U. S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-SB
File No.: __________________
CIK:
GENERAL FORM FOR REGISTRATION OF SECURITIES
OF SMALL BUSINESS ISSUERS
Under Section 12(b) or (g) of the Securities Exchange Act of 1934
Shogi, Inc.
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(Name of Small Business Issuer in its charter)
Wyoming 83-0327967
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State or other jurisdiction of IRS Employer ID Number
incorporation or organization
P.O. Box 917, Casper, Wyoming 82602
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(Address of principal executive offices) Zip Code)
Issuer's telephone number: None
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
Not Applicable
Securities to be registered under Section 12(g) of the Act:
Common Stock
(Title of class)
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TABLE OF CONTENTS
PART I
Page
Item 1. Business.....................................................3
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations....................24
Item 3. Properties..................................................26
Item 4. Security Ownership of Certain Beneficial Owners
and Management........................................26
Item 5. Directors and Executive Officers of the Registrant..........27
Item 6. Executive Compensation......................................32
Item 7. Certain Relationships and Related Transactions..............33
Item 8. Description of Securities...................................34
PART II
Item 1. Market for Registrant's Common Stock and
Security Holder Matters...............................36
Item 2. Legal Proceedings...........................................36
Item 3. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure................36
Item 4. Recent Sales of Unregistered Securities.....................36
Item 5. Indemnification of Directors and Officers...................39
PART F/S
Financial Statements and Supplementary Data..................................F-1
Signature Page................................................................35
Exhibits, Financial Statement Schedule and Reports on Form 8-K................
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PART I
Item 1. Description of Business.
General
The Company was incorporated under the laws of the State of Wyoming on
October 20, 1999, and is in the early developmental and promotional stages. To
date the Company's activities have been organizational ones, directed at
developing its business plan and raising its initial capital. The Company was
formed to seek business opportunities and is currently a "shell" with no
business. The company has no commercial operations as of date hereof. The
company has no full-time employees and owns no real estate.
The Company is a "shell" company and its only current business plan is to
seek, investigate, and, if warranted, acquire one or more businesses, and to
pursue other related activities intended to enhance shareholder value. The
acquisition of a business opportunity may be made by purchase, merger, exchange
of stock, or otherwise, and may encompass assets or a business entity, such as a
corporation, joint venture, or partnership. The Company has no capital, and it
is unlikely that the Company will be able to take advantage of more than one
such business opportunity. The Company intends to seek opportunities
demonstrating the potential of long-term growth as opposed to short-term
earnings.
At the present time the Company has not identified any business opportunity
that it plans to pursue, nor has the Company reached any agreement or definitive
understanding with any person concerning an acquisition. The Company is filing
Form 10-SB on a voluntary basis in order to become a 12(g) registered company
under the Securities Exchange Act of 1934.
It is anticipated that the Company's officers and directors will contact
broker-dealers and other persons with whom they are acquainted who are involved
in corporate finance matters to advise them of the Company's existence and to
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determine if any companies or businesses they represent have an interest in
considering a merger or acquisition with the Company. No assurance can be given
that the Company will be successful in finding or acquiring a desirable business
opportunity, given that no funds that are available for acquisitions, or that
any acquisition that occurs will be on terms that are favorable to the Company
or its stockholders.
The Company's search will be directed toward small and medium-sized
enterprises which have a desire to become public corporations and which are able
to satisfy, or anticipate in the reasonably near future being able to satisfy,
the minimum asset requirements in order to qualify shares for trading on NASDAQ
or a stock exchange (See "Investigation and Selection of Business
Opportunities"). The Company anticipates that the business opportunities
presented to it will (i) be recently organized with no operating history, or a
history of losses attributable to under-capitalization or other factors; (ii) be
experiencing financial or operating difficulties; (iii) be in need of funds to
develop a new product or service or to expand into a new market; (iv) be relying
upon an untested product or marketing concept; or (v) have a combination of the
characteristics mentioned in (i) through (iv). The Company intends to
concentrate its acquisition efforts on properties or businesses that it believes
to be undervalued. Given the above factors, investors should expect that any
acquisition candidate may have a history of losses or low profitability.
The Company does not propose to restrict its search for investment
opportunities to any particular geographical area or industry, and may,
therefore, engage in essentially any business, to the extent of its limited
resources. This includes industries such as service, finance, natural resources,
manufacturing, high technology, product development, medical, communications and
others. The Company's discretion in the selection of business opportunities is
unrestricted, subject to the availability of such opportunities, economic
conditions, and other factors.
As a consequence of this registration of its securities, any entity which
has an interest in being acquired by, or merging into the Company, is expected
to be an entity that desires to become a public company and establish a public
trading market for its securities. In connection with such a merger or
acquisition, it is highly likely that an amount of stock constituting control of
the Company would be issued by the Company or purchased from the current
principal shareholders of the Company by the acquiring entity or its affiliates.
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If stock is purchased from the current shareholders, the transaction is very
likely to result in substantial gains to them relative to their purchase price
for such stock. In the Company's judgment, none of its officers and directors
would thereby become an "underwriter" within the meaning of the Section 2(11) of
the Securities Act of 1933, as amended. The sale of a controlling interest by
certain principal shareholders of the Company could occur at a time when the
other shareholders of the Company remain subject to restrictions on the transfer
of their shares.
Depending upon the nature of the transaction, the current officers and
directors of the Company may resign management positions with the Company in
connection with the Company's acquisition of a business opportunity. See "Form
of Acquisition," below, and "Risk Factors - The Company - Lack of Continuity in
Management." In the event of such a resignation, the Company's current
management would not have any control over the conduct of the Company's business
following the Company's combination with a business opportunity.
It is anticipated that business opportunities will come to the Company's
attention from various sources, including its officers and director, its other
stockholders, professional advisors such as attorneys and accountants,
securities broker-dealers, venture capitalists, members of the financial
community, and others who may present unsolicited proposals. The Company has no
plans, understandings, agreements, or commitments with any individual for such
person to act as a finder of opportunities for the Company.
The Company does not foresee that it would enter into a merger or
acquisition transaction with any business with which its officers or directors
are currently affiliated. Should the Company determine in the future, contrary
to foregoing expectations, that a transaction with an affiliate would be in the
best interests of the Company and its stockholders, the Company is in general
permitted by Wyoming law to enter into such a transaction if:
1. The material facts as to the relationship or interest of the affiliate and as
to the contract or transaction are disclosed or are known to the Board of
Directors, and the Board in good faith authorizes the contract or transaction by
the affirmative vote of a majority of the disinterested directors, even though
the disinterested directors constitute less than a quorum; or
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2. The material facts as to the relationship or interest of the affiliate and as
to the contract or transaction are disclosed or are known to the stockholders
entitled to vote thereon, and the contract or transaction is specifically
approved in good faith by vote of the stockholders; or
3. The contract or transaction is fair as to the Company as of the time it is
authorized, approved or ratified, by the Board of Directors or the stockholders.
Investigation and Selection of Business Opportunities
To a large extent, a decision to participate in a specific business opportunity
may be made upon management's analysis of the quality of the other company's
management and personnel, the anticipated acceptability of new products or
marketing concepts, the merit of technological changes, the perceived benefit
the company will derive from becoming a publicly held entity, and numerous other
factors which are difficult, if not impossible, to analyze through the
application of any objective criteria. In many instances, it is anticipated that
the historical operations of a specific business opportunity 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. The
Company will be dependent upon the owners of a business opportunity to identify
any such problems which may exist and to implement, or be primarily responsible
for the implementation of, required changes. Because the Company may participate
in a business opportunity with a newly organized firm or with a firm which is
entering a new phase of growth, it should be emphasized that the Company will
incur further risks, because management in many instances will not have proved
its abilities or effectiveness, the eventual market for such company's products
or services will likely not be established, and such company may not be
profitable when acquired.
It is anticipated that the Company will not be able to diversify, but will
essentially be limited to one such venture because of the Company's limited
financing. This lack of diversification will not permit the Company to offset
potential losses from one business opportunity against profits from another, and
should be considered an adverse factor affecting any decision to purchase the
Company's securities.
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It is emphasized that management of the Company may effect transactions having a
potentially adverse impact upon the Company's shareholders pursuant to the
authority and discretion of the Company's management to complete acquisitions
without submitting any proposal to the stockholders for their consideration.
Holders of the Company's securities should not anticipate that the Company
necessarily will furnish such holders, prior to any merger or acquisition, with
financial statements, or any other documentation, concerning a target company or
its business. In some instances, however, the proposed participation in a
business opportunity may be submitted to the stockholders for their
consideration, either voluntarily by such directors to seek the stockholders'
advice and consent or because state law so requires.
The analysis of business opportunities will be undertaken by or under the
supervision of the Company's President, who is not a professional business
analyst. See "Management." Although there are no current plans to do so, Company
management might hire an outside consultant to assist in the investigation and
selection of business opportunities, and might pay a finder's fee. Since Company
management has no current plans to use any outside consultants or advisors to
assist in the investigation and selection of business opportunities, 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 the limited resources of the Company, it is likely that any
such fee the Company agrees to pay would be paid in stock and not in cash.
