As filed with the Securities and Exchange Commission on September 21, 2000
Registration No. 33
================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM SB-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
TRIPLE A HOMES, INC.
(Name of small business issuer in its charter)
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<S> <C> <C>
Florida 6552 59-3612687
(State or other jurisdiction of (Primary Standard Industrial (IRS Employer
incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
1616 Gulf to Bay Boulevard, Clearwater, Florida 34615; (727) 446-7981
(Address and telephone number of registrant's principal executive offices and
principal place of business)
Jim Scutti, Jim Scutti, P.A., 980 N. Federal Highway, Suite 434,
Boca Raton, FL 33432; (561) 750-1391
(Name, address and telephone number of agent for service)
Approximate date of proposed sale to public:
As soon as practicable after the effective date of this Registration Statement.
CALCULATION OF REGISTRATION FEE
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======================================================================================================
Title of Each Proposed
Class of Securities Amount Dollar Amount Maximum Offering Amount of
to be Registered to be Registered to be Registered Price Per Unit (1) Registration(2)
------------------------------------------------------------------------------------ ---------------
Fee(1)
------
<S> <C> <C> <C> <C>
Shares of common stock 500,000 $ 1,000,000 $2.00 $264.00
issuable upon exercise
of A Warrants
Shares of common stock 500,000 $ 2,000,000 $4.00 $528.00
issuable upon exercise
of B Warrants
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-continued on next page
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Title of Each Proposed
Class of Securities Amount Dollar Amount Maximum Offering Amount of
to be Registered to be Registered to be Registered Price Per Unit (1) Registration Fee(1)
---------------------------------------------------------------------------------- ---------------------
<S> <C> <C> <C> <C>
Shares of common 1,000,000 $1,000,000 $1.00(2) $ 264.00
stock offered by
selling securities
holders
Total Registration Fee $1,056.00
=============================================================================================================
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(1) The prices shown were estimated solely for the purpose of calculating the
registration fee.
(2) The price was estimated because there is currently no public market for the
registrant's securities.
The registrant hereby amends this statement on such date or dates as may be
necessary to delay its effective date until it shall file a further amendment
that specifically states that this Registration Statement shall thereafter
become effective in accordance with Section 8(a) of the Securities Act of 1933
or until the Registration Statement shall become effective on such date as the
Commission, acting pursuant to said Section 8(a), may determine.
Disclosure alternative used (Check one): Alternative 1 |_|; Alternative 2 |X|.
<PAGE>
TRIPLE A HOMES, INC.
A Maximum of 2,000,000 Shares of common stock (Par Value $.0005)
This Prospectus relates to a maximum of 2,000,000 shares (the "Shares") of
the common stock, par value $.0005 per share of Triple A Homes, Inc. (the
"Company") which may be issued from time to time in connection with the exercise
of 500,000 A Warrants and 500,000 B Warrants issued to the Company's
shareholders of record as of March 1, 1999, and 1,000,000 Shares being offered
by selling security holders of the Company (the "Selling Security Holders").
Prior to this offering there has been no public market for the Company's
securities. The warrants will become exercisable on the effective date of the
Registration Statement of which this Prospectus is a part. Every two A Warrants
can then be exercised at a price of $2.00 to acquire one share of common stock
and every two B Warrants can then be exercised at a price of $4.00 to acquire
one share of common stock. The exercise price per share and the proceeds to the
Company from the sale of the A Warrants and B Warrants are shown in the table
below.
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==========================================================================================
Exercise Price/ Underwriting Proceeds to
Price per Share discount and issuer or
to Public Total Price commissions(1) other persons(2)
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<S> <C> <C> <C> <C>
A Warrants $2.00 $1,000,000 None $1,000,000
B Warrants $4.00 $2,000,000 None $2,000,000
TOTAL $3,000,000
==========================================================================================
</TABLE>
(See notes on following page)
The Selling Security Holders named in the table on pages 23 to 31 may, from time
to time, offer the shares at prices then prevailing in any public market which
may develop or in isolated transactions, at negotiated prices, with
institutional and other investors.
----------
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK AND SUBSTANTIAL
DILUTION. SEE "RISK FACTORS" ON PAGES 5 TO 8 AND "DILUTION" ON PAGES 9 AND 10
FOR A DISCUSSION OF CERTAIN FACTORS REGARDING THESE MATTERS THAT SHOULD BE
CONSIDERED BY PROSPECTIVE PURCHASERS.
----------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Prospectus is _________________ , 2000
<PAGE>
The A Warrants shall expire twelve months and the B Warrants eighteen
months following the effective date of the Registration Statement. The Company
has the right to call the warrants upon thirty days written notice to the
warrantholders at a price of $.01 per warrant. If called, the warrantholders
have the right to immediately exercise the warrants. The exercise prices and
expiration dates of the respective warrants can be adjusted by the Company, as
determined by the Board of Directors. See DESCRIPTION OF SECURITIES for more
information regarding the Company's securities.
The approximate date of commencement of the proposed sale to the public
shall be as soon as practicable after the effective date of the Registration
Statement.
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(1) No commissions or fees will be paid to any person in connection with the
offering of the A Warrants and B Warrants.
(2) All funds received from the exercise of the A Warrants and B Warrants will
be paid to the Company. All expenses in connection with the issuance and
distribution of the common stock covered by this Prospectus will be paid
by the Company. These expenses include the securities registration fee,
printing, legal services, accounting services, Blue Sky filing fees,
transfer agent fees and OTC Bulletin Board listing fees, the total of
which is estimated to be $30,000.
----------
TABLE OF CONTENTS
Page
Prospectus Summary.................................................. 3
Risk Factors........................................................ 5
Dilution............................................................ 9
Plan of Distribution................................................ 10
Use of Proceeds to Issuer........................................... 10
Description of Business and Property................................ 12
Directors and Executive Officers.................................... 17
Remuneration of Directors and Officers.............................. 17
Securities Ownership of Management and Certain Security Holders..... 18
Interest of Management and Others in Certain Transactions .......... 19
Securities Being Offered............................................ 21
Significant Parties................................................. 23
Selling Security Holders............................................ 23
Disclosure of Commission Position on Indemnification for
Securities Act Liabilities........................................ 32
Financial Information............................................... 32
2
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PROSPECTUS SUMMARY
The following is a summary of certain of the information contained in the
body of this Prospectus and is qualified in its entirety by the detailed
information and financial statements appearing elsewhere in the Prospectus. Each
prospective investor is, therefore, urged to read this Prospectus in its
entirety. The securities offered hereby involve a high degree of risk and the
exercise of the A Warrants and B Warrants and subsequent issuance of the shares
by the Company will result in immediate substantial dilution. This Prospectus
contains forward looking statements that involve risks and uncertainties. The
Company's actual results could differ materially from those anticipated in these
forward looking statements as a result of certain factors discussed under the
caption "RISK FACTORS."
The Company
Triple A Homes, Inc. is a development stage company in the business of
residential real estate development. The Company was incorporated in Florida on
December 16, 1997. We plan to initially build a maximum of 51 apartment units on
approximately 13 acres of land in Dade City, Florida. We began operations in
1999 but did not have sufficient funds to conduct full operations until the
beginning of 2000. The Company currently has enough money to meet most of its
working capital needs in the next twelve months.
The mailing address and telephone number of the Company's executive
offices is 1616 Gulf to Bay Boulevard, Clearwater, Florida 34615; 727/446-7981.
Offering by the Company
1,000,000 shares of common stock are being offered by the Company through
the exercise of A Warrants and B Warrants. Every two A Warrants will entitle the
warrantholder to one share of common stock at an exercise price of $2.00 per
share. Every two B Warrants entitle the warrantholder to one share of common
stock upon exercise at a price of $4.00 per share. The Company currently has
1,000,000 shares of common stock outstanding. There will be 2,000,000 shares
outstanding if all of the A Warrants and B Warrants are exercised. See
DESCRIPTION OF SECURITIES for more information regarding the Company's common
stock and the A Warrants and B Warrants.
Use of Proceeds
If all of the A Warrants are exercised, the Company will receive, after
deducting offering expenses, approximately $970,000. The Company intends to use
these funds to, among other things, supplement construction financing, if it
cannot obtain 100 percent financing and for general corporate purposes. If all
of the A Warrants and B Warrants are exercised, the Company will receive total
proceeds after deducting expenses of approximately $2,970,000. The Company will
use the additional $2,970,000 to pay for construction rather than use
conventional financing. See USE OF PROCEEDS.
3
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Summary of Financial Information
The summary financial information of the Company presented below for the
period from January 1, 1999 through December 31, 1999 is derived from the
audited financial statements of the Company for the fiscal year ended December
31, 1999. The summary financial information for the six months ended June 30,
2000 is derived from the unaudited financial statements of the Company for such
period. In the opinion of management, all adjustments considered necessary for
the fair presentation of the results of operations for such period have been
included. The summary financial information should be read in conjunction with
the financial statements (and notes thereto). See FINANCIAL INFORMATION.
Six Months Ended Fiscal Year Ended
June 30, 2000 December 31, 1999
Item (Unaudited) (Audited)
---- ---------------- -----------------
Working capital $189,665 $200,408
Current assets 210,567 221,310
Total assets 215,991 221,734
Total current liabilities 20,902 20,902
Accumulated deficit (9,089) (3,346)
Shareholders equity 195,089 200,832
Revenue 2,873 11,918
Expenses 13,616 15,264
Net loss (10,743) (3,346)
Net loss per share (.01) (0.00)
Risk Factors
An investment in the Company is speculative and involves a high degree of
risk. Prospective purchasers of the Shares should review and carefully consider
the information set forth under RISK FACTORS, as well as other information
contained in this Prospectus, before purchasing any of the Shares. See RISK
FACTORS below.
4
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RISK FACTORS
The Shares being offered hereby are speculative and involve a high degree
of risk. Prospective investors should carefully consider the following risk
factors, together with the other information in this Prospectus.
Limited Operating History; New Business Activities. Since the Company's
incorporation in December 1997, its operations have been limited and revenues
from operations have been minimal. It must be considered in the initial stages
of building its business. Its business is subject to all of the risks of a new
business and there can be no assurance that any of the Company's proposed
activities will be successful. The likelihood of the Company's success must be
considered in light of the problems, expenses, complications and delays
frequently encountered in connection with a new business and the competitive
environment in which the Company is operating. The purchase of the securities
offered must, therefore, be regarded as placing funds at high risk in a new or
"start up" venture. See USE OF PROCEEDS and DESCRIPTION OF BUSINESS AND
PROPERTY.
Dependence Upon Proceeds of This Offering for Financing. The Company has
sufficient working capital to carry out its plan of operations for the next
twelve months, provided it can obtain construction financing. The Company
believes it will be able to obtain financing either through a municipal bond
offering, the Federal Housing Authority ("FHA") or a financial institution.
However, no assurances can be given that it will be successful in obtaining such
financing. If the Company is unable to obtain financing from outside sources, it
will be dependent on the proceeds of this offering for construction financing.
