Securities and Exchange Commission
Washington, D.C. 20549
--------
FORM 10-KSB
(Mark One)
|X| ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934.
For the fiscal year ended December 31, 1999
OR
|_| TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934.
For the transition period from _________ to _________
Commission file number 0-28963
STRATEGIC ACQUISITIONS, INC.
(Name of Small Business Issuer in its Charter)
Nevada 13-3506506
(State or Other Jurisdiction of IRS Employer ID Number
Incorporation or Organization)
50 East 42nd Street, Suite 1805
New York, NY 10017
(Address of Principal Executive Offices) (Zip Code)
(212) 682-5058
(Issuer's Telephone Number)
Securities registered under Section 12(b) of the Act: None
Securities registered under Section 12(g) of the Act:
Common Stock
(Title of Class)
Class A Warrants
(Title of Class)
Class B Warrants
(Title of Class)
Class C Warrants
(Title of Class)
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for past 90 days.
Yes __X__ No _____
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB.
Issuer's revenues for fiscal year 1999 were $5,200.
The aggregate market value of the voting and non-voting common equity held
by the issuer's non-affiliates, as of March 26, 2000, was $45,000.
As of December 31, 1999, a total of 1,600,000 shares of common stock were
issued and outstanding.
Documents incorporated by reference: None.
Transitional Small Business Format: No.
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TABLE OF CONTENTS
Page
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PART I........................................................................1
Item 1. Description of Business............................................1
Item 2. Description of Property...........................................15
Item 3. Legal Proceedings.................................................16
Item 4. Submission of Matters to a Vote of Security Holders...............16
PART II......................................................................16
Item 5. Market for Common Equity and Related Shareholder Matters..........16
Item 6. Management's Discussion and Analysis or Plan of Operations........16
Item 7. Financial Statements..............................................17
Item 8. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.........................................20
PART III.....................................................................20
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance With Section 16(a) of the Exchange Act.................20
Item 10. Executive Compensation............................................25
Item 11. Security Ownership of Certain Beneficial Owners and Management....26
Item 12. Certain Relationships and Related Transactions....................27
Item 13. Exhibits, List and Reports on Form 8-K............................28
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PART I
Item 1. Description of Business.
Business Development
Strategic Acquisitions, Inc. (the "Company" or "Strategic") was
incorporated under the laws of the State of Nevada on January 27, 1989, and is
in the developmental stage. During the last three years the Company had no
revenues other than nominal interest income. As of the date of filing of this
Form 10-KSB, the Company has no commercial operations, has no full-time
employees, and owns no real estate.
The Company's current business plan is to seek, investigate, and, if
warranted, acquire one or more properties or businesses, and to pursue other
related activities intended to enhance shareholder value. The acquisition of a
business opportunity may be made by purchase, merger, exchange of stock, or
otherwise, and may encompass assets or a business entity, such as a corporation,
joint venture, or partnership. The Company has limited capital, and it is
unlikely that the Company will be able to take advantage of more than one such
business opportunity. The Company intends to seek opportunities demonstrating
the potential of long-term growth as opposed to short-term earnings. At the
present time the Company has not identified any business opportunity that it
plans to pursue, nor has the Company reached any agreement or definitive
understanding with any person concerning an acquisition.
On January 18, 2000 the Company filed a registration statement Form 10-SB
in order to become a Section 12(g) registered company under the Securities
Exchange Act of 1934, as amended (the "Exchange Act").
No assurance can be given that the Company will be successful in finding or
acquiring a desirable business opportunity, given that limited funds are
available for acquisitions, or that any acquisition that occurs will be on terms
that are favorable to the Company or its stockholders.
The Company's search will be directed toward small and medium-sized
enterprises which have a desire to become public corporations and which are able
to satisfy, or anticipate in the reasonably near future being able to satisfy,
the minimum asset requirements in order to qualify shares for trading on NASDAQ
or a stock exchange (See "Investigation and Selection of Business
Opportunities"). The Company anticipates that the business opportunities
presented to it will (i) be recently organized with no operating history, or a
history of losses attributable to under-capitalization or other factors; (ii) be
experiencing financial or operating difficulties; (iii) be in need of funds to
develop a new product or service or to expand into a new market; (iv) be relying
upon an untested product or marketing concept; or (v) have a combination of the
characteristics mentioned in (i) through (iv) above. The Company intends to
concentrate its acquisition efforts on properties or businesses that it believes
to be undervalued. Given the above factors, investors should expect that any
acquisition candidate may have a history of losses or low profitability.
The Company does not propose to restrict its search for investment
opportunities to any particular geographical area or industry, and may,
therefore, engage in essentially any business,
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to the extent of its limited resources. The Company's discretion in the
selection of business opportunities is unrestricted, subject to the availability
of such opportunities, economic conditions, and other factors.
In connection with such a merger or acquisition, it is highly likely that
an amount of stock constituting control of the Company would be issued by the
Company or purchased from the current principal shareholders of the Company by
the acquiring entity or its affiliates. If stock is purchased from the current
shareholders, the transaction is very likely to result in substantial gains to
them relative to their purchase price for such stock. In the Company's judgment,
none of its officers and directors would thereby become an "underwriter" within
the meaning of the Section 2(11) of the Securities Act of 1933, as amended (the
"Act").
Depending upon the nature of the transaction, the current officers and
directors of the Company are likely to resign management positions with the
Company in connection with the Company's acquisition of a business opportunity.
See "Form of Acquisition," below, and "Risk Factors - The Company - Lack of
Continuity in Management." In the event of such resignations, the Company's
current management would not have any control over the conduct of the Company's
business following the Company's combination with a business opportunity.
It is anticipated that business opportunities will come to the Company's
attention from various sources, including its officers and directors, its other
stockholders, professional advisors such as attorneys and accountants,
securities broker-dealers, venture capitalists, members of the financial
community, and others who may present unsolicited proposals. The Company has no
plans, understandings, agreements, or commitments with any individual for such
person to act as a finder of opportunities for the Company.
The Company does not foresee that it would enter into a merger or
acquisition transaction with any business with which its officers or directors
are currently affiliated. Should the Company determine in the future, contrary
to foregoing expectations, that a transaction with an affiliate would be in the
best interests of the Company and its stockholders, the Company is in general
permitted by Nevada law to enter into such a transaction if:
1. The material facts as to the relationship or interest of the
affiliate and as to the contract or transaction are disclosed or are known
to the Board of Directors, and the Board in good faith authorizes the
contract or transaction by the affirmative vote of a majority of the
disinterested directors, even though the disinterested directors constitute
less than a quorum; or
2. The material facts as to the relationship or interest of the
affiliate and as to the contract or transaction are disclosed or are known
to the stockholders entitled to vote thereon, and the contract or
transaction is specifically approved in good faith by vote of the
stockholders; or
3. The contract or transaction is fair as to the Company as of the
time it is authorized, approved or ratified, by the Board of Directors or
the stockholders.
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Investigation and Selection of Business Opportunities
To a large extent, a decision to participate in a specific business
opportunity may be made upon management's analysis of the quality of the other
company's management and personnel, the anticipated acceptability of new
products or marketing concepts, the merit of technological changes, and numerous
other factors which are difficult, if not impossible, to analyze through the
application of any objective criteria. In many instances, it is anticipated that
the historical operations of a specific business opportunity may not necessarily
be indicative of the potential for the future because of the possible need to
shift marketing approaches substantially, expand significantly, change product
emphasis, change or substantially augment management, or make other changes. The
Company will be dependent upon the owners of a business opportunity to identify
any such problems which may exist and to implement, or be primarily responsible
for the implementation of, required changes. Because the Company may participate
in a business opportunity with a newly organized firm or with a firm which is
entering a new phase of growth, it should be emphasized that the Company will
incur further risks, because management in many instances will not have proven
its abilities or effectiveness, the eventual market for such company's products
or services will likely not be established, and such company may not be
profitable when acquired.
It is anticipated that the Company will not be able to diversify, but will
essentially be limited to only one venture because of the Company's limited
financing. This lack of diversification will not permit the Company to offset
potential losses from one business opportunity against profits from another, and
should be considered an adverse factor affecting any decision to purchase the
Company's securities.
It is emphasized that management of the Company may effect transactions
having a potentially adverse impact upon the Company's shareholders pursuant to
the authority and discretion of the Company's management to complete
acquisitions without submitting any proposal to the stockholders for their
consideration. Holders of the Company's securities should not anticipate that
the Company necessarily will furnish such holders, prior to any merger or
acquisition, with financial statements, or any other documentation, concerning a
target company or its business. In some instances, however, the proposed
participation in a business opportunity may be submitted to the stockholders for
their consideration, either voluntarily by such directors, to seek the
stockholders' advice and consent, or because state law so requires.
