Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospecus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there by any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
Registration No.
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------------------------
Form SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
-----------------------------------------
A-Z SOUTH STATE CORPORATION
(Name of small business issuer in its charter)
--------------------------------
UTAH 6512 87-0648985
--------------- ---- -----------
(State of jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
Richard Surber, President
268 West 400 South, Suite 300
Salt Lake City, Utah 84101
(801) 575-8073
--------------------------------------------------------------
(Address, including zip code and telephone number of principal
executive offices and principal place of business and
name, address and telephone number of agent for service)
Approximate date of proposed sale to the public: As soon as practicable
from time to time after this registration statement becomes effective.
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering.[ ] _________________________.
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering.[ ] _________________________.
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering.[ ] _________________________.
If the delivery of the prospectus is expected to be made pursuant to Rule
434, check the following box.[ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Title of each class of Amount of Dollar Proposed Proposed
securities to be securities to be Amount to be maximum maximum
registered registered registered offering price aggregate Amount of
per share(1) offering price registration fee
===========================================================================================================================
<S> <C> <C> <C> <C> <C>
Common Stock 4,000,000 shares $400,000 $0.10 $400,000 $105.60
===========================================================================================================================
</TABLE>
(1) Estimated solely for purposes of determining the filing fee pursuant to
Rule 457(f)(2) of the Securities Act of 1933.
The registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
Preliminary Prospectus dated December 26, 2000
A-Z SOUTH STATE CORPORATION
4,000,000 shares of $0.001 par value Common Stock
Purchase Price of $0.10 per share
The Offering:
Per Share Total
--------- -----
Public Price $0.10 $400,000
Underwriting Discounts/
Commissions $0.00 $0.00
Proceeds to
A-Z South State Corp. $0.10 $400,000
This is a "self-underwritten" public offering, with no minimum purchase
requirement.
(1) We are not using an underwriter for this offering. See "Plan of
Distribution."
(2) The commissions shown do not include legal, accounting, printing, and
related costs incurred in making this offering. We will need to pay all such
costs, which we estimate to be $20,000.
(3) There is no arrangement to place the proceeds from this offering in an
escrow, trust or similar account. Any funds raised from this offering will be
immediately available to the Company for its use.
Our company, A-Z South State Corporation, is a Utah corporation engaged in the
business of real estate investment. We currently own and operate one
single-story 7,000 square-foot building in downtown Salt Lake City, Utah.
We plan to buy more investment properties which we believe are undervalued,
compared to their cash flows and estimated resale value. Our acquisition
strategy is to identify properties with favorable financing arrangements already
in place, assume that financing, and satisfy any new down- payments with nominal
cash payments or some combination of cash and our own common stock.
This is an initial public offering of common stock. Before this offering, there
was no public trading market for our stock, and no assurance can be given that
an active market will ever develop. The offering price for our stock may not be
the same as the market price for our stock after the offering.
This offering involves a high degree of risk, and the securities offered by this
prospectus are highly speculative. You should only buy this stock if you can
afford to lose your entire investment. See "Risk Factors" (beginning on page 6)
and "Dilution" (beginning on page 11) to read about risks you should carefully
consider before buying this stock.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities or determined whether
the information in this prospectus is truthful or complete. It is a criminal
offense for anyone to inform you otherwise.
The information in this prospectus will be subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. We may not sell these securities, nor may we
accept offers to buy, until the registration statement becomes effective. This
prospectus shall not constitute an offer to sell or the solicitation of an offer
to buy, nor shall we sell any of these securities, in any state where such
offer, solicitation or sale would be unlawful before registration or
qualification under such state's securities laws.
2
<PAGE>
Inside front cover page of prospectus
--------------------------------------------------------------------------------
TABLE OF CONTENTS
Page
Summary ......................................................................4
Summary of Selected Financial Information ....................................5
Risk Factors .................................................................6
Use of Proceeds .............................................................10
Determination of Offering Price .............................................10
Dilution ....................................................................11
Plan of Distribution ........................................................13
Legal Proceedings ............................................................14
Directors, Executive Officers, Promoters &
Control Persons ........................................................14
Security Ownership of Certain Beneficial
Owners and Managers ....................................................16
Description of Securities ....................................................16
Interest of Named Experts and Counsel .......................................17
Disclosure of Commission Position on
Indemnification for Securities Act Liabilities...........................17
Certain Relationships and Related Transactions................................18
Description of Business ......................................................18
Management's Discussion and Analysis or
Plan of Operation .....................................................20
Description of Property ......................................................21
Market for Common Equity and Related Transactions 23
Executive Compensation .......................................................24
Financial Statements ...............................................F-1 to F-10
Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure...................................24
A-Z South State Corporation
Offering of
4,000,000 Shares of Common Stock
PROSPECTUS
December 26, 2000
A-Z South State Corporation intends to become a fully reporting company and
intends to file with the Securities and Exchange Commission (the "SEC") all
reports and other information required under the Securities Exchange Act of
1934. The public may read and copy, at certain prescribed rates, such material
at the Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549.
The SEC maintains a website at http://www.sec.gov, which contains reports,
proxy, other information statements, and other information regarding issuers
that file electronically.
Our stock currently has no public trading market. Once this Form SB-2 becomes
effective, we intend to file a Form 15c2-11 and apply for a listing on the Over
the Counter Bulletin Board (OTCBB). We believe obtaining a listing on the OTCBB
will provide some liquidity for our shareholders and create a public market for
our securities. However, there is no guarantee that the Company will obtain a
listing or that a public market for our securities will develop, even if we do
obtain a listing on the OTCBB.
We do not plan to send annual reports to our shareholders. However, upon request
we will send our shareholders a copy of our annual report (which will include
audited financial statements) free of charge. We will also provide free of
charge, to each person who has received a prospectus, a copy of any information
incorporated herein by reference. To request such information, call (801)
575-8073 or write to: Richard D. Surber, President, A-Z South State Corporation,
268 West 400 South, Suite 300, Salt Lake City, Utah 84101.
3
<PAGE>
First page of the prospectus
SUMMARY
The following summary highlights the more detailed information and financial
statements (with notes) appearing elsewhere in this prospectus. It is only a
summary. We urge you to read the entire prospectus carefully, especially the
risks of investing in our common stock as discussed in the "Risk Factors"
section (beginning on page 6).
A-Z SOUTH STATE CORPORATION
A-Z South State Corporation was formed under Utah law on November 30, 1999 as a
wholly owned subsidiary of Axia Group, Inc., a Nevada corporation. Our executive
office is at 268 West 400 South, Suite 300, Salt Lake City, Utah, 84101, and our
telephone number is (801) 575-8073. Our registered statutory office is at the
same address. We use the terms "Company" and "we" in this prospectus to refer to
A-Z South State Corporation, unless the context indicates otherwise.
The Company invests in real estate. On November 30, 1999, we bought a one-story
7,000 square foot retail building near downtown Salt Lake City, located at 1374
South State Street. The building is divided into two rentable spaces, one
representing 64% of the total area and the other representing 36%. At December
31, 1999, the Company had two lease agreements in place, one calling for monthly
rent of $3,800 (expiring in January 2004) and the other calling for monthly rent
of $1,600 (expiring in December 2001). In January 2000, the tenant with the
$1,600 lease defaulted. In June 2000, that tenant was replaced with a new
tenant, who leased the space for $1,700 per month until December 31, 2001. These
leases together represent an average annual rental rate of $9.48 per square
foot. The building competes for tenants with other retail space on State Street,
which is a significant commercial zone extending for several miles through Salt
Lake City.
Our business plan is to buy more investment properties which we believe are
undervalued, compared to their cash flows and estimated resale value. We plan to
identify properties with favorable financing arrangements already in place,
assume that financing, and satisfy any new down-payments with nominal cash
payments or a combination of cash and our own common stock. We plan to lease our
properties primarily to commercial tenants. We are prepared to make limited
improvements to our properties, so that we can increase occupancy, improve cash
flows, and enhance potential resale value.
THE OFFERING
Securities Offered.
4,000,000 shares of common stock.
Shares of Common Stock Outstanding.
Before Offering...................................10,000,000
After Offering....................................14,000,000
Use of Proceeds by The Company.
The Company will use the proceeds from this offering to (1)
pay costs of the offering (estimated at $20,000); (2) pay
off the payable to its parent company ($121,814); (3)
improve the building (estimated at $110,000); and (4)
acquire new properties (estimated at $148,186).
Risk Factors
The stock offered by this prospectus is speculative and
involves a high degree of risk. Investors should not buy
this stock unless they can afford to lose their entire
investment. (See "Risk Factors" beginning on page 6.)
4
<PAGE>
SUMMARY OF SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
Nine Months Ended One Month Ended
September 30, 2000 December 31, 1999
------------------ -----------------
<S> <C> <C>
REVENUE
Rental revenue $ 47,525 $ 4,125
TOTAL REVENUE 47,525 4,125
======== ========
GENERAL & ADMINISTRATIVE EXPENSES 15,677 1,709
------- ---------
NET INCOME FROM OPERATIONS 31,848 2,416
------- ---------
OTHER INCOME (EXPENSE):
Interest expense (28,881) -
--------- ---------
NET INCOME BEFORE INCOME TAXES $ 2,967 2,416
========= =========
PROVISION FOR INCOME TAXES 1,186 966
--------- ---------
NET INCOME $ 1,781 $ 1,450
========= =========
BALANCE SHEET DATA
Working Capital (Deficit) (135,032) (135,063)
Total Assets 534,023 534,093
Total Liabilities 520,792 522,643
Minority Interest -0- -0-
Shareholder's Equity 13,231 11,450
Income (Loss) Per Common Share
Income (Loss) Before Minority Interest 0.00 0.00
Minority Interest in Loss -0- -0-
Net income (loss) per weighted average common
share outstanding 0.00 0.00
Weighted average number of common shares
outstanding 10,000,000 10,000,000
</TABLE>
5
<PAGE>
RISK FACTORS
The stock offered in this prospectus involves a high degree of risk, and you
should carefully consider the possibility that you may lose your entire
investment. Given this possibility, we encourage you to evaluate the following
risk factors and all other information contained in this prospectus before
buying the common stock of A-Z South State Corporation. Any of the following
risks, alone or together, could adversely affect our business, our financial
condition, or the results of our operations, and therefore the value of your
stock.
