As filed with the Securities and Exchange Commission on July 13, 1999
Commission File No. 333-81851
U.S. Securities and Exchange Commission
Washington, D.C. 20549
--------------
PRE-EFFECTIVE AMENDMENT NUMBER 1 TO FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
DONNEBROOKE CORPORATION
(Exact name of small business registrant as specified in its charter)
Delaware 75-2228820
(State or jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
16910 Dallas Parkway, Suite 100, Dallas, Texas 75248 (972) 248-1922.
(Address and telephone number of principal executive offices)
Kevin B. Halter, Jr. 16910 Dallas Parkway, Suite 100, Dallas, Texas 75248
(972) 248-1922
( Name, address and telephone number of agent for service)
Copies to:
Richard Braucher, Esq.
16910 Dallas Parkway, Suite 100
Dallas, Texas 75248
(972) 248-1922
The common stock being sold by the selling shareholders will be sold from time
to time upon the effectiveness of this registration statement as determined by
the selling shareholders.
If any of the securities being registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [x]
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
- ---------------------------- ------------------------- -------------------------- ------------------------- ----------------------
<S> <C> <C> <C> <C>
Title of each class of Amount to be Proposed maximum offering Proposed maximum Registration Fee
securities to be registered registered price per share (1) aggregate offering
price (1)
Common Stock 330,000 shares $1.00 $97.35
$330,000.00
- ---------------------------- ------------------------- -------------------------- ------------------------- ----------------------
</TABLE>
Note: (1) Estimated solely for the purpose of calculating the registration fee.
The registrant amends this registration statement on such date or dates
necessary to delay its effective date until the registrant files a further
amendment, which specifically states that this registration statement is
thereafter effective in accordance with Section 8(a) of the Securities Act of
1933 or until the registration statement becomes effective on the date the
Commission, acting pursuant to said Section 8(a), determines.
<PAGE>
PRELIMINARY PROSPECTUS DATED JULY 13, 1999
(subject to completion)
DONNEBROOKE CORPORATION
330,000 SHARES OF COMMON STOCK
This prospectus relates to the sale from time to time of up to 330,000 shares of
the common stock of Donnebrooke Corporation, a Delaware corporation (herein
"Donnebrooke"), by two shareholders, Halter Capital Corporation and Charles R.
Dickinson (See "Prospectus Summary"). These shares are being registered in order
to make them freely tradeable but registration does not necessarily mean that
any or all of these shares will, in fact, be sold. Donnebrooke will not receive
any of the proceeds from the sale of these shares. Donnebrooke will pay all of
the expenses related to this registration.
There is currently no public market for the common stock. Donnebrooke expects
that the common stock will be traded on the over-the-counter market maintained
by members of the National Association of Securities Dealers, Inc. (the "OTC
Bulletin Board") after the registration statement is declared effective. There
can be no assurance that an active trading market will develop. See "Risk
Factors."
We urge you to read this prospectus carefully. An investment in the securities
offered hereby is speculative and involves a high degree of risk. You should
read "Risk Factors", beginning on page 3, which describes certain factors which
should be carefully considered before you purchase any of the common stock.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities or determined if this
prospectus is truthful and complete. Any representation to the contrary is a
criminal offense.
<TABLE>
Price to the Public Proceeds to Donnebrooke Proceed to
Selling Shareholders
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share $1.00 None $330,000.00
TOTAL $1.00 None $330,000.00
</TABLE>
No underwriters are involved or expected to be involved in the offer or sale of
this stock. The selling shareholders may, from time to time, offer and sell
these shares directly or through agents or broker-dealers on such terms as
either of them determines to be appropriate. See "Plan of Distribution."
The selling shareholders may not sell these securities until the registration
statement filed with the Securities and Exchange Commission is effective. This
prospectus is not an offer to sell these securities and it is not soliciting an
offer to buy these securities in any state where the offer or sale is not
permitted.
THE DATE OF THIS PROSPECTUS IS JULY_____, 1999.
<PAGE>
PROSPECTUS SUMMARY INFORMATION
Please read all of this prospectus carefully. It describes Donnebrooke and its
plans for the future. Federal and state securities laws require that we include
in this prospectus all information that investors will need to make an
investment decision. You should rely only on the information contained in this
prospectus to make your investment decision. We have not authorized anyone to
provide you with information that is different from what is contained herein.
The following is a summary of some of the information contained in this
prospectus. However, you should not rely on the summary but should read the more
detailed information in the rest of this prospectus.
THE COMPANY
Donnebrooke Corporation, a Delaware corporation, does not conduct any type of
business at this time. It was incorporated under the laws of State of Delaware
in 1988. Donnebrooke's only office is located at 16910 Dallas Parkway, Suite
100, Dallas, Texas 75248 and its telephone number is (972) 248-1922.
<TABLE>
<CAPTION>
THE OFFERING
<S> <C> <C>
Type of Security Offered Common Stock, $0.00001 par value per share
Number of Outstanding Shares 3,940,372
Number of Shares Offered by Selling Shareholders 330,000
Percentage of Outstanding Shares Being Registered 8.37%
Number of Outstanding Shares Owned by Non-Affiliates 368,307
</TABLE>
RISK FACTORS
You should consider the common stock of Donnebrooke to be an investment
involving a high degree of risk. You should read this entire prospectus and
carefully consider the risk involved with this investment, including the
following factors. You should carefully consider all of the risk factors and
other facts relating to Donnebrooke in making your evaluation of the company and
its future potential before purchasing any of Donnebrooke's common stock.
Donnebrooke needs additional working capital to maintain its existence
In the past Donnebrooke's expenses have been paid by one or more of its
principal shareholders. Currently, it has very little cash and no other liquid
assets with which to pay any expenses. Although Donnebrooke was able to raise
$10,000.00 by selling additional stock in a private placement recently, there
can be no assurance that it can sell additional unregistered restricted stock in
the future or, if some shares are sold, whether the price will be favorable to
the company. Unless one or more of its principal shareholders agrees to provide
cash to pay Donnebrooke's expenses as they are incurred, Donnebrooke may be
forced to cease its efforts to find an acceptable merger or acquisition partner
and as a result the stock could become worthless. Donnebrooke does not know of
any sources from which it can borrow money or otherwise obtain capital.
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<PAGE>
Donnebrooke's acquisition strategy may reduce the price that investors are
willing to pay for its shares
Donnebrooke intends to grow by acquiring a business or a corporation that is
privately owned and has a history of profitable operations or a future business
plan that management believes is likely to result in profitable operations. The
management of Donnebrooke has no specific target in mind and it is impossible to
predict when, or if, it will find a merger or acquisition candidate that it
deems desirable and that is interested in affiliating with Donnebrooke. There
can be no assurance that Donnebrooke will be able to identify, acquire or manage
such a business profitably or to integrate successfully such a business into
Donnebrooke without substantial and unanticipated costs, delays or other
problems. A business acquired by Donnebrooke may have liabilities that
Donnebrooke does not discover or may not be able to discover during its
pre-acquisition investigations and for which Donnebrooke, as legal successor
owner, may be responsible. Donnebrooke currently has no agreement with any party
to make an acquisition.
Donnebrooke has never operated a profitable business and without income or
profits, the stock may become worthless
Donnebrooke has never operated a profitable business and has never generated any
income; thus, Donnebrooke has no history of successfully operating any form of
business and generating any profits. Management cannot assure investors that the
company will ever operate or acquire a business that will generate income or
profits. If no business is ever acquired, the stock will become worthless.
Because there is no active market for Donnebrooke's stock now and one may not
develop, you may have difficulty valuing and selling Donnebrooke shares
There has never been an established public market for Donnebrooke's stock. There
can be no assurance that an active public market will develop or be sustained
for the common stock even though Donnebrooke intends to file an application with
the National Association of Securities Dealers, Inc. (herein " NASD") to list
the common stock on the OTC Bulletin Board. If there is little demand on the
part of potential purchasers of the stock, sellers will have difficulty selling
any of Donnebrooke's stock.
Because the price of Donnebrooke's stock is likely to continue to be volatile,
its market price is likely to very unpredictable
The market price of Donnebrooke's stock has been, and is likely to continue to
be, highly volatile. The market for Donnebrooke's stock may continue to be
volatile and unpredictable because of general market conditions, as well as
factors related to Donnebrooke's performance and its ability to meet market
expectations. Such factors as investor perceptions of Donnebrooke, variations in
Donnebrooke's financial condition, announcements regarding Donnebrooke's plans
and other developments affecting Donnebrooke's future could cause significant
fluctuations in the market price of the stock. In addition, the stock market in
general has recently experienced price and volume fluctuations which appear to
be unrelated to historical measures such as price-earnings ratio, anticipated
revenues, growth is sales or other investment standards for individual
companies. Broad market fluctuations having nothing to do with Donnebrooke may
also cause the price of the stock to go down.
Regulations affecting Donnebrooke may make it more difficult for you to resell
this stock
Because of the low price of Donnebrooke's common stock and the fact that it is
not currently listed on any NASDAQ market or any exchange, the shares may
continue to be subject to a number of regulations that may affect the price of
the shares and your ability to sell the shares in the secondary market. See
"Regulations Affecting the Price and Marketability of Donnebrooke's Stock."
