Rule 419. The post-effective amendment
must also contain information regarding the acquisition candidate and
its business, including audited financial statements. The agreement
must include, as a condition precedent to its consummation, a
requirement that the number of investors who contributed at least 80%
of the offering proceeds must elect to reconfirm their investments.
Third, the Company must conduct the reconfirmation offer and satisfy
all of the prescribed conditions. The post-effective amendment must
also include the terms of the reconfirmation offer mandated by Rule
419. After the Company submits a signed representation to the escrow
agent that the requirements of Rule 419 have been met and after the
acquisition is consummated, the escrow agent can release the deposited
funds and deposited securities. Investors who do not reconfirm their
investments will receive the return of a pro-rata portion thereof; and
in the event investors representing less than 80% of the Deposited
Funds reconfirm their investments, the deposited funds will be returned
to all the investors on a pro rata basis.
F-11
<PAGE>
LIONHEART.WS, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
(UNAUDITED)
<TABLE>
September 30, 2000
----------------------
ASSETS
<S> <C>
CURRENT ASSETS:
Cash $ 712
----------------------
TOTAL CURRENT ASSETS 712
----------------------
$ 712
======================
</TABLE>
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
<TABLE>
<S> <C>
CURRENT LIABILITIES:
Accounts payable 115
Accrued liabilities $ 2,250
----------------------
TOTAL CURRENT LIABILITIES 2,365
----------------------
COMMITMENTS AND CONTINGENCIES -
SHAREHOLDERS' EQUITY (DEFICIT):
Common Stock, no par value, 100,000,000 shares authorized, 25,900
10,000,000 shares issued and outstanding
Additional paid in capital 2,981
Accumulated deficit during the development stage (30,534)
----------------------
TOTAL SHAREHOLDERS' EQUITY (DEFICIT) (1,653)
----------------------
$ 712
======================
</TABLE>
See Footnotes
F-12
<PAGE>
LIONHEART.WS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Cumulative from
Three months ending Inception (April 13, 2000)
September 30, 2000 to September 30, 2000
--------------------------- --------------------------
<S> <C> <C>
REVENUE $ - $ -
EXPENSES:
Research & development 1,626 2,981
General and administrative 2,387 27,553
------------------------- --------------------
TOTAL EXPENSES 4,013 30,534
------------------------- --------------------
NET LOSS $ (4,013) $ (30,534)
========================= ====================
BASIC AND DILUTED NET LOSS PER SHARE $ (0.0004) $ (0.005)
========================= ====================
BASIC AND DILUTED WEIGHTED AVERAGE NUMBER
OF COMMON SHARES OUTSTANDING 10,000,000 6,303,030
========================= ====================
</TABLE>
See Footnotes
F-13
<PAGE>
LIONHEART.WS,INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Cumulative from
Three months ending Inception (April 13, 2000)
September 30, 2000 to September 30, 2000
--------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (4,013) $ (30,534)
Adjustments to reconcile net income to net cash
provided by operating activities:
Increase (decrease) in accounts payable (25) 115
Increase (decrease) in accrued liabilities (22,770) 2,250
Contributed capital - salary 1,626 2,981
-------------------------- ----------------
Net cash (used) provided by operating activities (25,182) (25,188)
-------------------------- ----------------
CASH FLOWS FROM INVESTING ACTIVITIES - -
-------------------------- ----------------
CASH FLOWS FROM FINANCING ACTIVITES:
Receipt of cash for common stock subscription 9,900 25,900
-------------------------- ----------------
Net cash provided by financing activities 9,900 25,900
-------------------------- ----------------
Net increase (decrease) in cash (15,282) 712
CASH, BEGINNING OF THE PERIOD (INCEPTION) 15,994 -
-------------------------- ----------------
CASH, END OF THE PERIOD $ 712 $ 712
========================== ================
</TABLE>
See Footnotes
F-14
<PAGE>
LIONHEART.WS, INC.
(A DEVELOPMENTAL STAGE COMPANY)
FOOTNOTES
SEPTEMBER 30, 2000
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
Lionheart.ws, Inc., a California corporation, was formed on April 13, 2000
to acquire an interest in a business entity that desires to seek the
perceived advantages of a cororation that has securities registered under
the Exchange Act. The Company has not commenced planned principal
operations and, therefore, is considered to be in the development stage.
