UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Darby Acquisition Corporation (Name of small business issuer in its charter)
Delaware 6770 ###-##-####
---------------------- ---------------------------- -------------------
(State or Jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Incorporation or Classification Code Number) Identification No.)
Organization)
Darby Acquisition Corporation
16 Corporate Woods Boulevard
Albany, New York 12211
(518) 432-7270
(Address and telephone number of principal executive offices)
Darby Acquisition Corporation
16 Corporate Woods Boulevard
Albany, New York 12211
(Address of Principal place of business or intended principal place of business)
Whiteman Osterman & Hanna
One Commerce Plaza
Albany, New York 12260
(518) 487-7600
Matthew P. Hoff, Esq.
(Name, address, and telephone number of agent for service)
APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC: As soon as practicable after
the effective date of this Registration Statement and Prospectus.
We may amend this registration statement on such date or dates as may be
necessary to delay its effective date until we file a further amendment which
specifically states that this registration statement shall thereafter become
effective in accordance with Section 8(a) of the Securities Act of 1933 or until
the registration statement shall become effective on a date that the SEC, acting
pursuant to said Section 8(a), may determine.
<PAGE>
CALCULATION OF REGISTRATION FEE
Title of Each Class of Amount Proposed Proposed
Securities Being Being Maximum Maximum
Registered Registered Offering Price Aggregate
Per Share (1) Offering Price (1)
Shares of Common Stock 300,000 $10.00 $3,000,000
TOTAL 300,000 $10.00 $3,000,000
(1) Estimated for purposes of computing the registration fee pursuant to
Rule 457.
Cross Reference Sheet Showing the
Location In Prospectus of Information
Required by Items of Form SB-2
Part I. Information Required in Prospectus
Item No. Required Item Location or Caption
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1. Front of Registration Statement Front of Registration
and Outside Front Cover of Statement and outside
Prospectus front cover of Prospectus
2. Inside Front and Outside Back Inside Front Cover Page
Cover Pages of Prospectus of Prospectus and Outside
Front Cover Page of Prospectus
3. Summary Information and Risk Prospectus Summary;
Factors High Risk Factors
4. Use of Proceeds Use of Proceeds
5. Determination of Offering Prospectus Summary -
Price Determination of Offering Price;
High Risk Factors
6. Dilution Dilution
7. Selling Security Holders Not Applicable
<PAGE>
8. Plan of Distribution Plan of Distribution
9. Legal Proceedings Litigation
10. Directors, Executive Officers, Management
Promoters and Control Persons
11. Security Ownership of Certain Principal Stockholders
Beneficial Owners and Management of Common Stock
12. Description of Securities Description of Securities
13. Interest of Named Experts and Legal Opinions; Experts
Counsel
14. Disclosure of Commission Position Statement as to
on Indemnification Indemnification for
Securities Act Liabilities
15. Organization Within Last Management, Certain
Five Years Transactions
16. Description of Business Proposed Business,
Remuneration
17. Management's Discussion and Proposed Business -
and Analysis or Plan of Operation Plan of Operation
18. Description of Property Proposed Business
19. Certain Relationships and Related Certain Transactions
Transactions
20. Market for Common Stock and Prospectus Summary,
Related Stockholder Matters Market for Registrant's Common
Stock and Related Stockholders
Matters; Shares Eligible for
Future Sale.
21. Executive Compensation Remuneration
22. Financial Statements Financial Statements
<PAGE>
23. Changes in and Disagreements Not Applicable
with Accountants on Accounting
and Financial Disclosure
<PAGE>
PROSPECTUS
Darby Acquisition Corporation
(A Delaware Corporation)
300,000 Shares of Common Stock Offered at $10.00 per Share
Darby Acquisition Corporation is offering for sale 300,000 shares of $.001
par value common stock for $10.00 per share. We will sell the shares on a
"best-efforts" basis for a period of up to one hundred eighty days (180) days
and will not use a professional underwriter or securities dealer. We will
conduct the offering on a minimum-maximum basis for a minimum of 50,000 shares
and a maximum of 300,000 shares, with the minimum purchase being 250 shares. If
we do not receive subscriptions to purchase at least 50,000 shares, we will
terminate the offering and return all subscription funds to investors with
interest. This is a "blank-check" offering being made in compliance with Rule
419 of Regulation C of the Securities and Exchange Commission. Under this rule,
the offering proceeds and the securities to be issued to purchasers will be
placed in an escrow account until the offering has been reconfirmed by our
shareholders and a business combination or merger is consummated. Because the
securities that we are offering constitute "penny stock", certain sales
restrictions apply to these securities. (See "Risk Factors", p. 6). The
officers, directors and shareholders of the company are Laurance C. Monks and
Roger D. Shearer.
Investing in our common stock involves substantial risks. See "Risk
Factors" beginning on page 6. Neither the U.S. Securities and Exchange
Commission nor the securities commission of any state has approved or
disapproved these securities, nor have they passed upon the accuracy or adequacy
of this prospectus. Any representation to the contrary is a criminal offense.
Prior to this offering, there has been no public market for the common stock of
the company. We cannot assure you that any trading market in these securities
will ever develop.
<TABLE>
<CAPTION>
Shares Offered Price to Public Underwriting Maximum Proceeds
Discounts and to Issuer
Commission
<S> <C> <C> <C> <C>
Per Share $10.00 n/a $10.00
Min. Share Amount 50,000 $10.00 n/a $50,000.00
Max Share Amount 300,000 $10.00 n/a $3,000,000.00
</TABLE>
1. Because the issuer's existing shareholder is paying expenses of the
offering, proceeds to the issuer are not subject to reduction on account of
such expenses.
2. We offer the securities for cash, payable when you subscribe. We will
manage the offering and sell the shares without any discounts or other
commissions through our officers, according to the safe harbor provisions
of Rule 3 a 4 (1) of the Securities Exchange Act of 1934.
3. After we receive investors' funds, we will immediately deposit them in an
escrow account which will be maintained by Whiteman Osterman & Hanna, One
Commerce Plaza, Albany, New York 12260. All investors' checks or money
orders must be made payable to "Whiteman Osterman & Hanna, as Escrow Agent
for Darby Acquisition Corporation."
4. The investors' funds will remain as deposited in the escrow account and may
not be traded or transferred, except that Federal regulations permit us to
withdraw up to 10% of the proceeds of the offering. We intend to ask the
escrow agent to release to us up to 10% of the proceeds of the offering.
We have filed a registration statement relating to these securities with
the Securities and Exchange Commission. The information in this prospectus is
not complete and may change. We will not sell these securities until the
registration statement is effective. This prospectus is not an offer to sell
these securities and it is not soliciting an offer to buy in any state when the
offer or sale is not permitted.
Darby Acquisition Corporation
16 Corporate Woods Boulevard
Albany, New York 12211
(518) 432-7270
The date of this Prospectus is November 22, 2000.
<PAGE>
TABLE OF CONTENTS
PROSPECTUS SUMMARY...........................................................1
The Company.........................................................1
The Offering .......................................................1
More About Rule 419 ................................................2
Risk Factors .......................................................2
Determination of Offering Price ....................................2
Use of Proceeds ....................................................2
SUMMARY FINANCIAL INFORMATION................................................3
YOUR RIGHTS AND SUBSTANTIVE PROTECTION UNDER RULE 419........................3
Deposit of Offering Proceeds and Securities ........................4
Acquisition Criteria ...............................................5
Post-Effective Amendment ...........................................5
Reconfirmation Offering ............................................5
Release of Securities and Funds ....................................6
HIGH RISK FACTORS............................................................6
DILUTION....................................................................13
USE OF PROCEEDS.............................................................15
CAPITALIZATION..............................................................17
PROPOSED BUSINESS...........................................................17
History of Organization............................................17
Plan of Operation..................................................18
Evaluation of Business Combinations................................20
Business Combinations..............................................21
Regulation.........................................................22
Employees..........................................................23
Facilities ........................................................23
MANAGEMENT..................................................................24
Biographies ....................................................24
Executive Compensation.............................................24
Other Blank Check Companies .......................................24
Conflicts of Interest .............................................24
Remuneration ......................................................25
Management Involvement ............................................25
Management Control ................................................25
STATEMENT AS TO INDEMNIFICATION ............................................25
MARKET FOR THE COMPANY'S COMMON STOCK ......................................26
PRINCIPAL AND SELLING STOCKHOLDERS..........................................27
DESCRIPTION OF SECURITIES...................................................28
Common Stock ......................................................28
Future Financing ..................................................28
Reports to Stockholders ...........................................29
Dividends .........................................................29
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Transfer Agent ....................................................29
PLAN OF DISTRIBUTION........................................................29
Method of Subscribing .............................................30
EXPIRATION DATE.............................................................30
LITIGATION..................................................................31
LEGAL OPINIONS..............................................................31
EXPERTS.....................................................................31
FURTHER INFORMATION.........................................................31
FINANCIAL STATEMENTS........................................................32
INFORMATION NOT REQUIRED IN PROSPECTUS......................................40
EXPENSES OF ISSUANCE AND DISTRIBUTION.......................................42
RECENT SALES OF UNREGISTERED SECURITIES.....................................43
EXHIBITS ...................................................................43
UNDERTAKINGS................................................................43
<PAGE>
PROSPECTUS SUMMARY
Darby Acquisition Corporation
16 Corporate Woods Boulevard
Albany, New York 12211
The following is a summary of certain information contained in this
Prospectus. Because this is a summary, it may not contain all the information
that you should consider before purchasing our common stock. You should read the
entire prospectus carefully.
The Company
Darby Acquisition Corporation was incorporated under the laws of the State
of Delaware on October 17, 2000 . We are a development stage entity, and have
neither engaged in any operations nor generated any revenues to date.
The company was organized as a vehicle to acquire or merge with another
business or company. This type of company is referred to as a "blank check
company" as defined in Rule 419 of Regulation C under the Securities and
Exchange Act of 1933.
Management believes that the company's characteristics as an enterprise
with liquid assets, nominal liabilities, a registered class of securities and
flexibility in structuring will make the company an attractive combination
candidate.
We have not yet identified any specific business or company as acquisition
or merger target.
The company does not intend to engage in the business of investing,
reinvesting or trading in securities as its primary business or pursue any
business which would render the company an "investment company" pursuant to the
Investment Company Act of 1940. Darby Acquisition Corporation will be referred
to in this prospectus as "we," "us," "our," or "the company."