Otherwise, the Company anticipates that it will consider, among other things,
the following factors:
1. Potential for growth and profitability, indicated by new technology,
anticipated market expansion, or new products;
2. The Company's perception of how any particular business opportunity will be
received by the investment community and by the Company's stockholders;
3. Whether, following the business combination, the financial condition of the
business opportunity would be, or would have a significant prospect in the
foreseeable future of becoming sufficient to enable the securities of the
Company to qualify for listing on an exchange or on a national automated
securities quotation system, such as NASDAQ, so as to permit the trading of such
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securities to be exempt from the requirements of Rule 15c2-6 recently adopted by
the Securities and Exchange Commission. See "Risk Factors - The Company -
Regulation of Penny Stocks."
4. Capital requirements and anticipated availability of required funds, to be
provided by the Company or from operations, through the sale of additional
securities, through joint ventures or similar arrangements, or from other
sources;
5. The extent to which the business opportunity can be advanced;
6. Competitive position as compared to other companies of similar size and
experience within the industry segment as well as within the industry as a
whole;
7. Strength and diversity of existing management, or management prospects that
are scheduled for recruitment;
8. The cost of participation by the Company as compared to the perceived
tangible and intangible values and potential; and
9. The accessibility of required management expertise, personnel, raw materials,
services, professional assistance, and other required items.
In regard to the possibility that the shares of the Company would qualify
for listing on NASDAQ, the current standards include the requirements that the
issuer of the securities that are sought to be listed have total net tangible
assets of at least $4,000,000. Many, and perhaps most, of the business
opportunities that might be potential candidates for a combination with the
Company would not satisfy the NASDAQ listing criteria.
No one of the factors described above will be controlling in the selection
of a business opportunity, and management will attempt to analyze all factors
appropriate to each opportunity and make a determination based upon reasonable
investigative measures and available data. Potentially available business
opportunities may occur in many different industries and at various stages of
development, all of which will make the task of comparative investigation and
analysis of such business opportunities extremely difficult and complex.
Potential investors must recognize that, because of the Company's limited
capital available for investigation and management's limited experience in
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business analysis, the Company may not discover or adequately evaluate adverse
facts about the opportunity to be acquired.
The Company is unable to predict when it may participate in a business
opportunity. It expects, however, that the analysis of specific proposals and
the selection of a business opportunity may take several months or more.
Prior to making a decision to participate in a business opportunity, the
Company will generally request that it be provided with written materials
regarding the business opportunity containing such items as a description of
products, services and company history; management resumes; financial
information; available projections, with related assumptions upon which they are
based; an explanation of proprietary products and services; evidence of existing
patents, trademarks, or services marks, or rights thereto; present and proposed
forms of compensation to management; a description of transactions between such
company and its affiliates during relevant periods; a description of present and
required facilities; an analysis of risks and competitive conditions; a
financial plan of operation and estimated capital requirements; audited
financial statements, or if they are not available, unaudited financial
statements, together with reasonable assurances that audited financial
statements would be able to be produced within a reasonable period of time not
to exceed 60 days following completion of a merger transaction; and other
information deemed relevant.
As part of the Company's investigation, the Company's executive officers
and directors may meet personally with management and key personnel, may visit
and inspect material facilities, obtain independent analysis or verification of
certain information provided, check references of management and key personnel,
and take other reasonable investigative measures, to the extent of the Company's
limited financial resources and management expertise.
It is possible that the range of business opportunities that might be
available for consideration by the Company could be limited by the impact of
Securities and Exchange Commission regulations regarding purchase and sale of
"penny stocks." The regulations would affect, and possibly impair, any market
that might develop in the Company's securities until such time as they qualify
for listing on NASDAQ or on another exchange which would make them exempt from
applicability of the "penny stock" regulations. See "Risk Factors -- Regulation
of Penny Stocks."
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Company management believes that various types of potential merger or
acquisition candidates might find a business combination with the Company to be
attractive. These include acquisition candidates desiring to create a public
market for their shares in order to enhance liquidity for current shareholders,
acquisition candidates which have long-term plans for raising capital through
the public sale of securities and believe that the possible prior existence of a
public market for their securities would be beneficial, and acquisition
candidates which plan to acquire additional assets through issuance of
securities rather than for cash, and believe that the possibility of development
of a public market for their securities will be of assistance in that process.
Acquisition candidates which have a need for an immediate cash infusion are not
likely to find a potential business combination with the Company to be an
attractive alternative.
There are no loan arrangements or arrangements for any financing whatsoever
relating to any business opportunities.
Form of Acquisition
It is impossible to predict the manner in which the Company may participate
in a business opportunity. Specific business opportunities will be reviewed as
well as the respective needs and desires of the Company and the promoters of the
opportunity and, upon the basis of that review and the relative negotiating
strength of the Company and such promoters, the legal structure or method deemed
by management to be suitable will be selected. Such structure may include, but
is not limited to leases, purchase and sale agreements, licenses, joint ventures
and other contractual arrangements. The Company may act directly or indirectly
through an interest in a partnership, corporation or other form of organization.
Implementing such structure may require the merger, consolidation or
reorganization of the Company with other corporations or forms of business
organization, and although it is likely, there is no assurance that the Company
would be the surviving entity. In addition, the present management and
stockholders of the Company most likely will not have control of a majority of
the voting shares of the Company following a reorganization transaction. As part
of such a transaction, the Company's existing directors may resign and new
directors may be appointed without any vote by stockholders.
It is likely that the Company will acquire its participation in a business
opportunity through the issuance of Common Stock or other securities of the
Company. Although the terms of any such transaction cannot be predicted, it
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should be noted that in certain circumstances the criteria for determining
whether or not an acquisition is a so-called "tax free" reorganization under the
Internal Revenue Code of 1986, depends upon the issuance to the stockholders of
the acquired company of a controlling interest (i.e. 80% or more) of the common
stock of the combined entities immediately following the reorganization. If a
transaction were structured to take advantage of these provisions rather than
other "tax free" provisions provided under the Internal Revenue Code, the
Company's current stockholders would retain in the aggregate 20% or less of the
total issued and outstanding shares. This could result in substantial additional
dilution in the equity of those who were stockholders of the Company prior to
such reorganization. Any such issuance of additional shares might also be done
simultaneously with a sale or transfer of shares representing a controlling
interest in the Company by the current officers, directors and principal
shareholders. (See "Description of Business - General.")
It is anticipated that any new securities issued in any reorganization
would be issued in reliance upon exemptions, if any are available, from
registration under applicable federal and state securities laws. In some
circumstances, however, as a negotiated element of the transaction, the Company
may agree to register such securities either at the time the transaction is
consummated, or under certain conditions or at specified times thereafter. The
issuance of substantial additional securities and their potential sale into any
trading market that might develop in the Company's securities may have a
depressive effect upon such market.
The Company will participate in a business opportunity only after the
negotiation and execution of a written agreement. Although the terms of such
agreement cannot be predicted, generally such an agreement would require
specific representations and warranties by all of the parties thereto, specify
certain events of default, detail the terms of closing and the conditions which
must be satisfied by each of the parties thereto prior to such closing, outline
the manner of bearing costs if the transaction is not closed, set forth remedies
upon default, and include miscellaneous other terms.
As a general matter, the Company anticipates that it, and/or its officers
and principal shareholders will enter into a letter of intent with the
management, principals or owners of a prospective business opportunity prior to
signing a binding agreement. Such a letter of intent will set forth the terms of
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the proposed acquisition but will not bind any of the parties to consummate the
transaction. Execution of a letter of intent will by no means indicate that
consummation of an acquisition is probable. Neither the Company nor any of the
other parties to the letter of intent will be bound to consummate the
acquisition unless and until a definitive agreement concerning the acquisition
as described in the preceding paragraph is executed. Even after a definitive
agreement is executed, it is possible that the acquisition would not be
consummated should any party elect to exercise any right provided in the
agreement to terminate it on specified grounds.
It is anticipated that the investigation of specific business opportunities
and the negotiation, drafting and execution of relevant agreements, disclosure
documents and other instruments will require substantial management time and
attention and substantial costs for accountants, attorneys and others. If a
decision is made not to participate in a specific business opportunity, the
costs theretofore incurred in the related investigation would not be
recoverable. Moreover, because many providers of goods and services require
compensation at the time or soon after the goods and services are provided, the
inability of the Company to pay until an indeterminate future time may make it
impossible to procure goods and services.
In all probability, upon completion of an acquisition or merger, there will
be a change in control through issuance of substantially more shares of common
stock. Further, in conjunction with an acquisition or merger, it is likely that
management may offer to sell a controlling interest at a price not relative to
or reflective of any value of the shares sold by management, and at a price
which could not be achieved by individual shareholders at the time.
Investment Company Act and Other Regulation
The Company may participate in a business opportunity by purchasing,
trading or selling the securities of such business. The Company does not,
however, intend to engage primarily in such activities. Specifically, the
Company intends to conduct its 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.
