As filed with the Securities and Exchange Commission on October 26, 2000
File No.__________
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form SB-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
JAVA SOLUTIONS, INC.
(Exact name of registrant as specified in its charter)
Nevada 522200 75-2887322
------------------ ------------------------- -------------------
(State or jurisdiction of (Primary Industrial I.R.S. Employer
incorporation or organization) Classification Code No.) Identification No.
17418 Shadow Valley Drive, Spring, Texas 77379 (713) 304-1970
---------------------------------------------------------------
(Address, including the ZIP code & telephone number, including area code of
Registrant's principal executive office)
Shannon Sherer
17418 Shadow Valley Drive, Spring, Texas 77379 (713) 304-1970
---------------------------------------------------------------
(Name, address, including zip code, and telephone number, including area code
of agent for service)
Copies to: T. Alan Owen & Associates, P.C.
---------
Attorneys at Law
1112 East Copeland Road, Suite 420
Arlington, Texas 76011
(817) 460-4498
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this Registration Statement.
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Title of Each Amount Proposed Maximum Proposed Amount of
Class of Securities To be Offering Price Maximum Aggregate Registration
to be Registered Registered Per Share (1) Offering Price (1) Fee
-----------------------------------------------------------------------------------
Common stock,
$0.001 par value
Minimum 50,000 $1.00 $ 50,000 $ 14
Maximum 500,000 $1.00 $ 500,000 $ 70
-----------------------------------------------------------------------------------
Total maximum 500,000 $1.00 $ 500,000 $269(2)
</TABLE>
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that the registration statement
shall hereafter 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.
(1) Estimated solely for the purpose of calculating the registration fee.
(2) Represents minimum fee.
<PAGE>
Initial public offering
prospectus
Java Solutions, Inc.
Minimum of 50,000 shares of common stock, and a
Maximum of 500,000 shares of common stock
$1.00 per share
We are making a best efforts offering to sell common stock in our
company. We own the master franchise to Java Centrale, a specialty coffee cafe
franchiser and wholesaler/retailer of coffee and we also sell specialty coffee
over the internet. The common stock will be sold by our sole officer and
director, Shannon Sherer. The offering price was determined arbitrarily and we
will raise a minimum of $50,000 and a maximum of $500,000. The funds will be
held in escrow by an attorney until the minimum amount is sold, at which time
the funds will be released to the company and stock certificates issued. The
offering will end on April 30, 2001 and should we not sell the minimum amount,
the funds will promptly be returned to the investors and no interest will be
paid on these funds.
The Offering:
Minimum offering Maximum offering
------------------------- -------------------------
Per Share Amount Per Share Amount
--------- -------- --------- --------
Public Offering Price $1.00 $ 50,000 $1.00 $500,000
Offering expenses $0.34 16,769 0.07 33,769
----- -------- --------- --------
Net proceeds $0.66 $ 33,231 $0.93 $466,231
There is currently no market for our shares and no market may ever develop for
our shares.
----------------------------
This investment involves a high degree of risk. You should purchase shares only
if you can afford a complete loss. See "Risk Factors" beginning on Page 3.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of the prospectus. Any representation to the contrary is a
criminal offense.
-----------------------------
This Prospectus is dated October 26, 2000
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PROSPECTUS SUMMARY
OUR COMPANY
We were incorporated on May 17, 2000 in the State of Nevada. We own the
master franchise to Java Centrale, a specialty coffee cafe franchisor and
wholesaler/retailer of coffee and we also sell specialty coffee over the
internet. The funds from this offering will allow us to continue advertising our
website, increase exposure for our brand of coffee and attract more franchisees
to retail our coffee. The minimum funds raised in this offering will take us to
a point where we reach the operating stage.
As well as being a newly formed company, we:
o are controlled by one individual;
o rely on our sole officer and director to manage the business, this
offering and continuing operations to see us through to profitability;
o have limited operating history with little revenue from operations; and
o received a report from our independent certified public accountant who
gave us a 'going concern' opinion which states that we do not have
sufficient capital or operations to show that we can continue as a
viable business for the coming year.
THE OFFERING
Minimum Maximum
--------- ---------
Common shares offered 50,000 500,000
Common shares outstanding before this offering 3,200,000 3,200,000
--------- ---------
Total shares outstanding after this offering 3,250,000 3,700,000
Officers, directors and their affiliates will not be able to purchase shares in
this offering.
USE OF PROCEEDS
Most of the money you invest will represent proceeds to the company. We will use
the proceeds from this offering to:
o pay expenses of this offering
o develop our website to offer more products and better service
o marketing and general working capital
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RISK FACTORS
You should carefully consider the risks described below and all other
information contained in this prospectus before making an investment decision.
We are a recently formed company, formed in the State of Nevada on May 17, 2000,
with limited activity and losses that may continue for the foreseeable future.
We have not achieved profitability and expect to continue to incur net
losses for the foreseeable future. We expect to incur significant operating
expenses and, as a result, will need to generate significant revenues to achieve
profitability, which may not occur. Even if we do achieve profitability, we may
be unable to sustain or increase profitability on a quarterly or annual basis in
the future. If we are unable to achieve profitability, your investment in our
common stock may decline or become worthless.