The Offering
<TABLE>
<CAPTION>
<S> <C>
Securities offered.................................................................300,000 Shares of Common Stock,
$.001 par value, being
offered at $10.00 per Share.
(See "Description Securities".)
Shares of Common Stock outstanding prior to the offering...................................................100,000
Minimum number of Shares of Common Stock to be outstanding after the offering..............................150,000
Maximum number of Shares of Common Stock to be outstanding after the offering...............................400,000
</TABLE>
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<PAGE>
More About Rule 419
Under Rule 419, investors have certain rights and will receive the
substantive protection provided by the Rule. The securities purchased by you and
other investors and the funds received in the offering will be deposited and
held in an escrow account until an acquisition meeting specific criteria is
completed. Before the acquisition can be completed and before the escrow funds
and securities can be released to the company and the investors, we will update
the registration statement with a post-effective amendment. This will give you
and other investors the details of the proposed acquisition or merger. You will
then have up to 45 days to reconfirm your investment (See "Your Rights Under
Rule 419").
Risk Factors
An investment in our common stock is highly speculative and involves a high
degree of risk. You should not purchase shares in the offering if you expect
short-term earnings or appreciation in the value of our company. (See "High Risk
Factors" and "Dilution.")
Determination of Offering Price
The offering price of $10.00 per share has been arbitrarily determined by
the company. This price bears no relation to our assets, book value, or any
other customary investment criteria, including our prior operating history.
Among factors we considered in determining the offering price were estimates of
the company's business potential, the limited financial resources of the
company, the amount of equity and control desired to be retained by the present
shareholders, the amount of dilution to public investors and the general
condition of the securities markets.
Use of Proceeds
If all of the shares are sold, then the gross proceeds of this offering
will be $3,000,000. Ten percent of this amount, or $300,000, may be released to
the company before you reconfirm your investment in accordance with Rule 419.
The balance of the proceeds will be used to defray the expense of a merger or
acquisition.
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<PAGE>
SUMMARY FINANCIAL INFORMATION
The following is a summary of our consolidated financial information. It is
derived from our audited financial statements appearing elsewhere in this
prospectus and should be read in conjunction with those statements. As the
company was incorporated on October 17, 2000 and the date of this prospectus is
November 17, 2000, the company's financial information is limited to its balance
sheet as of the date of the audited financials.
Statement of Operations Data:
Net Revenues.................................................. $ -0-
Net Loss...................................................... ($1,000)
Net Loss Per Share............................................ ($ .01 )
Shares Outstanding............................................ 100,000
As of October 31, 2000
Balance Sheet Data Pro-forma After Offering
If Maximum Sold(1) If Minimum Sold(2)
Working Capital $10,000 $3,010,000 $510,000
Total Assets $10,000 $3,010,000 $510,000
Long-Term Debt $ - 0 - $ - 0 - $ - 0 -
Total Liabilities $ - 0 - $ - 0 - $ - 0 -
Shareholder's Equity $10,000 $3,010,000 $510,000
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(1) Assuming that the maximum number of shares of common stock are sold,
$2,700,000 of this amount will be restricted pursuant to Rule 419. Upon the
sale of the maximum number of shares of common stock in this offering, the
company will receive deposited funds of approximately $3,000,000, all of
which must be deposited in the escrow account of the deposited funds. We
may, however, use $300,000 of the deposited funds as capital in order to
seek a business combination. We intend to request release of these funds
from escrow.
(2) Assuming that the minimum number of shares of common stock are sold,
$450,000 of this amount will be restricted pursuant to Rule 419. Upon the
sale of the minimum number of shares of common stock in this offering, the
company will receive deposited funds of approximately $500,000, all of
which must be deposited in the escrow account of the deposited funds. We
may, however, use $50,000 of the deposited funds as capital in order to
seek a business combination. We intend to request release of these funds
from escrow.
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<PAGE>
YOUR RIGHTS AND SUBSTANTIVE PROTECTION UNDER RULE 419
Deposit of Offering Proceeds and Securities
Rule 419 requires that offering proceeds after deduction for underwriting
commissions, underwriting expenses and dealer allowances, if any, and the
securities purchased by investors in this offering, be deposited into an escrow
or trust account. Under Rule 419, the escrowed funds and securities will be
released to the company and to the investors, only after the company has met the
following three basic conditions.
o First, we must execute an agreement for an acquisition meeting certain
prescribed criteria.
o Second, we must file a post-effective amendment to the Registration
Statement which gives you the opportunity to reconfirm your
investment. The post-effective amendment must also contain information
regarding the acquisition candidate and its business, including
audited financial statements.
o Third, we must conduct the reconfirmation offer and satisfy all of the
prescribed conditions, including the condition that a certain minimum
number of investors must elect to remain investors.
After we submit a signed representation to the escrow agent that these
conditions 419 have been met and after the acquisition or merger is consummated,
the escrow agent can release the escrowed funds and securities.
Accordingly, the company has entered into an escrow agreement with Whiteman
Osterman & Hanna which provides that:
(1) The proceeds will be deposited into the escrow account promptly upon
receipt. Rule 419 permits 10% of the escrowed funds to be released to the
company before the reconfirmation offering. The escrowed funds and any dividends
or interest they earn, if any, are to be held for the sole benefit of the
investors and can only be invested in bank deposits, in money market mutual
funds or federal government securities or securities for which the principal or
interest is guaranteed by the federal government.
(2) All securities issued in connection with the offering and any other
securities issued with respect to such securities, including securities issued
with respect to stock splits, stock dividends or similar rights are to be
deposited directly into the escrow account promptly upon issuance. The identity
of the investor is to be included on any stock certificate or other document
evidencing the securities. The securities held in the escrow account will remain
as issued, and will
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<PAGE>
be held for the sole benefit of the investors who retain the voting rights, if
any, with respect to the securities held in their names. The securities held in
the escrow account may not be transferred or disposed of, nor may any interest
be created in them other than by will or the laws of descent and distribution,
or pursuant to a qualified domestic relations order as defined by the Internal
Revenue Code of 1986, as amended, or Table 1 of the Employee Retirement Income
Security Act.
(3) Warrants, convertible securities or other derivative securities, if
any, relating to securities held in the escrow account may be exercised or
converted in accordance with their terms; provided that, however, the securities
received upon exercise or conversion together with any cash or other
consideration paid in connection with the exercise or conversion are to be
promptly deposited into the escrow account.
Acquisition Criteria
Rule 419 requires that before the funds and the securities in the escrow
account can be released, we must first execute an agreement to acquire an
acquisition candidate that meets certain specified criteria. The agreement must
provide for the acquisition of a business or assets whose fair value represents
at least 80% of the maximum proceeds of this offer. The agreement must include,
as a precondition to closing, a requirement that the number of investors
representing 80% of the maximum offering proceeds must elect to reconfirm their
investment. For purposes of the offering, the fair value of the business or
assets to be acquired must be at least $400,000 (80% of $500,000) if the minimum
number of shares of our stock are sold, or $2,400,000 (80% of $3,000,000) if the
maximum number of shares are sold.
Post-Effective Amendment
Once we execute the agreement to acquire or merge with a business that
meets the above criteria, we must update the registration statement with a
post-effective amendment. The post- effective amendment must contain information
about the proposed acquisition or merger candidate and its business, including
audited financial statements, the results of this offering and the use of the
funds disbursed from the escrow account. The post-effective amendment must also
include the terms of the reconfirmation offer required by Rule 419. The
reconfirmation offer must include certain prescribed conditions which must be
satisfied before the offering proceeds and securities can be released from
escrow.
Reconfirmation Offering
The reconfirmation offer must commence after the effective date of the
post-effective amendment. Under Rule 419, the terms of the reconfirmation offer
must include the following conditions:
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<PAGE>
(1) The prospectus contained in the post-effective amendment will be sent
to each investor whose securities are held in the escrow account within 5
business days after the effective date of the post-effective amendment.
(2) Each investor will have no fewer than 20 and no more than 45 business
days from the effective date of the post-effective amendment to notify us in
writing that the investor elects to remain an investor.
(3) If we do not receive written notification from any investor within 45
business days following the effective date, the pro rata portion of the funds
(and any related interest or dividends) held in the escrow account on the
investor's behalf will be returned to the investor within 5 business days by
first class mail or other equally prompt means.
(4) The acquisition or merger will be consummated only if investors
representing 80% of the offering proceeds ($400,000 if the minimum number of
shares are sold in this offering, $2,400,000 if the maximum number of shares are
sold) elect to reconfirm their investment.
(5) If we have not consummated an acquisition or merger by within 18 months
from the date of this prospectus, the funds held in the escrow account shall be
returned to all investors on a pro rata basis within 5 business days by first
class mail or other equally prompt means.
Release of Securities and Funds
The funds will be released to us, and the securities will be released to
you and other investors after the escrow agent has received a signed
representation from the company and any other evidence acceptable by the escrow
agent that:
o We have executed an agreement for an acquisition or merger;
o The fair market value of the acquisition or merger candidate represents at
least 80% of the maximum offering proceeds;
o We have filed the required post-effective amendment;
o The post-effective amendment has been declared effective, that the mandated
reconfirmation offer having the conditions prescribed by Rule 419 has been
completed and that the company has satisfied all of the prescribed
conditions of the reconfirmation offer.
HIGH RISK FACTORS
There is a high degree of risk associated with an investment in our common
stock. You should know that our business, financial condition or results of
operations, and especially, that of any business we acquire, could be materially
and adversely affected by any of the following risks. Consequently, the shares
we are offering should be purchased only by investors who can afford to lose
their entire investment. Carefully consider these factors before considering the
purchase of the shares.
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<PAGE>
1. We anticipate a change in control and management. Upon the completion of
this offering, our sole existing shareholder will own approximately sixty-six
per cent (66%) of our common stock if the minimum number of shares are sold in
this offering, and twenty-five per cent (25%) if the maximum number of shares
are sold. However, once we merge with or acquire another business, we anticipate
that we will have to issue to that entity an amount of our common stock which
will comprise a majority of the issued and outstanding shares of our common
stock. This will likely result in a change of control in the company. In
addition, the company's present officers and directors will likely resign or be
removed. We cannot assure you of the experience or qualification of new
management either in the operation of the company's activities or in the
operation of the business, assets or property being acquired.
