U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 1
TO
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES OF SMALL
BUSINESS ISSUERS
Under Section 12(b) or (g) of the Securities Exchange Act of 1934
AURORA ACQUISITIONS, INC.
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(Name of Small Business Issuer in its charter)
Colorado 84-1189368
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1050 Seventeenth Street Suite 1700, Denver, Colorado 80265
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number : (303) 292-3883
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Securities to be registered under Section 12(b) of the Act:
(None)
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Securities to be registered under Section 12(g) of the Act:
Common Stock
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(Title of class)
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PART I
Item 1. Description of Business
Aurora Acquisitions, Inc. (the "Company") was incorporated as "Auburn
Enterprises, Inc." under the laws of the State of Colorado on February 10, 1992
and changed its name to Aurora Acquisitions, Inc. on July 21, 1992. The Company
was organized as a "blank check/blind pool" company, i.e., one formed for the
purpose of creating a vehicle to obtain capital to take advantage of existing
business opportunities that may have potential for profit, including, but not
limited to, selected mergers and acquisitions. The Company has been in the
developmental stage since inception and has no operations to date. Since its
organization, the Company has had no revenues from operations or assets other
than cash from sales of shares of its Common Stock. As such, the Company can be
defined as a "shell" company, whose sole purpose at this time is to locate and
consummate a merger or acquisition with a private entity. The Board of Directors
of the Company has elected to commence implementation of the Company's principal
business purpose, described below under "Item 2. Plan of Operation."
The proceeds from the initial sales of shares in the Company aggregated
only $18,550, substantially all of which has been expended. As of December 31,
1996, the Company's assets consisted of only cash, in the amount of $114 and
organization expenses. Also as of December 31, 1996, the Company had an
accumulated deficit of $(32,946) and a shareholders' deficit of $(3,796). See
the Financial Statements and the notes thereto, included herewith. The Company
faces all of the risks inherent in a new business and those risks specifically
inherent in the type of business in which the Company proposes to engage,
namely, the investigation, and acquisition of business opportunities. In
addition, the Company will be limited in its efforts and ability to acquire one
or more business opportunities because it has no funds. Although the Company has
no plans to raise additional capital prior to the potential acquisition of a
business opportunity, it is possible that management may determine that it is
necessary to do so. There can be no assurance that the Company will be able to
successfully raise any additional funds. The potential business opportunities of
the Company have not been selected, and the Board of Directors will have
complete discretion in investigating and selecting such opportunities.
Therefore, shareholders must rely upon management of the Company to a greater
extent than may be the case in other investments.
Since the organization of the Company, its activities have been limited to
the sale of initial shares in connection with its organization and the
preparation and filing, in 1992, of a registration statement (the "1992
Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act"). The purpose of the preparation and filing of the 1992
Registration Statement was to register for issuance and sale 100,000 units of
securities (the "Units"), each Unit consisting of one share of Common Stock, one
Class A Warrant to purchase a share of Common Stock, one Class B Warrant to
purchase a share of Common Stock, and the shares of Common Stock underlying the
Class A Warrants and Class B Warrants. The proposed offering pursuant to the
1992 Registration Statement was anticipated to be a "blank check" offering, in
that neither the Company's business nor the use of proceeds from the proposed
offering was specified. The 1992 Registration Statement was abandoned by the
Company in December, 1993, and none of the Units were issued or sold.
Accordingly, the Company was not able to raise from the public the capital it
had proposed to raise in order to implement its business plan.
Mr. David Gregarek was one of the initial shareholders and investors in the
Company. After the Company abandoned its offering as noted in the preceding
paragraph and former management had failed to take steps to execute the original
business plan, Mr. Gregarek indicated to Mr. Jay Boisdrenghien that he was
willing to undertake to register the Company under the Securities Exchange Act
of 1934, as amended, to attempt to find an appropriate candidate for a "reverse
acquisition," to obtain counsel to represent the Company, and to assemble a
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management team for the Company. Mr. Boisdrenghien, a founder, promoter, and
principal shareholder of the Company, agreed to appoint Mr. Gregarek to the
Board of Directors and to bring Mr. Gregarek's proposal before the other members
of the Board of Directors for their consideration. Mr. Gregarek asked Schlueter
& Associates, P.C. to serve as counsel to the Company and to assist with the
Company's registration under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and with a reverse acquisition if a suitable candidate
were found and if satisfactory terms could be negotiated with such a candidate.
The former board of directors issued additional shares of stock to Mr. Gregarek,
Mr. Delaney, and the wife of the Company's counsel. These shares were issued in
exchange for cash, which was used by the Company to pay for completion of the
necessary audits for registration under the Exchange Act, fees and expenses of
counsel, and other expenses of the Company. As a result of these issuances and
the purchase of shares of common stock from several of the original shareholders
of the Company, control of the Company has changed. The security ownership of
the principal shareholders of the Company and its officers and directors is set
forth in Item 5 of the Form 10-SB.
The Company is filing this registration statement on a voluntary basis
because the primary attraction of the Company as a merger partner or acquisition
vehicle will be its status as a public company. Any business combination or
transaction will likely result in the issuance of a significant number of
additional shares and substantial dilution to present stockholders of the
Company. The issuance of such additional shares may be accomplished by the
direct action of the Company's Board of Directors without obtaining shareholder
approval.
The proposed business activities described herein classify the Company as a
"blank check" company. Many states have enacted statutes, rules and regulations
limiting the sale of securities of "blank check" companies in their respective
jurisdictions. In order to comply with these various limitations, management
does not intend to undertake any efforts to sell any additional securities of
the Company or cause a market to develop in the Company's securities until such
time as the Company has successfully implemented its business plan described
herein. Relevant thereto, each shareholder of the Company has executed and
delivered a "lock-up" letter agreement, affirming that they shall not sell their
respective shares of the Company's common stock until such time as the Company
has successfully consummated a merger or acquisition and the Company is no
longer classified as a "blank check" company. In order to provide further
assurances that no trading will occur in the Company's securities until a merger
or acquisition has been consummated, each shareholder has agreed to place their
respective stock certificate with the Company's legal counsel, Schlueter &
Associates, P.C., Denver, Colorado, which will not release these respective
certificates until such time as legal counsel has confirmed that a merger or
acquisition has been successfully consummated. However, while management
believes that the procedures established to preclude any sale of the Company's
securities prior to closing of a merger or acquisition will be sufficient, there
can be no assurances that the procedures established will unequivocally limit
any shareholders' ability to sell their respective securities before such
closing.
The Company's business is subject to numerous risk factors, including the
following:
No Operating History or Revenue and Minimal Assets. The Company has had no
operating history nor any revenues or earnings from operations. The Company has
no significant assets or financial resources. The Company will, in all
likelihood, sustain operating expenses without corresponding revenues, at least
until the consummation of a business combination. This may result in the Company
incurring a net operating loss which will increase continuously until the
Company can consummate a business combination with a profitable business
opportunity. There is no assurance that the Company can identify such a business
opportunity and consummate such a business combination.