INTERIM PERIODS
The accompanying unaudited financial statements have been prepared in
accordance with the instructions of Form 10-SBQ and do not include all of
the information required by generally accepted accounting principles for
complete financial statements. In the opinion of the Company's management,
all necessary adjustments (consisting of normal recurring adjustments) for
a fair presentation have been included. Operating results for the three
months ending September 30, 2000 are not necessarily indicative of results
for any future period. These statements should be read in conjunction with
the financial statements and notes thereto for the period beginning at
inception (April 13, 2000) through June 30, 2000 included in the Company's
Form 10-SB2.
F-15
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of Directors and Officers
The California Corporations Code provides for the indemnification of
the officers, directors and corporate employees and agents of Lionheart.ws, Inc.
(the "Registrant") under certain circumstances as follows:
INDEMNIFICATION OF OFFICERS, DIRECTORS, EMPLOYEES AND AGENTS; INSURANCE.
1. Section 317 of the California General Corporation Law provides that
each corporation shall have the following powers:
(a) For the purposes of this section, "agent" means any person who is or was a
director, officer, employee or other agent of the corporation, or is or was
serving at the request of the corporation as a director, officer, employee or
agent of another foreign or domestic corporation, partnership, joint venture,
trust or other enterprise, or was a director, officer, employee or agent of a
foreign or domestic corporation which was a predecessor corporation of the
corporation or of another enterprise at the request of the predecessor
corporation; "proceeding" means any threatened, pending or completed action or
proceeding, whether civil, criminal, administrative or investigative; and
"expenses" includes without limitation attorneys' fees and any expenses of
establishing a right to indemnification under subdivision (d) or paragraph (4)
of subdivision (e).
II-1
<PAGE>
(b) A corporation shall have power to indemnify any person who was or is a party
or is threatened to be made a party to any proceeding (other than an action by
or in the right of the corporation to procure a judgment in its favor) by reason
of the fact that the person is or was an agent of the corporation, against
expenses, judgments, fines, settlements, and other amounts actually and
reasonably incurred in connection with the proceeding if that person acted in
good faith and in a manner the person reasonably believed to be in the best
interests of the corporation and, in the case of a criminal proceeding, had no
reasonable cause to believe the conduct of the person was unlawful. The
termination of any 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 the
person reasonably believed to be in the best interests of the corporation or
that the person had reasonable cause to believe that the person's conduct was
unlawful.
(c) A corporation shall have power to indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending, or completed
action by or in the right of the corporation to procure a judgment in its favor
by reason of the fact that the person is or was an agent of the corporation,
against expenses actually and reasonably incurred by that person in connection
with the defense or settlement of the action if the person acted in good faith,
in a manner the person believed to be in the best interests of the corporation
and its shareholders. No indemnification shall be made under this subdivision
for any of the following:
(1) In respect of any claim, issue or matter as to which the person shall have
been adjudged to be liable to the corporation in the performance of that
person's duty to the corporation and its shareholders, unless and only to the
extent that the court in which the proceeding is or was pending shall determine
upon application that, in view of all the circumstances of the case, the person
is fairly and reasonably entitled to indemnity for expenses and then only to the
extent that the court shall determine.
(2) Of amounts paid in settling or otherwise disposing of a pending action
without court approval.
(3) Of expenses incurred in defending a pending action which is settled or
otherwise disposed of without court approval.
(d) To the extent that an agent of a corporation has been successful on the
merits in defense of any proceeding referred to in subdivision (b) or (c) or in
defense of any claim, issue, or matter therein, the agent shall be indemnified
against expenses actually and reasonably incurred by the agent in connection
therewith.
(e) Except as provided in subdivision (d), any indemnification under this
section shall be made by the corporation only if authorized in the specific
case, upon a determination that indemnification of the agent is proper in the
circumstances because the agent has met the applicable standard of conduct set
forth in subdivision (b) or (c), by any of the following:
II-2
<PAGE>
(1) A majority vote of a quorum consisting of directors who are not parties to
such proceeding.
(2) If such a quorum of directors is not obtainable, by independent legal
counsel in a written opinion.
(3) Approval of the shareholders (Section 153), with the shares owned by the
person to be indemnified not being entitled to vote thereon.
