U. S. Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-SB12G
File No.: __________________
CIK:0001129016
GENERAL FORM FOR REGISTRATION OF SECURITIES
OF SMALL BUSINESS ISSUERS
Under Section 12(b) or (g) of the Securities Exchange Act of 1934
VSAT NET, INC.
-------------------
(Name of Small Business Issuer in its charter)
NEVADA 65-1049253
------------------------------------ ----------
State or other jurisdiction of IRS Employer ID Number
incorporation or organization
465 Ocean Drive, #224, Miami Beach, FL 33139
-------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (305) 674-4412
Securities to be registered under Section 12(b) of the Act:
Title of each class Name of each exchange on which
to be so registered each class is to be registered
Not Applicable
Securities to be registered under Section 12(g) of the Act:
Common Stock
(Title of class)
<PAGE>
TABLE OF CONTENTS
PART I
Page
Item 1. Business..................................................... 3
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.................... 17
Item 3. Properties.................................................. 18
Item 4. Security Ownership of Certain Beneficial Owners
and Management........................................ 19
Item 5. Directors and Executive Officers of the Registrant.......... 19
Item 6. Executive Compensation...................................... 23
Item 7. Certain Relationships and Related Transactions.............. 24
Item 8. Description of Securities................................... 25
PART II
Item 1. Market for Registrant's Common Stock and
Security Holder Matters............................... 26
Item 2. Legal Proceedings........................................... 26
Item 3. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure................ 26
Item 4. Recent Sales of Unregistered Securities..................... 26
Item 5. Indemnification of Directors and Officers................... 27
PART F/S
Signature Page........................................................... 28
Financial Statements and Supplementary Data........................... F-1 - F-8
Index to Exhibits.................................................... 29
<PAGE>
PART I
ITEM 1. DESCRIPTION OF BUSINESS.
---------------------------------
GENERAL
The Company was incorporated under the laws of the State of Nevada on March
21, 2000, and is in the early developmental and promotional stages. To date the
Company's activities have been organizational ones, directed at developing its
business plan and raising its initial capital. The Company was formed to seek
business opportunities and is currently a "shell" with no business. The Company
has no commercial operations as of date hereof. The Company has no full-time
employees and owns no real estate.
The Company is a "shell" company and its only current business plan is to
seek, investigate, and, if warranted, acquire one or more properties or
businesses, and to pursue other related activities intended to enhance
shareholder value. The acquisition of a business opportunity may be made by
purchase, merger, exchange of stock, or otherwise, and may encompass assets or a
business entity, such as a corporation, joint venture, or partnership. The
Company has no capital, and it is unlikely that the Company will be able to take
advantage of more than one such business opportunity. The Company intends to
seek opportunities demonstrating the potential of long-term growth as opposed to
short-term earnings.
At the present time the Company has not identified any business opportunity
that it plans to pursue, nor has the Company reached any agreement or definitive
understanding with any person concerning an acquisition. The Company is filing
Form 10-SB on a voluntary basis in order to become a 12(g) registered company
under the Securities Exchange Act of 1934. As a "reporting company," the Company
may be more attractive to a private acquisition target because it may be listed
to trade its shares on the OTCBB.
It is anticipated that the Company's officers and directors will contact
broker-dealers and other persons with whom they are acquainted who are involved
in corporate finance matters to advise them of the Company's existence and to
determine if any companies or businesses they represent have an interest in
considering a merger or acquisition with the Company. No assurance can be given
that the Company will be successful in finding or acquiring a desirable business
opportunity, given that no funds that are available for acquisitions, or that
any acquisition that occurs will be on terms that are favorable to the Company
or its stockholders.
The Company's search will be directed toward small and medium-sized
enterprises which have a desire to become public corporations and which are able
to satisfy, or anticipate in the reasonably near future being able to satisfy,
the minimum asset requirements in order to qualify shares for trading on NASDAQ
or a stock exchange (See "Investigation and Selection of Business
Opportunities"). The Company anticipates that the business opportunities
presented to it will (i) be recently organized with no operating history, or a
history of losses attributable to under-capitalization or other factors; (ii) be
experiencing financial or operating difficulties; (iii) be in need of funds to
develop a new product or service or to expand into a new market; (iv) be relying
upon an untested product or marketing concept; or (v) have a combination of the
characteristics mentioned in (i) through (iv). The Company intends to
concentrate its acquisition efforts on properties or businesses that it believes
to be undervalued. Given the above factors, investors should expect that any
acquisition candidate may have a history of losses or low profitability.
3
<PAGE>
The Company does not propose to restrict its search for investment
opportunities to any particular geographical area or industry, and may,
therefore, engage in essentially any business, to the extent of its limited
resources. This includes industries such as service, finance, natural resources,
manufacturing, high technology, product development, medical, communications and
others. The Company's discretion in the selection of business opportunities is
unrestricted, subject to the availability of such opportunities, economic
conditions, and other factors.
As a consequence of this registration of its securities, any entity which
has an interest in being acquired by, or merging into the Company, is expected
to be an entity that desires to become a public company and establish a public
trading market for its securities. In connection with such a merger or
acquisition, it is highly likely that an amount of stock constituting control of
the Company would be issued by the Company or purchased from the current
principal shareholders of the Company by the acquiring entity or its affiliates.
If stock is purchased from the current shareholders, the transaction is
very likely to result in substantial gains to them relative to their purchase
price for such stock. In the Company's judgment, none of its officers and
directors would thereby become an "underwriter" within the meaning of the
Section 2(11) of the Securities Act of 1933, as amended. The sale of a
controlling interest by certain principal shareholders of the Company could
occur at a time when the other shareholders of the Company remain subject to
restrictions on the transfer of their shares.
Depending upon the nature of the transaction, the current officers and
directors of the Company may resign management positions with the Company in
connection with the Company's acquisition of a business opportunity. See "Form
of Acquisition," below, and "Risk Factors - The Company - Lack of Continuity in
Management." In the event of such a resignation, the Company's current
management would not have any control over the conduct of the Company's business
following the Company's combination with a business opportunity.
It is anticipated that business opportunities will come to the Company's
attention from various sources, including its officers and director, its other
stockholders, professional advisors such as attorneys and accountants,
securities broker-dealers, venture capitalists, members of the financial
community, and others who may present unsolicited proposals. The Company has no
plans, understandings, agreements, or commitments with any individual for such
person to act as a finder of opportunities for the Company.
The Company does not foresee that it would enter into a merger or
acquisition transaction with any business with which its officers or directors
are currently affiliated. Should the Company determine in the future, contrary
to foregoing expectations, that a transaction with an affiliate would be in the
best interests of the Company and its stockholders, the Company is in general
permitted by Nevada law to enter into such a transaction if:
1. The material facts as to the relationship or interest of the affiliate
and as to the contract or transaction are disclosed or are known to the Board of
Directors, and the Board in good faith authorizes the contract or transaction by
the affirmative vote of a majority of the disinterested directors, even though
the disinterested directors constitute less than a quorum; or
4
<PAGE>
2. The material facts as to the relationship or interest of the affiliate
and as to the contract or transaction are disclosed or are known to the
stockholders entitled to vote thereon, and the contract or transaction is
specifically approved in good faith by vote of the stockholders; or
3. The contract or transaction is fair as to the Company as of the time it
is authorized, approved or ratified, by the Board of Directors or the
stockholders.
INVESTIGATION AND SELECTION OF BUSINESS OPPORTUNITIES
To a large extent, a decision to participate in a specific business
opportunity may be made upon management's analysis of the quality of the other
company's management and personnel, the anticipated acceptability of new
products or marketing concepts, the merit of technological changes, the
perceived benefit the company will derive from becoming a publicly held entity,
and numerous other factors which are difficult, if not impossible, to analyze
through the application of any objective criteria. In many instances, it is
anticipated that the historical operations of a specific business opportunity
may not necessarily be indicative of the potential for the future because of the
possible need to shift marketing approaches substantially, expand significantly,
change product emphasis, change or substantially augment management, or make
other changes. The Company will be dependent upon the owners of a business
opportunity to identify any such problems which may exist and to implement, or
be primarily responsible for the implementation of, required changes. Because
the Company may participate in a business opportunity with a newly organized
firm or with a firm which is entering a new phase of growth, it should be
emphasized that the Company will incur further risks, because management in many
instances will not have proved its abilities or effectiveness, the eventual
market for such company's products or services will likely not be established,
and such company may not be profitable when acquired.
It is anticipated that the Company will not be able to diversify, but will
essentially be limited to one such venture because of the Company's limited
financing. This lack of diversification will not permit the Company to offset
potential losses from one business opportunity against profits from another, and
should be considered an adverse factor affecting any decision to purchase the
Company's securities.