Speculative Nature of Company's Proposed Operations. The success of the
Company's proposed plan of operation will depend to a great extent on the
operations, financial condition and management of the identified business
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opportunity. While management intends to seek business combination(s) with
entities having established operating histories, there can be no assurance that
the Company will be successful in locating candidates meeting such criteria. In
the event the Company completes a business combination, of which there can be no
assurance, the success of the Company's operations may be dependent upon
management of the successor firm or venture partner firm and numerous other
factors beyond the Company's control.
Scarcity of and competition for Business Opportunities and Combinations.
The Company is and will continue to be an insignificant participant in the
business of seeking mergers with, joint ventures with and acquisitions of small
private and public entities. A large number of established and well financed
entities, including venture capital firms, are active in mergers and
acquisitions of companies which may be desirable target candidates for the
Company. Nearly all such entities have significantly greater financial
resources, technical expertise and managerial capabilities than the Company and,
consequently, the Company will be at a competitive disadvantage in identifying
possible business opportunities and successfully completing a business
combination. Moreover, the Company will also compete in seeking merger or
acquisition candidates with numerous other small public companies.
No Agreement for Business Combination or Other Transaction-No Standards for
business Combination. The Company has no arrangement, agreement or understanding
with respect to engaging in a merger with, joint venture with or acquisition of,
a private or public entity. There can be no assurance the Company will be
successful in identifying and evaluating suitable business opportunities or in
concluding a business combination. Management has not identified any particular
industry or specific business within an industry for evaluation by the Company.
There is no assurance the Company will be able to negotiate a business
combination on terms favorable to the Company. The Company has not established a
specific length of operating history or a specified level of earnings, assets,
net worth or other criteria which it will require a target business opportunity
to have achieved, and without which the Company would not consider a business
combination in any form with such business opportunity. Accordingly, the Company
may enter into a business combination with a business opportunity having no
significant operating history, losses, limited or no potential for earnings,
limited assets, negative net worth or other negative characteristics.
Continued Management Control. Limited Time Availability. While seeking a
business combination, management anticipates devoting up to twenty hours per
month to the business of the Company. None of the Company's officers has entered
into a written employment agreement with the Company and none is expected to do
so in the foreseeable future. The Company has not obtained key man life
insurance on any of its officers or directors. Notwithstanding the combined
limited experience and time commitment of management, loss of the services of
any of these individuals would adversely affect development of the Company's
business and its likelihood of continuing operations. See "Management."
Conflicts of Interest-General. 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.
Reporting Requirements May Delay or Preclude Acquisition. Sections 13 and
l5(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
require companies subject thereto to provide certain information about
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significant acquisitions, including certified financial statements for the
company acquired, covering one, two, or three years, depending on the relative
size of the acquisition. The time and additional costs that may be incurred by
some target entities to prepare such statements may significantly delay or
essentially preclude consummation of an otherwise desirable acquisition by the
Company. Acquisition prospects that do not have or are unable to obtain the
required audited statements may not be appropriate for acquisition so long as
the reporting requirements of the Exchange Act are applicable.
Lack of Market Research or Marketing Organization. The Company has neither
conducted, nor have others made available to it, results of market research
indicating that market demand exists for the transactions contemplated by the
Company. Moreover, the Company does not have, and does not plan to establish, a
marketing organization. Even in the event demand is identified for a merger or
acquisition contemplated by the Company, there is no assurance the Company will
be successful in completing any such business combination.
Lack of Diversification. The Company's proposed operations, even if
successful, will in all likelihood result in the Company engaging in a business
combination with a business opportunity. Consequently, the Company's activities
may be limited to those engaged in by business opportunities which the Company
merges with or acquires. The Company's inability to diversify its activities
into a number of areas may subject the Company to economic fluctuations within a
particular business or industry and therefore increase the risks associated with
the Company's operations.
Regulation. Although the Company will be subject to regulation under the
Exchange Act, management believes the Company will not be subject to regulation
under the Investment Company Act of 1940, insofar as the Company will not be
engaged in the business of investing or trading in securities. In the event the
Company engages in business combinations which result in the Company holding
passive investment interests in a number of entities, the Company could be
subject to regulation under the Investment Company Act of 1940. In such event,
the Company would be required to register as an investment company and could be
expected to incur significant registration and compliance costs. The Company has
obtained no formal determination from the Securities and Exchange Commission as
to the status of the Company under the Investment Company Act of 1940 and,
consequently, any violation of such Act would subject the Company to material
adverse consequences.
Probable Change in Control and Management. A business combination involving
the issuance of the Company's Common Shares will, in all likelihood, result in
shareholders of a private company obtaining a controlling interest in the
Company. Any such business combination may require management of the Company to
sell or transfer all or a portion of the Company's Common Shares held by them,
or resign as members of the Board of Directors of the Company. The resulting
change in control of the Company could result in removal of one or more present
officers and directors of the Company and a corresponding reduction in or
elimination of their participation in the future affairs of the Company.
Reduction of Percentage Share Ownership Following Business Combination. The
Company's primary plan of operation is based upon a business combination with a
private concern which, in all likelihood, would result in the Company issuing
securities to shareholders of any such private company. Additional Common Shares
may be issued by the Board of Directors without further action by the Company's
shareholders. The issuance of previously authorized and unissued Common Shares
of the Company would result in reduction in percentage of shares owned by
present and prospective shareholders of the Company and may result in a change
in control or management of the Company. Further, such issuances could reduce
the value of the outstanding Common Shares.
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Disadvantages of Blank Check Offering. The Company may enter into a
business combination with an entity that desires to establish a public trading
market for its shares. A business opportunity may attempt to avoid what it deems
to be adverse consequences of undertaking its own public offering by seeking a
business combination with the Company. Such consequences may include, but are
not limited to, time delays of the registration process, significant expenses to
be incurred in such an offering, loss of voting control to public shareholders
and the inability or unwillingness to comply with various federal and state laws
enacted for the protection of investors.
Taxation. Federal and state tax consequences will, in all likelihood, be
minor considerations in any business combination the Company may undertake.
Currently, such transactions may be structured so as to result in tax-free
treatment to both companies, pursuant to various federal and state tax
provisions. The Company intends to structure any business combination so as to
minimize the federal and state tax consequences to both the Company and the
target entity; however, there can be no assurance that such business combination
will meet the statutory requirements of a tax-free reorganization or that the
parties will obtain the intended tax-free treatment upon a transfer of stock or
assets. A nonqualifying reorganization could result in the imposition of both
federal and state taxes which may have an adverse effect on both parties to the
transaction.