The analysis of business opportunities will be undertaken by or under the
supervision of the Company's officers and directors, who are not professional
business analysts. See "Management." Although there are no current plans to do
so, Company management might hire an outside consultant to assist in the
investigation and selection of business opportunities, and might pay a finder's
fee. Since Company management has no current plans to use any outside
consultants or advisors to assist in the investigation and selection of business
opportunities, no policies have been adopted regarding use of such consultants
or advisors, the criteria to be used in selecting such consultants or advisors,
the services to be provided, the term of service, or regarding the total amount
of fees that may be paid. However, because of the limited resources of the
Company, it is likely that any such fee the Company agrees to pay would be paid
in stock and not in cash. In assessing a potential transaction, the Company
anticipates that it will consider, among other things, the following factors:
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4. Potential for growth and profitability, indicated by new technology,
anticipated market expansion, or new products;
5. The Company's perception of how any particular business opportunity will
be received by the investment community and by the Company's stockholders;
6. Whether, following the business combination, the financial condition of
the business opportunity would be, or would have a significant prospect in the
foreseeable future of becoming sufficient to enable the securities of the
Company to qualify for listing on an exchange or NASDAQ, so as to permit the
trading of such securities to be exempt from the requirements of Rule 15g-9. See
"Risk Factors - The Company - Regulation of Penny Stocks";
7. Capital requirements and anticipated availability of required funds, to
be provided by the Company or from operations, through the sale of additional
securities, through joint ventures or similar arrangements, or from other
sources;
8. The extent to which the business opportunity can be advanced;
9. Competitive position as compared to other companies of similar size and
experience within the industry;
10. Strength and diversity of existing management, or management prospects
that are scheduled for recruitment; and
11. The accessibility of required management expertise, personnel, raw
materials, services, professional assistance, and other required items.
In regard to the possibility that the shares of the Company would qualify
for listing on NASDAQ, the current standards include the requirements that the
issuer of the securities that are sought to be listed have net assets of at
least $4,000,000. Many, and perhaps most, of the business opportunities that
might be potential candidates for a combination with the Company would not
satisfy the NASDAQ listing criteria.
No one of the factors described above will be controlling in the selection
of a business opportunity, and management will attempt to analyze all factors
appropriate to each opportunity and make a determination based upon reasonable
investigative measures and available data. Potentially available business
opportunities may occur in many different industries and at various stages of
development, all of which will make the task of comparative investigation and
analysis of such business opportunities extremely difficult and complex.
Potential investors must recognize that, because of the Company's limited
capital available for investigation and management's limited experience in
business analysis, the Company may not discover or adequately evaluate adverse
facts about the opportunity to be acquired. It should be noted that the Company
has not completed a transaction in the ten years of its existence.
The Company is unable to predict when it may participate in a business
opportunity. It expects, however, that the analysis of specific proposals, if
and when any are received, and the selection of a business opportunity may take
several months or more.
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The Company has no business proposals under consideration as of the date of
filing of this Form 10-KSB.
Prior to making a decision to participate in a business opportunity, the
Company will generally request that it be provided with written materials
regarding the business opportunity containing such items as a description of
products, services and company history; management resumes; financial
information; available projections, with related assumptions upon which they are
based; an explanation of proprietary products and services; evidence of existing
patents, trademarks, or services marks, or rights thereto; present and proposed
forms of compensation to management; a description of transactions between such
company and its affiliates during relevant periods; a description of present and
required facilities; an analysis of risks and competitive conditions; a
financial plan of operation and estimated capital requirements; audited
financial statements, or if they are not available, unaudited financial
statements, together with reasonable assurances that audited financial
statements would be able to be produced within a reasonable period of time not
to exceed 60 days following completion of a merger transaction; and other
information deemed relevant.
As part of the Company's investigation, the Company's executive officers
and directors may meet personally with management and key personnel, may visit
and inspect material facilities, obtain independent analysis or verification of
certain information provided, check references of management and key personnel,
and take other reasonable investigative measures, to the extent of the Company's
limited financial resources and management expertise.
It is possible that the range of business opportunities that might be
available for consideration by the Company could be limited by the impact of
Securities and Exchange Commission (the "Commission") regulations regarding
purchase and sale of "penny stocks." The regulations would affect, and possibly
impair, any market that might develop in the Company's securities until such
time as they qualify for listing on NASDAQ or on another exchange which would
make them exempt from applicability of the "penny stock" regulations. See "Risk
Factors - Regulation of Penny Stocks."
Company management believes that various types of potential merger or
acquisition candidates might find a business combination with the Company to be
attractive. These include acquisition candidates desiring to create a public
market for their shares in order to enhance liquidity for current shareholders,
acquisition candidates which have long-term plans for raising capital through
the public sale of securities and believe that the possible prior existence of a
public market for their securities would be beneficial, and acquisition
candidates which plan to acquire additional assets through issuance of
securities rather than for cash, and believe that the possibility of development
of a public market for their securities will be of assistance in that process.
Acquisition candidates which have a need for an immediate cash infusion are not
likely to find a potential business combination with the Company to be an
attractive alternative.
There are no loan arrangements or arrangements for any financing whatsoever
relating to any business opportunities.
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Form of Acquisition
It is impossible to predict the manner in which the Company may participate
in a business opportunity. Specific business opportunities will be reviewed as
well as the respective needs and desires of the Company and the promoters of the
opportunity and, upon the basis of that review and the relative negotiating
strength of the Company and such promoters, the legal structure or method deemed
by management to be suitable will be selected. Such structure may include, but
is not limited to leases, purchase and sale agreements, licenses, joint ventures
and other contractual arrangements. The Company may act directly or indirectly
through an interest in a partnership, corporation or other form of organization.
Implementing such structure may require the merger, consolidation or
reorganization of the Company with other corporations or forms of business
organization, and although it is likely, there can be no assurance that the
Company would be the surviving entity. In addition, the present management and
stockholders of the Company most likely will not have control of a majority of
the voting shares of the Company following a reorganization transaction. As part
of such a transaction, the Company's existing directors may resign and new
directors may be appointed without any vote by stockholders.
It is likely that the Company will acquire its participation in a business
opportunity through the issuance of common stock or other securities of the
Company. Although the terms of any such transaction cannot be predicted, it
should be noted that in certain circumstances the criteria for determining
whether or not an acquisition is a so-called "tax free" reorganization under the
Internal Revenue Code of 1986 (the "Internal Revenue Code"), depends upon the
issuance to the stockholders of the acquired company of a controlling interest
(i.e., 80% or more) of the common stock of the combined entities immediately
following the reorganization. If a transaction were structured to take advantage
of these provisions rather than other "tax free" provisions provided under the
Internal Revenue Code, the Company's current stockholders would retain in the
aggregate 20% or less of the total issued and outstanding shares. This could
result in substantial additional dilution in the equity of those who were
stockholders of the Company prior to such reorganization. Any such issuance of
additional shares might also be done simultaneously with a sale or transfer of
shares representing a controlling interest in the Company by the current
officers, directors and principal shareholders. (See "Description of Business -
Business Development").
It is anticipated that any new securities issued in any reorganization
would be issued in reliance upon exemptions, if any are available, from
registration under applicable federal and state securities laws. In some
circumstances, however, as a negotiated element of the transaction, the Company
may agree to register such securities either at the time the transaction is
consummated, or under certain conditions or at specified times thereafter. The
issuance of substantial additional securities and their potential sale into any
trading market that might develop in the Company's securities may have a
depressive effect upon such market.
The Company will participate in a business opportunity only after the
negotiation and execution of a written agreement. Although the terms of such
agreement cannot be predicted, generally such an agreement would require
specific representations and warranties by all of the parties thereto, specify
certain events of default, detail the terms of closing and the conditions which
must be satisfied by each of the parties thereto prior to such closing, outline
the manner of
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bearing costs if the transaction is not closed, set forth remedies upon default,
and include miscellaneous other terms.
As a general matter, the Company anticipates that it, and/or its officers
and principal shareholders will enter into a letter of intent with the
management, principals or owners of a prospective business opportunity prior to
signing a binding agreement. Such a letter of intent will set forth the terms of
the proposed acquisition but will not bind any of the parties to consummate the
transaction. Execution of a letter of intent will by no means indicate that
consummation of an acquisition is probable. Neither the Company nor any of the
other parties to the letter of intent will be bound to consummate the
acquisition unless and until a definitive agreement concerning the acquisition
as described in the preceding paragraph is executed. Even after a definitive
agreement is executed, it is possible that the acquisition would not be
consummated should any party elect to exercise any right provided in the
agreement to terminate it on specified grounds.