It is emphasized that management of the Company may effect transactions
having a potentially adverse impact upon the Company's shareholders pursuant to
the authority and discretion of the Company's management to complete
acquisitions without submitting any proposal to the stockholders for their
consideration. Holders of the Company's securities should not anticipate that
the Company necessarily will furnish such holders, prior to any merger or
acquisition, with financial statements, or any other documentation, concerning a
target company or its business. In some instances, however, the proposed
participation in a business opportunity may be submitted to the stockholders for
their consideration, either voluntarily by such directors to seek the
stockholders' advice and consent or because state law so requires.
The analysis of business opportunities will be undertaken by or under the
supervision of the Company's President, who is not a professional business
analyst. See "Management." Although there are no current plans to do so, Company
management might hire an outside consultant to assist in the investigation and
selection of business opportunities, and might pay a finder's fee. Since Company
management has no current plans to use any outside consultants or advisors to
assist in the investigation and selection of business opportunities, no policies
5
<PAGE>
have been adopted regarding use of such consultants or advisors, the criteria to
be used in selecting such consultants or advisors, the services to be provided,
the term of service, or regarding the total amount of fees that may be paid.
However, because of the limited resources of the Company, it is likely that any
such fee the Company agrees to pay would be paid in stock and not in cash.
Otherwise, the Company anticipates that it will consider, among other things,
the following factors:
1. Potential for growth and profitability, indicated by new technology,
anticipated market expansion, or new products;
2. The Company's perception of how any particular business opportunity
will be received by the investment community and by the Company's stockholders;
3. Whether, following the business combination, the financial condition
of the business opportunity would be, or would have a significant prospect in
the foreseeable future of becoming sufficient to enable the securities of the
Company to qualify for listing on an exchange or on a national automated
securities quotation system, such as NASDAQ, so as to permit the trading of such
securities to be exempt from the requirements of Rule 15c2-6 recently adopted by
the Securities and Exchange Commission. See "Risk Factors - The Company
-Regulation of Penny Stocks."
4. Capital requirements and anticipated availability of required funds,
to be provided by the Company or from operations, through the sale of additional
securities, through joint ventures or similar arrangements, or from other
sources;
5. The extent to which the business opportunity can be advanced;
6. Competitive position as compared to other companies of similar size
and experience within the industry segment as well as within the industry as a
whole;
7. Strength and diversity of existing management, or management
prospects that are scheduled for recruitment;
8. The cost of participation by the Company as compared to the
perceived tangible and intangible values and potential; and
9. The accessibility of required management expertise, personnel, raw
materials, services, professional assistance, and other required items.
In regard to the possibility that the shares of the Company would
qualify for listing on NASDAQ, the current standards include the requirements
that the issuer of the securities that are sought to be listed have total net
tangible assets of at least $4,000,000. Many, and perhaps most, of the business
opportunities that might be potential candidates for a combination with the
Company would not satisfy the NASDAQ listing criteria.
No one of the factors described above will be controlling in the selection
of a business opportunity, and management will attempt to analyze all factors
appropriate to each opportunity and make a determination based upon reasonable
investigative measures and available data. Potentially available business
opportunities may occur in many different industries and at
6
<PAGE>
various stages of development, all of which will make the task of comparative
investigation and analysis of such business opportunities extremely difficult
and complex. Potential investors must recognize that, because of the Company's
limited capital available for investigation and management's limited experience
in business analysis, the Company may not discover or adequately evaluate
adverse facts about the opportunity to be acquired.
The Company is unable to predict when it may participate in a business
opportunity. It expects, however, that the analysis of specific proposals and
the selection of a business opportunity may take several months or more. Prior
to making a decision to participate in a business opportunity, the Company will
generally request that it be provided with written materials regarding the
business opportunity containing such items as a description of products,
services and company history; management resumes; financial information;
available projections, with related assumptions upon which they are based; an
explanation of proprietary products and services; evidence of existing patents,
trademarks, or services marks, or rights thereto; present and proposed forms of
compensation to management; a description of transactions between such company
and its affiliates during relevant periods; a description of present and
required facilities; an analysis of risks and competitive conditions; a
financial plan of operation and estimated capital requirements; audited
financial statements, or if they are not available, unaudited financial
statements, together with reasonable assurances that audited financial
statements would be able to be produced within a reasonable period of time not
to exceed 60 days following completion of a merger transaction; and other
information deemed relevant.
As part of the Company's investigation, the Company's executive officers
and directors may meet personally with management and key personnel, may visit
and inspect material facilities, obtain independent analysis or verification of
certain information provided, check references of management and key personnel,
and take other reasonable investigative measures, to the extent of the Company's
limited financial resources and management expertise.
It is possible that the range of business opportunities that might be
available for consideration by the Company could be limited by the impact of
Securities and Exchange Commission regulations regarding purchase and sale of
"penny stocks." The regulations would affect, and possibly impair, any market
that might develop in the Company's securities until such time as they qualify
for listing on NASDAQ or on another exchange which would make them exempt from
applicability of the "penny stock" regulations. See "Risk Factors -- Regulation
of Penny Stocks."
Company management believes that various types of potential merger or
acquisition candidates might find a business combination with the Company to be
attractive. These include acquisition candidates desiring to create a public
market for their shares in order to enhance liquidity for current shareholders,
acquisition candidates which have long-term plans for raising capital through
the public sale of securities and believe that the possible prior existence of a
public market for their securities would be beneficial, and acquisition
candidates which plan to acquire additional assets through issuance of
securities rather than for cash, and believe that the possibility of development
of a public market for their securities will be of assistance in that process.
Acquisition candidates which have a need for an immediate cash infusion are not
likely to find a potential business combination with the Company to be an
attractive alternative.
There are no loan arrangements or arrangements for any financing whatsoever
relating to any business opportunities.
7
<PAGE>
FORM OF ACQUISITION
It is impossible to predict the manner in which the Company may participate
in a business opportunity. Specific business opportunities will be reviewed as
well as the respective needs and desires of the Company and the promoters of the
opportunity and, upon the basis of that review and the relative negotiating
strength of the Company and such promoters, the legal structure or method deemed
by management to be suitable will be selected. Such structure may include, but
is not limited to leases, purchase and sale agreements, licenses, joint ventures
and other contractual arrangements. The Company may act directly or indirectly
through an interest in a partnership, corporation or other form of organization.
Implementing such structure may require the merger, consolidation or
reorganization of the Company with other corporations or forms of business
organization, and although it is likely, there is no assurance that the Company
would be the surviving entity. In addition, the present management and
stockholders of the Company most likely will not have control of a majority of
the voting shares of the Company following a reorganization transaction. As part
of such a transaction, the Company's existing directors may resign and new
directors may be appointed without any vote by stockholders.
It is likely that the Company will acquire its participation in a business
opportunity through the issuance of common stock or other securities of the
Company. Although the terms of any such transaction cannot be predicted, it
should be noted that in certain circumstances the criteria for determining
whether or not an acquisition is a so-called "tax free" reorganization under the
Internal Revenue Code of 1986, depends upon the issuance to the stockholders of
the acquired company of a controlling interest (i.e. 80% or more) of the common
stock of the combined entities immediately following the reorganization. If a
transaction were structured to take advantage of these provisions rather than
other "tax free" provisions provided under the Internal Revenue Code, the
Company's current stockholders would retain in the aggregate 20% or less of the
total issued and outstanding shares. This could result in substantial additional
dilution in the equity of those who were stockholders of the Company prior to
such reorganization. Any such issuance of additional shares might also be done
simultaneously with a sale or transfer of shares representing a controlling
interest in the Company by the current officers, directors and principal
shareholders. (See "Description of Business - General").
It is anticipated that any new securities issued in any reorganization
would be issued in reliance upon exemptions, if any are available, from
registration under applicable federal and state securities laws. In some
circumstances, however, as a negotiated element of the transaction, the Company
may agree to register such securities either at the time the transaction is
consummated, or under certain conditions or at specified times thereafter. The
issuance of substantial additional securities and their potential sale into any
trading market that might develop in the Company's securities may have a
depressive effect upon such market.
The Company will participate in a business opportunity only after the
negotiation and execution of a written agreement. Although the terms of such
agreement cannot be predicted, generally such an agreement would require
specific representations and warranties by all of the parties thereto, specify
certain events of default, detail the terms of closing and the conditions which
must be satisfied by each of the parties thereto prior to such closing, outline
the manner of bearing costs if the transaction is not closed, set forth remedies
upon default, and include miscellaneous other terms.
8
<PAGE>
As a general matter, the Company anticipates that it, and/or its officers
and principal shareholders will enter into a letter of intent with the
management, principals or owners of a prospective business opportunity prior to
signing a binding agreement. Such a letter of intent will set forth the terms of
the proposed acquisition but will not bind any of the parties to consummate the
transaction. Execution of a letter of intent will by no means indicate that
consummation of an acquisition is probable. Neither the Company nor any of the
other parties to the letter of intent will be bound to consummate the
acquisition unless and until a definitive agreement concerning the acquisition
as described in the preceding paragraph is executed. Even after a definitive
agreement is executed, it is possible that the acquisition would not be
consummated should any party elect to exercise any right provided in the
agreement to terminate it on specified grounds.