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Section 3(a) of the Investment Act contains the definition of an
"investment company," and it excludes any entity that does not engage primarily
in the business of investing, reinvesting or trading in securities, or that does
not engage in the business of investing, owning, holding or trading "investment
securities" (defined as "all securities other than government securities or
securities of majority-owned subsidiaries") the value of which exceeds 40% of
the value of its total assets (excluding government securities, cash or cash
items). The Company intends to implement its business plan in a manner which
will result in the availability of this exception from the definition of
"investment company." Consequently, the Company's participation in a business or
opportunity through the purchase and sale of investment securities will be
limited.
The Company's plan of business may involve changes in its capital
structure, management, control and business, especially if it consummates a
reorganization as discussed above. Each of these areas is regulated by the
Investment Act, in order to protect purchasers of investment company securities.
Since the Company will not register as an investment company, stockholders will
not be afforded these protections.
Any securities which the Company might acquire in exchange for its Common
Stock are expected to be "restricted securities" within the meaning of the
Securities Act of 1933, as amended (the "Act"). If the Company elects 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 Act, which exempts
sales of securities not involving a distribution, would in all likelihood be
available to permit a private sale. Although the plan of operation does not
contemplate resale of securities acquired, if such a sale were to be necessary,
the Company would be required to comply with the provisions of the Act to effect
such resale.
An acquisition made by the Company 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.
Competition
The Company expects to encounter substantial competition in its efforts to
locate attractive opportunities, primarily from business development companies,
venture capital partnerships and corporations, venture capital affiliates of
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large industrial and financial companies, small investment companies, and
wealthy individuals. Many of these entities will have significantly greater
experience, resources and managerial capabilities than the Company and will
therefore be in a better position than the Company to obtain access to
attractive business opportunities. The Company also will possibly experience
competition from other public "blank check" companies, some of which may have
more funds available than does the Company.
No Rights of Dissenting Shareholders
The Company does not intend to provide Company shareholders with complete
disclosure documentation including audited financial statements, concerning a
possible target company prior to acquisition, because Wyoming Business
Corporation Act vests authority in the Board of Directors to decide and approve
matters involving acquisitions within certain restrictions. A transaction
could be structured as an acquisition, not a merger, with the Registrant being
the parent company and the acquiree being merged into a wholly owned subsidiary.
Therefore, a shareholder will have no right of dissent under Wyoming law.
No Target Candidates for Acquisition
None of the Company's Officers, Directors, promoters, affiliates, or
associates have had any preliminary contact or discussion with any specific
candidate for acquisition. There are no present plans, proposals, arrangements,
or understandings with any representatives of the owners of any business or
company regarding the possibility of an acquisition transaction.
Administrative Offices
The Company currently maintains a mailing address at P.O. Box 917, Casper,
Wyoming 82602 which is the mailing address of its Presiden. Other than this
mailing address, the Company does not currently maintain any other office
facilities, and does not anticipate the need for maintaining office facilities
at any time in the foreseeable future. The Company pays no rent or other fees
for the use of this mailing address.
Employees
The Company is a development stage company and currently has no employees.
Management of the Company expects to use consultants, attorneys and accountants
as necessary, and does not anticipate a need to engage any full-time employees
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so long as it is seeking and evaluating business opportunities. The need for
employees and their availability will be addressed in connection with the
decision whether or not to acquire or participate in specific business
opportunities. Although there is no current plan with respect to its nature or
amount, remuneration may be paid to or accrued for the benefit of, the Company's
officers prior to, or in conjunction with, the completion of a business
acquisition for services actually rendered, if for. See "Executive Compensation"
and under "Certain Relationships and Related Transactions."
Risk Factors
1. Conflicts of Interest. Certain conflicts of interest may exist between the
Company and its officers and directors. They have other business interests to
which they devote their attention, and may be expected to continue to do so
although management time should be devoted to the business of the Company. As a
result, conflicts of interest may arise that can be resolved only through
exercise of such judgment as is consistent with fiduciary duties to the Company.
See "Management," and "Conflicts of Interest."
It is anticipated that Company's officers and directors may actively
negotiate or otherwise consent to the purchase of a portion of his common stock
as a condition to, or in connection with, a proposed merger or acquisition
transaction. In this process, the Company's officers may consider his own
personal pecuniary benefit rather than the best interests of other Company
shareholders, and the other Company shareholders are not expected to be afforded
the opportunity to approve or consent to any particular stock buy-out
transaction. See "Conflicts of Interest."
2. Need For Additional Financing. The Company has very limited funds, and such
funds may not be adequate to take advantage of any available business
opportunities. Even if the Company's funds prove to be sufficient to acquire an
interest in, or complete a transaction with, a business opportunity, the Company
may not have enough capital to exploit the opportunity. The ultimate success of
the Company may depend upon its ability to raise additional capital. The Company
has not investigated the availability, source, or terms that might govern the
acquisition of additional capital and will not do so until it determines a need
for additional financing. If additional capital is needed, there is no assurance
that funds will be available from any source or, if available, that they can be
obtained on terms acceptable to the Company. If not available, the Company's
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operations will be limited to those that can be financed with its modest
capital.
3. Regulation of Penny Stocks. The Company's securities, if ever available
for trading, will be subject to a Securities and Exchange Commission rule that
imposes special sales practice requirements upon broker-dealers who sell such
securities to persons other than established customers or accredited investors.
For purposes of the rule, the phrase "accredited investors" means, in general
terms, institutions with assets in excess of $5,000,000, or individuals having a
net worth in excess of $1,000,000 or having an annual income that exceeds
$200,000 (or that, when combined with a spouse's income, exceeds $300,000). For
transactions covered by the rule, the broker-dealer must make a special
suitability determination for the purchaser and receive the purchaser's written
agreement to the transaction prior to the sale. Consequently, the rule may
affect the ability of broker-dealers to sell the Company's securities and also
may affect the ability of purchasers in this offering to sell their securities
in any market that might develop therefore.
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, 15g-7, 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 owners of
Shares to sell the securities of the Company in any market that might develop
for them.
Shareholders should be aware that, according to Securities and Exchange
Commission, 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. The
Company's management is aware of the abuses that have occurred historically in
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the penny stock market. Although the Company does 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 the
Company's securities.
4. Lack of Operating History. The Company was formed in October, 1999 for the
purpose of seeking a business opportunity. Due to the special risks inherent in
the investigation, acquisition, or involvement in a new business opportunity,
The Company must be regarded as a new or start-up venture with all of the
unforeseen costs, expenses, problems, and difficulties to which such ventures
are subject.
5. No Assurance of Success or Profitability. There is no assurance that the
Company will acquire a favorable business opportunity. Even if the Company
should become involved in a business opportunity, there is no assurance that it
will generate revenues or profits, or that the market price of the Company's
Common Stock will be increased thereby.
6. Possible Business - Not Identified and Highly Risky. The Company has not
identified and has no commitments to enter into or acquire a specific business
opportunity and therefore can disclose the risks and hazards of a business or
opportunity that it may enter into in only a general manner, and cannot disclose
the risks and hazards of any specific business or opportunity that it may enter
into. An investor can expect a potential business opportunity to be quite risky.
The Company's acquisition of or participation in a business opportunity will
likely be highly illiquid and could result in a total loss to the Company and
its stockholders if the business or opportunity proves to be unsuccessful. See
Item 1 "Description of Business."
7. Type of Business Acquired. The type of business to be acquired may be one
that desires to avoid effecting its own public offering and the accompanying
expense, delays, uncertainties, and federal and state requirements which purport
to protect investors. Because of the Company's limited capital, it is more
likely than not that any acquisition by the Company will involve other parties
whose primary interest is the acquisition of control of a publicly traded
company. Moreover, any business opportunity acquired may be currently
unprofitable or present other negative factors.
8. Impracticability of Exhaustive Investigation. The Company's 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 business opportunity
17
<PAGE>
before the Company commits its 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 the Company had more
funds available to it, would be desirable. The Company will be particularly
dependent in making decisions upon information provided by the promoter, owner,
sponsor, or others associated with the business opportunity seeking the
Company's participation. A significant portion of the Company's available funds
may be expended for investigative expenses and other expenses related to
preliminary aspects of completing an acquisition transaction, whether or not any
business opportunity investigated is eventually acquired.
9. Lack of Diversification. Because of the limited financial resources that the
Company has, it is unlikely that the Company will be able to diversify its
acquisitions or operations. The Company's probable inability to diversify its
activities into more than one area will subject the Company to economic
fluctuations within a particular business or industry and therefore increase the
risks associated with the Company's operations.
10. Reliance upon Financial Statements. The Company generally will require
audited financial statements from companies that it proposes to acquire. Given
cases where audited financials are available, the Company will have to rely upon
interim period unaudited information received from target companies' management
that has not been verified by outside auditors. The lack of the type of
independent verification which audited financial statements would provide,
increases the risk that the Company, in evaluating an acquisition with such a
target company, will not have the benefit of full and accurate information about
the financial condition and recent interim operating history of the target
company. This risk increases the prospect that the acquisition of such a company
might prove to be an unfavorable one for the Company or the holders of the
Company's securities.