2. We are a development stage company with no record for you to evaluate.
The company was incorporated in the State of Delaware on October 17, 2000 and
has had no operations to date. The company was formed to serve as a vehicle to
effect a business combination. We cannot assure you that the company's intended
acquisition or merger activities will succeed or be profitable. Since we have
not yet attempted to seek a business combination, and due to our lack of
experience, there is only a limited basis upon which to evaluate the company's
prospects for achieving its intended business objectives. We face all risks
which are associated with any new business. Any investment in these securities
should be considered an extremely high risk investment.
3. We have some discretion in use of the proceeds. 90% of the net proceeds
of this offering must be held in escrow until we enter into a business
combination, which must occur within 18 months of the effective date of this
offering. The funds from this offering may not be sufficient to fund the
company's search for a merger or acquisition candidate. Rule 419 permits 10% of
the net proceeds of the offering to be disbursed to the company from the escrow
account before we enter into an acquisition or merger. We intend to request
release of this money. If we do not request release of these funds, we will
receive these funds in the event we enter into an acquisition or merger.
4. You will have no access to your money while it is in escrow. We are
offering for sale 300,000 shares, at $10.00 per Share. The maximum offering
period is 180 days. No one has committed to purchase any portion of these
securities. You will have no right to the return or the use of your money and
you cannot earn interest on it until conclusion of the offering. Your money
(minus payments for expense amounts, if any, which are permitted by Rule 419)
may remain in the escrow account, and will not earn interest. You will have no
right to the return of or the use of their funds for a period of 18 months from
the effective date.
Investors will be offered return of their pro rata portion of the funds
held in escrow only in connection with the reconfirmation offering. If the
company is unable to find an acquisition or merger target, you will have to wait
18 months from the effective date before a pro rata portion of your money is
returned without interest.
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<PAGE>
5. We will not be able to consummate an acquisition or merger if enough
investors do not reconfirm their investment. Under Rule 419, investors
representing 80% of the maximum offering proceeds must reconfirm their
investments in order for us to merge with or acquire a business. Otherwise, the
business combination will not be consummated, none of the securities held in
escrow will be issued and the escrowed funds will be returned to investors on a
pro rata basis.
6. We have extremely limited capital. As of October 31, 2000, we had assets
of $10,000 and no liabilities. If we sell the maximum number of shares offered,
we will receive $3,000,000 in proceeds. We may use $300,000 of that amount as
capital to seek a business combination. If we sell the minimum number of shares,
we will receive $500,000 in proceeds and may use $50,000 as capital to seek a
business combination. We will use the money in the company's treasury to pay the
costs of conducting the company's business activities. Assuming suitable
prospects are identified, if ever, the company may be unable to complete an
acquisition or merger due to a lack of sufficient funds. For example, this may
occur if a target company insists the company obtain additional capital.
Therefore, we may need additional financing in order to consummate a business
combination. Such financing may consist of the issuance of debt or equity
securities. We cannot assure you that such funds will be available, that they
will be available on terms acceptable to us.
7. The escrowed securities may not be sold. You will not be able to
transfer the escrowed securities except by will or the laws of descent and
distribution, or pursuant to a qualified domestic relations order (divorce
proceedings) as that term is defined by the Internal Revenue Code of 1986, or
Title 7 of the Employee Retirement Income Security Act. The law prohibits you
from selling or offering to sell the securities held in the escrow account other
than in divorce proceedings. Therefore, any contract which obligates you to
deliver the securities (e.g., contract for sale on a "when as" and "if used"
basis) are prohibited. You also may not sell any interest in the securities or
any derivative securities whether or not physical delivery is required.
8. There may not be a public market for the shares you buy. Under Rule 419,
all securities issued by a blank check company must be placed in an escrow
account. These securities will not be released from escrow until we identify a
merger or acquisition candidate and complete the transaction. There is no
present market for the common stock of the company and we cannot assure you that
any active and liquid public trading market will develop after the securities
are released from escrow. Therefore, you may find it difficult to sell your
shares. To date, we have not asked any broker dealer to act as a market maker
for our common stock. We do not intend to seek a market maker for our common
stock until you and other investors reconfirm your investments in this offering
and we enter into an acquisition or merger.
9. We are at a competitive disadvantage in seeking business combinations.
To date, we have not selected any particular industry in which to concentrate
our merger or acquisition efforts. In relation to our competitors, we are an
insignificant participant in the business of seeking business combinations. Many
established and well-financed entities, including venture capital firms, have
recently increased their merger and acquisition activities. Nearly all of them
have significantly greater financial resources, technical expertise and
managerial capabilities than we do.
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<PAGE>
Consequently, we will be at a competitive disadvantage in identifying suitable
merger or acquisition candidates and successfully consummating a merger or
acquisition. Also, we will be competing with a large number of other small,
blank check companies.
10. The time to be devoted by management to the affairs of Darby
Acquisition Corporation will be limited and could be inadequate. Our officers
and directors are engaged in business activities outside of the company, and
will only devote what time they can to our affairs. Their priority will be their
responsibilities in their full-time occupation.
11. Our management may face conflicts resulting from involvement in other
businesses. Because our directors and officers are primarily engaged in business
outside the company, they may have a conflict of interest with our pursuit of
business combinations. In an effort to avoid such conflicts, we will adopt a
procedure whereby a special meeting of our shareholders will be called to vote
on a business combination with an affiliated entity. Shareholders who also hold
securities of that affiliated entity will be required to vote their shares of
our stock in the same proportion as our publicly-held shares are voted. This
procedure will be in the form of an oral agreement between management and the
company. Our officers and directors are not currently involved in other blank
check companies. However, potential conflicts of interest may result if and when
any officer of the company becomes an officer or director of another company,
especially another blank check company.
12. Our Certificate of Incorporation, Bylaws and Minutes do not require our
officers and directors to disclose to the company merger or acquisition
candidates that come to their attention. The officers and directors do, however,
have a fiduciary duty of loyalty to the company to disclose to the company any
target businesses that they discover, even if they learn about it through their
involvement as an officer and director of another company. We will not purchase
the assets of any company which is beneficially owned by any officer, director,
promoter or affiliate or associate of this company. Management will examine a
target business's financial statements, its assets and liabilities and its
projections for future growth.
13. We could acquire a business in which one of our insiders has an
interest. The company may acquire a business in which the company's promoters,
management or their affiliates own a beneficial interest. If this happens, the
transaction may be considered a related party transaction not at arms-length. We
are not presently planning a related party transaction. If we consider a related
party transaction sometime in the future, we intend to seek shareholder
approval. However, shareholders objecting to any such related party transaction
will be able only to request the return of the pro-rata portion of their
invested funds held in escrow in connection with the reconfirmation offering to
be conducted in accordance with Rule 419 upon execution of the acquisition
agreement.
14. There are possible disadvantages of a blank check offering. We might
acquire or merge with a company which does not need substantial additional
capital but which wants to
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establish a public trading market for its shares. A company seeking to
consolidate its operations through a merger, reorganization, asset acquisition,
or some other form of combination with us may want to do so to avoid the adverse
consequences of undertaking a public offering themselves. Their reasoning may
include factors such as time delays, significant expense, loss of voting control
and their inability or unwillingness to comply with various federal and state
laws enacted for the protection of investors. In making an investment in us you
may be doing so under terms which may ultimately be less favorable than making
an investment directly in a company with a specific business.
15. We have not researched or identified an acquisition or merger
candidate. The company has not conducted nor received the results of market
research concerning the feasibility of a business combination with a specific
target business. Therefore, management is not sure that market demand exists for
an acquisition or merger as contemplated by the company. Management has not
selected any particular industry or specific business within an industry to
evaluate. There is no assurance the company will be able to form a business
combination on terms favorable to the company.
16. Our success is dependent on management. Our officers and directors have
limited experience in the business activities in which we intend to engage.
While they believe they have sufficient experience to implement our plan, there
is no assurance that additional managerial assistance will not be required. Our
success depends on the active participation of our officers. They have not
entered into an employment agreement with the company and are not expected to do
so in the foreseeable future. We have not obtained key man life insurance on our
officers and directors.
17. We have not yet identified an acquisition or merger candidate. As of
the date of this prospectus, there are no present arrangements or understandings
with any representatives of the owners of any business regarding the possibility
of a merger or acquisition. Because we have not yet sought a candidate for a
business combination, there is a limited basis on which you can evaluate the
prospects for our success.
18. We lack the diversity that may be needed for success. If we identify a
suitable merger or acquisition candidate, we will in all likelihood be required
to issue our common stock in an acquisition or merger transaction. Inasmuch as
the company's capitalization is limited and the issuance of additional common
stock will result in a dilution of interest for present and prospective
shareholders, it is unlikely we will be capable of negotiating more than one
acquisition or merger. This lack of diversification will prevent us from being
able to offset potential losses from one venture against another.
19. We can't assure you that we won't be subject to regulation as an
"Investment Company." Although we will be subject to regulation under the
Securities Act of 1933 and the Securities Exchange Act of 1934, we believe we
will not be subject to regulation under the Investment Company Act of 1940. The
regulations under the Investment Company Act of 1940,
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which was enacted principally for the purpose of regulating vehicles for pooled
investments in securities, extends generally to Companies primarily in the
business of investing, reinvesting, owning, holding or trading securities. The
Investment Company Act may, however, also be applicable to a company which does
not intend to be characterized as an Investment Company but which, nevertheless,
engages in activities which may be deemed to be within the definition of the
scope of certain provisions of the Investment Company Act.
We can not assure you that the company will not be deemed to be an
Investment Company. The net proceeds may be invested primarily in certificates
of deposit, interest bearing savings accounts or government securities. In the
event the company is deemed to be an Investment Company, we may be subject to
certain restrictions relating to our activities, including restrictions on the
nature of our investments and the issuance of securities. We have obtained no
formal determination from the Securities and Exchange Commission as to the
status of the company under the Investment Company Act of 1940.
20. We can't assure you a merger would not be taxable. Any acquisition or
merger that we enter into will be evaluated for its federal and state tax
consequences for us and the "target" company. Presently, a qualified
reorganization between business entities will generally not be taxable for the
parties to the transaction. While we expect to undertake any merger or
acquisition so as to minimize federal and state tax consequences, we cannot
assure you that such a transaction will meet the statutory requirements of a
reorganization or that the parties will obtain the intended tax-free treatment
upon a transfer of stock or assets. A non-qualifying reorganization could result
in the imposition of both federal and state taxes which may have a substantial
adverse effect on the company.