We rely on our sole officer for decisions and he will retain substantial control
over our business after the offering and may make decisions that are not in the
best interest of all stockholders.
Upon completion of this offering, our sole officer will, in the
aggregate, beneficially own approximately 92.31% (or 81.08% if maximum is sold)
of the outstanding common stock. As a result, our sole officer will have the
ability to control substantially all the matters submitted to our stockholders
for approval, including the election and removal of directors and any merger,
consolidation or sale of all or substantially all of our assets. He will also
control our management and affairs. Accordingly, this concentration of ownership
may have the effect of delaying, deferring or preventing a change in control of
us, impeding a merger, consolidation, takeover or other business combination
involving us or discouraging a potential acquirer from making a tender offer or
otherwise attempting to take control of us, even if the transaction would be
beneficial to other stockholders. This in turn could materially cause the value
of our stock to decline or become worthless.
We may have to raise additional capital which may not be available or may be too
costly.
Our capital requirements are and will continue to be more than our
operating income. We do not have sufficient cash to indefinitely sustain
operating losses. Our potential profitability depends on our ability to generate
and sustain substantially higher net sales while maintaining reasonable expense
levels. We cannot assure you that we will be able to operate on a profitable
basis or that cash flow from operations will be sufficient to pay our operating
costs. We anticipate that the funds raised in this offering will be sufficient
to fund operations through June 2001. Thereafter, if we do not achieve
profitability, we will need to raise additional capital to finance our
operations. We anticipate seeking additional financing through debt or equity
offerings. We cannot assure you that additional financing will be available to
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us, or, if available, any financing will be on terms acceptable or favorable to
us. If we need and cannot raise additional funds, further development of our
business, upgrades in our technology, additions to our product lines may be
delayed and we otherwise may not be able to execute our business plan, all of
which may have a material adverse effect on our operations; if this happens, the
value of your investment will decline and may become worthless.
We are dependent on one supplier for all our franchise coffee shipments and if
we lose this relationship without replacing it, our business could decline and
cause your investment to become worthless.
We are dependent on one supplier, Coffee Bean International, to supply
all of our coffee to our franchisees. If this supplier relationship goes away
for some reason, we may be unable to replace the suppler relationship in time to
salvage our franchise business in time by finding a suitable substitute coffee
for them. Should this happen, it could have a material adverse impact on our
franchisees which could cause a loss of business and the value of your
investment to decline or become worthless.
FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements. These
forward-looking statements are not historical facts but rather are based our
current expectations, estimates and projections about our industry, our beliefs
and our assumptions. Words such as "anticipates", "expects", "intends", "plans",
"believes", "seeks" and "estimates", and variations of these words and similar
expressions, are intended to identify forward-looking statements. These
statements are not guarantees of future performance and are subject to risks,
uncertainties and other factors, some of which are beyond our control, are
difficult to predict and could cause actual results to differ materially from
those expressed, implied or forecasted in the forward-looking statements. In
addition, the forward-looking events discussed in this prospectus might not
occur. These risks and uncertainties include, among others, those described in
"Risk Factors" and elsewhere in this prospectus. Readers are cautioned not to
place undue reliance on these forward-looking statements, which reflect our
management's view only as of the date of this prospectus.
DILUTION
If you purchase common stock in this offering, you will experience an
immediate and substantial dilution in the projected book value of the common
stock from the price you pay in this initial offering.
The projected book value of our common stock as of September 30, 2000
was $25,175 or $0.01 per share. Projected book value per share is equal to our
total assets, less total liabilities, divided by the number of shares of common
stock outstanding.
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After giving effect to the sale of common stock offered by us in this
offering, and the receipt and application of the estimated net proceeds (at an
initial public offering price of $1.00 per share, after deducting estimated
offering expenses), our projected book value as of September 30, 2000 would be
approximately $43,281 or $0.03 per share, if the minimum is sold, and $476,281
or $0.12 per share, if the maximum is sold.
This means that if you buy stock in this offering at $1.00 per share,
you will pay substantially more than our current shareholders. The following
represents your dilution:
o if the minimum of 50,000 shares are sold, an immediate decrease in book
value to our new shareholders from $1.00 to $0.01 per share and an
immediate increase in book value per common share to our current
stockholders.
o if the maximum of 500,000 shares are sold, an immediate decrease in
book value to our new shareholders from $1.00 to $0.13 per share and an
immediate increase in book value per common share to our current
stockholders.