Moreover, the Company will be subject to the reporting provisions of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and thus will
be required to furnish certain information about significant acquisitions,
including audited financial statements for any business that it acquires.
Consequently, acquisition prospects that do not have, or are unable to provide
reasonable assurances that they will be able to obtain, the required audited
statements would not be considered by the Company to be appropriate for
acquisition so long as the reporting requirements of the Exchange Act are
applicable. Should the Company, during the time it remains subject to the
18
<PAGE>
reporting provisions of the Exchange Act, complete an acquisition of an entity
for which audited financial statements prove to be unobtainable, the Company
would be exposed to enforcement actions by the Securities and Exchange
Commission (the "Commission") and to corresponding administrative sanctions,
including permanent injunctions against the Company and its management. The
legal and other costs of defending a Commission enforcement action would have
material, adverse consequences for the Company and its business. The imposition
of administrative sanctions would subject the Company to further adverse
consequences.
In addition, the lack of audited financial statements would prevent the
securities of the Company from becoming eligible for listing on NASDAQ, or on
any existing stock exchange. Moreover, the lack of such financial statements is
likely to discourage broker-dealers from becoming or continuing to serve as
market makers in the securities of the Company. Without audited financial
statements, the Company would almost certainly be unable to offer securities
under a registration statement pursuant to the Securities Act of 1933, and the
ability of the Company to raise capital would be significantly limited until
such financial statements were to become available.
11. Other Regulation. An acquisition made by the Company may be of a business
that is subject to regulation or licensing by federal, state, or local
authorities. Compliance with such regulations and licensing can be expected to
be a time-consuming, expensive process and may limit other investment
opportunities of the Company.
12. Dependence upon Management; Limited Participation of Management. The Company
currently has only three individuals who are serving as its officers and
directors on a part time basis. The Company will be heavily dependent upon their
skills, talents, and abilities to implement its business plan, and may, from
time to time, find that the inability of the officers and directors to devote
their full time attention to the business of the Company results in a delay in
progress toward implementing its business plan. See "Management." Because
investors will not be able to evaluate the merits of possible business
acquisitions by the Company, they should critically assess the information
concerning the Company's officers and directors.
13. Lack of Continuity in Management. The Company does not have an employment
agreement with its officers and directors, and as a result, there is no
assurance they will continue to manage the Company in the future. In connection
with acquisition of a business opportunity, it is likely the current officers
19
<PAGE>
and directors of the Company may resign subject to compliance with Section 14f
of the Securities Exchange Act of 1934. A decision to resign will be based upon
the identity of the business opportunity and the nature of the transaction, and
is likely to occur without the vote or consent of the stockholders of the
Company.
14. Indemnification of Officers and Directors. Wyoming Statutes provide for the
indemnification of its directors, officers, employees, and agents, under certain
circumstances, against attorney's fees and other expenses incurred by them in
any litigation to which they become a party arising from their association with
or activities on behalf of the Company. The Company will also bear the expenses
of such litigation for any of its directors, officers, employees, or agents,
upon such person's promise to repay the Company therefor if it is ultimately
determined that any such person shall not have been entitled to indemnification.
This indemnification policy could result in substantial expenditures by the
Company which it will be unable to recoup.
15. Director's Liability Limited. Wyoming Statutes exclude personal liability of
its directors to the Company and its stockholders for monetary damages for
breach of fiduciary duty except in certain specified circumstances. Accordingly,
the Company will have a much more limited right of action against its directors
than otherwise would be the case. This provision does not affect the liability
of any director under federal or applicable state securities laws.
16. Dependence upon Outside Advisors. To supplement the business experience of
its officers and directors, the Company may be required to employ accountants,
technical experts, appraisers, attorneys, or other consultants or advisors. The
selection of any such advisors will be made by the Company's President without
any input from stockholders. Furthermore, it is anticipated that such persons
may be engaged on an "as needed" basis without a continuing fiduciary or other
obligation to the Company. In the event the President of the Company considers
it necessary to hire outside advisors, he may elect to hire persons who are
affiliates, if they are able to provide the required services.
17. Leveraged Transactions. There is a possibility that any acquisition of a
business opportunity by the Company may be leveraged, i.e., the Company may
finance the acquisition of the business opportunity by borrowing against the
assets of the business opportunity to be acquired, or against the projected
future revenues or profits of the business opportunity. This could increase the
20
<PAGE>
Company's exposure to larger losses. A business opportunity acquired through a
leveraged transaction is profitable only if it generates enough revenues to
cover the related debt and expenses. Failure to make payments on the debt
incurred to purchase the business opportunity could result in the loss of a
portion or all of the assets acquired. There is no assurance that any business
opportunity acquired through a leveraged transaction will generate sufficient
revenues to cover the related debt and expenses.
18. Competition. The search for potentially profitable business opportunities is
intensely competitive. The Company expects to be at a disadvantage when
competing with many firms that have substantially greater financial and
management resources and capabilities than the Company. These competitive
conditions will exist in any industry in which the Company may become
interested.
19. No Foreseeable Dividends. The Company has not paid dividends on its Common
Stock and does not anticipate paying such dividends in the foreseeable future.
20. Loss of Control by Present Management and Stockholders. The Company may
consider an acquisition in which the Company would issue as consideration for
the business opportunity to be acquired, an amount of the Company's authorized
but unissued Common Stock that would, upon issuance, represent the great
majority of the voting power and equity of the Company. The result of such an
acquisition would be that the acquired company's stockholders and management
would control the Company, and the Company's management could be replaced by
persons unknown at this time. Such a merger would result in a greatly reduced
percentage of ownership of the Company by its current shareholders. In addition,
the Company's major shareholders could sell control blocks of stock at a premium
price to the acquired company's stockholders.
21. No Public Market Exists. There is no public market for the Company's common
stock, and no assurance can be given that a market will develop or that a
shareholder ever will be able to liquidate his investment without considerable
delay, if at all. If a market should develop, the price may be highly volatile.
Factors such as those discussed in this "Risk Factors" section may have a
significant impact upon the market price of the securities offered hereby. Owing
to the low price of the securities, many brokerage firms may not be willing to
effect transactions in the securities. Even if a purchaser finds a broker
willing to effect a transaction in these securities, the combination of
brokerage commissions, state transfer taxes, if any, and any other selling costs
21
<PAGE>
may exceed the selling price. Further, many lending institutions will not permit
the use of such securities as collateral for any loans.
22. Rule 144 Sales. All of the outstanding shares of Common Stock held by
present officers, directors, and stockholders are "restricted securities" within
the meaning of Rule 144 under the Securities Act of 1933, as amended. As
restricted shares, these shares may be resold only pursuant to an effective
registration statement or under the requirements of Rule 144 or other applicable
exemptions from registration under the Act, if any are available, and as
required under applicable state securities laws. Rule 144 provides in essence
that a person who has held restricted securities for one year may, under certain
conditions, sell every three months, in brokerage transactions, a number of
shares that does not exceed the greater of 1.0% of a company's outstanding
common stock or the average weekly trading volume during the four calendar weeks
prior to the sale. A sale under Rule 144 or under any other exemption from the
Act, if available, or pursuant to subsequent registration of shares of Common
Stock of present stockholders, may have a depressive effect upon the price of
the Common Stock in any market that may develop.
23. Blue Sky Considerations. Because the securities registered hereunder have
not been registered for resale under the blue sky laws of any state, the holders
of such shares and persons who desire to purchase them 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 investors to sell the
securities and of purchasers to purchase the securities. Some jurisdictions may
not under any circumstances allow the trading or resale of blind-pool or
"blank-check" securities. Accordingly, investors should consider the secondary
market for the Company's securities to be a limited one.
22
<PAGE>
24. Blue Sky Restrictions. Many states have enacted statutes or rules which
restrict or prohibit the sale of securities of "blank check" companies to
residents so long as they remain without specific business companies. To the
extent any current shareholders or subsequent purchaser from a shareholder may
reside in a state which restricts or prohibits resale of shares in a "blank
check" company, warning is hereby given that the shares may be "restricted" from
resale as long as the company is a shell company.
At the date of this registration statement, the Company has no
intention of offering further shares in a private offering to anyone. Further,
the policy of the Board of Directors is that any future offering of shares will
only be made after an acquisition has been made and can be disclosed in
appropriate 8-K filings.
In the event of a violation of state laws regarding resale of "blank
check" shares the Company could be liable for civil and criminal penalties which
would be a substantial impairment to the Company. At date of this registration
statement, all shareholders' shares bear a "restrictive legend," and the Company
will examine each shareholders' resident state laws at the time of any proposed
resale of shares now outstanding to attempt to avoid any inadvertent breach of
state laws.
23
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATIONS OR PLAN OF
OPERATIONS.