(4) The court in which the proceeding is or was pending upon application made by
the corporation or the agent or the attorney or other person rendering services
in connection with the defense, whether or not the application by the agent,
attorney or other person is opposed by the corporation.
(f) Expenses incurred in defending any proceeding may be advanced by the
corporation prior to the final disposition of the proceeding upon receipt of an
undertaking by or on behalf of the agent to repay that amount if it shall be
determined ultimately that the agent is not entitled to be indemnified as
authorized in this section. The provisions of subdivision (a) of Section 315 do
not apply to advances made pursuant to this subdivision.
(g) The indemnification authorized by this section shall not be deemed exclusive
of any additional rights to indemnification for breach of duty to the
corporation and its shareholders while acting in the capacity of a director or
officer of the corporation to the extent the additional rights to
indemnification are authorized in an article provision adopted pursuant to
paragraph (11) of subdivision (a) of Section 204. The indemnification provided
by this section for acts, omissions, or transactions while acting in the
capacity of, or while serving as, a director or officer of the corporation but
not involving breach of duty to the corporation and its shareholders shall not
be deemed exclusive of any other rights to which those seeking indemnification
may be entitled under any bylaw, agreement, vote of shareholders or
disinterested directors, or otherwise, to the extent the additional rights to
indemnification are authorized in the articles of the corporation. An article
provision authorizing indemnification "in excess of that otherwise permitted by
Section 317" or "to the fullest extent permissible under California law" or the
substantial equivalent thereof shall be construed to be both a provision for
additional indemnification for breach of duty to the corporation and its
shareholders as referred to in, and with the limitations required by, paragraph
(11) of subdivision (a) of Section 204 and a provision for additional
indemnification as referred to in the second sentence of this subdivision. The
rights to indemnity hereunder 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 the person. Nothing contained in this
section shall affect any right to indemnification to which persons other than
the directors and officers may be entitled by contract or otherwise.
(h) No indemnification or advance shall be made under this section, except as
provided in subdivision (d) or paragraph (4) of subdivision (e), in any
circumstance where it appears:
II-3
<PAGE>
(1) That it would be inconsistent with a provision of the articles, bylaws, a
resolution of the shareholders, or an agreement in effect at the time of the
accrual of the alleged cause of action asserted in the proceeding in which the
expenses were incurred or other amounts were paid, which prohibits or otherwise
limits indemnification.
(2) That it would be inconsistent with any condition expressly imposed by a
court in approving a settlement.
(i) A corporation shall have power to purchase and maintain insurance on behalf
of any agent of the corporation against any liability asserted against or
incurred by the agent in that capacity or arising out of the agent's status as
such whether or not the corporation would have the power to indemnify the agent
against that liability under this section. The fact that a corporation owns all
or a portion of the shares of the company issuing a policy of insurance shall
not render this subdivision inapplicable if either of the following conditions
are satisfied: (1) if the articles authorize indemnification in excess of that
authorized in this section and the insurance provided by this subdivision is
limited as indemnification is required to be limited by paragraph (11) of
subdivision (a) of Section 204; or (2) (A) the company issuing the insurance
policy is organized, licensed, and operated in a manner that complies with the
insurance laws and regulations applicable to its jurisdiction of organization,
(B) the company issuing the policy provides procedures for processing claims
that do not permit that company to be subject to the direct control of the
corporation that purchased that policy, and (C) the policy issued provides for
some manner of risk sharing between the issuer and purchaser of the policy, on
one hand, and some unaffiliated person or persons, on the other, such as by
providing for more than one unaffiliated owner of the company issuing the policy
or by providing that a portion of the coverage furnished will be obtained from
some unaffiliated insurer or reinsurer.
(j) This section does not apply to any proceeding against any trustee,
investment manager, or other fiduciary of an employee benefit plan in that
person's capacity as such, even though the person may also be an agent as
defined in subdivision (a) of the employer corporation. A corporation shall have
power to indemnify such a trustee, investment manager, or other fiduciary to the
extent permitted by subdivision (f) of Section 207.
2. The Issuer's Articles of Incorporation limit liability of its
Officers and Directors to the full extent permitted by the California General
Corporation Law. The bylaws provide for indemnification in accordance with the
foregoing statutory provisions.
