UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES
OF SMALL BUSINESS ISSUERS
Under Section 12(b) or 12(g) of the
Securities Exchange Act of 1934
Private Capital Investors, Inc.
(Name of Small Business Issuer in its charter)
Florida 65-1036706
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
511 NE 94th Street Miami Shores, Florida 33138
------------------------------------------- -----
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (305) 758-3738
-------------
With A Copy To:
Alfred G. Smith, II, Esq.
Shutts & Bowen LLP
1500 Miami Center
201 South Biscayne Boulevard
Miami, Florida 33131
(305) 358-6300
Securities to be registered under Section 12(b) of the Act:
Title of each class Name of each exchange on which
to be so registered each class is to be registered
Securities to be registered under Section 12(g) of the Act:
Common Stock, $.001 Par Value
(Title of class)
<PAGE>
INFORMATION REQUIRED IN REGISTRATION STATEMENT
ITEM 1. DESCRIPTION OF BUSINESS.
GENERAL
The name of our company is Private Capital Investors, Inc. (the "Company"). We
were incorporated under the laws of the State of Florida on August 6, 1999. We
are a developmental stage company and have no revenues to date. Since inception,
our activities have been limited to actions related to our organization and the
preparation of this Registration Statement. We are a "shell" company conducting
virtually no business operation, other than our efforts to seek merger partners
or acquisition candidates. We have no full time employees and own no real
estate.
<PAGE>
We were created to effect a merger, exchange of capital stock, asset acquisition
or other similar business combination (a "Business Combination") with an
operating or development stage business (the "Target Business") which desires to
utilize our status as a reporting corporation under the Securities Exchange Act
of 1934, as amended ("Exchange Act"). We have a shareholder base of three
shareholders and 1,000,000 shares of Common Stock outstanding, all of which
shares are restricted pursuant to Rule 144 of the Securities Act of 1933, as
amended (the "Securities Act"). See "Description of Securities". Pursuant to a
resolution of our board of directors, we will not enter into any Business
Combination until the Target Business has obtained the requisite audited
financial statements required pursuant to Form 8-K (or its equivalent) under the
Exchange Act.
Upon the effectiveness of this registration statement, we intend to seek
potential business opportunities and effectuate a Business Combination with a
Target Business with significant growth potential which, in the opinion of our
management, could provide a profit to both the Company and its shareholders. We
intend to seek opportunities demonstrating the potential of long term growth as
opposed to short term earnings. Our efforts in identifying a prospective Target
Business are expected to emphasize businesses primarily located in the United
States; however, we reserve the right to acquire a Target Business located
primarily elsewhere. While we may, under certain circumstances, seek to effect
Business Combinations with more than one Target Business, as a result of our
limited resources, we will, in all likelihood, have the ability to effect only a
single Business Combination. We may effect a Business Combination with a Target
Business which may be financially unstable or in its early stages of development
or growth. We will not restrict our search to any specific business, industry or
geographical location, and we may participate in a business venture of virtually
any kind or nature. Our management may become involved in management of the
Target Business and/or may hire qualified but as yet unidentified individuals to
manage such Target Business. Presently, we have no plans, proposal, agreement,
understanding or arrangement to acquire or merge with any specific business or
company, and we have not identified any specific business or company for
investigation and evaluation.
-2-
<PAGE>
Our discussion of the proposed business under this caption and throughout this
registration statement is purposefully general and is not meant to restrict our
virtually unlimited discretion to search for and enter into potential business
opportunities.
"SHELL" CORPORATION
Background.
We have conducted virtually no business operations to date and expect to conduct
none in the future, other than our efforts to effectuate a Business Combination,
we can be characterized as a "shell" corporation. As a shell corporation, we
face risks inherent in the investigation, acquisition, or involvement in a new
business opportunity. Further, as a new or "start-up" company, we face all of
the unforeseen costs, expenses, problems, and difficulties related to such
companies. We are dependent upon the efforts of our officers and directors to
effectuate a Business Combination. Assuming our officers and directors are
successful in identifying a Business Combination, it is unlikely our
shareholders will have an opportunity to evaluate the specific merits or risks
of any one or more Business Combinations and will have no control over the
decision making relating to such Business Combination.
Due to our limited capital resources, the consummation of a Business Combination
will likely involve the acquisition of, or merger or consolidation with, a
company that does not need substantial additional capital but which desires to
establish a public trading market for its shares, while avoiding what it might
deem to be the adverse consequences of undertaking a public offering itself,
such as the time delays and significant expenses incurred to comply with the
various federal and state securities laws that regulate initial public
offerings. A Target Business might desire, among other reasons, to create a
public market for their shares in order to enhance liquidity for current
shareholders, facilitate raising capital through the public sale of securities
of which a prior existence of a public market for its securities exists, and/or
acquire additional assets through the issuance of securities rather than for
cash.
No trading market in our securities presently exists. In light of the
restrictions concerning shell companies contained in many state blue sky laws
and regulations, it is not likely that a trading market will be created in our
securities until such time as a Business Combination occurs with a Target
Business. No assurances are given that subsequent to such a Business Combination
that a trading market in our securities will develop. We presently have
1,000,000 shares of Common Stock outstanding, all of which are deemed to be
"restricted securities", as that term is defined under Rule 144 promulgated
under the Securities Act, in that such shares were issued in private
transactions not involving a public offering. These shares will be available for
sale under Rule 144 beginning in August, 2000 so long as all other conditions of
Rule 144 are met (and assuming no other changes in our capitalization). No
assurances are made; however, that Rule 144 will be available at any time for
any shareholders' shares, that the Rule will not be amended or that we will not
provide to any shareholder
-3-
<PAGE>
registration rights to register under the Securities Act any shareholder's
shares for sale. As of the date hereof, we have not provided to any shareholder
registration rights to register under the Securities Act any shareholder's
shares for sale. See "Market for Common Equity and Related Stockholder Matters".
We cannot estimate the time that it will take to effectuate a Business
Combination. It could be time consuming; possibly in excess of many months or
years. Additionally, no assurance can be made that we will be able to effectuate
a Business Combination on favorable terms. We might identify and effectuate a
Business Combination with a Target Business which proves to be unsuccessful for
any number of reasons, many of which are due to the fact that the Target
Business is not identified at this time. If this occurs, the Company and its
shareholders might not realize any type of profit.
Unspecified Industry and Target Business.
We will seek to acquire a Target Business without limiting ourselves to a
particular industry. Most likely, the Target Business will be primarily located
in the United States, although we reserve the right to acquire a Target Business
primarily located outside the United States. In seeking a Target Business, we
will consider, without limitation, businesses which (i) offer or provide
services or develop, manufacture or distribute goods in the United States or
abroad, including, without limitation, in the following areas: Internet
services, real estate, health care and health products, educational services,
environmental services, consumer-related products and services (including
amusement, entertainment and/or recreational services), personal care services,
voice and data information processing and transmission and related technology
development or (ii) is engaged in wholesale or retail distribution. To date, we
have not selected any particular industry or any Target Business in which to
concentrate its Business Combination efforts. Accordingly, we are only able to
make general disclosures concerning the risks and hazards of effectuating a
Business Combination with a Target Business since there is presently no current
basis for us to evaluate the possible merits or risks of the Target Business or
the particular industry in which we may ultimately operate. Any Target Business
that is selected will be required to have audited financial statements prior to
the commencement of the Business Combination.
To the extent that we effect a Business Combination with a financially unstable
company or an entity in its early stage of development or growth (including
entities without established records of sales or earnings), we will become
subject to numerous risks inherent in the business and operations of financially
unstable and early stage or potential emerging growth companies. In addition, to
the extent that we effect a Business Combination with a Target Business in an
industry characterized by a high level of risk, we will become subject to the
currently unascertainable risks of that industry. An extremely high level of
risk frequently characterizes certain industries which experience rapid growth.