Liquidity and Capital Resources
The Company remains in the development stage and, since inception, has
experienced significant liquidity problems and has no significant capital
resources and has stockholder's equity of only $611. The Company has current
assets in the form of cash of $611 and total assets of $611.
The Company will carry out its plan of business as discussed above. The
Company cannot predict to what extent its lack of liquidity and capital
resources will impair the consummation of a business combination or whether it
will incur further operating losses through any business entity which the
Company may eventually acquire.
RESULTS OF OPERATIONS SINCE INCEPTION TO DECEMBER 31, 1999
During the period from October 20, 1999 (inception) through date of this
registration statement the Company has engaged in no significant operations
other than organizational activities, acquisition of capital and preparation for
registration of its securities under the Securities Exchange Act of 1934, as
amended. No revenues were received by the Company during this period except $5
in interest. The company has incurred operating expenses since inception to
December 31, 1999 of $1500. The net loss on operations was ($1495) through
December 31, 1999. Such losses will continue unless revenues and business can be
acquired by the company. There is no assurance that revenues or profitability
will ever be achieved by the company. The loss per share from inception in 1999
was ($.01).
RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000
The Company had no revenues in the first nine months of 2000 or 1999. The
Company incurred no expenses in the nine month period in 2000, and in 1999, the
Company incurred $100 in expenses.
The Company had no profit or loss in the nine month period in 2000 but had
a $100 loss in the nine month period in 1999.
24
<PAGE>
For the current fiscal year, the Company anticipates incurring a loss
as a result of legal and accounting expenses, expenses associated with
registration under the Securities Exchange Act of 1934, and expenses associated
with locating and evaluating acquisition candidates. The Company anticipates
that until a business combination is completed with an acquisition candidate, it
will not generate revenues other than interest income, and may continue to
operate at a loss after completing a business combination, depending upon the
performance of the acquired business.
Need for Additional Financing
The Company does not have capital sufficient to meet the Company's cash
needs, including the costs of compliance with the continuing reporting
requirements of the Securities Exchange Act of 1934. The Company will have to
seek loans or equity placements to cover such cash needs. In the event the
Company is able to complete a business combination during this period, lack of
its existing capital may be a sufficient impediment to prevent it from
accomplishing the goal of completing a business combination. There is no
assurance, however, that without funds it will ultimately allow registrant to
complete a business combination. Once a business combination is completed, the
Company's needs for additional financing are likely to increase substantially.
No commitments to provide additional funds have been made by management
or other stockholders. Accordingly, there can be no assurance that any
additional funds will be available to the Company to allow it to cover its
expenses as they may be incurred.
Irrespective of whether the Company's cash assets prove to be
inadequate to meet the Company's operational needs, the Company might seek to
compensate providers of services by issuances of stock in lieu of cash.
Year 2000 Issues
Year 2000 problems result primarily from the inability of some computer
software to property store, recall, or use data after December 31, 1999. These
problems may affect many computers and other devices that contain embedded
computer chips. The Company's operations, however, do not rely on information
25
<PAGE>
technology (IT) systems. Accordingly, the Company does not believe it will be
material affected by Year 2000 problems.
The Company could be improved by non-IT systems that may suffer from Year
2000 problems, including telephone systems and facsimile and other office
machines. Moreover, third-parties suppliers may suffer from Year 2000 problems
that could affect the Company's operations, including banks, oil field
operators, and utilities. In light of the Company's minimal operations, the
Company does not believe that such non-IT systems or third-party Year 2000
problems will affect the Company in a manner that is different or more
substantial than such problems affect other similarly situated companies or
industry generally. Consequently, the Company does not currently intend to
conduct a readiness assessment of Year 2000 problems or to develop a detailed
contingency plan with respect to Year 2000 problems that may affect the Company.
Item 3. Description of Property.
The Company has no property. The Company does not currently maintain an
office or any other facilities. It does currently maintain a mailing address at
P.O. Box 917, Casper, Wyoming 82602, which is the office address of its
President. The Company pays no rent for the use of this mailing address. The
Company does not believe that it will need to maintain an office at any time in
the foreseeable future in order to carry out its plan of operations described
herein.
Item 4. Security Ownership of Certain Beneficial Owners and Management.
The following table sets forth, as of the date of this Registration
Statement, the number of shares of Common Stock owned of record and beneficially
by executive officers, directors and persons who hold 5.0% or more of the
outstanding Common Stock of the Company. Also included are the shares held by
all executive officers and directors as a group.
26
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF SHARES OWNERSHIP
SHAREHOLDERS/BENEFICIAL OWNERS PERCENTAGE
----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Ronald A. Shogren, President 120,000 16.4%
49 Calypso
Casper, WY 82604
Rory L. Shogren, Secretary/Treasurer and Director 120,000 16.4%
49 Calypso
Casper, WY 82604
G. Todd Erickson, Director 120,000 16.4%
5170 Alcova Rt.
Box 5
Casper WY 82604
All directors and executive 360,000 49.2%
officers as a group (3 persons)
</TABLE>
Each principal shareholder has sole investment power and sole voting power over
the shares.
Item 5. Directors, Executive Officers, Promoters and Control Persons.
The directors and executive officers currently serving the Company are
as follows:
Name Position Held Tenure
-------------------------------------------------------------------
Ronald A. Erickson President and Director Annual since 1999
Rory L. Shogren Secretary, Treasurer and
Director Annual since 1999
G. Todd Erickson Director Annual since 1999
The directors named above will serve until the next annual meeting of
the Company's stockholders. Thereafter, directors will be elected for one-year
terms at the annual stockholders' meeting. Officers will hold their positions at
27
<PAGE>
the pleasure of the board of directors, absent any employment agreement, of
which none currently exists or is contemplated. There is no arrangement or
understanding between the directors and officers of the Company and any other
person pursuant to which any director or officer was or is to be selected as a
director or officer.
The directors and officers of the Company will devote such time to the
Company's affairs on an "as needed" basis, but less than 20 hours per month. As
a result, the actual amount of time which they will devote to the Company's
affairs is unknown and is likely to vary substantially from month to month.
Biographical Information
Ronald A. Shogren, age 57, is President and a Director of the company. Mr.
Shogren attended Eastern Montana College. Mr. Shogren is the past Exalted Ruler
of the Casper's Elk Lodge 1353. Mr. Shogren has been a licensed general
contractor from 1976 to present. Mr. Shogren also has seventeen years experience
as an insurance claims adjuster and presently owns and operates Cowboy State
Claims Service. Mr. Shogren is President and Director of Kearney, Inc. and a
director of Butts, Inc., and Garner Investments, Inc.
Rory L. Shogren, age 24 is Secretary/Treasurer and a Director of the
Company. Mr. Shogren is the owner and operator of Rocky Mountain Enterprises,
Inc. The business has 25 employees and operates in the state of Montana and
wyoming. Mr. Shogren is an officer and director of Rocky Mountain Enterprises,
Inc.
G. Todd Erickson, age 39, is a Director of the Company. Mr. Erickson is a
Computer Specialist and is the Team Leader of the Cardiopulmonary unit at the
Wyoming Medical Center in Casper, Wy. Mr. Erickson started his employment with
the Wyoming Medical Center in 1983. He was a Staff Tech, a Specials Tech, a
Supervisor, a Telemedical Coordinator, a Radiologic Technologist and spent two
and a half years as a Missionary in Albanian.
Family Relationships:
Secretary/Director, Rory L. Shogren is the son of President and Director Ronald
A. Shogren.
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<PAGE>
Management will devote minimal time to the operations of the Company,
and any time spent will be devoted to screening and assessing and, if warranted,
negotiating to acquire business opportunities.
None of the Company's officers and/or directors receives any
compensation for their respective services rendered to the Company, nor have
they received such compensation in the past. They all have agreed to act without
compensation until authorized by the Board of Directors, which is not expected
to occur until the Company has generated revenues from operations after
consummation of a merger or acquisition. As of the date of filing this report,
the Company has no funds available to pay officers or directors. Further, none
of the officers or directors is accruing any compensation pursuant to any
agreement with the Company. No retirement, pension, profit sharing, stock option
or insurance programs or other similar programs have been adopted by the Company
for the benefit of its employees.
It is possible that, after the Company successfully consummates a
merger or acquisition with an unaffiliated entity, that entity may desire to
employ or retain one or a number of members of the Company's management for the
purposes of providing services to the surviving entity, or otherwise provide
other compensation to such persons. However, the Company has adopted a policy
whereby the offer of any post-transaction remuneration to members of management
will not be a consideration in the Company's decision to undertake any proposed
transaction. Each member of management has agreed to disclose to the Company's
Board of Directors any discussions concerning possible compensation to be paid
to them by any entity which proposes to undertake a transaction with the Company
and further, to abstain from voting on such transaction. Therefore, as a
practical matter, if each member of the Company's Board of Directors were
offered compensation in any form from any prospective merger or acquisition
candidate, the proposed transaction would not be approved by the Company's Board
of Directors as a result of the inability of the Board to affirmatively approve
such a transaction.