21. We have paid no dividends and won't in the near future. We were only
recently organized, have no earnings, and have paid no dividends to date. Since
we are a blank check company with its only intended business being the search
for an appropriate business combination, we do not anticipate having any
earnings until a business combination is effected. However, there are no
assurances that even upon the consummation of a business combination, we will
have earnings or issue dividends. Therefore, we do not expect to pay cash
dividends, if at all, until after a business combination is effected.
22. We have arbitrarily determined the offering price. We arbitrarily
determined the initial offering price of $10.00 per share. It bears no
relationship whatsoever to the company's assets, earnings, book value or any
other objective standard of value. Among the factors we considered in
determining the offering price were:
o The lack of operating history of the company;
o The net proceeds to be raised by the Offering;
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o The amount of capital to be contributed by the public in
proportion to the amount of stock to be retained by present
stockholders;
o The relative requirements of the company;
o The current market conditions in the over-the-counter market.
23. Present management and shareholders have substantial control of the
company. After the offering is complete, the present shareholders of the company
will own approximately 25% of the company if the maximum number of shares are
sold in this offering, and approximately 67% if the minimum number of shares are
sold. They would therefore have continuing control of the company, and the
ability to elect all of our directors and officers, and control our affairs and
operations. Our Certificate of Incorporation does not provide for cumulative
voting. There are no arrangements, agreements or understandings between
non-management shareholders and management under which non-management
shareholders may directly or indirectly participate in or influence the
management of the company's affairs or to exercise their voting rights to
continue to elect the current directors.
24. The value of shares you purchase is subject to immediate substantial
dilution. Assuming we sell the minimum number of shares offered in this
offering, the net tangible book value of the company's common stock will be
approximately $3.40 per share, substantially less than the $10.00 per share to
be paid by the public investors. Therefore, you will sustain an immediate
dilution of approximately $6.60 per share in the book value of your holdings.
Assuming we sell the maximum number of shares offered in this offering, the net
tangible book value of the company's common stock will be approximately $7.52
per share, substantially less than the $10.00 per share to be paid by the public
investors. Therefore, you will sustain an immediate dilution of approximately
$2.48 per share in the book value of your holdings.
25. Insiders could purchase shares. Our officers, directors, current
shareholders and any of their affiliates or associates may purchase shares
offered in this offering. Any shares they purchase will be acquired for
investment purposes and not with a view towards distribution.
26. Shares in this offering may be made available to residents of any U.S.
state . We will use our best efforts to ensure that sales of shares will only
occur in those states in which such sales would not be a violation of any states
laws.
27. There are risks associated with a leveraged transaction. We are not
prohibited from consummating a business combination through a leveraged
transaction. However, such a transaction could result in our assets being
mortgaged and possibly foreclosed. The use of leverage to consummate a business
combination may reduce our ability to incur additional debt, make other
acquisitions or declare dividends. Such leverage may also subject the company's
operations to strict financial controls and significant interest expense.
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28. Laws regulating low-priced stocks may affect your ability to sell your
shares. Transactions in "penny stocks" are regulated by certain rules adopted by
the Securities and Exchange Commission. With some exceptions, penny stocks
generally are equity securities with a price of less than $5.00. Under the penny
stock rules, a broker-dealer planning a transaction in a penny stock must
provide the customer with extensive disclosure documents. These disclosure
requirements may reduce the level of trading activity in the secondary market
for a stock that becomes subject to the penny stock rules. If the our common
stock becomes subject to the penny stock rules, you may find it more difficult
to sell your shares.
DILUTION
The net tangible book value of the company as of October 31, 2000 was $0.10
per share. Net tangible book value is the net tangible assets of the company
(generally, total assets less total liabilities). The public offering price per
share is $10.00. The pro forma net tangible book value per share after the
offering will be $3.40, if the minimum number of shares are sold. Assuming that
the minimum number of shares are sold, the shares purchased by investors in this
offering will be diluted $6.60. Assuming the maximum number of shares are sold,
the shares purchased by investors in this offering will be diluted $2.48. As of
October 31, 2000, there were 100,000 shares of the Company's Common Stock
outstanding. Dilution represents the difference between the public offering
price and the pro forma net tangible book value per share immediately after the
completion of the public offering. The following table illustrates this per
share dilution to be experienced by investors in the offering:
<TABLE>
<CAPTION>
If Minimum If Maximum
#Shares Sold #Shares Sold
------------ ------------
<S> <C> <C>
Public offering price per share $10.00 $10.00
Net tangible book value per share before Offering $ 0.10 $ 0.10
Pro forma net tangible book value per share after Offering $ 3.40 $ 7.52
Increase per share attributable to shares offered hereby $ 3.30 $ 7.42
Dilution to public investors $ 6.60 $ 2.48
</TABLE>
<TABLE>
<CAPTION>
# shares before offering Money received for shares Net tangible book value per
------------------------ ------------------------- ---------------------------
before offering share before offering
--------------- ---------------------
<S> <C> <C>
100,000 $11,000 $0.10
<CAPTION>
Total # of Shares After Total Amount of Money Pro Forma Net Tangible
----------------------- --------------------- ----------------------
Offering Received For Shares Book Value Per Share After
-------- ------------------- --------------------------
Offering
--------
<S> <C> <C>
Min. 150,000 Min. $511,000 Min. $3.40
Max. 400,000 Max. $3,011,000 Max. $7.52
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Pro Forma Net Tangible Net Tangible Book Value per Increase Per Share Attributed
---------------------- --------------------------- -----------------------------
Book Value Per Share After Share Before Offering To Shares Offered
-------------------------- --------------------- -----------------
Offering Hereby
-------- ------
<S> <C> <C>
Min. $3.40 $.10 Min. $3.30
Max. $7.52 $.10 Max. $7.42
<CAPTION>
Public Offering Price Per Pro Forma Net Tangible Dilution to Public Investors
------------------------- ---------------------- ----------------------------
Share Book Value Per Share After
----- --------------------------
Offering
--------
<S> <C> <C>
$10.00 Min. $3.40 Min. $6.60
Max. $7.52 Max. $2.48
</TABLE>
As of the date of this prospectus, the following table sets forth the
percentage of equity to be purchased by public investors in this offering
compared to the percentage of equity to be owned by the present stockholders,
and the comparative amounts paid for the shares by the public investors as
compared to the total consideration paid by the present stockholders of the
company.
<TABLE>
<CAPTION>
Stockholders Shares Approx. % Total Total Approx. % Total
Purchased Shares Consideration Consideration
Outstanding
<S> <C> <C> <C> <C>
New Investors if 50,000 33.33% $500,000 97.8%
Min. # Shares Sold
New Investors if 300,000 75% $3,000,000 99.6%
Max. # Shares Sold
Existing
Stockholders 100,000 66.67% $11,000 2.2%
if Min. # Shares Sold
Existing
Stockholders 100,000 25% $11,000 0.4%
if Max. # Shares Sold
</TABLE>
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<PAGE>
USE OF PROCEEDS
The gross proceeds of this offering will be $500,000, if the minimum number
of shares are sold and $3,000,000 if the maximum number of shares are sold.
Pursuant to Rule 419 under the Securities Act, after all of the shares are sold,
10% of the deposited funds may be released from escrow to the company. We intend
to request release of this 10%. If we do not request release of these funds, we
will receive these funds in the event a business combination is consummated in
accordance with Rule 419. After we complete a business combination and after the
shareholders reconfirm their investment in our common stock, $450,000 (if the
minimum number of shares are sold) or $2,700,000 (if the maximum number of
shares are sold) (plus any dividends received, but less any portion disbursed to
the company and less any amount returned to investors who did not reconfirm
their investment) will be released to the company.
Approximate Percentage
Amount Total
Maximum escrowed funds pending
business combination $2,700,000 90%
Minimum escrowed funds
pending business combination $450,000 90%
(1) The company expects to request release of 10% of the deposited funds
($300,000 if the maximum number os shares are sold in this offering, and $50,000
of the minimum number os shares is sold) pursuant to Rule 419.
We will not incur any expenses in connection with the issuance and
distribution of the securities. The expenses of the offering will be borne by
our principal shareholder.
We do not intend to advertise or promote the company. Instead, our
management will actively search for potential target businesses. If we decide to
advertise (in the form of an ad in a legal publication) to attract a target
business, the cost of that advertising will be assumed by management.
Once we enter into a merger or acquisition, we anticipate that there will
be a change in the management. New management may decide to change the policies
regarding use of proceeds of this offering. The company's present management
anticipates that those proceeds will be used by the post-merger management at
its sole discretion. No compensation will be paid or due or owing to any officer
or director until after we complete a merger or acquisition. We are not
presently considering any outside individual for a consulting position; however,
we cannot rule out the need for outside consultants in the future. No decisions
have been made as to payment of these consultants.
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<PAGE>
Present management of the company will not make any loans of the funds that
will be available from the escrowed funds of this offering, nor will we borrow
funds and use either our working capital or the escrowed funds as security. Once
the escrowed funds are released from escrow, management may loan the proceeds or
borrow funds and use the proceeds as security.
The proceeds received in this offering will be put into the escrow account
pending consummation of a business combination and reconfirmation by investors.
The funds will be placed in an interest bearing account by Whiteman Osterman &
Hanna.
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CAPITALIZATION
The following table sets forth the capitalization of the company as of
October 31, 2000, and as adjusted to give effect to the sale of all of the
Shares offered by the company.
<TABLE>
<CAPTION>
Actual Pro-Forma As Pro-Forma as
Adjusted After Adjusted After
Minimum Maximum Shares
Shares Sold Sold
<S> <C> <C> <C>
Long-term debt $ 0 $ 0 $ 0
Stockholders' equity: Common stock, $100 $150 $400
$.001 par value; authorized 10,000,000
shares, issued and outstanding 100,000
shares and min. 150,000/ max. 400,000
shares, pro-forma as adjusted
Additional paid-in capital $10,900 $510,850 $3,010,600
Deficit accumulated during the ($1,000) ($1,000) ($1,000)
development period
Stockholders' equity, net $10,000 $510,000 $3,010,000
Total capitalization $10,000 $510,000 $3,010,000
</TABLE>
PROPOSED BUSINESS
History and Organization
Darby Acquisition Corporation was organized under the laws of the State of
Delaware on October 17, 2000. Since inception, our primary activity has been
directed to organizational efforts and obtaining initial financing. The company
was formed as a vehicle to pursue a business combination. We have not engaged in
any preliminary efforts to identify possible merger or acquisition candidates
and have neither conducted negotiations concerning, nor entered into a letter of
intent concerning any such transaction.