Although management will endeavor to evaluate the risks inherent in a particular
industry or Target Business, there can be no assurances that we will properly
ascertain or assess all significant risk factors.
-4-
<PAGE>
Probable Lack of Business Diversification.
As a result of our limited resources, in all likelihood, we will have the
ability to effect only a single Business Combination. Accordingly, our prospects
for success will be entirely dependent upon the future performance of a single
business.
Unlike certain entities that have the resources to consummate several Business
Combinations or entities operating in multiple industries or multiple segments
of a single industry, it is highly unlikely that we will have the resources to
diversify our operations or benefit from spreading risks or offsetting losses.
Our probable lack of diversification could subject us to numerous economic,
competitive and regulatory developments, any or all of which may have a material
adverse impact upon the particular industry in which we may operate subsequent
to consummation of a Business Combination. The prospects for our success may
become dependent upon the development or market acceptance of a single or
limited number of products, processes or services. Accordingly, notwithstanding
the possibility of management assistance to the Target Business by us, there can
be no assurance that the Target Business will prove to be commercially viable.
Limited Ability to Evaluate Target Business' Management.
While our ability to successfully effect a Business Combination will be
dependent upon certain key personnel, the future role of such personnel in the
Target Business cannot presently be stated with any certainty. There can be no
assurance that current management will remain associated in any operational
capacity with the Company following a Business Combination. Moreover, there can
be no assurances that current management will have any experience or knowledge
relating to the operations of the particular Target Business. Furthermore,
although we intend to closely scrutinize the management of a prospective Target
Business in connection with evaluating the desirability of effecting a Business
Combination, there can be no assurances that our assessment of such management
will prove to be correct, especially since none of our management are
professional business analysts. See "Directors, Executive Officers, Promoters
and Control Persons".
Accordingly, we will be dependant, in some significant respects, on the ability
of the management of the Target Business who are unidentifiable as of the date
hereof. In addition, there can be no assurances that such future management will
have the necessary skills, qualifications or abilities to manage a public
company. We may also seek to recruit additional managers to supplement the
incumbent management of the Target Business. There can be no assurances that we
will have the ability to recruit such additional managers, or that such
additional managers will have the requisite skill, knowledge or experience
necessary or desirable to enhance the incumbent management.
-5-
<PAGE>
Opportunity for Shareholder Evaluation or Approval of Business Combinations.
Our non-affiliate shareholders will, in all likelihood, not receive nor
otherwise have the opportunity to evaluate any financial or other information
which will be made available to us in connection with selecting a potential
Business Combination until after we have entered into an agreement to effectuate
a Business Combination. Such agreement to effectuate a Business Combination,
however, will be subject to shareholder approval pursuant to applicable law. As
a result, our non-affiliate shareholders will be almost entirely dependent on
the judgment and experience of management in connection with the selection and
ultimate consummation of a Business Combination. In addition, under Florida law,
the form of Business Combination could impact upon the availability of
dissenters' rights (i.e., the right to receive fair payment with respect to the
Company's Common Stock) to shareholders disapproving the proposed Business
Combination. See "Description of Business - Shell Corporation - Conflicts of
Interest" and "Certain Relationships and Related Transactions".
Selection of a Target Business and Structuring of a Business Combination.
We anticipate that the selection of a Target Business will be complex and risky
because of competition for such business opportunities among all segments of the
financial community. The nature of our search for the acquisition of a Target
Business requires maximum flexibility inasmuch as we will be required to
consider various factors and circumstances which may preclude meaningful direct
comparison among the various business enterprises, products or services
investigated. Investors should recognize that the possible lack of
diversification among our acquisitions may not permit us to offset potential
losses from one venture against profits from another. We have virtually
unrestricted flexibility in identifying and selecting a prospective Target
Business. In addition, in evaluating a prospective Target Business, management
will consider, among other factors, the following factors which are not listed
in any particular order:
- financial condition and results of operation of the Target Business;
- growth potential and projected financial performance of the Target
Business and the industry in which it operates;
- experience and skill of management and availability of additional
personnel of the Target Business;
- capital requirements of the Target Business;
- the availability of a transaction exemption from registration pursuant to
the Securities Act for the Business Combination;
- the location of the Target Business;
- competitive position of the Target Business;
-6-
<PAGE>
- stage of development of the product, process or service of the Target
Business;
- degree of current or potential market acceptance of the product, process
or service of the Target Business;
- possible proprietary features and possible other protection of the
product, process or service of the Target Business;
- regulatory environment of the industry in which the Target Business
operates;
- costs associated with effecting the Business Combination; and
- equity interest in and possible management participation in the Target
Business.
The foregoing criteria are not intended to be exhaustive; any evaluation
relating to the merits of a particular Business Combination will be based, to
the extent relevant, on the above factors as well as other considerations deemed
relevant by us in connection with effecting a Business Combination consistent
with our business objective. In many instances, it is anticipated that the
historical operations of a Target Business may not necessarily be indicative of
the potential for the future because of the possible need to shift marketing
approaches substantially, expand significantly, change product emphasis, change
or substantially augment management, or make other changes.
We will be dependent upon the owners of a Target Business to identify any such
problems which may exist and to implement, or be primarily responsible for the
implementation of, required changes. Because we may engage in a Business
Combination with a newly organized firm or with a firm which is entering a new
phase of growth, we will incur further risks, because in many instances,
management of the Target Business will not have proven its abilities or
effectiveness, the eventual market for the products or services of the Target
Business will likely not be established, and the Target Business may not be
profitable subsequent to a Business Combination.
Our limited funds and the lack of full-time management will likely make it
impracticable to conduct a complete and exhaustive investigation and analysis of
a Target Business before we commit our capital or other resources thereto.
Management decisions, therefore, will likely be made without detailed
feasibility studies, independent analysis, market surveys and the like which, if
we had more funds available to us, would be desirable. We will be particularly
dependent in making decisions upon information provided by the promoter, owner,
sponsor, or others associated with the business opportunity seeking our
participation.
-7-
<PAGE>
In connection with its evaluation of a prospective Target Business, management
anticipates that it will conduct a due diligence review which will encompass,
among other things, meetings with incumbent management and inspection of
facilities, as well as review of financial or other information which will be
made available to us. The time and costs required to select and evaluate a
Target Business (including conducting a due diligence review) and to structure
and consummate the Business Combination (including negotiating relevant
agreements and preparing requisite documents for filing pursuant to applicable
securities laws and state "blue sky" and corporation laws) cannot presently be
ascertained with any degree of certainty. Our officers and directors only devote
a small portion of their time to the operations of the Company, and,
accordingly, consummation of a Business Combination may require a greater period
of time than if they devoted their full time to the Company's affairs.
However, our officers and directors will devote such time as they deem
reasonably necessary, to carry out the business and affairs of the Company,
including the evaluation of potential Target Businesses and the negotiation of a
Business Combination and, as a result, the amount of time devoted to our
business and affairs may vary significantly depending upon, among other things,
whether we have identified a Target Business or are engaged in active
negotiations of a Business Combination. Any costs incurred in connection with
the identification and evaluation of a prospective Target Business with which a
Business Combination is not ultimately consummated will result in a loss to the
Company and reduce the amount of capital available to otherwise complete a
Business Combination or for the resulting entity to utilize. In the event we
deplete our cash reserves, we might be forced to cease operations and a Business
Combination might not occur.
We anticipate that we will locate and make contact with Target Businesses
primarily through the reputation and efforts of our officers and directors, who
will meet personally with existing management and key personnel, visit and
inspect material facilities, assets, products and services belonging to such
prospects, and undertake such further reasonable investigation as they deem
appropriate. Management has a network of business contacts and believes that
prospective Target Businesses will be referred to the Company through this
network of contacts.