The following table illustrates this per share dilution:
--------------------------------------------------------
Minimum Maximum
Assumed initial public offering price $1.00 $1.00
Projected book value as of September 30, 2000 $0.00 $0.00
Projected book value after this offering $0.01 $0.13
Increase attributable to new stockholders: $0.01 $0.13
Projected book value
as of September 30, 2000 after this offering $0.01 $0.13
Decrease to new stockholders ($0.99) ($0.87)
Percentage dilution to new stockholders 99% 87%
The following table summarizes on a projected basis as of September 30,
2000, shows the differences between the number of shares of common stock
purchased, the total consideration paid and the total average price per share
paid by the existing stockholders and the new investors purchasing shares of
common stock in this offering:
Minimum offering
----------------
Number Percent Average
of shares of shares Amount price per %
owned owned paid share paid
--------------------------------------------------------------------------------
Current
shareholders 3,200,000 98.5 $ 13,000 $ 0.004 20.6
New investors 50,000 1.5 $ 50,000 $ 1.00 79.4
------------------------------------------------------------
Total 3,250,000 100.0 $ 63,000
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Maximum offering
----------------
Number Percent Average
of shares of shares Amount price per %
owned owned paid share paid
--------------------------------------------------------------------------------
Current
shareholders 3,200,000 86.5 $ 13,000 $ 0.004 2.6
New investors 500,000 13.5 $ 500,000 $ 1.00 97.4
------------------------------------------------------------
Total 3,700,000 100.0 $ 513,000
PLAN OF DISTRIBUTION
This is a direct participation offering of our common stock and is
being sold on our behalf by our sole officer and director, who will receive no
commission on such sales. All sales will be made by personal contact by our sole
officer and director, Shannon Sherer. We will not be mailing our prospectus to
anyone or soliciting anyone who is not personally known by Ms. Sherer,
introduced to Ms. Sherer and personally contacted by her or referred to her.
The money we raise in this offering before the minimum amount is sold
will be held under an escrow agreement with T. Alan Owen & Associates, P.C.,
Attorneys at Law. Such funds will be refunded immediately, without interest, if
the minimum amount is not sold by April 30, 2001.
Certificates for shares of common stock sold in this offering will be
delivered to the purchasers by Signature Stock Transfer, Inc., the stock
transfer company chosen by the company as soon as the minimum subscription
amount is raised.
USE OF PROCEEDS
The total cost of the offering is estimated to be $16,769 if the
minimum is sold, or $33,769 if the maximum is sold, consisting primarily of
legal, accounting and blue sky fees. We will pay these costs out of the funds we
raise in this offering.
The following table shows how we plan to use the proceeds from selling
common stock in this offering, reflecting the minimum and maximum subscription
amounts:
$50,000 $500,000
minimum maximum
--------------------------------------------------------------------------------
Legal, accounting & printing expenses 9,500 26,500
Other offering expenses 7,269 7,269
Net proceeds to company 33,231 466,231
-------- ---------
Total $ 50,000 $ 500,000
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The following describes each of the expense categories:
o legal, accounting and printing expense is the estimated costs
associated with this offering;
o other offering expenses includes SEC registration fee, blue sky fees
and miscellaneous expenses with regards to this offering.
The following table shows how we plan to use the net proceeds to the
company:
$50,000 $500,000
minimum maximum
--------------------------------------------------------------------------------
Development of website $ 6,000 $ 30,000
Office equipment 4,000 36,000
Salaries -0- 80,000
Internet security -0- 12,000
Advertising our website 18,000 138,000
Expenses in opening coffee house -0- 150,000
General corporate overhead 5,231 20,231
--------- --------
Proceeds to company $ 33,231 $466,231
DESCRIPTION OF BUSINESS
We were incorporated in Nevada on May 17,2000. Our founder, Shannon
Sherer, is our sole director, officer and employee and holds 3,000,000 shares of
common stock which we issued to her for $3,000, composed of $500 cash and $2,500
of her services.
We own the master franchise rights to Java Centrale, a specialty coffee
cafe franchiser and wholesaler/retailer of coffee. We purchase high quality
whole bean coffees and sell them, along with fresh, rich brewed coffees,
Italian-style espresso beverages, primarily through its franchised retail
stores. We also operate a website at www.java-solutions.net.
-----------------------
In addition to sales through its franchised-operated retail stores, We
sell whole bean coffees through a specialty sales group and a direct response
business, although this segment of our business is just being developed. Our
objective is to establish Java as a recognized and respected brand of coffee. To
achieve this goal, we plan to continue to expand our franchise operations,
develop our specialty sales and direct response businesses, and selectively
pursue other opportunities to leverage the Java Centrale brand through the
introduction of new products and the development of new distribution channels.
We are committed to selling only the finest whole bean coffees and
coffee beverages. We purchase our coffee beans from companies that buy green
coffee beans and then roast them to our standards; the roasted coffee beans are
grown from coffee-producing regions around the world.
All our franchises offer a choice of regular or decaffeinated coffee
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beverages, a broad selection of European-style espresso beverages and
distinctively packaged, roasted whole bean coffees. The stores also offer a
selection of fresh pastries and other food items, sodas, juices, tea, and
coffee-making equipment and accessories. Each Java Centrale store varies its
product mix depending upon the size of the store and its location. The cafes
carry a broad selection of the our whole bean coffees in various sizes and types
of packaging, as well as an assortment of coffee and espresso-making equipment
and accessories such as coffee grinders, drip coffee makers, espresso machines,
coffee filters, storage containers, travel tumblers and mugs.
Direct Response. Our direct response operations ensure that fresh Java coffee
and products are conveniently available via on-line. We operate an electronic
store on the internet that allows customers to order their favorite coffee and
products on-line. We believes that the our direct response operations support
its expansion into new markets and reinforce brand recognition in existing
markets.
Competition. Our whole bean coffees compete directly against specialty coffees
sold at retail through supermarkets, specialty retailers, and a growing number
of specialty coffee stores and against all restaurant and beverage outlets that
serve coffee and a growing number of espresso stands, carts, and stores. Both
our whole bean coffees and its coffee beverages compete indirectly against all
other coffees on the market. We believe that customers choose among retailers
primarily on the basis of product quality, service and convenience, and, to a
lesser extent, on price.