Future sales of Donnebrooke's stock pursuant to Rule 144 could have an adverse
affect on the market price of this stock
We are unable to predict the affect that sales of the stock in the future made
under Rule 144 or otherwise may have on the then prevailing market price of
Donnebrooke's stock. It is possible that sales of large numbers of shares by one
of more of the principal shareholders will have the effect of depressing the
market price of the common stock. See "Description of Donnebrooke's Common Stock
- - Shares Eligible for Future Sale."
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<PAGE>
Because Donnebrooke is controlled by its two executive officers and directors,
some potential investors will not buy the stock
Donnebrooke's existing officers and directors will continue to beneficially own,
directly or indirectly, over 90% of the common stock. As a result, these
shareholders acting together control all decisions that will be made by the
shareholders, including the election of directors, approval or rejection of any
proposed acquisition or merger, and possible recapitalizations of Donnebrooke.
The voting power of these shareholders could, under certain circumstances, delay
or prevent a change in control of Donnebrooke.
Anti-takeover provisions in Donnebrooke's Certificate and Bylaws, as well as
Delaware law, could adversely affect the stock's price
Some provisions of Delaware law and certain provisions contained in
Donnebrooke's Certificate of Incorporation and Bylaws could delay or impede the
removal of incumbent directors and could make it more difficult for a third
party to acquire, or could discourage third parties from attempting to acquire,
control of Donnebrooke. Such provisions could limit the price that certain
investors might be willing to pay in the future for Donnebrooke's common stock.
The Certificate and Bylaws impose various procedural requirements that could
make it more difficult for shareholders to effect certain corporate actions such
as mergers or other forms of consolidation. Donnebrooke's Certificate gives the
Board of Directors, without any additional authorization from the shareholders,
authority to issue more than 46,000,000 additional shares of common stock for
various corporate purposes. Issuance of a substantial number of shares would
dilute the existing shareholders' percentage ownership of Donnebrooke.
PRINCIPAL AND SELLING SHAREHOLDERS
The following table sets forth certain information as of July 1, 1999 with
regard to the beneficial ownership of the common stock by (i) each person known
to Donnebrooke to be the beneficial owner of 5% or more of its outstanding
shares; (ii) by the officers and directors of Donnebrooke individually and (iii)
by the officers and directors as a group. Included is the number of shares
before and after this offering and the number of shares to be offered by each
selling shareholder. This information assumes that all shares offered by the
selling shareholders are sold and that no additional common stock is sold or
acquired by either of them.
<TABLE>
Name of Beneficial Number of Shares Percent of Number of Shares Number Owned After Percent of
Owner Owned Outstanding Offered for Sale Sale Outstanding
<S> <C> <C> <C> <C>
(adjusted)
Halter Capital 1,303,392 33.1% 30,000 1,273,392 32.3%
Corporation (A)
Kevin B. Halter 604 0% -0- 604 0%
Kevin B. Halter, Jr. 2,268,069 57.6% -0- 2,268,069 57.6%
Charles R. Dickinson (B) 300,000 7.6% 300,000 -0- 0%
All Directors & 3,572,065 90.6% -0- 3,542,065 89.9%
Officers as a Group
(2 persons)
</TABLE>
(A) Halter Capital Corporation is owned exclusively by Kevin B. Halter and Kevin
B. Halter, Jr., father and son, who are the only directors and officers of
Donnebrooke. This corporation and both Messrs. Halter are affiliates of
Donnebrooke, as that term is defined by the Securities Act of 1933.
(B) Charles R. Dickinson does not now hold, and has never held, any position,
office or material relationship with Donnebrooke and is not an affiliate of
Donnebrooke.
5
<PAGE>
PLAN OF DISTRIBUTION
Reasons for this Registration
Donnebrooke's Board of Directors has determined that it is in the best interest
of Donnebrooke to register these 330,000 shares at this time. Currently only
68,911 shares of Donnebrooke's common stock are freely tradeable and there is no
active market for trading. After the completion of this registration 398,911
shares will be freely tradeable. After this registration 3,541,461 shares or
approximately 90% of the shares issued and outstanding will remain restricted
and cannot be sold until such time as a subsequent registration statement is
filed by Donnebrooke or, with the passage of time, the owners of the restricted
stock can obtain removal of the restriction pursuant to rules and regulations of
the SEC, including Rule 144 or 144(k).
In addition, Donnebrooke hopes to expand in the future by means of acquisitions
of one or more existing businesses. The Board of Directors believes that having
a public market for the common stock will allow Donnebrooke to more readily make
such acquisitions in the future by structuring them as stock transactions.
Listing and Trading of the Common Stock in the Future
Immediately after this registration is declared effective, Donnebrooke intends
to apply to NASD for listing of the Common stock on NASD's OTC Bulletin Board
and it is anticipated that trading in the common stock should commence shortly
after approval of the listing is received from NASD. No assurance can be given
as to when that approval will be received.
Donnebrooke expects that the common stock will initially be traded on the OTC
Bulletin Board after the effectiveness of the registration statement. Shares of
the common stock will be freely transferable, except for shares beneficially
owned by persons who may be deemed to be "affiliates" of Donnebrooke under the
Securities Act. Persons who may be deemed to be affiliates of Donnebrooke
include individuals or entities that control, are controlled by or under common
control with Donnebrooke, and include the directors and principal executive
officers of Donnebrooke, as well as any stockholder that owns 10% or more of the
total stock issued and outstanding. Persons who are affiliates of Donnebrooke
will be permitted to sell their shares of common stock only pursuant to an
effective registration statement under the Securities Act or an exemption from
the registration requirements of the Securities Act which is applicable to them.
The directors and executive officers of Donnebrooke, Kevin B. Halter and Kevin
B. Halter, Jr., as well as Halter Capital Corporation, are currently affiliates
of Donnebrooke.
Common Stock Being Sold by the Two Selling Shareholders
Halter Capital Corporation and Charles R. Dickinson currently own in excess of
33% and 7%, respectively, of the company's stock. After the registration is
effective, Halter Capital Corporation and Charles R. Dickinson intend to offer
and sell, from time to time, up to 30,000 shares and 300,000 shares,
respectively. The stock will be sold at such price or prices as either of the
selling shareholders is able to negotiate for the shares being sold. The price
may or may not be at prevailing market and may represent a negotiated price
based on factors deemed appropriate by the buyer and seller. Although
Donnebrooke is registering these shares for the selling shareholders,
registration of the shares does not necessarily mean that any of these hares
will be offered and sold by the selling shareholders or either of them.
Donnebrooke will not receive any proceeds from the sale of these shares by the
selling shareholder and will pay the costs of this registration, estimated to be
$6000.00.
These shares may be sold directly by the selling shareholders. Alternatively,
the selling shareholder may from time to time offer part or all of these shares
to or through broker-dealers, and broker-dealers may receive compensation in the
form of discounts, concessions or commissions from the selling shareholder
and/or the purchasers of the shares for whom they may act as agents or tot whom
they may sell as principal, or both. Donnebrooke is not aware as of the date of
this prospectus of any agreements between any of the selling shareholders and
any broker-dealers with respect to the common stock offered by the selling
shareholders pursuant to this prospectus. In connection with the distribution of
the shares or otherwise, the selling shareholders may enter into hedging
transactions with broker-dealers. In connection with these transactions ,
broker-dealers may engage in short sales of the shares in the course of hedging
the positions they assume with selling shareholders. The selling shareholders
may also enter into option or other transactions with broker-dealers which
require the delivery to the broker-dealer of the shares described in this
prospectus, which the broker-dealer may resell pursuant to this prospectus.
6
<PAGE>
The selling shareholders and any broker, dealer or other agent executing sell
order on behalf of the selling shareholders may be "underwriters" within the
meaning of the Securities Act, in which event commission received by the broker,
dealer or agent and profit on any resale of the shares may be underwriting
commissions under the Securities Act. Any commissions received by a broker,
dealer or agent may be in excess of customary compensation. The shares may also
be sold, if applicable, in accordance with Section 4(1) of the Securities Act or
Rule 144 and Rule 145 under the Securities Act.
Information as to whether any underwriter who may be selected by the selling
shareholders, or any other broker-dealer, is acting as principal or agent for
the selling shareholders, the compensation to be received by any such
underwriters or broker-dealers, when acting as principal or agent for the
selling shareholders and the compensation received by other-broker-dealers will,
to the extent required, be set froth in a supplement to this prospectus. Any
dealer or broker participating in any distribution of the shares may be required
to deliver a copy of this prospectus, including the prospectus supplement, if
any, to any person who purchases any of the shares from or though such dealer or
broker.
Donnebrooke will pay all expenses of registration incurred in connection with
this offering, estimated to be approximately $6000.00. The selling shareholders
will be responsible for all selling and other expenses incurred by the selling
shareholders.