Requirement of Audited Financial Statements May Disqualify Business
Opportunities. Management of the Company believes that any potential business
opportunity must provide audited financial statements for review, for the
protection of all parties to the business combination. One or more attractive
business opportunities may choose to forego the possibility of a business
combination with the Company, rather than incur the expenses associated with
preparing audited financial statements.
Possible Borrowings to Benefit Management, Promoters, or their Affiliates
or Associates. Although management of the Company has no present intention to do
so, the Company could borrow funds and use the proceeds therefrom to make
payments to the Company's promoters, management or their affiliates or
associates. Any such payments would constitute an additional benefit to such
persons that is not otherwise available to the other shareholders of the
Company.
Item 2. Plan of Operation
The Company intends to seek to acquire assets or shares of an entity
actively engaged in business which generates revenues, in exchange for its
securities. The Company has no particular acquisitions in mind and has not
entered into any negotiations regarding such an acquisition. None of the
Company's officers, directors, promoters or affiliates have engaged in any
preliminary contact or discussions with any representative of any other company
regarding the possibility of an acquisition or merger between the Company and
such other company as of the date of this registration statement.
The Company's Board of Directors intends to provide the Company's
shareholders with complete disclosure documentation concerning a potential
business opportunity and the structure of the proposed business combination
prior to consummation of the same, which disclosure is expected to be in the
form of a proxy or information statement. While such disclosure may include
audited financial statements of such a target entity, there is no assurance that
such audited financial statements will be available. The Board of Directors does
intend to obtain certain assurances of value of the target entity assets prior
to consummating such a transaction, with further assurances that an audited
statement would be provided within sixty days after closing of such a
transaction. Closing documents relative thereto will include representations
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that the value of the assets conveyed to or otherwise transferred will not
materially differ from the representations included in such closing documents,
or the transaction will be voidable. Further, the Company will not acquire or
merge with any company for which audited financial statements cannot be obtained
within a reasonable period of time after closing of the proposed transaction.
The Company has no full time employees. The Company's officers have agreed
to allocate a portion of their time to the activities of the Company, without
compensation. These officers anticipate that the business plan of the Company
can be implemented by their devoting approximately 20 hours per month to the
business affairs of the Company and, consequently, conflicts of interest may
arise with respect to the limited time commitment by such officers. See
"Management - Resumes and Blank Check Experience."
Two of the Company's officers and directors were formerly involved with
other "blank check" companies. See "Management - Resumes and Blank Check
Experience." The Company's officers and directors may, in the future, become
involved with other companies who have a business purpose similar to that of the
Company. As a result, additional potential conflicts of interest may arise in
the future. If such a conflict does arise and an officer or director of the
Company is presented with business opportunities under circumstances where there
may be a doubt as to whether the opportunity should belong to the Company or
another "blank check" company they are affiliated with, they will disclose the
opportunity to all such companies. If a situation arises in which more than one
company desires to merge with or acquire that target company and the principals
of the proposed target company have no preference as to which company will merge
or acquire such target company, the company which first filed a registration
statement with the Securities and Exchange Commission will be entitled to
proceed with the proposed transaction. See "Management - Resumes and Blank Check
Experience."
The Articles of Incorporation of the Company provide that the Company shall
possess and may indemnify officers and/or directors of the Company for
liabilities, which can include liabilities arising under the securities laws.
Therefore, assets of the Company could be used or attached to satisfy any
liabilities subject to such indemnification. See "Item 12, Indemnification of
Directors and Officers."
General Business Plan
The Company's purpose is to seek, investigate and, if such investigation
warrants, acquire an interest in business opportunities presented to it by
persons or firms who or which desire to seek the perceived advantages of an
Exchange Act registered corporation. The Company will not restrict its search to
any specific business, industry, or geographical location and the Company may
participate in a business venture of virtually any kind or nature. This
discussion of the proposed business is purposefully general and is not meant to
be restrictive of the Company's virtually unlimited discretion to search for and
enter into potential business opportunities. Management anticipates that it may
be able to participate in only one potential business venture because the
Company has nominal assets and limited financial resources. See "Item F/S,
Financial Statements." This lack of diversification should be considered a
substantial risk to shareholders of the Company because it will not permit the
Company to offset potential losses from one venture against gains from another.
The Company may seek a business opportunity with entities which have
recently commenced operations, or which wish to utilize the public marketplace
in order to raise additional capital in order to expand into new products or
markets, to develop a new product or service, or for other corporate purposes.
The Company may acquire assets and establish wholly-owned subsidiaries in
various businesses or acquire existing businesses as subsidiaries.
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The Company anticipates that the selection of a business opportunity in
which to participate will be complex and extremely risky. Due to general
economic conditions, rapid technological advances being made in some industries
and shortages of available capital, management believes that there are numerous
firms seeking the perceived benefits of a publicly registered corporation. Such
perceived benefits may include facilitating or improving the terms on which
additional equity financing may be sought, providing liquidity for incentive
stock options or similar benefits to key employees, providing liquidity (subject
to restrictions of applicable statutes), for all shareholders and other factors.
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.
The Company has, and will continue to have, no capital with which to
provide the owners of business opportunities with any significant cash or other
assets. However, management believes the Company will be able to offer owners of
acquisition candidates the opportunity to acquire a controlling ownership
interest in a publicly registered company without incurring the cost and time
required to conduct an initial public offering. The owners of the business
opportunities will, however, incur significant legal and accounting costs in
connection with acquisition of a business opportunity, including the costs of
preparing Form 8-Ks, 10-Qs or 10-KSBs, agreements and related reports and
documents. The Securities Exchange Act of 1934, as amended (the "Exchange Act"),
specifically requires that any merger or acquisition candidate comply with all
applicable reporting requirements, which include providing audited financial
statements to be included within the numerous filings relevant to complying with
the Exchange Act. Nevertheless, the officers and directors of the Company have
not conducted market research and are not aware of statistical data which would
support the perceived benefits of a merger or acquisition transaction for the
owners of a business opportunity.
The analysis of new business opportunities will be undertaken by, or under
the supervision of, the officers and directors of the Company, none of whom is a
professional business analyst. Management intends to concentrate on identifying
preliminary prospective business opportunities which may be brought to its
attention through present associations of the Company's officers and directors,
or by the Company's shareholders. In analyzing prospective business
opportunities, management will consider such matters as the available technical,
financial and managerial resources; working capital and other financial
requirements; history of operations, if any; prospects for the future; nature of
present and expected competition; the quality and experience of management
services which may be available and the depth of that management; the potential
for further research, development, or exploration; specific risk factors not now
foreseeable but which then may be anticipated to impact the proposed activities
of the Company; the potential for growth or expansion; the potential for profit;
the perceived public recognition of acceptance of products, services, or trades;
name identification; and other relevant factors. Officers and directors of the
Company expect to meet personally with management and key personnel of the
business opportunity as part of their investigation. To the extent possible, the
Company intends to utilize written reports and personal investigation to
evaluate the above factors. The Company will not acquire or merge with any
company for which audited financial statements cannot be obtained within a
reasonable period of time after closing of the proposed transaction.