It is anticipated that the investigation of specific business opportunities
and the negotiation, drafting and execution of relevant agreements, disclosure
documents and other instruments will require substantial management time and
attention and substantial costs for accountants, attorneys and others. If a
decision is made not to participate in a specific business opportunity, the
costs theretofore incurred in the related investigation would not be
recoverable. Moreover, because many providers of goods and services require
compensation at the time or soon after the goods and services are provided, the
inability of the Company to pay until an indeterminate future time may make it
impossible to procure goods and services.
In all probability, upon completion of an acquisition or merger, there will
be a change in control through issuance of substantially more shares of common
stock. Further, in conjunction with an acquisition or merger, it is likely that
management may offer to sell a controlling interest at a price not relative to
or reflective of any value of the shares sold by management, and at a price
which could not be achieved by individual shareholders at the time.
INVESTMENT COMPANY ACT AND OTHER REGULATION
The Company may participate in a business opportunity by purchasing,
trading or selling the securities of such business. The Company does not,
however, intend to engage primarily in such activities. Specifically, the
Company intends to conduct its activities so as to avoid being classified as an
"investment company" under the Investment Company Act of 1940 (the "Investment
Act"), and therefore to avoid application of the costly and restrictive
registration and other provisions of the Investment Act, and the regulations
promulgated thereunder.
Section 3(a) of the Investment Act contains the definition of an
"investment company," and it excludes any entity that does not engage primarily
in the business of investing, reinvesting or trading in securities, or that does
not engage in the business of investing, owning, holding or trading "investment
securities" (defined as "all securities other than government securities or
securities of majority-owned subsidiaries") the value of which exceeds 40% of
the value of its total assets (excluding government securities, cash or cash
items). The Company intends to implement its business plan in a manner which
will result in the availability of this exception from the definition of
"investment company." Consequently, the Company's participation in a business or
opportunity through the purchase and sale of investment securities will be
limited.
9
<PAGE>
The Company's plan of business may involve changes in its capital
structure, management, control and business, especially if it consummates a
reorganization as discussed above. Each of these areas is regulated by the
Investment Act, in order to protect purchasers of investment company securities.
Since the Company will not register as an investment company, stockholders will
not be afforded these protections.
Any securities which the Company might acquire in exchange for its common
stock are expected to be "restricted securities" within the meaning of the
Securities Act of 1933, as amended (the "Act"). If the Company elects to resell
such securities, such sale cannot proceed unless a registration statement has
been declared effective by the Securities and Exchange Commission or an
exemption from registration is available. Section 4(1) of the Act, which exempts
sales of securities not involving a distribution, would in all likelihood be
available to permit a private sale. Although the plan of operation does not
contemplate resale of securities acquired, if such a sale were to be necessary,
the Company would be required to comply with the provisions of the Act to effect
such resale.
An acquisition made by the Company may be in an industry which is regulated
or licensed by federal, state or local authorities. Compliance with such
regulations can be expected to be a time-consuming and expensive process.
COMPETITION
The Company expects to encounter substantial competition in its efforts to
locate attractive opportunities, primarily from business development companies,
venture capital partnerships and corporations, venture capital affiliates of
large industrial and financial companies, small investment companies, and
wealthy individuals. Many of these entities will have significantly greater
experience, resources and managerial capabilities than the Company and will
therefore be in a better position than the Company to obtain access to
attractive business opportunities. The Company also will possibly experience
competition from other public "blank check" companies, some of which may have
more funds available than does the Company.
NO RIGHTS OF DISSENTING SHAREHOLDERS
The Company does not intend to provide Company shareholders with complete
disclosure documentation including audited financial statements, concerning a
possible target company prior to acquisition, because Nevada Business
Corporation Act vests authority in the Board of Directors to decide and approve
matters involving acquisitions within certain restrictions. A transaction could
be structured as an acquisition, not a merger, with the Registrant being the
parent company and the acquiree being merged into a wholly owned subsidiary.
Therefore, a shareholder will have no right of dissent under Nevada law.
NO TARGET CANDIDATES FOR ACQUISITION
None of the Company's Officers, Directors, promoters, affiliates, or
associates have had any preliminary contact or discussion with any specific
candidate for acquisition. There are no present plans, proposals, arrangements,
or understandings with any representatives of the owners of any business or
company regarding the possibility of an acquisition transaction.
10
<PAGE>
ADMINISTRATIVE OFFICES
The Company currently maintains a mailing address at 465 Ocean Drive, #224,
Miami Beach, FL 33139 which is the mailing address of its President, Scott A.
Deitler. Other than this mailing address, the Company does not currently
maintain any other office facilities, and does not anticipate the need for
maintaining office facilities at any time in the foreseeable future. The Company
pays no rent or other fees for the use of this mailing address.
EMPLOYEES
The Company is a development stage company and currently has no employees.
Management of the Company expects to use consultants, attorneys and accountants
as necessary, and does not anticipate a need to engage any full-time employees
so long as it is seeking and evaluating business opportunities. The need for
employees and their availability will be addressed in connection with the
decision whether or not to acquire or participate in specific business
opportunities. Although there is no current plan with respect to its nature or
amount, remuneration may be paid to or accrued for the benefit of, the Company's
officers prior to, or in conjunction with, the completion of a business
acquisition for services actually rendered, if any. See "Executive Compensation"
and under "Certain Relationships and Related Transactions."
RISK FACTORS
1. CONFLICTS OF INTEREST. Certain conflicts of interest may exist
between the Company and its officers and directors. They have other business
interests to which they devote their attention, and may be expected to continue
to do so although management time should be devoted to the business of the
Company. As a result, conflicts of interest may arise that can be resolved only
through exercise of such judgment as is consistent with fiduciary duties to the
Company. See "Management," and "Conflicts of Interest."
It is anticipated that Company's officers and directors may actively
negotiate or otherwise consent to the purchase of a portion of his common stock
as a condition to, or in connection with, a proposed merger or acquisition
transaction. In this process, the Company's officers may consider his own
personal pecuniary benefit rather than the best interests of other Company
shareholders, and the other Company shareholders are not expected to be afforded
the opportunity to approve or consent to any particular stock buy-out
transaction. See "Conflicts of Interest."
2. NEED FOR ADDITIONAL FINANCING. The Company has very limited funds,
and such funds may not be adequate to take advantage of any available business
opportunities. Even if the Company's funds prove to be sufficient to acquire an
interest in, or complete a transaction with, a business opportunity, the Company
may not have enough capital to exploit the opportunity. The ultimate success of
the Company may depend upon its ability to raise additional capital. The Company
has not investigated the availability, source, or terms that might govern the
acquisition of additional capital and will not do so until it determines a need
for additional financing. If additional capital is needed, there is no assurance
that funds will be available from any source or, if available, that they can be
obtained on terms acceptable to the Company. If not available, the Company's
operations will be limited to those that can be financed with its modest
capital.
11
<PAGE>
3. REGULATION OF PENNY STOCKS. The Company's securities, when available
for trading, will be subject to a Securities and Exchange Commission rule that
imposes special sales practice requirements upon broker-dealers who sell such
securities to persons other than established customers or accredited investors.
For purposes of the rule, the phrase "accredited investors" means, in general
terms, institutions with assets in excess of $5,000,000, or individuals having a
net worth in excess of $1,000,000 or having an annual income that exceeds
$200,000 (or that, when combined with a spouse's income, exceeds $300,000). For
transactions covered by the rule, the broker-dealer must make a special
suitability determination for the purchaser and receive the purchaser's written
agreement to the transaction prior to the sale. Consequently, the rule may
affect the ability of broker-dealers to sell the Company's securities and also
may affect the ability of purchasers in this offering to sell their securities
in any market that might develop therefore.
In addition, the Securities and Exchange Commission has adopted a
number of rules to regulate "penny stocks." Such rules include Rules 3a51-1,
15g-1, 15g-2, 15g-3, 15g-4, 15g-5, 15g-6, 15g-7, and 15g-9 under the Securities
Exchange Act of 1934, as amended. Because the securities of the Company may
constitute "penny stocks" within the meaning of the rules, the rules would apply
to the Company and to its securities. The rules may further affect the ability
of owners of Shares to sell the securities of the Company in any market that
might develop for them.
Shareholders should be aware that, according to Securities and Exchange
Commission, the market for penny stocks has suffered in recent years from
patterns of fraud and abuse. Such patterns include (i) control of the market for
the security by one or a few broker-dealers that are often related to the
promoter or issuer; (ii) manipulation of prices through prearranged matching of
purchases and sales and false and misleading press releases; (iii) "boiler room"
practices involving high-pressure sales tactics and unrealistic price
projections by inexperienced sales persons; (iv) excessive and undisclosed
bid-ask differentials and markups by selling broker- dealers; and (v) the
wholesale dumping of the same securities by promoters and broker-dealers after
prices have been manipulated to a desired level, along with the resulting
inevitable collapse of those prices and with consequent investor losses. The
Company's management is aware of the abuses that have occurred historically in
the penny stock market. Although the Company does not expect to be in a position
to dictate the behavior of the market or of broker-dealers who participate in
the market, management will strive within the confines of practical limitations
to prevent the described patterns from being established with respect to the
Company's securities.