The selling shareholders will be subject to applicable provisions of the
Exchange Act and the rules and regulations thereunder, including without
limitation, Rule 102 under Regulation M, which may limit the timing of purchases
and sales of any shares of the common stock by the selling shareholders. Rule
102 provides, with some exceptions, that it is unlawful for a selling
shareholder or its affiliated purchaser to, directly or indirectly, bid for or
purchase or attempt to induce any person to bid for or purchase, from an account
in which the selling shareholder or affiliated purchaser has a beneficial
interest in any securities that are the subject of the distribution during the
applicable restricted period under Regulation M. All of the foregoing may affect
the marketability of the common stock. Donnebrooke will require each selling
shareholder and his broker, if applicable, to provide a letter that acknowledges
compliance with Regulation M under the Exchange Act before authorizing the
transfer of the selling shareholders' shares.
It is anticipated that the selling shareholders may offer all 330,000 shares for
sale. Because it is possible that a significant number of shares could be sold
at the same time, these sales, or the possibility of these sales, may have a
depressive effect on the market price of Donnebrooke's common stock. No
assurance can be given as to the liquidity of the trading market for the common
stock.
Regulations Affecting the Price and Marketability of Donnebrooke's Stock
Because of the low price of the common stock and the fact that it is not listed
on any established market or exchange, the shares may be subject to a number of
regulations that may affect the price of the shares and your ability to sell the
shares in the secondary market.
For example, Rule 15g-9 under the Exchange Act may affect the ability of
broker-dealers to sell the shares may affect your ability to sell the common
stock in the secondary market. This rule generally applies to all shares not
listed with NASD or any stock exchange. The rule imposes additional sales
practices requirements on broker-dealers that sell low-priced securities to
persons other than institutional accredited investors and established customers.
For transactions covered by this rule, a broker-dealer must make a special
suitability determination for the purchaser and have received the purchaser's
written consent to the transaction.
In addition, because the penny stock rules will probably continue to apply to
Donnebrooke's shares, investors will probably find ti more difficult to sell
this stock. SEC regulations define a penny stock to be any equity security that
has a market price or exercise price of less than $5.00 per share, subject to
some exceptions. The penny stock rules require a broker-dealer to deliver a
standardized disclosure document prepared by the SEC, to provide the customer
with additional information including current bid and offer quotations for the
penny stock, the compensation that the broker-dealer and its salesperson in the
transaction, monthly account statements showing the market value of each penny
stock held in the customer's account, and to make a special written
determination that the penny stock is a suitable investment for the purchaser
and receive the purchaser's written agreement to the transaction. These
requirements will probably reduce the level of trading activity in the secondary
market for the common stock and may severely and adversely affect the ability of
broker-dealers to sell Donnebrooke securities.
DIVIDEND POLICY
Donnebrooke has never paid or declared a cash dividend on its common stock and
does not intend to pay cash dividends in the foreseeable future. The payment by
Donnebrooke of dividends, if any, on its common stock in the future is subject
7
<PAGE>
to the discretion of the Board of Directors and will depend on Donnebrooke's
earnings, financial condition, capital requirements and other relevant factors.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATION
The following discussion and analysis should be read in conjunction with
Donnebrooke's financial statements and the notes associated with them as set
forth elsewhere in this document. This discussion should not be construed to
imply that the results discussed herein will necessarily continue into the
future or that any conclusion reached herein will necessarily be indicative of
actual operating results in the future. This discussion represents only the best
present assessment by the management of Donnebrooke.
Caution Regarding Forward-Looking Information
This registration statement contains certain forward-looking statements and
information relating to Donnebrooke that are based on the beliefs of Donnebrooke
or its management as well as assumptions made by and information currently
available to Donnebrooke or its management. When used in this document, the
words "anticipate", "believe", "estimate", "expect" and "intend" and similar
expressions, as they relate to Donnebrooke or its management, are intended to
identify forward-looking statements. Such statements reflect the current view of
Donnebrooke or its management regarding future events and are subject to certain
risks, uncertainties and assumptions, including the risks and uncertainties
noted. Should one or more of these risks or uncertainties materialize, or should
the underlying assumptions prove incorrect, actual results may vary materially
from those described herein as anticipated, believed, estimated, expected or
intended. In each instance, the forward-looking information should be considered
in light of the accompanying meaningful cautionary statements herein.
Company's History
Donnebrooke Corporation was incorporated with the name, Alluristics, Inc., on
April 19, 1988 under the laws of the State of Delaware. In 1988 Donnebrooke
filed a Form S-1 Registration Statement under the Securities Act of 1933 (which
was declared effective February 15, 1989), covering 5,000,000 shares of its
common stock. Later in 1989 the Allison family of Houston, Texas acquired a
controlling interest in Donnebrooke. Over the years there were a number of stock
issuances, in addition to stock splits. On October 16, 1998 Halter Capital
Corporation acquired 19,490,735 shares of Donnebrooke's common stock,
representing approximately 52% of the number of shares then issued and
outstanding. Subsequently Donnebrooke's shareholders approved a one for 1000
reverse split of the common stock. This action decreased the number of issued
and outstanding shares of common stock from 37,333,000 to 38,072 as of the
effective date. On March 15, 1999, Donnebrooke issued 1,313,000 shares of its
common stock to Halter Capital Corporation which had paid certain debts of
Donnebrooke owing to its creditors and 2,289,300 shares of its common stock to
Kevin B. Halter, Jr. for services which he had previously rendered as a
consultant for Donnebrooke. On June 30, 1999, Donnebrooke sold 300,000 shares of
its restricted, unregistered common stock to an unrelated third party for
$10,000.00 cash so that it could pay expenditures related to this registration
and other current bills.
Discussion of Financial Condition
Donnebrooke currently has no revenues, no operations and owns no assets.
Donnebrooke will remain illiquid until such time as a business combination
transaction occurs, if ever. No prediction of the future financial condition of
Donnebrooke can be made.
Due to the lack of sustaining operations from inception, Donnebrooke is
considered in the development stage and, as such, has generated no significant
operating revenues and has incurred cumulative operating losses of approximately
$169,000. These were extinguished in March 1999 when Donnebrooke issued
3,602,300 shares of restricted stock to two existing shareholders and in June
1999 when a new investor purchased 300,000 shares for $10,000.00 cash.
Accordingly, Donnebrooke is dependent upon its current management and/or
significant shareholders to provide sufficient working capital to preserve the
integrity of the corporation during this phase.
Donnebrooke's independent auditor, S.W. Hatfield, CPA, expressed, in its opinion
on Donnebrooke's audited financial statements, doubt about Donnebrooke's ability
to continue as a going concern. Reference is made to Note A to the financial
statements of Donnebrooke included elsewhere in this registration statement.
8
<PAGE>
Plan of Business
General
Donnebrooke intends to locate and combine with an existing, privately-held
company which is profitable or, in management's view, has growth potential,
irrespective of the industry in which it is engaged. However, Donnebrooke does
not intend to combine with a private company that may be deemed to be an
investment company subject to the Investment Company Act of 1940. A combination
may be structured as a merger, consolidation, exchange of Donnebrooke's common
stock for stock or assets, or any other form that will result in the combined
enterprises becoming a publicly-held corporation.
Pending negotiation and consummation of a combination, Donnebrooke anticipates
that it will have, aside from carrying on its search for a combination partner,
no business activities, and, thus, will have no source of revenue. Should
Donnebrooke incur any significant liabilities prior to a combination with a
private company, it may not be able to satisfy such liabilities as they are
incurred.
If Donnebrooke's management pursues one or more combination opportunities beyond
the preliminary negotiations stage and those negotiations are subsequently
terminated, it is foreseeable that such efforts will exhaust Donnebrooke's
ability to continue to seek such combination opportunities before any successful
combination can be consummated. In that event, Donnebrooke's common stock will
become worthless and holders of Donnebrooke's common stock will receive a
nominal distribution, if any, upon Donnebrooke's liquidation and dissolution.
Combination Suitability Standards
In its pursuit for a combination partner, Donnebrooke's management intends to
consider only combination candidates that are profitable or, in management's
view, have growth potential. Donnebrooke's management does not intend to pursue
any combination proposal beyond the preliminary negotiation stage with any
combination candidate that does not furnish Donnebrooke with audited financial
statements for at least its most recent fiscal year and unaudited financial
statements for interim periods subsequent to the date of such audited financial
statements, or is in a position to provide such financial statements in a timely
manner. In the event such a combination candidate is engaged in a high
technology business, Donnebrooke may obtain reports from independent
organizations of recognized standing covering the technology being developed
and/or used by the candidate. Donnebrooke's limited financial resources may make
the acquisition of such reports difficult or even impossible to obtain and,
thus, there can be no assurance that Donnebrooke will have sufficient funds to
obtain such reports when considering combination proposals or candidates. To the
extent that Donnebrooke is unable to obtain the advice or reports from experts,
the risks of any combined enterprise's being unsuccessful will be increased.