The Company believes that a maximum of $2,550,000 would be needed to construct
all of the apartment units which are planned. If the Company is unable to obtain
outside financing or raise sufficient funds to pay for construction from the
exercise of the A Warrants and B Warrants, it will not be able to carry out its
plan of operations and its prospects for success will diminish substantially.
Reliance on Management. The Company has been and will continue to be
dependent upon Richard E. Metz, its President. Mr. Metz is a real estate broker
and has over 35 years experience in residential and commercial real estate
development and management. In the event of the loss of Mr. Metz, the Company
may not be successful in securing an adequate replacement at reasonable cost and
its business could be adversely affected. The Company does not have "key man"
life insurance for Mr. Metz and does not intend to purchase any.
Conflict of Interest Between the Company and Mr. Metz. For at least the
next year, Mr. Metz will not be devoting full time to the business of the
Company. He will continue to act as a real estate broker and engage in the
management of other real estate ventures, including apartment complexes. Since
Mr. Metz's business activities will be similar to those of the Company's, a
potential conflict of interest exists between his duties to the Company and his
duties in other real estate-related businesses. Mr. Metz has agreed that, prior
to pursuing any substantial business opportunity which might be in conflict with
the interest of the Company, he will offer the opportunity to the Company to
pursue. However, the Company may not be able
5
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financially to pursue such opportunity, if it arises. See DIRECTORS AND
EXECUTIVE OFFICERS.
Control by Existing Shareholders. After this offering, RemProp, Inc.
("RemProp"), a company wholly owned by Richard E. Metz, and Key Management, Inc.
("Key Management") will each beneficially own 33.5% or a total of 67% of the
Company's outstanding common stock. They will collectively have the ability to
elect the Board of Directors and, therefore, the ability to control all matters
requiring shareholder approval.
Difficulty Obtaining Apartment Construction Financing. The Company will
not undertake construction of any apartment units until permanent financing has
been obtained for those units. Such factors as high interest rates, building
moratoriums, inability to obtain building permits and unknown environmental
problems may prevent the Company from obtaining the funding needed from
conventional financing sources. If the Company does not have sufficient funds
from the proceeds of this offering to pay for construction, the Company's
prospects for success will diminish substantially.
Governmental Approval and Other Contingencies for Dade City Site. Prior to
constructing apartment units at the Dade City site, any one of many factors
might intervene and hinder the construction and site approval process and thus
delay site construction and income generation. Such factors include, but are not
limited to weather, labor disputes, improper construction and necessary
corrections, and governmental approval delays such as postponement of city
meetings. In the event that apartment construction is delayed, for any reason,
the Company will experience significant negative cash flow.
No Environmental Assessment. The Dade City site has not been assessed for
environmental problems. If any such problems are present, it could greatly
increase the cost of development or prevent development entirely and could
subject the Company to significant liability.
General Real Estate, Economic and Other Conditions. The residential real
estate industry is extremely cyclical, impacted by a myriad of factors, involves
high degrees of risk and is significantly affected by changes in general
economic conditions. In addition, builders are subject to various risks, such as
availability and cost of materials and labor, construction delays, cost
overruns, delays caused by weather conditions, government regulation, and
increases in real estate taxes. It is extremely difficult, if not impossible, to
determine how and when such factors will affect the residential real estate and
home construction markets.
Regulation. The housing industry is subject to extensive and complex
regulations. The Company and its subcontractors must comply with a variety of
federal, state and local laws which regulate, among other things, advertising
and construction, as well as land use and development. In addition, the
Company's construction must comply with all codes, regulations and rules
governing building, wiring, plumbing, heating and air conditioning or other
apartment unit construction related matters. Failure by the Company to comply
with such federal, state or local laws, codes, regulations and/or rules may have
a severe negative impact on the operations
6
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of the Company. For example, if the Company fails to comply with applicable
building codes it very likely will be prohibited from receiving a certificate of
occupancy on its apartment units.
Subcontractor Risks. The Company intends to obtain below-market,
fixed-price subcontracts based on the high volume of work subcontractors will
perform. However, no assurance can be given that subcontractors will agree to
provide services and/or materials on such terms. If subcontractors do agree to
below-market, fixed-price contracts, no assurance can be given as to the
duration or other terms of such agreements.
Competition. Apartment construction and ownership is highly competitive.
The Company will compete with numerous national, regional and/or local apartment
owners, some of which have substantially greater capital and human resources
than it has.
Recent Rise in Interest Rates. The recent rise in mortgage interest rates
may have a negative impact on the Company's ability to obtain financing. The
increase in interest rates will increase the total amount to be paid over the
term of the loan and, very likely, the monthly payments the Company will have to
make. As a consequence, the Company could be forced to reduce the number of
apartment units planned for construction.
No Public Market; No Market Maker. No public market for the common stock,
A Warrants or B Warrants exists, and there is no assurance that a public market
for these securities will develop after this offering. If a market does develop,
there can be no assurance that it will be maintained or that any of the
securities being offered can be resold at or near the offering price. The
Company will attempt to obtain one or more market makers to assist it in
developing a public market. The Company, at present, has no agreement with any
broker-dealer to act as a market maker. If the Company is unsuccessful in
obtaining one or more market makers, the volume of trading of its securities
will likely be smaller and support of prices may be more difficult.
No Nasdaq Listing. The Company intends to apply for listing on the OTC
Bulletin Board ("OTCBB"). The National Association of Securities Dealers, Inc.
("NASD") oversees the OTCBB but the OTCBB is not part of the Nasdaq Stock
Market. If the Company's application for OTCBB listing privileges is denied, its
securities will have to trade in the over the counter market in the so-called
"Pink Sheets." Listing in either the OTCBB or Pink Sheets could result in an
investor finding it more difficult to dispose of or obtain accurate quotations
regarding the market value of the Company's securities.
Compliance with Penny Stock Rule. Since the Company's securities will not
be traded on a national securities exchange or quoted on Nasdaq, trading in the
common stock and warrants must be carried out in compliance with Rule 15g under
the Securities Exchange Act of 1934 (the "Exchange Act"). Broker-dealers who
recommend non-Nasdaq and non-exchange listed securities to persons other than
established customers and accredited investors must make a special written
suitability determination for the purchaser and receive the purchaser's written
agreement to a transaction prior to sale. Securities are exempt from this rule
if the market price is at least $5.00 per share or other exemptions are
available. Such exemptions include an equity
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security issued by an issuer that has (i) net tangible assets of at least $5
million, if such issuer has been in continuous operation for less than three (3)
years, or (ii) average revenue of at least $6 million for the proceeding three
(3) years. Unless an exemption is available, the regulations require the
delivery, prior to any transaction involving a penny stock, of a disclosure
schedule explaining the penny stock market and the risks associated with that
market. Since the Company's common stock will be subject to the penny stock
rules, the market liquidity for the common stock could be severely and adversely
affected because of the limitations on the ability of broker-dealers to sell the
common stock in the public market.
Arbitrary Method of Determining Exercise Prices. The exercise prices of
the A Warrants and B Warrants was determined by the Company. The prices bear no
relationship to the Company's assets, operating results, book value or any other
generally recognized criteria of value.
Dilution. Warrantholders who exercise the A Warrants or B Warrants will
experience an immediate and substantial dilution in the net tangible book value
of their investment. See DILUTION.
Current Prospectus and State Registration Required to Exercise Warrants.
At such time as the Shares underlying the A Warrants and B Warrants become
registered under the Securities Act of 1933 ("Securities Act"), warrantholders
will be able to exercise the warrants if (i) a current Prospectus under the
Securities Act relating to the Shares is then in effect and (ii) the Shares are
qualified for sale or exempt from qualification under the applicable securities
laws of the state in which the various holders of the warrants reside. Although
the Company will use its best efforts to maintain a current registration
statement covering the Shares, there can be no assurance that it will be able to
do so. The value of the Shares may be greatly reduced if a registration
statement covering the Shares is not kept current or if the Shares are not
qualified, or exempt from qualification, in the states in which the holders of
warrants reside. Persons holding warrants who reside in jurisdictions in which
the Shares are not qualified and in which there is no exemption will be unable
to exercise their warrants and would either have to sell their warrants or allow
them to expire unexercised.
Forward Looking Statements. The Prospectus contains various "forward
looking statements" within the meaning of federal and state securities laws,
including those identified or predicated by the words "believes," "anticipates,"
"expects," "plans" or similar expressions. Such statements are subject to a
number of uncertainties that could cause the actual results to differ materially
from those projected. Such factors include, but are not limited to, those
described above under RISK FACTORS. Considering these uncertainties, prospective
purchasers are cautioned not to place undue reliance upon such statements.
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DILUTION
As of June 30, 2000, there were 1,000,000 shares of the Company's common
stock outstanding. The net tangible book value of those shares was $195,089, or
approximately $.20 per share. Net tangible book value per share is the net
tangible assets of the Company (total assets less total liabilities and
intangible assets) divided by the number of shares of common stock outstanding.
If all of the securities being offered by the Company pursuant to this
Prospectus are exercised (a total of 1,000,000 shares upon exercise of all of
the A Warrants and B Warrants), there will be 2,000,000 shares of the Company's
common stock outstanding, having a net tangible book value subsequent to June
30, 2000, of approximately $3,165,089, or $1.58 per share. As a result of the
cash contributions of the warrantholders who exercise their warrants, the net
tangible book value per share will increase by $1.38.
The above difference between the exercise price of the warrants and the
net tangible book value per share immediately after exercise is "dilution." The
dilution arises from the arbitrary determination by the Company of the exercise
prices of the A Warrants and B Warrants at prices substantially more than the
net tangible book value of the shares acquired upon exercise of such warrants
and the lower cost basis (about $.20 per share) of the Company's present
shareholders.
The following table illustrates per share dilution assuming the exercise
of (a) 50% of the A Warrants, (b) 100% of the A Warrants, (c) all of the A
Warrants and 50% of the B Warrants or (d) all of the A Warrants and all of the B
Warrants.
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<C> <S> <C>
(a) 250,000 Shares: Public offering price for every two A Warrants exercised...... $2.00
Net tangible book value per share of common stock before offering............. $ .20
Increase per share by offering................................................ $ .33
Net tangible book value per share of common stock after offering.............. $ .53
Dilution per share to Purchaser............................................... $1.35
(b) 500,000 Shares: Public offering price for every two A Warrants exercised...... $2.00
Net tangible book value per share of common stock before offering............. $ .20
Increase per share by offering................................................ $ .58
Net tangible book value per share of common stock after offering.............. $ .78
Dilution per share to Purchaser............................................... $1.16
(c) 750,000 Shares: Public offering price for every two B Warrants exercised...... $4.00
Net tangible book value per share of common stock before offering............. $ .20
Increase per share by offering................................................ $1.04
</TABLE>
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<TABLE>
<C> <S> <C>
Net tangible book value per share of common stock after offering.............. $1.24
Dilution per share to Purchaser............................................... $1.39
(d) 1,000,000 Shares: Public offering price for every two B Warrants exercised.... $4.00
Net tangible book value per share of common stock before offering............. $ .20
Increase per share by offering................................................ $1.38
Net tangible book value per share of common stock after offering.............. $1.58
Dilution per share to Purchaser............................................... $1.39
</TABLE>
PLAN OF DISTRIBUTION
The Company is offering, by this Prospectus, 1,000,000 shares of its
common stock upon the exercise of the A Warrants and B Warrants. See DESCRIPTION
OF SECURITIES-A Warrants and B Warrants.