Risks Related to A-Z South State's Business
1. A-Z South State's Real Estate Investments Are Inherently Risky and Dependent
on Rental Income.
Real estate investments are inherently risky. The value of a real estate
investment company's stock depends largely on the rental income and the capital
appreciation generated by the properties which the investment company owns. If
our properties do not generate enough cash flow from rental income to meet
operating expenses (such as debt service, capital expenditures and tenant
improvements), our ability to develop our business and become profitable will be
adversely affected.
Income from real estate investments may be adversely affected by a number of
factors, including:
o the general economic climate and local real estate conditions (such as too
much supply or too little demand for rental space, as well as changes in
market rental rates);
o prospective tenants' perceptions of a building's safety, convenience and
attractiveness, or the overall appeal of a particular building;
o the property owner's ability to provide adequate management, maintenance
and insurance;
o expenses for periodically renovating, repairing and re-letting spaces;
o rising operating costs for our properties (including real estate taxes and
utilities), which we may not be able to pass through to tenants because of
their leases;
o falling operating costs for competing properties, which would allow them to
undercut our rental rates;
o rising unemployment rates in the area, which may reduce the demand for
rental space;
o adverse changes in zoning laws, tax laws, or other laws affecting real
estate or businesses in the area;
o damage from earthquakes or other natural disasters;
o mortgage interest rates and the availability of financing.
Some significant expenses associated with real estate investment (such as
mortgage payments, real estate taxes, insurance and maintenance costs) are fixed
and generally can not be reduced if circumstances cause lower rental incomes
from a building. For example, if we can not meet the mortgage payments, we could
lose some or all of our investment in a building due to foreclosure on the
property.
6
<PAGE>
2. Our Real Estate Investment Has Limited Liquidity and No Certainty of Capital
Appreciation.
Our real estate investment has limited liquidity. Real estate investments in
general are relatively illiquid. Our ability to vary our portfolio in response
to changes in economic and other conditions will be limited. We cannot ascertain
whether we will be able to sell an investment when a sale would be advantageous
or necessary. The sale price may not be enough to recoup the amount of our
investment. Accordingly, the Company can provide no assurance that the value of
its properties will appreciate.
There are numerous uncertainties in estimating real estate values and
prospective appreciation value. The estimated values set forth in appraisals are
based on various comparisons to other property sales; predictions about market
conditions such as demand, vacancy rates, prospective vacancy rates, renewal
terms and other factors; assumptions about the property's condition, conformance
with laws and regulations, absence of material defects; estimates of lease
revenues and operating expenses; and other factors. Any significant change in
these comparisons, predictions, assumptions, and estimates, most of which are
beyond our control, could materially and adversely affect the market values and
appreciation potential of our properties.
3. We Compete with Substantially Larger Companies to Acquire Suitable Buildings.
The commercial real estate market is highly competitive. We compete with
substantially larger companies for the acquisition, development and operation of
properties that fit within the parameters of our business plan.. Some of these
companies are national or regional operators with far greater resources than
ours. The presence of these competitors may significantly impede our business
growth or survival.
4. We May Not Be Able to Collect Enough Rent.
Our business would be adversely affected if a significant number of tenants in
our property failed to meet lease obligations or if we could not lease a
significant amount of vacant space. If a tenant defaulted on a lease, we might
experience a delay before the courts enforced our rights against the tenant. We
could lose cash flow if a major tenant declared bankruptcy, which could result
in non-payment of rent and also a complete termination of the tenant's lease. No
assurance can be given that our tenants will faithfully pay their rent.
5. Our Operating Costs Could Rise to Unacceptable Levels.
Our income could be seriously affected by rising operating expenses such as:
cleaning; electricity; heating, ventilation and air-conditioning; elevator
repair and maintenance; insurance and administrative costs, security,
landscaping, building repairs and maintenance, and regulatory compliance. While
commercial tenants often must pay a portion of these escalating costs, there can
be no assurance that they will agree to pay these costs or that their payments
will fully cover them. If operating expenses increase, the local rental market,
or local laws, or the lease, may limit how much we can increase rents to meet
expenses. If we cannot control operating costs or raise rents to cover them, our
cash flow and financial condition may be adversely affected.
6. We Are Dependent On Key Personnel and Have No Employment Agreements or
Full-Time Employees.
We are dependent on the services of Richard D. Surber, our president and
director. We do not have an employment agreement with him, and losing his
services would likely have an adverse effect on our ability to conduct business.
Further, the Company has no full time employees. We expect to use consultants,
managers, attorneys and accountants as necessary and do not anticipate a need
for any full time employees.
7
<PAGE>
7. We Will Need New Funding ,Which May Not Be Available, In Order to Fully
Execute Our Business Plan.
Our business plan-buying undervalued buildings-will depend on our ability to
raise more money. Management and shareholders have not committed to provide new
funding. We have not investigated sources, availability, or terms for new
funding. There is no assurance that funding will be available from any source
or, if available, that it can be obtained on acceptable terms. If we can not
obtain new funding, our operations could be severely limited.
8. Environmental Liability Could Affect Our Real Estate Investments.
We do not know of any environmental liability affecting our property that would
have a material adverse effect on our business. However, various federal, state
and local environmental laws make a real estate owner liable for the costs of
removal or remediation of certain hazardous or toxic substances on a property.
These laws often impose environmental liability regardless of whether the owner
was responsible for-or knew of-the presence of hazardous substances. The
presence of hazardous substances, or the failure to properly remediate them, may
adversely affect our ability to sell or rent a property or to borrow using the
property as collateral. No assurance can be given that the environmental
assessments of our property revealed all environmental liabilities, or that a
material, adverse environmental condition does not exist on our property.
9. We May Face an Uninsured Loss.
We carry comprehensive insurance for liability, fire, extended coverage and
rental loss relating to our real estate, with policy specifications, insured
limits and deductibles customarily carried for similar properties. However,
there are certain types of losses (such as civil disturbance or pollution) which
are either uninsurable or too expensive to insure. If an uninsured loss or a
loss in excess of insured limits occurs, our investment in a property as well as
anticipated future revenues could be lost. Meanwhile, obligations on any
mortgage debt for the property would continue. Therefore, any uninsured loss
could adversely affect our financial condition and results of operation.
10. The Americans With Disabilities Act and Similar Legislation May Increase Our
Costs.
The Americans with Disabilities Act of 1980 (ADA) requires that commercial
facilities and places of public accommodation be accessible to disabled people.
A number of additional federal, state and local laws impose other requirements
on owners concerning access by disabled people. We may need to make both
structural and non- structural changes to our property in order to comply with
the ADA and similar laws. Noncompliance could result in government fines or an
award of damages to a private litigant. Although we believe that our property
complies substantially with such laws, we may incur additional costs, which we
cannot fully ascertain now, to ensure compliance in the future. While we do not
expect the prospective costs of compliance to have a material effect on our
operations, a potential for substantial costs exists. If changes are required
and are more costly than currently anticipated, our financial condition and
results of operations could be adversely affected.
Risks Related to the Building
11. One of Our Tenants Has A Lease that Expires December 31, 2001.
Our tenant renting 36% of the building has a lease that expires December 31,
2001. We believe he will renew the lease, but he has not committed to renew at
this time. If our tenant does not renew his lease, and if we can not find an
acceptable replacement tenant immediately, our building's operations would be
severely affected.
8
<PAGE>
12. We Have No Assurance that the Building Will Remain Occupied at Current
Levels.
Our retail building is located in the Northeast Sector of Salt Lake City along
State Street, one of the city's major thoroughfares, and is comparable to other
retail buildings of the "anchorless strip mall" type, meaning they have no large
"anchor" store in the development. In the Northeast sector of Salt Lake City,
overall vacancy rates for retail space have fluctuated about 1 1/2 percentage
points over the past three years from an average of 2.68% in 1997 to an average
of 4.18% in 1999. Our vacancy rate is currently 0%. Overall vacancy rates for
anchorless strip mall properties in Salt Lake City have increased about 5% over
the past 3 years, from a little less than 4% in 1997 to almost 9% by mid-2000.
There can be no assurance that the trend towards more vacant space in downtown
retail properties will not continue or that it will not affect our type of
retail space.
We are unable to predict whether we will need to forego rental increases or
reduce rental rates in order to maintain or increase the level of occupancy in
our building. Should our vacancy rate rise, we may be unable to maintain our
tenant base without reducing rental fees, which would adversely affect the
Company's revenues.
Further, we can provide no assurance of continued tenant occupancy. We cannot
presume that current tenants will renew their leases upon expiration of their
terms or that current tenants will not attempt to terminate their leases prior
to the expiration of their lease terms. Should either of these possibilities
occur, we might not be able to locate qualified replacement tenants. Any
increase in our vacancy rate might in turn result in insufficient cash flow to
pay for operating expenses and any debt service that may be associated with the
property.