Our initial public offering will comprise 300,000 shares of common stock at
a purchase price of $10.00 per share.
We are filing this registration statement in order to effect a public
offering for our securities.
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Plan of Operation
The company was organized to seek, investigate and, if such investigation
warrants, engage in business combinations presented to it by persons or firms
who desire to employ the company's funds in their business or to seek the
perceived advantages of a publicly-held corporation. Our principal business
objective will be to seek long-term growth potential in a business combination
venture rather than to seek immediate, short-term earnings. We will not restrict
our search for merger or acquisition candidates to any specific business,
industry or geographical location.
None of the company's officers, directors, promoters, their affiliates or
associates have had any preliminary contact or discussions with any
representatives of the owners of any business or company regarding the
possibility of an acquisition or merger transaction contemplated in the
prospectus. Further, there are no present plans, proposals, arrangements or
understandings with any such person regarding an acquisition or merger.
We do not currently engage in any business activities which provide any
cash flow. The costs of identifying, investigating, and analyzing business
combinations will be paid with money in the our treasury. You and other
shareholders will most likely not have the opportunity to participate in any of
these decisions. Our proposed business is sometimes referred to as a "blank
check" company because investors will entrust their investment monies to our
management before they have a chance to analyze any ultimate use to which their
money may be put. Although substantially all of the proceeds of this offering
are intended to be used generally to effect a business combination, the proceeds
are not otherwise being designated for any specific purposes. Under to Rule 419,
you will have an opportunity to evaluate the specific merits or risks of only
the merger or acquisition that management decides to enter into. Cost overruns
will be borne equally by all current shareholders of the company.
We may seek a business combination with firms which:
o have recently commenced operations;
o are developing companies in need of additional funds for expansion
into new products or markets;
o are seeking to develop a new product or service; or
o are established businesses which may be experiencing financial or
operating difficulties and are in need of additional capital.
A business combination may involve the acquisition of, or merger with, a
company which does not need substantial additional capital but which wants to
establish a public trading market for its shares. Such a company may choose this
transaction to avoid what it may deem to be adverse consequences of undertaking
a public offering itself, such as time delays, significant expense, loss of
voting control and compliance with various federal and state securities laws.
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We will not acquire or merge with another company unless the fair market
value of that company represents 80% of the maximum offering proceeds. To
determine the fair market value of a target business, our management will
examine the audited financial statements of any candidate, focusing their
attention on the potential target business's assets, liabilities, sales and net
worth. In addition, management will participate in a personal inspection of any
potential target business. If we determine that the financial statements of a
proposed target business do not clearly indicate that the fair market value
represents at least 80% of the offering proceeds, we will obtain an opinion from
an investment banking firm with respect to the satisfaction of that criteria.
Based upon management's experience with and knowledge of blank check
companies, the probable desire on the part of the owners of target businesses to
assume voting control over the company will almost assure that we will combine
with just one target business. Management also anticipates that after the
combination, control of the company will change and will most likely result in
the resignation or removal of our present officers and directors.
The company's officers and directors have had no preliminary contact or
discussions with any representative of any other entity regarding a business
combination. Any candidate that is selected may be a financially unstable
company or an entity in its early stage of development or growth (including
entities without established records of sales or earnings). The company will
become subjected to numerous risks inherent in the business and operations of
financially unstable and early stage or potential emerging growth companies. In
addition, we may combine with an entity in an industry characterized by a high
level of risk, and although management will endeavor to evaluate the risks
inherent in a particular industry or target business, we cannot assure you that
we will properly ascertain or assess all significant risks.
We anticipate that we will be able to effect only one business combination,
due primarily to our limited financing, and the dilution of interest for our
present and prospective shareholders, which is likely to result from a merger or
acquisition. This lack of diversification should be considered a substantial
risk in investing in the company because it will not permit the company to
offset potential losses from one venture against gains from another.
We anticipate that the selection of an acquisition or merger target will be
complex and extremely risky. Because of general economic conditions, rapid
technological advances being made in some industries, and shortages of available
capital, management believes that there are numerous firms seeking even the
limited additional capital which we will have and/or the benefits of a publicly
traded corporation. The perceived benefits of a publicly traded corporation may
include:
facilitating or improving the terms on which additional equity financing may be
sought;
o providing liquidity for the principals of a business;
o creating a means for providing incentive stock options or similar
benefits to key employees;
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o providing liquidity (subject to restrictions of applicable statutes)
for all shareholders, among other factors.
Potentially available business combinations may occur in many different
industries and at various stages of development, all of which will make
comparing, investigating and analyzing such business opportunities extremely
difficult and complex.
Evaluation of Business Combinations
Our officers and directors, who are not professional business analysts,
will oversee the analysis of business combinations. They intend to concentrate
on identifying preliminary prospective business combinations through present
associations. In analyzing prospective business combinations, they will consider
the following factors:
o the available technical, financial, and managerial resources;
o working capital and other financial requirements;
o history of operation, if any;
o prospects for the future;
o nature of present and expected competition;
o the quality and experience of management services which may be
available and the depth of that management;
o the potential for further research, development, or exploration;
o specific risk factors not now foreseeable but which then may be
anticipated to impact the proposed activities of the company;
o the potential for growth or expansion;
o the potential for profit;
o the perceived public recognition or acceptance or products, services,
or trades;
o name identification
As part of their investigation, the officers and directors of the company
will meet personally with management and key personnel of the firm sponsoring
the business opportunity as part of his investigation. To the extent possible,
we intend to utilize written reports and personal investigation to evaluate the
above factors.
Since the company will be subject to Section 13 or 15 (d) of the Securities
Exchange Act of 1934, we will have to furnish certain information about
significant acquisitions, including audited financial statements for the
company(s) acquired, covering one, two or three years depending upon the
relative size of the acquisition. Consequently, acquisition prospects that do
not have or are unable to obtain the required audited statements may not be
appropriate for acquisition so long as these reporting requirements are
applicable. In the event our obligation to file periodic reports is suspended
under Section 15(d), we intend to voluntarily file such reports.
We anticipate that any business combination will present certain risks.
Many of these risks cannot be adequately identified prior to selection.
Therefore, you must depend on the ability of
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management to identify and evaluate such risks. In the case of some of the
potential merger or acquisition targets available to the company, we anticipate
that the promoters of those businesses have been unable to develop a going
concern or that the business is in its development stage, which means that it
has not generated significant revenues from its principal business activity.
There is a risk, even after we merge with or acquire such a business, that the
combined enterprises will still be unable to become a going concern or advance
beyond the development stage. Many of the combinations may involve new and
untested products, processes, or market strategies which may not succeed. Such
risks will be assumed by the company and, therefore, its shareholders.
Business Combinations
In implementing a structure for a particular business acquisition, we may
become a party to a merger, consolidation, reorganization, joint venture, or
licensing agreement with another corporation or entity. We may also purchase
stock or assets of an existing business.
Any merger or acquisition that we plan could significantly dilute the
percentage of shares held by the company's then-shareholders, including those
who purchase in this offering. When we combine with a target business, the
target business will have significantly more assets than we do. Therefore,
management plans to offer a controlling interest in the company to the target
business. In order to limit taxes on the transaction, the owners of the target
business may have to own 80% or more of the voting stock of the surviving
entity. In that event, the shareholders of our company, including investors in
this offering, would retain less than 20% of the issued and outstanding shares
of the surviving entity, which would mean significant dilution in the equity of
those shareholders. Management of the company may choose this type of
transaction. In addition, the company's directors and officers may, as part of
the terms of the acquisition transaction, resign those positions. (See "High
Risk Factors" and "Dilution").
Any securities issued in any such transaction would be issued in reliance
on exemptions from registration under applicable federal and state securities
laws. In some circumstances, however, as a negotiated element of this
transaction, the company may agree to register such securities either at the
time the transaction is consummated, under certain conditions, or at specified
times thereafter. The issuance of substantial additional securities and their
potential sale into any trading market which may develop in our common stock may
have a depressive effect on such market.
As a part of the company's investigation of possible business combination
candidates, the company's officers and directors will meet personally with
management and key personnel, visit and inspect material facilities, obtain
independent analysis or verification of certain information provided, check
references of management and key personnel, and take other reasonable
investigative measures, to the extent of our limited financial resources and
management expertise.
The manner of the business combination will depend on the nature of the
target business, the respective needs and desires of the company and other
parties, the management of the target business, and the relative negotiating
strength of the company.
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If we enter negotiations with a possible merger candidate at any time prior
to the completion of this offering, and such a transaction becomes probable,
then this offering will be suspended so that we can file an amendment which will
include financial statements of the proposed target.
We will not purchase the assets of any company which is beneficially owned
by any of our officers, directors, promoters or affiliates or associates.
Furthermore, we intend to adopt a procedure whereby a special meeting of our
shareholders will be called to vote upon a business combination with an
affiliated entity. Shareholders who also hold securities of that affiliated
entity will be required to vote their shares of the Company's stock in same
proportion as our publicly held shares are voted. Our officers and directors
have not approached and have not been approached by any person or entity with
regard to any proposed business ventures with respect to the company. We will
evaluate all possible business combinations brought to our attention. If any of
our promoters, management, or their affiliates or associates bring a business
combination proposal to us, we will disclose this fact in the post-effective
amendment, thereby allowing the public investors the opportunity to fully
evaluate the business combination.
We have adopted a policy that we will not pay a finder's fee to any member
of management for locating a merger or acquisition candidate. No member of
management intends to or may seek and negotiate for the payment of finder's
fees. If there is a finder's fee, it will be paid at the direction of the
successor management after a change in management control resulting from a
business combination. Our policy regarding finder's fees is based on an oral
agreement among management. Management is unaware of any circumstances under
which such policy through their own initiative may be changed.