We also expect that many prospective Target Businesses will be brought to
management's attention from various other non-affiliated sources, including
securities broker-dealers, investment bankers, venture capitalists, bankers, and
other members of the financial community. We have neither the present intention,
nor does the present potential exist for us, to consummate a Business
Combination with a Target Business in which our management, promoters, or their
affiliates or associates directly or indirectly have a pecuniary interest,
although no existing corporate policies would prevent this from occurring.
Although there are no current plans to do so, we may engage the services of
professional firms that specialize in finding business acquisitions and pay a
finder's fee or other compensation. Since we have no current plans to utilize
any outside consultants or advisors to assist in a Business Combination, no
policies have been adopted regarding use of such consultants or advisors, the
criteria to be used in selecting such consultants or advisors, the services to
be provided, the term of service, or regarding the total amount of fees that may
be paid. However, because of our limited resources, it is likely that any such
fee we agree to pay would be paid in stock and not in cash. In no event will we
pay a finder's fee or commission to any officer or director or to any entity
with which they are affiliated for such service. Moreover, in no event shall we
issue any of our securities to any of our other officers, directors or promoters
if any, or any of their respective affiliates or associates, in connection with
activities designed to locate a target business.
-8-
<PAGE>
As a general rule, Federal and state tax laws and regulations have a significant
impact upon the structuring of business combinations. We will evaluate the
possible tax consequences of any prospective Business Combination and will
endeavor to structure a Business Combination so as to achieve the most favorable
tax treatment for us, the Target Business and their respective stockholders.
There can be no assurance that the Internal Revenue Service or relevant state
tax authorities will ultimately assent to our tax treatment of a particular
consummated Business Combination.
To the extent the Internal Revenue Service or any relevant state tax authorities
ultimately prevail in recharacterizing the tax treatment of a Business
Combination, there may be adverse tax consequences to us, the Target Business
and their respective stockholders. Tax considerations as well as other relevant
factors will be evaluated in determining the precise structure of a particular
Business Combination, which could be effected through various forms of a merger,
consolidation or stock or asset acquisition.
Although we have no commitments as of the date of this registration statement to
issue any shares of Common Stock, preferred stock, options or warrants, other
than as described in this registration statement, we will, in all likelihood,
issue a substantial number of additional shares in connection with the
consummation of a Business Combination. To the extent that such additional
shares are issued, dilution to the interests of our stockholders will occur.
Additionally, if a substantial number of shares of Common Stock are issued in
connection with the consummation of a Business Combination, a change in our
control is likely to occur which will likely affect, among other things, our
ability to utilize net operating loss carry forwards, if any.
Any such change in control may also result in the resignation or removal of our
present officer and director. If there is a change in management, no assurance
can be given as to the experience or qualification of such persons, either in
the operation of our activities or in the operation of the business, assets or
property being acquired. Management considers it likely that in order to
consummate a Business Combination, a change in control will occur; therefore,
management anticipates offering a controlling interest to a Target Business in
order to effectuate a Business Combination.
Management may actively negotiate for or otherwise consent to the disposition of
any portion of their Common Stock as a condition to or in connection with a
Business Combination. Therefore, it is possible that the terms of any Business
Combination will provide for the sale of some shares of Common Stock held by
management. It is likely that none of our other shareholders will be afforded
the right to sell their shares of Common Stock in connection with a Business
Combination pursuant to the same terms that Management will be provided.
-9-
<PAGE>
There are currently no limitations relating to our ability to borrow funds to
increase the amount of capital available to us to effect a Business Combination
or otherwise finance the operations of the Target Business. However, our limited
resources and lack of operating history could make it difficult for us to borrow
additional funds from other sources. The amount and nature of any borrowings by
us will depend on numerous considerations, including our capital requirements,
potential lenders' evaluation of our ability to meet debt service on borrowings
and the then prevailing conditions in the financial markets, as well as general
economic conditions. We do not have any arrangements with any bank or financial
institution to secure additional financing and there can be no assurance that
such arrangements if required or otherwise sought, would be available on terms
commercially acceptable or otherwise in our best interests. Our inability to
borrow funds required to effect or facilitate a Business Combination, or to
provide funds for an additional infusion of capital into a Target Business, may
have a material adverse effect on our financial condition and future prospects,
including the ability to effect a Business Combination. To the extent that debt
financing ultimately proves to be available, any borrowings may subject us to
various risks traditionally associated with indebtedness, including the risks of
interest rate fluctuations and insufficiency of cash flow to pay principal and
interest. Furthermore, a Target Business may have already incurred debt
financing and, therefore, all the risks inherent thereto.
If our securities are issued as part of an acquisition, such securities are
required to be issued either in reliance upon exemptions from registration under
applicable federal or state securities laws or registered for public
distribution. We intend to primarily target only those companies where an
exemption from registration would be available; however, since the structure of
the Business Combination has yet to be determined, no assurances can be made
that we will be able to rely on such exemptions. Registration of securities
typically requires significant costs and time delays are typically encountered.
In addition, the issuance of additional securities and their potential sale in
any trading market which might develop in our Common Stock, of which there is
presently no trading market and no assurances can be given that one will
develop, could depress the price of our Common Stock in any market which may
develop in our Common Stock. Further, such issuance of additional securities
would result in a decrease in the percentage ownership of present shareholders.
Due to our small size and limited amount of capital, our ability to raise
additional capital if and when needed could be constrained. Until such time as
any enterprise, product or service which we acquire generates revenues
sufficient to cover operating costs, it is conceivable that we could find
ourselves in a situation where it needs additional funds in order to continue
our operations. This need could arise at a time when we are unable to borrow
funds and when market acceptance for the sale of additional shares of our Common
Stock does not exist. See "Management's Discussion and Analysis or Plan of
Operation".
Conflicts of Interest.
None of our affiliates, officers and directors are required to commit their full
time to our affairs and, accordingly, such persons may have conflicts of
interest in allocating management time
-10-
<PAGE>
among various business activities. Our affiliates, officers and directors may
engage in other business activities similar and dissimilar to those we are
engaged in. To the extent that such persons engage in such other activities,
they will have possible conflicts of interest in diverting opportunities to
other companies, entities or persons with which they are or may be associated or
have an interest, rather than diverting such opportunities to us. As no policy
has been established for the resolution of such a conflict, we could be
adversely affected should management choose to place their other business
interests before ours. No assurance can be given that such potential conflicts
of interest will not cause us to lose potential opportunities. Management may
become aware of investment and business opportunities which may be appropriate
for presentation to us as well as the other entities with which they are
affiliated. Management may have conflicts of interest in determining which
entity a particular business opportunity should be presented. Accordingly, as a
result of multiple business affiliations, management may have similar legal
obligations relating to presenting certain business opportunities to multiple
entities. In addition, conflicts of interest may arise in connection with
evaluations of a particular business opportunity by the board of directors with
respect to the foregoing criteria. There can be no assurances that any of the
foregoing conflicts will be resolved in our favor. We may also consider Business
Combinations with entities owned or controlled by persons other than those
persons described above. There can be no assurances that any of the foregoing
conflicts will be resolved in our favor.
Management may actively negotiate for or otherwise consent to the disposition of
any portion of their Common Stock as a condition to or in connection with a
Business Combination. Therefore, it is possible that the terms of any Business
Combination will provide for the sale of some shares of Common Stock held by
Management. In the event that occurs, the Company's directors intend to approve
the Business Combination pursuant to Section 607.0902(2)(d)(7) of the Florida
Business Corporation Act which will have the effect of removing the transaction
from the purview of the control-share acquisition statute promulgated under
Section 607.0902 of the Florida Business Corporation Act. Thus, it is likely
that none of our other shareholders will be afforded the right to sell their
shares of Common Stock in connection with a Business Combination pursuant to the
same terms that Management will be provided. Also, such shareholders will not be
afforded an opportunity to approve or consent to Management's stock purchase.