Based upon the information furnished to the Company regarding the holders,
Jim Scutti, the Company's securities counsel, is of the opinion that the holders
of the warrants, if exercised (with the possible exception of Key Management,
Michael B. and Joan A. McLaughlin, joint tenants, and RemProp) would, if the
holders so elect, be able to sell the Shares received upon exercise from time to
time without delivery of a prospectus complying with Section 10(a)(3) of the
Securities Act naming each such holder as a "Selling Security Holder;" however,
the Company is not aware of any selling intention by any of such holders.
Regarding the Shares issued upon the exercise of the A Warrants and B Warrants
held by Key Management, Mr. and Mrs. McLaughlin and RemProp, the Company's
securities counsel has advised these persons that, as affiliates of the Company
(as that term is defined in Rule 144(a)(1) and Rule 405 of the Securities Act),
they may be required to deliver a prospectus complying with Section 10(a)(3) of
the Securities Act in which they are named as a Selling Security Holder or may
have to rely on Rule 144 or another exemption from registration under the
Securities Act to sell the underlying common stock in the future.
The Selling Security Holders may sell an aggregate of 1,000,000 shares,
from time to time, at prices prevailing in any public market which may develop
or in isolated transactions, at negotiated prices, with institutional or other
investors. See SELLING SECURITY HOLDERS.
USE OF PROCEEDS
The Company anticipates that it will receive cash proceeds upon the
exercise of the A Warrants and B Warrants in an amount equal to their respective
exercise prices, after deduction of estimated offering expenses of $30,000. If
50% of the A Warrants are exercised, the net proceeds to the Company would be
$470,000; if all of the A Warrants are exercised, the net proceeds would be
$970,000. If 50% of the B Warrants and all of the A Warrants are exercised, the
net proceeds would be $1,970,000; if all of the B Warrants and all of the A
Warrants are
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exercised, the net proceeds would be $2,970,000. The Company cannot determine
when or if any of the warrants will be exercised or the amount, if any, of the
proceeds which will be received upon exercise. The Company intends to use the
proceeds from the exercise of the A Warrants and B Warrants, if any, in the
following order of priority.
Exercise of A Warrants
<TABLE>
<CAPTION>
Assuming Assuming
Exercise of Percent of 50% Exercise Percent of
Purpose All A Warrants Proceeds of A Warrants Proceeds
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Amount Available
for Company Use
after Deducting
Expenses $ 970,000 $ 470,000
Supplement Construction
Financing; Apartment Unit
Construction (1) $ 824,500 85% $ 349,500 85%
Real Estate Taxes on
Dade City Site (2) $ 97,000 10% $ 47,000 10%
General Corporate
Purposes (3) $ 48,500 5% $ 23,500 5%
Total Application of
Net Proceeds $ 970,000 100% $ 470,000 100%
=========== === ========== ===
</TABLE>
Exercise of B Warrants
<TABLE>
<CAPTION>
Assuming Assuming
Exercise of 50% Exercise
All B Warrants Percent of of B Warrants Percent of
Purpose and All A Warrants Proceeds and All A Warrants Proceeds
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Amount Available
for Company Use
after Deducting
Expense $ 2,970,000 $ 1,970,000
Apartment Unit
Construction (4) $ 2,550,000 86% $ 1,674,500 85%
Real Estate Taxes on $ 97,000 3% $ 97,000 4.9%
Dade City Site (2)
</TABLE>
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Exercise of B Warrants
<TABLE>
<CAPTION>
Assuming Assuming
Exercise of 50% Exercise
All B Warrants Percent of of B Warrants Percent of
Purpose and All A Warrants Proceeds and All A Warrants Proceeds
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
General Corporate $ 323,000 11% $ 298,500 10.1%
%
Purposes (3)
Total Application of
Net Proceeds $ 2,970,000 100% $ 1,970,000 100%
=========== === =========== ====
</TABLE>
----------
(1) The Company may use these funds to reduce its debt service, or fully pay
for the construction of several units.
(2) Property taxes will increase as the property develops. The amount of such
increases can only be estimated.
(3) Includes administrative expenses, such as legal, accounting and consulting
fees, marketing and apartment management costs.
(4) Each apartment unit will cost approximately $50,000 to build. The number
of units constructed will depend on the amount of funds available.
The foregoing represents the Company's best estimate of its allocation of
the proceeds of the offering based upon the present state of its business
operations, its present plans and current economic and industry conditions. The
Company reserves the right to reallocate the proceeds within the categories
described above if, in the judgment of management, business reasons justify such
reallocation.
Pending expenditure of the proceeds, the Company may make temporary
investments in government securities, certificates of deposit, money market
instruments, commercial paper or other income-producing investments which are
stable and conservative in nature.
DESCRIPTION OF THE BUSINESS AND PROPERTY
General
The Company is in the business of residential real estate development. It
was incorporated in Florida in December 1997 as a wholly owned subsidiary of
Federal Affordable Housing Corporation, now known as American Dream
Entertainment, Inc. ("Federal
12
<PAGE>
Affordable"). Effective March 5, 1999, Federal Affordable entered into a license
and royalty agreement with Dreamweavers N.V., a company organized under the laws
of Curacao, which resulted in Federal Affordable acquiring the exclusive
marketing, trademark and merchandising rights in the United States to an
animation media product known as "Robin and the Dreamweavers." To acquire the
rights, Federal Affordable issued Dreamweavers N.V. 16,000,000 shares of its
restricted common stock and agreed to pay Dreamweavers N.V. $5,500,000 on the
successful completion of a private placement of its securities. The transaction
resulted in a change of control of Federal Affordable to Dreamweavers N.V. In
connection with the same transaction, Federal Affordable, Dreamweavers N.V. and
the Company entered into a separate agreement that resulted in the Company
acquiring all of the assets (except for the marketing, trademark and
merchandising rights to "Robin and the Dreamweavers") and assuming all of the
liabilities of Federal Affordable, as of December 31, 1998. The transfer of
assets and liabilities from Federal Affordable to the Company was treated as a
distribution. In addition, the Company issued 992,900 shares to the existing
shareholders of Federal Affordable on a one-for-one basis as a dividend; it was
then spun off from Federal Affordable and became an independent entity.
The Company began operations in 1999 but, until the beginning of 2000, was
not able to conduct full operations because of a lack of working capital. In
January 2000, the Company received $201,897 from a mortgage it owned that was
paid off in full. The mortgage was one of the assets acquired in the change of
control transaction by and among Federal Affordable, Dreamweavers N.V. and the
Company. The funds will enable us to begin full operations and will satisfy most
of our working capital needs in the next twelve months. Although our operating
history is limited, Richard E. Metz, the Company's President and director, has
developed and built real estate projects for over twenty years. See DIRECTORS
AND EXECUTIVE OFFICERS.
Description of Property
The Company plans initially to build a maximum of 51 apartment units on
approximately 13 acres of land in Dade City, Florida. Dade City is about 50
miles northeast of Tampa. The land is properly zoned for the type of apartment
units the Company proposes to build and is connected to city utilities. The
annual real estate tax on the property is approximately $1,500. Taxes will
increase upon improvement of the property.
The property is owned by RemProp, a company wholly owned by Richard Metz.
RemProp has agreed to transfer ownership to the Company free and clear once
permanent financing for construction of the units has been obtained, provided
that the Company pays a land cost in an amount that is allocated in the approved
mortgage for land costs. The land costs are estimated to be $2,000 per unit.
Therefore, if all of the sites are developed, the amount paid by the Company to
RemProp would be $102,000. See INTEREST OF MANAGEMENT AND OTHERS IN CERTAIN
TRANSACTIONS.
13
<PAGE>
Steps Necessary Prior to Construction of Units
Since the Dade City property is properly zoned, no zoning variances or
changes need be obtained. However, prior to construction the Company must obtain
preliminary site approval from the city, county and water district in which the
project is located.
The Company intends to engage local engineers to prepare preliminary site
drawings and begin the approval process. The finished site drawings will be
submitted simultaneously to the city, county and water district in which the
Dade City property is located.
The Company expects the preliminary site approval process to be complete
within 90 days after an engineer has been retained. As soon as possible after
preliminary site approval, we intend to begin construction sufficient to support
a minimum of 51 apartment units. Although construction may begin once
preliminary site approval is granted, the Company must provide the municipality
with assurance that the project will be completed in accordance with the
specifications in the approved preliminary site drawings, before final site
approval will be granted.
Any one of many factors might intervene and hinder the construction or
site approval process. These factors include but are not limited to, weather,
labor disputes, improper construction and necessary corrections, and
postponement of meetings to consider governmental approval. In the event that
site approval is delayed, for any reason, the Company will experience
significant negative cash flow, for at least the duration of such delay. See
RISK FACTORS-Government Approval and Other Contingencies for Dade City Site;
General Real Estate, Economic and Other Conditions; Regulation.
Insurance
The Company will obtain insurance, which it believes will adequately
protect it from possible liability on the Dade City property.
Marketing and Leasing
The Company's primary market will be the Tampa Bay area. The rental rate
of the apartment units will range between $650 to $700 a month. Our promotional
efforts may include television advertisements, illustrated brochures,
billboards, on-site displays and possibly a model apartment. We intend to lease
our apartments through a property manager.
Competition and Market Factors
The development and rental of residential apartment units is highly
competitive. The Company will compete on the basis of a number of interrelated
factors, including location, product design, perceived value, and price in a
regional marketplace, with a limited number of national and regional apartments
and numerous local units (rental houses). The Company's
14
<PAGE>
apartment units must also compete with the resale of existing homes and
available rental housing.
Apartment Construction
The Company intends to act as the general contractor. We plan to either
(i) purchase pre-fabricated, factory-built apartment units to be assembled and
completed on site by subcontractors, or (ii) hire subcontractors to construct
apartments in the traditional manner on site.
The Company's apartment supervisors will monitor the construction of each
unit, participate in design and building decisions, coordinate the activities of
subcontractors and suppliers, maintain quality and cost controls, and monitor
compliance with zoning and building codes.
The Company intends to retain subcontractors for specific time periods or
projects pursuant to contracts which obligate the subcontractors to complete
their duties on a fixed-price basis. Contracts with our subcontractors and
material suppliers will be entered into only after competitive bidding during
predetermined time periods or on a project by project basis.
The Company intends construction time for each unit will be based on a
construction schedule established for each type of unit and method of
construction. Variances from the schedule may occur due to weather conditions,
availability of labor, materials and supplies. Our construction schedules will
range in duration from seven days to four months.
Apartment Construction Financing
We will not undertake the construction of any apartment units until
financing has been approved for the building to be constructed. We intend to
obtain financing from one of the following four sources, (i) a bond issue which
would provide all financing needed; (ii) FHA financing which would provide all
financing; (iii) financing from a local bank or other mortgagees who will loan
up to 90% of the purchase price; or (iv) funds obtained from the proceeds of
this offering. Ninety percent financing is feasible since the Company would own
the land free and clear. If the Company uses proceeds from the offering for
financing construction of all 51 units, approximately $2,550,000 would be
needed.