In addition to the competition generated by supermarket sales of
coffee, we competes for whole bean coffee sales with franchise operators and
independent specialty coffee stores. In virtually every major metropolitan area
where Java Solutions operates and expects to expand, there are local or regional
competitors with substantial market presence in the specialty coffee business.
Our specialty sales and direct response businesses also face
significant competition from established wholesale and mail order suppliers,
some of whom have greater financial and marketing resources than the Company.
PLAN OF OPERATIONS
Following is our plan of operations based upon the amount of capital we
raise in this offering. We will be engaged in marketing and sales of gourmet
coffee. In order to operate and market these products, we have to have capital
to fund the purchase of inventory. We are currently seeking to raise between
$50,000 and $500,000 to expand our business.
We will market our coffee products directly to the consumer through the
Internet as well as through grocery stores, gourmet food stores and coffee
houses.
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Assuming we raise the minimum amount in this offering, netting approximately
$33,000 to the Company, we will be able to fund the following:
o Purchase inventory;
o Limited advertising on banner and brick ads on other Internet
companies' websites; and
o Design enhancements to the existing website.
At this level of funding, we should be able to concentrate our sales
efforts through the Internet. We will not pay salaries until such time as we are
generating revenue from our sales; our overhead will be minimal because we will
be using the resources of our President. At this level of funding, growth will
be slow, however, we will be profitable and operationally self sustaining and
the Company will not need to raise additional capital for operations.
Assuming we raise the maximum amount in this offering, netting approximately
$466,000 to the Company, we will be able to accomplish the following:
o Purchase more inventory;
o Advertise on banner and brick ads on other Internet companies'
websites;
o Launch an e-mail campaign to attract first time purchasers with a "two
for one sale";
o Purchase key words on certain search engines so that if a net surfer
types in a search word such as "coffee" and "java", our Company's ad
will appear;
o Advertise on "talk" format radio stations in the Dallas/Fort Worth
area; and
o Open a Coffee House.
At this level of funding, we will purchase software unique to inventory
control and sales to enable us to service our customers. However, the major
portion of funds will be used to fund inventory, marketing, and to operate a
coffee house since that is the way we will build up our revenue and growth. If
we raise the maximum amount in this offering, we will not need to raise
additional funds in the next six months.
We believe the key to building sales is purchasing and marketing
quality gourmet coffee products.
DESCRIPTION OF PROPERTY
Our corporate facilities are shared with our sole officer and director
which includes the use of telephones and equipment for $100.00 per month. This
arrangement started in July 2000 and will continue until such time as the
Company needs and can afford to lease its own office facilities.
We also lease space on an internet service provider's server based upon
the amount of memory we use.
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DIRECTORS, EXECUTIVE OFFICERS AND SIGNIFICANT EMPLOYEES
The directors and officers of the company, their ages and principal
positions are as follows:
Name Age Position
--------------------------------------------------------------------------------
Shannon Sherer 36 President; Secretary and Director
Background of Directors and Executive Officers:
Shannon Sherer. Ms. Sherer, graduated from Texas Christian University, Fort
Worth, Texas in 1986 and graduated from the Texas Paralegal School, Houston,
Texas in 1988. Since that time she has been employed as a para-legal.
Initially, Ms. Sherer will not spend full time on the activities of the
company since her current activities take up some of her time. In addition, the
company's activities need very little time since most steps in the business of
the company are automated. Initially, she expects to spend one quarter of her
time per week and increase that weekly time as the activities of the company
require. Ms. Sherer is prepared to devote herself full time to the success of
the company.
REMUNERATION OF DIRECTORS AND OFFICERS
Our sole officer and director has received no compensation other than
the 2,500,000 shares of common stock she received for services on May 20, 2000
and has no employment contract with the company.
Name of Person Capacity in which he served Aggregate
Receiving compensation to receive remuneration remuneration
--------------------------------------------------------------------------------
Shannon Sherer President, Secretary 2,500,000 shares
and Treasurer of common stock
Ms. Sherer received the common stock upon formation of the company and
it is impracticable to determine the cash value. Since the common stock was
issued upon forming of our company for services performed which we cannot
estimate the value since that work continues through the filing and
effectiveness of this registration statement, with no other compensation to be
granted for the work done on this filing.
As of the date of this offering, we have no plans to pay any
remuneration to anyone in or associated with our company. When we have funds
and/or revenue, our board of directors will determine any remuneration at that
time.
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INTEREST OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS
In May 2000, the president of the company received 3,000,000 shares of
common stock which we issued to her for $2,000, composed of $500 cash and $2,500
of her services.
In July 2000, we entered into an agreement with a company to develop
and link our website for which the company received a total of 200,000 shares
valued at $0.05 per share.
As of the date of this filing, there are no agreements or proposed
transactions, whether direct or indirect, with anyone, but more particularly
with any of the following:
o a director or officer of the issuer;
o any principal security holder;
o any promoter of the issuer;
o any relative or spouse, or relative of such spouse, of the above
referenced persons.