4. LACK OF OPERATING HISTORY. The Company was formed in March 2000
for the purpose of seeking a business opportunity. Due to the special risks
inherent in the investigation, acquisition, or involvement in a new business
opportunity, the Company must be regarded as a new or start-up venture with all
of the unforeseen costs, expenses, problems, and difficulties to which such
ventures are subject.
5. NO ASSURANCE OF SUCCESS OR PROFITABILITY. There is no assurance that
the Company will acquire a favorable business opportunity. Even if the Company
should become involved in a business opportunity, there is no assurance that it
will generate revenues or profits, or that the market price of the Company's
common stock will be increased thereby.
6. POSSIBLE BUSINESS - NOT IDENTIFIED AND HIGHLY RISKY. The Company has
not identified and has no commitments to enter into or acquire a specific
business opportunity and therefore can disclose the risks and hazards of a
12
<PAGE>
business or opportunity that it may enter into in only a general manner, and
cannot disclose the risks and hazards of any specific business or opportunity
that it may enter into. An investor can expect a potential business opportunity
to be quite risky. The Company's acquisition of or participation in a business
opportunity will likely be highly illiquid and could result in a total loss to
the Company and its stockholders if the business or opportunity proves to be
unsuccessful. See Item 1 "Description of Business."
7. TYPE OF BUSINESS ACQUIRED. The type of business to be acquired may
be one that desires to avoid effecting its own public offering and the
accompanying expense, delays, uncertainties, and federal and state requirements
which purport to protect investors. Because of the Company's limited capital, it
is more likely than not that any acquisition by the Company will involve other
parties whose primary interest is the acquisition of control of a publicly
traded company. Moreover, any business opportunity acquired may be currently
unprofitable or present other negative factors.
8. IMPRACTICABILITY OF EXHAUSTIVE INVESTIGATION. The Company's limited
funds and the lack of full-time management will likely make it impracticable to
conduct a complete and exhaustive investigation and analysis of a business
opportunity before the Company commits its capital or other resources thereto.
Management decisions, therefore, will likely be made without detailed
feasibility studies, independent analysis, market surveys and the like which, if
the Company had more funds available to it, would be desirable. The Company will
be particularly dependent in making decisions upon information provided by the
promoter, owner, sponsor, or others associated with the business opportunity
seeking the Company's participation. A significant portion of the Company's
available funds may be expended for investigative expenses and other expenses
related to preliminary aspects of completing an acquisition transaction, whether
or not any business opportunity investigated is eventually acquired.
9. LACK OF DIVERSIFICATION. Because of the limited financial resources
that the Company has, it is unlikely that the Company will be able to diversify
its acquisitions or operations. The Company's probable inability to diversify
its activities into more than one area will subject the Company to economic
fluctuations within a particular business or industry and therefore increase the
risks associated with the Company's operations.
10. RELIANCE UPON FINANCIAL STATEMENTS. The Company generally will
require audited financial statements from companies that it proposes to acquire.
Given cases where audited financials are available, the Company will have to
rely upon interim period unaudited information received from target companies'
management that has not been verified by outside auditors. The lack of the type
of independent verification which audited financial statements would provide,
increases the risk that the Company, in evaluating an acquisition with such a
target company, will not have the benefit of full and accurate information about
the financial condition and recent interim operating history of the target
company. This risk increases the prospect that the acquisition of such a company
might prove to be an unfavorable one for the Company or the holders of the
Company's securities.
Moreover, the Company will be subject to the reporting provisions of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and thus
will be required to furnish certain information about significant acquisitions,
including audited financial statements for any business that it acquires.
Consequently, acquisition prospects that do not have, or are unable to provide
reasonable assurances that they will be able to obtain, the required audited
statements would not be considered by the Company to be appropriate for
13
<PAGE>
acquisition so long as the reporting requirements of the Exchange Act are
applicable. Should the Company, during the time it remains subject to the
reporting provisions of the Exchange Act, complete an acquisition of an entity
for which audited financial statements prove to be unobtainable, the Company
would be exposed to enforcement actions by the Securities and Exchange
Commission (the "Commission") and to corresponding administrative sanctions,
including permanent injunctions against the Company and its management. The
legal and other costs of defending a Commission enforcement action would have
material, adverse consequences for the Company and its business. The imposition
of administrative sanctions would subject the Company to further adverse
consequences.
In addition, the lack of audited financial statements would prevent the
securities of the Company from becoming eligible for listing on NASDAQ, or on
any existing stock exchange. Moreover, the lack of such financial statements is
likely to discourage broker-dealers from becoming or continuing to serve as
market makers in the securities of the Company. Without audited financial
statements, the Company would almost certainly be unable to offer securities
under a registration statement pursuant to the Securities Act of 1933, and the
ability of the Company to raise capital would be significantly limited until
such financial statements were to become available.
11. OTHER REGULATION. An acquisition made by the Company may be of a
business that is subject to regulation or licensing by federal, state, or local
authorities. Compliance with such regulations and licensing can be expected to
be a time-consuming, expensive process and may limit other investment
opportunities of the Company.
12. DEPENDENCE UPON MANAGEMENT; LIMITED PARTICIPATION OF MANAGEMENT.
The Company currently has only two individuals who are serving as its officers
and directors on a part time basis. The Company will be heavily dependent upon
their skills, talents, and abilities to implement its business plan, and may,
from time to time, find that the inability of the officers and directors to
devote their full time attention to the business of the Company results in a
delay in progress toward implementing its business plan. See "Management."
Because investors will not be able to evaluate the merits of possible business
acquisitions by the Company, they should critically assess the information
concerning the Company's officers and directors.
13. LACK OF CONTINUITY IN MANAGEMENT. The Company does not have an
employment agreement with its officers and directors, and as a result, there is
no assurance they will continue to manage the Company in the future. In
connection with acquisition of a business opportunity, it is likely the current
officers and directors of the Company may resign subject to compliance with
Section 14f of the Securities Exchange Act of 1934. A decision to resign will be
based upon the identity of the business opportunity and the nature of the
transaction, and is likely to occur without the vote or consent of the
stockholders of the Company.
14. INDEMNIFICATION OF OFFICERS AND DIRECTORS. Nevada Statutes provide
for the indemnification of its directors, officers, employees, and agents, under
certain circumstances, against attorney's fees and other expenses incurred by
them in any litigation to which they become a party arising from their
association with or activities on behalf of the Company. The Company will also
bear the expenses of such litigation for any of its directors, officers,
employees, or agents, upon such person's promise to repay the Company therefor
if it is ultimately determined that any such person shall not have been entitled
to indemnification. This indemnification policy could result in substantial
expenditures by the Company which it will be unable to recoup.
14
<PAGE>
15. DIRECTOR'S LIABILITY LIMITED. Nevada Statutes exclude personal
liability of its directors to the Company and its stockholders for monetary
damages for breach of fiduciary duty except in certain specified circumstances.
Accordingly, the Company will have a much more limited right of action against
its directors than otherwise would be the case. This provision does not affect
the liability of any director under federal or applicable state securities laws.
16. DEPENDENCE UPON OUTSIDE ADVISORS. To supplement the business
experience of its officers and directors, the Company may be required to employ
accountants, technical experts, appraisers, attorneys, or other consultants or
advisors. The selection of any such advisors will be made by the Company's
President without any input from stockholders. Furthermore, it is anticipated
that such persons may be engaged on an "as needed" basis without a continuing
fiduciary or other obligation to the Company. In the event the President of the
Company considers it necessary to hire outside advisors, he may elect to hire
persons who are affiliates, if they are able to provide the required services.
17. LEVERAGED TRANSACTIONS. There is a possibility that any acquisition
of a business opportunity by the Company may be leveraged, i.e., the Company may
finance the acquisition of the business opportunity by borrowing against the
assets of the business opportunity to be acquired, or against the projected
future revenues or profits of the business opportunity. This could increase the
Company's exposure to larger losses. A business opportunity acquired through a
leveraged transaction is profitable only if it generates enough revenues to
cover the related debt and expenses. Failure to make payments on the debt
incurred to purchase the business opportunity could result in the loss of a
portion or all of the assets acquired. There is no assurance that any business
opportunity acquired through a leveraged transaction will generate sufficient
revenues to cover the related debt and expenses.
18. COMPETITION. The search for potentially profitable business
opportunities is intensely competitive. The Company expects to be at a
disadvantage when competing with many firms that have substantially greater
financial and management resources and capabilities than the Company. These
competitive conditions will exist in any industry in which the Company may
become interested.
19. NO FORESEEABLE DIVIDENDS. The Company has not paid dividends on its
common stock and does not anticipate paying such dividends in the foreseeable
future.