Articles V and VI of the Registrant's certificate of incorporate
provide as follows:
Article V. The liability of the directors of the corporation for
monetary damages shall be eliminated to the fullest extent permissible under
California law.
Article VI. This Corporation is authorized to provide indemnification
of agents as defined in Section 317 of the California Corporations Code for
breach of duty to the corporation and its stockholders through by-law provisions
or through agreements with the agents, or both, in excess
II-4
<PAGE>
of the indemnification otherwise permitted by Section 317 of the California
Corporations Code, subject to the limits on such excess indemnification set
forth in Section 204 of the California Corporations Code.
Article II, Section 5 of the Registrant's by-laws provides as follows:
SECTION 5. INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS. The
corporation may indemnify any Director, Officer, agent or employee as to those
liabilities and on those terms and conditions as are specified in Section 317.
In any event, the corporation shall have the right to purchase and maintain
insurance on behalf of any such persons whether or not the corporation would
have the power to indemnify such person against the liability insured against.
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:
<TABLE>
<S> <C>
Escrow Fee $ 600.00
Securities and Exchange Commission Registration Fee $ 26.40
Legal Fees and Consulting Fees $ 20,000.00
Accounting Fees $ 5,000.00
Printing and Engraving $ 3,000.00
Blue Sky Qualification Fees and Expenses $ 1,000.00
Transfer Agent Fee $ 1,000.00
Miscellaneous $ 400.00
----------
TOTAL $ 31,026.40
</TABLE>
Item 26. Recent Sales of Unregistered Securities
The registrant issued 2,500,000 shares of common stock on June 1, 2000 to
its President for cash consideration of $.0026 per share for an aggregate
investment of $25,900. The registrant sold these shares of common stock under
the exemption from registration provided by Section 4(2) of the Securities Act.
No securities have been issued for services.
Neither the registrant nor any person acting on its behalf offered or
sold the securities by means of any form of general solicitation or general
advertising. No services were performed by any purchaser as consideration for
the shares issued.
The purchaser represented in writing that he acquired the securities
for his own account. A legend was placed on the stock certificates stating that
the securities have not been registered under the Securities Act and cannot be
sold or otherwise transferred without an effective registration or an exemption
there from.
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<PAGE>
EXHIBITS
Item 27.
3.1 Certificate of Incorporation
3.2 By-Laws
4.1 Specimen Certificate of Common Stock
4.2 Form of Escrow Agreement
5.1 Opinion of Kennan E. Kaeder, Esq.
23.1 Accountant's Consent to Use Opinion dated July 27, 2000
23.2 Consent of Kennan E. Kaeder, Esq. to Use Opinion
23.3 Accountant's Consent to Use Opinion dated September 30, 2000
27 Financial Data Schedule
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 (the "Registration
Statement"):
(i) To include any prospectus required by Section 10 (a) (3) of the
Securities Act of 1933 (the "Securities Act");
(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 this registration
II-6
<PAGE>
statement, including (but not limited to) the addition of an
underwriter;
(2) That, for the purpose of determining any liability under the Securities Act,
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.
(4) To deposit into the Escrow Account at the closing, certificates in such
denominations and registered in such names as required by the Company to permit
prompt delivery to each purchaser upon release of such securities from the
Escrow Account in accordance with Rule 419 of Regulation C under the Securities
Act. Pursuant to Rule 419, these certificates shall be deposited into an escrow
account, not to be released until a business combination is consummated.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to any provisions contained in its Articles of
Incorporation, or by-laws, or otherwise, the Registrant has been advised that in
the opinion of the Commission such indemnification is against public policy as
expressed in the Securities 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 Securities
Act and will be governed by the final adjudication of such issue.
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<PAGE>
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 the registration
statement to be signed on its behalf by the undersigned, in the City of La
Jolla, California, 92037, on October 30, 2000.
LIONHEART.WS, INC.
By: /s/Sheldon Silverman
---------------------------
Sheldon Silverman, President
In accordance with the requirements of the Securities Act of 1933, the
registration statement was signed by the following persons in the capacities and
on the dates stated.
/s/Sheldon Silverman Dated: October 30, 2000
-------------------------------
Sheldon Silverman
President, Treasurer, Director
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