Furthermore, to the knowledge of Donnebrooke's officers and directors, neither
the candidate nor any of its directors, executive officers, principal
shareholders or general partners:
(1) will have been convicted of securities fraud, mail fraud, tax fraud,
embezzlement, bribery, or a similar criminal offense involving
misappropriation or theft of funds, or be the subject of a pending
investigation or indictment involving any of those offenses;
(2) will have been subject to a temporary or permanent injunction or
restraining order arising from unlawful transactions in securities, whether
as issuer, underwriter, broker, dealer, or investment advisor, may be the
subject of any pending investigation or a defendant in a pending lawsuit
arising from or based upon allegations of unlawful transactions in
securities; or
(3) will have been a defendant in a civil action which resulted in a final
judgement against it or him awarding damages or rescission based upon
unlawful practices or sales of securities.
Donnebrooke's officers and directors will make these determinations by asking
pertinent questions of the management and/or owners of prospective combination
candidates. Such persons will also ask pertinent questions of others who may be
involved in the combination negotiations or proceedings. However, Donnebrooke's
officers and directors will not generally take other steps to verify
independently information obtained in this manner which is favorable. Unless
something comes to their attention which puts them on notice of a possible
disqualification that is being concealed from them, such persons will rely on
information received from the management of the prospective combination
candidate and from others who may be involved in the combination proceedings.
9
<PAGE>
BUSINESS
General
Donnebrooke Corporation was incorporated with the name, Alluristics, Inc., on
April 19,1988 under the laws of the State of Delaware. Later in 1988 Donnebrooke
filed a registration statement under the Securities Act of 1933 with the
Securities and Exchange Commission with respect to a distribution of its common
stock to the shareholders of Halter Venture Corporation, the corporation that
was at that time its parent. This distribution of Donnebrooke's common stock
became effective February 15, 1989. Donnebrooke had not yet engaged in any
business operations. The business purpose of Donnebrooke was, and remains, to
seek out and obtain an acquisition, merger or outright sale transaction, whereby
its shareholders would benefit.
Early in 1989 Albert Ray Allison III and his family purchased control of
Donnebrooke. During 1989 and 1990 Donnebrooke attempted to enter into the
business of owning, operating and managing various parcels of real estate and to
own, operate and manage shared tenant service operations tailored predominately
for the legal profession and related professions. Donnebrooke was not successful
in initiating these operations. Accordingly, Donnebrooke has never had any
substantial operations or substantial assets since its inception.
Donnebrooke's corporate charter was revoked in 1992 by the State of Delaware for
failure to file required franchise tax reports and to pay franchise taxes. On
October 16, 1998 Halter Capital Corporation acquired a controlling interest in
Donnebrooke and the current Board of Directors was appointed by the previous
Board of Directors, who then resigned. On October 26, 1998, tax reports were
filed with, and franchise taxes were paid to, the State of Delaware and the
corporate charter was revived.
Thereafter Donnebrooke's new management caused Donnebrooke's SEC periodic
reporting to be brought current, including the filing of all required reports on
Forms 10-K or 10-KSB and 10-Q or 10-QSB covering the periods through June 30,
1999. These actions were taken in order that Donnebrooke might be potentially
more attractive to a private business that has an interest in becoming a
publicly-held company be means of merging or otherwise affiliating itself with
Donnebrooke.
Proposed Business
Donnebrooke intends to locate and combine with an existing, privately-held
company, which is profitable, or, in management's view, has growth potential,
irrespective of the industry in which it is engaged. However, Donnebrooke does
not intend to combine with a private company that may be deemed to be an
investment company subject to the Investment Company Act of 1940. A combination
may be structured as a merger, consolidation, exchange of Donnebrooke's common
stock for stock or assets or any other form that will result in the combined
enterprise's becoming a publicly-held corporation.
Pending negotiation and consummation of a combination, Donnebrooke anticipates
that it will have, aside from carrying on its search for a combination partner,
no business activities, and, thus, will have no source of revenue. Should
Donnebrooke incur any significant liabilities prior to a combination with a
private company, it may not be able to satisfy such liabilities as they are
incurred.
If Donnebrooke's management pursues one or more combination opportunities beyond
the preliminary negotiations stage and those negotiations are subsequently
terminated, it is foreseeable that such efforts will exhaust Donnebrooke's
ability to continue to seek such combination opportunities before any successful
combination can be consummated. In that event, Donnebrooke's common stock will
become worthless and holders of Donnebrooke's common stock will receive a
nominal distribution, if any, upon Donnebrooke's liquidation and dissolution.
Combination Suitability Standards
In its pursuit for a combination partner, Donnebrooke's management
intends to consider only combination candidates which are profitable or, in
management's view, have growth potential. Donnebrooke's management does not
intend to pursue any combination proposal beyond the preliminary negotiation
stage with any combination candidate that does not furnish Donnebrooke with
audited financial statements for at least its most recent fiscal year and
unaudited financial statements for interim periods subsequent to the date of
10
<PAGE>
such audited financial statements, or is in a position to provide such financial
statements in a timely manner. In the event such a combination candidate is
engaged in a high technology business, Donnebrooke may obtain reports from
independent organizations of recognized standing covering the technology being
developed and/or used by the candidate. Donnebrooke's limited financial
resources may make the acquisition of such reports difficult or even impossible
to obtain and, thus, there can be no assurance that Donnebrooke will have
sufficient funds to obtain such reports when considering combination proposals
or candidates. To the extent Donnebrooke is unable to obtain the advice or
reports from experts, the risks of any combined enterprise's being unsuccessful
will be increased. Furthermore, to the knowledge of Donnebrooke's officers and
directors, neither the candidate nor any of its directors, executive officers,
principal shareholders or general partners:
(1) will have been convicted of securities fraud, mail fraud, tax fraud,
embezzlement, bribery, or a similar criminal offense involving
misappropriation or theft of funds, or be the subject of a pending
investigation or indictment involving any of those offenses;
(2) will have been subject to a temporary or permanent injunction or
restraining order arising from unlawful transactions in securities,
whether as issuer, underwriter, broker, dealer, or investment advisor,
may be the subject of any pending investigation or a defendant in a
pending lawsuit arising from or based upon allegations of unlawful
transactions in securities; or
(3) will have been a defendant in a civi1 action which resulted in a final
judgement against it or him awarding damages or rescission based upon
unlawful practices or sales of securities.
Donnebrooke's officers and directors will make these determinations by
asking pertinent questions of the management and/or owners of prospective
combination candidates. Such persons will also ask pertinent questions of others
who may be involved in the combination negotiations or proceedings. However, the
officers and directors of Donnebrooke will not generally take other steps to
verify independently information obtained in this manner which is favorable.
Unless something comes to their attention that puts them on notice of a possible
disqualification that is being concealed from them, such persons will rely on
information received from the management of the prospective combination
candidate and from others who may be involved in the combination proceedings.
Properties
Donnebrooke has no properties or assets of any kind.
Legal Proceedings
Donnebrooke is not a party to any pending litigation nor is it aware of
any threatened legal proceeding.
Employees
Donnebrooke has no employees.
DIRECTORS AND OFFICERS
The current directors and officers of Donnebrooke are as follows:
NAME AGE POSITION
Kevin B. Halter 63 President, Treasurer and Director
Kevin B. Halter, Jr. 38 Vice President, Secretary and Director
Kevin B. Halter has served as President, Treasurer and a director of Donnebrooke
since October 1998. Mr. Halter has served as Chairman of the Board and Chief
Executive Officer of Halter Capital Corporation, a privately-held investment and
consulting company, since 1987. Kevin B. Halter is the father of Kevin B.
Halter, Jr. Mr. Halter has served as Chairman of the Board and President of
Millennia, Inc. and Digital Communications Technology Corporation since 1994.
11
<PAGE>
Kevin B. Halter, Jr. has served as Vice President, Secretary and a director of
Donnebrooke since October 1998. Mr. Halter also serves as Vice President and
Secretary of Halter Capital Corporation. He is the President of Securities
Transfer Corporation, a stock transfer company registered with the Securities
and Exchange Commission, a position which he has held since 1987. Kevin B.
Halter, Jr. is the son of Kevin B. Halter. Mr. Halter has served as Vice
President, Secretary and a director of Millennia, Inc. and Digital
Communications Technology Corporation since 1994.
EXECUTIVE COMPENSATION
None of the officers and directors of Donnebrooke were compensated in any way
for their service to Donnebrooke during the fiscal years ended December 31, 1997
and 1998.
CERTAIN TRANSACTIONS
On March 15, 1999, Donnebrooke issued 1,313,000 shares of its restricted,
unregistered common stock to Halter Capital Corporation which had paid certain
debts of Donnebrooke owing to Donnebrooke's creditors and 2,289,300 shares of
its restricted, unregistered common stock to Kevin B. Halter, Jr. for services
which he had previously rendered as a consultant for Donnebrooke.
On June 30, 1999, Donnebrooke sold 300,000 shares of its restricted,
unregistered common stock to an unrelated third party for $10,000.00 cash so
that it could pay expenditures related to this registration and other current
bills.