See "Description of Business - Shell Corporation - Selection of a Target
Business and Structuring of a Business Combination".
Investment Company Act and Other Regulation
We may participate in a Business Combination by purchasing, trading or selling
the securities of such Target Business. We do not, however, intend to engage
primarily in such activities.
Specifically, we intend to conduct our activities so as to avoid being
classified as an "investment company" under the Investment Company Act of 1940
(the "Investment Act"), and therefore to avoid application of the costly and
restrictive registration and other provisions of the Investment Act, and the
regulations promulgated thereunder.
-11-
<PAGE>
Our plan of business may involve changes in our capital structure, management,
control and business, especially if we consummate a Business Combination as
discussed above. Each of these areas is regulated by the Investment Act, in
order to protect purchasers of investment company securities. Since we will not
register as an investment company, stockholders will not be afforded these
protections.
Any securities which we might acquire in exchange for our Common Stock will be
"restricted securities" within the meaning of the Securities Act of 1933, as
amended (the "Securities Act"). If we elect to resell such securities, such sale
cannot proceed unless a registration statement has been declared effective by
the Securities and Exchange Commission or an exemption from registration is
available. Section 4(1) of the Securities Act, which exempts sales of securities
not involving a public distribution by persons other than the issuer, would in
all likelihood be available to permit a private sale. Although our plan of
operation does not contemplate the resale of an acquired Target Business'
securities, if such a sale were to be necessary, we would be required to comply
with the provisions of the Securities Act to effect such resale.
Any acquisition we make may be in an industry which is regulated or licensed by
federal, state or local authorities. Compliance with such regulations can be
expected to be a time consuming and expensive process.
Penny Stock Regulations - State Blue Sky restrictions - Restrictions on
Marketability.
The Securities and Exchange Commission (the "Commission") has adopted
regulations which generally define "penny stock" to be any equity security that
has a market price (as defined) less than $5.00 per share or an exercise price
of less than $5.00 per share, subject to certain exceptions. Our securities may
be covered by the penny stock rules, which impose additional sales practice
requirements on broker-dealers who sell such securities to persons other than
established customers and accredited investors (generally institutions with
assets in excess of $5,000,000 or individuals with net worth in excess of
$1,000,000 or annual income exceeding $200,000 or $300,000 jointly with their
spouse). For transactions covered by the rule, the broker-dealers must make a
special suitability determination for the purchase and receive the purchaser's
written agreement of the transaction prior to the sale. Consequently, the rule
may affect the ability of broker-dealers to sell our securities and also may
affect the ability of our shareholders to sell their shares in the secondary
market.
In addition, the Securities and Exchange Commission has adopted a number of
rules to regulate "penny stocks". Such rules include Rules 3a51-1, 15g-1, 15g-2,
15g-3, 15g-4, 15g-5, 15g-6, and 15g-9 under the Securities Exchange Act of 1934,
as amended. Because the securities of the Company may constitute "penny stocks"
within the meaning of the rules, the rules would apply to the Company and to its
securities. The rules may further affect the ability of the Company's
shareholders to sell their shares in any public market which might develop.
-12-
<PAGE>
Shareholders should be aware that, according to Securities and Exchange
Commission Release No. 34-29093, the market for penny stocks has suffered in
recent years from patterns of fraud and abuse. Such patterns include (i) control
of the market for the security by one or a few broker-dealers that are often
related to the promoter or issuer; (ii) manipulation of prices through
prearranged matching of purchases and sales and false and misleading press
releases; (iii) "boiler room" practices involving high-pressure sales tactics
and unrealistic price projections by inexperienced sales persons; (iv) excessive
and undisclosed bid-ask differentials and markups by selling broker-dealers; and
(v) the wholesale dumping of the same securities by promoters and broker-dealers
after prices have been manipulated to a desired level, along with the resulting
inevitable collapse of those prices and with consequent investor losses. We are
aware of the abuses that have occurred historically in the penny stock market.
Although we do not expect to be in a position to dictate the behavior of the
market or of broker-dealers who participate in the market, management will
strive within the confines of practical limitations to prevent the described
patterns from being established with respect to our securities.
COMPETITION
We expect to encounter intense competition from other entities having a business
objective similar to ours. Many of these entities are well-established and have
extensive experience in connection with identifying and effecting business
combinations directly or through affiliates. Many of these competitors possess
greater financial, marketing, technical, personnel and other resources than us
and there can be no assurances that we will have the ability to compete
successfully. Our financial resources will be extremely limited in comparison to
those of many of its competitors. This inherent competitive limitation could
compel us to select certain less attractive Target Businesses for a Business
Combination. There can be no assurances that such Target Businesses will permit
us to meet our stated business objective. Management believes, however, that our
status as a reporting public entity could give us a competitive advantage over
privately held entities having a similar business objective to ours in acquiring
a Target Business with significant growth potential on favorable terms.
-13-
<PAGE>
UNCERTAINTY OF COMPETITIVE ENVIRONMENT OF TARGET BUSINESS
In the event that we succeed in effecting a Business Combination, we will, in
all likelihood, become subject to intense competition from competitors of the
Target Business. In particular, certain industries which experience rapid growth
frequently attract an increasingly larger number of competitors, including
competitors with increasingly greater financial, marketing, technical and other
resources than the initial competitors in the industry. The degree of
competition characterizing the industry of any prospective Target Business
cannot presently be ascertained. There can be no assurances that, subsequent to
a Business Combination, we will have the resources to compete effectively,
especially to the extent that the Target Business is in a high-growth industry.
FEDERAL SECURITIES LAWS COMPLIANCE
Under the Federal securities laws, companies reporting under the Exchange Act
must furnish stockholders certain information about significant acquisitions,
which information may require audited financial statements for a Target Business
with respect to one or more fiscal years, depending upon the relative size of
the acquisition. Consequently, the Company's policy is to only effect a Business
Combination with a Target Business that has available the requisite audited
financial statements. See "Description of Securities--Securities Exchange Act of
1934".
FACILITIES
Our principal office is located at the personal residence of our president at
511 NE 94th Street in Miami Shores, Florida 33138. We occupy this space rent
free at the principal place of business of our company president, Stuart D.
Cooper. We believe these facilities are adequate to serve our needs until such
time as a Business Combination occurs. We expect to be able to utilize these
facilities, free of charge, until such time as a Business Combination occurs.
See "Description of Property" and "Certain Relationships and Related
Transactions".
EMPLOYEES
As of the date of this Registration Statement, we are in the development stage
and currently have no full time employees. Our management serves on a part time
basis. We expect to use consultants, attorneys and accountants as necessary, and
do not anticipate a need to engage any full-time employees so long as it is
seeking and evaluating Target Businesses. The need for employees and their
availability will be addressed in connection with the decision whether or not to
acquire or participate in a specific Business Combination.
-14-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
We are presently a development stage company conducting virtually no business
operation, other than our efforts to effect a Business Combination with a Target
Business which we considers to have significant growth potential. To date, we
have neither engaged in any operations nor generated any revenue. We receive no
cash flow. We will carry out our plan of business as we discussed above. See
"Description of Business". We cannot predict to what extent our liquidity and
capital resources will be diminished prior to the consummation of a Business
Combination or whether our capital will be further depleted by the operating
losses, if any, of the Target Business which we effectuate a Business
Combination with. The continuation of our business is dependant upon our ability
to obtain adequate financing arrangements, effectuate a Business Combination and
ultimately, engage in future profitable operations.