20. LOSS OF CONTROL BY PRESENT MANAGEMENT AND STOCKHOLDERS. The Company
may consider an acquisition in which the Company would issue as consideration
for the business opportunity to be acquired, an amount of the Company's
authorized but unissued common stock that would, upon issuance, represent the
great majority of the voting power and equity of the Company. The result of such
an acquisition would be that the acquired company's stockholders and management
would control the Company, and the Company's management could be replaced by
persons unknown at this time. Such a merger would result in a greatly reduced
percentage of ownership of the Company by its current shareholders. In addition,
the Company's major shareholders could sell control blocks of stock at a premium
price to the acquired company's stockholders.
15
<PAGE>
21. NO PUBLIC MARKET EXISTS. There is no public market for the
Company's common stock, and no assurance can be given that a market will develop
or that a shareholder ever will be able to liquidate his investment without
considerable delay, if at all. If a market should develop, the price may be
highly volatile. Factors such as those discussed in this "Risk Factors" section
may have a significant impact upon the market price of the securities offered
hereby. Owing to the low price of the securities, many brokerage firms may not
be willing to effect transactions in the securities. Even if a purchaser finds a
broker willing to effect a transaction in these securities, the combination of
brokerage commissions, state transfer taxes, if any, and any other selling costs
may exceed the selling price. Further, many lending institutions will not permit
the use of such securities as collateral for any loans.
22. RULE 144 SALES. All of the outstanding shares of common stock held
by present officers, directors, and stockholders are "restricted securities"
within the meaning of Rule 144 under the Securities Act of 1933, as amended. As
restricted shares, these shares may be resold only pursuant to an effective
registration statement or under the requirements of Rule 144 or other applicable
exemptions from registration under the Act and as required under applicable
state securities laws. Rule 144 provides in essence that a person who has held
restricted securities for one year may, under certain conditions, sell every
three months, in brokerage transactions, a number of shares that does not exceed
the greater of 1.0% of a company's outstanding common stock or the average
weekly trading volume during the four calendar weeks prior to the sale. There is
no limit on the amount of restricted securities that may be sold by a
nonaffiliate after the restricted securities have been held by the owner for a
period of two years.
23. BLUE SKY CONSIDERATIONS. Because the securities registered
hereunder have not been registered for resale under the blue sky laws of any
state, the holders of such shares and persons who desire to purchase them in any
trading market that might develop in the future, should be aware that there may
be significant state blue-sky law restrictions upon the ability of investors to
sell the securities and of purchasers to purchase the securities. Some
jurisdictions may not under any circumstances allow the trading or resale of
blind-pool or "blank-check" securities. Accordingly, investors should consider
the secondary market for the Company's securities to be a limited one.
24. BLUE SKY RESTRICTIONS. Many states have enacted statutes or rules
which restrict or prohibit the sale of securities of "blank check" companies to
residents so long as they remain without specific business companies. To the
extent any current shareholders or subsequent purchaser from a shareholder may
reside in a state which restricts or prohibits resale of shares in a "blank
check" company, warning is hereby given that the shares may be "restricted" from
resale as long as the company is a shell company.
16
<PAGE>
At the date of this registration statement, the Company has no
intention of offering further shares in a private offering to anyone. Further,
the policy of the Board of Directors is that any future offering of shares will
only be made after an acquisition has been made and can be disclosed in
appropriate 8-K filings.
In the event of a violation of state laws regarding resale of "blank
check" shares the Company could be liable for civil and criminal penalties which
would be a substantial impairment to the Company. At date of this registration
statement, all shareholders' shares bear a "restrictive legend," and the Company
will examine each shareholders' resident state laws at the time of any proposed
resale of shares now outstanding to attempt to avoid any inadvertent breach of
state laws.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATIONS OR PLAN OF OPERATIONS
--------------------------------------------------------------------------------
LIQUIDITY AND CAPITAL RESOURCES
The Company remains in the development stage and, since inception, has
experienced significant liquidity problems and has no significant capital
resources and has stockholder's deficit of ($435). The Company has current
assets in the form of accounts payable by a related party of $435 and total
assets of $0.
The Company will carry out its plan of business as discussed above. The
Company cannot predict to what extent its lack of liquidity and capital
resources will impair the consummation of a business combination or whether it
will incur further operating losses through any business entity which the
Company may eventually acquire.
During the period from March 21, 2000 (inception) through date of this
registration statement the Company has engaged in no significant operations
other than organizational activities, acquisition of capital and preparation for
registration of its securities under the Securities Exchange Act of 1934, as
amended. No revenues were received by the Company during this period. The
company has incurred operating expenses since inception to March 21, 2000 of
$635. The net loss on operations was $(635) through October 31, 2000. The fiscal
year end is October 31. Such losses will continue unless revenues and business
can be acquired by the company. There is no assurance that revenues or
profitability will ever be achieved by the company.
RESULTS OF OPERATIONS YEAR ENDED OCTOBER 31, 2000 FROM INCEPTION - MARCH 21,
2000
The Company had no revenues in 1999 or 1998. The Company incurred $635 in
expenses from inception in March 2000.
The net operating loss in fiscal year 2000 was $(635). The net loss per
share each year was less than ($.01) per share.
For the current fiscal year, the Company anticipates incurring a loss as a
result of legal and accounting expenses, expenses associated with registration
under the Securities Exchange Act of 1934, and expenses associated with locating
and evaluating acquisition candidates. The Company anticipates that until a
business combination is completed with an acquisition candidate, it will not
generate revenues other than interest income, and may continue to operate at a
loss after completing a business combination, depending upon the performance of
the acquired business.
17
<PAGE>
NEED FOR ADDITIONAL FINANCING
The Company does not have capital sufficient to meet the Company's cash
needs, including the costs of compliance with the continuing reporting
requirements of the Securities Exchange Act of 1934. The Company will have to
seek loans or equity placements to cover such cash needs. In the event the
Company is able to complete a business combination during this period, lack of
its existing capital may be a sufficient impediment to prevent it from
accomplishing the goal of completing a business combination. There is no
assurance, however, that without funds it will ultimately allow registrant to
complete a business combination. Once a business combination is completed, the
Company's needs for additional financing are likely to increase substantially.
No commitments to provide additional funds have been made by management or
other stockholders. Accordingly, there can be no assurance that any additional
funds will be available to the Company to allow it to cover its expenses as they
may be incurred.
Irrespective of whether the Company's cash assets prove to be inadequate to
meet the Company's operational needs, the Company might seek to compensate
providers of services by issuances of stock in lieu of cash.
YEAR 2000 ISSUES
Year 2000 problems result primarily from the inability of some computer
software to properly store, recall, or use data after December 31, 1999. These
problems may affect many computers and other devices that contain embedded
computer chips. The Company's operations, however, do not rely on information
technology (IT) systems. Accordingly, the Company does not believe it will be
material affected by Year 2000 problems.
The Company could be improved by non-IT systems that may suffer from Year
2000 problems, including telephone systems and facsimile and other office
machines. Moreover, third-parties suppliers may suffer from Year 2000 problems
that could affect the Company's operations, including banks, oil field
operators, and utilities. In light of the Company's minimal operations, the
Company does not believe that such non-IT systems or third-party Year 2000
problems will affect the Company in a manner that is different or more
substantial than such problems affect other similarly situated companies or
industry generally. Consequently, the Company does not currently intend to
conduct a readiness assessment of Year 2000 problems or to develop a detailed
contingency plan with respect to Year 2000 problems that may affect the Company.
ITEM 3. DESCRIPTION OF PROPERTY.
-------------------------------
The Company has no property. The Company does not currently maintain an
office or any other facilities. It does currently maintain a mailing address at
465 Ocean Drive, #224, Miami Beach, FL 33139, which is the mailing address of
its President, Scott A. Deitler. The Company pays no rent for the use of this
mailing address. The Company does not believe that it will need to maintain an
office at any time in the foreseeable future in order to carry out its plan of
operations described herein.
18
<PAGE>
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
-----------------------------------------------------------------------------
The following table sets forth, as of the date of this Registration
Statement, the number of shares of common stock owned of record and beneficially
by executive officers, directors and persons who hold 5.0% or more of the
outstanding common stock of the Company. Also included are the shares held by
all executive officers and directors as a group.
SHAREHOLDERS/ NUMBER OF SHARES OWNERSHIP
BENEFICIAL OWNERS PERCENTAGE
--------------------------------------------------------------------------------
Scott A. Deitler
President & Director 100,000 10%
Lawrence S. Deitler
Secretary & Treasurer 0 0%
Susan J. Cornman 500,000 50%
Mergers & Acquisitions, L.L.C. 400,000* 40%*
All directors and executive 500,000 50%
officers as a group (2 persons)
*Beneficially owned by President, Scott A. Deitler.
Each principal shareholder has sole investment power and sole voting power over
the shares.
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS.