Management of the Company, while not especially experienced in matters
relating to the new business of the Company, shall rely upon their own efforts
and, to a much lesser extent, the efforts of the Company's shareholders, in
accomplishing the business purposes of the Company. It is not anticipated that
any outside consultants or advisors will be utilized by the Company to
effectuate its business purposes described herein. However, if the Company does
retain such an outside consultant or advisor, any cash fee earned by such party
will need to be paid by the prospective merger/ acquisition candidate, as the
Company has no cash assets with which to pay such obligation. With respect to
legal matters, each of the officers and directors has engaged Mr. Schlueter to
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represent them as counsel in the past, and management expects to continue to
engage Mr. Schlueter as counsel to the Company. There have been no contracts or
agreements with any outside consultants and none are anticipated in the future.
The Company will not restrict its search for any specific kind of firms,
but may acquire a venture which is in its preliminary or development stage,
which is already in operation, or in essentially any stage of its corporate
life. It is impossible to predict at this time the status of any business in
which the Company may become engaged, in that such business may need to seek
additional capital, may desire to have its shares publicly traded, or may seek
other perceived advantages which the Company may offer. However, the Company
does not intend to obtain funds in one or more private placements, any public
offerings, or off-shore offerings under Regulation S adopted under the
Securities Act, to finance the operation of any acquired business opportunity
until such time as the Company has successfully consummated such a merger or
acquisition.
It is anticipated that the Company will incur nominal expenses in the
implementation of its business plan described herein. Because the Company has no
capital with which to pay these anticipated expenses, present management of the
Company (i.e., Messrs. David Gregarek and Michael Delaney) and the Company's
counsel-Henry F. Schlueter and his wife (collectively the "Lending Parties")
have advised that they will pay certain costs and expenses of the Company from
their personal funds as interest free loans. There has been no specific
agreement upon a dollar cap of any such loans by the Lending Parties. Further,
the Lending Parties recognize that the only opportunity to have these loans
repaid will be from a prospective merger or acquisition candidate. The Lending
Parties have agreed among themselves that the repayment of any loans made on
behalf of the Company will not impede, or be made conditional in any manner, to
consummation of a proposed transaction. If the prospective merger or acquisition
candidate has insufficient capital with which to repay any such loans or
advances, or does not want to use its capital to repay any such loans or
advances, the Lending Parties may be required to convert such loans or advances
into stock. The Lending Parties may under such circumstances agree to convert
any such advances or loans into stock in whole or in part rather than being
repaid by the acquisition candidate. Further, the Lending Parties may desire to
convert such advances or loans into stock, even if the prospective merger or
acquisition candidate is willing to repay such loans or advances, in which case
the equity ownership of other shareholders would be diluted.
Acquisition of Opportunities
In implementing a structure for a particular business acquisition, the
Company may become a party to a merger, consolidation, reorganization, joint
venture, or licensing agreement with another corporation or entity. It may also
acquire stock or assets of an existing business. On the consummation of a
transaction, it is probable that the present management and shareholders of the
Company will no longer be in control of the Company. In addition, the Company's
directors may, as part of the terms of the acquisition transaction, resign and
be replaced by new directors without a vote of the Company's shareholders or may
sell their stock in the Company. It is management's present intention to make
all reasonable efforts to afford all shareholders of the Company the opportunity
to sell their shares upon similar terms and conditions of sale as are negotiated
by the officers and directors of the Company for the sale of their own shares.
Any and all such sales will only be made in compliance with the securities laws
of the United States and any applicable state securities laws.
It is anticipated that any securities issued in any such reorganization
would be issued in reliance upon exemption from registration under applicable
federal and state securities laws. In some circumstances, however, as a
negotiated element of its transaction, the Company may agree to register all or
a part of such securities immediately after the transaction is consummated or at
specified times thereafter. If such registration occurs, of which there can be
no assurance, it will be undertaken by the surviving entity after the Company
has successfully consummated a merger or acquisition and the Company is no
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longer considered a shell company. Until such time as this occurs, the Company
will not attempt to register any additional securities. The issuance of
substantial additional securities and their potential sale into any trading
market which may develop in the Company' s securities may have a depressive
effect on the value of the Company's securities in the future if such a market
develops, of which there is no assurance.
While the actual terms of a transaction to which the Company may be a party
cannot be predicted, it may be expected that the parties to the business
transaction will find it desirable to avoid the creation of a taxable event and
thereby structure the acquisition in a so-called "tax-free" reorganization under
Sections 368(a)(1) or 351 of the Internal Revenue Code (the "Code"). In order to
obtain tax-free treatment under the Code, it may be necessary for the owners of
the acquired business to own 80% or more of the voting stock of the surviving
entity. In such event, the shareholders of the Company would retain less than
20% of the issued and outstanding shares of the surviving entity, which would
result in significant dilution in the equity of such shareholders.
As part of the Company's investigation, officers and directors of the
Company will meet personally with management and key personnel, may visit and
inspect material facilities, obtain independent analysis of verification of
certain information provided, check references of management and by personnel,
and take other reasonable investigative measures, to the extent of the Company's
limited financial resources and management expertise. The manner in which the
Company participates in an opportunity will depend on the nature of the
opportunity, the respective needs and desires of the Company and other parties,
the management of the opportunity and the relative negotiation strength of the
Company and such other management.
With respect to any merger or acquisition, negotiations with target company
management is expected to focus on the percentage of the Company which target
company shareholders would acquire in exchange for all of their shareholdings in
the target company. Depending upon, among other things, the target company's
assets and liabilities, the Company's shareholders will in all likelihood hold a
substantially lesser percentage ownership interest in the Company following any
merger or acquisition. The percentage ownership may be subject to significant
reduction in the event the Company acquires a target company with substantial
assets. Any merger or acquisition effected by the Company can be expected to
have a significant dilutive effect on the percentage of shares held by the
Company's then shareholders. While management of the Company anticipates
obtaining the approval of the shareholders of the Company via a Proxy Statement,
the effect will be to assure such approval where management supports such a
business transaction because management presently controls sufficient shares of
the Company to effectuate a positive vote on the proposed transaction. Further,
a prospective transaction may be structured so that shareholder approval is not
required, and such a transaction may be effectuated by the Board of Directors
without shareholder approval.