We will remain an insignificant player among the firms which engage in
business combinations. There are many established venture capital and financial
concerns which have significantly greater financial and personnel resources and
technical expertise than we do. In view of our combined limited financial
resources and limited management availability, we will continue to be at a
significant competitive disadvantage compared to our competitors. Also, we will
be competing with a large number of other small, blank check public companies
located throughout the United States.
We do not intend to advertise or promote the Company. Instead, our
management will actively search for potential target businesses. In the event
management decides to advertise (in the form of an ad in a legal publication) to
attract a target business, the cost of such advertising will be assumed by
management.
Regulation
The Investment Company Act defines an "investment company" as an issuer
which is or holds itself out as being engaged primarily in the business of
investing, reinvesting or trading in securities. While we do not intend to
engage in such activities, we could become subject to regulations under the
Investment Company Act if we obtain or continue to hold a minority interest in a
number of enterprises. It would be expensive for us to register under and comply
with the
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Investment Company Act. Accordingly, management will continue to review our
activities from time to time to limit the likelihood that we could be classified
as an "Investment Company."
Employees
We currently do not have any employees. The officers and directors of the
company are engaged in business activities outside of the company, and thus will
only devote time and effort in connection with our business and operations on a
part time basis. Upon completion of the public offering, it is anticipated that
the officers and directors of the company will devote the time necessary each
month to the affairs of the company until a successful business opportunity has
been acquired.
Facilities
We are presently using the office of an affiliated entity, located at 16
Corporate Woods Boulevard, Albany, New York 12211, at no cost to the company.
This arrangement is expected to continue after completion of this offering only
until a business combination is consummated, although there is currently no such
agreement. The company at present owns no equipment, and does not intend to own
any upon completion of this offering.
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MANAGEMENT
The officers and directors of the company, and further information concerning
them, is as follows:
Name Age Position
---- --- --------
Roger D. Shearer 53 President, Treasurer, Director
Laurance C. Monks 37 Vice President, Secretary, Director
Biographies
Roger D. Shearer is a director of the Company, and its President and Treasurer
and co-founder, with Laurance C. Monks. Mr. Shearer received his education at
the State University of New York, Albany, New York. Mr. Shearer has extensive
experience in market research, technology commercialization and business
development.
Laurance C. Monks, J.D., CPA, is a director of the Company and its Vice
President and Secretary and a co-founder with Roger D. Shearer. Mr. Monks
received his B.B.A. from Siena College and his J.D. from William & Mary. In
addition to being licensed to practice law in the State of New York he is also a
Certified Public Accountant and has extensive professional experience in
business development.
Executive Compensation
The payment of the directors' compensation by the target company, and the
repayment of loans or advances to the officers and directors by the target
company will not be a criteria in considering any merger or acquisition
candidate.
Other Blank Check Companies
Competing searches for combination candidates among blank check affiliates
may present conflicts of interest. Management intends to present each business
combination candidate to the shareholders for their approval. There are
currently no other blank check affiliates of the company seeking combination
candidates. The company's offering and other contemplated offerings (if any) by
other blank check companies do not constitute a single plan of financing.
We may not acquire, be acquired by or merge with any affiliated blank check
companies or join with such companies in acquiring a business.
Conflicts of Interest
Our officers and directors are not currently affiliated or associated with
any blank check
-24-
<PAGE>
company. They do not currently intend to promote blank check entities other than
the company. However, they may become involved with the promotion of other blank
check companies in the future. A potential conflict of interest may occur in the
event of such involvement. Management intends to present each business
combination candidate to the shareholders for their approval.
Remuneration
The company's officers and directors have not received any cash
remuneration since the company's inception, and they are not to receive or
accrue any remuneration or reimbursements of expenses from the company once this
offering is completed. No remuneration of any nature has been paid for or on
account of services rendered by any director in such capacity.
The legal fee to be paid to Whiteman Osterman & Hanna, counsel for the
corporation, is fifteen thousand dollars ($15,000.00). This fee, which has not
been paid prior to this offering and is contingent on the company successfully
completing a business combination, will be paid by the issuer's sole
stockholder.
Management Involvement
The company has conducted no business as of yet, and aside from the search
for shareholders associated with the company's formation, management has done no
work with or for the company. Management will speak to business associates and
acquaintances and will search the New York Times, the Wall Street Journal and
other business publications for merger or acquisition candidates. After the
closing of this offering, management intends to search for, consider and
negotiate with a target business.
Management Control
Management may not divest themselves of ownership and control of the
company prior to the consummation of an acquisition or merger transaction.
Management is not aware of any circumstances under which this policy, through
their own initiative, may be changed.
STATEMENT AS TO INDEMNIFICATION
Section 145 of the Delaware General Corporation Law provides for
indemnification of the officers, directors, employees and agents of registrants
by the company. Complete disclosure of this statute is provided in Part II of
this prospectus. This information can be examined as described in "Further
Information."
Paragraph Seventh of the Certificate of Incorporation of the Darby
Acquisition Corporation provides as follows:
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<PAGE>
The corporation shall, to the fullest extent permitted by Section 145 of
the General Corporation Law of the State of Delaware, as the same may be
amended and supplemented, indemnify any and all persons whom it shall have
power to indemnify under said section from and against any and all of the
expenses, liabilities, or other matters referred to in or covered by said
section, and the indemnification provided for herein shall not be deemed
exclusive of any other rights to which those indemnified may be entitled
under any by-law, agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in his official capacity and as
to action in another capacity while holding such office, and shall continue
as to a person who has ceased to be a director, officer, employee, or agent
and shall inure to the benefit of the heirs, executors, and administrators
of such a person.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers or persons controlling the registrant
pursuant to the foregoing provisions, the registrant has been informed that in
the opinion of the Securities and Exchange Commission such indemnification is
against the public policy as expressed in the Securities Act and is therefore,
unenforceable.
MARKET FOR THE COMPANY'S COMMON STOCK
Prior to the date of this prospectus, there has been no trading market for
our common stock. Pursuant to the requirements of Rule 15g-8 of the Exchange
Act, a trading market will not develop prior to or after the effectiveness of
this prospectus or while the common stock under this offering is maintained in
escrow. The common stock issued in this offering will remain in escrow until we
enter into a business combination. Current shareholders will own a minimum of
25% of the outstanding shares upon completion of the offering if the maximum
number of shares are sold in the offering, and 66.67% if the minimum number of
shares are sold in the offering. As a result, we cannot assure you that an
active public trading market, as that term is commonly understood, will develop
for the shares. We cannot assure you that a trading market will develop after we
complete a merger or acquisition and the shares purchased in this offering are
released from escrow. We have not worked toward retaining or encouraging any
broker dealer to act as a market maker for our common stock, and we do
anticipate doing so prior to the execution of an acquisition agreement.
When we do enter discussion with a prospective market maker for our stock,
we expect that they will ultimately be initiated by the party or parties that
control the entity that we merge with or acquire. Those parties may use
consultants or advisors to obtain a market maker, but we have no intention of
doing so at the present time. Our officers and directors and controlling
shareholders have not in the past used particular consultants or advisers, and
the company has no set criteria to use in its possible evaluation of any
consultants or advisers.
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<PAGE>
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of our common stock as of the date of this prospectus. It is adjusted
to reflect the sale of the shares offered in this prospectus, by:
o each person who is known by the company to own beneficially more than 5% of
the company's outstanding common stock;
o each of the company's officers and directors; and
o all directors and officers of the company as a group.
<TABLE>
<CAPTION>
Name/Address Common Shares Number of Common Shares
Beneficial Beneficially Owned Shares to be Beneficially Owned
Owner Before Offering Sold in After Offering**
------ --------------- Offering ----------------
No. % -------- %
--- - -
<S> <C> <C> <C> <C>
Priority AccessNetworks, Inc.
16 Corporate Woods Blvd. 100,000* 100* NONE 66.67% / 25%
Albany, New York 12211
Laurence C. Monks 100,000* 100* NONE 66.67% / 25.5%
16 Corporate Woods Blvd.
Albany, NY 12211
Roger D. Shearer 100,000* 100* NONE 66.67% / 25%
16 Corporate Woods Blvd.
Albany, NY 12211
Total Officers and
Directors (2 Persons) 100,000 100 NONE 66.67% / 25%
Total (3 Persons) 100,000 100 NONE 66.67% / 25%
</TABLE>
* The table lists different beneficial owners of the same 100,000 shares. Mr.
Monks and Mr. Shearer, who are directors of Darby Acquisition Corporation, are
the principal shareholders of Spectrum Capital, LLC. Spectrum Capital owns 88%
of the outstanding stock of PriorityAccess Networks, Inc., which owns 100,000
shares of our common stock.
** These numbers represent the maximum and minimum percentage of our shares that
the principal stockholders may own after this offering, depending upon the
number of shares sold in the offering.
The principal stockholders may be deemed "promoters" of the company, as that
term is defined
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<PAGE>
under the Securities Act of 1933, as amended.
DESCRIPTION OF SECURITIES
Common Stock
We are authorized to issue 10,000,000 shares of common stock, $.001 par
value per share. 100,000 shares were issued and outstanding as of the date of
this prospectus. Each outstanding share of common stock is entitled to one vote,
either in person or by proxy, on all matters that may be voted upon at meetings
of the stockholders.
Stockholders of common stock have the following rights or limitations on
their rights:
o They have equal ratable rights to dividends from legally available funds
when and if the board of directors declares dividends of the company;
o They are entitled to share ratably in all of the assets of the company
available for distribution to holders of common stock;
o In the event of liquidation, dissolution or winding up of the affairs of
the company, they do not have preemptive, subscription or conversion
rights, or redemption or sinking fund provisions applicable to those
rights; and
o They are entitled to one non-cumulative vote per share on all matters on
which stockholders may vote at all meetings of stockholders.
All shares of common stock which are the subject of this offering, when
issued, will be fully paid for and non-assessable, and will have no personal
liability attaching to the ownership of them. Our stockholders do not have
cumulative voting rights, which means that the holders of more than 50% of the
outstanding shares voting for the election of directors can elect all of the
directors of the company if they so choose. In that event, the holders of the
remaining shares will not be able to elect any of the company's directors. At
the completion of this offering, the present officers and directors and
shareholders will beneficially own at least 25% of the outstanding shares, and
could own up to 67% if the minimum number of shares is sold in this offering.
Therefore, they will be in a position to control all of the affairs of the
company.