Benefits to Affiliates
Richard Metz, the sole shareholder of RemProp, will receive benefits from
the business activities of the Company. The Company, in partial consideration
for an option to purchase the Dade City property, has agreed to pay property
taxes for which RemProp would otherwise be responsible. Upon transferring the
property to the Company, RemProp would receive a land cost fee of $2,000 per
unit. Consequently, the total amount received by RemProp could be $102,000. See
INTEREST OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS.
15
<PAGE>
Employees
The Company currently has 2 employees, including one officer, Mr. Metz.
Corporate Headquarters
The Company's principal offices are located at 1616 Gulf-to-Bay Boulevard,
Clearwater, Florida. The building is owned by RemProp and leased to the Company
at or below the prevailing market rate for similar rental property. See INTEREST
OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS.
Regulations
The housing industry is subject to extensive and complex regulations. The
Company and its subcontractors must comply with a variety of federal, state and
local laws, which regulate, among other things, advertising, construction,
consumer credit and land use and development.
Environmental laws may result in delays and cause the Company to incur
substantial compliance and other costs, and prohibit or severely restrict
home-building activity in certain environmentally-sensitive regions or areas.
Plan of Operations
The Company's plan of operations for the 12 month period following the
commencement of the proposed offering is to develop a site plan and clear the
property for construction. Engineering will be carried out in accordance with
the site plan, surveys will be made and the ground will be tested for
environmental hazards and concerns. Any problems regarding city and county water
requirements will be resolved. The Company will obtain a permit to use water and
sewers.
While these other tasks are going on, we will take our site plan to
potential lenders for financing. If we decide to use modular construction of the
apartment units, the first units could be completed within 90 days after
permanent financing is obtained. The time period would be approximately 90 days
longer if construction is by hand. We do not believe it will be necessary to
raise additional funds in the next six months. In our opinion, the proceeds from
the offering are not needed to satisfy our cash requirements in the next twelve
months. We would only need the proceeds of the offering if we are unable to
obtain financing from other sources, which is unlikely. We anticipate hiring a
property manager and/or leasing agent within the twelve month period following
the beginning of the offering. The property manager and/or leasing agent will be
responsible for obtaining qualified persons to assist in leasing and
maintenance.
16
<PAGE>
DIRECTORS AND EXECUTIVE OFFICERS
Directors and Executive Officers
Set forth below are the names, ages and positions of the directors,
executive officers and significant employees of the Company.
Name Age Position
---- --- --------
Richard E. Metz 62 President, Chief Executive
Officer, Director
The officers of the Company are elected annually and serve at the
discretion of the Board of Directors. Mr. Metz is not employed pursuant to a
written employment agreement.
Background of Directors and Executive Officers
Richard E. Metz has been President, Chief Executive Officer, Secretary,
and Director of the Company since December 1997. Since December 1989, he has
been the President and sole shareholder of RemProp, Inc, a Florida corporation,
engaged in the business of management of residential and commercial real estate.
From 1993 to 1999, Mr. Metz was President and a director of Federal Affordable
Housing Corporation, a public company engaged in the business of real estate
development. Prior to 1993, Mr. Metz was the president of two other publicly
held companies, one in the business of residential and commercial real estate
development and the other in the business of constructing and selling affordable
housing. Mr. Metz's duties with these positions included managing commercial and
residential real estate projects, locating and negotiating the purchase of land
development sites, and acting as general contractor for home construction.
Overall, Mr. Metz has over 35 years experience in commercial and residential
real estate development and/or management. Mr. Metz is a licensed real estate
broker and member of the National Association of Realtors.
REMUNERATION OF DIRECTORS AND OFFICERS
Executive Compensation
Since the formation of the Company in December 1997, Mr. Metz, the
Company's only executive officer, has not received any compensation. See
INTEREST OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS in this Prospectus for
a discussion of certain transactions which might be construed as benefiting Mr.
Metz, either now or in the future.
The following is a summary table of compensation and fees to management
from December 1997 through December 31, 1999
17
<PAGE>
Name of Individual Capacities in Which Aggregate
or Identity of Group Remuneration Was Received Remuneration
-------------------- ------------------------- ------------
Richard E. Metz President, Chief Executive -0-
Officer, Secretary
Mr. Metz believes that his compensation for managing the Company comes
from the potential for liquidity and appreciation in value of the 335,000 shares
of common stock which RemProp owns. Also, RemProp will receive compensation from
land cost fees, as much as $102,000, once construction funding is obtained.
The Company does not have any arrangements or plans to provide its
management with any long-term compensation, whether restricted stock awards,
options, stock appreciation rights or any other long-term incentive plans.
Director Compensation
No cash compensation is currently paid to Mr. Metz, the Company's sole
director, for his services as a director. In the future, directors may be
granted options to purchase stock of the Company in consideration for their
services, but no stock option plan has been proposed.
SECURITIES OWNERSHIP OF MANAGEMENT AND
CERTAIN SECURITY HOLDERS
The following table provides information regarding the beneficial
ownership of the Company's common stock outstanding on, and as adjusted to show
the sale to the public of the warrants in this offering by (i) each person known
to the Company to be the beneficial owner of 10% or more of the common stock,
(ii) the officers and directors of the Company, individually, and (iii) all
officers and directors of the Company as a group.
<TABLE>
<CAPTION>
Beneficial Ownership
After the Offering
Beneficial Ownership (Assuming Exercise
Prior to the Offering (1) of all Warrants)
--------------------------------------------------------------------------------
Name and Address of Shares of Shares of
Beneficial Owner common stock Percent common stock Percent
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Richard E. Metz 335,000 (2) 33.5% (2) 670,000 (2) 33.5% (2)
1616 Gulf-to-Bay Blvd
Clearwater, FL 34615
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
Beneficial Ownership
After the Offering
Beneficial Ownership (Assuming Exercise
Prior to the Offering (1) of all Warrants)
--------------------------------------------------------------------------------
Name and Address of Shares of Shares of
Beneficial Owner common stock Percent common stock Percent
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Key Management, Inc. (3) 335,000 (2) 33.5% 670,000 33.5%
3618 Halifax Ave. N.
Robbinsdale, MN 55422
Michael B. McLaughlin (4) 106,800 10.7% 213,600 10.7%
1016 Shore Acres Drive
Leesburg, FL 34748
All directors and 335,000 33.5% 670,000 33.5%
officers as a group
(one person)
</TABLE>
----------
(1) All shares are beneficially owned, and sole voting and investment power is
held, by the persons named except as otherwise noted.
(2) RemProp, Inc. is the record owner of these shares. Mr. Metz is the sole
shareholder of RemProp.
(3) Mr. Wayne A. Weyrauch is the sole shareholder of Key Management, Inc.
However, Mr. Weyrauch has advised the Company that certain shares of Key
Management may be transferred or sold to his siblings.
(4) Mr. McLaughlin owns 91,500 of the shares jointly with his wife, Joan A.
McLaughlin. 15,000 of the shares are owned by Bernard, Lee & Edwards
Securities, Inc. (Bernard, Lee), a securities broker-dealer. Mr.
McLaughlin is the majority shareholder and Chief Executive Officer of
Bernard, Lee. 300 shares are owned by Heartland Diversified Industries,
Inc. ("Heartland"). Mr. McLaughlin is the President and a director of
Heartland.
INTEREST OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS
Pursuant to the terms of an option agreement between RemProp and the
Company dated April 1, 2000, RemProp will transfer ownership of the property to
be developed by the Company free and clear under certain conditions. RemProp has
owned the property with full title for more than two years. It paid $277,985 for
the property. Mr. Metz is the sole shareholder of RemProp. He is the Company's
sole executive officer and director and beneficially owns 33.5% of the
19
<PAGE>
Company's outstanding common stock. The terms and conditions of the transfer of
ownership are that the Company obtain permanent financing for construction of
apartment units on the property and that the Company pay RemProp a land cost in
an amount that is allocated in the approved mortgage for land costs. Such land
costs, if all of the property is developed, would be $102,000. The Company has
agreed, pursuant to the option agreement, to pay the property taxes on the land.
The property taxes were $1,622 in 1998 and $1,747 in 1999. RemProp is a licensed
real estate broker. If at a later time the Company decides to sell the apartment
units constructed on the property, RemProp likely would be retained as the
Company's broker and receive a fee equal to approximately 7% of the amount
received upon the sale of the property. No estimate can be made at this time of
the selling price for such property if it is fully developed. See RISK FACTORS -
Conflict of Interest Between the Company and Mr. Metz; Control by Existing
Shareholders.
RemProp owns the building in which the Company rents office space.
Beginning on April 1, 2000, the Company began paying RemProp rent of $400 a
month to lease approximately 500 square feet of space. The lease is for one
year. The rent being paid by the Company is below the current market price for
such space. See DESCRIPTION OF BUSINESS AND PROPERTY - Corporate Headquarters.
Mr. Metz, Key Management and Mr. McLaughlin may be deemed promoters of the
Company. As a result of the transaction that became effective March 5, 1999,
between the Company, Federal Affordable and Dreamweavers N.V., the Company
agreed to acquire all of the assets and assume the liabilities of Federal
Affordable as of December 31, 1998. Prior to the transaction, the Company had
493,500 shares outstanding. As part of the transaction, Federal Affordable and
Dreamweavers N.V. agreed that additional shares could be issued to satisfy
existing liabilities of Federal Affordable, provided the total amount of shares
outstanding did not exceed 1,000,000. This left 506,500 shares available for
issuance. Prior to the March 5, 1999 transaction, Mr. Metz and Key Management
owned 135,000 shares of Federal Affordable and Mr. McLaughlin owned 300 shares
for a period in excess of two years. 200,000 of the 506,500 shares were issued
to Mr. Metz and 200,000 to Key Management, bringing their ownership of Federal
Affordable to 335,000 shares each. Mr. McLaughlin was issued 1,500 shares and
Bernard, Lee, a brokerage firm he controls, was issued 15,000, bringing his
total beneficial ownership to 106,800 shares.
The additional shares were issued to Mr. Metz in consideration for
services to the Company in past years for which he did not receive any
compensation. In addition, Mr. Metz performed services related to the Federal
Affordable-Dreamweavers N.V. transaction. These services included financial and
business consulting. The additional shares were issued to Key Management for
performing financial and business consulting services for Federal Affordable.
Key Management was involved in searching for a merger partner and assisting in
negotiating the transaction which resulted in the agreement of March 5, 1999.
Mr. McLaughlin was issued 91,500 shares for performing financial and investment
banking services for Federal Affordable. He introduced Dreamweavers N. V. to
Federal Affordable and participated in the negotiations which resulted in the
March 5, 1999 agreement. Bernard, Lee was issued 15,000 shares for
20
<PAGE>
compensation the firm was entitled to but never received in connection with its
underwriting of the Federal Affordable initial public offering.