--------------------------------------------------------------------------------
The directors and executive officers currently serving the Company are
as follows:
NAME POSITION HELD TENURE
Scott A. Deitler President and Director Annual since 2000
Lawrence S. Deitler Secretary and Treasurer Annual since 2000
The directors named above will serve until the next annual meeting of the
Company's stockholders. Thereafter, directors will be elected for one-year terms
at the annual stockholders' meeting. Officers will hold their positions at the
pleasure of the board of directors, absent any employment agreement, of which
none currently exists or is contemplated. There is no arrangement or
understanding between the directors and officers of the Company and any other
person pursuant to which any director or officer was or is to be selected as a
director or officer.
The directors and officers of the Company will devote such time to the
Company's affairs on an "as needed" basis, but less than 20 hours per month. As
a result, the actual amount of time which they will devote to the Company's
affairs is unknown and is likely to vary substantially from month to month.
19
<PAGE>
BIOGRAPHICAL INFORMATION
SCOTT A. DEITLER, age 43, President and director since inception, received
a B.A. in Business and Conservation from the University of Colorado in 1978.
From 1987 to 1995, he was President and a director of Colorado Coin Co. in
Boulder, Colorado. From 1993 to 1998, he was President of Ulta Travel, Inc., a
travel agency. He has been President and Director of J.S.J. Capital Corp.
(1999-2000), J.S.J. Capital II, Inc. (1999-2000), J.S.J. Capital III, Inc.
(1999-2000), Investra Enterprises, Inc. (1999), Advanced Ceiling Supplies, Inc.
(1997-2000), Marathon Marketing Corp. (since 1991-2000), S.D.E. Holdings 1 Inc.
(2000), S.D.E. Holdings 2 Inc. and S.D.E. Holdings 3 Inc. (since 2000). He was
Secretary and Director of Cross Check Corp. since 1997. All of which are blank
check companies without specific business, but which are seeking an acquisition
or merger. Investra Enterprises, Inc. merged with Pathobiotek Diagnostics, Inc.
in March 2000, Cross Check Corp. merged with HouseholdDirect.com, Inc. in March
2000, and S.D.E. 1 Holdings Inc. merged with DNAPrint genomics, Inc. in October
2000. Mr. Deitler resigned as an officer of Cross Check Corp., Marathon
Marketing Corp., Advanced Ceiling Supplies, Inc., J.S.J. Capital Corp., J.S.J.
Capital II, Inc., J.S.J. Capital III, Inc. and Investra Enterprises, Inc. in
early 2000. He resigned as an officer and director of S.D.E. Holdings 1 Inc. in
October 2000.
LAWRENCE S. DEITLER, Secretary and Treasurer since inception. From 1957
until 1988 he had a private CPA firm in Fairfield, Connecticut dealing with
individuals and private companies. In 1989 he and Scott A. Deitler purchased a
vending company in Boulder, Colorado, which they expanded to Southern
California, Hawaii and Massachusetts. He was involved in all aspects of the
business including management, finance and marketing (since 1989-1995). Since
1995 Mr. Deitler has had a private accounting practice. He recently started a
yacht management and maintenance business.
Management will devote minimal time to the operations of the Company, and
any time spent will be devoted to screening and assessing and, if warranted,
negotiating to acquire business opportunities.
None of the Company's officers and/or directors receives any compensation
for their respective services rendered to the Company, nor have they received
such compensation in the past. They all have agreed to act without compensation
until authorized by the Board of Directors, which is not expected to occur until
the Company has generated revenues from operations after consummation of a
merger or acquisition. As of the date of filing this report, the Company has no
funds available to pay officers or directors. Further, none of the officers or
directors is accruing any compensation pursuant to any agreement with the
Company. No retirement, pension, profit sharing, stock option or insurance
programs or other similar programs have been adopted by the Company for the
benefit of its employees.
It is possible that, after the Company successfully consummates a merger or
acquisition with an unaffiliated entity, that entity may desire to employ or
retain one or a number of members of the Company's management for the purposes
of providing services to the surviving entity, or otherwise provide other
compensation to such persons. However, the Company has adopted a policy whereby
the offer of any post-transaction remuneration to members of management will not
be a consideration in the Company's decision to undertake any proposed
transaction. Each member of management has agreed to disclose to the Company's
Board of Directors any discussions concerning possible compensation to be paid
to them by any entity which proposes to undertake a transaction with the Company
20
<PAGE>
and further, to abstain from voting on such transaction. Therefore, as a
practical matter, if each member of the Company's Board of Directors were
offered compensation in any form from any prospective merger or acquisition
candidate, the proposed transaction would not be approved by the Company's Board
of Directors as a result of the inability of the Board to affirmatively approve
such a transaction.
It is possible that persons associated with management may refer a
prospective merger or acquisition candidate to the Company. In the event the
Company consummates a transaction with any entity referred by associates of
management, it is possible that such an associate will be compensated for their
referral in the form of a finder's fee. It is anticipated that this fee will be
either in the form of restricted common stock issued by the Company as part of
the terms of the proposed transaction, or will be in the form of cash
consideration. However, if such compensation is in the form of cash, such
payment will be tendered by the acquisition or merger candidate, because the
Company has insufficient cash available. The amount of such finder's fee cannot
be determined as of the date of filing this report, but is expected to be
comparable to consideration normally paid in like transactions. No member of
management of the Company will receive any finders fee, either directly or
indirectly, as a result of their respective efforts to implement the Company's
business plan outlined herein.
The Company has adopted a policy that its affiliates and management shall
not be issued further common shares of the Company, except in the event
discussed in the preceding paragraphs.
PREVIOUS "BLANK CHECK" OR "SHELL" COMPANY INVOLVEMENT
Management of the Company has been involved in prior private "blank check"
or "shell" companies as follows:
Scott Deitler has also been an officer and director of certain other
"shell" companies, as follows: J.S.J. Capital Corp., J.S.J. Capital II, Inc.,
J.S.J. Capital III, Inc., Marathon Marketing Corp., Cross Check Corp., Investra
Enterprises, Inc., Advanced Ceiling Supplies, Inc., S.D.E. Holdings 1 Inc.,
S.D.E. Holdings 2 Inc., and S.D.E. Holdings 3 Inc. Most of the companies have
completed an acquisition or merger and all of the companies are in the
development stage, except that Investra Enterprises, Inc. merged with
Pathobiotek Diagnostics, Inc. in March 2000, Cross Check Corp. merged with
HouseholdDirect.com, Inc. in March 2000, and Marathon Marketing Corp. merged
with InterSpace Enterprises, Inc. in April 2000. S.D.E. 1 Holdings Inc. merged
with DNAPrint genomics, Inc. in October 2000, J.S.J. Capital Corp. merged with
Hi Speed Net Solutions on April 24, 2000. Mr. Deitler sold control of J.S.J.
Capital II, Inc. in May 2000, and resigned as an officer and director. J.S.J.
Capital III, Inc. merged with Accesspoint Corp. on April 17, 2000.
INDEMNIFICATION OF OFFICERS AND DIRECTORS
As permitted by Nevada Statutes, the Company may indemnify its directors
and officers against expenses and liabilities they incur to defend, settle, or
satisfy any civil or criminal action brought against them on account of their
being or having been Company directors or officers unless, in any such action,
they are adjudged to have acted with gross negligence or willful misconduct.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers or persons controlling the Company
pursuant to the foregoing provisions, the Company has been informed that, in the
opinion of the Securities and Exchange Commission, such indemnification is
against public policy as expressed in that Act and is, therefore, unenforceable.
21
<PAGE>
EXCLUSION OF LIABILITY
The Nevada Corporation Act excludes personal liability for its directors
for monetary damages based upon any violation of their fiduciary duties as
directors, except as to liability for any breach of the duty of loyalty, acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, acts in violation of the Nevada Corporation Act, or any
transaction from which a director receives an improper personal benefit. This
exclusion of liability does not limit any right which a director may have to be
indemnified and does not affect any director's liability under federal or
applicable state securities laws.
CONFLICTS OF INTEREST
The officers and directors of the Company will not devote more than a
portion of their time to the affairs of the Company. There will be occasions
when the time requirements of the Company's business conflict with the demands
of their other business and investment activities. Such conflicts may require
that the Company attempt to employ additional personnel. There is no assurance
that the services of such persons will be available or that they can be obtained
upon terms favorable to the Company.
Conflicts of Interest - General. Certain of the officers and directors of
the Company may be directors and/or principal shareholders of other companies
and, therefore, could face conflicts of interest with respect to potential
acquisitions. In addition, officers and directors of the Company may in the
future participate in business ventures which could be deemed to compete
directly with the Company. Additional conflicts of interest and non-arms length
transactions may also arise in the future in the event the Company's officers or
directors are involved in the management of any firm with which the Company
transacts business. The Company's Board of Directors has adopted a policy that
the Company will not seek a merger with, or acquisition of, any entity in which
management serve as officers or directors, or in which they or their family
members own or hold a controlling ownership interest. Although the Board of
Directors could elect to change this policy, the Board of Directors has no
present intention to do so. In addition, if the Company and other companies with
which the Company's officers and directors are affiliated both desire to take
advantage of a potential business opportunity, then the Board of Directors has
agreed that said opportunity should be available to each such company in the
order in which such companies registered or became current in the filing of
annual reports under the Exchange Act subsequent to January 1, 1997.