DESCRIPTION OF DONNEBROOKE'S COMMON STOCK
Donnebrooke's Certificate of Incorporation authorizes the issuance of 50,000,000
shares of common stock, with a par value of $.00001 per share. Donnebrooke
currently has approximately 900 shareholders. Holders of common stock are
entitled to one vote for each share owned on each matter submitted to a vote of
the shareholders. Currently there are 3,940,372 shares of common stock issued
and outstanding. Donnebrooke's Board of Directors has the legal authority to
issue the remaining unissued authorized shares (approximately 36,000,000 in
number), without shareholder approval, for any purpose deemed to be in the best
interest of Donnebrooke. Shares could be issued to deter or delay a takeover or
other change of control of Donnebrooke.
All the shares of the common stock which are now outstanding are fully paid,
validly issued and nonassessable. Holders of the common stock have no preemptive
rights to subscribe for or to purchase any additional securities issued by
Donnebrooke. Upon liquidation, dissolution or winding up of Donnebrooke, the
holders of common stock are entitled to share ratably in the distribution of
assets after payment of debts and expenses. There are no conversion, sinking
fund or redemption provisions, or similar restrictions with respect to the
common stock.
Holders of the common stock are entitled to receive dividends, when and if
declared by the Board of Directors, out of funds legally available therefor. See
"Dividend Policy,"
Shares Eligible for Future Sale
Donnebrooke currently has 3,940,372 shares of common stock outstanding. The
330,000 shares proposed to be sold in the offering will be freely tradeable
without restriction or further registration under the Securities Act. An
additional 68,911 shares are already freely tradeable as a result of the
registration completed in 1989. 3,541,461 outstanding shares are deemed to be
"restricted securities" within the meaning of Rule 144 promulgated under the
Securities Act and may be publicly resold only if registered under the
Securities Act in the future or sold in accordance with an eligible exemption
from registration, such as Rule 144. All of these restricted shares are owned by
affiliates of Donnebrooke.
In general, under Rule 144 as currently in effect, a person (including an
affiliate of Donnebrooke) who beneficially has owned restricted securities that
were acquired from Donnebrooke for at least one year prior to an intended sale
date is entitled to sell within any three-month period a number of shares that
does not exceed the greater of the following:
12
<PAGE>
(a) one percent of the number of shares of common stock then outstanding; or
(b) the average weekly reported trading volume of the common stock during the
four calendar weeks immediately preceding the date on which notice of such sale
is filed with the SEC, provided that manner of sale and notice requirements and
requirements as to the availability of current public information concerning
Donnebrooke are satisfied.
Under Rule 144(k), a person who has not been an affiliate of Donnebrooke for at
least three months preceding the intended sale date and who beneficially has
owned restricted securities acquired from Donnebrooke for at least two years
prior to the sale date, would be entitled to sell the shares without volume
limitations, manner of sale provisions, or notification requirements.
Shares owned by persons who, under the Securities Act, are deemed to be
affiliates of Donnebrooke are subject to volume limitations, manner of sale
provisions, notification requirements, and requirements as to the availability
of current public information regarding Donnebrooke, regardless of how long the
shares have been owned. As defined in Rule 144, an affiliate of an issuer is a
person that directly or indirectly through the use of one or more
intermediaries, controls, or is controlled by, or is under common control with,
the issuer.
Halter Capital Corporation is an affiliate of Donnebrooke because it owns more
than ten percent of Donnebrooke's outstanding shares and because it is owned and
controlled by Messrs. Halter. Both Kevin B. Halter and Kevin B. Halter, Jr. are
affiliates of Donnebrooke because they are officers and directors and because
they own and control Halter Capital Corporation. If any of the named affiliates
ceased to be an affiliate of Donnebrooke, as much as 90% of the issued and
outstanding shares of Donnebrooke's common stock could be marketable under Rule
144(k) three months thereafter. Sale of a substantial number of the shares owned
by these persons in the public market could adversely affect the prevailing
market price of Donnebrooke's stock.
TRANSFER AGENT
Donnebrooke's transfer agent is Securities Transfer Corporation, 16910 Dallas
Parkway, Suite 100, Dallas, Texas 75248.
LEGAL MATTERS
Richard Braucher, attorney at law, Dallas, Texas, has acted as legal counsel for
Donnebrooke in connection with this prospectus and related matters.
EXPERTS
The financial statements of Donnebrooke included in this prospectus and in the
registration statement have been audited by S.W. Hatfield, CPA, to the extent
and for the periods indicated in their report with respect thereto, and are
included herein in reliance upon the authority of said firm as experts in
auditing and accounting.
ADDITIONAL INFORMATION
Donnebrooke is currently subject to the reporting requirements of the Securities
and Exchange Act of 1934, as amended, and has in the past filed, and will
continue in the future to file, periodic reports, proxy statements and other
information with the Securities and Exchange Commission (the "Commission"). You
may read and copy any of these reports at the following public reference rooms
maintained by the Commission :
In Washington, D.C. In New York, New York In Chicago, Illinois
450 Fifth Street, N.W. 7 World Trade Center 500 West Madison Street
Room 1024 Suite 1300 Suite 1400
Washington, D.C. 20549 New York, N.Y. 10048 Chicago, IL 60661-2511
You may obtain information on the operation of the public reference rooms by
calling the Commission at 1-800-SEC-0330. You may also obtain copies of this
information by mail from the Public Reference Section of the Commission at 450
Fifth Street, N.C., Washington, D.C., 20549. The Commission also maintains an
internet website that contains these reports and information about issuers, like
Donnebrooke Corporation, who file electronically with the Commission. The
address of that site is http://www.sec.gov.
13
<PAGE>
Donnebrooke has filed with the Commission a registration statement (including
exhibits and information which the Commission permits the registrant to omit
from this prospectus) on Form SB-2 under the Securities Act of 1933, as amended,
with respect to the common stock covered by this prospectus. Statements
contained in this prospectus as to the contents of any contract, agreement or
other document referred to are not necessarily complete and in each instance
reference is made to the copy of such contract or other document filed as an
exhibit to the registration statement. You may obtain copies of the registration
statement, including exhibits and other information about Donnebrooke, by
contacting the Commission in the manner and at the addresses referenced above.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE None
DISCLOSURE OF COMMISSION'S POSITION ON INDEMNIFICATION FOR SECURITIES ACT
LIABILITIES
Donnebrooke's bylaws provide that Donnebrooke will indemnify its directors and
officers to the full extent authorized or permitted under Delaware law.
Insofar as indemnification for liabilities arising under the Securities Act 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 Commission, such indemnification is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than payment by the registrant of expenses incurred or paid
by a director, officer or controlling person in connection with the successful
defense of any action, suit or proceeding) is asserted by such director, officer
or controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question of 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.
INDEX TO FINANCIAL STATEMENTS
Page
Report of Independent Certified Public Accountants F-1
Balance Sheets
as of December 31, 1998, 1997 and 1996 F-2
Statements of Operations and Comprehensive Income
for the years ended December 31, 1998, 1997 and 1996
and for the period April 19, 1988 (date of inception)
to December 31, 1998 F-3
Statements of Changes in Stockholders' Equity
for the period from April 19, 1988 (date of
inception) to December 31, 1998 F-4
Statements of Cash Flows
For the years ended December 31, 1998, 1997 and 1996
and for the period from April 19, 1988 (date of
inception) to December 31, 1998 F-7
Notes to Financial Statements F-8
Balance Sheets
as of June 30, 1999 and December 31, 1998 F-11
Statements of Operations and Comprehensive Income
as of June 30, 1999 and December 31, 1998 F-12
Statements of Cash Flows
as of June 30, 1999 and December 31, 1998 F-13
Notes to Financial Statements F-14
14
<PAGE>
You should rely only on the information contained in this document or to which
we have referred you. We have not authorized anyone to provide you with
information that is different. This document may only be used where it is legal
to sell these securities. The information in this document may only be accurate
on the date of this document.
DONNEBROOKE CORPORATION
TABLE OF CONTENTS
Page
Prospectus Summary 3 PROSPECTUS
Risk Factors 3
Principal and Selling Shareholders 5
Plan of Distribution 6
Dividend Policy 7 330,000 Shares of
Management's Discussion and
Analysis of Financial Condition Common Stock
and Results of Operation 8
Business 10
Directors and Officers 11 July ,1999
Certain Transactions 12
Description of Common Stock 12
Transfer Agent 13
Legal Matters 13
Experts 13
Additional Information 13
Changes in and Disagreements with
Accountants on Accounting
and Financial Disclosure 14
Disclosure of Commission
Position on Indemnification
for Securities Liabilities 14
Index to Financial Statements 14
15
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
Other Expenses of Issuance and Distribution.
The estimated expenses of the registration, all of which will be paid by
Donnebrooke, are as follows:
SEC Filing Fee $100
Printing Expense $2500
Accounting Fees and Expenses $2500
Legal Fees and Expenses $1000
Blue Sky Fees and Expenses -0-
TOTAL $6100
Exhibits.
3.1 Articles of Incorporation of Donnebrooke*
3.2 Bylaws of Donnebrooke*
4.1 Specimen Stock Certificate for Common Shares*
5.1 Opinion of Richard Braucher, Esq.**
23.1 Consent of S.W. Hatfield, C.P.A.**
23.2 Consent of Richard Braucher, Esq.**
* previously filed
** filed herewith
Undertakings.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to the registration statement:
(a) To include any prospectus required under Section 10(a)(3) of the
Securities Act.