As part of the March 5, 1999 transaction, the Company issued 1,000,000
shares to the existing shareholders of Federal Affordable on a one-for-one basis
as a dividend and the Company was then spun off from Federal Affordable. As a
result of the issuance of 506,500 shares of Federal Affordable common stock to
Mr. Metz, Key Management, Mr. McLaughlin and Bernard, Lee and the spin off
dividend of the Company's shares, these persons acquired shares of the Company
with a total value of $101,721 (as of December 31, 1999). The Company believes
that issuance of the additional 506,500 shares was justified because of the
substantial services rendered in consideration for the shares and the results
achieved. The existing shareholders of the Company still own shares in another
public company, Federal Affordable, with the potential for appreciation in the
value of those shares as a result of Federal Affordable acquiring the "Robin and
the Dreamweavers" marketing, trademark and merchandising rights in the United
States. See RISK FACTORS - Control by Existing Shareholders; DILUTION;
SECURITIES OWNERSHIP OF MANAGEMENT AND CERTAIN SECURITY HOLDERS.
SECURITIES BEING OFFERED
Common Stock.
The Company's authorized capital stock consists of 10,000,000 shares of
common stock, $.0005 par value. As of June 30, 2000, 1,000,000 shares of common
stock were outstanding. The holders of the common stock are entitled to one vote
on each matter submitted to a vote at any meeting of shareholders. Shares of
common stock do not carry cumulative voting rights, which means that
shareholders holding a majority of the votes will be able to elect all of the
members of the Board of Directors. As of the date of this Prospectus, the
Company's three largest shareholders own approximately 78% of the outstanding
common stock.
The Company's bylaws provide that any action required to be taken at a
meeting of the shareholders, or any other action which may be taken at a meeting
of the shareholders, may be taken without a meeting if consent in writing,
setting for the action taken, is signed by all of the shareholders entitled to
vote on the matter under consideration. The common stock is not subject to
redemption and carries no subscription or conversion rights. Upon liquidation,
dissolution or winding up of the Company's affairs, the holders of the common
stock are entitled to receive, pro rata, all assets available for distribution,
subject to the rights of creditors. All of the outstanding common stock is
validly issued, fully paid and nonassessable.
Holders of common stock are entitled to receive dividends as the Board of
Directors may from time to time declare out of funds legally available for the
payment of dividends, in the manner and upon the terms and conditions provided
by law.
21
<PAGE>
A Warrants and B Warrants
The Company has outstanding 1,000,000 A Warrants and 1,000,000 B Warrants.
The A Warrants and B Warrants were issued to shareholders of record as of March
1, 1999 on the basis of one A Warrant and one B Warrant for each share of common
stock owned by the shareholders. The warrants become exerciseable on the
effective date of the Registration Statement of which this Prospectus is a part.
Every two A Warrants can then be exercised at a price of $2.00 to acquire one
share of common stock and every two B Warrants can then exercised at a price of
$4.00 to acquire one share of common stock.
The A Warrants expire 12 months and the B Warrants 18 months following the
effective date of the Registration Statement. The Company has the right to call
the warrants upon 30 days written notice to the warrantholders at a price of
$.01 per warrant. If called, the warrantholders have the right to immediately
exercise the warrants. The exercise prices and expiration of the A Warrants and
B Warrants can be adjusted by the Company, as determined by the Board of
Directors. There will be 2,000,000 shares outstanding if all the A Warrants and
B Warrants are exercised.
The A Warrants and B Warrants are held by 71 owners of record. The holders
of the warrants are protected against dilution of their interest represented by
the number of shares of common stock underlying such warrants if stock
dividends, stock splits or reclassifications occur. The holders of the warrants
have no right to vote on matters submitted to the shareholders of the Company
and they have no right to receive dividends. Nor are the warrantholders entitled
to share in the assets of the Company in the event of liquidation, dissolution
or the winding up of the Company's affairs. However, upon exercise of the
warrants and the issuance of the shares of common stock to the holders of the
warrants, such shares of common stock shall have the rights identical to all
other shares of common stock of the Company. The exercise price of the warrants
was determined by the Company and does not necessarily bear any relationship to
the Company's assets, book value, net worth or any other recognized criteria of
value.
The Company is required to have a current registration on file with the
Securities and Exchange Commission and to effect appropriate qualifications
under the laws and regulations of the states in which the selling security
holders and holders of the A Warrants and B Warrants reside to comply with
applicable state securities laws. Regarding the warrants issued to Mr. Metz, Key
Management and Michael McLaughlin and all of the shares of the selling security
holders owned by them, the Company will be required to file post-effective
amendments to its Registration Statement, or a new Registration Statement, when
subsequent events require such filings, in order to continue the registration of
the common stock underlying the warrants and to take appropriate action under
state securities laws. There can be no assurance that the Company will be able
to keep its registration statement current or to effect appropriate actions
under applicable state securities laws, the failure of which would result in the
exercise of such warrants and the resale or other disposition of the common
stock issued upon such exercise becoming unlawful.
22
<PAGE>
The A Warrants and B Warrants may be exercised upon delivery of a written
exercise notice to the offices of the Company on or before the expiration date
of such warrants. The written notice must be accompanied by payment in the name
of Triple A Homes, Inc. in full of the exercise price for the number of warrants
being exercised. The written notice and payment must be sent to the Company at
the following address: 1616 Gulf to Bay Boulevard, Clearwater, Florida 34615.
SIGNIFICANT PARTIES
The full names and business addresses of the Company's director, officer,
record and beneficial owners of 5% or more of the Company's common stock,
promoters and affiliates are set forth in this Prospectus under the caption
SECURITIES OWNERSHIP OF MANAGEMENT AND CERTAIN SECURITY HOLDERS.
The Company's counsel is Jim Scutti, Jim Scutti, P.A. Jim Scutti, P.A.'s
business address is 980 N. Federal Highway, Suite 434, Boca Raton, Florida
33432.
SELLING SECURITY HOLDERS
The names of the Selling Security Holders, the nature of any relationship
they have with the Company and information about their securities ownership is
shown below.
<TABLE>
<CAPTION>
Amount of Common
Stock Owned Percentage of
------------------------ Beneficial
Relationship to Before After Ownership
Name the Company Sale Offered Sale After Sale (1)
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Martin Barke 6,000 6,000 0
5000 Highwood Dr.
Minneapolis MN
55436
Bernard Lee & Beneficial 15,000 15,000 0 0
Edwards Securities, Owner
Inc.(2)
1016 Shore Acres Dr.
Leesburg FL 34748
Bill Bernhagen 36,600 36,000 0 0
PO Box 2176
Billing MT 59103
Jean Bickel 900 900 0
770 SW 4th Street
Boca Raton FL 33486
</TABLE>
23
<PAGE>
<TABLE>
<CAPTION>
Amount of Common
Stock Owned Percentage of
-------------------------- Beneficial
Relationship to Before After Ownership
Name the Company Sale Offered Sale After Sale (1)
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Joseph Cenetello 600 600 0
5286 Slater Road
Spring Hill FL 34608
Thomas Clark 300 300 0
1206 Clear Creek Rd.
Nicholasville KY 40356
Rodney Converse 300 300 0
521 Charles Street
Brainerd MN 56401
Kathleen Cullen 3,600 3,600 0
E. 2006 S Ridge Drive
Spokane WA 99223
Susan Cullen 3,000 3,000 0
1630 University
Helena MT 59601
Kenneth DeBoer 300 300 0
10720 Gee Norman Rd
Belgrade MT 59714
Dimitri Dimitri 1,500 1,500 0
572 LeParc
Buffalo Grove IL 60089
John Doubek 6,300 6,300 0
640 S. Harris
Helena MT 59601
John Doubek 600 600 0
C/F Andy, Jake, Anna
640 S. Harris
Helena MT 59601
</TABLE>
24
<PAGE>
<TABLE>
<CAPTION>
Amount of Common
Stock Owned Percentage of
------------------------ Beneficial
Relationship to Before After Ownership
Name the Company Sale Offered Sale After Sale (1)
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Alice Fernandez 600 600 0
4017 Windtree Drive
Tampa FL 33624
Richard Forrette 600 600 0
49 Greenwood Trail
Clancy MT 59634
Robert Green 600 600 0
203 Nelson Drive
Lewiston MT 59457
Les Hangenlock 3,000 3,000 0
426 N 9th Avenue
Bozeman MT 59715
Bruce Hanson 1,500 1,500 0
6980 Lakes Drive
Lino Lakes MN 55014
Warren Hanson 450 450 0
PO Box 5118
Mankato MN 56002
Henry Hanson 600 600 0
768 Fallow Lane #7
Billings MT 59102
James Hanson 450 450 0
4750 Gilbert Lake Rd.
Brainerd MN 56401
Lyle Happel 3,900 3,900 0
4700 Gooch Hill Road
Bozeman MT 59771
Dean Hartman 600 600 0
PO Box 4
Gallatin Gateway MT
59730
</TABLE>
25
<PAGE>
<TABLE>
<CAPTION>
Amount of Common
Stock Owned Percentage of
------------------------ Beneficial
Relationship to Before After Ownership
Name the Company Sale Offered Sale After Sale (1)
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Maisie Hartsfield 300 300 0
16601 round Oak Drive
Tampa FL 33618
Heartland Diversified Beneficial 300 300 0 0
Industries, Inc. (3) Owner
1016 Shore Acres Drive
Leesburg FL 34748
Theresa Hills 600 600 0
3138 E Fox Court
Inverness FL 34452
Richard Holborn 3,000 300 0
PO Box 1305
Bozeman MT 59771
Gilbert Jannelli 600 600 0
C/F Jennifer Carpenter
Uniform Gifts to
Minors Act
909 S. Ft. Harrison Ave.
Clearwater FL 34616
Gilbert Jannelli 1,800 1,800 0
909 S. Ft. Harrison Ave.
Clearwater FL 34616
Robert W. Johnson 2,100 2,100 0
1734 Grand
St. Paul MN 55105
Dale Judson 300 300 0
813 Lorena Road
Lutz FL 33549
Lisa Kampa-Duac 600 600 0
16913 Rolling Rock Dr.
Tampa FL 33618
</TABLE>
26
<PAGE>
<TABLE>
<CAPTION>
Amount of Common
Stock Owned Percentage of
------------------------ Beneficial
Relationship to Before After Ownership
Name the Company Sale Offered Sale After Sale (1)
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Key Management, Beneficial Owner; 335,000 335,000 0 0
Inc. (4) Largest Shareholder
3618 Halifax Ave. N. with RemProp, Inc.
Robbinsdale, MN 55422
Robert Koth 300 300 0
1820 Beech Drive
Great Falls MT
59404
Bruce W. Kuiper 2,100 2,100 0
5740 Orchard Ave. N.
Crystal MN 55429
Debbie Kurz 3,000 3,000 0
3118 E. Wick
LaPorte TX 77571
Richard Lash 3,000 3,000 0
4015 Windtree Drive
Tampa FL 33624
Dennis Masbruch 3,000 3,000 0
PO Box 20631
Billings MT 59104
Patricia McHenry 4,200 4,200 0
1758 Jackrabbit Lane
Bozeman MT 59715
Michael B. and Joan Beneficial 91,500 91,500 0 0
A. McLaughlin (5) Owner
1016 Shore Acres Dr
Leesbrug FL 34748
Dave McWalter 750 750 0
PO Box 1283
Bozeman MT 59771
</TABLE>
27
<PAGE>
<TABLE>
<CAPTION>
Amount of Common
Stock Owned Percentage of
------------------------ Beneficial
Relationship to Before After Ownership
Name the Company Sale Offered Sale After Sale (1)
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Codute Patrick 1,500 1,500 0
815 Co. Rd. 169
Minneapolis MN 55441
Ron and Sharon 1,500 1,500 0
Pearson
2060 N US Hwy 27,
Lot 319
Lake Wales FL 33853
Mary Pollard 1,500 1,500 0
428 Jupiter Lakes Blvd.,
#124
Jupiter FL 33458
Steve Polski 2,400 2,400 0
2710 Sylvan Rd. S.
Minnetonka MN 55305
Kathleen Pratt 900 900 0
101 Milton Ave. #2F
Syracuse NY 13204-1993
Judy Quinn 1,500 1,500 0
4078 Cavell Ave. N.
New Hope MN 55427
Norman Raymond 1,200 1,200 0
9083 W. Forest View Dr.
Homosassa FL 34448
RemProp, Inc. (6) Beneficial Owner; 335,000 335,000 0 0
1616 Gulf to Bay Largest Shareholder
Blvd. with Key
Clearwater FL 33755 Management, Inc.