PRINCIPAL SHAREHOLDERS
The following table lists the officers, directors and stockholders who,
at the date hereof, own of record or beneficially, directly or indirectly, more
than 10% of the outstanding common stock, and all officers and directors of the
company:
Name and Address Amount owned
Title of Owner before offering Percent
--------------------------------------------------------------------------------
President, Secretary Shannon Sherer 3,000,000 93.75%
And Director 17418 Shadow Valley Drive
Spring, Texas 77379
--------- -------
Total outstanding 3,200,000 100.00%
After offering: Minimum 3,000,000 92.31%
--------------
Maximum 3,000,000 81.08%
SECURITIES BEING OFFERED
We are offering for sale common stock in our company at a price of
$1.00 per share. We are offering a minimum of 50,000 shares and a maximum of
500,000 shares. The authorized capital in our company consists of 25,000,000
shares of common stock, $0.001 par value per share. As of September 30, 2000, we
had 3,200,000 shares of common stock issued and outstanding.
Every investor who purchases our common stock is entitled to one vote
at meetings of our shareholders and to participate equally and ratably in any
11
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dividends declared by us and in any property or assets that may be distributed
by us to the holders of common stock in the event of a voluntary or involuntary
liquidation, dissolution or winding up of the company.
The existing stockholders have no preemptive rights to purchase common
stock offered for sale by us, and no right to cumulative voting in the election
of our directors.
RELATIONSHIP WITH ISSUER OF EXPERTS NAMED IN REGISTRATION STATEMENT
The experts named in this registration statement were not hired on a
contingent basis and have no direct or indirect interest in our company. Our
attorney may purchase shares in this offering. Our certified public accountant
may not purchase shares in this offering.
LEGAL PROCEEDINGS
We are not involved in any legal proceedings at this time.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
We have retained the same accountant, Charles E. Smith, as our
independent certified public accountant since our inception on May 17, 2000. We
have had no disagreements with him on accounting and disclosure issues.
DISCLOSURE OF COMMISSION POSITION OF INDEMNIFICATION
FOR SECURITIES ACT LIABILITIES
Our certificate of incorporation provides that the liability of our
officers and directors for monetary damages shall be eliminated to the fullest
extent permissible under Nevada law, which includes elimination of liability for
monetary damages for defense of civil or criminal actions. The provision does
not affect a director's responsibilities under any other laws, such as the
federal securities laws or state or federal environmental laws.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "Act") may be permitted to directors, officers and
controlling persons of the small business issuer pursuant to the
foregoing provisions, or otherwise, the small business issuer has been
advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable.
We have no underwriting agreement and therefore no provision for
indemnification of officers and directors is made in an underwriting by a broker
dealer.
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LEGAL MATTERS
Our attorney has passed upon the legality of the common stock issued
before this offering and passed upon the common stock offered for sale in this
offering. Our attorney is T. Alan Owen & Associates, P.C., 1112 East Copeland
Road, Arlington, Texas 76011.
EXPERTS
The financial statements as of September 30, 2000, and for the period
from inception (May 17, 2000) to September 30, 2000 of the company included in
this prospectus have been audited by Charles E. Smith, independent certified
public accountant, as set forth in his report. The financial statements have
been included in reliance upon the authority of him as an expert in accounting
and auditing.
DIVIDEND POLICY
To date, we have not declared or paid any dividends on our common
stock. We do not intend to declare or pay any dividends on our common stock in
the foreseeable future, but rather to retain any earnings to finance the growth
of our business. Any future determination to pay dividends will be at the
discretion of our board of directors and will depend on our results of
operations, financial condition, contractual and legal restrictions and other
factors it deems relevant.
TRANSFER AGENT
We will serve as our own transfer agent and registrar for the common
stock until such time as this registration is effective and we sell the minimum
offering, then we intend to retain Signature Stock Transfer, Inc., 14675 Midway
Road, Suite 221, Dallas, Texas 75244.
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Charles E. Smith
Certified Public Accountant
709-B West Rusk
Suite 580
Rockwall, Texas 75087
TELEPHONE (214) 212-2307
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Shareholders
of Java Solutions, Inc.
I have audited the accompanying balance sheet of Java Solutions, Inc.
(a development stage company) as of September 30, 2000, and the related
statements of operations, stockholders' equity and accumulated deficit, and cash
flows for the period from inception (May 17, 2000) to September 30, 2000. 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 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 provides a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Discount Mortgage
Source, Inc. as of September 30, 2000, and the results of operations and its
cash flows for the period from inception (May 17, 2000) to September 30, 2000 in
conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that
the Company will continue as a going concern. As described in Note F to the
financial statements the Company is a start up enterprise and presently does not
have capital resources which raises doubt about the Company's ability to
continue as a going concern. The financial statements do not include any
adjustment that might arise from the outcome of this uncertainty.