(b) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement.
(c) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
nay material change to such information in the registration statement.
(2) That, for the purpose of determining any liability under the Securities
Act, each such post-effective amendment shall be deemed to be anew registration
statement relating tot he securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(3)To remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of the
offering.
16
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Donnebrooke
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form SB-2 and had duly caused this Registration
Statement to be signed on its behalf by the undersigned thereunto duly
authorized, in the City of Dallas, State of Texas, on the 12th day of July,
1999.
DONNEBROOKE CORPORATION
By: /s/ Kevin B. Halter July 12, 1999
- -------------------------------------
Kevin B. Halter, President
and Chief Executive Officer
(Principal Executive Officer)
POWER OF ATTORNEY
Donnebrooke and each person whose signature appears below hereby designates and
appoints Kevin B. Halter as his attorney-in-fact (the " Attorney-in-Fact") with
full power to act alone, and to execute and in the name and on behalf of
Donnebrooke and each person, individually and in the capacity stated below, any
amendments (including post-effective amendments) to this Registration Statement,
which amendments may make such changes in this Registration Statement as the
Attorney-in-Fact deems appropriate, and to file each such amendment to this
Registration Statement together with all exhibits thereto and any and all
documents in connection therewith.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
/s/ Kevin B. Halter July 12, 1999
- -------------------------------------
Kevin B. Halter, President, Treasurer
and Chief Executive Officer
(Principal Executive, Financial and
Accounting Officer)
/s/ Kevin. B. Halter, Jr. July 12, 1999
- -------------------------------------
Kevin B. Halter, Jr., Vice President,
Secretary and Director
17
<PAGE>
EXHIBIT 5.1
(on stationery of Richard Braucher, Esq.)
July 13, 1999
Donnebrooke Corporation.
16910 Dallas Parkway, Suite 100
Dallas, Texas 75248
Re: Form SB-2 Registration Statement
At your request, I have examined the Registration Statement under File No.
333-81851 and pre-effective amendment number 1 thereto which you have filed with
the Securities and Exchange Commission (the "Registration Statement"), in
connection with the registration under the Securities Act of 1933, as amended,
of an aggregate of 330,000 shares of your Common Stock (the "Stock").
In rendering the following opinion, I have examined and relied only upon the
documents and certificates of officers and directors of the Company as
specifically described below. In my examination, I have assumed the genuineness
of all signatures, the authenticity, accuracy and completeness of the documents
submitted to me as originals, and the conformity with the original documents of
all documents submitted to me as copies. My examination was limited to the
following documents:
1. Articles of Incorporation of the Company, as amended to date;
2. Bylaws of the Company, as amended to date;
3. Resolutions of the Company's Board of Directors relating to the issuance of
the Stock; and
4. The Registration Statement, as amended.
I have not undertaken, nor do I intend to undertake, any independent
investigation beyond such documents and records.
Based on the foregoing, it is my opinion that the Stock has been legally
authorized and validly issued and is fully paid and non-assessable.
I consent to the filing of this opinion as an exhibit to any filing made with
the Securities and Exchange Commission or under any state or other
jurisdiction's securities act for the purpose of registering, qualifying or
establishing eligibility for an exemption from registration or qualification of
the Stock described in the Registration Statement in connection with the
offering described therein. Nothing herein shall be deemed to relate to or
constitute an opinion concerning any matters not specifically set forth above.
By giving this opinion and consent, I do not admit that I am an expert with
respect to any part of the Registration Statement or Prospectus within the
meaning of that term "expert" as used in Section 11 of the Securities Act of
1933, as amended, or the Rules and Regulations of the Securities and Exchange
Commission promulgated thereunder.
Yours very truly,
/s/ Richard Braucher
- ---------------------
Richard Braucher
18
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the use in the Pre-Effective Amendment Number 1 to the Form SB-2
Registration Statement under The Securities Act of 1933 of Donnebrooke
Corporation (a Delaware corporation) of our report dated January 18, 1999
(except for Note D as to which the date is March 31, 1999) on the financial
statements of Donnebrooke Corporation as of December 31, 1998, 1997 and 1996 and
for each of the years then ended, accompanying the financial statements
contained in such Form SB-2 Registration Statement Under The Securities Act of
1933, and to the use of our name and the statements with respect to us as
appearing under the heading "Experts".
/s/ S.W. Hatfield
-------------------------------------
S. W. HATFIELD, CPA
(formerly S. W. HATFIELD + ASSOCIATES)
Dallas, Texas
July 12, 1999
19
<PAGE>
EXHIBIT 23.2
CONSENT OF ATTORNEY FOR REGISTRANT
The undersigned, as attorney for the registrant, Donnebrooke Corporation, hereby
consents to the use in the Form SB-2 Registration Statement under The Securities
Act of 1933, as amended, by Donnebrooke Corporation of the legal opinion
rendered by the undersigned and referenced therein and filed as an exhibit
thereto and the use of his name in said registration statement.
Dallas, Texas /s/ Richard Braucher
------------------------
July 13, 1999 Richard Braucher, Esq.
20
<PAGE>
S. W. HATFIELD, CPA
certified public accountants
Member: American Institute of Certified Public Accountants
SEC Practice Section
Information Technology Section
Texas Society of Certified Public Accountants
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
--------------------------------------------------
Board of Directors and Stockholders
Donnebrooke Corporation
We have audited the accompanying balance sheets of Donnebrooke Corporation (a
Delaware corporation and a development stage company) as of December 31, 1998,
1997 and 1996 and the related statements of operations, changes in stockholders'
equity and cash flows for each of the three years then ended, respectively, and
for the period from April 19, 1988 (date of inception) through December 31,
1998. 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 Donnebrooke Corporation (a
development stage company) as of December 31, 1998, 1997 and 1996, and the
results of its operations and its cash flows for each of the three years then
ended, respectively, and for the period from April 19, 1988 (date of inception)
through December 31, 1998, in conformity with generally accepted accounting
principles.
S. W. HATFIELD, CPA
(formerly S. W. HATFIELD + ASSOCIATES)
Dallas, Texas
January 18, 1999 (except for
Note D, as to which the
date is March 31, 1999)
Use our past to assist your future sm
P. O. Box 820395 9002 Green Oaks Circle, 2nd Floor
Dallas, Texas 75382-0395 Dallas, Texas 75243-7212
214-342-9635 (voice) (fax) 214-342-9601
800-244-0639 [email protected]
F-1
<PAGE>
DONNEBROOKE CORPORATION
(a development stage company)
BALANCE SHEETS
December 31, 1998, 1997 and 1996
1998 1997 1996
--------- --------- ---------
ASSETS $ -- $ -- $ --
========= ========= =========
LIABILITIES
Due to controlling shareholder $ 18,217 $ -- $ --
--------- --------- ---------
STOCKHOLDERS' EQUITY
Preferred stock - $0.00001 par value
10,000,000 shares authorized; none
issued and outstanding -- -- --
Common stock - $0.00001 par value
50,000,000 shares authorized
38,072 issued and outstanding -- -- --
Additional paid-in capital 132,590 132,590 132,590
Deficit accumulated during
the development stage (150,807) (132,590) (132,590)
--------- --------- ---------
Total stockholders' equity (18,217) -- --
--------- --------- ---------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ -- $ -- $ --
========= ========= =========
The accompanying notes are an integral part of these financial statements.