Mary Roden 300 300 0
18106 Fairmead Court
Lutz FL 33549
</TABLE>
28
<PAGE>
<TABLE>
<CAPTION>
Amount of Common
Stock Owned Percentage of
------------------------ Beneficial
Relationship to Before After Ownership
Name the Company Sale Offered Sale After Sale (1)
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Ray Rossini 25,000 25,000 0 0
5353 Gamble Drive #150
Minneapolis MN 55416
John Sabol 600 600 0
6740 Quincy Street NE
Fridley MN 55432
Susan Salmela 9,000 9,000 0
1114 Oakview Lane
Minneapolis MN 55441
Pam Shapiro 600 600 0
1060 W Cornellia, Ap. 1
Chicago IL 60657
Andy Slovak 6,000 6,000 0
3015 Chapman Lane
Billings MT 59102
Gerald Steelman 2,250 2,250 0
419 Washington Ave. N.
Minneapolis MN 55401
Jennifer Taft 4,500 4,500 0
3618 Halifax Avenue N.
Robbinsdale MN 55422-2122
Delilah Taylor 3,000 3,000 0
3027 8th Avenue S.
Great Falls MT 59405
Bradley Terrell 2,550 2,550 0
PO Box 1867
Bozeman MT 59715
Harold Thompson 3,750 3,750 0
3701 2nd Street N.E.
Minneapolis MN 55421
</TABLE>
29
<PAGE>
<TABLE>
<CAPTION>
Amount of Common
Stock Owned Percentage of
------------------------ Beneficial
Relationship to Before After Ownership
Name the Company Sale Offered Sale After Sale (1)
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Tuschner & Company, Inc. 400 400 0
f/b/o John Doe (7)
121 South Eighth Street
Suite 1500
Minneapolis, MN 55402
Van Clemens Co. (8) 200 200 0
4414 Josephine Lane
Robbinsdale MN 55422
Howtz Van Steenburgh 3,000 3,000 0
1925 Nelson Road
Bozeman MT 59715
Brenda Vellance 600 600 0
227 Dunbridge Drive
Palm Harbor FL 34682
Brian Watts 5,100 5,100 0
4400 Highland Drive
Carlsbad CA 92008
Jennifer Weyrauch Wife of Wayne 900 900 0 0
3618 Halifax Ave. N Weyrauch,
Robbinsdale, MN Officer, Director
55422 of Former Affiliate
and Principal
Officer and Largest
Shareholder of Key
Management, Inc.
a Beneficial
Owner
Dennis Yankus 3,000 3,000 0
223 S. Howard Ave.
Tampa FL 33606
Joseph Zachman 30,000 30,000 0 0
13353 42nd St. NE
St. Michael, MN 55376
</TABLE>
30
<PAGE>
<TABLE>
<CAPTION>
Amount of Common
Stock Owned Percentage of
------------------------ Beneficial
Relationship to Before After Ownership
Name the Company Sale Offered Sale After Sale (1)
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Joseph and Marlene 7,500 7,500 0 0
Zachman JTWRS
13353 42nd St. NE
St. Michael MN 55376
Brian Zogg C/F 3,120 3,120 0
Bethany Zogg
RR 5 Box 45
Allwit Lea, MN
56007-9305
Brian Zogg C/F 2,080 2,080 0
Kevin Zogg
RR 5 Box 45
Allwit Lea, MN
56007-9305
</TABLE>
----------
(1) The percentages computed in the table are based on 1,000,000 shares of
common stock being outstanding as of June 30, 2000, without giving affect
to the probable exercise of the A Warrants or B Warrants.
(2) A securities broker-dealer incorporated in Delaware with offices in
Florida. Its Chief Executive Officer and controlling shareholder is
Michael B. McLaughlin, the beneficial owner of approximately 10.7% of the
Company's outstanding common stock.
(3) A Montana corporation with its principal office in Florida. Michael B.
McLaughlin, a beneficial owner of the Company's common stock, is the
President of Heartland.
(4) A Florida corporation with its principal office in Minnesota. Wayne A.
Weyrauch is Key Management's principal executive officer and controlling
shareholder.
(5) The McLaughlin's own 91,500 shares directly and Mr. McLaughlin owns,
indirectly, 15,000 shares in the name of Bernard, Lee & Edwards Securities
and 300 shares in the name of Heartland.
(6) RemProp is a Florida corporation. Richard E. Metz is the sole shareholder
and President of RemProp.
(7) The name John Doe is a pseudonym. The Company does not know the name of
the beneficial owner. The Federal Affordable Housing shares which were
used to determine
31
<PAGE>
the number of shares of the Company to issue were in street name at
Tuschner & Company, Inc., which at the time was a securities
broker-dealer. Tuschner and Company is no longer in business. The address
shown is Tuschner & Company's last known address.
(8) A dissolved Minnesota corporation. Van Clemens was the company's
principal.
DISCLOSURE OF COMMISSION POSITION ON
INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
The Company's bylaws provide that its directors, officers and employees
shall be indemnified against all expenses and liabilities, including counsel
fees, reasonably incurred by or imposed upon them in connection with any
proceeding to which they may be made a party or in which they may become
involved, by reason of being or having been a director, officer or employee of
the Company, are or were serving at the request of the Company as a director,
officer or employee, or any settlement thereof, whether or not such persons were
officers, directors or employees at the time such expenses were incurred. The
only exception is in situations where the director, officer or employee is
adjudged guilty of willful misfeasance or malfeasance in the performance of his
or her duties. If there is a settlement, the indemnification shall apply only
when the Board of Directors proves such settlement and reimbursement as being in
the best interest of the Company. The Board of Directors, in its discretion, may
purchase liability insurance as a way of providing the indemnification provided
for in the bylaws.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Company pursuant to the foregoing provisions, or otherwise, the Company has been
advised that in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in such Act and is,
therefore, unenforceable.
FINANCIAL STATEMENTS
The financial information described below appears in the Prospectus at the page
indicated.
Item Page
Financial Statements as of and for the Period Ended December 31, 1999
Independent Auditor's Report F-1
Balance Sheet as of December 31, 1999 F-2
Statement of Operations F-3
Statement of Changes in Stockholders' Equity F-4
Statement of Cash Flows F-5
Notes to Financial Statements F-6 to F-8
32
<PAGE>
Financial Statements as of and for the Period Ended June 30, 2000
Accountant's Review Report F-9
Balance Sheet as of June 30, 2000 F-10
Statement of Operations F-11
Statement of Changes in Stockholders' Equity F-12
Statement of Cash Flows F-13
Notes to Financial Statements F-14 to F-16
33
<PAGE>
[LETTERHEAD OF LARRY LEGEL, CPA]
INDEPENDENT AUDITOR'S REPORT
Stockholders
Triple A Homes, Inc.
(A Development Stage Enterprise)
Clearwater, Florida
I have audited the accompanying balance sheet of Triple A Homes, Inc. (A
Development Stage Enterprise) as of December 31, 1999 and the related statements
of operations, changes in stockholders' equity, and cash flows for the year then
ended and for the period from December 16, 1997 (inception) to December 31,
1999. These financial statements are the responsibility of the Company's
management. My responsibility is to express an opinion on these financial
statements based on my audit.
I conducted my audit in accordance with generally accepted auditing standards.
Those standards require that I plan and perform an audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
I believe that my audit provides a reasonable basis for my opinion.
In my opinion the financial statements referred to above present fairly, the
financial position of Triple A Homes, Inc. as of December 31, 1999 and the
results of its operations and its cash flows for the year then ended and from
December 16, 1997 (inception) to December 31, 1999, in conformity with generally
accepted accounting principles.
Larry Legel
/s/ Larry Legel, CPA
Certified Public Accountant
August 29, 2000
Ft. Lauderdale, FL
F - 1
<PAGE>
TRIPLE A HOMES, INC.
(A Development Stage Enterprise)
Balance Sheet
As of December 31, 1999
ASSETS
Current Asset:
Cash $ 20 283
Mortgage receivable 201 027
--------
Total current assets 221 310
--------
Other Assets:
Deposits 424
Total other assets 424
--------
TOTAL $221 734
========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 20 902
--------
Total current liabilities 20 902
--------
Stockholders' Equity:
Common Stock, $.0005 par value
10,000,000 shares authorized
1,000,000 shares issued and outstanding 500
Additional paid in capital 203 678
Deficit accumulated during the
Development stage (3 346)
--------
Total stockholders' equity 200 832
--------
TOTAL $221 734
========
The accompanying notes are an integral part of these financial statements.
F - 2
<PAGE>
TRIPLE A HOMES, INC.
(A Development Stage Enterprise)
Statement of Operations
For the Year Ended December 31, 1999 and for the Period from
December 16, 1997 (inception) to December 31, 1999
For the
Year Ended From
December 31, 1999 Inception
----------------- ---------
Revenue $ 11 918 $ 11 918
Expenses 15 264 15 264
--------- ---------
Income Before Taxes (3 346) (3 346)
Provision for Income Taxes -0- -0-
--------- ---------
Net Income (Loss) $ (3 346) $ (3 346)
========= =========
Net Income (Loss) per share of
common stock
Basic $ (.00)
=========
Diluted $ (.00)
=========
Weighted average number of
common shares outstanding
Basic 1,000,000
=========
Diluted 1,000,000
=========
F - 3
<PAGE>
TRIPLE A HOMES, INC.