Risks Related to Investment
13. Our Stock Value Is Dependent On Our Ability To Generate Net Cash Flows.
A large portion of any potential return on our common stock will be dependent on
our ability to generate net cash flows. If we can not operate our commercial
property at a net profit, there will be no return on shareholder's equity, and
this could well result in a loss of share value. No assurance can be given that
we will be able to operate at a net profit now or in the future.
14. Our Common Stock Has No Prior Market, And Value May Decline After the
Offering.
There is no public market for our common stock, and no assurance can be given
that a market will develop or that any shareholder will be able to liquidate its
shares without considerable delay, if at all. The trading market price of our
common stock may decline below the offering valuation. If a market should
develop, the price may be highly volatile. In addition, an active public market
for our common stock may not develop or continue. The Risk Factors discussed in
this "Risk Factors" section may significantly affect the market price of our
stock. Owing to the low price of our stock, many brokerage firms may not be
willing to deal in our stock. Even if a buyer finds a broker willing to effect a
transaction in our common stock, the combination of brokerage commissions, state
transfer taxes, if any, and other selling costs may exceed the selling price.
Further, many lending institutions will not permit the use of this stock as
collateral for loans. Thus, you may be unable to sell or otherwise realize the
value of your investment in our stock.
15. Our Shareholders May Face Significant Restrictions on the Resale of Our
Stock Due to State Blue Sky Laws.
Each state has its own securities laws, often called "blue sky laws," which (1)
limit sales of stock to a state's residents unless the stock is registered in
that state or qualifies for an exemption from registration and (2) govern the
reporting requirements for broker-dealers and stock brokers doing business
directly or indirectly in the state. Before a security is sold in a state, there
must be a registration in place to cover the transaction, or else it must be
9
<PAGE>
exempt from registration. Also, the broker must be registered in that state,. We
do not know whether our stock will be registered, or exempt, under the laws of
any states. A determination regarding registration will be made by the
broker-dealers, if any, who agree to serve as the market-makers for our stock.
There may be significant state blue sky law restrictions on the ability of
investors to sell, and on purchasers to buy, our stock.
Accordingly, you should consider the resale market for our securities to be
limited. Shareholders may be unable to resell their stock, or may be unable to
resell it without the significant expense of state registration or
qualification.
16. There May Be Significant Restrictions on Resale of Our Stock Due To Federal
Penny Stock Regulations.
Our stock differs from many stocks, in that it is a "penny stock." The SEC has
adopted a number of rules to regulate "penny stocks." These rules include, but
are not limited to, Rules 3a5l-l, 15g-1, 15g-2, 15g-3, 15g-4, 15g- 5, 15g-6 and
15g-7 under the Securities Exchange Act of 1934, as amended. The rules may
affect your ability to sell your shares in any market that may develop for them.
There may be a limited market for penny stocks, due to the regulatory burdens on
broker-dealers. The market among dealers may not be active. Investors in penny
stock often are unable to sell stock back to the dealer that sold it to them.
The mark-ups or commissions charged by broker-dealers may be greater than any
profit a seller can make. Because of large dealer spreads, investors may be
unable to sell the stock immediately back to the dealer at the same price the
dealer sold it to them. In some cases, the stock value may fall quickly.
Investors may be unable to gain any profit from any sale of the stock, if they
can sell it at all.
USE OF PROCEEDS
The Company will use the proceeds from this offering in the following manner,
and in the following order of priority:
Priority Use of Proceeds Est'd Cost
-------- --------------- ----------
1 Costs of offering $20,000
2 Pay off payable to parent corporation $121,814
3 Upgrades to building at 1374 So. State
-New Roof (+\- $50,000)
-Stucco Exterior (+\- $40,000)
-Front Canopy (+\- $10,000)
-Parking lot paving (+\-$7,000)
-Windows (+\- $3,000) $110,000
4 Funds to acquire new properties $148,186
DETERMINATION OF OFFERING PRICE
This is the initial public offering of the Company's common stock, and before
this offering there was no public trading market in the Company's stock. As a
result, the initial public offering price for the 4,000,000 shares being
registered in this offering was determined in a largely arbitrary manner, with
no reference to established criteria of value. The factors considered in
determining the offering price were our financial condition and estimated
10
<PAGE>
prospects, our limited operating history, the amount of our company liabilities
we hope to pay off, and the general condition of the securities market. The
offering price is not an indication of and is not based on the actual value of
the Company and bears no relation to the book value, assets, or earnings of the
Company. The offering price should not be regarded as an indicator of the future
price of the stock.
DILUTION
"Dilution" represents the difference between the offering price and the net
tangible book value per share immediately after completing this offering. "Net
tangible book value" is the amount that results from subtracting total
liabilities and intangible assets from total assets. Dilution arises mainly
because we have arbitrarily determined the offering price for the shares offered
in this prospectus. Dilution also occurs because of the lower book value of the
shares held by our current stockholders.
As of September 30, 2000, the net tangible book value of our shares of common
stock was $13,231 or approximately $0.001 per share, based on 10,000,000 shares
outstanding.
Upon completion of this offering, if 100% of the offered shares are sold, the
net tangible book value of the 14,000,000 shares to be outstanding will be
$413,231, or approximately $0.030 per share. The net tangible book value of the
shares held by our existing stockholders will be increased by $0.029 per share
without any additional investment on their part. You will incur an immediate
dilution from $0.10 per share to $0.030 per share.
Upon completion of this offering, if 75% of the offered shares are sold, the net
tangible book value of the 13,000,000 shares to be outstanding will be $313,231,
or approximately $0.024 per share. The net tangible book value of the shares
held by our existing stockholders will be increased by $0.023 per share without
any additional investment on their part. You will incur an immediate dilution
from $0.10 per share to $0.024 per share.
Upon completion of this offering, if 50% of the offered shares are sold, the net
tangible book value of the 12,000,000 shares to be outstanding will be $213,231,
or approximately $0.018 per share. The net tangible book value of the shares
held by our existing stockholders will be increased by $0.017 per share without
any additional investment on their part. You will incur an immediate dilution
from $0.10 per share to $0.018 per share.
Upon completion of this offering, if 25% of the offered shares are sold, the net
tangible book value of the 11,000,000 shares to be outstanding will be $113,231,
or approximately $0.010 per share. The net tangible book value of the shares
held by our existing stockholders will be increased by $0.009 per share without
any additional investment on their part. You will incur an immediate dilution
from $0.10 per share to $0.010 per share.
After completion of this offering, if 4,000,000 shares are sold, the new
investors will own approximately 29% of the total number of shares then
outstanding, for which they will have made a cash investment of $400,000, or
$0.10 per share. Our current stockholders will own approximately 71% of the
total number of shares then outstanding, for which they have made contributions
of cash and/or services and/or other assets, totaling $10,000, or approximately
$0.001 per share.
After completion of this offering, if 3,000,000 shares are sold, the new
investors will own approximately 23% of the total number of shares then
outstanding, for which they will have made a cash investment of $300,000, or
$0.10 per share. Our current stockholders will own approximately 77% of the
total number of shares then outstanding, for which they have made contributions
of cash and/or services and/or other assets, totaling $10,000, or approximately
$0.001 per share.
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After completion of this offering, if 2,000,000 shares are sold, the new
investors will own approximately 17% of the total number of shares then
outstanding, for which they will have made a cash investment of $200,000, or
$0.10 per share. Our current stockholders will own approximately 83% of the
total number of shares then outstanding, for which they have made contributions
of cash and/or services and/or other assets, totaling $10,000, or approximately
$0.001 per share.
After completion of this offering, if 1,000,000 shares are sold, the new
investors will own approximately 9% of the total number of shares then
outstanding, for which they will have made a cash investment of $100,000, or
$0.10 per share. Our current stockholders will own approximately 91% of the
total number of shares then outstanding, for which they have made contributions
of cash and/or services and/or other assets, totaling $10,000, or approximately
$0.001 per share.
The following table compares the differences of your investment in our shares
with the investment of our existing stockholders.
EXISTING STOCKHOLDERS
Price per share..........................................................$ 0.001
Net tangible book value per share before offering........................$ 0.001
Net tangible book value per share after offering.........................$ 0.030
Increase to present stockholders in net tangible book
value per share after offering......................................$ 0.029
Capital contributions....................................................$10,000
Number of shares outstanding before the offering......................10,000,000
Number of shares after offering
held by existing stockholders....................................10,000,000
Percentage of ownership after offering.......................................71%
PURCHASERS OF SHARES IN THIS OFFERING IF ALL SHARES SOLD
Price per share...........................................................$ 0.10
Dilution per share.......................................................$ 0.070
Capital contributions..................................................$ 400,000
Number of shares after offering held by public investors...............4,000,000
Percentage of ownership after offering.......................................29%
PURCHASERS OF SHARES IN THIS OFFERING IF 75% OF SHARES SOLD
Price per share...........................................................$ 0.10
Dilution per share.......................................................$ 0.076
Capital contributions..................................................$ 300,000
Number of shares after offering held by public investors...............3,000,000
Percentage of ownership after offering.......................................23%
PURCHASERS OF SHARES IN THIS OFFERING IF 50% OF SHARES SOLD
Price per share...........................................................$ 0.10
Dilution per share.......................................................$ 0.082
Capital contributions..................................................$ 200,000
Number of shares after offering held by public investors...............2,000,000
Percentage of ownership after offering.......................................17%
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PURCHASERS OF SHARES IN THIS OFFERING IF 25% OF SHARES SOLD
Price per share...........................................................$ 0.10
Dilution per share........................................................$ 0.09
Capital contributions..................................................$ 100,000
Number of shares after offering held by public investors...............1,000,000
Percentage of ownership after offering........................................9%
PLAN OF DISTRIBUTION
We plan to offer and sell a maximum of 4,000,000 shares of A-Z South State
Corporation's $0.001 par value common stock to the public at a purchase price of
ten cents ($0.10) per share. The offering will be made on a "self-underwritten"
basis, meaning we will sell shares through our director, Ed G. Haidenthaller,
without an underwriter, and without any selling agents. The offering will be
made on a continuous basis until September 30, 2001, when this offering will
end. There will be no extensions to this offering. This is not an underwritten
offering. The gross proceeds from this offering will be $400,000 if all the
shares offered are sold. No commissions or other fees will be paid, directly or
indirectly, to any person or firm in connection with solicitation of sales of
the shares.