The Company will participate in a business opportunity only after the
negotiation and execution of appropriate written agreements. Although the terms
of such agreements cannot be predicted, generally such agreements will require
some specific representations and warranties by all of the parties thereto, will
specify certain events of default, will detail the terms of closing and the
conditions which must be satisfied by each of the parties prior to and after
such closing, will outline the manner of bearing costs, including costs
associated with the Company's attorneys and accountants, will set forth remedies
on default and will include miscellaneous other terms.
As stated hereinabove, the Company will not acquire or merge with any
entity which cannot provide independent audited financial statements within a
reasonable period of time after closing of the proposed transaction. The Company
is subject to all of the reporting requirements included in the Exchange Act.
Included in these requirements is the affirmative duty of the Company to file
independent audited financial statements as part of its Form 8-K to be filed
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with the Securities and Exchange Commission upon consummation of a merger or
acquisition, as well as the Company's audited financial statements included in
its annual report on Form 10-K (or 10-KSB, as applicable). If such audited
financial statements are not available at closing, or within time parameters
necessary to insure the Company's compliance with the requirements of the
Exchange Act, or if the audited financial statements provided do not conform to
the representations made by the candidate to be acquired in the closing
documents, the closing documents will provide that the proposed transaction will
be voidable, at the discretion of the present management of the Company. If such
transaction is voided, the agreement will also contain a provision providing for
the acquisition entity to reimburse the Company for all costs associated with
the proposed transaction.
The Investment Company Act of 1940
The Company may participate in a business or opportunity by purchasing,
trading, or selling the securities of such business. However, the Company does
not 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 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 provides the definition of an
"investment company," which includes an entity that engages or holds itself out
as being engaged primarily in the business of investing, reinvesting, or trading
in securities, or that engages or proposes to engage in the business of
investing, reinvesting, owning, holding, or trading "investment securities"
(defined as all securities other than government securities, securities of
majority-owned subsidiaries, and certain other securities) 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 that 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. In order to avoid classification as an investment company, the
Company will search for, analyze, and acquire or participate in a business
opportunity by use of a method that does not involve the acquisition, ownership,
or holding of investment securities.
The Company's plan of business may involve changes in its capital
structure, management, control, and business, especially if it consummates a
reorganization as discussed above. Each of these areas is regulated by the
Investment Act, which regulation has the purported purpose of protecting
purchasers of investment company securities. Since the Company will not register
as an investment company, its shareholders will not be afforded these purported
protections.
The Company intends to vigorously resist classification as an investment
company and to take advantage of any exemptions or exceptions from application
of the Investment Act, which allows an entity a one-time option during any
three-year period to claim an exemption as a "transient" investment company. The
necessity of asserting any such resistance, or making any claim of exemption,
could be time consuming and costly, or even prohibitive, given the Company's
limited resources.
Competition
The Company will remain an insignificant participant among the firms which
engage in the acquisition of business opportunities. There are many established
venture capital and financial concerns which have significantly greater
financial and personnel resources and technical expertise than the Company. In
view of the Company's combined extremely limited financial resources and limited
management availability, the Company will continue to be at a significant
competitive disadvantage compared to the Company's competitors.
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Employees
The Company has no full time employees. The Company's officers have agreed
to allocate a portion of their time to the activities of the Company, without
compensations These officers anticipate that the business plan of the Company
can be implemented by their devoting approximately 20 hours per month to the
business affairs of the Company and, consequently, conflicts of interest may
arise with respect to the limited time commitment by such officers. See
"Management - Resumes."
Item 3. Description of Property
The Company has no properties and at this time has no agreements to acquire
any properties. The Company intends to attempt to acquire assets or a business
in exchange for its securities which assets or business is determined to be
desirable.
Prior to January of 1996, the Company operated from the offices of its
former president A. Jay Boisdrenghien, on a rent free basis. From January 1996
until June 1996, the Company's Secretary and Treasurer, Mr. David Gregarek
provided the Company with office space in his home on a rent free basis.
Commencing July 1, 1996, the Company began operating from the offices of its
counsel-Schlueter & Associates, P.C. at 1050 Seventeenth Street, Suite 1700,
Denver, Colorado 80265. This space is provided to the Company on a rent free
basis by Schlueter & Associates, P.C., counsel to the Company, and it is
anticipated that this arrangement will remain until such time as the Company
successfully consummates a merger or acquisition. Management believes that this
space will meet the Company's needs for the foreseeable future.
Item 4. Security Ownership of Certain Beneficial Owners and Management.
The following table sets forth information with respect to the ownership of
the Company's Common Stock, by all officers and directors, individually, all
officers and directors as a group, and all beneficial owners of more than ten
percent of the Common Stock. Except as otherwise indicated, the following
shareholders have sole voting and investment power with respect to the shares.
Percent
Name and address Number of of
of owner shares Class
- ---------------- ------ -----
David J. Gregarek 540,000 50.94%
71 Spyglass Drive
Littleton, Colorado 80123
Derrin Smith 60,000 5.66%
3746 East Easter Circle S.
Littleton, Colorado 80122
Michael J. Delaney 10,000 0.09%
P.O. Box 890261
Temecula, CA 92589
Sandra Schlueter(1) 280,208 26.43%
6711 S. Clayton Way
Littleton, CO 80122
All officers and directors 610,000 57.54%
as a group (three persons)
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- -----------------------
(1)Sandra Schlueter is the wife of the Company's legal counsel, Henry F.
Schlueter, and is the holder of 280,208 shares of the Company's Common Stock.
Mr. Schlueter may be deemed to be the beneficial owner of these shares.
There are no outstanding options, warrants, or rights to purchase
securities from the Company, and the balance of the Company's shares are held by
6 persons.
Item 5. Directors, Executive Officers, Promoters and Control Persons.
Officers and Directors
- ----------------------
The officers and directors of the Company are as follows:
Tenure as Officer
Name Age Position(s) or Director
---- --- ----------- -----------
Michael J. Delaney 40 President January 6, 1996
and a Director to Present
David J. Gregarek 41 Secretary, Treasurer January 6, 1996
and a Director Present
Derrin R. Smith, Ph.D. 42 Director January 6, 1996
to Present
Messrs. Gregarek, Delaney, Smith, and the Company's legal counsel Henry F.
Schlueter and his wife may be deemed to be "promoters" and "parents" of the
Company within the meaning of the Rules and Regulations promulgated under the
Securities Act.
The directors of the Company are elected to hold office until the next
annual meeting of shareholders and until their respective successors have been
elected and qualified. Officers of the Company are elected annually by the Board
of Directors and hold office until their successors are duly elected and
qualified. Each of the Company's officers and directors is employed in devotes
only such time as is available to the business of the Company. Further, there
are no family relationships between any director or executive officer and any
other director or executive officer.
Management is not aware of any person, other than the officers and/or
directors of the Company and its legal counsel-Henry F. Schlueter, whose
activities will be material to the affairs of the Company.