It is possible that persons associated with management may refer a
prospective merger or acquisition candidate to the Company. In the event the
Company consummates a transaction with any entity referred by associates of
management, it is possible that such an associate will be compensated for their
29
<PAGE>
referral in the form of a finder's fee. It is anticipated that this fee will be
either in the form of restricted Common Stock issued by the Company as part of
the terms of the proposed transaction, or will be in the form of cash
consideration. However, if such compensation is in the form of cash, such
payment will be tendered by the acquisition or merger candidate, because the
Company has insufficient cash available. The amount of such finder's fee cannot
be determined as of the date of filing this report, but is expected to be
comparable to consideration normally paid in like transactions. No member of
management of the Company will receive any finders fee, either directly or
indirectly, as a result of their respective efforts to implement the Company's
business plan outlined herein.
The Company has adopted a policy that its affiliates and management
shall not be issued further common shares of the Company, except in the event
discussed in the preceding paragraphs.
Previous "Blank Check" or "Shell" Company Involvement
Management of the Company has been involved in prior private "blank
check" or "shell" companies as follows:
Ronald A. Shogren is President and Director of Kearney, Inc. and a
director of Butts, Inc., and Garner Investments, Inc.
Rory L. Shogren is an officer and director of Rocky Mountain Enterprises,
Inc.
Indemnification of Officers and Directors
As permitted by Wyoming Statutes, the Company may indemnify its
directors and officers against expenses and liabilities they incur to defend,
settle, or satisfy any civil or criminal action brought against them on account
of their being or having been Company directors or officers unless, in any such
action, they are adjudged to have acted with gross negligence or willful
misconduct. Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers or persons
controlling the Company pursuant to the foregoing provisions, the Company has
been informed that, in the opinion of the Securities and Exchange Commission,
30
<PAGE>
such indemnification is against public policy as expressed in that Act and is,
therefore, unenforceable.
Exclusion of Liability
The Wyoming Corporation Act excludes personal liability for its
directors for monetary damages based upon any violation of their fiduciary
duties as directors, except as to liability for any breach of the duty of
loyalty, acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, acts in violation of the Wyoming
Corporation Act, or any transaction from which a director receives an improper
personal benefit. This exclusion of liability does not limit any right which a
director may have to be indemnified and does not affect any director's liability
under federal or applicable state securities laws.
Conflicts of Interest
The officers and directors of the Company will not devote more than a
portion of their time to the affairs of the Company. There will be occasions
when the time requirements of the Company's business conflict with the demands
of their other business and investment activities. Such conflicts may require
that the Company attempt to employ additional personnel. There is no assurance
that the services of such persons will be available or that they can be obtained
upon terms favorable to the Company.
Conflicts of Interest - General. Certain of the officers and directors of the
Company may be directors and/or principal shareholders of other companies and,
therefore, could face conflicts of interest with respect to potential
acquisitions. In addition, officers and directors of the Company may in the
future participate in business ventures which could be deemed to compete
directly with the Company. Additional conflicts of interest and non-arms length
transactions may also arise in the future in the event the Company's officers or
directors are involved in the management of any firm with which the Company
transacts business. The Company's Board of Directors has adopted a policy that
the Company will not seek a merger with, or acquisition of, any entity in which
management serve as officers or directors, or in which they or their family
members own or hold a controlling ownership interest. Although the Board of
Directors could elect to change this policy, the Board of Directors has no
present intention to do so. In addition, if the Company and other companies with
which the Company's officers and directors are affiliated both desire to take
advantage of a potential business opportunity, then the Board of Directors has
agreed that said opportunity should be available to each such company in the
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<PAGE>
order in which such companies registered or became current in the filing of
annual reports under the Exchange Act subsequent to January 1, 1997.
The Company's officers and directors may actively negotiate or
otherwise consent to the purchase of a portion of their common stock as a
condition to, or in connection with, a proposed merger or acquisition
transaction. It is anticipated that a substantial premium over the initial cost
of such shares may be paid by the purchaser in conjunction with any sale of
shares by the Company's officers and directors which is made as a condition to,
or in connection with, a proposed merger or acquisition transaction. The fact
that a substantial premium may be paid to the Company's officers and directors
to acquire their shares creates a potential conflict of interest for them in
satisfying their fiduciary duties to the Company and its other shareholders.
Even though such a sale could result in a substantial profit to them, they would
be legally required to make the decision based upon the best interests of the
Company and the Company's other shareholders, rather than their own personal
pecuniary benefit.
<TABLE>
<CAPTION>
Item 6. Executive Compensation.
SUMMARY COMPENSATION TABLE OF EXECUTIVES
Annual Compensation Awards
------------------------ ------------ -------------- ------------ ----------------------- -------------------- ---------------------
Name and Principal Year Salary ($) Bonus ($) Other Annual Restricted Stock Securities
Position Compensation ($) Award(s) Underlying Options/
($) SARs (#)
------------------------ ------------ -------------- ------------ ----------------------- -------------------- ---------------------
<S> <C> <C> <C> <C> <C> <C>
Ronald A. Shogren 1999 0 0 0 0 0
President, 2000 0 0 0 0 0
Director
------------------------ ------------ -------------- ------------ ----------------------- -------------------- ---------------------
Rory L. Shogren, 1999 0 0 0 0 0
Secretary, Treasurer 2000 0 0 0 0 0
Director
------------------------ ------------ -------------- ------------ ----------------------- -------------------- ---------------------
G. Todd Erickson, 1999 0 0 0 0 0
Director 2000 0 0 0 0 0
------------------------ ------------ -------------- ------------ ----------------------- -------------------- ---------------------
</TABLE>
32
<PAGE>
<TABLE>
<CAPTION>
Directors' Compensation
-----------------------
Name Annual Meeting Consulting Number Number of
Retainer Fees Fees/Other of Securities
Fee ($) ($) Fees ($) Shares Underlying
(#) Options
SARs (#)
<S> <C> <C> <C> <C> <C>
A. Director 0 0 0 0 0
Ronald A. Shogren
B. Director
Rory L. Shogren 0 0 0 0 0
C. Director
G. Todd Erickson 0 0 0 0 0
</TABLE>
Option/SAR Grants Table (None)
Aggregated Option/SAR Exercises in Last Fiscal Year an FY-End Option/SAR
value (None)
Long Term Incentive Plans - Awards in Last Fiscal Year (None)
No officer or director has received any other remuneration in the two year
period prior to the filing of this registration statement. There is no current
plan in existence, to pay or accrue compensation to its officers and directors
for services related to seeking business opportunities and completing a merger
or acquisition transaction. See "Certain Relationships and Related
Transactions." The Company has no stock option, 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.
Item 7. Certain Relationships and Related Transactions.
In 1999, the Company issued to its founding directors a total of 360,000
shares of Common Stock for a total of $900. In 1999, 12 persons purchased
360,000 shares at $.0033 per share for a total of $1,200. Certificates
evidencing the Common Stock issued by the Company to these persons have all been
stamped with a restrictive legend, and are subject to stop transfer orders by
the Company. For additional information concerning restrictions that are imposed
upon the securities held by current stockholders, and the responsibilities of
such stockholders to comply
33
<PAGE>
with federal securities laws in the disposition of such Common Stock, see "Risk
Factors - Rule 144 Sales."
No officer, director, or affiliate of the Company has or proposes to
have any direct or indirect material interest in any asset proposed to be
acquired by the Company through security holdings, contracts, options, or
otherwise.
The Company has adopted a policy under which any consulting or finder's fee
that may be paid to a third party for consulting services to assist management
in evaluating a prospective business opportunity would be paid in stock or in
cash. Any such issuance of stock would be made on an ad hoc basis. Accordingly,
the Company is unable to predict whether or in what amount such a stock issuance
might be made.
Although management has no current plans to cause the Company to do so,
it is possible that the Company may enter into an agreement with an acquisition
candidate requiring the sale of all or a portion of the Common Stock held by the
Company's current stockholders to the acquisition candidate or principals
thereof, or to other individuals or business entities, or requiring some other
form of payment to the Company's current stockholders, or requiring the future
employment of specified officers and payment of salaries to them. It is more
likely than not that any sale of securities by the Company's 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 the Company would be
determined entirely by the largely unforeseeable terms of a future agreement
with an unidentified business entity.
Item 8. Description of Securities.
Common Stock
The Company's Articles of Incorporation authorize the issuance of
50,000,000 shares of Common Stock $.001 par value. Each record holder of Common
Stock is entitled to one vote for each share held on all matters properly
submitted to the stockholders for their vote. Cumulative voting for the election
of directors is not permitted by the Articles of Incorporation.
34
<PAGE>
Holders of outstanding shares of Common Stock are entitled to such
dividends as may be declared from time to time by the Board of Directors out of
legally available funds; and, in the event of liquidation, dissolution or
winding up of the affairs of the Company, holders are entitled to receive,
ratably, the net assets of the Company available to stockholders after
distribution is made to the preferred stockholders, if any, who are given
preferred rights upon liquidation. Holders of outstanding shares of Common Stock
have no preemptive, conversion or redemptive rights. All of the issued and
outstanding shares of Common Stock are, and all unissued shares when offered and
sold will be, duly authorized, validly issued, fully paid, and nonassessable. To
the extent that additional shares of the Company's Common Stock are issued, the
relative interests of then existing stockholders may be diluted.