There is no minimum investment or minimum number of shares that must be sold in
this offering. Any money we receive will be immediately appropriated by us for
the uses set forth in the Use of Proceeds section of this prospectus. No funds
will be placed in an escrow or trust account during the offering period, and no
money will be returned to you once we accept your subscription. Once the SEC
declares this offering effective, the shares of common stock represented by the
offering will be registered pursuant to Section 5 of the Securities Act of 1933.
We will sell the shares in this offering through Ed G. Haidenthaller, one of our
directors. Mr. Haidenthaller will contact individuals and corporations with whom
he has an existing or past pre-existing business or personal relationship and
will offer to sell them our common stock. Mr. Haidenthaller will receive no
commission from the sale of any shares. Mr. Haidenthaller will not register as a
broker-dealer pursuant to Section 15 of the Securities Exchange Act of 1934 in
reliance upon Rule 3a4-1. Rule 3a4-1 sets forth those conditions under which a
person associated with an issuer may participate in the offering of the issuer's
securities and not be deemed to be a broker- dealer. The conditions are that:
1. The person is not subject to a statutory disqualification, as that
term is defined in Section 3(a)(39) of the Act, at the time of his
participation; and,
2. The person is not compensated in connection with his participation by
the payment of commissions or other remuneration based either directly
or indirectly on transactions in securities; and
3. The person is not at the time of their participation, an associated
person of a broker-dealer; and,
4. The person meets the conditions of Paragraph (a)(4)(ii) of Rule 3a4-1
of the Exchange Act, in that he (A) primarily performs, or is intended
primarily to perform at the end of the offering, substantial duties for
or on behalf of the issuer otherwise than in connection with
transactions in securities; and (B) is not a broker or dealer, or an
associated person of a broker or dealer, within the preceding twelve
months; and (C) does not participate in selling and offering of
securities for any issuer more than once every twelve months other than
in reliance on Paragraphs (a)(4)(i) or (a)(4)(iii).
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Mr. Haidenthaller is not subject to disqualification, is not being compensated,
and is not associated with a broker- dealer. Mr. Haidenthaller is and will
continue to be one of our directors at the end of the offering and has not been
during the last twelve months and is currently not a broker/dealer or an
associated person of a broker/dealer. Mr. Haidenthaller has not during the last
twelve months and will not in the next twelve months offer or sell securities
for another corporation. Mr. Haidenthaller intends to contact persons with whom
he had a past or has a current personal or business relationship and solicit
them to invest in this offering.
Procedures for Subscribing: If you decide to subscribe for any shares in this
offering, you must:
1. execute and deliver to us a subscription agreement; and
2. deliver a check or certified funds to us for acceptance or rejection.
All checks for subscriptions must be made payable to "A-Z SOUTH STATE
CORPORATION."
Right to Reject Subscriptions: We have the right to accept or reject
subscriptions in whole or in part, for any reason or for no reason. We will
immediately return all monies from rejected subscriptions to the subscriber,
without interest or deductions. We will accept or reject subscriptions for
securities within 48 hours after we receive them.
Regulation M of the Securities and Exchange Act of 1934 (which replaced Rule
10b-6) may prohibit a broker/dealer from engaging in any market making
activities with regard to a company's securities. Under ss.242.104 of Regulation
M, stabilizing is prohibited except for the purpose of preventing or retarding a
decline in the market price of a security. We do not plan to engage in any
passive stabilizing activities.
Once the SEC declares this offering effective, the shares of common stock
represented by the offering will be registered pursuant to Section 5 of the
Securities Act of 1933.
LEGAL PROCEEDINGS
We are not a party to any pending legal proceeding or litigation, and none of
our property is the subject of a pending legal proceeding. Further, the officers
and directors know of no legal proceedings against us or our property
contemplated by any person, entity or governmental authority.
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS & CONTROL PERSONS
The following persons are officers and directors of the Company as of the date
of this prospectus:
Name Age Position
---- --- --------
Richard D. Surber 27 President and Director
Ed G. Haidenthaller 38 Director
Bruce M. Pritchett 35 Director
Richard D. Surber, 27, was appointed as the Company's first director and as its
president on November 30, 1999, and will serve as director until the next annual
meeting of the Company's shareholders.
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Mr. Surber graduated from the University of Utah with a Bachelor of Science
degree in Finance and then with a Juris Doctorate with an emphasis in corporate
law, including securities, taxation, and bankruptcy. Since 1992, he has gained
extensive experience serving as an officer and/or director of many public and
private companies.
Mr. Surber has served as an officer and/or director of the following public
companies: Axia Group, Inc., our parent corporation and a holding company whose
subsidiaries invest in real estate and provide financial consulting services
(president and director from 1992 to the present); Chattown.com Network, Inc.,
an Internet company which is unrelated to the Company (president and director
from June, 1999 to April 10, 2000); Kelly's Coffee, Group, Inc., a shell company
whose plan is to acquire an unidentified company (president and director from
May, 1999 to the present); China Mall USA.com, Inc., a former subsidiary of Axia
Group, Inc., which is currently a non-reporting Chinese Internet company and
unrelated to our Company (president and director from 1992 to June, 1999);
Eurotronics Corporation, a shell company which is currently unrelated to the
Company and whose post-1996 operations if any are not known (president and
director, 1994-1996); Area Investment Development Company, a shell corporation,
unrelated to the Company, which recently acquired an Internet business whose
content revolves around religious events (president and director, 1994-1996);
Youthline USA, Inc., an unrelated company that distributes educational
newspapers to children in grades K-12 (secretary and director from April 6, 1999
to July 29,1999); CathayOne, Inc., a Chinese Internet content provider,
unrelated to the Company, which is also the parent of several subsidiaries doing
business with China (president and director April, 1998 - September, 1998);
Golden Opportunity Development Corporation, a wholly owned subsidiary of Axia
Group, Inc., which operates a 134-room hotel in Baton Rouge, Louisiana
(president and director from September, 1999 to present); and Power Exploration,
Inc., an oil and gas company (director from January 28, 2000 to the present).
Ed G. Haidenthaller, 38, was appointed as a director of the Company on November
30, 2000 and will serve as director until the next annual meeting of the
Company's shareholders.
Mr. Haidenthaller obtained a Bachelor of Science degree, with honors, from Weber
State University in Ogden, Utah, where he majored in corporate finance, and an
Executive Master's of Business Administration degree from the University of
Utah, with a special emphasis on international business. He has ten years of
experience managing numerous finance departments and businesses.
Mr. Haidenthaller is the current Chief Financial Officer of Axia Group, Inc., a
publicly traded company. He was the Assistant Controller for the First Security
Van Kasper Division, the brokerage and capital markets division of First
Security Corporation, a multi-billion dollar bank whose stock at the time was
publicly traded on the New York Stock Exchange and has since been acquired by
Wells Fargo & Company, another publicly traded company. He has also managed a
government facility with a 100+ person staff, has been involved in the startup
of many multi-million dollar projects, and has managed two groups of qualified
benefit plans with assets of $10 million and $30 million respectively.
Bruce M. Pritchett, 35, was appointed as a director of the Company on November
30, 2000 and will serve as director until the next annual meeting of the
Company's shareholders.
Mr. Pritchett studied at Stanford University in Palo Alto, California in 1990
under a full-tuition FLAS Fellowship; obtained a Juris Doctor degree in 1992
from the University of Washington in Seattle, where he was Managing Editor of
the Pacific Rim Law & Policy Journal; and earned a Bachelor of Arts degree, cum
laude, in 1989 from Brigham Young University in Provo, Utah.
Mr. Pritchett is an attorney whose practice emphasizes securities and corporate
law. He was the President, CEO, and a director of the publicly traded company
Premier Brands, Inc. from December 1999 to June 2000. He is presently corporate
counsel for Hudson Consulting Group, Inc., one of Axia Group, Inc.'s corporate
consulting subsidiaries, and is listed in Who's Who in American Law.
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He owned his own private law practice from 1996 to 1998, was an associate
attorney at the law firm of Hanson, Epperson & Smith from 1994 to 1996, and was
a judicial law clerk to Chief Judge George Shields of the Washington State Court
of Appeals from 1992 to 1993. Mr. Pritchett has 8 years of experience in the
legal field.
No other person is expected to make a significant contribution to the Company
who is not identified in this prospectus as an executive officer or director of
the Company.
All executive officers are appointed by the board and hold office until the
board appoints their successors.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information concerning the ownership of
the Company's common stock as of November 30, 2000, with respect to: (i) each
person known to the Company to be the beneficial owner of more than five percent
of the Company's common stock; (ii) all directors; and (iii) directors and
executive officers of the Company as a group. The notes accompanying the
information in the table below are necessary for a complete understanding of the
figures provided below. As of November 30, 2000, there were 10,000,000 shares of
common stock issued and outstanding.