It is anticipated that the investigation of specific business opportunities
and the negotiation, drafting and execution of relevant agreements, disclosure
documents and other instruments will require substantial management time and
attention and substantial costs for accountants, attorneys and others. If a
decision were made not to participate in a specific business opportunity, the
costs theretofore incurred in the related investigation would not be
recoverable. Moreover, because many providers of goods and services require
compensation at the time or soon after the goods and services are provided, the
inability of the Company to pay until an indeterminate future time may make it
impossible to procure goods and services.
An acquisition made by the Company may be in an industry which is regulated
or licensed by federal, state or local authorities. Compliance with such
regulations can be expected to be a time-consuming and expensive process.
Investment Company Act and Other Regulation
The Company may participate in a business opportunity by purchasing,
trading or selling the securities of such business. The Company does not,
however, intend to engage primarily in such activities. Specifically, the
Company intends to conduct its activities so as to avoid being classified as an
"investment company" under the Investment Company Act of 1940 (the "Investment
Act"), and therefore to avoid application of the costly and restrictive
registration and other provisions of the Investment Act, and the regulations
promulgated thereunder.
Section 3(a) of the Investment Act contains the definition of an
"investment company," and it excludes any entity that does not engage primarily
in the business of investing, reinvesting or trading in securities, or that does
not engage in the business of investing, owning, holding or trading "investment
securities" (defined as "all securities other than government securities or
securities of majority-owned subsidiaries") the value of which exceeds 40% of
the value of its total assets (excluding government securities, cash or cash
items). The Company intends to implement its business plan in a manner which
will result in the availability of this exception from the definition of
"investment company." Consequently, the Company's participation in a business or
opportunity through the purchase and sale of investment securities will be
limited.
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The Company's plan of business may involve changes in its capital
structure, management, control and business, especially if it consummates a
reorganization as discussed above. Each of these areas is regulated by the
Investment Company Act, in order to protect purchasers of investment company
securities. Since the Company will not register as an investment company,
stockholders will not be afforded these protections.
Competition
The Company expects to encounter substantial competition in its efforts to
locate attractive opportunities, primarily from business development companies,
venture capital partnerships and corporations, venture capital affiliates of
large industrial and financial companies, small investment companies, and
wealthy individuals. Many of these entities will have significantly greater
experience, resources and managerial capabilities than the Company and will
therefore be in a better position than the Company to obtain access to
attractive business opportunities. The Company also will possibly experience
competition from other public "Blank Check" companies, some of which may have
more funds available than does the Company.
No Rights of Dissenting Shareholders
The Company does not intend to provide its shareholders with disclosure
documentation concerning a possible target company prior to acquisition, because
the Nevada Business Corporation Act vests authority in the board of directors to
decide and approve matters involving acquisitions within certain restrictions.
If any transaction is structured as an acquisition, not a merger, with the
Company being the parent company and the acquiree being merged into a wholly
owned subsidiary, a shareholder will have no right of dissent under Nevada law.
Administrative Offices
The Company currently maintains it corporate records and a mailing address
at the office of its President, Richard S. Kaye, 50 East 42nd Street, Suite
1805, New York, NY 10017. Other than this mailing address, the Company does not
currently maintain any other office facilities, and does not anticipate the need
for maintaining office facilities at any time in the foreseeable future. The
Company pays no rent or other fees for the use of this mailing address.
Employees
The Company has no employees. Management of the Company expects to use
consultants, attorneys and accountants as necessary, and does not anticipate a
need to engage any full-time employees so long as it is seeking and evaluating
business opportunities. The need for employees and their availability will be
addressed in connection with the decision whether or not to acquire or
participate in specific business opportunities. Although there is no current
plan with respect to its nature or amount, remuneration may be paid to or
accrued for the benefit of, the Company's officers prior to, or in conjunction
with, the completion of a business acquisition for services actually rendered.
See "Executive Compensation" and "Certain Relationships and Related
Transactions."
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Risk Factors
1. Officers and directors of Strategic may have certain conflicts of
interest which are adverse to the Company and may also be afforded certain
opportunities that are not extended to other Strategic shareholders.
Certain conflicts of interest may exist between Strategic and its officers
and directors. Such officers and directors have other business interests to
which they devote their attention, and may be expected to continue to do so
although management should devote time to the business of Strategic. As a
result, conflicts of interest may arise that can be resolved only through
exercise of such judgment as is consistent with fiduciary duties to Strategic.
See "Management," and "Conflicts of Interest."
It is anticipated that each of Strategic's officers and directors may
actively negotiate or otherwise consent to the purchase of a portion of his
common stock as a condition to, or in connection with, a proposed merger or
acquisition transaction. In this process, our officers and directors may
consider their own personal pecuniary benefit rather than the best interests of
other Strategic shareholders, and the other Strategic shareholders are not
expected to be afforded the opportunity to approve or consent to any particular
stock buy-out transaction. See "Conflicts of Interest."
2. Strategic may not have sufficient funds to finance any transaction or to
exploit opportunities in any business in which Strategic decides to invest.
Strategic has very limited funds, and such funds may not be adequate to
take advantage of any available business opportunities. Even if our funds prove
to be sufficient to acquire an interest in, or complete a transaction with, a
business opportunity, we may not have enough capital to exploit the opportunity.
Our ultimate success may depend upon our ability to raise additional capital. We
have not investigated the availability, source, or terms that might govern the
acquisition of additional capital and will not do so until we determine a need
for additional financing. If additional capital is needed, there is no assurance
that funds will be available from any source or, if available, that they can be
obtained on terms acceptable to us. If not available, our operations will be
limited to those that can be financed with our modest capital.
3. Because the Commission considers our securities to be a "penny stock,"
there are a number of special rules that govern the trading of our securities.
In addition, many penny stocks have been the subject of fraud and abuse, which
may have a negative effect on the value of your investment in Strategic.
Our securities are subject to a Commission rule that imposes special sales
practice requirements upon broker-dealers who sell such securities to persons
other than established customers or accredited investors. For purposes of the
rule, the phrase "accredited investors" means, in general terms, institutions
with assets in excess of $5,000,000, or individuals having a net worth in excess
of $1,000,000 or having an annual income that exceeds $200,000 (or that, when
combined with a spouse's income, exceeds $300,000). For transactions covered by
the rule, the broker-dealer must make a special suitability determination for
the purchaser and receive the purchaser's written agreement to the transaction
prior to the sale. Consequently, the
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rule may affect the ability of our shareholders to sell their securities in any
market that might develop.
Shareholders should be aware that, according to the Commission, the market
for penny stocks has suffered in recent years from patterns of fraud and abuse.
Such patterns include (i) control of the market for the security by one or a few
broker-dealers that are often related to the promoter or issuer; (ii)
manipulation of prices through prearranged matching of purchases and sales and
false and misleading press releases; (iii) "boiler room" practices involving
high-pressure sales tactics and unrealistic price projections by inexperienced
sales persons; (iv) excessive and undisclosed bid-ask differentials and markups
by selling broker-dealers; and (v) the wholesale dumping of the same securities
by promoters and broker-dealers after prices have been manipulated to a desired
level, along with the resulting inevitable collapse of those prices and with
consequent investor losses. Our management is aware of the abuses that have
occurred historically in the penny stock market. Although we do not expect to be
in a position to dictate the behavior of the market or of broker-dealers who
participate in the market, management will strive within the confines of
practical limitations to prevent the described patterns from being established
with respect to Strategic's securities.
4. We may never find a business opportunity and if we find a business
opportunity, such opportunity may never make a profit.
There is no assurance that we will acquire a favorable business
opportunity. Even if we should become involved in a business opportunity, there
is no assurance that it will generate revenues or profits, or that the market
price of our common stock will be increased thereby.
5. We cannot accurately assess the risk of any future transactions and you
may lose all or part of your investment in Strategic.
We have not identified and have no commitments to enter into or acquire a
specific business opportunity and therefore can disclose the risks and hazards
of a business or opportunity that we may enter into in only a general manner,
and cannot disclose the risks and hazards of any specific business or
opportunity that we may enter into. An investor can expect a potential business
opportunity to be quite risky. Our acquisition of or participation in a business
opportunity will likely be highly illiquid and could result in a total loss to
Strategic and our stockholders if the business or opportunity proves to be
unsuccessful.
6. We may enter into a transaction with a company that is seeking to avoid
the difficulties of effecting its own public offering.
The type of business to be acquired may be one that desires to avoid
effecting its own public offering and the accompanying expense, delays,
uncertainties, and federal and state requirements which purport to protect
investors. Because of our limited capital, it is more likely than not that any
acquisition by Strategic will involve other parties whose primary interest is
the acquisition of control of a publicly traded company. Moreover, any business
opportunity acquired may be currently unprofitable or present other negative
factors.