Presently, we are not in a position to meet our cash requirements for the
remainder of the fiscal year or for the next 12 months. We do not generate any
cash revenue or receive any type of cash flow. From inception to the date of
this registration statement, management has committed to make loans to us on a
need be basis in the form of promissory notes. Our operating costs, which
includes professional fees and costs related to a Business Combination, are
likely to approximate $10,000 to $15,000 during the next 12 months. It is likely
that a Business Combination might not occur during the next 12 months. In the
event we cannot meet our operating costs prior to the effectuation of a Business
Combination, we may cease operations and a Business Combination may not occur.
Prior to the occurrence of a Business Combination, we may be required to raise
capital through the sale or issuance of additional securities in order to ensure
that we can meet our operating the effectuation of a Business Combination. As of
the date of this registration statement, no commitments of any kind to provide
additional funds have been made by management, other present shareholders or any
other third person. There are no agreements or understandings of any kind with
respect to any loans from such persons on our behalf. Accordingly, there can be
no assurance that any additional funds will be available to the Company to allow
it to cover its expenses. In the event the Company can no longer borrow funds
from management, and the Company elects to raise additional capital prior to the
effectuation of a Business Combination, it expects to do so through the private
placement of restricted securities rather than going through a public offering.
The Company does not currently contemplate making a Regulation S offering.
ITEM 3. DESCRIPTION OF PROPERTY.
The principal office of the Company is located at 511 NE 94th Street Miami
Shores, Florida 33138 at the personal residence of our president. This space is
provided to us rent free. We believe these facilities are adequate to serve our
needs until such time as a Business Combination occurs. We expect to be able to
utilize these facilities, free of charge, until such time as a
-15-
<PAGE>
Business Combination occurs.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of October 4, 2000, the number and percentage
of shares of our outstanding common stock which are beneficially owned, directly
or indirectly, by:
o Each shareholder who owns more than 5% of the outstanding shares
o Each of our directors
o Each of our executive directors; and
o All of our directors and executive officers as a group.
We determine beneficial ownership based on the rules of the Securities and
Exchange Commission. In general, beneficial ownership includes shares over which
a person has sole or shared voting or investment power and shares which the
person has the right to acquire within 60 days of September 18, 2000. Unless
otherwise indicated, the persons listed below have sole voting and investment
power over the shares beneficially owned.
<TABLE>
<CAPTION>
Name and Address
Of Beneficial Owner Shares Beneficially Owned Percent of Class:
-------------------- ------------------------- -----------------
<S> <C> <C>
Cooper Family Holdings(1)
511 NE 94th Street
Miami Shores, Florida 33318 400,000 40%
Global Intermatch, Inc.(1)
511 NE 94th Street
Miami Shores, Florida 33318 200,000 20%
Frank O'Donnell
1100 SW 156th Avenue
Pembroke Pines, FL 33027 400,000 40%
------- ---
All Executive Officers and
Directors As A Group (1 person)(1) 800,000 80%
</TABLE>
--------
(1) Stuart Cooper, the President, Secretary, Treasurer and a director of the
Company, maintains sole voting and investment control of the shares held by
Cooper Family Holdings and Global Intermatch, Inc. As a result, Mr. Cooper
is deemed to beneficially own all of the shares held by Cooper Family
Holdings and Global Intermatch, Inc.
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS.
The following tables sets forth certain information with respect to our
directors and executive officers.
<TABLE>
<CAPTION>
Name Age Position
----- --- --------
<S> <C> <C>
Stuart D Cooper 55 President,
Secretary,
Treasurer,
Director
</TABLE>
-16-
<PAGE>
Stuart D. Cooper, Certified Public Accountant, is a consultant and an auditor in
the areas of public companies, securities regulatory compliance and regulatory
compliance for financial institutions for over 29 years. Since 1995, Mr. Cooper
has been the owner and chief executive of Cooper Consultants. Mr. Cooper is
qualified as an expert witness in areas of securities, business evaluations,
accounting issues and interpretation. During 1995, Mr. Cooper was subject to a
Securities and Exchange Commission administrative proceeding in which, without
admitting or denying any findings, he agreed to a suspension from appearing or
practicing before the Securities and Exchange Commission for a two year period.
There are no agreements or understandings for our sole officer or director to
resign at the request of another person, and our sole officer and director is
not acting on behalf of or will act at the discretion of any other person.
Until such time as a Business Combination occurs, management does not expect any
significant changes in the composition of our officers or board of directors.
ITEM 6. EXECUTIVE COMPENSATION.
Executive Compensation.
Management receives no salary or other compensation in connection with their
employment as such. None of our officers or directors have employment agreements
with us.
Compensation of Directors
No director receives any type of compensation from us for serving as a director.
Until we effectuate a Business Combination, it is not anticipated that any
officer or director will receive any compensation other than reimbursement for
out-of-pocket expenses incurred on our behalf. See "Certain Relationships and
Related Transactions". We have no stock option,
-17-
<PAGE>
retirement, pension, or profit-sharing programs for the benefit of directors,
officers or other employees, but the Board of Directors may recommend adoption
of one or more such programs in the future. No other arrangements are presently
in place regarding compensation to directors for their services as directors or
for committee participation or special assignments. Our officers and directors
hold office until their respective successors are elected and qualified or until
his/her resignation in the manner provided in our Bylaws.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
None of our officers, directors, promoters or affiliates has or proposes to have
any direct or indirect material interest in any asset proposed to be acquired
through security holdings, contracts, options, or otherwise.
It is not currently anticipated that any other salary, consulting fee, or
finder's fee shall be paid to any of our directors or executive officers, or to
any other of our affiliates except as described in this registration statement.
See "Executive Compensation".
Our officers, directors and principal shareholders may actively negotiate for or
otherwise consent to the disposition of any portion of their Common Stock as a
condition to or in connection with a Business Combination. Therefore, it is
possible that the terms of any Business Combination will provide for the sale of
some shares of Common Stock held by management. Thus, it is likely that no other
shareholders of the Company will be afforded the right to sell their shares of
Common Stock in connection with a Business Combination pursuant to the same
terms that management will be provided. Also, such shareholders will not be
afforded an opportunity to approve or consent to management's stock purchase.
See "Description of Business - Shell Corporation - Selection of a Target
Business and Structuring of a Business Combination". It is more likely than not
that any sale of securities by our current stockholders to an acquisition
candidate would be at a price substantially higher than that originally paid by
such stockholders. Any payment to current stockholders in the context of an
acquisition involving us would be determined entirely by the largely
unforeseeable terms of a future agreement with an unidentified business entity.
See "Description of Business - Shell Corporation - - Selection of a Target
Business and Structuring of a Business Combination".
Should we require additional funds, management has agreed to loan the Company
funds on an as needed basis.
ITEM 8. DESCRIPTION OF SECURITIES.
GENERAL
We are authorized to issue 100,000,000 shares of Common Stock, par value $.001
per share. As of the date of this
-18-
<PAGE>
registration statement 1,000,000 shares of Common Stock are outstanding, held of
record by 3 shareholders.
We have elected not to be governed by Florida statute Section 607.0901 and
607.0902 which govern affiliated transactions and control share acquisitions,
respectively. By virtue of this election, our non-affiliated shareholders will
be less likely given an opportunity to vote upon any type of acquisition or
reorganization.
COMMON STOCK
Our shareholders are entitled to one vote for each share held of record on all
matters to be voted on by shareholders. There is no cumulative voting with
respect to the election of directors, with the result that the holders of more
than 50% of the shares voted for the election of directors can elect all of the
directors. By virtue of management's ownership of more than 50% of the
outstanding Common Stock, management can elect all of the directors of the
Company. Florida law permits the holders of the minimum number of shares
necessary to take action at a meeting of shareholders (normally a majority of
the outstanding shares) to take action by written consent without a meeting,
provided notice is given within ten days to all other shareholders. The holders
of Common Stock are entitled to receive dividends when, as and if declared by
the board of directors out of funds legally available therefor. In the event of
liquidation, dissolution or winding up of the Company, the holders of Common
Stock are entitled to share ratably in all assets remaining available for
distribution to them after payment of liabilities and after provision has been
made for each class of stock, if any, having preference over the Common Stock.