<TABLE>
<CAPTION>
Nature of Amount of
Title of Class Name and Address Ownership Ownership Percent of class
-------------- ----------------- --------- --------- ----------------
<S> <C> <C> <C> <C>
Common Stock Axia Group, Inc. Direct 10,000,000 100 %
($0.001 par 268 West 400 South, # 300
value) Salt Lake City, Utah 84101
Common Stock Richard D. Surber Beneficial(1) 10,000,000 100 %
($0.001 par Director and President
value) 268 West 400 South, # 300
Salt Lake City, Utah 84101
Common Stock All Directors and Executive Beneficial 10,000,000 100 %
($0.001) par Officers as a Group
value
</TABLE>
------------------------
(1) Richard Surber is the president and a director of Axia Group, Inc.,
thereby controlling our company.
DESCRIPTION OF SECURITIES
General
The Company's authorized capital stock consists of 50,000,000 shares of common
stock, par value $0.001, of which 10,000,000 are issued and outstanding as of
November 30, 2000. There is no authorized preferred stock, and there are no
options, warrants or other instruments convertible into shares outstanding.
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Shares of Common Stock
Each holder of common stock is entitled to one vote for each share owned of
record on all matters voted upon by stockholders, and a majority vote is
required for all actions to be taken by stockholders. In the event of a
liquidation, dissolution or wind-up of the Company, the holders of common stock
are entitled to share equally and ratably in the assets of the Company, if any,
remaining after the payment of all debts and liabilities of the Company and the
liquidation preference of any outstanding preferred stock. There are no
dividend, voting, preemptive or other rights associated with the Company's
common stock, except those generally provided under state law.
The Company has not paid any cash dividends since inception and does not
anticipate doing so in the foreseeable future. The future payment of cash and
non-cash dividends, if any, on the common stock is within the discretion of the
board of directors and will depend on the Company's earnings, capital
requirements, financial condition and other relevant factors. No assurance can
be made that any cash or non-cash dividends will be paid on the common stock in
the future.
INTEREST OF NAMED EXPERTS AND COUNSEL
No "Expert" or "Counsel" (as defined by Item 509 of Regulation S-B promulgated
pursuant to the Securities Act of 1933) whose services were used in the
preparation of this Form SB-2 was hired on a contingent basis or will receive a
direct or indirect interest in the Company.
Legal Matters
The validity of the shares of common stock offered hereby will be passed upon
for the Company by Michael Golightly, an attorney licensed in the states of
Texas and Utah.
Experts
The financial statements of the Company as of December 31, 1999 and September
30, 2000 included in this prospectus have been audited by Mantyla McReynolds,
Certified Public Accountants, our independent auditors, as stated in their
reports appearing herein and have been so included in reliance upon the reports
of such firm given upon their authority as experts in accounting and auditing.
DISCLOSURE OF SEC POSITION ON INDEMNIFICATION
FOR SECURITIES ACT LIABILITIES
A-Z South State's Articles of Incorporation provide that it will indemnify its
officers and directors to the full extent permitted by Utah state law. A-Z South
State's bylaws likewise provide that the Company will indemnify and hold
harmless its officers and directors for any liability including reasonable costs
of defense arising out of any act or omission taken on behalf of the Company, to
the full extent allowed by Utah law, if the officer or director acted in good
faith and in a manner the officer or director reasonably believed to be in, or
not opposed to, the best interests of the corporation.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
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successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On December 1, 1999, the Company issued 10,000,000 shares of its common stock to
Axia Group, Inc. (AXIA), a publicly traded company, in exchange for $10,000 in
cash. AXIA advanced funds to the Company for the purchase of the building
located at 1374 South State Street in Salt Lake City, Utah. As of September 30,
2000, the Company had an account payable to AXIA for cash advances totaling
$121,814, which obligation bears no interest and is payable on demand.
The Company is a wholly owned subsidiary of AXIA. Richard Surber, our president
and one of our directors, is also the president and a director of AXIA .
Furthermore, AXIA files consolidated federal and state income tax returns, which
include A-Z South State Corporation as a wholly owned subsidiary of AXIA.
DESCRIPTION OF BUSINESS
This prospectus contains forward-looking statements which involve risks and
uncertainties, including trends in the real estate investment market, projected
leasing and sales and future prospects. Actual results could differ materially
from those discussed in the forward-looking statements. Factors that might cause
such a difference include, but are not limited to, those discussed in "Risk
Factors."
General
A-Z South State Corporation was formed under Utah law on November 30, 1999 as a
wholly owned subsidiary of Axia Group, Inc., a publicly traded Nevada
corporation. We organized the Company for the purpose of investing in commercial
properties. We currently own one building in Salt Lake City, Utah and plan to
acquire ownership interests in more commercial buildings as we grow in the
future.
The Building at 1374 South State Street
On November 30, 1999, the Company bought its only asset to date, a building in
Salt Lake City, Utah which the board of directors had identified as an
acceptable business opportunity. The Company paid $10,000 cash and entered into
two seller-financed mortgages totaling $475,000 (one for $400,000 and another
for $75,000) to finance the remainder of the purchase price. As of September 30,
2000, he $75,000 mortgage had been paid off, and the $400,000 mortgage had been
paid down to $391,798. The building is a 7,000 square-foot one story retail
building located in Salt Lake City, Utah approximately 7 blocks from the central
business district. It is divided into two rentable spaces, one comprising
approximately 4500 square feet (64% of the total area) and the other comprising
approximately 2500 square feet (36%).
As of December 31, 1999, we had two lease agreements in place for the building.
The first lease is with a rent-to- own seller of home furnishings and similar
goods, named RTO Operating, Inc. DBA HomeChoice, which occupies the 4500 square
foot space in the building. RTO's lease calls for monthly rent of $3,800 and
expires in January 2004. The second lease was with Jason Nunley, the owner of a
thrift store that occupied the 2500 square foot space. His lease called for
monthly rent of $1600 and was set to expire in December 2001.
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However, Mr. Nunley defaulted on the lease in January 2000, and we replaced him
with new tenants in June, 2000-Frank Saucedo and Ana Sanchez, who use the 2500
square foot space in the building as an office for immigration and other legal
matters. They have a signed lease with us, which calls for monthly rent of
$1,700 and expires on December 31, 2001. The RTO and Saucedo leases together
represent an average annual rental rate of $9.48 per square foot.
Overview of the Salt Lake City Retail Real Estate Market
Our decision to invest in Salt Lake area retail properties was influenced by
several factors, including the following: the significant growth in retail sales
in the city; increased interest in Salt Lake from specialty retailers;
relatively low vacancy rates for retail space in the area; estimated slowdowns
in the rate of new retail space construction; and Utah economic indicators
pointing to above-average retail sales.
Significant Growth in Retail Sales. According to the Summer 2000 Retail Market
Trends newsletter published by national real estate broker Grubb & Ellis, the
Salt Lake City retail market "continues to expand at an unprecedented rate (12
percent growth in retail sales last year)" and "has attracted attention from
more national retailers. Many existing retailers are relocating, expanding or
retooling their concepts to improve their market positions. Rental rates remain
high."
Increased Interest from Specialty Retailers. Research from the 2000 Mid-Year
Review for Salt Lake City, published by worldwide real estate broker Colliers
Commerce CRG, indicates that "a more sophisticated, affluent Wasatch Front
market is attracting increased interest from specialty retailers," based on the
fact that "Almost half of the 700,000 sq. ft. retail component of downtown's
Gateway Project has already been leased to specialty retailers, with the
center's debut still a year away." Morever, the success of the Shoppes at
Riverwoods, Utah's first specialty retail center (located 35 miles south of Salt
Lake in Provo, Utah) has induced developers in Provo to proceed with a second
phase of construction.
Relatively Low Vacancy Rates for Retail Space. According to the Colliers 2000
Mid-Year Review, "the overall retail market remains vibrant and strong. A parity
in the balance between absorption and new construction has continued for the
past six years, a period in which vacancy has consistently held at between four
and five percent. Four million sq. ft. of the 4.5 million constructed since 1995
has been absorbed." This absorption rate means that most of the newly
constructed retail space is being leased by tenants rather than standing vacant.
The building at 1374 South State lies along a major city thoroughfare in the
Northeast sector of Salt Lake and, although not part of a strip mall, is
comparable to other retail properties in anchorless strip malls due to the
relatively high traffic in the area. "Anchorless" means that the strip mall does
not have a large "anchor" store in the development.
According to the Colliers research, the vacancy rate for comparable anchorless
strip malls in Salt Lake has fluctuated between 4% and 9% from 1996 to the
present, with a current vacancy rate near 9%. By comparison, our building has a
0% vacancy rate at the moment, and we expect this to continue for the next year.
Vacancy rates for retail properties in the Northeast sector of Salt Lake,
according to Colliers, have ranged from 2.68% to 6.15% from 1996 to the present,
with a current rate near 3.8%. This vacancy rate information suggests that there
is relatively good demand for retail space in our area, among similar types of
properties, if we decide to buy other similar properties or need to find
additional tenants to fill vacant space.
Estimated Slowdown in Construction of New Retail Space. We estimate that new
retail space construction will slow down over the next year or two, which may
improve the market for existing retail space. The Colliers report stated that "A
rise in new retail construction will peak in 2001.