The Company's officers and directors may actively negotiate or otherwise
consent to the purchase of a portion of their common stock as a condition to, or
in connection with, a proposed merger or acquisition transaction. It is
anticipated that a substantial premium over the initial cost of such shares may
be paid by the purchaser in conjunction with any sale of shares by the Company's
officers and directors which is made as a condition to, or in connection with, a
proposed merger or acquisition transaction. The fact that a substantial premium
may be paid to the Company's officers and directors to acquire their shares
creates a potential conflict of interest for them in satisfying their fiduciary
duties to the Company and its other shareholders. Even though such a sale could
result in a substantial profit to them, they would be legally required to make
the decision based upon the best interests of the Company and the Company's
other shareholders, rather than their own personal pecuniary benefit.
22
<PAGE>
<TABLE>
<CAPTION>
ITEM 6. EXECUTIVE COMPENSATION.
------------------------------
SUMMARY COMPENSATION TABLE OF EXECUTIVES
Annual Compensation Awards
<S> <C> <C> <C> <C> <C> <C>
Name & Year Salary Bonus Other Annual Restricted Securities
Principal ($) ($) Compensation Stock Underlying
Position ($) Award(s) Options/
($) SARS (#)
-------------------------------------------------------------------------------------------------------------------
Scott A. Deitler, 1999 0 0 0 0 0
President 2000 0 0 0 0 0
Lawrence S. Deitler, 1999 0 0 0 0 0
Secretary & 2000 0 0 0 0 0
Treasurer
</TABLE>
<TABLE>
<CAPTION>
Directors' Compensation
<S> <C> <C> <C> <C> <C>
Name Annual Meeting Consulting Number Number of
Retainer Fees ($) Fees/Other of Securities
Fee($) Fees ($) Shares Underlying
(#) Options SARS
(#)
------------------------------------------------------------------------------------------------------------------
A. Director, Scott A. Deitler 0 0 0 0 0
</TABLE>
Option/SAR Grants Table (None)
Aggregated Option/SAR Exercises in Last Fiscal Year an FY-End Option/SAR
value (None)
Long Term Incentive Plans - Awards in Last Fiscal Year (None)
23
<PAGE>
No officer or director has received any other remuneration in the two year
period prior to the filing of this registration statement. There is no current
plan in existence, to pay or accrue compensation to its officers and directors
for services related to seeking business opportunities and completing a merger
or acquisition transaction. See "Certain Relationships and Related
Transactions." The Company has no stock option, retirement, pension, or
profit-sharing programs for the benefit of directors, officers or other
employees, but the Board of Directors may recommend adoption of one or more such
programs in the future.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
------------------------------------------------------
During October 2000, the Company issued for cash and stock subscriptions
receivable, 900,000 shares of its $.001 par value common stock to private
investors. The Company also issued for cash and a stock subscription receivable,
100,000 shares of its $.001 par value common stock to its president.
Certificates evidencing the common stock issued by the Company to these persons
have all been stamped with a restrictive legend, and are subject to stop
transfer orders by the Company. For additional information concerning
restrictions that are imposed upon the securities held by current stockholders,
and the responsibilities of such stockholders to comply with federal securities
laws in the disposition of such common stock, see "Risk Factors - Rule 144
Sales."
No officer, director, or affiliate of the Company has or proposes to have
any direct or indirect material interest in any asset proposed to be acquired by
the Company through security holdings, contracts, options, or otherwise.
The Company has adopted a policy under which any consulting or finder's fee
that may be paid to a third party for consulting services to assist management
in evaluating a prospective business opportunity would be paid in stock or in
cash. Any such issuance of stock would be made on an ad hoc basis. Accordingly,
the Company is unable to predict whether or in what amount such a stock issuance
might be made.
Although management has no current plans to cause the Company to do so, it
is possible that the Company may enter into an agreement with an acquisition
candidate requiring the sale of all or a portion of the common stock held by the
Company's current stockholders to the acquisition candidate or principals
thereof, or to other individuals or business entities, or requiring some other
form of payment to the Company's current stockholders, or requiring the future
employment of specified officers and payment of salaries to them. It is more
likely than not that any sale of securities by the Company's current
stockholders to an acquisition candidate would be at a price substantially
higher than that originally paid by such stockholders. Any payment to current
stockholders in the context of an acquisition involving the Company would be
determined entirely by the largely unforeseeable terms of a future agreement
with an unidentified business entity.
24
<PAGE>
ITEM 8. DESCRIPTION OF SECURITIES.
---------------------------------
COMMON STOCK
The Company's Articles of Incorporation authorize the issuance of
75,000,000 shares of common stock $.001 par value. Each record holder of common
stock is entitled to one vote for each share held on all matters properly
submitted to the stockholders for their vote. Cumulative voting for the election
of directors is not permitted by the Articles of Incorporation.
Holders of outstanding shares of common stock are entitled to such
dividends as may be declared from time to time by the Board of Directors out of
legally available funds; and, in the event of liquidation, dissolution or
winding up of the affairs of the Company, holders are entitled to receive,
ratably, the net assets of the Company available to stockholders after
distribution is made to the preferred stockholders, if any, who are given
preferred rights upon liquidation. Holders of outstanding shares of common stock
have no preemptive, conversion or redemptive rights. All of the issued and
outstanding shares of common stock are, and all unissued shares when offered and
sold will be, duly authorized, validly issued, fully paid, and nonassessable. To
the extent that additional shares of the Company's common stock are issued, the
relative interests of then existing stockholders may be diluted.
PREFERRED STOCK
The Company's Articles of Incorporation authorize the issuance of
25,000,000 shares of preferred stock $.001 par value. The Board of Directors of
the Company is authorized to issue the preferred stock from time to time in
classes and series and is further authorized to established such classes and
series, to fix and determine the variations in the relative rights and
preferences as between series, to fix voting rights, if any, for each class or
series, and to allow for the conversion of preferred stock into common stock. No
preferred stock has been issued by the Company. Preferred stock may be utilized
in making acquisitions.
SHAREHOLDERS
Each shareholder has sole investment power and sole voting power over the
shares owned by such shareholder.
No shareholder has entered into or delivered any lock up agreement or
letter agreement regarding their shares or options thereon. Under Nevada laws,
no lock up agreement is required regarding the Company's shares as it might
relate to an acquisition.
TRANSFER AGENT
The Company has engaged Mountain Share Transfer, Inc., 1625 Abilene Drive,
Broomfield, Colorado 80020 as its transfer agent.
REPORTS TO STOCKHOLDERS
The Company plans to furnish its stockholders with an annual report for
each fiscal year containing financial statements audited by its independent
certified public accountants. In the event the Company enters into a business
combination with another company, it is the present intention of management to
continue furnishing annual reports to stockholders. The Company intends to
comply with the periodic reporting requirements of the Securities Exchange Act
of 1934 for so long as it is subject to those requirements, and to file
unaudited quarterly reports and annual reports with audited financial statements
as required by the Securities Exchange Act of 1934.
25
<PAGE>
PART II
ITEM 1. MARKET PRICE AND DIVIDENDS ON THE REGISTRANT'S COMMON
EQUITY AND OTHER SHAREHOLDER MATTERS
--------------------------------------------------------------------------------
No public trading market exists for the Company's securities and all of its
outstanding securities are restricted securities as defined in Rule 144. There
were three (3) holders of record of the Company's common stock on October 31,
2000. No dividends have been paid to date and the Company's Board of Directors
does not anticipate paying dividends in the foreseeable future.
ITEM 2. LEGAL PROCEEDINGS
------------------------------------
The Company is not a party to any pending legal proceedings, and no such
proceedings are known to be contemplated.
No director, officer or affiliate of the Company, and no owner of record or
beneficial owner of more than 5.0% of the securities of the Company, or any
associate of any such director, officer or security holder is a party adverse to
the Company or has a material interest adverse to the Company in reference to
any litigation.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
---------------------------------------------------------------
Not applicable.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES
---------------------------------------------------------
Since March 21, 2000 (the date of the Company's formation), the Company has
sold its common stock to the persons listed in the table below in transactions
summarized as follows:
Purchase Date of
Purchaser Per Share Amount Purchase Shares
--------------------------------------------------------------------------------
Scott A. Deitler $.0002 $20.00 10/21/00 100,000
President and Director
P.O. Box 1467
Boulder, CO 80306
Mergers and Acquisitions L.L.C. $.0002 $80.00 10/21/00 400,000
Beneficially owned by Scott A. Deitler
2724 Irma Lake Dr.
West Palm Beach, FL 33411
Susan J. Cornman $.0002 $100.00 10/21/00 500,000
7609 Ralston Road
Arvada, CO 80002
Each of the sales listed above was made for cash as listed. All of the
listed sales were made in reliance upon the exemption from registration offered
by Section 4(2) of the Securities Act of 1933, as amended. Based upon
Subscription Agreements completed by each of the subscribers, the Company had
26
<PAGE>
reasonable grounds to believe immediately prior to making an offer to the
private investors, and did in fact believe, when such subscriptions were
accepted, that such purchasers (1) were purchasing for investment and not with a
view to distribution, and (2) had such knowledge and experience in financial and
business matters that they were capable of evaluating the merits and risks of
their investment and were able to bear those risks. The purchasers had access to
pertinent information enabling them to ask informed questions. The shares were
issued without the benefit of registration. An appropriate restrictive legend is
imprinted upon each of the certificates representing such shares, and
stop-transfer instructions have been entered in the Company's transfer records.