F-2
<PAGE>
<TABLE>
<CAPTION>
DONNEBROOKE CORPORATION
(a development stage company)
STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
Years ended December 31, 1998, 1997 and 1996
and Period from April 19, 1988 (date of inception) through December 31, 1998
Period from
April 19, 1988
(date of inception)
through
December 31,
1998 1997 1996 1998
--------- ------ ------ ----------------
<S> <C> <C> <C> <C>
Revenues
Real estate management fees $ -- $ -- $ -- $ 41,253
--------- ------ ------ ---------
Expenses
General and administrative expenses -- -- -- 45,685
Reorganization and reactivation costs 18,217 -- -- 18,217
Amortization of organization costs -- -- -- 1,208
--------- ------ ------ ---------
Total expenses 18,217 -- -- 65,110
--------- ------ ------ ---------
Loss from operations (18,217) -- -- (23,857)
Other expenses
Loss on abandonment of fixed assets -- -- -- (126,950)
--------- ------ ------ ---------
Net loss (18,217) -- -- (150,807)
Other comprehensive income -- -- -- --
--------- ------ ------ ---------
Comprehensive loss $ (18,217) $ -- $ -- $(150,807)
========= ====== ====== =========
Loss per weighted-average
share of common stock
outstanding, calculated
on net loss - basic and fully diluted $ (0.48) nil nil $ (4.05)
========= ====== ====== =========
Weighted-average number
of shares of common
stock outstanding 38,072 38,072 38,072 37,207
========= ====== ====== =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
<TABLE>
<CAPTION>
DONNEBROOKE CORPORATION
(a development stage company)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
Period from April 19, 1988 (date of inception) through December 31, 1998
Deficit
accumulated
Additional during the
Common Stock paid-in development
Shares Amount capital stage Total
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Issuance of stock at formation
on April 19, 1988 16,000,000 $ 160 $ -- $ -- $ 160
Capital contributed to
support development -- -- 1,700 -- 1,700
Net loss for the period -- -- -- (1,728) (1,728)
----------- ----------- ----------- ----------- -----------
Balances at
December 31, 1988 16,000,000 160 1,700 (1,728) 132
Shares issued during
the year 21,333,000 213 130,517 -- 130,730
Shares issued into
escrow pending
acquisition of
real estate 17,303,000 -- -- -- --
Net loss for the year -- -- -- (5,520) (5,520)
----------- ----------- ----------- ----------- -----------
Balances at
December 31, 1989 54,636,000 373 132,217 (7,248) 125,342
Return of shares to
unissued status due
to non-performance
by the selling parties (17,303,000) -- -- -- --
Net loss for the year -- -- -- (124,633) (124,633)
----------- ----------- ----------- ----------- -----------
Balances at
December 31, 1990 37,333,000 373 132,217 (131,881) 709
Net loss for the year -- -- -- (242) (242)
----------- ----------- ----------- ----------- -----------
Balances at
December 31, 1991 37,333,000 $ 373 $ 132,217 $ (132,123) $ 467
=========== =========== =========== =========== ===========
</TABLE>
- Continued -
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
<TABLE>
<CAPTION>
DONNEBROOKE CORPORATION
(a development stage company)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY - CONTINUED
Period from April 19, 1988 (date of inception) through December 31, 1998
Deficit
accumulated
Additional during the
Common Stock paid-in development
Shares Amount capital stage Total
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Balances at
December 31, 1991 37,333,000 $ 373 $ 132,217 $ (132,123) $ 467
Net loss for the year -- -- -- (242) (242)
---------- ---------- ---------- ---------- ----------
Balances at
December 31, 1992 37,333,000 373 132,217 (132,365) 225
Net loss for the year -- -- -- (221) (221)
---------- ---------- ---------- ---------- ----------
Balances at
December 31, 1993 37,333,000 373 132,217 (132,586) 4
Net loss for the year -- -- -- (4) (4)
---------- ---------- ---------- ---------- ----------
Balances at
December 31, 1994 37,333,000 373 132,217 (132,590) --
Net loss for the year -- -- -- -- --
---------- ---------- ---------- ---------- ----------
Balances at
December 31, 1995 37,333,000 373 132,217 (132,590) --
Net loss for the year -- -- -- -- --
---------- ---------- ---------- ---------- ----------
Balances at
December 31, 1996 37,333,000 373 132,217 (132,590) --
Net loss for the year -- -- -- -- --
---------- ---------- ---------- ---------- ----------
Balances at
December 31, 1997 37,333,000 373 132,217 (132,590) --
Net loss for the year -- -- -- (18,217) (18,217)
---------- ---------- ---------- ---------- ----------
Balances at
December 31, 1998, as
originally presented 37,333,000 $ 373 $ 132,217 $ (150,807) $ (18,217)
========== ========== ========== ========== ==========
</TABLE>
- Continued -
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
<TABLE>
<CAPTION>
DONNEBROOKE CORPORATION
(a development stage company)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY - CONTINUED
Period from April 19, 1988 (date of inception) through December 31, 1998
Deficit
accumulated
Additional during the
Common Stock paid-in development
Shares Amount capital stage Total
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Balances at
December 31, 1998, as
originally presented 37,333,000 373 132,217 (150,807) (18,217)
Effect of one for 1,000
reverse stock split in
February 1999, including
effect of fractional share
rounding (37,294,928) (373) 373 -- --
----------- ----------- ----------- ----------- -----------
Balances at
December 31, 1998,
as restated 38,072 $ -- $ 132,590 $ (150,807) $ (18,217)
=========== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
<TABLE>
<CAPTION>
DONNEBROOKE CORPORATION
(a development stage company)
STATEMENTS OF CASH FLOWS
Years ended December 31, 1998, 1997 and 1996 and
Period from April 19, 1988 (date of inception) through December 31, 1998
Period from
April 19, 1988
(date of inception)
through
December 31,
1998 1997 1996 1998
------------ ------ ------ ----------------
<S> <C> <C> <C> <C>
Cash Flows from Operating Activities
Net loss for the period $ (18,217) $ -- $ -- $(150,807)
Adjustments to reconcile net loss
to net cash provided by operating activities
Loss on abandonment of fixed assets -- -- -- 126,950
Amortization of organization costs -- -- -- 1,208
Payment of organization costs -- -- -- (1,208)
------------ ------ ------ ---------
Net cash used in operating activities (18,217) -- -- (23,857)
------------ ------ ------ ---------
Cash Flows from Investing Activities -- -- -- --
------------ ------ ------ ---------
Cash Flows from Financing Activities
Issuance of common stock -- -- -- 3,940
Cash advanced by controlling shareholder 18,217 -- -- 18,217
Capital contributed to support development -- -- -- 1,700
------------ ------ ------ ---------
Net cash used in financing activities -- -- -- 23,857
------------ ------ ------ ---------
Increase in Cash -- -- -- --
Cash at beginning of period -- -- -- --
------------ ------ ------ ---------
Cash at end of period $ -- $ -- $ -- $ --
============ ====== ====== =========
Supplemental Disclosure of
Interest and Income Taxes Paid
Interest paid for the period $ -- $ -- $ -- $ --
============ ====== ====== =========
Income taxes paid for the period $ -- $ -- $ -- $ --
============ ====== ====== =========
Supplemental Disclosure of
Non-cash Investing and
Financing Activities
Common stock exchanged for
office furniture and equipment $ -- $ -- $ -- $ 126,950
============ ====== ====== =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-7
<PAGE>
DONNEBROOKE CORPORATION
(a development stage company)
NOTES TO FINANCIAL STATEMENTS
NOTE A - Organization and Description of Business
Donnebrooke Corporation (Company) was incorporated on April 19, 1988 as
Alluristics, Inc. under the laws of the State of Delaware. During 1989 and 1990,
the Company attempted to enter the business of owning, operating and managing
various parcels of real estate and to own, operate and manage shared tenant
service operations tailored predominately for the legal profession and related
professionals. The Company was unsuccessful in initiating these operations.
Accordingly, the Company has had no substantial operations or substantial assets
since inception. The current business purpose of the Company is to seek out and
obtain a merger, acquisition or outright sale transaction whereby the Company's
stockholders will benefit. The Company is not engaged in any negotiations and
has not undertaken any steps to initiate the search for a merger or acquisition
candidate.
Due to the lack of sustaining operations from inception, the Company is
considered in the development stage and, as such, has generated no significant
operating revenues and has incurred cumulative operating losses of approximately
$151,000. Accordingly, the Company is fully dependent upon its current
management and/or significant stockholders to provide sufficient working capital
to preserve the integrity of the corporate entity during this phase. It is the
intent of management and significant stockholders to provide sufficient working
capital necessary to support and preserve the integrity of the corporate entity.
During the fourth quarter, the Company has had paid on its behalf by management
and significant shareholders or has accrued various aggregate reorganization and
reactivation expenses of approximately $18,200 on behalf of the Company.
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 B - Summary of Significant Accounting Policies
1. Cash and cash equivalents
The Company considers all cash on hand and in banks, including accounts in
book overdraft positions, certificates of deposit and other highly-liquid
investments with maturities of three months or less, when purchased, to be
cash and cash equivalents.
2. Organization costs
Organization costs were amortized using the straight-line basis.
3. Income taxes
The Company files its own separate federal income tax return and uses the
asset and liability method of accounting for income taxes. Due to a
September 30, 1998 change in control involving in excess of 50.0% of the
outstanding common stock of the Company, the Company has no net operating
loss carryforwards available to offset financial statement or tax return
taxable income in future periods.
F-8
<PAGE>
DONNEBROOKE CORPORATION
(a development stage company)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE B - Summary of Significant Accounting Policies - Continued
4. Loss per share
Basic earnings (loss) per share is computed by dividing the net income
(loss) by the weighted-average number of shares of common stock and common
stock equivalents (primarily outstanding options and warrants). Common
stock equivalents represent the dilutive effect of the assumed exercise of
the outstanding stock options and warrants, using the treasury stock
method. The calculation of fully diluted earnings (loss) per share assumes
the dilutive effect of the exercise of outstanding options and warrants at
either the beginning of the respective period presented or the date of
issuance, whichever is later. As of December 31, 1998, 1997 and 1996, the
Company had no outstanding warrants and/or options outstanding.
NOTE C - Related Party Transactions
For the period April 19, 1988 (date of inception) through December 31, 1988,
Halter Venture Corporation, the Company's initial former controlling
shareholder, provided office space and management services to the Company for an
aggregate fee of $1,700.