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New construction completed during the first half of this year exceeded mid-year
1999 levels by approximately 400,000 sq. ft. Approximately 645,000 sq. ft. of
shopping center space is currently under construction. An enormous wave of new
projects being undertaken this year by retailers such as Wal-Mart, Home Depot,
Lowe's and Costco will augment the market by almost two million sq. ft. when
they come on line next year. Approximately 347,000 sq. ft. of new construction
has been proposed for scheduled completion in 2002." Furthermore, a slowdown in
expansions by the theater industry is forcing some major retail projects to
adjust their tenant mix. Theater chains have overbuilt in markets nationwide,
and the moratorium on new construction is altering the makeup of several new
Wasatch Front developments.
Utah Economic Indicators Pointing to Above-Average Retail Sales. Colliers notes
that Utah's growing population and affluence will continue to draw higher
caliber tenants: "The market is achieving demographic milestones that are
must-have criteria for upscale tenants. The proposed Grand Salt Lake Mall, which
has spurred controversy in Salt Lake City, indicates a future trend in
development that is market driven rather than site specific." Moreover, the
Colliers study noted that "economic indicators point to sales that will continue
to exceed the national average."
Our Plan to Acquire Other Retail Properties
Our business plan is to buy more retail properties that we believe are
undervalued, compared to their cash flows and estimated resale value. Our
strategy is to identify a property with a favorable financing arrangement
already in place, assume that financing, and satisfy any new down-payment with a
nominal cash payment or some combination of cash and our own common stock. We
plan to lease primarily to commercial tenants. We are prepared to make limited
improvements to our properties, so that we can increase occupancy, improve cash
flows, and enhance potential resale value. We do not plan to limit the
geographical area in which we buy properties; however, given our current
financial condition, we will most likely seek properties in the Salt Lake City
area.
Employees
As of November 30, 2000, the Company had no full-time or part-time employees.
Reports to Security Holders
We are not required to deliver an annual report to security holders and do not
plan to send a copy of the annual report to them. If we choose to create an
annual report, it will contain audited financial statements. We intend to file
all required information with the Securities and Exchange Commission ("SEC"). We
plan to file with the SEC our Forms 10KSB, 10QSB and all other forms that are or
may become applicable to us.
The public may read and copy any materials filed with the SEC at the SEC's
Public Reference Room at 450 Fifth Street NW, Washington, D.C. 20549. The public
may obtain information on the operation of the Public Reference Room by calling
the SEC at 1-800-SEC-0330. We have filed all statements and forms with the SEC
electronically, and they are available for viewing or copy on the SEC's Internet
site, that contains reports, proxy and information statements, and other
information regarding issuers that file electronically with the SEC. The
Internet address for this site is http://www.sec.gov.
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with the Financial Statements and
accompanying notes and the other financial information appearing elsewhere in
this prospectus. Our fiscal year end is December 31.
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General
Our business plan for the next twelve months is to continue operating our retail
building in Salt Lake City, and to identify and acquire additional undervalued
retail properties in the Salt Lake City area.
Expected Cash Requirements
As of September 30, 2000, we had one asset: our building and the land it sits
on, valued at a total of $525,705. As of that date, we had $6,618 cash on hand,
and our net income as of that date, after allowance for taxes, was $1,781. We
believe that rental income will be sufficient to meet our cash requirements to
operate the building over the next twelve months. With operations at the present
level, we estimate that we will have a net profit from building operations of
$14,000 during the next twelve month period. This estimate is based on the
assumption that monthly operating rental income and operating costs will remain
relatively constant. An unexpected increase or decrease in rental income or
operating costs could cause this estimate to vary. There can be no guarantee
that operating costs will remain constant through the end of 2001.
If we acquire ownership interests in more rental properties in the coming year,
our cash requirements to fund operations could increase. While we have no
present intention to raise equity capital for operations in the next twelve
months, the acquisition of, or opportunity to acquire, additional commercial
real estate could create a need to raise additional capital.
Product Research and Development
We do not plan to conduct any significant research or development activities in
the coming twelve month period.
Expected Purchase or Sale of Plant and Equipment
We have no current plan to buy any specific additional plant or equipment.
However, we are investigating the possibility of buying additional retail real
estate in the Salt Lake area. We are using the services of a licensed real
estate broker to suggest potential properties for us. We have investigated a
number of potential properties and are continuing to consider buying additional
retail properties in the Salt Lake area.
Expected Changes in Number of Employees
We do not expect to hire any employees in the coming twelve-month period.
DESCRIPTION OF PROPERTY
Location and Description
We currently own a commercial retail building in Salt Lake City, Utah, located
at 1374 South State Street (within approximately 7 blocks of the city's central
business district). The building is 7,000 square feet, one story tall,
constructed in the late 1960's, and is currently 100% occupied by two tenants,
one of whom has a lease for $3,800 per month until 2004, and the other of whom
has a $1,700 per month lease until December 31, 2001.
21
<PAGE>
Investment Policies
The Company's policy is to actively pursue the acquisition of real estate for
investment income and appreciation in property value. The Company intends to
place an emphasis on acquiring commercial retail property which management feels
is undervalued. The Company's policy will be to focus primarily on favorable
terms of financing and potential return on capital. The Company intends to look
for commercial retail properties that can be purchased by assuming the existing
financing or by paying the balance of the purchase price with a nominal cash
expenditure and/or the issuance of shares of the Company's common stock.
The Company has no present intention to invest in first or second mortgages,
securities of companies primarily engaged in real estate activities, or
interests in real estate investment trusts or real estate limited partnerships.
However, the Company's board of directors is not precluded in the future from
participating in such investments.
The Company currently has no limitations on the percentage of assets which may
be invested in any one investment, or the type of securities or investments it
may buy. However, the board of directors in its discretion may set policies
without a vote of the Company's securities holders regarding the percentage of
assets which may be invested in any one investment, or type of investment. The
Company's current policy is to evaluate each investment based on its potential
capital return to the Company on a relatively short term basis. Furthermore, the
Company does not plan to enter into the business of originating, servicing or
warehousing mortgages or deeds of trust, except as may be incidental to its
primary purpose of acquiring real estate.
Description of Real Estate and Operating Data
The Company's primary asset is the commercial retail building located at 1374
South State Street. We paid $10,000 cash, and entered into two seller-financed
mortgages totaling $475,000 (one for $400,000 and one for $75,000) for the
remaining balance, in order to purchase the building on November 30, 1999. The
$75,000 mortgage was paid off on or about September, 2000.
The Company plans to use approximately $110,000 from the proceeds of this
offering to renovate and upgrade the building. We plan to install a new roof
(approx. $50,000), stucco the building exterior (approx. $40,000), put in a new
canopy at the front of the building (approx. $10,000), re-pave the parking lot
(approx. $7,000), and upgrade some of the building's windows (approx. $3,000).
The building generates average monthly rental revenue of Five Thousand Five
Hundred dollars ($5,500). The average annual rental rate of the commercial
retail space in the building is approximately $9.48 per square foot.
Both of the building's two present tenants are under leases. The larger tenant
has a lease for $3,800 per month until January 2004. The smaller tenant has a
$1,700 per month lease extending until December 31, 2001.
Of the existing tenants, both occupy more than 10% of the available space in the
building. The nature of the business of each of these tenants and the principal
provisions of their leases are outlined below:
<TABLE>
<CAPTION>
Lessee Type of Business Type of Lease Monthly Square % Available
Rent Feet Space
===============================================================================================================================
<S> <C> <C> <C> <C> <C>
RTO Operating, Inc. rent-to-own sales Lease ending $3,800 4,500 64%
d/b/a HomeChoice 1/30/04
Frank Saucedo and office space Lease ending $1,700 2,500 36%
Ana Sanchez 12/31/01
===============================================================================================================================
</TABLE>
22
<PAGE>
The building is located in downtown Salt Lake City, Utah, roughly 7 blocks from
the city's central business district, considered the Northeast sector of the
city in the market survey we have relied on. Based on location of retail
property, the vacancy rate for other retail properties in the Northeast sector
of Salt Lake, according to Colliers, has ranged from 2.68% to 6.15% over the
years 1996 to the present, with a current rate near 3.8%.
Based on the type of retail property, the vacancy rates for types of retail
space comparable to our building have averaged around 9% through mid-year 2000,
throughout the city. Since 1996, this vacancy rate has ranged from 4% to 9%. We
have used anchorless strip-malls, meaning strip-malls without a large "anchor"
store, as the type of properties comparable to our building because they more
closely resemble our property than any of the 4 other categories described in
the market surveys we have relied on from Colliers Commerce CRG realtors. The
other 4 categories were regional malls, regional centers, community centers, and
neighborhood centers. Our building is a stand-alone and not part of any shopping
center other than the general commercial area running along State Street, which
is one of the main thoroughfares of Salt Lake City, and therefore more closely
resembles an anchorless strip mall than the other categories.
The federal tax basis for the building is Five Hundred Thirty Five Thousand
dollars ($535,000). The property tax rate is 1.428%. The annual property taxes
for 1999 were $5,161.54. The Company is depreciating the property over a 39 year
period and uses the straight line method of depreciation for accounting
purposes. The Company is of the opinion that the building is adequately covered
by insurance.
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company currently has no public trading market. In an effort to provide some
liquidity for the Company's shareholders and create a public market for its
securities, the Company intends to file a Form 15c2-11 so that it may obtain a
listing on the Over the Counter Bulletin Board ("OTC BB") upon this offering
becoming effective. However, there is no guarantee that the Company will obtain
a listing on the OTC BB or that a public market for the Company' securities will
develop even if a listing on the OTC BB is obtained.
Record Holders
As of November 30, 2000, there was one shareholder of record holding a total of
10,000,000 shares of common stock. The holders of the common stock are entitled
to one vote for each share held of record on all matters submitted to a vote of
stockholders. Holders of the common stock have no preemptive rights and no right
to convert their common stock into any other securities. There are no redemption
or sinking fund provisions applicable to the common stock.