All such sales were effected without the aid of underwriters, and no sales
commissions were paid.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
-------------------------------------------------
The Nevada Statutes provide that the Company may indemnify its officers and
directors for costs and expenses incurred in connection with the defense of
actions, suits, or proceedings where the officer or director acted in good faith
and in a manner he reasonably believed to be in the Company's best interest and
is a party by reason of his status as an officer or director, absent a finding
of negligence or misconduct in the performance of duty.
27
<PAGE>
SIGNATURES:
Pursuant to the requirements of Section 12 of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
DATED: January 15, 2001
VSAT NET, INC.
/s/Scott A. Deitler
-------------------
Scott A. Deitler, President
/s/Lawrence S. Deitler
-----------------------
Lawrence S. Deitler, Secretary and Treasurer
Directors:
/s/Scott A. Deitler
-------------------
Scott A. Deitler, Director
28
<PAGE>
VSAT NET, INC.
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
FOR THE PERIOD ENDED OCTOBER 31, 2000
<PAGE>
INDEX TO FINANCIAL STATEMENTS
PAGE
Independent Auditors' Report F-2
Financial Statements:
Balance Sheet F-3
Statements of Operations F-4
Statement of Changes in Stockholders' Equity (Deficit) F-5
Statements of Cash Flows F-6
Notes to Financial Statements F-7-F-8
F-1
<PAGE>
AJ. ROBBINS, P.C.
3033 EAST FIRST AVENUE, SUITE 201
DENVER, COLORADO 80206
(303) 321-1281
INDEPENDENT AUDITORS' REPORT
TO THE BOARD OF DIRECTORS AND STOCKHOLDERS
VSAT NET, INC.
BOULDER, COLORADO
We have audited the accompanying balance sheet of VSAT Net, Inc. (a development
stage company) as of October 31, 2000, and the related statements of operations,
changes in stockholders' equity (deficit), and cash flows for the period from
March 21, 2000 (inception) to 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 VSAT Net, Inc. as of October
31, 2000, and the results of its operations and its cash flows for the period
from March 21, 2000 (inception) to October 31, 2000, in conformity with
generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company is in the development stage and has not
commenced operations. Its ability to continue as a going concern is dependent
upon its ability to develop additional sources of capital, locate and complete a
merger with another company and ultimately achieve profitable operations. These
conditions raise substantial doubt about its ability to continue as a going
concern. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
/s/ AJ. ROBBINS, P.C.
CERTIFIED PUBLIC ACCOUNTANTS
AND CONSULTANTS
DENVER, COLORADO
NOVEMBER 3, 2000
F-2
<PAGE>
<TABLE>
<CAPTION>
VSAT NET, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
OCTOBER 31, 2000
ASSETS
<S> <C>
ASSETS $ -
==================
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES, ACCOUNTS PAYABLE - RELATED PARTY $ 435
------------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY (DEFICIT):
Preferred stock, $.001 par value, 25,000,000 shares -
authorized, none issued
Common stock, $.001 par value, 75,000,000 shares 1,000
authorized, 1,000,000 shares issued and outstanding
Stock subscription receivable (800)
(Deficit) accumulated during the development stage (635)
------------------
TOTAL STOCKHOLDERS' EQUITY (DEFICIT) (435)
------------------
$ -
==================
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
F-3
<PAGE>
<TABLE>
<CAPTION>
VSAT NET, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
<S> <C> <C>
CUMULATIVE
FROM
MARCH 21,
FOR THE PERIOD 2000
FROM MARCH 21, (INCEPTION)
2000 TO TO
OCTOBER 31, OCTOBER 31,
2000 2000
----------------- -----------------
REVENUE $ - $ -
----------------- -----------------
EXPENSES:
General and administrative 635 635
----------------- -----------------
Total Expenses 635 635
----------------- -----------------
NET (LOSS) $ (635) $ (635)
================= =================
NET (LOSS) PER COMMON SHARE - BASIC $ *
============
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 1,000,000
=================
*Less than $(.01)
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
F-4
<PAGE>
<TABLE>
<CAPTION>
VSAT NET, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE PERIOD FROM MARCH 21, 2000 (INCEPTION)
TO OCTOBER 31, 2000
<S> <C> <C> <C> <C> <C>
(DEFICIT)
ACCUMULATED
STOCK DURING THE
COMMON STOCK SUBSCRIPTION DEVELOPMENT
SHARES AMOUNT RECEIVABLE STAGE TOTAL
-----------------------------------------------------------------------------------------------
BALANCES, MARCH 21, 2000 - $ - $ - $ - $ -
Issuance of stock on October 1,000,000 1,000 (800) - 200
21, 2000
Net (loss) - - - (635) (635)
---------------- ---------------- ---------------- ---------------- ----------------
BALANCES, OCTOBER 31, 2000 1,000,000 $ 1,000 $ (800) $ (635) $ (435)
================ ================ ================ ================ ================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
F-5
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
VSAT NET, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
<S> <C> <C>
CUMULATIVE
FROM
MARCH 21,
FOR THE PERIOD 2000
FROM MARCH 21, (INCEPTION)
2000 TO TO
OCTOBER 31, OCTOBER 31,
2000 2000
------------------ ------------
CASH FLOWS FROM (TO) OPERATING ACTIVITIES:
Net (loss) from operations $ (635) $ (635)
Adjustments to reconcile net (loss) to net cash (used) by
operating activities:
Changes in:
Accounts payable - related party 435 435
----------------- -------------
Net Cash (Used) by Operating Activities (200) (200)
----------------- -------------
CASH FLOWS FROM (TO) FINANCING ACTIVITIES:
Common stock issued for cash 200 200
----------------- -------------
Net Cash Provided by Financing Activities 200 200
----------------- -------------
NET CHANGE IN CASH AND ENDING BALANCE $ - $ -
================== =============
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
F-6
<PAGE>
VSAT NET, INC
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
HISTORY
VSAT Net, Inc. (the Company), a development stage company, was organized under
the laws of the State of Nevada on March 21, 2000. The Company is in the
development stage as defined in Financial Accounting Standards Board Statement
No. 7. The fiscal year end is October 31, 2000.
GOING CONCERN AND PLAN OF OPERATION
The Company's financial statements have been presented on the basis that it is a
going concern, which contemplates the realization of assets and the satisfaction
of liabilities in the normal course of business. The Company is in the
development stage and has not earned any revenues from operations to date.
The Company is currently devoting its efforts to locating merger candidates. The
Company's ability to continue as a going concern is dependent upon its ability
to develop additional sources of capital, locate and complete a merger with
another company, and ultimately, achieve profitable operations. The accompanying
financial statements do not include any adjustments that might result from the
outcome of these uncertainties.
INCOME TAXES
The Company uses the liability method of accounting for income taxes pursuant to
Statement of Financial Accounting Standards No. 109. Under this method, deferred
income taxes are recorded to reflect the tax consequences in future years of
temporary differences between the tax basis of the assets and liabilities and
their financial amounts at year end.
For federal income tax purposes, substantially all expenses must be deferred
until the Company commences business and then they may be written off over a 60
month period. Therefore, $635 of net losses incurred in the period from March
21, 2000 (inception) to October 31, 2000 have not been deducted for tax purposes
and represent a deferred tax asset. The Company is providing a valuation
allowance in the full amount of the deferred tax asset since there is no
assurance of future taxable income. Tax deductible losses can be carried forward
for 20 years until utilized.
EARNINGS (LOSS) PER COMMON SHARE
Basic earnings (loss) per common share is computed based upon the weighted
average number of common shares outstanding during the period. Diluted earnings
per share consists of the weighted average number of common shares outstanding
plus the dilutive effects of options and warrants calculated using the treasury
stock method. In loss periods, dilutive common equivalent shares are excluded as
the effect would be anti-dilutive.
F-7
<PAGE>
VSAT NET, INC
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities, the disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting periods.
Actual results could differ from those estimates and assumptions.
NOTE 2 - STOCKHOLDERS' EQUITY
During October 2000, the Company issued for cash and stock subscriptions
receivable, 900,000 shares of its $.001 par value common stock to private
investors. The Company also issued for cash and a stock subscription receivable,
100,000 shares of its $.001 par value common stock to its president.
F-8
<PAGE>
INDEX TO EXHIBITS
SK# 3.1 Articles of Incorporation
3.2 Bylaws of VSAT Net, Inc.
27.1 Financial Data Schedule
29