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7. We will not be able to perform an exhaustive investigation of any
potential strategic partners, which increases the risk that you may lose all or
part of your investment in Strategic.
Our limited funds and the lack of full-time management will likely make it
impracticable to conduct a complete and exhaustive investigation and analysis of
a business opportunity before we commit our capital or other resources thereto.
Management decisions, therefore, will likely be made without detailed
feasibility studies, independent analysis, market surveys and the like which, if
we had more funds available to us, would be desirable. We will be particularly
dependent in making decisions upon information provided by the promoter, owner,
sponsor, or others associated with the business opportunity seeking our
participation. A significant portion of our available funds may be expended for
investigative expenses and other expenses related to preliminary aspects of
completing an acquisition transaction, whether or not any business opportunity
investigated is eventually acquired.
8. We will only be able to complete one transaction which increases the
risk that you may lose all or part of your investment in Strategic.
Because of our limited financial resources, it is unlikely that we will be
able to diversify our acquisitions or operations. Our probable inability to
diversify our activities into more than one area will subject us to economic
fluctuations within a particular business or industry and increase the risks
associated with our operations.
9. We may acquire a company that does not have audited financial statements
which may increase the risk that such information is not accurate and may
preclude Strategic's securities from being listed on NASDAQ which may have a
negative affect on the value of your investment in Strategic.
We generally will require audited financial statements from companies that
we propose to acquire. Given cases where audited financials are not available,
we will have to rely upon unaudited information received from target companies'
management that has not been verified by outside auditors. The lack of the type
of independent verification which audited financial statements would provide,
increases the risk that we, in evaluating an acquisition with such a target
company, will not have the benefit of full and accurate information about the
financial condition and recent operating history of the target company. This
risk increases the prospect that the acquisition of such a company might have a
negative impact on the value of your investment in Strategic.
We are subject to the reporting provisions of the Exchange Act, and we are
required to furnish certain information about significant acquisitions,
including audited financial statements for any business that we acquire.
Consequently, acquisition prospects that do not have, or are unable to provide
reasonable assurances that they will be able to obtain, the required audited
statements would not be considered by Strategic to be appropriate for
acquisition so long as the reporting requirements of the Exchange Act are
applicable. Should we, during the time we remain subject to the reporting
provisions of the Exchange Act, complete an acquisition of an entity for which
audited financial statements prove to be unobtainable, we would be exposed to
enforcement actions by the Commission and to corresponding administrative
sanctions, including permanent injunctions against us and our management. The
legal and other costs of
11
<PAGE>
defending a Commission enforcement action would have material, adverse
consequences for us and our business. The imposition of administrative sanctions
would subject us to further adverse consequences.
In addition, the lack of audited financial statements would prevent our
securities from becoming eligible for listing on NASDAQ, or on any existing
stock exchange and would cause the prohibition of brokers-dealers from
continuing to quote our stock on the over-the-counter bulletin board, where it
is presently quoted. Moreover, the lack of such financial statements is likely
to discourage broker-dealers from becoming or continuing to serve as market
makers in our securities. Without audited financial statements, we would almost
certainly be unable to offer securities under a registration statement pursuant
to the Securities Act of 1933, and our ability to raise capital would be
significantly limited until such financial statements were to become available.
10. We are highly dependent on our officers and directors. Their lack of
full-time attention to our business may negatively affect our ability to find
and complete a transaction, which could reduce the value of your investment in
Strategic.
We currently have only three individuals who are serving as our officers
and directors on a part-time basis. We are heavily dependent upon their skills,
talents, and abilities to implement our business plan, and may, from time to
time, find that the inability of the officers and directors to devote their
full-time attention to the business of Strategic results in a delay in progress
toward implementing our business plan. See "Management." Because you will not be
able to evaluate the merits of possible business acquisitions by Strategic, you
should critically assess the information concerning our officers and directors.
11. Our business may be negatively impacted if our officers leave.
We do not have employment agreements with our officers, and as a result,
there is no assurance they will continue to manage Strategic in the future. In
connection with acquisition of a business opportunity, it is likely the current
officers and directors of Strategic may resign subject to compliance with
Section 14(f) of the Exchange Act. A decision to resign will be based upon the
identity of the business opportunity and the nature of the transaction, and is
likely to occur without the vote or consent of the stockholders of Strategic.
12. We may incur large expenses if we were required to indemnify an officer
or director and your investment in Strategic may be negatively impacted.
Nevada statutes provide for the indemnification of directors, officers,
employees, and agents, under certain circumstances, against attorney's fees and
other expenses incurred by them in any litigation to which they become a party
arising from their association with or activities on behalf of Strategic. Our
By-Laws further provide that we will bear the expenses of such litigation for
any of our directors, officers, employees, or agents, upon such person's promise
to repay us therefor if it is ultimately determined that any such person shall
not have been entitled to indemnification. This indemnification policy could
result in substantial expenditures by us which we may be unable to recoup.
12
<PAGE>
13. We may engage in a leveraged transaction which may increase our
exposure to larger losses, make it more difficult to make a profit and possibly
result in the loss of all or part of your investment in strategic.
There is a possibility that any acquisition of a business opportunity by
Strategic may be leveraged, i.e., we may finance the acquisition of the business
opportunity by borrowing against the assets of the business opportunity to be
acquired, or against the projected future revenues or profits of the business
opportunity. This could increase our exposure to larger losses. A business
opportunity acquired through a leveraged transaction is profitable only if it
generates enough revenues to cover the related debt and expenses. Failure to
make payments on the debt incurred to purchase the business opportunity could
result in the loss of a portion or all of the assets acquired. There is no
assurance that any business opportunity acquired through a leveraged transaction
will generate sufficient revenues to cover the related debt and expenses.
14. We may lose valuable business opportunities because we have limited
resources and may not be able to compete with other firms for such business
opportunities.
The search for potentially profitable business opportunities is intensely
competitive. We expect to be at a disadvantage when competing with many firms
that have substantially greater financial and management resources and
capabilities than Strategic. These competitive conditions will exist in any
industry in which Strategic may become interested.
15. We do not plan on paying any dividends on our common stock which may
make our common stock a less attractive investment to future potential investors
and have a negative impact on the value of your investment in Strategic.
We have not paid dividends on our common stock and we do not anticipate
paying such dividends in the foreseeable future.
16. We may sell control of Strategic to an outside investor and current
management of Strategic may be replaced. In addition, your percentage ownership
of Strategic may be greatly reduced by such a transaction and you will have less
voting control over Strategic.
We may consider an acquisition in which Strategic would issue as
consideration for the business opportunity to be acquired an amount of our
authorized but unissued common stock that would, upon issuance, represent the
great majority of Strategic's voting power and equity. The result of such an
acquisition would be that the acquired company's stockholders and management
would control Strategic, and our management could be replaced by persons unknown
at this time. Such a merger would result in a greatly reduced percentage of
ownership of Strategic by our current shareholders. In addition, our major
shareholders could sell control blocks of stock at a premium price to the
acquired company's stockholders.
17. Because certain shares of our common stock are "restricted securities"
they are subject to certain trading restrictions which may cause you to
experience delays and expenses in the sale of such securities.
The outstanding shares of common stock held by present officers and
directors are "restricted securities" within the meaning of Rule 144 under the
Act. As restricted shares, these
13
<PAGE>
shares may be resold only pursuant to an effective registration statement or
under the requirements of Rule 144 or other applicable exemptions from
registration under the Act and as required under applicable state securities
laws. Rule 144 provides in essence that a person who has held restricted
securities for one year may, under certain conditions, sell every three months,
in brokerage transactions, a number of shares that does not exceed the greater
of 1.0% of a company's outstanding common stock or the average weekly trading
volume during the four calendar weeks prior to the sale. There is no limit on
the amount of restricted securities that may be sold by a nonaffiliate after the
restricted securities have been held by the owner for a period of two years.
Under Rule 144(k), nonaffiliate shareholders who have held their shares for a
period of two years are eligible to have freely tradable shares. A sale under
Rule 144 or under any other exemption from the Act, if available, or pursuant to
subsequent registration of shares of a company's common stock of present
stockholders, may have a depressive effect upon the price of the common stock in
any market that may develop.
18. We will not be able to issue shares of Strategic's common stock to
residents of any state upon exercise of the Warrants unless either the shares of
Strategic's common stock issuable upon the exercise of the Warrants are
registered in that state or an exemption from registration is available.