Dividends
The Company has not declared any cash dividends since inception and does not
anticipate paying any dividends in the foreseeable future. The payment of
dividends is within the discretion of the board of directors and will depend on
the Company's earnings, capital requirements, financial condition, and other
relevant factors. There are no restrictions that currently limit the Company's
ability to pay dividends on its common stock other than those generally imposed
by applicable state law.
23
<PAGE>
EXECUTIVE COMPENSATION
No compensation in excess of $100,000 was awarded to, earned by, or paid to any
executive officer or employee of the Company during the years 1999 through 2000.
The following table and the accompanying notes provide summary information for
each of the last three fiscal years concerning cash and non-cash compensation
paid or accrued by Richard Surber, the Company's chief executive officer for the
past three years.
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation
Awards Payouts
Securities
Restricted Underlying
Other Annual Stock Options All Other
Name and Principal Salary Bonus Compensation Award(s) SARs LTIP payouts Compensation
Position Year ($) ($) ($) ($) (#) ($) ($)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Richard Surber, 2000 0 - - - - - -
President& Director, 1999 0 - - - - - -
</TABLE>
Compensation of Directors
The Company's directors are not currently compensated for their services as
directors of the Company.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
There were no changes in accountants or disagreements between the Company and
its accountants.
24
<PAGE>
A-Z SOUTH STATE CORPORATION
Table of Contents
Page
Independent Auditors' Report.................................................F-1
Balance Sheets - September 30, 2000 and December 31, 1999.............F-2 to F-3
Statements of Stockholder's Equity for the nine month and one month
periods ended September 30, 2000 and December 31, 1999.......................F-4
Statements of Income for the nine month and one month periods ended
September 30, 2000 and December 31, 1999.....................................F-5
Statements of Cash Flows for the nine month and one month periods ended
September 30, 2000 and December 31, 1999.....................................F-6
Notes to Financial Statements........................................F-7 to F-10
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors and Stockholders
A-Z South State Corporation
Salt Lake City, Utah
We have audited the accompanying balance sheets of A-Z South State Corporation
as of September 30, 2000 and December 31, 1999, and the related statements of
stockholder's equity, income, and cash flows for the nine month and one month
periods ended September 30, 2000 and December 31, 1999. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits 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 audits provide 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 A-Z South State Corporation as
of September 30, 2000 and December 31, 1999, and the results of operations and
cash flows for the nine month and one month periods ended September 30, 2000 and
December 31, 1999, in conformity with generally accepted accounting principles.
/s/ Mantyla McReynolds
--------------------------------
Mantyla McReynolds
December 13, 2000
Salt Lake City, Utah
F-1
<PAGE>
A-Z SOUTH STATE CORPORATION
Balance Sheets
September 30, 2000 and December 31, 1999
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
---------------------- ----------------------
<S> <C> <C>
ASSETS
Current Assets
Cash $ 6,618 $ 0
Rents receivable 1,700
---------------------- ----------------------
Total Current Assets 8,318 0
Fixed Assets
Property and equipment, net - Notes 1 & 4 425,705 434,093
Land 100,000 100,000
---------------------- ----------------------
Total Fixed Assets 525,705 534,093
TOTAL ASSETS $ 534,023 $ 534,093
====================== ======================
</TABLE>
See accompanying notes to financial statements
F-2
<PAGE>
A-Z SOUTH STATE CORPORATION
Balance Sheets
September 30, 2000 and December 31, 1999
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
---------------------- ----------------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDER'S EQUITY
LIABILITIES
Current Liabilities
Accrued liabilities $ 5,994 $ 1,600
Payable to parent - Note 2 121,814 45,077
Mortgage note payable - Note 5 0 75,000
Income taxes payable - Notes 1, 2 & 3 1,186 966
Current portion long-term debt - Note 5 14,356 12,420
---------------------- ----------------------
Total Current Liabilities 143,350 135,063
---------------------- ----------------------
Long-Term Liabilities
Mortgage payable - Note 5 391,798 400,000
Less current portion long-term debt (14,356) (12,420)
---------------------- ----------------------
Total Long-Term Liabilities 377,442 387,580
---------------------- ----------------------
TOTAL LIABILITIES 520,792 522,643
STOCKHOLDER'S EQUITY
Capital stock - 50,000,000 shares authorized at $0.001 par; 10,000 10,000
10,000,000 shares issued and outstanding
Retained earnings 3,231 1,450
TOTAL STOCKHOLDER'S EQUITY 13,231 11,450
---------------------- ----------------------
TOTAL LIABILITIES AND
STOCKHOLDER'S EQUITY $ 534,023 $ 534,093
====================== ======================
</TABLE>
See accompanying notes to financial statements
F-3
<PAGE>
A-Z SOUTH STATE CORPORATION
Statements of Stockholder's Equity
for the nine month and one month periods ended
September 30, 2000 and December 31, 1999
<TABLE>
<CAPTION>
Additional Total
Number of Common Paid-in Retained Stockholder's
Shares Stock Capital Earnings Equity
---------------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Balance, November 30, 1999 0 $ 0 $ 0 $ 0 $ 0
Issued stock for cash 10,000,000 10,000 0 0 10,000
Net income for one month 1999 0 0 0 1,450 1,450
---------------- --------------- --------------- --------------- ---------------
Balance, December 31, 1999 10,000,000 10,000 0 1,450 11,450
Net income for nine months 2000 0 0 0 1,781 1,781
---------------- --------------- --------------- --------------- ---------------
Balance, September 30, 2000 10,000,000 $ 10,000 $ 0 $ 3,231 $ 13,231
================ =============== =============== =============== ===============
</TABLE>
See accompanying notes to financial statements
F-4
<PAGE>
A-Z SOUTH STATE CORPORATION
Statements of Income
for the nine month and one month periods ended
September 30, 2000 and December 31, 1999
<TABLE>
<CAPTION>
Nine months One month
ended ended
September 30, December 31,
2000 1999
---------------------- ----------------------
<S> <C> <C>
Rental revenues $ 47,525 $ 4,125
General and administrative expenses 15,677 1,709
---------------------- ----------------------
Net income from operations 31,848 2,416
Interest expense 28,881
---------------------- ----------------------
Net income before income taxes 2,967 2,416
Provision for income taxes - Notes 1 & 3 1,186 966
---------------------- ----------------------
Net Income $ 1,781 $ 1,450
====================== ======================
Net income per common share $ 0.00 $ 0.00
====================== ======================
Weighted average shares outstanding 10,000,000 10,000,000
====================== ======================
</TABLE>
See accompanying notes to financial statements
F-5
<PAGE>
A-Z SOUTH STATE CORPORATION
Statements of Cash Flows
for the nine month and one month periods ended
September 30, 2000 and December 31, 1999
<TABLE>
<CAPTION>
Nine months One month
ended ended
September 30, December 31,
Cash Flows from Operating Activities: 2000 1999
------------------ ------------------
<S> <C> <C>
Net Income $ 1,781 $ 1,450
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 8,388 907
Decrease (increase) in rents receivable (1,700)
Increase in income tax payable 220 966
Increase in accrued liabilities 4,394 1,600
------------------ ------------------
Net Cash Provided by/(Used for) in Operating Activities 13,083 4,923
Cash Flows from Investing Activities:
Purchase of land and building (535,000)
------------------ ------------------
Net Cash Provided by/(Used for) Investing Activities 0 (535,000)
Cash Flows from Financing Activities:
Increase (decrease) in notes and mortgages payable (83,202) 475,000
Increase in amount due to shareholder 76,737 45,077
Issued stock for cash 10,000
------------------ ------------------
Net Cash Provided by/(used for) Financing Activities (6,465) 530,077
Net Increase(decrease) in Cash 6,618 0
Beginning Cash Balance 0 0
------------------ ------------------
Ending Cash Balance $ 6,618 $ 0
================== ==================
Supplemental Disclosure Information:
Cash paid during the year for interest $ 28,881 $ 0
Cash paid during the year for income taxes $ 0 $ 0
</TABLE>
See accompanying notes to financial statements
F-6
<PAGE>
A-Z SOUTH STATE CORPORATION
Notes to Financial Statements
September 30, 2000
NOTE 1 Summary of Significant Accounting Policies
------------------------------------------
Nature of Operations
The Company incorporated under the laws of the State of Utah on
November 30, 1999 and is a wholly owned subsidiary of CyberAmerica
Corporation. On December 1, 1999 the Company purchased a one story
retail building located at 1374 South State Street in Salt Lake City,
Utah for the purpose of generating rental income. The building is
divided into two rentable areas; one represents 64% of the total area
and the other represents 36% of the total.
Statement of Cash Flows
Cash is comprised of cash on hand or on deposit in banks. The Company
had $6,618 and $0 at September 30, 2000 and December 31, 1999.
Deferred Income Taxes
In February 1992, the Financial Accounting Standards Board (FASB)
issued Statement of Financial Accounting Standard (SFAS) No. 109,
"Accounting For Income Taxes," which is effective for fiscal years
beginning after December 15, 1992. SFAS No. 109 requires the asset and
liability method of accounting for income taxes. The asset and
liability method requires that the current or deferred tax consequences
of all events recognized in the financial statements are measured by
applying the provisions of enacted tax laws to determine the amount of
taxes payable or refundable currently or in future years. The Company
adopted SFAS No. 109 for financial reporting purposes in 1999. See Note
3 below.
Depreciation
The Company's property and equipment is depreciated using the
straight-line method for financial reporting purposes and amounted to
$8,388 for the nine months ended September 30, 2000 and $907 for the
one month period ended December 31, 1999.