Future Financing
If the proceeds of this offering are not sufficient to fund the company's
search for a merger or acquisition candidate, we may seek additional financing.
At this time, we believe that the proceeds of this offering will be sufficient
and so we do not expect to issue any additional securities before we complete a
business combination. However, we may issue additional securities, incur debt or
secure other types of financing. We have not entered into any agreements, plans
or proposals for financing through the issuance of additional securities and we
have no plans to do so. We will not use the escrowed funds as collateral or
security for or to pay back, any loan or debt that we incur.
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<PAGE>
If we do require additional financing, there is no guarantee that financing will
be available, or if it is available, that it will be on terms that are
acceptable to us.
Reports to Stockholders
We intend to furnish our stockholders with annual reports containing
audited financial statements as soon as practicable at the end of each fiscal
year.
Dividends
We were only recently organized, have no earnings, and have paid no
dividends to date. Since we were formed as a blank check company with our only
intended business being the search for an appropriate business combination, we
do not anticipate having any earnings until a business combination is
reconfirmed by the stockholders. However, we cannot assure you that after we
complete a business combination, we will have earnings or issue dividends.
Therefore, we do not expect to pay that cash dividends to stockholders until
after a business combination is reconfirmed.
Transfer Agent
The company will act as its own transfer agent.
PLAN OF DISTRIBUTION
Darby Acquisition Corporation is offering the right to subscribe for
300,000 shares at $10.00 per share. We propose to offer the shares directly on a
minimum-maximum basis with a minimum of 50,000 shares. The minimum purchase will
be 250 shares. We will pay no compensation to any person in connection with the
offer and sale of the shares. Our officers and directors will distribute
prospectuses related to this offering. Although the officers and directors are
each an "associated person" of the company as that term is defined in Rule 3a4-1
under the Securities Exchange Act of 1934, they are deemed not to be brokers for
the following reasons:
(1) They are not subject to a statutory disqualification as that term is
defined in Section 3(a)(39) of the Exchange Act at the time they
participate in the sale of our securities;
(2) They will not be compensated for assisting in the sale of our securities
with commissions or other remuneration based either directly or indirectly
on transactions in securities;
(3) They are not an associated person of a broker or dealer at the time they
participate in the sale of our securities; and
(4) They will restrict their participation to the following activities:
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<PAGE>
(a) preparing any written communication or delivering such
communication through the mail or other means that do not involve oral
solicitation of a potential purchaser;
(b) responding to inquiries of potential purchasers made in
communications that they initiate; provided however, that the content of
their responses are limited to information contained in a registration
statement filed under the Securities Act of 1933 or other offering
document; and
(c) performing ministerial and clerical work involved in effecting any
transaction.
As of the date of this prospectus, we have not retained a broker in
connection with the sale of securities in this offering. In the event we retain
a broker who may be deemed an underwriter, we will file an amendment to our
registration statement with the Securities and Exchange Commission.
Neither we nor anyone acting on our behalf, including the company's
shareholders, officers, directors, promoters, affiliates or associates will
approach a market maker or take any steps to request or encourage a market in
these securities either prior or subsequent to an acquisition of any business
opportunity. Neither we nor anyone acting on our behalf has had preliminary
discussions or understandings with any market maker regarding the participation
of any such market maker in the future trading market for the company's
securities. We do not have any plans to engage in such discussions, and we do
not intend to use consultants to obtain market makers. No member of management,
promoter or anyone acting at their direction will recommend, encourage or advise
investors to open brokerage accounts with any broker-dealer who is obtained to
make a market in our shares subsequent to the acquisition of any business
opportunity. Our investors will make their own decisions regarding whether to
hold or sell their shares. We will not exercise any influence over such
decisions.
Method of Subscribing
You may subscribe by filling in and signing a subscription agreement and
delivering it to us before the expiration date. The subscription price of $10.00
per share must be paid in cash or by check, bank draft or postal express money
order payable in United States dollars to the order of "Whiteman Osterman &
Hanna as Escrow Agent for Darby Acquisition Corporation."
The company's principals and any of its affiliates or associates may
purchase a portion of the shares offered in this offering. The aggregate number
of shares which may be purchased by such persons shall not exceed 20% of the
number of shares sold in this offering. Shares purchased by the company's
officers, directors and principal shareholders will be acquired for investment
purposes and not with a view towards distribution.
EXPIRATION DATE
This offering will expire 180 days from the date of this prospectus.
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<PAGE>
LITIGATION
We are not presently a party to any litigation, nor to the knowledge of
management is any litigation threatened against us which may materially affect
the company.
LEGAL OPINIONS
Whiteman Osterman & Hanna, One Commerce Plaza, Albany, New York 12260, our
special counsel, has rendered an opinion that the shares are validly issued and
non-assessable.
EXPERTS
Our financial statements for the period from inception (October 17, 2000)
through October 31, 2000, appearing in this prospectus and registration
statement, have been audited by Kaufman, Rossin & Co., independent auditors, as
set forth in their report appearing elsewhere herein, and are included in
reliance upon such reports given on the authority of such firm as experts in
accounting and auditing.
FURTHER INFORMATION
We have filed with the Securities and Exchange Commission, a registration
statement on Form SB-2 with respect to the securities offered by this
prospectus. This prospectus omits certain information contained in the
registration statement as permitted by the rules and regulations of the SEC.
Reports and other information that we file may be inspected and copied at the
public reference facilities of the SEC in Washington, D.C. Copies can be
obtained from the Public Reference Section of the Commission, Washington, D.C.
20549 at a prescribed rate or at the Commission's web site, www.sec.gov.
Statements contained in this prospectus as to the contents of any contract or
other document referred to are not complete and where such contract or other
document is an exhibit to the registration statement, each such statement is
deemed qualified and amplified in all respects by the provisions of the exhibit.
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<PAGE>
FINANCIAL STATEMENTS
DARBY ACQUISITION CORPORATION
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
FOR THE PERIOD FROM INCEPTION
(OCTOBER 17, 2000) THROUGH
OCTOBER 31, 2000
C O N T E N T S
Page
--------------------------------------------------------------------------------
INDEPENDENT AUDITORS' REPORT 33
FINANCIAL STATEMENTS
Balance Sheet 34
Statement of Operations 34
Statement of Stockholder's Equity 35
Statement of Cash Flows 36
Notes to Financial Statements 37
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<PAGE>
INDEPENDENT AUDITORS' REPORT
--------------------------------------------------------------------------------
To the Stockholder
Darby Acquisition Corporation
We have audited the accompanying balance sheet of Darby Acquisition Corporation
(a Development Stage Company) as of October 31, 2000, and the related statements
of operations, stockholder's equity and cash flows for the period from inception
(October 17, 2000) through October 31, 2000. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes 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 Darby Acquisition Corporation
as of October 31, 2000, and the results of its operations, and its cash flows
for the period from inception (October 17, 2000) through October 31, 2000, in
conformity with generally accepted accounting principles.
KAUFMAN, ROSSIN & CO.
Miami, Florida
November 16, 2000
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<PAGE>
DARBY ACQUISITION CORPORATION
-----------------------------
(A Development Stage Company)
BALANCE SHEET AS OF OCTOBER 31, 2000
ASSETS
================================================================================
Cash...............................................................$ 10,000
================================================================================
STOCKHOLDER'S EQUITY ...................................................$ 10,000
================================================================================
See Accompanying Notes
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<PAGE>
DARBY ACQUISITION CORPORATION
-----------------------------
(A Development Stage Company)
STATEMENT OF OPERATIONS
PERIOD FROM INCEPTION (OCTOBER 17, 2000) THROUGH OCTOBER 31, 2000
EXPENSES
Organizational Costs .............................................. $1,000
--------------------------------------------------------------------------------
NET LOSS ...............................................................($1,000)
================================================================================
NET LOSS PER SHARE ..................................................... ($0.01)
================================================================================
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING .............................................100,000
--------------------------------------------------------------------------------
See Accompanying Notes
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<PAGE>
DARBY ACQUISITION CORPORATION
-----------------------------
(A Development Stage Company)
STATEMENT OF STOCKHOLDER'S EQUITY
PERIOD FROM INCEPTION (OCTOBER 17, 2000) THROUGH OCTOBER 31, 2000
Common Stock, $.001 par
value; shares authorized,
10,000,000; issued and
outstanding, 100,000
=========================
<TABLE>
<CAPTION>
Deficit
Accumulated
Additional During the
Paid In Development
Transaction Shares Par Value Capital Stage Total
----------- ------ --------- ------- ----- -----
<S> <C> <C> <C> <C> <C>
Issuance of 100,000 $ 100 $ 9,900 $ -0- $ 10,000
Stock For Cash
10/17/00
Capital -0- $ -0- $ 1,000 $ -0- $ 1,000
Contributions
10/31/00
Net (Loss) -0- $ -0- $ -0- ($ 1,000) ($ 1,000)
10/17/2000 to
10/31/2000
------- -------- -------- -------- --------
Total 100,000 $ 100 $ 10,900 ($ 1,000) $ 10,000
======= ======== ======== ======== ========
</TABLE>
See Accompanying Notes
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<PAGE>
DARBY ACQUISITION CORPORATION
-----------------------------
(A Development Stage Company)
STATEMENT OF CASH FLOWS
PERIOD FROM INCEPTION (OCTOBER 17, 2000) THROUGH OCTOBER 31, 2000
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (Loss).........................................................($1,000)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from the Issuance of Common Stock and Capital
Contributions.....................................................$11,000
--------------------------------------------------------------------------------
NET INCREASE IN CASH (representing cash balance at October 31, 2000)....$10,000
================================================================================
Supplemental Disclosures:
--------------------------------------------------------------------------------
Interest Paid........................................................$ 0
--------------------------------------------------------------------------------
Income Taxes Paid....................................................$ 0
--------------------------------------------------------------------------------
See Accompanying Notes
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<PAGE>
DARBY ACQUISITION CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
--------------------------------------------------------------------------------
Organization and Business Activity
Darby Acquisition Corporation (the Company) was incorporated in October
2000, under the laws of the State of Delaware. The Company's business
activities to date have primarily consisted of organizing and capitalizing
the Company and preparing to file a registration statement and prospectus
for its initial public offering.
The Company was organized for the purpose of creating a corporate vehicle
to engage in business combinations.
The Company is considered to be in the development stage and the
accompanying financial statements represent those of a development stage
company.