Although certain exemptions in the Blue Sky laws of certain states might
permit the Warrants to be transferred even though the Units were not initially
registered for sale therein, we will be prevented from issuing shares of our
common stock to residents of any state upon exercise of the Warrants unless
either the shares of our common stock issuable upon the exercise of the Warrants
are registered in that state or an exemption from registration is available. We
may decide not to seek or may not be able to obtain registration for the
issuance of our shares of common stock in all of the states in which the
ultimate holders of the Warrants reside during the period when the Warrants are
exercisable. In this case, if there is no exemption from registration available,
the Warrants, as the case may be, held by purchasers will expire and have no
value. Holders of the Warrants may determine if shares of Strategic's common
stock to be issued upon exercise of the Warrants are registered in any
particular state by contacting us. (See "Description of Securities - Warrants")
19. In the event a current prospectus is not available, you will not be
able to exercise your Warrants.
During the exercise period of the Warrants, we must maintain and make
available a current prospectus. Therefore, management will likely have to
provide a new and current prospectus to all Warrant holders upon the exercise of
the Warrants. The sums received upon the exercise of the Warrants, if any, will
be reduced by the costs we will incur in preparing and printing a new
prospectus, including accounting and legal fees. Nevertheless, there can be no
assurance that we will not be prevented by financial or other considerations
from maintaining a current prospectus. In the event a current prospectus is not
available, the Warrants will not be exercisable. At present, there is no such
prospectus available.
14
<PAGE>
20. We may redeem your Warrants at any time on thirty days' prior written
notice.
We may redeem the Warrants at any time after on thirty days' prior written
notice if there is then a prospectus available to permit the sale of such
shares. Although Warrant holders will have the right to exercise their Warrants
through the date of redemption, they may be unable to do so because they lack
sufficient funds at the time of redemption, or they may simply not wish to
invest any more money in our shares of common stock at that time. Should a
Warrant holder fail to exercise such Warrants on or prior to the redemption
date, such Warrants will have no value except for the $.01 per Warrant
redemption price after the close of business on the date set for redemption.
(See "Description of Securities - Warrants")
21. There may be restrictions on your ability to resell your shares of
Strategic due to restrictions under state Blue Sky laws.
Because our securities have not been registered for resale under the blue
sky laws of any state, the holders of such shares and persons who desire to
purchase them in any trading market that might develop in the future, should be
aware that there may be significant state blue-sky law restrictions upon the
ability of investors to sell the securities and of purchasers to purchase the
securities. Some jurisdictions may not under any circumstances allow the trading
or resale of blind-pool or "Blank-Check" securities. Accordingly, investors
should consider the secondary market for our securities to be a limited one.
22. You may be prevented from selling your shares of Strategic.
Many states have enacted statutes or rules which restrict or prohibit the
sale of securities of "Blank Check" companies to residents so long as they
remain without specific business plans. To the extent any current shareholders
or subsequent purchaser from a shareholder may reside in a state which restricts
or prohibits resale of shares in a "Blank Check" company, warning is hereby
given that the shares may be "restricted" from resale as long as we are a shell
company.
As of the date of filing of this Form 10-KSB, we have no intention of
offering further shares in a private offering to anyone. Further, the policy of
the Board of Directors is that any future offering of shares will only be made
after an acquisition has been made and can be disclosed in appropriate 8-K
filings.
In the event of a violation of state laws regarding resale of "Blank Check"
shares we could be liable for civil and criminal penalties which would be a
substantial impairment to us.
Item 2. Description of Property.
The Company has no property. The Company does not currently maintain an
office or any other facilities. It does currently maintain a mailing address at
the office of its President, Richard S. Kaye, 50 East 42nd Street, Suite 1805,
New York 10017. The Company pays no rent for the use of this mailing address.
The Company does not believe that it will need to maintain an office at any time
in the foreseeable future in order to carry out its plan of operations described
herein.
15
<PAGE>
Item 3. Legal Proceedings.
The Company is not a party to any pending legal proceedings, and no such
proceedings are known to be contemplated.
Item 4. Submission of Matters to a Vote of Security Holders.
None
PART II
Item 5. Market for Common Equity and Related Shareholder Matters.
The Company's shares of common stock are currently traded on the
Over-the-Counter Bulletin Board.
CLOSING QUARTERLY BID PRICES
Q1 Q2 Q3 Q4
-- -- -- --
1998 1/32 1/32 1/32 1/32
1999 1/16 1/32 1/8 1/8
The quotations reflect inter-dealer prices, without retail mark-up,
mark-down or commission, and may not represent actual transactions.
At December 23, 1999, there were 218 beneficial and record holders of the
Company's common stock.
The Board of Directors has never paid dividends and the Company does not
anticipate paying dividends at any time in the foreseeable future. Also, in the
event of the acquisition of a business by the Company, control of the Company
and its Board of Directors may pass to others and the payment of dividends would
be wholly dependent upon the decisions of such persons.
Item 6. Management's Discussion and Analysis or Plan of Operations.
Plan of Operation
The Company remains in the development stage and has limited capital
resources and stockholder's equity. At December 31, 1999, the Company has
current assets in the form of cash and cash equivalents of $138,182, total
assets of $138,182 and no liabilities. The cash assets may not satisfy cash
requirements for the company within the next twelve months. In the event
additional cash is required the Company may have to borrow funds from
shareholders or other sources, or seek funds from a private placement among new
investors, none of which can be assured. The Company cannot predict to what
extent its limited capital resources will impair the consummation of a business
combination or whether it will incur further operating losses through any
business entity which the Company may eventually acquire.
16
<PAGE>
During each of the last two fiscal years, the Company has engaged in no
significant operations other than organizational activities and preparation for
registration of its securities under the Exchange Act. No revenues were received
by the Company during this period other than interest income of approximately
$5,700 in fiscal year 1998 and approximately $5,200 in fiscal year 1999. During
the last fiscal year, the Company incurred operating expenses of $10,236. The
Company's accumulated deficit at December 31, 1999 was $47,121. Such losses will
continue unless revenues and business can be acquired by the Company. There is
no assurance that revenues or profitability will ever be achieved by the
Company.
For the current fiscal year, the Company anticipates incurring a loss as a
result of legal and accounting expenses, expenses associated with registration
under the Exchange Act, and expenses associated with locating and evaluating
acquisition candidates. The Company anticipates that until a business
combination is completed with an acquisition candidate, it will not generate
revenues other than interest income, and may continue to operate at a loss after
completing a business combination, depending upon the performance of the
acquired business.
Year 2000 Issues
Year 2000 problems result primarily from the inability of some computer
software to properly store, recall, or use data after December 31, 1999. These
problems may affect many computers and other devices that contain embedded
computer chips. The Company's operations, however, do not rely on information
technology (IT) systems. Accordingly, the Company does not believe it will be
materially affected by Year 2000 problems.
The Company relies on non-IT systems that may suffer from Year 2000
problems, including telephone systems and facsimile and other office machines.
Moreover, the Company relies on third parties that may suffer from Year 2000
problems that could affect the Company's operations, including banks and
utilities. In light of the Company's limited operations, the Company does not
believe that such non-IT systems or third-party Year 2000 problems will affect
the Company in a manner that is different or more substantial than such problems
affecting other similarly situated companies or industry generally.
Item 7. Financial Statements.
17
<PAGE>
PART F/S
STRATEGIC ACQUISITIONS, INC.
(A Development Stage Company)
Index to Financial Statements
CONTENTS
COVER PAGE...................................................................F-1
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS...........................F-2
BALANCE SHEETS, DECEMBER 31, 1999 AND 1998...................................F-3
STATEMENTS OF OPERATIONS FOR THE YEARS
ENDED DECEMBER 31, 1999 AND 1998.............................................F-4
STATEMENTS OF CASH FLOWS FOR THE YEARS
ENDED DECEMBER 31, 1999 AND 1998.............................................F-5
STATEMENTS OF STOCKHOLDER'S EQUITY,
DECEMBER 31, 1999 AND 1998...................................................F-6
NOTES TO FINANCIAL STATEMENTS................................................F-7
18
<PAGE>
STRATEGIC ACQUISITIONS INC.
(A Development Stage Company)
FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
F-1
<PAGE>
MAYER RISPLER & COMPANY, P.C.
CERTIFIED PUBLIC ACCOUNTANTS
MAYER RISPLER, C.P.A. 18 HEYWARD STREET
MICHAEL FRIEDMAN, C.P.A. BROOKLYN, NEW YORK 11211
JOSEPH SCHWARTZ, C.P.A. (718) 852-9200
FAX (718) 596-3968
INDEPENDENT AUDITORS' REPORT
To The Board of Directors:
Strategic Acquisitions Inc.
New York, New York
We have audited the accompanying balance sheets of Strategic Acquisitions Inc.
(a Development Stage Company) as of December 31, 1999 and 1998 and the related
statements of operations, stockholders' equity and cash flows for the years then
ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these statements
based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the statement is free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Strategic Acquisitions Inc. as
of December 31, 1999 and 1998, and the results of its operations and cash flows
for the years then ended, in conformity with generally accepted accounting
principles.