Holders of shares of Common Stock, as such, have no conversion, preemptive,
redemption provisions or other subscription rights.
DIVIDENDS
We have not paid any dividends on our Common Stock and do not presently intend
to pay cash dividends prior to the consummation of a Business Combination. The
payment of cash dividends in the future, if any, will be contingent upon our
revenues and earnings, if any, capital requirements and general financial
condition subsequent to consummation of a Business Combination. The payment of
any dividends subsequent to a Business Combination will be within the discretion
of our then board of directors. It is the present intention of the board of
directors to retain all earnings, if any, for use in our business operations
and, accordingly, the board does not anticipate paying any cash dividends in the
foreseeable future.
-19-
<PAGE>
ANTI-TAKEOVER PROVISIONS
General. The Florida Business Corporation Act contains provisions designed to
enhance the ability of our board of directors to respond to attempts to acquire
control of the Company. These provisions may discourage takeover attempts which
have not been approved by the board of directors. This could include takeover
attempts that some of our shareholders deem to be in their best interest. These
provisions may adversely affect the price that a potential purchaser would be
willing to pay for our common stock. These provisions may deprive shareholders
of the opportunity to obtain a takeover premium for your shares. Theses
provisions could make the removal of incumbent management more difficult. These
provisions may enable a minority of our directors and the holders of a minority
of our outstanding voting stock to prevent, discourage or make more difficult a
merger, tender offer or proxy contest, even though the transactions may be
favorable to the interests of shareholders. These provisions could also
potentially adversely affect the market price of the common stock.
Authorized but Unissued Stock. The authorized but unissued shares of our common
stock will be available for future issuance without shareholder approval. These
additional shares may be used for a variety of corporate purposes, including
future public offerings to raise additional capital, corporate acquisitions and
employee benefit plans. The existence of authorized but unissued shares of
common stock may enable our board of directors to issue shares of stock to
persons friendly to existing management. This may have the effect of
discouraging attempts to obtain control of the Company.
Evaluation of Acquisition Proposals. The Florida Business Corporation Act
expressly permits our board of directors, when evaluating any proposed tender or
exchange offer, any merger, consolidation or sale of substantially all of the
assets of the Company, or any similar extraordinary transaction, to consider all
relevant facts including, without limitation, the social, legal, and economic
effects on the employees, customers, suppliers and other constituencies of the
Company, and on the communities and geographical areas in which they operate.
Our board of directors may also consider the amount of consideration being
offered in relation to the then current market price for our outstanding shares
of capital stock and our then current value in a freely negotiated transaction.
Our board of directors believes that these provisions are in the long term best
interests of the Company and its shareholders.
Transactions with Interested Shareholders. We are subject to the Florida
affiliated transactions statute which generally requires approval by the
disinterested directors or supermajority approval by shareholders for certain
specified transactions between a corporation and a holder, or its affiliates, of
more than 10% of the outstanding shares of the corporation. These provisions
could prohibit or delay the accomplishment of mergers or other takeover or
change in control attempts. Accordingly, these provisions may discourage
attempts to acquire the Company.
TRANSFER AGENT
We presently serve as our own transfer agent and registrar for our common stock.
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON
EQUITY AND RELATED STOCKHOLDER MATTERS.
-20-
<PAGE>
MARKET INFORMATION
Our common stock has not been registered with the Securities and Exchange
Commission or any state securities agency or authority. No public trading market
presently exists for our Common Stock, and there are no present plans,
proposals, arrangements or understandings with any person with regard to the
development of any trading market in any of our securities. No assurances can be
made that a trading market for our Common Stock will ever develop. No shares of
Common Stock have been registered for resale under the blue sky laws of any
state. The holders of shares of Common Stock and persons who may desire to
purchase shares of Common Stock in any trading market that might develop in the
future, should be aware that there may be significant state blue-sky law
restrictions upon the ability of shareholders to sell their shares and of
purchasers to purchase the shares of Common Stock. Some jurisdictions may not
allow the trading or resale of blind-pool or "blank-check" securities under any
circumstances. Accordingly, shareholders should consider the secondary market
for our securities to be a limited one.
No shares of Common Stock of the Company are presently subject to outstanding
options or warrants to purchase, or securities convertible into our common
equity. There are 3 holders of the Company's Common Stock. The Company presently
has 1,000,000 shares of Common Stock outstanding, all of which are "restricted
securities", as that term is defined under Rule 144 promulgated under the
Securities Act, in that such shares were issued in private transactions not
involving a public offering. None of these shares are currently available for
sale under Rule 144 as currently in effect. The Company has not provided to any
shareholder registration rights to register under the Securities Act any
shareholder's shares for sale.
In general, under Rule 144, as currently in effect, subject to the satisfaction
of certain other conditions, a person, including an affiliate of the Company (or
persons whose shares are aggregated), who has beneficially owned restricted
shares of Common Stock for at least one year is entitled to sell, within any
three-month period, a number of shares that does not exceed the greater of 1% of
the total number of outstanding shares of the same class or, if the Common Stock
is traded on a national securities exchange or the NASDAQ system, the average
weekly trading volume during the four calendar weeks preceding the sale.
A person who has not been an affiliate of the Company for at least the three
months immediately preceding the sale and who has beneficially owned restricted
shares of Common Stock for at least two years is entitled to sell such shares
under Rule 144 without regard to any of the limitations described above. No
assurances are made; however, that Rule 144 will be available at any time for
any shareholder's shares.
We have no present plans, proposals, arrangements, understandings or intention
of selling any amount of shares of Common Stock in the public market subsequent
to a Business Combination. Nevertheless, in the event that substantial amounts
of Common Stock are sold in
-21-
<PAGE>
the public market subsequent to a Business Combination, such sales may adversely
affect the price for the sale of the Company's equity securities in any trading
market which may develop. No prediction can be made as to the effect, if any,
that market sales of restricted shares of Common Stock or the availability of
such shares for sale will have on the market prices prevailing from time to
time.
DIVIDENDS
We have not paid any dividends on our Common Stock to date and do not presently
intend to pay cash dividends prior to the consummation of a Business
Combination. The payment of cash dividends in the future, if any, will be
contingent upon our revenues and earnings, if any, capital requirements and
general financial condition subsequent to the consummation of a Business
Combination. The payment of any dividends subsequent to a Business Combination
will be within the discretion of our then board of directors. It is the present
intention of the board of directors to retain all earnings, if any, for use in
our business operations and, accordingly, the board of directors does not
anticipate paying any cash dividends in the foreseeable future.
ITEM 2. LEGAL PROCEEDINGS.
We are not a party to any material legal proceedings, nor are we aware of any
threatened litigation of a material nature.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS.
Not Applicable.