/s/ Charles E. Smith
--------------------
Charles E. Smith
Rockwall, Texas
October 21, 2000
F-1
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JAVA SOLUTIONS, INC.
a Development Stage Company
BALANCE SHEETS
September 30, 2000
ASSETS
------
Sept 30, 2000
----------------
CURRENT ASSETS:
Cash $819
Accounts receivable 64
----------------
Total current assets $883
PROPERTY AND EQUIPMENT:
Website (net of $833 amortization) 9,167
----------------
TOTAL ASSETS $10,050
================
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
LIABILITIES 0
STOCKHOLDERS' EQUITY
Common stock, $0.001 par value, 25,000,000 authorized,
3,200,000 shares issued and outstanding 3,200
Additional paid-in-capital 10,100
Deficit accumulated during the development stage (3,250)
----------------
Total Stockholders' Equity 10,050
----------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $10,050
================
See accompanying notes F-2
<PAGE>
JAVA SOLUTIONS, INC.
a Development Stage Company
STATEMENT OF OPERATIONS
Period from inception (May 17, 2000) to September 30, 2000
Period from
Inception
(May 17, 2000)
to
Sept 30, 2000
----------------
REVENUE:
Franchise revenue $1,986
Sales 0
----------------
Total revenue 1,986
COST OF SALES: 0
----------------
GROSS PROFIT 1,986
OPERATING EXPENSE:
Depreciation and amortization 833
Consulting - related party 2,500
General and administrative 1,903
----------------
Total Operating Expense 5,236
----------------
NET LOSS ($3,250)
================
Weighted average shares outstanding 3,058,824
================
Loss per share - basic and diluted ($0.00)
================
See accompanying notes F-3
<PAGE>
<TABLE>
<CAPTION>
JAVA SOLUTIONS, INC.
a Development Stage Company
STATEMENT OF STOCKHOLDERS' EQUITY AND ACCUMULATED DEFICIT
Period from inception (May 17, 2000) to September 30, 2000
Common Stock Paid In
Shares Amount Capital Total
-------------------------------------------------------------- ----------------
<S> <C> <C> <C> <C>
Balance,
May 17, 2000
(date of inception) -0- -0- -0- -0-
Shares issued on May 20, 2000 for:
Cash 500,000 500 500
Services 2,500,000 2,500 2,500
July 7, 2000 for:
Website development 200,000 200 9,800 10,000
Paid in capital 300 300
Net Loss (3,250)
-------------------------------------------------------------- ----------------
Balance
September 30, 2000 3,200,000 $3,200 $10,100 $10,050
============================================================== ================
</TABLE>
See accompanying notes F-4
<PAGE>
<TABLE>
<CAPTION>
JAVA SOLUTIONS, INC.
a Development Stage Company
STATEMENT OF CASH FLOWS
Period from inception (May 17, 2000) to September 30, 2000
Period from
Inception
(May 17, 2000)
to
Sept 30, 2000
----------------
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ($3,250)
Adjustments to reconcile net loss to net
cash (used) by operating activities:
Increase in accounts receivable (64)
Items not requiring cash - stock issued for services
Stock issued for services 2,500
Amortization 833
Paid in capital (rent) 300
----------------
NET CASH (USED) BY OPERATING ACTIVITIES: 319
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of assets 0
CASH FLOWS FROM FINANCING ACTIVITIES:
Sale of common stock 500
----------------
Total cash flows from financing activities 500
----------------
NET INCREASE IN CASH $819
CASH, BEGINNING OF PERIOD 0
----------------
CASH, END OF PERIOD $819
================
</TABLE>
Note:
Non-cash investing activity - the company issued 200,000 shares valued
at $0.05 per share for a total of $10,000 for development of its
website.
See accompanying notes F-5
<PAGE>
JAVA SOLUTIONS, INC.
a Development Stage Company
NOTES TO FINANCIAL STATEMENTS
September 30, 2000
Note A - Nature of Business and Summary of Significant Accounting Policies:
---------------------------------------------------------------------------
History: The Company was organized May 17, 2000 under the name of Java
Solutions, Inc. in the State of Nevada and is in the development stage. The
Company's business plan outlines its plan of operations which is to purchase and
market specialty coffee to its franchisees and over the internet. Its
development activities included purchasing the master franchise for Java
Centrale and setting up of the Company's website to market coffee over the
internet.
Basis of Accounting:
--------------------
It is the Company's policy to prepare its financial statements on the accrual
basis of accounting in conformity with generally accepted accounting principles.
Sales are recorded as income in the period in which they are earned and expenses
are recognized in the period in which the related liability is incurred.
Revenue Recognition:
--------------------
Revenue is recognized when a sale is made. For franchise sales, the Company
receives a royalty of franchise sales. All other sales will have the respective
cost of sales recognized at time of shipment. The Company has an agreement
whereby they will purchase items for shipment only after they have an order
which in the short term eliminates the need for carrying an inventory.
Cash and Cash Equivalents:
--------------------------
For purposes of the statement of cash flows, the Company considers all highly
liquid debt instruments with a maturity of three months or less to be cash
equivalents.
Loss per Common Share:
----------------------
Loss applicable to common share is based on the weighted average number of
shares of common stock outstanding during the period presented.
Accounting Estimates:
---------------------
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make certain estimates and
assumptions that affect the amount reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
F-6
<PAGE>
JAVA SOLUTIONS, INC.
A Development Stage Company
NOTES TO FINANCIAL STATEMENTS
September 30, 2000
Note A - Nature of Business and Summary of Significant Accounting Policies
--------------------------------------------------------------------------
(con't):
--------
Stock based compensation:
-------------------------
The Company accounts for stock based compensation in accordance with FAS 123 and
APB No. 25 and the Financial Accounting Standards Board Interpretation No. 44.