Shareholders
Each shareholder has sole investment power and sole voting power over
the shares owned by such shareholder.
No shareholder has entered into or delivered any lock up agreement or
letter agreement regarding their shares or options thereon. Under Wyoming laws,
no lock up agreement is required regarding the Company's shares as it might
relate to an acquisition.
Transfer Agent
The Company has engaged Interstate Transfer Company, 874 E. 5900 South,
Suite 101, Salt Lake City, Utah 8410 as its transfer agent.
Reports to Stockholders
The Company plans to furnish its stockholders with an annual report for
each fiscal year containing financial statements audited by its independent
certified public accountants. In the event the Company enters into a business
combination with another company, it is the present intention of management to
continue furnishing annual reports to stockholders. The Company intends to
comply with the periodic reporting requirements of the Securities Exchange Act
of 1934 for so long as it is subject to those requirements, and to file
unaudited quarterly reports and annual reports with audited financial statements
as required by the Securities Exchange Act of 1934.
35
<PAGE>
PART II
Item 1. Market Price and Dividends on the Registrant's Common Equity and Other
Shareholder Matters
No public trading market exists for the Company's securities and all of its
outstanding securities are restricted securities as defined in Rule 144. There
were thirty (30) holders of record of the Company's common stock on September
30, 1999. No dividends have been paid to date and the Company's Board of
Directors does not anticipate paying dividends in the foreseeable future.
Item 2. Legal Proceedings
The Company is not a party to any pending legal proceedings, and no
such proceedings are known to be contemplated.
No director, officer or affiliate of the Company, and no owner of
record or beneficial owner of more than 5.0% of the securities of the Company,
or any associate of any such director, officer or security holder is a party
adverse to the Company or has a material interest adverse to the Company in
reference to any litigation.
Item 3. Changes in and Disagreements with Accountants.
Not applicable.
Item 4. Recent Sales of Unregistered Securities.
Since October 20, 1999 (the date of the Company's formation), the Company
has sold its Common Stock to the persons listed in the table below in
transactions summarized as follows:
Purchase Date of
Purchaser Per Share Amount Purchase Shares
--------- --------- ------ -------- ------
Michael R. Butler $.0033 100 11/02/99 40,000
13750 Bessemer Bend Rd.
Casper, Wy 82604
Brandy M. Caughron $.0033 100 11/02/99 40,000
P.O. Box 574
Mills, WY 82644
Lori J. Clark $.0033 100 11/02/99 40,000
4421 East Mulberry St.
Ft. Collins, CO 80524
Everett M. Fowler $.0033 100 11/02/99 40,000
P.O.Box 827
Spearfish, SD 57783
36
<PAGE>
Donn C. Douglass $.0033 100 11/02/99 40,000
255 Kearney
Denver, CO 80220
Rory L. Shogren $.0033 300 11/02/99 120,000
40 Calypso
Casper, WY 82604
G. Todd Erickson $.0033 300 11/02/99 120,000
56 Bird Farm Road
Sheridan, WY 82801
Sharon K. Fowler $.0033 100 11/02/99 40,000
M13740 Box 1
Evansville, WY 82636
Warren N. Golliher, M.D. $.0033 100 11/02/99 40,000
R.R. 1
Box 237D
Spearfish, SD 57783
Philip G. Hinds $.0033 100 11/02/99 40,000
P.O. Box 472
Evansville, WY 82636
Guy E. Fowler $.0033 100 11/02/99 40,000
56 Bird Farm Rd.
Sheridan, Wy 82801
Caroline Leach $.0033 100 11/02/99 40,000
3301 Arroya
Casper, WY 82604
Everett M. Gorden $.0033 100 11/02/99 40,000
107 Lampliter Lane
McMurray, PA 15317
Ronald A. Shogren $.0033 100 11/02/99 120,000
P.O. Box 4644
Casper, WY 82604
Andrea K. Hunt $.0033 300 11/02/99 40,000
2760 Robertson Rd. #75
Casper, WY 82604
37
<PAGE>
Each of the sales listed above was made for cash as listed. All of the listed
sales were made in reliance upon the exemption from registration offered by
Section 4(2) of the Securities Act of 1933, as amended and exemptions under
Wyoming law. Based upon Subscription Agreements completed by each of the
subscribers, the Company had reasonable grounds to believe immediately prior to
making an offer to the private investors, and did in fact believe, when such
subscriptions were accepted, that such purchasers (1) were purchasing for
investment and not with a view to distribution, and (2) had such knowledge and
experience in financial and business matters that they were capable of
evaluating the merits and risks of their investment and were able to bear those
risks. The purchasers had access to pertinent information enabling them to ask
informed questions. The shares were issued without the benefit of registration.
An appropriate restrictive legend is imprinted upon each of the certificates
representing such shares, and stop-transfer instructions have been entered in
the Company's transfer records. All such sales were effected without the aid of
underwriters, and no sales commissions were paid.
Item 5. Indemnification of Directors and Officers
The Wyoming Statutes provide that the Company may indemnify its
officers and directors for costs and expenses incurred in connection with the
defense of actions, suits, or proceedings where the officer or director acted in
good faith and in a manner he reasonably believed to be in the Company's best
interest and is a party by reason of his status as an officer or director,
absent a finding of negligence or misconduct in the performance of duty.
38
<PAGE>
SIGNATURES:
Pursuant to the requirements of Section 12 of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
DATED: December 5, 2000
Shogi, Inc.
/s/ Ronald A. Shogren
by: ------------------------------
Ronald A. Shogren, President
Directors:
/s/ Rory L. Shogren
----------------------------------
Rory L. Shogren, Secretary/Treasurer
& Director
/s/ G. Todd Erickson
----------------------------------
G. Todd Erickson, Director
30
<PAGE>
Shogi, Inc.
(A Development Stage Company)
FINANCIAL STATEMENTS
For the Period October 20, 1999 (Inception) to December 31, 1999
<PAGE>
Shogi, Inc.
(A Development Stage Company)
Index to Financial Statements
Shogi, Inc.
(A Development Stage Company)
FINANCIAL STATEMENTS
For the Period October 20, 1999 (Inception) to December 31, 1999
Cover Page F-1
Auditors Report F-2
Balance Sheet F-3
Statement of Operations F-4
Statement of Cash Flows F-5
Statement of Stockholders' Equity F-6
Notes to Financial Statements F-7 - F-8
Interim Financial Statements as of September 30, 2000
Cover Page F-9
Balance Sheet F-10
Statement of Operations F-11
Statement of Cash Flows F-12
Stockholders' Equity F-13
Notes to Financial Statements F-14 - F-15
<PAGE>
Shogi, Inc.
(A Development Stage Company)
FINANCIAL STATEMETNS
For the Period October 4, 1999 (Inception) to December 31, 1999
F-1
<PAGE>
MICHAEL JOHNSON & CO., LLC
Certified Public Accountants
9175 East Kenyon Ave., Suite 100
Denver, Colorado 80237
Michael B. Johnson C.P.A. Telephone: (303) 796-0099
Member: A.I.C.P.A. Fax: (303) 796-0137
Colorado Society of C.P.A.s
INDEPENDENT AUDITORS' REPORT
Board of Directors
Shogi, Inc.
Casper, WY
We have audited the accompanying balance sheet of SHOGI, INC., (A Development
Stage Company) as of December 31, 1999 and the related statements of operations,
stockholders' equity, and cash flows for the period October 20, 1999 (inception)
through December 31, 1999. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
These standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes 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.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of SHOGI, INC., as of December 31,
1999, and the results of their operations and their cash flows for the period
October 20, 1999 (inception) through December 31, 1999 in conformity with
generally accepted accounting principles.
/s/ Michael Johnson & Co., LLC
Denver, Colorado
January 19, 2000
F-2
<PAGE>
Shogi, Inc.
(A Development Stage Company)
Balance Sheet December 31
(audited)
ASSETS: 1999
----
Current Assets:
Cash $ 605
--------
Total Current Assets 605
TOTAL ASSETS $ 605
========
LIABILITIES & STOCKHOLDERS' EQUITY
Stockholders' Equity (Note 3)
50,000,000 shares authorized $.001 par value 840
840,000 shares issued and outstanding in 1999
Additional Paid-In Capital 1,260
Deficit accumulated during the
development stage (1,495)
-------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 605
=======
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
Shogi, Inc.
(A Development Stage Company)
Statement of Operations
For the Year Ended December 31, 1999
(since inception)
(audited)
1999
----
Revenue:
Interest Income $ 5
--------
Total Income 5
Costs and Expenses:
Accounting Fees 1,400
Filing Fees 100
--------
Total Expenses 1,500
--------
Net Loss ($1,495)
========
Per Share Information:
Weighted average number
of common shares outstanding 140,000
--------
Net Loss per common share ($0.01)
========
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
Shogi, Inc.