ITEM 4. RECENT SALE OF UNREGISTERED SECURITIES
On August 6, 1999, we issued an aggregate of 1,000,000 shares of our common
stock in a private offering exempt from registration under the Securities Act
pursuant to Section 4(2) thereof for the total consideration of $10,000 or
$0.001 per share to three investors, Global Intermatch, Inc., Cooper Family
Holding and Frank O'Donnell. The investors represented their intention to
acquire the securities for investment only and not with a view to sell the
securities in connection with any distribution thereof and appropriate
restrictive legends were affixed to the share certificates. We believe that the
investors were accredited investors as defined in Rule 501 promulgated under the
Securities Act.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Our bylaws contain the broadest form of indemnification for our officers and
directors and former officers and directors permitted under Florida law. Our
bylaws generally provide that: The
-22-
<PAGE>
Company shall indemnify any person who was or is a party or is threatened to be
made a party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (other than an action
by, or in the right of the Company) by reason of the fact that he is or was a
director, officer, employee or agent of the Company, or is or was serving at the
request of the Company as a director, officer, employee or agent of any other
corporation, partnership, joint venture, trust or other enterprise against
expenses (including attorney's fees), judgments, fines, amounts paid in
settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding, including any appeal thereof, if he acted in good
faith in a manner he reasonably believed to be in, or not opposed to the best
interests of the Company, and with respect to any criminal action or proceeding,
had no reasonable cause to believe that her conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction or upon a plea of no contenders or its equivalent shall not create,
of itself, a presumption that the person did not act in good faith or in a
manner which he reasonably believed to be in, or not opposed to, the best
interests of the Company or, with respect to any criminal action or proceeding,
had reasonable cause to believe that her conduct was unlawful.
To the extent that a director, officer, employee or agent of the Company has
been successful on the merits or otherwise in defense of any action, suit or
proceeding referred to above, or in any defense of any claim, issue or matter
therein, he shall be indemnified against expenses, including attorneys fees,
actually and reasonably incurred by him in connection therewith.
Any indemnification shall be made only if a determination is made that
indemnification of the director, officer, employee or agent is proper in the
circumstances because such person has met the applicable standard of conduct set
forth above. Such determination shall be made either (1) by the Board of
Directors by a majority vote of a quorum consisting of directors who were not
parties to such action, suit or proceeding, or (2) by the shareholders who were
not parties to such action, suit or proceeding. If neither of the above
determinations can occur because the Board of Directors consists of a sole
director or the Company is owned by a sole shareholder, then the sole director
or sole shareholder shall be allowed to make such determination.
Expenses incurred in defending any action, suit or proceeding may be paid in
advance of the final disposition of such action, suit or proceeding as
authorized in the manner provided above upon receipt of any undertaking by or on
behalf of the director, officer, employee or agent to repay such amount, unless
it shall ultimately be determined that she is entitled to be indemnified by the
Company.
The indemnification provided shall be in addition to the indemnification rights
provided pursuant to Chapter 607 of the Florida Statutes, and shall not be
deemed exclusive of any other rights to which any person seeking indemnification
may be entitled under any bylaw, agreement, vote of shareholders or
disinterested directors or otherwise, both as to action in such person's
official capacity and as to action in another capacity while holding such
office, and shall continue as to a person who has ceased to be a director,
officer, employee or agent of the Company and shall inure to the benefit of the
heirs, executors and administrators of such a person.
-23-
<PAGE>
PART F/S
INDEX TO FINANCIAL STATEMENTS
Description Page
Independent Auditors Report ................................... F-1
Balance Sheet ................................................. F-2
Statement of Operations and Accumulated Deficits .............. F-3
Statement of Cash Flows ....................................... F-4
Statement of Shareholders' Equity ............................. F-5
Notes to Financial Statements ................................. F-6
-24-
<PAGE>
PART III
ITEM 1. INDEX TO EXHIBITS.
Exhibit
Number Description
------ -----------
3.1 Articles of Incorporation, as amended
3.2 Bylaws
4.1 Specimen of Common Stock Certificate
27 Financial Data Schedule
-25-
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
registrant caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized.
Private Capital Investors, Inc.
Date: October 4, 2000 By: /s/ Stuart D. Cooper
-----------------------
Stuart D. Cooper, President
-26-
<PAGE>
Private Capital Investors, Inc. (formally Private Funding Inc.)
INDEX TO FINANCIAL STATEMENTS
Description
Independent Auditors Report. . . . . . . . . . . . . . . . F-1
Balance Sheet. . . . . . . . . . . . . . . . . . . . . . . F-2
Statement of Operations and Accumulated Deficits . . . . . F-3
Statement of Cash Flows. . . . . . . . . . . . . . . . . . F-4
Statement of Shareholders' Equity. . . . . . . . . . . . . F-5
Notes to Financial Statements. . . . . . . . . . . . . . . F-6
<PAGE>
CPA
David I. Tow
132 SW Oakridge Drive
Port St. Lucie, Fl 34984
TELEPHONE (800) 766-0679 FACSIMILE (561) 343-0919
Independent Auditors Report
To the Board of Directors
Private Funding Inc.
Miami Shores, Florida
I have audited the accompanying balance sheet of Private Funding Inc. as of July
31, 2000 and the related statement of operations and retained earnings
(accumulated Deficits), statement of shareholders' equity, and the statement of
cash flows for the period then ended. These financial statements are the
responsibility of the Company's management. My responsibility is to express
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 the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well, as evaluating the overall financial statement presentation.
I believe that my audit provide a reasonable basis for my opinion.
In my opinion, the accompanying financial statements present fairly, in all
material respects, the financial position of Private Capital Investors, Inc.
formally Private Funding Inc. as of July 31,2000, the result of operations,
and its cash flows for the period then ended in conformity with generally
accepted accounting principles.
/s/ David I. Tow
------------------------
David I. Tow
Port St. Lucie, Florida
Certified Public Accountant
September 8, 2000
F-1
<PAGE>
PRIVATE FUNDING INC.
A DEVELOPMENT STAGE COMPANY
BALANCE SHEET
AS OF JULY 31, 2000
ASSETS
Current assets:
Cash and equivalents $ 1,000
Organization Costs, Net of Amortization -0-
Total Assets $ 1,000
=======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses $ 400
Shareholders' Equity:
Common Stock, $.01 par value, 1,000,000 shares authorized
issued and outstanding
$10,000
Accumulated Deficit (9,400) $ 600
-------
Total Liabilities and Shareholders' Equity $ 1,000
=======
READ ACCOUNTANT'S REPORT AND ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
F-2
<PAGE>
PRIVATE FUNDING INC.
A DEVELOPMENT STAGE COMPANY
STATEMENT OF OPERATIONS AND ACCUMULATED DEFICITS
FROM INCEPTION (AUGUST 6, 1999) TO JULY 31, 2000
<TABLE>
<CAPTION>
<S> <C>
REVENUE:
$ -0-
EXPENSES:
Organization Costs 9,400
------
Net Loss $ (9,400)
------
Retained Earnings (Deficit) - beginning -0-
Accumulated Deficits - ending $ (9,400)
======
Weighted average number of shared outstanding during the period - 1,000,000
Net loss per share $ .0094
======
</TABLE>
READ ACCOUNTANT'S REPORT AND ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
F-3
<PAGE>
PRIVATE FUNDING INC.
A DEVELOPMENT STAGE COMPANY
STATEMENT OF CASH FLOWS
FROM INCEPTION (AUGUST 6, 1999) TO JULY 31, 2000
Cash Flows From Operating Activities:
Net Loss $ (9,400)
Increase in Accounts Payable 400
--------
Cash applied to operations (9,000)
Cash Flows From Investing Activities:
Proceeds from issuance of common stock 10,000
--------
Net Increase in cash 1,000
--------
Cash-Beginning -0-
Cash-Ending $ 1,000
========
READ ACCOUNTANT'S REPORT AND ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
F-4
<PAGE>
PRIVATE FUNDING INC.
A DEVELOPMENT STAGE COMPANY
STATEMENT OF SHAREHOLDERS' EQUITY
FROM INCEPTION (AUGUST 6, 1999) TO JULY 31, 2000
Number
Of Common Common Accumulated
Shares Stock Deficit Total
Balance at
August 6, 1999 0 $ 0 $ 0 $ 0
Net Loss for
the period $ (9,400) $ (9,400)
--------- ---------
Shares Issued
for cash 100,000 1,000 1,000
Shares Issued
for Services 900,000 9,000 9,000
------- ----- ---------
Balance at
July 31, 2000 1,000,000 $10,000 $ (9,400) $ 600
========= ======= ========= ========
READ ACCOUNTANT'S REPORT AND ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
F-5
<PAGE>
PRIVATE FUNDING INC.