/s/ Mayer Rispler & Company, P.C.
February 20, 2000
Brooklyn, New York
F-2
<PAGE>
STRATEGIC ACQUISITIONS INC.
(A Development Stage Company)
BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS
December 31,
1999 1998
--------- ---------
<S> <C> <C>
Cash and Equivalents $ 138,182 $ 143,213
TOTAL ASSETS $ 138,182 $ 143,213
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Stockholders' Equity
Common Stock, par value $.001; authorized 50,000,000
shares, 1,600,000 shares issued and outstanding at
December 31, 1999 and 1998, respectively $ 1,600 $ 1,600
Additional Paid-In Capital 183,703 183,703
Accumulated Deficit (47,121) (42,090)
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
$ 138,182 $ 143,213
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
STRATEGIC ACQUISITIONS INC.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED
<TABLE>
<CAPTION>
December 31,
1999 1998
----------- -----------
<S> <C> <C>
Interest Income $ 5,205 $ 5,788
----------- -----------
Expenses:
Transfer Agent Fees 2,400 2,400
State of Nevada Filing Fees 100 85
Registered Agent Fee 108 103
Bank Confirmation Fee 25 -0-
Legal Fees 3,603 -0-
Auditing Fees 4,000 -0-
----------- -----------
Total Expenses 10,236 2,588
----------- -----------
NET INCOME (LOSS) $ (5,031) $ 3,200
=========== ===========
Basic Earnings (Loss) Per Common Share $ (.003) $ .002
=========== ===========
Weighted Average Number of Shares Outstanding 1,600,000 1,600,000
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
STRATEGIC ACQUISITIONS INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED
December 31,
1999 1998
--------- ---------
Cash Flows From Operating Activities:
Net Income (Loss) $ (5,031) $ 3,200
CASH - BEGINNING 143,213 140,013
CASH - ENDING $ 138,182 $ 143,213
========= =========
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
STRATEGIC ACQUISITIONS INC.
(A Development Stage Company)
STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Total
Common Additional Accumulated Stockholders
Stock Paid-In Capital (Deficit) Equity
--------- --------------- ----------- ------------
<S> <C> <C> <C> <C>
Issuance of common stock on July 31,
1989 at par value ($.001 per share) for cash $ 1,360 $ 4,640 $ 6,000
Public offering - 40,000 units (six
shares per unit) @ $6.00 per unit, net of costs 240 179,063 179,303
Net Loss - Inception to December 31, 1997 (45,290) (45,290)
--------- --------- --------- ---------
Balance - December 31, 1997 1,600 183,703 (45,290) 140,013
Net Income 3,200 3,200
--------- --------- --------- ---------
Balance - December 31, 1998 1,600 183,703 (42,090) 143,213
Net Loss (5,031) (5,031)
--------- --------- --------- ---------
Balance - December 31, 1999 $ 1,600 $ 183,703 $ (47,121) $ 138,182
========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
STRATEGIC ACQUISITIONS INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
Background - Strategic Acquisitions Inc. (the Company) was organized under
the laws of the State of Nevada on January 27, 1989. Its purpose is to provide a
vehicle to acquire or merge with another entity. Since the Company does not have
any operations, it is considered a development stage company.
Cash and Equivalents - Cash and equivalents are stated at cost plus accrued
interest. The Company considers all highly liquid investments with a maturity
date of three months or less to be cash equivalents.
Concentration of Credit Risk - At December 31, 1999 and 1998, the Company
maintained all its cash in one commercial bank.
Earnings Per Share -- Basic earnings per share is computed using the
weighted average number of shares outstanding during the reporting period.
NOTE 2 - STOCKHOLDERS' EQUITY
The Company is authorized to issue 50,000,000 common shares with a par value of
$.001. On July 31, 1989, the Company issued 1,360,000 shares of its common stock
to its officers for a total consideration of $6,000.
During the fourth quarter 1989, the Company's public offering was declared
effective. In connection therewith, the Company sold 40,000 units of common
stock at $6.00 per unit. Each unit consists of six shares of Common Stock, $.001
par value, thirty Class A Warrants, thirty Class B Warrants and thirty Class C
Warrants. Each Class A Warrant entitles the holder thereof to purchase one share
of Common Stock at $0.75 per share for an exercise period of eighteen months
commencing from the effective date of this offering (the "Effective Date"). Each
Class B Warrant entitles the holder thereof to purchase one share of Common
Stock at $0.875 per share for an exercise period of two years from the Effective
Date. Each Class C Warrant entitles the holder thereof to purchase on share of
common Stock at $1.00 per share for and exercise period of two years from the
Effective Date. The Company has the right to call the Warrants at any time upon
thirty days written notice to the holders of record thereof at a call price of
$.01 per Warrant. The Company has extended the life of these Warrants and
currently the Class A Warrants expire on April 17, 2000, and the Class B and
Class C Warrants expire October 16, 2000.
F-7
<PAGE>
STRATEGIC ACQUISITIONS INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
(CONTINUED)
The Company granted the underwriter of its initial public offering warrants to
purchase an aggregate of 4,000 units that are identical in all respects to the
units sold to the public pursuant to the terms of the underwriting agreement at
an exercise price of $6.42 per unit. The Company has extended the life of these
warrants and currently they expire on April 17, 2000.
NOTE 3 - COMMITMENTS AND THE MATTERS
a) The Company currently utilizes the office of its president as a mailing
address. Pursuant to an oral agreement these facilities are rent free.
NOTE 4 - INCOME TAXES
At December 31, 1999 and 1998 the Company had available Federal net operating
loss carry-forwards of $47,121 and $42,090, respectively. The Company has
established a valuation allowance equal to 100% of the deferred tax asset that
would be created upon recording the tax effect of the net operating loss
carry-forwards, as the Company could not conclude that the deferred tax asset
would be realized.
NOTE 5 - REGISTRATION STATEMENT
A Registration Statement on Form 10-SB was filed with the Securities and
Exchange Commission January 18, 2000. The Company has been advised by the
Commission that no review of such statement has been or will be made and that
the Registration Statement will go effective automatically on sixty days after
filing.
F-8
<PAGE>
Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
None.
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance
With Section 16(a) of the Exchange Act.
The directors and executive officers currently serving the Company are as
follows:
Name Positions Held Tenure
- ---- -------------- ------
Richard S. Kaye President and Director Annual
Deborah A. Salerno Vice President and Director Annual
Victor E. Stewart Secretary, Treasurer and Director Annual
There is no arrangement or understanding between the directors and officers
of the Company and any other person pursuant to which any director or officer
was or is to be selected as a director or officer.
All of the Company's directors hold office until the next annual
stockholders meeting or until their death, resignation, retirement, removal,
disqualification, or until their successors have been elected and qualified.
Vacancies in the existing Board of Directors are filled by a majority vote of
the remaining directors. Officers of the Company serve at the will of the Board
of Directors.
The directors and officers of the Company will devote such time to the
Company's affairs on an "as-needed" basis, but less than 20 hours per month. As
a result, the actual amount of time which they will devote to the Company's
affairs is unknown and is likely to vary substantially from month to month.
Section 16(a) Beneficial Ownership Reporting Compliance.
Each of the Company's officers and directors filed his Form 3 late.
Biographical Information.
Brief biographies of the Company's directors and officers are set forth
below. Each of these persons may be deemed a "promoter" of the Company as those
terms are defined in the rules and regulations promulgated under the Act.
20
<PAGE>
RICHARD S. KAYE, age 67, has acted as the Company's president and director
since 1989. For more than the past five years, Mr. Kaye has managed his own
investment portfolio for his own account.
DEBORAH A. SALERNO, age 46, has acted as the Company's vice president and a
director since 1989. Ms. Salerno has also acted as the president (and owner) of
DAS Consulting, Inc., a private corporation located in New York City, providing
financial consulting services to corporations since 1988.
Ms. Salerno, who attended Pace University, has also been employed as a
trader in the over-the-counter market (Greentree Securities, October 1986
through March 1987); and as Vice President and Syndicate Manager (Yves Hentic &
Company, Inc., Jersey City, New Jersey, 1985 through 1986). She was also
involved with the risk arbitrage market from 1978 through 1985, and was vice
president of Bodkin Securities (1980 through 1985) and Assistant Options P&S
Manager for Ivan F. Boesky, from 1978 through 1980.
Ms. Salerno has had significant experience with "shell" or "Blank Check"
companies, which experience is detailed on pages following under Previous Blank
Check Offerings.