This requires that we base the issuance of stock at the fair value of the
consideration received.
Software Development Costs:
---------------------------
The Company accounts for its software development costs under the provisions of
Statement of Position 98-1 "Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use", which was issued by the AICPA in 1998.
This requires the capitalization of the costs incurred in connection with
developing or obtaining internal-use software.
Income Tax:
-----------
The Company is subject to the greater of federal income taxes computed under the
regular system or the alternative minimum tax (ATM) system. The Company uses an
asset and liability approach for the accounting and financial reporting of
income tax as required by SFAS No. 109. Under this method, deferred tax assets
and liabilities are determined based on temporary differences between the
financial carrying amounts and the tax bases of assets and liabilities using
enacted tax rates in effect in the years in which the temporary differences are
expected to reverse.
Note B - Web site:
------------------
The Company's primary asset is its web site which is the center of its
operational and income generating activities for which it paid $10,000. The cost
of the web site is being amortized over three years starting in July 2000, the
first full month of operation.
The cost of developing the web site is accounted for under the provisions of
Statement of Position 98-1 "Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use", which was issued by the AICPA in 1998.
This requires the capitalization of the costs incurred in connection with
developing or obtaining internal-use software.
In March 2000, the Financial Accounting Standards Board issued Interpretation
No. 44 (FIN No. 44) "Accounting for Certain Transactions Involving Stock
Compensation", an interpretation of APB Opinion No. 25" which was effective July
1, 2000. The website development was paid for by issuing 200,000 shares of
common stock, the value of which was $0.05 per share which was arbitrarily
determined and negotiated since there was no readily determinable market value
for the Company's shares.
F-7
<PAGE>
JAVA SOLUTIONS, INC.
A Development Stage Company
NOTES TO FINANCIAL STATEMENTS
September 30, 2000
Note C - Stockholders' Equity:
-----------------------------
Common Stock:
-------------
The Company is authorized to issue 25,000,000 common shares of stock at a par
value of $0.001 per share. These shares have full voting rights. At September
30, 2000, there were 3,200,000 shares outstanding respectively. The Company has
not paid a dividend to its shareholders.
Common stock issuances
----------------------
On May 20, 2000, the Company issued 3,000,000 shares to the President for
$3,000, comprised of $500 cash and $2,500 of her services. The services were
valued at $1,500 and the stock issued at par.
On July 7, 2000, the Company issued to unrelated parties 200,000 shares for the
development of its website valued at $10,000. The value assigned of $0.05 per
share was arbitrarily determined and negotiated by the Company and the
developers of the website since there was no readily determinable market value
for the shares.
Note D - Income Taxes:
----------------------
The Company had a net operating loss of $3,250 for the period presented. The
Company's year end is September 30. No deferred tax asset has been recognized
for the operating loss as any valuation allowance would reduce the benefit to
zero.
Operating losses expire: 2020 $3,250
The Company has adopted the asset and liability method of accounting for income
taxes as required by SFAS No. 109. In accordance with SFAS No. 109, the Company
has recorded a valuation allowance equal to the deferred tax asset as a result
of the Company's "going concern" opinion referred to in Note F and the
uncertainty that it will be realized.
F-8
<PAGE>
JAVA SOLUTIONS, INC.
A Development Stage Company
NOTES TO FINANCIAL STATEMENTS
September 30, 2000
Note D - Income Taxes (con't):
-----------------------------
The components of the provision (benefit) for income taxes included in the
financial statements as of September 30, 2000 are as follows:
Deferred tax assets:
Net operating loss carryforwards $( 1,105)
Valuation allowance 1,105
----------
Total deferred income tax assets -0-
Total deferred income tax liabilities -0-
----------
Net deferred income tax assets $ -0-
The Company's effective tax rate on a pre-tax income (loss) from continuing
operations differs from the U.S federal statutory rate as follows:
U.S. federal statutory rate ( 34)%
Increase (decrease) in rates resulting from:
Change in valuation allowance for deferred tax asset 34 %
---------
Effective tax rate 0 %
Note E - Related Party Transactions:
-----------------------------------
In May 2000, the Company issued to its President 3,000,000 shares in
consideration for $3,000, comprised of $500 cash and $2,500 of her services. The
services were valued at $2,500 and the stock was issued at par.
Note F - Going Concern:
-----------------------
The Company has minimal capital resources available to meet obligations expected
to be incurred given that it is a start up enterprise. Accordingly, the
Company's continued existence is dependent upon the successful operation of the
Company's plan of operations, selling common stock in the Company, or obtaining
financing. Unless these conditions among others are met, the Company may be
unable to continue as a going concern.
F-9
<PAGE>
No dealer, salesman or any other person has been authorized to give any
quotation or to make any representations in connection with the offering
described herein, other than those contained in this Prospectus. If given or
made, such other information or representation'; must not he relied upon as
having been authorized by the Company or by any Underwriter. This Prospectus
does not constitute an offer to sell, or a solicitation of an otter to buy any
securities offered hereby in any jurisdiction to any person to whom it is
unlawful to make such an offer or solicitation in such jurisdiction.