(A Development Stage Enterprise)
Statement of Changes in Stockholders' Equity
For the Year Ended December 31, 1999 and
For the Period From December 16, 1997 (inception) to December 31, 1999
<TABLE>
<CAPTION>
Deficit
Common Stock Accumulated
---------------------- Additional During
Number Par Paid In Development
of Shares Value Capital Stage Total
--------- ----- ---------- ----------- --------
<S> <C> <C> <C> <C> <C>
December 16, 1997
Incorporated -0- $-0- $ -0- $ -0-
February 1, 1999
Issuance of shares to
purchase assets 1,000 000 500 203 678 204 178
Net Income (loss) $(3 346) (3 346)
--------- ---- -------- ------- --------
Balance
December 31, 1999 1,000,000 $500 $203 678 $(3 346) $200 832
========= ==== ======== ======= ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F - 4
<PAGE>
TRIPLE A HOMES, INC.
(A Development Stage Enterprise)
Statement of Cash Flows
For the Year Ended December 31, 1999 and
For the Period From December 16, 1997 (inception)
To December 31, 1999
For the
Year Ended From
December 31, 1999 Inception
----------------- ---------
Cash Flows From Operating Activities:
Net income (loss) $ (3 346) $ (3 346)
Adjustment to reconcile net income (loss)
to net cash (used in) operating activities:
Increase in interest receivable in mortgage (2 608) (2 608)
-------- --------
Net cash flow provided by (used in)
operating activities (5 954) (5 954)
-------- --------
Cash Flows From Investing Activities
Repayment of mortgage receivable 23 081 23 081
--------- ---------
Net cash flow provided by (used in)
investing activities 23 081 23 081
--------- ---------
Cash Flows From Financing Activities:
Cash balance on purchase of assets 20 616 20 616
Payments to related companies 17 460 17 460
--------- ---------
Net cash flow provided by (used in)
Investing activities 3 156 3 156
--------- ---------
Net Increase In Cash 20 283 20 283
Cash at Beginning of Year -0- -0-
--------- ---------
Cash at End of Year $ 20 283 $ 20 283
========= =========
The accompanying notes are an integral part of these financial statements.
F - 5
<PAGE>
TRIPLE A HOMES, INC.
(A Development Stage Enterprise)
Notes to Financial Statements
For the Year Ended December 31, 1999 and
For the Period From December 16, 1997 (inception) to December 31, 1999
Note 1 - Summary of Significant Accounting Policies and Other Matters
Triple A Homes, Inc. was incorporated under the laws of the State of Florida on
December 16, 1997. Since its inception, the Company has been in the development
stage to invest its assets while preparing for a full registration with the
Securities and Exchange Commission.
On December 23, 1997, the shareholders of Federal Affordable Housing Corporation
agreed to sell and the shareholders of Triple A Homes, Inc. agreed to purchase
all the assets subject to the liabilities of Federal Affordable Housing
Corporation. Triple A Homes, Inc. issued restricted stock certificates to the
shareholders of Federal Affordable Housing Corporation as of February 1, 1999.
Use of Estimates - the preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that effect certain reported amounts and disclosures.
Accordingly, actual results could differ from those estimates.
Cash and Cash Equivalents - for purposes of the statements of cash flows, the
Company considers all highly liquid investments with a maturity of three months
or less at the date of purchase to be cash equivalents.
Net Income (Loss) Per Share of Common Stock - As of December 31, 1999, the
Company adopted Statement of Financial Accounting Standards (SFAS) No. 128,
"Earnings Per Share," which specifies the method of computation, presentation
and disclosure for earnings per share. SFAS No. 128 requires the presentation of
two earnings per share amounts, basic and diluted.
Basic earnings per share is calculated using the average number of common shares
outstanding. Diluted earnings per share is computed on the basis of the average
number of common shares outstanding plus the dilutive effect of outstanding
stock options using the "treasury stock" method.
F - 6
<PAGE>
TRIPLE A HOMES, INC.
(A Development Stage Enterprise)
Notes to Financial Statements (Continued)
For the Year Ended December 31, 1999 and
For the Period From December 16, 1997 (inception)
To December 31, 1999
Note 2 - Mortgage Receivable
The mortgage receivable was secured by twenty-nine vacant lots in Pasco County,
Florida. The mortgage was satisfied in full on January 20, 2000.
Note 3 - Related Party Transactions
The accounts receivable and payable consist of open accounts receivable and
payable from/to related Companies and an officer and/or stockholder of the
Company.
Note 4 - Common Stock Purchase Warrants
On February 15, 1999, the Board of Directors adopted a resolution to issue
common stock purchase warrants to shareholders of record on March 1, 1999 to
provide for potential future financing. Each shareholder will receive one
Warrant A and one Warrant B for each common share held. Each shareholder may
acquire one share of common stock for two Warrant A's at an exercise price of
$2.00; and one share of common stock for two Warrant B's at an exercise price of
$4.00. The warrants cannot be exercised until the effective date of the
registration statement being filed with the Securities and Exchange Commission.
Then the Warrant A will expire twelve months from said date and Warrant B will
expire eighteen months from said date. The Company has the right to call the
warrants at $.01 per warrant upon thirty days written notice. The owners have
the right to immediately exercise the warrants if called. As of December 31,1999
these warrants have not yet been issued.
Note 5 - Income Taxes
Significant components of deferred income taxes are as follows:
Net operating loss $500
----
Total deferred tax asset 500
Less Valuation allowance 500
----
Net deferred tax asset $ 0
====
The Company does not anticipate showing a profit as it will more than likely
spend all investment income on investigating merger candidates. A valuation
allowance of $ 500
F - 7
<PAGE>
TRIPLE A HOMES, INC.
(A Development Stage Enterprise)
Notes to Financial Statements (Continued)
For the Year Ended December 31, 1999 and
For the Period From December 16, 1997 (inception)
To December 31, 1999
Note 5 - Income Taxes (Cont.)
as of December 31, 1999 is maintained on deferred tax assets which the Company
has not determined to be more likely than not realized at this time. The Company
will continue to review this valuation on an annual basis and make adjustments
as appropriate.
As of December 31, 1999 the Company had a net operating loss carry forward of $
3,646. The net operating loss can be carried forward to offset future taxable
income and will expire December 31, 2019.
F - 8
<PAGE>
[LETTERHEAD OF LARRY LEGEL, CPA]
ACCOUNTANT'S REVIEW REPORT
Stockholders
Triple A Homes, Inc.
(A Development Stage Enterprise)
Clearwater, Florida
I have reviewed the accompanying balance sheet of Triple A Homes, Inc. as of
June 30, 2000 and the related statements of operations, changes in stockholders'
equity, and cash flows for the period then ended and for the period from
December 16, 1997 (inception) to June 30, 2000, in accordance with Statements on
Standards for Accounting and Review Services issued by the American Institute of
Certified Public Accountants. All information included in the financial
statements is the representation of the management of the Company.
A review consists principally of inquiries of company personnel and analytical
procedures applied to financial data. It is substantially less in scope than an
examination in accordance with generally accepted auditing standards, the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, I do not express such an opinion.
Based on my review, I am not aware of any material modification that should be
made to the accompanying reviewed financial statements in order for them to be
in conformity with generally accepted accounting principles.
The financial statements for the year ended December 31, 1999 were examined by
me and I issued and unqualified opinion on them.
Larry Legel
/s/ Larry Legel, CPA
Certified Public Accountant
August 29, 2000
Ft. Lauderdale, FL
F - 9
<PAGE>
TRIPLE A HOMES, INC.
(A Development Stage Enterprise)
Balance Sheet
As of June 30, 2000 and December 31, 1999
(Read Accountants' Review Report)
ASSETS
Audited
June 30, 2000 December 31, 1999
------------- -----------------
Current Asset:
Cash $204 572 $ 20 283
Mortgage receivable -0- 201 027
Accounts receivable 5 995 -0-
-------- --------
Total current assets 210 567 221 310
-------- --------
Other Assets:
Deferred offering costs 5 000 -0-
Deposits 424 424
-------- --------
Total other assets 5 424 424
-------- --------
TOTAL $215 991 $221 734
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 20 902 $ 20 902
-------- --------
Total current liabilities 20 902 20 902
-------- --------
Stockholders' Equity:
Common Stock, $.0005 par value
10,000,000 shares authorized
1,000,000 shares issued and outstanding 500 500
Additional paid in capital 203 678 203 678
Deficit accumulated during the
Development stage (9 089) (3 346)
-------- --------
Total stockholders' equity 195 089 200 832
-------- --------
TOTAL $215 991 $221 734
======== ========
The accompanying notes are an integral part of these financial statements.
F - 10
<PAGE>
TRIPLE A HOMES, INC.
(A Development Stage Enterprise)
Statement of Operations
For the Periods From December 16, 1997 (inception)
To June 30, 2000
(Read Accountants' Review Report)
<TABLE>
<CAPTION>
For the Audited
Six Months for the Year
Ended Ended From
June 30, 2000 December 31, 1999 Inception
------------- ----------------- ---------
<S> <C> <C> <C>
Revenue $ 2 873 $ 11 918 $ 14 791
Expenses 8 616 15 264 23 880
---------- ---------- ---------
Income Before Taxes (5 743) (3 346) (9 089)
Provision for Income Taxes -0- -0- -0-
---------- ---------- ---------
Net Income (Loss) $ (5 743) $ (3 346) $ (9 089)
========== ========== =========
Net Income (Loss) per share of
common stock
Basic $ (.01) $ .00
========== ==========
Diluted $ (.01) $ .00
========== ==========
Weighted average number of
common shares outstanding
Basic 1 000 000 1 000 000
========== ==========
Diluted 1 000 000 1 000 000
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F - 11
<PAGE>
TRIPLE A HOMES, INC.
(A Development Stage Enterprise)
Statement of Changes in Stockholders' Equity
For the Period From December 16, 1997 (inception) to June 30, 2000
(Read Accountants' Review Report)
<TABLE>
<CAPTION>
Deficit
Common Stock Accumulated
------------------------ Additional During
Number Par Paid In Development
of Shares Value Capital Stage Total
------------ ------ ---------- ------------- ---------
<S> <C> <C> <C> <C> <C>
December 16, 1997
Incorporated -0- $-0- $ -0- $ -0-
February 1, 1999
Issuance of shares to
purchase assets 1 000 000 500 203 678 204 178
Net Income (loss) $ (3 346) (3 346)
--------- ---- -------- -------- --------
Balance (audited)
December 31, 1999 1 000 000 500 203 678 (3 346) 200 832
Net Income (loss) $ (5 743) (5 743)
--------- ---- -------- -------- --------
Balance
June 30, 2000 1 000 000 $500 $203 678 $ (9 089) $195 089
========= ==== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F - 12
<PAGE>
TRIPLE A HOMES, INC.