VICTOR E. STEWART, age 49, has acted as the Company's secretary, treasurer
and director since 1989. Since 1997 Mr. Stewart has been a partner in the law
firm of Lovell & Stewart, LLP, which specializes in securities, commodities and
antitrust litigation. From 1994 until 1996 Mr. Stewart served as a director of
Deutsche Morgan Grenfell.
Mr. Stewart graduated from Yale College in 1972 (B.A. English) and from
Harvard Business School in 1975 (M.B.A.). Mr. Stewart received his J.D. from the
University of Virginia in 1979.
Mr. Stewart has had significant experience with "shell" or "blank check"
companies, which experience is detailed on the pages following under Previous
Blank Check Offerings.
None of the Company's officers and directors currently receives any
compensation for their respective services rendered to the Company. Compensation
of any officer or director is not expected to occur until the Company has
generated revenues from operations after consummation of a merger or
acquisition. Currently, no retirement, pension, profit sharing, stock option or
insurance programs or other similar programs have been adopted by the Company
for the benefit of its employees.
It is possible that, after the Company successfully consummates a merger or
acquisition with an unaffiliated entity, that entity may desire to employ or
retain one or a number of members of the Company's management for the purposes
of providing services to the surviving entity, or otherwise provide other
compensation to such persons. However, the Company has adopted a policy whereby
the offer of any post-transaction remuneration to members of management will not
be a consideration in the Company's decision to undertake any proposed
transaction. Each member of management has agreed to disclose to the Company's
Board of Directors any discussions concerning possible compensation to be paid
to them by any entity which proposes to undertake a transaction with the Company
and further, to abstain from voting on such transaction. Therefore, as a
practical matter, if each member of the Company's Board of Directors were
offered compensation in any form from any prospective merger or acquisition
candidate, the proposed transaction would not be approved by the Company's Board
of
21
<PAGE>
Directors as a result of the inability of the Board to affirmatively approve
such a transaction.
It is possible that persons associated with management may refer a
prospective merger or acquisition candidate to the Company. In the event the
Company consummates a transaction with any entity referred by associates of
management, it is possible that such an associate will be compensated for their
referral in the form of a finder's fee. It is anticipated that this fee will be
either in the form of restricted common stock issued by the Company as part of
the terms of the proposed transaction, or will be in the form of cash
consideration. However, if such compensation is in the form of cash, such
payment will be tendered by the acquisition or merger candidate, because the
Company has insufficient cash available. The amount of such finder's fee cannot
be determined as of the date of filing this report, but is expected to be
comparable to consideration normally paid in like transactions. No member of
management of the Company will receive any finder's fee, either directly or
indirectly, as a result of their respective efforts to implement the Company's
business plan outlined herein.
Management has been involved in several other "Blind Pool" and "Blank
Check" companies as described in the following section.
Previous "Blank Check" or "Blind Pool" Offerings.
A "Blank Check" company is a company which is formed without a specified
business as its purpose.
A "Blind Pool" company is a company which has raised money through a public
or private offering for use to acquire unspecified, undesignated business or
company.
Management of the Company has been involved in prior public "Blind Pool" or
"Blank Check" offerings. As set forth below, management has been part of the
formation of many new companies which made offerings of shares without a
designated business.
DEBORAH A. SALERNO has been an officer and director of twelve blind pool
corporations, excluding the Company. Eleven of such corporations have conducted
public offerings (pursuant to effective registration statements on Form S-18, as
filed with the Commission), and of those, all have completed merger or
acquisition transactions.
The blank check companies with which Ms. Salerno has been involved have
concentrated primarily on companies with plans for expansion and/or the
introduction of new products or services; such new products or services were, in
some cases, the acquisition or merger candidate's primary business, and in other
cases, an addition to existing lines of business.
Ms. Salerno's past and present blind pool affiliations are as follows:
1. Formerly president and a director of Amsterdam Capital Corporation,
until it acquired Care Concepts, Inc. as of June 16, 1989. The registration
statement for Amsterdam Capital
22
<PAGE>
Corporation became effective on January 17, 1989, for 40,000 Units @ $5.50 per
unit raising $220,000.
2. Formerly president of East End Investment, Inc., until it acquired The
Theme Factory, Inc. as of October, 16 1989. Ms. Salerno continued to serve as a
director of The Theme Factory, Inc. until her resignation in July 1992. The
registration statement for East End Investment, Inc. became effective on
September 8, 1989, for 10,000 Units @ $6 per unit raising $60,000.
3. Formerly president and a director of West End Ventures, Inc. until
January 26, 1990, when it acquired Future Medical Technologies. The registration
statement for West End Ventures, Inc. became effective on January 2, 1990 for
12,000 Units @ $6.00 per unit raising $72,000.
4. Formerly president and a director of Sharon Capital Corporation until it
acquired Process Engineers Inc., as of April 5, 1990. The registration statement
for Sharon Capital Corporation became effective on February 14, 1990 for 36,000
Units @ $6.00 per unit raising $216,000.
5. Formerly president and a director of Fulton Ventures, Inc., until June
16, 1990, which acquired Triad Warranty Corporation. The registration statement
for Fulton Ventures, Inc. became effective on April 10, 1990 for 12,000 Units @
$6.00 per unit raising $72,000.
6. Formerly, president and a director of Elmwood Capital Corporation whose
registration statement was declared effective on June 27, 1990 for 12,000 Units
@ $6.00 per unit raising $72,000. Elmwood Capital Corporation acquired U.S.
Environmental Solutions, Inc., as of March 5, 1991, at which time Ms. Salerno
ceased acting as an officer or director.
7. Formerly president and a director of Carnegie Capital Corporation, whose
registration statement became effective on February 1, 1991 for 18,000 Units @
$6.00 per unit raising $108,000. During November 1991, Carnegie Capital
corporation acquired Nevada Construction supply, which later changed its name to
National Building Supply. Ms. Salerno resigned as president, upon the
acquisition but continued in her position as a director until September 29,
1992.
8. Formerly president and a director of Avalon Enterprises Inc., which had
its registration statement declared effective on March 26, 1991, for 16,000
Units @ $6.00 per unit raising a total of $96,000. It acquired Southern
Corrections Services, Inc. on June 15, 1992. The company's name was thereafter
changed to Avalon Community Services, Inc., and then to Avalon Correctional
Services, Inc. a post-effective amendment to its registration statement became
effective on November 16, 1991.
9. Formerly president and a director of South End Ventures, Inc. whose
registration statement became effective on November 15, 1991, for 12,000 Units @
$6.00 per unit raising $72,000. South End Ventures completed an acquisition of
Shore Group, Inc., a private company located, in Philadelphia, PA, during
December 1992, at which time Ms. Salerno resigned as officer and director. The
name of the company has been changed to Shore Group Incorporated.
23
<PAGE>
10. Formerly president and a director of Hard Funding, Inc., which merged
with Marinex which subsequently merged with Texas Equipment Corp. A Registration
Statement was effective for 8,500 Units @ $6.00 per unit raising a total of
$51,000.
11. Former president and director of Bishop Equities, Inc. which registered
with the Commission effective March 8, 1999 which raised $60,000. Bishop
completed an acquisition of Aethlon Medical, Inc. on March 3, 1993.
Detailed information and financial data about the above companies may be
obtained, where applicable, by reviewing the registration statements on file
with the Commission together with other subsequent filings. No assurance can be
given that the Company's management will investigate or eventually engage in a
combination with, similar companies, focus on the same or similar industries, or
utilize similar criteria in the evaluation of business combination candidates.
Ms. Salerno has also acted as president and director of OSK Capital I Corp.
(1999) and secretary and director of Park Hill Capital I Corp. (1999) and
Franklyn Resources I, Inc. (1999), all blank check companies, without specific
business plans which have filed registration statements under section 12(g) of
the Exchange Act.
VICTOR E. STEWART has been affiliated with several blank check entities
including the following: Asset Development Corporation, which merged with Joe
Franklin Productions in August 1987; The Acquisition Company, Inc., which merged
with Nightwing Group, Inc. in October 1987; Mergers Are Us, Inc., which merged
with North American Karate Conference, Inc. in September 1987; Asset Exploration
Company, Inc., which merged with K.F.O. Associates, Inc. in September 1987; and
The Value Added Company, Inc., which merged with Advanced Video Robotics Corp.
in November 1987. During 1988, Mr. Stewart served as secretary-treasurer and
director of Big Mergers, Inc., which merged with Self Insurers Services &
Underwriters, Inc. in January 1988; Bigger Mergers, Inc., which merged with
Modem Chemical Technology, Inc. in February 1988; Biggest Merger, Inc., which
merged with Sportsplex Health and Fitness, Inc. in April 1988; Creative Mergers,
Inc. which merged with Accucomp Equipment, Inc. in July 1988; Most Creative
Mergers, Inc. which merged with We Are Systems 21 Inc. and PN Computer Gaming
Systems, Inc. in July 1988; and More Creative Mergers, Inc. which merged with
ATS Money Systems, Inc. in September 1988. Most recently, Mr. Stewart served as
secretary-treasurer and director of Deals Are Us, Inc., which merged with
Equestrian Centers of America, Inc. in April 1989 and Easy Mergers, Inc., which
merged with Graystone Companies, Incorporated in July 1989.