Resumes and Blank Check Experience
David J. Gregarek has served as Secretary, Treasurer and a Director of the
Company since January 6, 1996. Mr. Gregarek is also a Director and principal
shareholder of Ferrari Capital, Ltd., a blank check company. On December 15,
1987 Clearview Capital Corporation merged with Arriba Fajita, Inc., an operator
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of four restaurants in Austin, Texas, and changed its name to Arriba Fajita
Holdings, Inc. Mr. Gregarek resigned from the Board of Directors of Arriba
Fajita Holdings, Inc. on June 20, 1988. From January of 1985 through February of
1987, Mr. Gregarek served as a Director of Belleview Capital Corporation. On
February 27, 1987, Belleview Capital Corporation acquired and changed its name
to Medical Ancillary Services, Inc., a one-call medical services company. From
February 1987 through August 1987, when he resigned, Mr. Gregarek served on the
Board of Directors of Medical Ancillary Services, Inc. Mr. Gregarek is also a
principal shareholder of Huntington Capital Corporation, a company that was
formed to acquire other businesses or entities. Mr. Gregarek only devotes such
time as is available to the business of the Company.
Michael J. Delaney has served as President and a Director of the Company
since January 6, 1996. Since 1980 Mr. Delaney has been the owner and president
of MD Sales, a sales representative and consulting firm for various companies in
product development, sales, and marketing. Mr. Delaney will devote only such
time as is available to the business of the Company.
Derrin R. Smith Ph.D. has served as a Director of the Company since January
6, 1996. Dr. Smith has over 17 years of experience developing and directing
strategic high technology programs and enterprises. This background includes
domestic and international (Asia, South America, and Middle East) activities for
both government and the private sector. For the last four years Dr. Smith has
operated his own private company-DRS Sciences, Inc., which is engaged primarily
in providing consulting services in the design and development of computer
software and the integration of such software with the hardware platforms
utilized by his clients. Prior to commencing active operations of his own
company Dr. Smith was employed by M.I.T.R.E. Corporation in various capacities.
Dr. Smith is currently providing consulting services to several companies. Dr.
Smith will devote only such time as is necessary to the business of the Company.
Conflicts of Interest
- ---------------------
Members of the Company's management are associated with other firms
involved in a range of business activities. Consequently, there are potential
inherent conflicts of interest in their acting as officers and directors of the
Company. Insofar as the officers and directors are engaged in other business
activities, management anticipates it will devote only a minor amount of time to
the Company's affairs.
The officers and directors of the Company are now and may in the future
become shareholders, officers or directors of other companies which may be
formed for the purpose of engaging in business activities similar to those
conducted by the Company. Accordingly, additional direct conflicts of interest
may arise in the future with respect to such individuals acting on behalf of the
Company or other entities. Moreover, additional conflicts of interest may arise
with respect to opportunities which come to the attention of such individuals in
the performance of their duties or otherwise. The Company does not currently
have a right of first refusal pertaining to opportunities that come to
management's attention insofar as such opportunities may relate to the Company's
proposed business operations. However, the Company's Articles of Incorporation
provide that all business opportunities within areas of interest determined from
time to time by the board of directors, as evidenced by resolutions appearing in
the Company's minutes, that come to the attention of any officer or director of
the Company must be promptly disclosed and made available to the Company. This
provision limits the fiduciary duties that the officers and directors might
otherwise have to offer a broad range of business opportunities to the Company.
If the board of directors rejects any opportunity presented to it, any officer
or director may then avail himself of that opportunity. These provisions of the
Articles of Incorporation do not apply to limit the right of any officer or
director to continue an activity or type of business existing prior to the time
of delineation of an area of interest.
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The officers and directors are, so long as they are officers or directors
of the Company, subject to the restriction that all opportunities contemplated
by the Company's plan of operation which come to their attention, either in the
performance of their duties or in any other manner, will be considered
opportunities of, and be made available to the Company and the companies that
they are affiliated with on an equal basis. A breach of this requirement will be
a breach of the fiduciary duties of the officer or director. If the Company or
the companies in which the officers and directors are affiliated with both
desire to take advantage of an opportunity, then paid officers and directors
would abstain from negotiating and voting upon the opportunity. However, all
directors may still individually take advantage of opportunities if the Company
should decline to do so. Except as set forth above, the Company has not adopted
any other conflict of interest policy with respect to such transactions.
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.
There can be no assurance that management will resolve all conflicts of
interest in favor of the Company.
Item 6. Executive Compensation
None of the Company's officers and/or directors receive any compensation
for their respective services rendered unto the Company, nor have they received
such compensation in the past. They all have agreed to act without compensation
until authorized by the Board of Directors, which is not expected to occur until
the Company has generated revenues from operations after consummation of a
merger or acquisition. As of the date of this registration statement, the
Company has no funds available to pay directors. Further, none of the directors
are accruing any compensation pursuant to any agreement with the Company.
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 this registration statement, 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.
Except as described below under "Certain Relationships and Related
Transactions," the Company paid no cash or non-cash compensation to any officer
or director during the fiscal years ended December 31, 1993, 1994, 1995, or
1996.
The Company has no retirement, pension, profit sharing, stock option or
insurance or medical reimbursement plans or programs covering its officers and
directors, and does not contemplate implementing any such plans at this time.
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No advances have been made or are contemplated by the Company to any of its
officers or directors.
Item 7. Certain Relationships and Related Transactions.
On January 6, 1996, the Company issued and sold 510,000 shares of its $.01
par value common stock to two officers and directors of the Company in exchange
for $5,100. In addition, the Company issued 250,000 shares of its $.01 par value
common stock to the wife of the Company's legal counsel in exchange for $2,500
in cash. During the six months ended June 30, 1996, the Company paid A. Jay
Boisdrenghien, the Company's former president, $3,000 for consulting services
rendered to the Company. In addition, the Company paid the law firm of Schlueter
& Associates, P.C. a retainer of $2,000. During the period ended December 31,
1995, the Company's former president A. Jay Boisdrenghien paid an expense for
the Company totaling $1,500 in consideration for the issuance of 150,000 shares
of its $.01 par value common stock. See "Recent Sales of Unregistered
Securities" below. During 1996, a principal shareholder of the Company paid an
expense of the Company in the amount of $1,500, which has been reflected as a
contribution to capital in the Company's financial statements.
From March 1992 until January 1993, the Company had a lease arrangement
with its former President, A. Jay Boisdrenghien, providing for the rental of a
portion of his business office as a temporary office for the Company, for
$300.00 per month. During the year ended December 31, 1993, the president
forgave $2,417 due to him by the Company for rental payments and other related
expenses. The Company has no outstanding obligations under this lease. This
lease cannot be considered the result of arm's length negotiations. However,
management of the Company believes that the rent for its office and facilities
was no higher than that which the Company would have been required to pay to
unaffiliated parties for comparable facilities in the same locale. The Company
is currently receiving office space and clerical services on a rent-free basis
from its counsel-Schlueter & Associates, P.C. The Company does not anticipate
changing this arrangement until the Company is able to conclude a merger or
acquisition.