(A Development Stage Company)
Statement of Cash Flow
For the Year Ended December 31, 1999
1999
----
Cash Flows from Operating Activities:
Net Loss ($1,495)
--------
Net Cash Provided by operating Activities (1,495)
Cash Flows from Financing Activities:
Proceeds from stock issuance 2,100
--------
Net Cash Provided by Financing Activities 2,100
--------
Net Increase in Cash & Cash Equivalents 605
Beginning Cash & Cash Equivalents -
--------
Ending Cash & Cash Equivalents $ 605
========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash Paid During the Year for:
Interest -
Income Taxes -
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
<TABLE>
<CAPTION>
Shogi, Inc.
Stockholders' Equity
December 31, 1999
COMMON STOCK Additional Retained Total
Paid-In Earnings Stockholders'
Shares Amount Capital (Deficit) Equity
------ ------ ---------- --------- -------------
<S> <C> <C> <C> <C> <C>
Issuance 9/22/99 for Cash 840,000 $840 $1,260 $ - $ 2,100
Net Deficit 12/31/99 - - - ($1,495) (1,495)
------- ---- ------ -------- --------
Balance December 31, 1999 840,000 $840 $1,260 ($1,495) 605
======= ==== ====== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
Shogi, Inc.
(A Development Stage Company)
Notes to Financial Statements
For the Period October 20, 1999 (Inception) to December 31, 1999
Note 1 - Organizational and Summary of Significant Accounting Policies:
Organization:
------------
The Company was incorporated on October 20, 1999, in the state of Wyoming. The
Company is in the development stages and was organized for the purpose of
raising capital. The Company's fiscal year end is December 31.
Basis of Presentation:
---------------------
The Company is primarily engaged in capital raising. The authorized capital
stock of the corporation is 50,000,000 shares of common stock at $.001 par
value.
Cash and Cash Equivalents:
-------------------------
The Company considers all highly liquid debt instruments, purchased with an
original maturity of three months or less to be cash equivalents.
Revenue Recognition:
-------------------
Revenue is recognized when earned and expenses are recognized when they occur.
Use of Estimates:
----------------
The preparation of financial statements, in conformity with generally accepted
accounting principles, requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenue and expenses during the reporting period.
Actual results could differ from those estimates.
Net Loss Per Share:
------------------
Net loss per share is based on the weighted average number of common shares and
common shares equivalents outstanding during the period.
F-7
<PAGE>
Shogi, Inc.
(A Development Stage Company)
Notes to Financial Statements
For the Period October 20, 1999 (Inception) to December 31, 1999
Note 2 - Federal Income Taxes:
The Company accounts for income taxes under SFAS No. 109, which requires the
asset and liability approach to accounting for income taxes. Under this
approach, deferred income taxes are determined based upon differences between
the financial statement and tax bases for the Corporation's assets and
liabilities and operating loss carryforwards using enacted tax rates in effect
for the years in which the difference are expected to reverse. Deferred taxes
are recognized if it is more likely than not that the future tax benefit will be
realized.
Note 3 - Stockholders' Equity
During the period, the Company issued 840,000 shares of its $.001 par value
common stock. 840,000 shares were sold in September 1999 for cash of $2,100.
Note 4 - Related Party Transactions
The officers and directors of this Company are also officers and directors of
other companies.
F-8
<PAGE>
Shogi, Inc.
(A Development Stage Company)
INTERIM FINANCIAL STATEMENTS
For the Three-Months and Nine Months Ended June 30, 2000
(Unaudited)
F-9
<PAGE>
<TABLE>
<CAPTION>
Shogi, Inc.
(A Development Stage Company)
Balance Sheet
For the Nine Months Ended September 30, 2000
(Unaudited)
Period
Ended
September 30, 2000 December 31, 1999
ASSETS:
<S> <C> <C>
Current Assets:
Cash $ 605 $ 605
-------- --------
Total Current Assets 605 605
Total Assets 605 605
Liabilities
======== ========
LIABILITIES & STOCKHOLDERS' EQUITY 0 0
Stockholders' Equity (Note 3):
50,000,000 shares authorized $.001 par value,
720,000 shares issued and outstanding. 840 840
Additional paid-in capital 1,260 1,260
Deficit accumulated during the
development stage (1,495) (1,495)
-------- --------
Total Liabilities & Stockholders' Equity 605 605
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-10
<PAGE>
<TABLE>
<CAPTION>
Shogi, Inc.
(A Development Stage Company)
Statement of Operations
For the Three and Nine Months Ended September 30,
(Unaudited)
Three-Months Ended Nine-Months Ended
September 30, September 30, September 30, September 30,
2000 1999 2000 1999
------------ ------------ ------------- -------------
<S> <C> <C> <C> <C>
Revenue
$ - $ - $- $ -
Costs and Expenses:
Office Expenses - - - -
Filing Fees - 100 - 100
Audit Fees - - - -
------------ ------------ ---------- --------
Net Loss $ - $(100) - $ (100)
============ ============ ========== ========
Per share information:
Weighted average number
of common shares outstanding 840,000 840,000 840,000 840,000
------------ ------------ -------- --------
Net Loss per common share * ($.0) - ($.0)
============ ============ ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-11
<PAGE>
<TABLE>
<CAPTION>
Shogi, Inc.
(A Development Stage Company)
Statement of Cash Flows
For the Nine-Months Ended September 30
(Unaudited)
September 30, September 30,
2000 1999
------------- -------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net Loss $ (0) ($100)
Decrease in Investment - -
----------- ------
Net cash provided by operating activities (0) (100)
Cash Flows from Financing Activities:
Proceeds from stock issuance, net of
issuance costs. - 2100
----------- ------
Net Cash Provided by Financing Activities - 2100
----------- ------
Net Decrease in Cash and Cash Equivalent (0) 2000
Beginning Cash and Cash Equivalent 605 -
----------- ------
Ending Cash and Cash Equivalent $ 605 $2000
=========== ======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash Paid During the Year for:
Interest -
Income Taxes -
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-12
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Shogi, Inc.
Stockholders' Equity
September 30, 1999
COMMON STOCK Additional Retained Total
Paid-In Earnings Stockholders'
Shares Amount Capital (Deficit) Equity
------ ------ ---------- --------- -------------
<S> <C> <C> <C> <C> <C>
Issuance 9/22/99 for Cash 840,000 $840 $1,260 $ - $ 2,100
Net Deficit 12/31/99 - - - ($1,495) (1,495)
------- ---- ------ -------- --------
Balance December 31, 1999 840,000 $840 $1,260 ($1,495) 605
======= ==== ====== ======== ========
Accumulated Deficit at
September 30, 2000 - - - ($1,495) -
------- ---- ------- -------- --------
Balance September 30, 2000 840,000 $840 $1,260 ($1,495) 605
======= ===== ======= ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-13
<PAGE>
Shogi, Inc.
(A Development Stage Company)
Notes to Financial Statements
For the Period ended September 30, 2000
Note 1 - Organizational and Summary of Significant Accounting Policies:
Organization:
------------
The Company was incorporated on October 20, 1999, in the state of Wyoming. The
Company is in the development stages and was organized for the purpose of
raising capital. The Company's fiscal year end is December 31.
Basis of Presentation:
---------------------
The Company is primarily engaged in capital raising. The authorized capital
stock of the corporation is 50,000,000 shares of common stock at $.001 par
value.
Cash and Cash Equivalents:
-------------------------
The Company considers all highly liquid debt instruments, purchased with an
original maturity of three months or less to be cash equivalents.
Revenue Recognition:
-------------------
Revenue is recognized when earned and expenses are recognized when they occur.
Use of Estimates:
----------------
The preparation of financial statements, in conformity with generally accepted
accounting principles, requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenue and expenses during the reporting period.
Actual results could differ from those estimates.
Net Loss Per Share:
------------------
Net loss per share is based on the weighted average number of common shares and
common shares equivalents outstanding during the period.
F-14
<PAGE>
Shogi, Inc.
(A Development Stage Company)
Notes to Financial Statements
For the Period Ended September 30, 2000
Note 2 - Federal Income Taxes:
The Company accounts for income taxes under SFAS No. 109, which requires the
asset and liability approach to accounting for income taxes. Under this
approach, deferred income taxes are determined based upon differences between
the financial statement and tax bases for the Corporation's assets and
liabilities and operating loss carryforwards using enacted tax rates in effect
for the years in which the difference are expected to reverse. Deferred taxes
are recognized if it is more likely than not that the future tax benefit will be
realized.
Note 3 - Stockholders' Equity
The Company issued 840,000 shares of its $.001 par value common stock in
September 1999 for cash of $2,100.
Note 4 - Related Party Transactions
The officers and directors of this Company are also officers and directors of
other companies.
F-15
<PAGE>
INDEX TO EXHIBITS
SK#
3.1 Articles of Incorporation
3.2 Bylaws