Conflicts of Interest.
The officers and directors of the Company will not devote more than a
portion of their time to the affairs of the Company. There will be occasions
when the time requirements of the Company's business conflict with the demands
of their other business and investment activities. Such conflicts may require
that the Company attempt to employ additional personnel. There is no assurance
that the services of such persons will be available or that they can be obtained
upon terms favorable to the Company.
24
<PAGE>
Certain of the officers and directors of the Company may be directors
and/or principal shareholders of other companies and, therefore, could face
conflicts of interest with respect to potential acquisitions. In addition,
officers and directors of the Company may in the future participate in business
ventures which could be deemed to compete directly with the Company. Additional
conflicts of interest and non-arms' length transactions may also arise in the
future in the event the Company's officers or directors are involved in the
management of any firm with which the Company transacts business. The Company's
Board of Directors has adopted a policy that the Company will not seek a merger
with, or acquisition of, any entity in which management serve as officers or
directors, or in which they or their family members own or hold a controlling
ownership interest. Although the Board of Directors could elect to change this
policy, the Board of Directors has no present intention to do so.
The Company's officers and directors may actively negotiate or otherwise
consent to the purchase of a portion of their common stock as a condition to, or
in connection with, a proposed merger or acquisition transaction. It is
anticipated that a substantial premium over the initial cost of such shares may
be paid by the purchaser in conjunction with any sale of shares by the Company's
officers and directors which is made as a condition to, or in connection with, a
proposed merger or acquisition transaction. The fact that a substantial premium
may be paid to the Company's officers and directors to acquire their shares
creates a potential conflict of interest for them in satisfying their fiduciary
duties to the Company and its other shareholders. Even though such a sale could
result in a substantial profit to them, they would be legally required to make
the decision based upon the best interests of the Company and the Company's
other shareholders, rather than their own personal pecuniary benefit.
Item 10. Executive Compensation.
SUMMARY COMPENSATION TABLE OF EXECUTIVES
Annual Compensation Awards
<TABLE>
<CAPTION>
Securities
Name and Other Annual Restricted Underlying
Principal Salary Bonus Compensation Stock Options/
Position Year ($) ($) ($) Award(s) SARs (#)
--------- ---- ------ ----- ------------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Richard S. 1997 0 0 0 0 0
Kaye, 1998 0 0 0 0 0
President 1999 0 0 0 0 0
Deborah A. 1997 0 0 0 0 0
Salerno, 1998 0 0 0 0 0
Vice-President 1999 0 0 0 0 0
Victor E. 1997 0 0 0 0 0
Stewart, 1998 0 0 0 0 0
Secretary, 1999 0 0 0 0 0
Treasurer
</TABLE>
25
<PAGE>
Directors' Compensation
Number of
Securities
Annual Meeting Consulting Underlying
Retainer Fee Fees Fees/Other Options
Name ($) ($) Fees ($) SARs(#)
---- ------------ ------- ---------- ----------
A. Richard S. Kaye 0 0 0 0
B. Deborah A. 0 0 0 0
Salerno
C. Victor E. 0 0 0 0
Stewart
Aggregated Option/SAR Grants in Last Fiscal Year and Aggregated Option/SAR
Exercises in Last Fiscal Year and FY-End Option/SAR values: None
Long Term Incentive Plans - Awards in Last Fiscal Year: None
No officer or director has received any other remuneration in the two-year
period prior to the filing of this Form 10-KSB. Although there is no current
plan in existence, it is possible that the Company will adopt a plan to pay or
accrue compensation to its officers and directors for services related to
seeking business opportunities and completing a merger or acquisition
transaction. See "Certain Relationships and Related Transactions." The Company
has no stock option, retirement, pension, or profit-sharing programs for the
benefit of directors, officers or other employees, but the Board of Directors
may recommend adoption of one or more such programs in the future. The Company's
officers do not have employment contracts with the Company.
Item 11. Security Ownership of Certain Beneficial Owners and Management.
The following table sets forth, as of the date hereof, the number of shares
of common stock owned of record and beneficially by executive officers,
directors and any person who is the beneficial owner of more than 5% of the
Company's common stock. Also included are the shares held by all executive
officers and directors as a group.
26
<PAGE>
MANAGEMENT AND 5% OR GREATER OWNERSHIP
SHAREHOLDERS/BENEFICIAL OWNERS NUMBER OF SHARES PERCENTAGE
- ------------------------------ ---------------- ----------
Richard S. Kaye 453,333 28.33%
50 East 42nd Street, Suite 1805
New York, NY 10017
Victor E. Stewart 453,334 28.33%
269 South Irving Street
Ridgewood, NJ 07450
Deborah A. Salerno 453,333 28.33%
355 South End Ave., 22B
New York, NY 10280
All directors and executive 1,360,000 85.0%
Officers as a group (3 persons)
Each principal shareholder has sole investment power and sole voting power over
the shares owned.
Possible Change in Control.
In the event of a purchase of control by other persons, or a merger, the
shareholders and management listed above will no longer own the percentages set
forth above, and shareholders may be subject to decisions by the new control
parties to which they may not assent.
Item 12. Certain Relationships and Related Transactions.
No officer, director, or affiliate of the Company has during the last two
years, or proposes to have, any direct or indirect material interest in any
asset proposed to be acquired by the Company through security holdings,
contracts, options, or otherwise.
The Company has adopted a policy under which any consulting or finder's fee
that may be paid to a third party or affiliate for consulting services to assist
management in evaluating a prospective business opportunity would be paid in
stock or in cash. Any such issuance of stock would be made on an ad hoc basis.
Accordingly, the Company is unable to predict whether or in what amount such a
stock issuance might be made.
Although there is no current plan in existence, it is possible that the
Company will adopt a plan to pay or accrue compensation to its officers and
directors for services related to seeking business opportunities and completing
a merger or acquisition transaction.
The Company maintains a mailing address at 50 East 42nd Street, Suite 1805,
New York, NY 10017, the office of its President, Richard S. Kaye, but otherwise
does
27
<PAGE>
not maintain an office. As a result, it pays no rent and incurs no expenses for
maintenance of an office and does not anticipate paying rent or incurring office
expenses in the future. It is likely that the Company will establish and
maintain an office after completion of a business combination.
Item 13. Exhibits, List and Reports on Form 8-K.
3.1 Articles of Incorporation*
3.2 By-Laws*
4.2 Warrant Agreement between Strategic Acquisitions, Inc. and American Stock
Transfer & Trust Company, dated October 16, 1989.*
27.1 Financial Data Schedule
- ----------
*Previously filed with the Securities and Exchange Commission as an exhibit to
its Form 10-SB.
28
<PAGE>
SIGNATURES
In accordance with section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereto duly
authorized.
Date: March 30, 2000
STRATEGIC ACQUISITIONS, INC.
By:/s/ Richard S. Kaye
---------------------------------
Richard S. Kaye, President
In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the registrant and in the capacities and on
the dates indicated.
Name Title Date
---- ----- ----
/s/ Richard S. Kaye Director, President March 28, 2000
-------------------
Richard S. Kaye
/s/ Victor E. Stewart Director, Vice President March 28, 2000
- ---------------------
Victor E. Stewart
/s/ Deborah Salerno Director, Secretary and March 28, 2000
-------------------
Deborah Salerno Treasurer
29
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 12-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1999
<PERIOD-END> DEC-31-1998 DEC-31-2000
<CASH> 143,213 138,182
<SECURITIES> 0 0
<RECEIVABLES> 0 0
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 143,213 138,182
<PP&E> 0 0
<DEPRECIATION> 0 0
<TOTAL-ASSETS> 143,213 138,182
<CURRENT-LIABILITIES> 0 0
<BONDS> 0 0
0 0
0 0
<COMMON> 1,600 1,600
<OTHER-SE> 0 0
<TOTAL-LIABILITY-AND-EQUITY> 143,213 138,182
<SALES> 0 0
<TOTAL-REVENUES> 5,788 5,205
<CGS> 0 0
<TOTAL-COSTS> 0 0
<OTHER-EXPENSES> 2,588 10,236
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> 3,200 (5,031)
<INCOME-TAX> 0 3,824
<INCOME-CONTINUING> 5,788 5,205
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 3,200 (5,031)
<EPS-BASIC> .002 (.003)
<EPS-DILUTED> .002 (.003)
</TABLE>