During 1992, the Company paid $5,000 to a shareholder as compensation for
services provided in organizational and fund-raising activities.
Except as otherwise disclosed herein, there have been no related party
transactions, or any other transactions or relationships required to be
disclosed pursuant to Item 404 of Regulation S-B.
Item 8. Description of Securities
Common Stock
- ------------
The Company has 10,000,000 shares of Common Stock authorized, par value
$.01 per share. Each share of Common Stock is entitled to share pro rata in
dividends and distributions, if any, with respect to the Common Stock when, as
and if declared by the Board of Directors from funds legally available therefor.
No holder of any shares of Common Stock has any preemptive rights to subscribe
for any securities of the Company. Upon liquidation, dissolution, or winding up
of the Company, each share of the Common Stock is entitled to share ratably in
the amount available for distribution to holders of Common Stock. All shares of
Common Stock outstanding are fully paid and nonassessable, and the Common Stock
is not subject to conversion or redemption.
Each shareholder is entitled to one vote for each share of Common Stock
held. There is no right to cumulative voting for the election of directors. This
means that holders of more than 50% of the shares voting for the election of
directors can elect all of the directors if they choose to do so, and in such
event, the holders of the remaining less than 50% of the shares voting for the
election of directors will not be able to elect any person or persons to the
Board of Directors.
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The proposed business activities described herein classify the Company as a
"blank check" Company. Many States have enacted statutes, rules and regulations
limiting the sale of securities of "blank check" companies in their respective
jurisdictions. Management does not intend to undertake any efforts to cause a
market to develop in the Company's securities until such time as the Company has
successfully implemented its business plan described herein. Relevant thereto,
each shareholder of the Company has executed and delivered a "lock-up" letter
agreement, affirming that they shall not sell their respective shares of the
Company's common stock until such time as the Company has successfully
consummated a merger or acquisition and the Company is no longer classified as a
"blank check" company. In order to provide further assurances that no trading
will occur in the Company's securities until a merger or acquisition has been
consummated, each shareholder has agreed to place their respective stock
certificate with the Company's legal counsel Schlueter & Associates, P.C., who
will not release these respective certificates until such time as legal counsel
has confirmed that a merger or acquisition has been successfully consummated.
However, while Management believes that the procedures established to preclude
any sale of the Company's securities prior to closing of a merger or acquisition
will be sufficient, there can be no assurances that the procedures established
relevant herein will unequivocally limit any shareholder's ability to sell their
respective securities before such closing.
The Company has not paid any dividends on its Common Stock and intends to
retain earnings, if any, to finance the development and expansion of its
business. Future dividend policy is subject to the discretion of the Board of
Directors and will depend upon a number of factors, including future earnings,
capital requirements and the financial condition of the Company.
PART II
Item 1. Market price of and Dividends on the Registrant's Common Equity and
Other Shareholder Matters
There is no trading market for the Company's Common Stock at present and
there has been no trading market to date. Management has not undertaken any
discussions, preliminary or otherwise, with any prospective market maker
concerning the participation of such market maker in the aftermarket for the
Company's securities and management does not intend to initiate any such
discussions until such time as the Company has consummated a merger or
acquisition. There is no assurance that a trading market will ever develop or,
if such a market does develop, that it will continue.
a. Market Price. The Company's Common Stock is not quoted at the present
time.
Effective August 11, 1993, the Securities and Exchange Commission adopted
Rule 15g-9, which established the definition of a "penny stock," for purposes
relevant to the Company, as any equity security that has a market price of less
than $5.00 per share or with an exercise price of less than $5.00 per share,
subject to certain exceptions. For any transaction involving a penny stock,
unless exempt, the rules require: (i) that a broker or dealer approve a person's
account for transactions in penny stocks; and (ii) the broker or dealer receive
from the investor a written agreement to the transaction, setting forth the
identity and quantity of the penny stock to be purchased. In order to approve a
person's account for transactions in penny stocks, the broker or dealer must (i)
obtain financial information and investment experience and objectives of the
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<PAGE>
person; and (i ) make a reasonable determination that the transactions in penny
stocks are suitable for that person and that person has sufficient knowledge and
experience in financial matters to be capable of evaluating the risks of
transactions in penny stocks. The broker or dealer must also deliver, prior to
any transaction in a penny stock, a disclosure schedule prepared by the
Concession relating to the penny stock market, which, in highlight form, (i)
sets forth the basis on which the broker or dealer made to suitability
determination; and (ii) that the broker or dealer received a signed, written
agreement from the investor prior to the transaction. Disclosure also has to be
made about the risks of investing in penny stock in both public offering and in
secondary trading, and about commissions payable to both the broker-dealer and
the registered representative, current quotations for the securities and the
rights and remedies available to an investor in cases of fraud in penny stock
transactions. Finally, monthly statements have to be sent disclosing recent
price information for the penny stock held in the account and information on the
limited market in penny stocks.
The NASDAQ Stock Market, which administers NASDAQ, has recently made
changes in the criteria for NASDAQ eligibility. In order to be included in
NASDAQ's SmallCap Market, a company must satisfy the requirements described
below. A company must meet one or more of the following three requirements: (i)
net tangible assets of $4 million ($2 million for continued inclusion), (ii)
have a market capitalization of $50 million ($35 million for continued
inclusion), or (iii) have net income (in the latest fiscal year or 2 of the last
3 fiscal years) of $750,000 ($500,000 for continued inclusion). In addition, a
company must also satisfy the following requirements: (i) 1 million shares in
the public float (500,000 for continued inclusion), (ii) $5 million of market
value of the public float ($1 million for continued inclusion), (iii) a minimum
bide price of $4 ($1 for continued inclusion), (iv) 3 market makers (2 for
continued inclusion), (v) 300 (round lot) shareholders, (vi) an operating
history of 1 year or market capitalization of $50 million, and (vii) certain
corporate governance standards.
Management intends to strongly consider undertaking a transaction with any
merger or acquisition candidate which will allow the Company's securities to be
traded without the aforesaid limitations. However, there can be no assurances
that, upon successful merger! or acquisition, the Company will qualify its
securities for listing on NASDAQ as some other national exchange, or be able to
maintain the maintenance criteria necessary to insure continued listing. The
failure of the Company to qualify its securities or to meet the relevant
maintenance criteria after such qualification in the future may result in the
discontinuance of the inclusion of the Company's securities on a national
exchange. In such events, trading, if any, in the Company's securities may then
continue in the non-NASDAQ over-the-counter market. As a result, a shareholder
may find it more difficult to dispose of, or to obtain accurate quotations as to
the market value of, the Company's securities.
b. Holders. There are ten (10) holders of the Company's Common Stock. All
of the issued and outstanding shares of the Company's Common Stock were issued
in accordance with the exemption from registration afforded by Section 4(2) of
the Securities Act.