TABLE OF CONTENTS
Prospectus Summary 2
Corporate Information 2
Risk Factors 3
Forward Looking Statements 4
Dilution 4
Plan of Distribution 6
Use of Proceeds 6
Description of Business 7
Plan of Operations 8
Description of Property 9
Director's, Executive Officers and Significant Employees 10
Remuneration of Officers and Directors 10
Interest of Management and Others in Certain Transactions 11
Principal Shareholders 11
Securities Being Offered 11
Relationship with Issuer of Experts Named in Registration Statement 12
Legal Proceedings 12
Changes In and Disagreements with Accountants on Accounting
and Financial Disclosure 12
Disclosure of Commission Position of Indemnification for
Securities Act Liabilities 12
Legal Matters 13
Experts 13
Dividend Policy 13
Transfer Agent 13
Financial Statements F-1
Until the (90th day after the later of (1) the effective date of the
registration statement or (2) the first date on which the securities are offered
publicly), all dealers that effect transactions in these securities, whether or
not participating in this offering, may be required to deliver a prospectus.
This is in addition to the dealers' obligation to deliver a prospectus when
acting as underwriters and with respect to their unsold allotments or
subscriptions.
14
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 1. Indemnification of Directors and Officers
Our Articles of Incorporation and our Bylaws limit the liability of
directors to the maximum extent permitted by Nevada law. We carry no director or
executive liability insurance.
Item 2. Other Expenses of Issuance and Distribution
All expenses, including all allocated general administrative and
overhead expenses, related to the offering or the organization of the Company
will be borne by the Company.
The following table sets forth a reasonable itemized statement of all
anticipated out-of-pocket and overhead expenses (subject to future
contingencies) to be incurred in connection with the distribution of the
securities being registered, reflecting the minimum and maximum subscription
amounts.
Minimum Maximum
-------- ---------
SEC Registration Fee $ 269 $ 269
Printing and Engraving Expenses 2,000 19,000
Legal Fees and Expenses 3,500 5,000
Edgar Fees 1,800 1,800
Accounting Fees and Expenses 4,000 2,500
Blue Sky Fees and Expenses 5,000 5,000
Miscellaneous 200 200
-------- ---------
TOTAL $ 16,769 $ 33,769
Item 3. Undertakings
The Registrant hereby undertakes to:
(1) File, during any period in which it offers or sells securities, a
post-effective amendment to this Registration Statement to:
(i) Include any prospectus required by section 10(a)(3) of the
Securities Act; and
(ii) Reflect in the prospectus any facts or events which,
individually or together,
represent a fundamental change in the information in the Registration Statement.
(2) For determining liability under the Securities Act, treat each
post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time to be the initial bona
fide offering.
(3) File a post-effective amendment to remove from registration any of
the securities that remain unsold at the end of the offering.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Act") may be permitted to directors, officers and
controlling persons of the small business issuer pursuant to the foregoing
provisions, or otherwise, the small business issuer has been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore, unenforceable.
11.1
<PAGE>
Item 4. Unregistered Securities Issued or Sold Within One Year
The Company sold on May 17, 2000 to its founder 3,000,000 shares of
common stock which was issued to him for $3,000, composed of $500 cash and
$2,500 of his services. This stock was issued under the exemption under the
Securities Act of 1933, section 4(2); this section states that transactions by
an issuer not involving any public offering is an exempted transaction. The
company relied upon this exemption because in a private transaction during May
2000, the founder, sole officer and director purchased stock for a combination
of $500 cash and $2,500 of services.
The Company issued 200,000 shares on July 7, 2000 in consideration for
building and developing the website. This stock was valued at $10,000 or $0.05
per share. This stock was issued under the exemption under the Securities Act of
1933, section 4(2); this section states that transactions by an issuer not
involving any public offering is an exempted transaction. The company relied
upon this exemption because in a private transaction on July 7, 2000, the
company developed the web site in exchange for 200,000 shares of stock valued at
$0.05 per share or a total of $10,000. The purchasers were sophisticated
investors who purchased the stock for their own account and not with a view
toward distribution to the public. The certificates evidencing the securities
bear legends stating that the shares may not be offered, sold or otherwise
transferred other than pursuant to an effective registration statement under the
Securities Act, or an exemption from such registration requirements.
Item 5. Exhibits
The following Exhibits are filed as part of the Registration
Statement:
Exhibit No. Identification of Exhibit
3.1 - Articles of Incorporation
3.2 - By Laws
4.2 - Specimen Stock Certificate
10.4 - Subscription Escrow Agreement
10.6 - Form of Subscription Agreement
23.1 - Opinion of T. Alan Owen & Associates, P.C. Attorneys at Law
23.2 - Consent of T. Alan Owen & Associates, P.C. Attorneys at Law
23.3 - Consent of Charles E. Smith, Certified Public Accountant
11.2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets the
requirements for filing on Form SB-1 and authorizes this Registration Statement
to be signed on its behalf by the undersigned, being duly authorized, in the
City of Spring, State of Texas, on the date indicated below.
Java Solutions, Inc.
By: /s/ Shannon Sherer
-------------------------
Shannon Sherer, President
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following person in the capacity and on
the date indicated:
Signature Title Date
------------------------------ --------------------- ----------------
By: /s/ Shannon Sherer President, Secretary,
------------------------- Treasurer; Director October 25, 2000
Shannon Sherer