During the fourth quarter of 1998, the Company had paid on its behalf or accrued
approximately $14,600 in expenses for stock transfer and electronic document
filing services to an entity related to an officer and controlling shareholder
of the Company.
NOTE D - Subsequent Events
In January 1999, the Company circulated a proxy statement for a Special Meeting
of Shareholders to be held on February 16, 1999. The principal purpose of this
meeting was to elect two directors to serve until the next Annual Meeting of
Shareholders and approved an amendment to the Company's Certificate of
Incorporation to effect a one for one thousand (1 for 1,000) reverse split of
the Company's issued and outstanding common stock and to reduce the number of
Authorized Shares from one billion (1,000,000,000) to fifty million.
(50,000,000). There was no change to the stated par value of the Company's
common stock in this proposal.
In February 1999, the Company's stockholders approved an amendment to the
Company's Certificate of Incorporation to effect a one (1) for one thousand
(1,000) reverse stock split of the issued and outstanding shares of the
Company's common stock and to reduce the number of authorized shares from one
billion (1,000,000,000) to fifty million (50,000,000). The effect of the reverse
split is reflected in the accompanying financial statements as if the reverse
split had occurred on the first day of the earliest period presented.
In March 1999, the Company filed an Amended and Restated Certificate of
Incorporation with the State of Delaware. This amendment changed the Company's
capital structure to eliminate all references to preferred stock and reduced the
number of common shares authorized from 1,000,000,000 of $0.00001 par value to
50,000,000 shares of $0.00001 par value.
F-9
<PAGE>
DONNEBROOKE CORPORATION
(a development stage company)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE D - Subsequent Events - Continued
In March 1999, the Company issued an aggregate 3,602,300 shares of common stock,
pursuant to a Form S-8, Registration Statement under The Securities Act of 1933,
to a controlling shareholder and an affiliated individual, who is an officer and
director of the Company, in settlement of expenses paid or accrued on behalf of
the Company for various consulting, reorganization, stock transfer and
electronic document filing services. This transaction was valued at an aggregate
of approximately $36,000, which equaled the respective invoiced amounts paid or
accrued on behalf of the Company by the respective related parties. Of the
aggregate amount, approximately $19,000 was for services paid or accrued on the
Company's behalf by an entity related to the individual who is an officer and
director of the Company.
(Remainder of this page left blank intentionally)
F-10
<PAGE>
<TABLE>
<CAPTION>
Part 1 - Item 1
Financial Statements
Donnebrooke Corporation
(a development stage enterprise)
Balance Sheets
(Unaudited) (Audited)
June 30, December 31,
1999 1998
------------ ------------
<S> <C> <C>
Assets
Cash on hand and in bank $ 10,000 $ --
============ ============
Liabilities
Due to controlling shareholder $ -- $ 18,217
------------ ------------
Stockholders' Equity
Common stock - $0.00001 par value 50,000,000
shares authorized. 3,940,372 and 38,072 shares
issued and outstanding, respectively 39 --
Additional paid-in capital 178,574 132,590
Deficit accumulated during the development stage (168,613) (150,807)
------------ ------------
Total stockholders' equity 10,000 (18,217)
------------ ------------
Total Liabilities and Stockholders' Equity $ 10,000 $ --
============ ============
</TABLE>
The financial information presented herein has been prepared by management
without audit by independent certified public accountants.
F-11
<PAGE>
<TABLE>
<CAPTION>
Donnebrooke Corporation
(a development stage enterprise)
Statements of Operations and Comprehensive Income
(Unaudited)
Six months Six months Three months Three months
ended ended ended ended
June 30, June 30, June 30, June 30,
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues $ -- $ -- $ -- $ --
----------- ----------- ----------- -----------
Expenses
General and
administrative expenses 17,806 -- -- --
----------- ----------- ----------- -----------
Net Loss (17,806) -- -- --
Other comprehensive income -- -- -- --
----------- ----------- ----------- -----------
Comprehensive Loss $ (17,806) $ -- $ -- $ --
=========== =========== =========== ===========
Net loss per weighted-average
share of common stock
outstanding, calculated on
net loss - basic and fully diluted $(0.01) nil nil nil
===== === === ===
Weighted-average number
of common stock shares
outstanding - basic and
fully diluted 2,189,169 38,072 3,643,670 38,072
=========== =========== =========== ===========
</TABLE>
The financial information presented herein has been prepared by management
without audit by independent certified public accountants.
F-12
<PAGE>
Donnebrooke Corporation
(a development stage enterprise)
Statements of Cash Flows
(Unaudited)
Six months Six months
ended ended
June 30, June 30,
1999 1998
---------- ----------
Cash flows from operating activities
Net loss for the period $(17,806) $ --
Adjustments to reconcile net loss
to net cash provided by operating
activities
Common stock issued for consulting services 17,806 --
-------- --------
Net cash used in operating activities -- --
-------- --------
Cash flows from investing activities -- --
-------- --------
Cash flows from financing activities
Proceeds from sale of common stock 10,000 --
-------- --------
Increase (decrease) in cash 10,000 --
Cash at beginning of period -- --
-------- --------
Cash at end of period $ 10,000 $ --
======== ========
The financial information presented herein has been prepared by management
without audit by independent certified public accountants.
F-13
<PAGE>
Donnebrooke Corporation
(a development stage enterprise)
Notes to Financial Statements
Note 1 - Basis of Presentation
During interim periods, Donnebrooke Corporation (Company) follows the accounting
policies set forth in its Annual Report Pursuant to Section 13 of the Securities
Exchange Act of 1934 on Form 10-K as filed with the U. S. Securities and
Exchange Commission. The December 31, 1998 balance sheet data was derived from
audited financial statements of Donnebrooke Corporation, but does not include
all disclosures required by generally accepted accounting principles. Users of
financial information provided for interim periods should refer to the annual
financial information and footnotes contained in the Annual Report Pursuant to
Section 13 of the Securities Exchange Act of 1934 on Form 10-K when reviewing
the interim financial results presented herein.
In the opinion of management, the accompanying interim financial statements,
prepared in accordance with the instructions for Form 10-Q, are unaudited and
contain all material adjustments, consisting only of normal recurring
adjustments necessary to present fairly the financial condition, results of
operations and comprehensive income and cash flows of the Company for the
respective interim periods presented. The current period results of operations
are not necessarily indicative of results which ultimately will be reported for
the full fiscal year ending December 31, 1999.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect certain reported amounts and disclosures.
Accordingly, actual results could differ from those estimates.
Note 2 - Summary of Significant Accounting Policies
1. Cash and cash equivalents
-------------------------
The Company considers all cash on hand and in banks, certificates of
deposit and other highly-liquid investments with maturities of three months
or less, when purchased, to be cash and cash equivalents.
Cash overdraft positions may occur from time to time due to the timing of
making bank deposits and releasing checks, in accordance with the Company's
cash management policies.
2. Loss per share
--------------
Basic earnings (loss) per share is computed by dividing the net income
(loss) by the weighted-average number of shares of common stock and common
stock equivalents (primarily outstanding options and warrants). Common
stock equivalents represent the dilutive effect of the assumed exercise of
the outstanding stock options and warrants, using the treasury stock
method. The calculation of fully diluted earnings (loss) per share assumes
the dilutive effect of the exercise of outstanding options and warrants at
either the beginning of the respective period presented or the date of
issuance, whichever is later. As of June 30, 1999 and 1998, the Company had
no outstanding warrants and/or options outstanding.
F-14
<PAGE>
Donnebrooke Corporation
(a development stage enterprise)
Notes to Financial Statements - Continued
Note 3 - Common Stock Transactions
In February 1999, the Company's stockholders approved an amendment to the
Company's Certificate of Incorporation to effect a one (1) for one thousand
(1,000) reverse stock split of the issued and outstanding shares of the
Company's common stock and to reduce the number of authorized shares from one
billion (1,000,000,000) to fifty million (50,000,000). The effect of the reverse
split is reflected in the accompanying financial statements as if the reverse
split had occurred on the first day of the earliest period presented.
In March 1999, the Company filed an Amended and Restated Certificate of
Incorporation with the State of Delaware. This amendment changed the Company's
capital structure to eliminate all references to preferred stock and reduced the
number of common shares authorized from 1,000,000,000 of $0.00001 par value to
50,000,000 shares of $0.00001 par value.
In March 1999, the Company issued an aggregate 3,602,300 shares of common stock,
pursuant to a Form S-8, Registration Statement under The Securities Act of 1933,
to a controlling shareholder and an affiliated individual, who is an officer and
director of the Company, in settlement of expenses paid or accrued on behalf of
the Company for various consulting, reorganization, stock transfer and
electronic document filing services. This transaction was valued at an aggregate
of approximately $36,000, which equaled the respective invoiced amounts paid or
accrued on behalf of the Company by the respective related parties. Of the
aggregate amount, approximately $19,000 was for services paid or accrued on the
Company's behalf by an entity related to the individual who is an officer and
director of the Company.
On June 30, 1999, the Company sold 300,000 shares of restricted, unregistered
common stock to an unrelated third party for $10,000 cash.
(Remainder of this page left blank intentionally)
F-15