Use of Estimates
The preparation of these 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 revenues and expenses
during the reported period. Actual results could differ from those
estimates.
Preferred Stock
The Company has the authority to issue 100,000 shares of preferred stock,
par value $0.001 per share, with the preferences, limitations and relative
rights determined by the Board of Directors. At October 31, 2000 no
preferred stock was issued and outstanding.
Income Taxes
The Company accounts for income taxes according to Statement of Financial
Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes". Under
the liability method specified by SFAS No. 109, deferred income taxes are
recognized for the future tax consequences of temporary differences between
the financial statement carrying amounts and tax bases of assets and
liabilities.
Net Loss Per Share
The Company applies Statement of Financial Accounting Standards No. 128,
"Earnings Per Share" (FAS 128). Net loss per share is computed by dividing
net income by the weighted average number of common shares outstanding
during the
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<PAGE>
reported period. There were no potentially dilutive securities outstanding
during the period.
--------------------------------------------------------------------------------
NOTE 2. RELATED PARTY TRANSACTIONS
--------------------------------------------------------------------------------
In addition to the initial capital contribution of $10,000, the Company's
sole shareholder has committed to fund all expenses related to the
organization of the Company and preparation and filing of the registration
statement discussed in Note 1. Expenses incurred during the period from
inception (October 17, 2000) through October 31, 2000 were funded with
capital contributions which are reflected in the accompanying statement of
stockholder's equity.
--------------------------------------------------------------------------------
NOTE 3. INCOME TAXES
--------------------------------------------------------------------------------
At October 31, 2000 the Company had a deferred tax asset of approximately
$400 which is completely offset by a valuation allowance.
Deferred tax assets are reduced by a valuation allowance if, in the opinion
of management, it is more likely than not that some portion or all of the
deferred tax assets will not be realized. Management's valuation procedures
consider projected utilization of deferred tax assets prospectively over
the next several years, and continually evaluate new circumstances
surrounding the future realization of such assets.
The income tax benefit differs from the amount computed by applying the
federal statutory income tax rate to the loss before income taxes due to a
change in the deferred tax asset valuation allowance.
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<PAGE>
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of Directors and Officers
The Delaware General Corporation Law, as amended, provides for the
indemnification of the company's officers, directors and corporate employees and
agents under certain circumstances as follows:
INDEMNIFICATION OF OFFICERS, DIRECTORS, EMPLOYEES AND AGENTS; INSURANCE. --
(a) A corporation shall have power to indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation) by
reason of the fact that the person is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by the person in connection with such action, suit or proceeding if the
person acted in good faith and in a manner the person reasonably believed to be
in or not opposed to the best interests of the corporation, and, with respect to
any criminal action or proceeding, had no reasonable cause to believe the
person's conduct was unlawful. The termination of any action, suit or proceeding
by judgment, order, settlement, conviction, or upon a plea of nolo contendere or
its equivalent, shall not, of itself, create a presumption that the person did
not act in good faith and in a manner which the person reasonably believed to be
in or not opposed to the best interests of the corporation, and, with respect to
any criminal action or proceeding, had reasonable cause to believe the person's
conduct was unlawful.
(b) A corporation shall have power to indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the corporation to procure a
judgment in its favor by reason of the fact that the person is or was a
director, officer, employee or agent of the corporation, or is or was serving at
the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise
against expenses (including attorneys' fees) actually and reasonably incurred by
the person in connection with the defense or settlement of such action or suit
if the person acted in good faith and in a manner the person reasonably believed
to be in or not opposed to the best interests of the corporation and except that
no indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the corporation
unless and only to the extent that the Court of Chancery or the court in which
such action or suit was brought shall determine upon application that, despite
the adjudication of liability but in view of all the circumstances of the case,
such person is fairly and reasonably entitled to indemnity for such expenses
which the Court of Chancery or such court shall deem proper.
(c) To the extent that a present or former director or officer of a
corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in subsections (a) and (b) of this
section, or in defense of any claim, issue or matter therein, such person shall
be indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by
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<PAGE>
him in connection therewith.
(d) Any indemnification under subsections (a) and (b) of this section
(unless ordered by a court) shall be made by the corporation only as authorized
in the specific case upon a determination that indemnification of the present or
former director, officer, employee or agent is proper in the circumstances
because the person has met the applicable standard of conduct set forth in
subsections (a) and (b) of this section. Such determination shall be made, with
respect to a person who is a director or officer at the time of such
determination, (1) by a majority vote of the directors who are not parties to
such action, suit or proceeding, even though less than a quorum, or (2) by a
committee of such directors designated by majority vote of such directors, even
though less than a quorum, or (3) if there are no such directors, or if such
directors so direct, by independent legal counsel in a written opinion, or (4)
by the stockholders.
(e) Expenses (including attorneys' fees) incurred by an officer or director
in defending any civil, criminal, administrative or investigative action, suit
or proceeding may be paid by the corporation in advance of the final disposition
of such action, suit or proceeding upon receipt of an undertaking by or on
behalf of such director or officer to repay such amount if it shall ultimately
be determined that such person is not entitled to be indemnified by the
corporation as authorized in this section. Such expenses (including attorneys'
fees) incurred by former directors and officers or other employees and agents
may be so paid upon such terms and conditions, if any, as the corporation deems
appropriate.
(f) The indemnification and advancement expenses provided by, or granted
pursuant to, the other subsections of this section shall not be deemed exclusive
of any other rights to which those seeking indemnification or advancement
expenses may be entitled under any bylaw, agreement, vote of stockholders or
disinterested directors or otherwise, both as to action in such person's
official capacity and as to action in another capacity while holding such
office.
(g) A corporation shall have power to purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against such
person and incurred by such person in any such capacity or arising out of such
person's status as such, whether or not the corporation would have the power to
indemnify him against such liability under this section.
(h) For purposes of this section, references to "the corporation" shall
include, in addition to the resulting corporation, any constituent corporation
(including any constituent of a constituent) or absorbed in a consolidation of
merger which, if its separate existence had continued, would have had power and
authority to indemnify its directors, officers and employees or agents, so that
any person who is or was a director, officer, employee or agent of such
constituent corporation, or is or was serving at the request of such constituent
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, shall stand in the same
position under this section with respect to the resulting or surviving
corporation as such person would have with respect to such constituent
corporation as if its separate existence had continued.
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(i) For purposes of this section, references to "other enterprises" shall
include employee benefit plans; references to "fines" shall include any excise
taxes assessed on a person with respect to an employee benefit plan; and
references to "serving at the request of the corporation" shall include any
service as a director, officer, employee or agent of the corporation which
imposes duties on, or involves services by, such director, officer, employee, or
agent with respect to an employee benefit plan, its participants, or
beneficiaries; and a person who acted in good faith and in a manner such person
reasonably believed to be in the interest of the participants and beneficiaries
of an employee benefit plan shall be deemed to have acted in a manner "not
opposed to the best interests of the corporation" as referred to in this
section.
(j) The indemnification and advancement of expenses provided by, or granted
pursuant to, this section shall, unless otherwise provided when authorized or
ratified, continue as to a person who has ceased to be a director, officer,
employee or agent and shall inure to the benefit of the heirs, executors, and
administrators of such person.
(k) The Court of Chancery is hereby vested with exclusive jurisdiction to
hear and determine all actions for advancement of expenses or indemnification
brought under this section or under any bylaw, agreement, vote of stockholders
or disinterested directors, or otherwise. The Court of Chancery may summarily
determine a corporation's obligation to advance expenses (including attorneys'
fees).
Article 8 of the company's By-laws provides for the indemnification of the
company's officers, directors, and corporate employees and agents under certain
circumstances as follows:
The corporation shall, to the fullest extent permitted by Section 145
of the General Corporation Law of the State of Delaware, as amended
from time to time, indemnify all persons whom it may indemnify
pursuant thereto.
Item 25. Expenses of Issuance and Distribution
The Registrant will not incur any expenses in connection with the issuance
and distribution of the securities being registered. All such expenses will be
borne by the Registrant's principal shareholder.
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Item 26. Recent sales of unregistered securities.
During the past year, the registrant has sold securities in the manner set
forth below without registration under the Securities Act of 1933. On or about
October 17, 2000, the company raised $10,000.00 through the sale of 100,000
shares of common stock at a price of $.10 per share as follows:
Name and Address of No. of Shares Date Amount
Beneficial Owner Purchased Purchased Paid
PriorityAccess Networks, Inc. 100,000 10/17/ 2000 $10,000
16 Corporate Woods Blvd.
Albany, New York 12211
The shares listed above were issued as founders' shares in connection with
the company's organization. This transaction was not registered under the
Securities Act in reliance on the exemption from registration in Section 4(2) of
the Act, as a transaction not involving any public offering.
Item 27. Exhibits.
3.1 Certificate of Incorporation.
3.2 By-Laws.
4.1 Specimen Certificate of Common Stock.
4.6 Form of Escrow Agreement.
4.8 Independent Auditors' Report.
5.0 Opinion of Counsel.
24.0 Accountant's Consent to Use Opinion.
24.1 Counsel's Consent to Use Opinion.
Item 28. Undertakings.
The registrant undertakes:
(1) To file, during any period in which offers or sales are being made,
post-effective
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amendment to this registration statement:
(i) To include any prospectus required by Section 10 (a) (3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the Effective Date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement,
including (but not limited to) any addition or deletion of managing
underwriter;
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be treated as a new
registration statement of the securities offered, and the offering of the
securities at that time to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
(4) To deposit into the escrow account at the closing, certificates in such
denominations and registered in such names as required by the company to permit
prompt delivery to each purchaser upon release of such securities from the
escrow account in accordance with Rule 419 of Regulation C under the Securities
Act. Pursuant to Rule 419, these certificates shall be deposited into an escrow
account, not to be released until a business combination is consummated.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to any provisions contained in its Certificate of
Incorporation, or by-laws, or otherwise, the registrant has been advised that in
the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form SB-2 and
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authorized this registration statement to be signed on its behalf by the
undersigned, in the City of Albany, State of New York, on , 2000.
Darby Acquisition Corporation
BY:
---------------------------
Roger D. Shearer
President
In accordance with the requirements of the Securities Act of 1933, this
registration statement was signed by the following persons in the capacities and
on the dates stated.
Roger D. Shearer Dated: , 2000
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