(A Development Stage Enterprise)
Statement of Cash Flows
For the Periods Ended December 16, 1997 (inception)
To June 30, 2000
(Read Accountants' Review Report)
<TABLE>
<CAPTION>
For the Audited
Six Months for the Year
Ended Ended From
June 30, 2000 December 31, 1999 Inception
------------- ----------------- ---------
<S> <C> <C> <C>
Cash Flows From Operating Activities:
Net income (loss) $ (5 743) $ (3 346) $ (9 089)
Adjustment to reconcile net income (loss)
To net cash (used in) operating activities:
Increase in interest receivable in mortgage -0- (2 608) (2 608)
--------- -------- ---------
Net cash flow provided by (used in)
operating activities (5 743) (5 954) (11 697)
--------- -------- ---------
Cash Flows From Investing Activities:
Repayment of mortgage receivable 201 027 23 081 224 108
--------- -------- ---------
Net cash flow provided by (used in)
Investing activities 201 027 23 081 224 108
--------- -------- ---------
Cash Flows From Financing Activities:
Cash balance on purchase of assets -0- 20 616 20 616
--------- -------- ---------
Payments to related companies 5 995 17 460 23 455
Payments of Deferred Offering Costs 5 000 -0- 5 000
--------- -------- ---------
10 995 17 460 28 455
--------- -------- ---------
Net cash flow provided by (used in)
Financing activities (10 995) 3 156 (7 839)
--------- -------- ---------
Net Increase In Cash 184 289 20 283 204 572
Cash at Beginning of Period 20 283 -0- -0-
--------- -------- ---------
Cash at End of Period $ 204 572 $ 20 283 $ 204 572
========= ======== =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F - 13
<PAGE>
TRIPLE A HOMES, INC.
(A Development Stage Enterprise)
Notes to Financial Statements
For the Period From December 16, 1997 (inception)
To June 30, 2000
(Read Accountants' Review Report)
Note 1 - Summary of Significant Accounting Policies and Other Matters
Triple A Homes, Inc. was incorporated under the laws of the State of Florida on
December 16, 1997. Since its inception, the Company has been in the development
stage to invest its assets while preparing for a full registration with the
Securities and Exchange Commission.
On December 23, 1997, the shareholders of Federal Affordable Housing Corporation
agreed to sell and the shareholders of Triple A Homes, Inc. agreed to purchase
all the assets subject to the liabilities of Federal Affordable Housing
Corporation. Triple A Homes, Inc. issued restricted stock certificates to the
shareholders of Federal Affordable Housing Corporation as of February 1, 1999.
Use of Estimates - the preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that effect certain reported amounts and disclosures.
Accordingly, actual results could differ from those estimates.
Deferred Offering Costs - These costs have been capitalized and will be offset
against the proceeds of the common stock purchase warrants.
Cash and Cash Equivalents - for purposes of the statements of cash flows, the
Company considers all highly liquid investments with a maturity of three months
or less at the date of purchase to be cash equivalents.
Net Income (Loss) Per Share of Common Stock - As of December 31, 1999, the
Company adopted Statement of Financial Accounting Standards (SFAS) No. 128,
"Earnings Per Share," which specifies the method of computation, presentation
and disclosure for earnings per share. SFAS No. 128 requires the presentation of
two earnings per share amounts, basic and diluted.
Basic earnings per share is calculated using the average number of common shares
outstanding. Diluted earnings per share is computed on the basis of the average
number of common shares outstanding plus the dilutive effect of outstanding
stock options using the "treasury stock" method.
F - 14
<PAGE>
TRIPLE A HOMES, INC.
(A Development Stage Enterprise)
Notes to Financial Statements (Continued)
For the Periods From December 16, 1997 (inception) to June 30, 2000
(Read Accountants' Review Report)
Note 2 - Mortgage Receivable
The mortgage receivable was secured by twenty-nine vacant lots in Pasco County,
Florida. The mortgage was satisfied in full on January 20, 2000.
Note 3 - Related Party Transactions
The accounts receivable and payable consist of open accounts receivable and
payable from/to related Companies and an officer and/or stockholder of the
Company.
Note 4 - Common Stock Purchase Warrants
On February 15, 1999, the Board of Directors adopted a resolution to issue
common stock purchase warrants to shareholders of record on March 1, 1999 to
provide for potential future financing. Each shareholder will receive one
Warrant A and one Warrant B for each common share held. Each shareholder may
acquire one share of common stock for two Warrant A's at an exercise price of
$2.00; and one share of common stock for two Warrant B's at an exercise price of
$4.00. The warrants cannot be exercised until the effective date of the
registration statement being filed with the Securities and Exchange Commission.
Then the Warrant A will expire twelve months from said date and Warrant B will
expire eighteen months from said date. The Company has the right to call the
warrants at $.01 per warrant upon thirty days written notice. The owners have
the right to immediately exercise the warrants if called. As of June 30, 2000,
these warrants have not yet been issued.
Note 5 - Income Taxes
Significant components of deferred income taxes are as follows:
Net operating loss $ 1 360
-------
Total deferred tax asset 1 360
Less Valuation allowance 1 360
-------
Net deferred tax asset $ 0
=======
The Company does not anticipate showing a profit as it will more than likely
spend all investment income on investigating merger candidates. A valuation
allowance of
F - 15
<PAGE>
TRIPLE A HOMES, INC.
(A Development Stage Enterprise)
Notes to Financial Statements (Continued)
For the Periods From December 16, 1997 (inception) to June 30, 2000
(Read Accountants' Review Report)
Note 5 - Income Taxes (Cont.)
$ 1,360 as of June 30, 2000 is maintained on deferred tax assets which the
Company has not determined to be more likely than not realized at this time. The
Company will continue to review this valuation on an annual basis and make
adjustments as appropriate.
As of June 30, 2000 the Company had a net operating loss carry forward of $
9,089. The net operating loss can be carried forward to offset future taxable
income and will expire December 31, 2019 and 2020.
F - 16
<PAGE>
TRIPLE A HOMES, INC.
A Maximum of 2,000,000 Shares of Common Stock
---------------------------------------------
PROSPECTUS
---------------------------------------------
Dealer Prospectus Delivery Obligation
Until _________, 2000, all dealers effecting transactions in these
securities, whether or not participating in this distribution, may be required
to deliver a Prospectus. This is in addition to the obligation of dealers to
deliver a Prospectus when acting as underwriters and with respect to their
unsold allotments or subscriptions.
_________________________, 2000
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
(FORM SB-1)
Item 1. Indemnification of Directors and Officers
Section 607.0950 of the Florida Business Corporation Act permits
indemnification by a corporation to any director or officer of the corporation
in connection with corporate action, if he acted in good faith and in a manner
he reasonably believed to be in, or not opposed to, the best interests of the
corporation and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The Company's bylaws
contain coverage for indemnification which, effectively, are the same as those
described above in Section 607.0950. Indemnification is also permitted for
shareholder derivative actions in which officers and directors are named as
defendants, if, among other circumstances, the proceeding is settled or
successfully defended. Expenses incurred by an officer or director in defending
a civil or criminal proceeding may be paid by the corporation in advance,
provided the officer or director undertakes in writing to repay the amount
advanced if he is ultimately found not to be entitled to indemnification by the
corporation.
Item 2. Other Expenses of Issuance and Distribution
The estimated expenses in connection with this offering are as follows:
Item Amount
Securities and Exchange Commission Registration Fee ............... $ 1,050.00
Cost of Printing, Edgarizing ................................... 2,450.00
Legal Services and Expenses ...................................... 13,000.00
Accountant's Services and Expenses ................................ 3,500.00
"Blue Sky" Fees and Expenses (including legal counsel)............. 2,500.00
Transfer Agent Fee .............................................. 1,500.00
OTC Bulletin Board Listing Fee and Related Expenses ............... 6,000.00
-----------
TOTAL .................................................. $ 30,000.00
No portion of the above expenses will be paid by the selling security
holders whose shares are being registered in this Registration Statement.
II-1
<PAGE>
Item 3. Undertakings
A. The undersigned registrant will:
(1) File, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement to:
(i) Include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) Reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in the
information set forth in the Registration Statement; and
(iii) Include any additional or changed material information to the
plan of distribution.
(2) For determining liability under the Securities Act, treat each such
post-effective amendment as a new Registration Statement of the securities
offered, and the offering of such securities at that time to be the initial bona
fide offering thereof.
(3) File a post-effective amendment to remove from registration any of the
securities being registered that remain unsold at the end of the offering.
B. Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the registrant of expenses incurred or paid by a
director, officer, or controlling person of the registrant in the successful
defense of any action, suit or proceeding) is asserted by such director, officer
or controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
Item 4. Unregistered Securities Issued or Sold Within One Year
Not applicable.
II-2
<PAGE>
Item 5. Exhibits
The following exhibits are filed herewith:
Exhibit
Number Description of Exhibit
------- ----------------------
2.1 Articles of Incorporation of the Registrant, effective December 16,
1997
2.2 Bylaws of the Registrant, adopted on September 1, 1999
3.1 Form of A Warrant and B Warrant
6.1 Bill of Sale dated December 31, 1998 by and between Triple A
Homes, Inc. and Federal Affordable Housing Corporation
6.2 Agreement dated March 5, 1999 by and between Dreamweavers N.V.,
Federal Affordable Housing Corporation and Triple A Homes, Inc.,
including Exhibit "A" attached thereto and Bill of Sale
6.3 Option Agreement between Registrant and RemProp, Inc. dated April 1,
2000
6.4 Lease Agreement between Registrant and RemProp, Inc. dated April 1,
2000
10.1 Consent of Jim Scutti, P.A. (included in Exhibit 11)
10.2 Consent of Larry Legel, CPA
11 Opinion regarding legality and consent (related to shares underlying
warrants and shares of selling security holders being registered on
Form SB-1)
27.1 Financial Data Schedule (Period Ended December 31, 1999)
27.2 Financial Data Schedule (Period Ended June 30, 2000)
II-3
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
Company certifies that it has reasonable grounds to believe that it meets all of
the requirements of filing on Form SB-1 and authorized this registration
statement to be signed on its behalf by the undersigned, in the City of
Clearwater, State of Florida, on September 20, 2000.
TRIPLE A HOMES, INC.
By: /s/ Richard E. Metz
--------------------------
Richard E. Metz, President
In accordance with the requirements of the Securities Act of 1933, this
registration statement was signed by the following persons in the capacities and
on the dates stated.
Signature: /s/ Richard E. Metz
------------------------
Richard E. Metz
Title: President and Director (Principal Financial and Accounting Officer)
Date: September 20, 2000
II-4
<PAGE>
INDEX AND DESCRIPTION OF EXHIBITS
Exhibit
Number Description of Exhibit
------- ----------------------
2.1 Articles of Incorporation of the Registrant, effective December 16,
1997
2.2 Bylaws of the Registrant, adopted on September 1, 1999
3.1 Form of A Warrant and B Warrant
6.1 Agreement dated March 5, 1999 by and between Dreamweavers N.V.,
Federal Affordable Housing Corporation and Triple A Homes, Inc.,
including Exhibit A ("A") attached thereto and Bill of Sale
6.2 Option Agreement between Registrant, RemProp, Inc. and Key
Management, Inc. dated April 1, 2000
6.3 Lease Agreement between Registrant and RemProp, Inc. dated April 1,
2000
10.1 Consent of Jim Scutti, P.A. (included in Exhibit 11)
10.2 Consent of Larry Legel, CPA
11 Opinion regarding legality and consent (related to shares underlying
warrants and shares of selling security holders being registered on
Form SB-1)
27.1 Financial Data Schedule (Period Ended December 31, 1999)
27.2 Financial Data Schedule (Period Ended June 30, 2000)