A DEVELOPMENT STAGE COMPANY
NOTES TO FINANCIAL STATEMENTS
JULY 31, 2000
ACCOUNTING POLICIES AND OPERATIONS
Organization- Private Funding Inc., a development stage company, was
incorporated in Florida on August 6, 1999. The company intends to serve as a
vehicle to effect asset acquisition, merger, exchange of capital stock or other
business combination with a domestic or foreign business. At July 31, 2000 the
company had not yet commenced any formal business operations and all activity to
date related to the Company formation, capital stock issuance, professional fees
with regard to proposed Securities and Exchange Commission filing and
identification of businesses. The Company's fiscal year ends on July 31st.
Use of Estimates- In preparing financial statements in conformity with generally
accepted accounting principles management is required to make estimates and
assumptions that effect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of the financial
statements and revenue and expenses during the reported period.
Actual results could differ from those estimates.
Cash and Equivalents- For purposes of the cash flow statements the company
considers all highly liquid investments with original maturities of three months
or less at the time of purchase to be cash equivalents.
Income Taxes- The Company accounts for income taxes under the Financial
Accounting Standards Board Statement of financial accounting standards No. 109
"Accounting for Income Taxes" (Statement 109). Under Statement 109 deferred tax
assets and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to
be recovered or settled.
Organization Costs- During 1999 the company issued 900,000 shares of common
stock at $.01 par value in exchange for $9000 in organizational costs to its
incorporators.
Loss Per Share- Statement of Financial Accounting Standard No. 128 provides a
different method of calculating earnings per share than currently used in
accordance with ABP 15, Earnings Per share. Basic earnings per share includes no
dilution of earnings per share. Basic earnings per share includes no dilution
and is computed by dividing income available to common shareholders by the
weighted average number of common shares outstanding for the period. Diluted
earnings per share reflects the potential dilution of securities that could
share in the earnings of the entity, similar to fully diluted earnings per
share. SFAS 128 is effective for fiscal years and interim periods after December
15, 1997. The Company has adopted this pronouncement during the fiscal year.
Fair Value of Financial Instruments-Statement of Financial Accounting Standards
107 "Disclosures About Fair Value of Financial Statements" (SFAS 107) issued by
the FASB became effective December 31, 1995. This statement requires the
disclosure of estimated values for all financial instruments for which it is
practicable to estimate. The accompanying amount of financial instruments
including cash, accounts receivable, current maturities of long-term debt and
accounts payable approximate fair value due to their short maturity.
F-6
<PAGE>
New Accounting Standards-Statement of Financial Accounting Standards No. 130
"Reporting Comprehensive Income" (SFAS 130) issued by the FASB is effective for
financial statements with fiscal years beginning after December 15, 1997.
Earlier application is permitted. SFAS 130 establishes standards for reporting
and display of comprehensive income and its components in a full set of internal
purpose financial statements. The Company adopted SFAS 130 as of 1999 and it has
had no effect on the financial position or results of operations. Statement of
Financial Accounting Standards No. 132 "Disclosures About Segments of and
Enterprise and Related Information" (SFAS 131) issued by the FASB is effective
for financial statements with years beginning after December 15, 1997. Earlier
application is permitted. SFAS 131 requires that public companies report certain
information about operating segments, products services and geographical areas
in which they operate and their major customers. The company adopted SFAS 131
during 1999 and it did]\ no effect on its financial position or results of
operations. The company is a development stage entity with no operations.
Statement of Position 98-5 "Reporting on the Costs of Start Up Activities" (SOP
98-5) issued by the American Institute of Certified Public Accountants is
effective for financial statements beginning after December 15, 1998. SOP 98-5
requires that the cost of start up activities including organizational costs, be
expensed as incurred. Start up activities are defined broadly as those one time
activities related to opening a new facility, introducing a new product or
service, conducting business in a new territory, conducting business with a new
class of customer (excluding ongoing customer acquisition costs or loan
origination costs) or beneficiary; initiating a new process in an existing
facility or commencing some new operation. The company does not expect the
adoption of SOP 98-5 to have an ongoing material impact. At July 31, 2000, the
expensing of organizational costs has a material impact on the financial
position and results of operations for the company. For future periods the
company does not expect the adoption of SOP 98-5 to have a material impact, if
any, on its financial position or results of operations. In June, 1998, the FASB
issued SFAS No. 133 " Accounting for Derivative Instruments and Hedging
Activities" effective for financial statements with fiscal years beginning after
June 15, 1999.
SFAS 133 provides a comprehensive and consistent standard for the recognition
and measurement of derivatives and hedging activities and requires all
derivatives to be recorded on the balance sheet at fair value. The Company does
not expect the adoption of SFAS 133 to have a material impact, if any, on its
financial position, results of operations or cash flows now or in the future.
The Company adopted this standard during 1999.
GOING CONCERN
The accompanying financial statements have been prepared assuming that the
company will continue as a going concern which contemplates the realization of
assets and the satisfaction of liabilities in the normal course of business. The
amounts of assets and liabilities in the financial statements do not purport to
represent realizable or settlement values. However, the company has incurred an
operating loss. Such loss may impair its ability to obtain additional financing.
This factor raises substantial doubt about the Company's ability to continue as
a going concern. The financial statements do not include any adjustments that
might result from the outcome of this uncertainty. The company has met its
historical working capital requirements from sale of capital shares. Owners of
the shares, in order not to burden the Company, have agreed to pay its annual
audit fees, filing costs and legal fees as long as the board of directors deem
it necessary. However, there can be no assurance that such financial support
shall be ongoing or available on terms or conditions acceptable to the Company.
F-7
<PAGE>
COMMITMENTS AND CONTINGENCIES
Operational Costs- At July 31, 2000 rental space for the office, secretarial
services, telephone, fax and daily operational costs were being provided by
shareholders without charge to the Company. The Company has no obligation for
such costs.
Salaries- At July 31, 2000 the principal officer and director has waived all
obligations by the Company for salaries for the period then ended.
Employment Contracts- At July 31, 2000 there are no employment contracts issued,
outstanding or in process by the Company.
Legal- At July 31, 2000 the Company is not a party to any legal action in the
ordinary course of business or in any other manner.
SHAREHOLDERS' EQUITY
On August 6, 1999 the Company issued 1,000,000 shares of $.01 par value common
stock to its initial shareholders in exchange for $1,000 in cash and $9,000 in
services rendered. At July 31, 2000 there are no stock options or warrants
outstanding.
SIGNIFICANT VENUES AND CONCENTRATION OF CREDIT RISK
At July 31, 2000 there are no significant venue issues or concentrations of
risk.
INCOME TAXES
Income taxes in the statement of operations consists of the following:
Current
Federal -0-
State -0-
----
$-0-
====
Deferred taxes are as follows:
Tax Rate
40%
Deferred tax assets
Net operating loss carry over $ 1,880 $ 760
Less: Valuation allowance (1,880) (760)
------ -----
$ -0- $ -0-
======= =====
The net deferred tax assets have a 100% valuation allowance as management can
not determine if it is more likely than not that the deferred tax assets will be
realized.
SUBSEQUENT EVENT
On September 5, 2000 the board of directors proposed a change of name to Private
Capital Investors, Inc. In addition, by vote of the majority of shareholders,
the authorized shares were increased to 100,000,000 shares at a par value of
$.001. At the report date no filings of the above items had been made with the
Secretary of State of Florida.
F-8
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description
------ -----------
3.1 Articles of Incorporation, as amended
3.2 Bylaws
4.1 Specimen of Common Stock Certificate
27 Financial Data Schedule