Net Income Per Common Share
Net income per common share is based on the weighted average number of
shares outstanding.
F-7
<PAGE>
A-Z SOUTH STATE CORPORATION
Notes to Financial Statements
September 30, 2000
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
NOTE 2 Related Party Transactions
On December 1, 1999 the company issued 10,000,000 shares of $.001 par
value common stock to CyberAmerica Corporation (CYAA), a publicly
traded company, for $10,000.00. CYAA advanced funds to the Company for
the purchase of a building on December 1, 1999. At September 30, 2000
and December 31, 1999 the Company had a payable to CYAA for cash
advances in the amount of $121,814 and $45,077 bearing no interest and
payable on demand.
CYAA files consolidated federal and state income tax returns which
include the Company as a member. Income tax expense is allocated from
the parent to the members by multiplying the members' net income before
tax by the parent's marginal tax rate. In 2000 and 1999 the parent's
marginal tax rate was 35% federal and 5% state. Accordingly, income
taxes payable at September 30, 2000 and December 31, 1999 were $1,186
and $966, payable to CYAA and not to the taxing authority. This brings
the total payable to CYAA at September 30, 2000 and December 31, 1999
to $123,000 and $46,043.
NOTE 3 Accounting for Income Taxes
The Company has adopted Statement of Financial Accounting Standards No.
109, "Accounting for Income Taxes." For the nine month period ended
September 30, 2000 and one month period ended December 31, 1999, the
Company incurred income tax expense of $1,186 and $966, payable to its
parent (see Note 2 above) as follows.
Income tax payable September December
30, 2000 31, 1999
---------------------------------- ----------------- -----------------
Federal income tax (35%) $ 1,038 $ 845
State income tax (5%) 148 121
Deferred income tax 0 0
----------------- -----------------
Income tax expense $ 1,186 $ 966
================= =================
F-8
<PAGE>
NOTE 4 Property and Equipment
Property and equipment consist of the following:
September December
30, 2000 31, 1999
------------------ ------------------
Building $ 435,000 $ 435,000
Accumulated depreciation (9,295) (907)
------------------ -----------------
$ 425,705 $ 434,093
================== ==================
NOTE 5 Debt
The Company's long-term debt consists of the following:
September December
30, 2000 31, 1999
------------------ ------------------
Note secured by building $ 391,798 $ 400,000
------------------ ------------------
$ 391,798 $ 400,000
================== ==================
The note is a seller financed mortgage bearing interest at 9.725% with
monthly payments of $4,231.38 beginning on January 1, 2000. The
remaining balance plus accrued interest is due and payable in full on
December 1, 2002. The note is secured by a trust deed against the
building at 1374 South State Street. The trust deed includes a senior
trust deed of $375,640, interest rate of 9.25% and monthly payments of
$4025.55 payable by seller to a local bank.
In addition, the seller financed a second mortgage, also secured by a
trust deed against the building, in the amount of $75,000 bearing no
interest with a due date of September 1, 2000. As of September 30, 2000
this note had been paid in full.
F-9
<PAGE>
A-Z SOUTH STATE CORPORATION
Notes to Financial Statements
September 30, 2000
The following is a summary of principal maturities of long-term debt
during the next five years:
Twelve months ended September 30, 2001 $ 14,356
Twelve months ended September 30, 2002 14,715
Twelve months ended September 30, 2003 362,727
Twelve months ended September 30, 2004 0
Twelve months ended September 30, 2005 0
----------------------
Total due within five years $ 391,798
======================
NOTE 6 Concentrations
An extended vacancy in either of the two rentable areas of the building
at 1374 South State could have a severe impact on revenues in the near
term. At December 31, 1999 the Company had lease agreements in place
calling for monthly rents of $3,800 and $1,600 expiring January 2004
and December 2001 respectively. In January 2000 the $1,600 lease was
defaulted upon and was subsequently replaced with a new lease for
$1,700 per month beginning in June 2000 and expiring in May 2001.
F-10
<PAGE>
Outside back cover of prospectus.
No dealer, salesman or other person has been authorized to give any information
or to make any representations not contained in this prospectus. If given or
made, such information or representation must not be relied upon as having been
authorized by the Company. This prospectus does not constitute an offer to sell,
or a solicitation of an offer to buy, the common stock in any jurisdiction
where, or to any person to whom, it is unlawful to make such offer or
solicitation. Neither the delivery of this prospectus nor any sale hereunder
shall, under any circumstances, create an implication that there has not been
any change in the facts set forth in this prospectus or in the affairs of the
Company since the date hereof.
Until 40 days after the first date upon which the security was bona fide offered
to the public by the issuer or by or through an underwriter (Item 503(e)) all
dealers effecting transactions in the registered securities, whether or not
participating in this distribution, may be required to deliver a prospectus.
This is in addition to the obligation of dealers to deliver a prospectus when
acting as underwriters and with respect to their unsold allotments and
subscriptions.
25
<PAGE>
PART II -- INFORMATION NOT REQUIRED IN PROSPECTUS
INDEMNIFICATION OF DIRECTORS AND OFFICERS
According to Article Ten of the Company's Articles of Incorporation and Section
6.09 of the Company's Bylaws, the Company is authorized and required to
indemnify its officers and directors to the full extent allowed by the laws of
the State of Utah.
Sections 16-10a-901 through 16-10a-909 of the Utah Revised Business Corporation
Act provide for indemnification of the Company's officers and directors, and
limits on that indemnification, in certain situations where they might otherwise
personally incur liability, judgments, penalties, fines and expenses in
connection with a proceeding or lawsuit to which they might become parties
because of their position with the Company.
To the extent that indemnification may be related to liability arising under the
Securities Act, the Securities and Exchange Commission takes the position that
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable.
OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the estimated expenses of this offering, all of
which will be paid by the Company:
SEC Registration Fee............................................$105.60
Accounting Fees and Expenses...................................5,000.00
Legal Fees and Expenses.......................................10,000.00
Printing and Engraving Expenses................................1,000.00
Transfer Agent and Registrar Fees and Expenses.................2,000.00
Miscellaneous..................................................1,894.40
Total...............................................20,000.00
RECENT SALES OF UNREGISTERED SECURITIES
On December 1, 1999, the Company issued 10,000,000 shares of common stock to
Axia Group, Inc. at par value ($0.001) for a total of $10,000. The Company
relied on exemptions provided by Section 4(2) of the Securities Act of 1933, as
amended. The Company made this offering based on the following factors: (1) the
issuance was an isolated private transaction by the Company which did not
involve a public offering; (2) there was only one offeree who was an affiliate
of the Company; (3) the offeree did not resell the stock but continues to hold
it until the present; (4) there were no subsequent or contemporaneous public
offerings of the stock; (5) the stock was not broken down into smaller
denominations; and (6) the negotiations for the sale of the stock took place
directly between the offeree and the Company.
26
<PAGE>
EXHIBITS
Exhibit
Number Page Description
------- ---- -----------
3(i) 30 Articles of Incorporation for A-Z South State Corporation,
filed November 30, 1999
3(ii) 34 Bylaws of the Company, adopted on November 30, 1999
5(i) 44 Legal Opinion and Consent of Counsel
10(i) 47 All-Inclusive Promissory Note Secured by All-Inclusive Trust
Deed, dated November 30, 1999
10(ii) 54 All-Inclusive Trust Deed With Assignment of Rents, dated
November 30, 1999
10(iii) 59 Third Promissory Note, dated November 30, 1999
10(iv) 60 Third Deed of Trust With Assignment of Rents, dated December
1, 1999
10(v) 65 Assignment of Leases, dated December 1, 1999
10(vi) 66 Warranty Deed, dated December 1, 1999
10(vii) 67 Lease Agreement with RTO Operating, Inc. DBA HomeChoice,
dated October 29, 1998
10(viii) 79 Lease Agreement with Jason Nunley, dated November 12, 1999
10(ix) 89 Lease Agreement with Frank Saucedo and Ana Sanchez, dated
May 25, 2000
23 100 Consent of Independent Certified Public Accountant
27 101 Financial Data Schedule "CE"
UNDERTAKINGS
A. Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "Act") may be permitted to directors, officers and
controlling persons of the small business issuer pursuant to the
foregoing provisions, or otherwise, the small business issuer has been
advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the small business issuer of expenses
incurred or paid by a director, officer or controlling person of the
small business issuer in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling
27
<PAGE>
person in connection with the securities being registered, the small
business issuer will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Securities Act and
will be governed by the final adjudication of such issue.
B. The Company will:
(1) For determining any liability under the Securities Act, treat the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the small business issuer under Rule 424(b)
(1) or (4) or 497(h) under the Securities Act as part of this
registration statement at the time the Commission declared it
effective.
(2) For determining any liability under the Securities Act, treat each
post-effective amendment that contains a form of prospectus as a new
registration statement for the securities offered in the registration
statement, and that Offering of the securities at that time as the
initial bona fide Offering of those securities.
28
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form SB-2 and authorized this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Salt Lake City, State of Utah, on December 26, 2000.
A-Z South State Corporation
/s/ Richard D. Surber
---------------------------
By Richard D. Surber, President
In accordance with the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates stated.
/s/ Richard D. Surber President, Director, December 26, 2000
---------------------------- Chief Financial Officer
Richard D. Surber
/s/ Ed G. Haidenthaller Director December 26, 2000
----------------------------
Ed G. Haidenthaller
/s/ Bruce M. Pritchett Director December 26, 2000
----------------------------
Bruce M. Pritchett
29