As of August 31, 1997, all of the issued and outstanding shares of the
Company's Common Stock were eligible for sale under Rule 144 promulgated under
the Securities Act, subject to certain limitations included in said Rule. In
general, under Rule 144, a person (or persons whose shares are aggregated), who
has satisfied a one year holding period, under certain circumstances, may sell
within any three month period a number of shares which does not exceed the
greater of one percent of the then outstanding Common Stock or the average
weekly trading volume during the four calendar weeks prior to such sale. Rule
144 also permits, under certain circumstances, the sale of shares without any
quantity limitation by a person who has satisfied a three year holding period
and who is not, and has not been for the preceding three months an affiliate of
the Company.
c. Dividends. The Company has not paid any dividends to date, and has no
plans to do so in the immediate future.
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Item 2. Legal Proceedings
The Company is currently not a party to any pending legal proceedings, and
none of its property is the subject of a pending legal proceeding.
Item 3. Changes in and Disagreements with Accountants
The Company engaged the accounting firm of Causey Demgen & Moore Inc. as
its independent certified public accountants in connection with the preparation
and filing of the 1992 Registration Statement. During the Company's previous two
fiscal years, there were not any disagreements with Causey Demgen & Moore Inc.
on any matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedure. As the 1992 Registration Statement
was abandoned, the Company has not, since 1992, engaged any independent
certified public accountants to audit the Company's financial statements for any
purpose until the preparation of this registration statement.
On February 15, 1995, the Company engaged Cordovano and Company, P.C.,
Denver, Colorado, as its new principal independent accountant to audit the
Company's financial statements in connection with the preparation and filing of
this registration statement. Neither the Company nor anyone on its behalf has
consulted Cordovano and Company, P.C. regarding the application of accounting
principles to a specific completed or contemplated transaction, or the type of
audit opinion that might be rendered on the Company's financial statements.
Item 4. Recent Sales of Unregistered Securities
On December 31, 1995, the Company issued and sold 150,000 shares of Common
Stock to A. Jay Boisdrenghien, a former director and officer of the Company for
$1,500 in cash. On January 6, 1996, the Company issued and sold to Mr. David J.
Gregarek, the Secretary, Treasurer, and a Director of the Company, 500,000
shares of its Common Stock for a consideration of $5,000 in cash. On January 6,
1996, the Company issued and sold to Ms. Sandra Schlueter, the wife of the
Company's legal counsel, Henry F. Schlueter, 250,000 shares of its Common Stock
for a consideration of $2,500 in cash. On January 6, the Company issued and sold
to Mr. Michael J. Delaney, the President and a Director of the Company, an
aggregate of 10,000 shares of its Common Stock for a consideration of $100 in
cash. No underwriter, broker or dealer, in its capacity as such, was involved in
any of the above sales of these unregistered securities, and no underwriting
discounts, commissions or brokerage fees were paid with respect to such
transactions.
The Company considers that the above transactions are exempt from the
registration requirements of Section 5 of the Securities Act, by virtue of
Section 4(2) and 3(b) of such Act as sales of securities not involving a public
offering. Management of the Company has represented that the persons purchased
the securities in the foregoing transactions were either officers, directors or
organizers of the Company or persons who possessed material information
concerning the Company and were in a position to obtain from the Company
information necessary to verify such information. All such persons were offered
the opportunity to obtain information from the Company in order to evaluate the
merits and risks of the proposed investment. In addition, all such persons were
informed that they were obtaining "restricted securities" as defined in Rule 144
under the Act, that such shares cannot be transferred without appropriate
registration or exemption therefrom, that they must bear the economic risk of
the investment for an indefinite period of time and that the Company would
restrict the transfer of the securities in accordance with such restrictions. In
addition, each certificate representing shares purchased in the above
transactions bears the standard restrictive legend.
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Item 5. Indemnification of Officers and Directors
Article VII of the Company's Articles of Incorporation, included herewith
as Exhibit 3(i), provides for the indemnification of the Company's officers and
directors. Further, the officers and directors are indemnified under various
provisions of the Colorado Business Act, which provide for the indemnification
of officers and directors and other persons against expenses, judgments, fines
and amounts paid in settlement in connection with threatened, pending or
completed suits or proceedings against such persons by reason of serving or
having served as officers, directors or in other capacities, except in relation
to matters with respect to which such persons shall be determined not to have
acted in good faith and in the best interests of the Company. With respect to
matters as to which the Company's officers and directors and others are
determined to be liable for misconduct or negligence, including gross negligence
In the performance of their duties to the Company, Colorado law provides for
indemnification only to the extent that the court in which the action or suit is
brought determines that such person is fairly and reasonably entitled to
indemnification for which the court deems proper.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to officers, directors or persons controlling the Company
pursuant to the foregoing, the Company has been informed that in the opinion of
the U.S. Securities and Exchange Commission such indemnification is against
public policy as expressed in the Securities Act, and is therefore
unenforceable.
In accordance with the laws of the State of Colorado, the Company's Bylaws
authorize indemnification of a director, officer, employee, or agent of the
Company for expenses incurred in connection with any action, suit, or proceeding
to which he or the is named a party by reason of his having acted or served in
such capacity, except for liabilities arising from his own misconduct or
negligence in performance of his or her duty. In addition, even a director
officer, employee, or agent of the Company who was found liable for misconduct
or negligence in the performance of his or her duty may obtain such
indemnification if, in view of all the circumstances in the case, a court of
competent jurisdiction determines such person is fairly and reasonably entitled
to indemnification. Insofar as indemnification for liabilities arising under the
Securities Act, may be permitted to directors, officers, or persons controlling
the issuing Company pursuant to the foregoing provisions, the Company has been
informed that in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Securities Act and
is therefore unenforceable.
PART F/S
The audited financial statements of the Company, and related notes thereto,
as of December 31, 1996, and for the years ended December 31, 1996 and 1995, are
accompanied by the independent auditors' report and are included herewith.
PART III
Item 1. Index to Exhibits
Exhibit Number Description of Exhibit
- -------------- ----------------------
3(i) Articles of Incorporation
3(ii) Bylaws
12 Form of Lockup Agreement
19
<PAGE>
AURORA ACQUISITIONS. INC.
(A DEVELOPMENT STAGE COMPANY)
Index to Financial Statements
Page
Independent auditors' report F-2
Balance sheet, as of December 31, 1996 F-3
Statements of operations, for the years ended
December 31, 1996 and 1995, and from February 10,
1992 (inception) through December 31, 1996 (unaudited) F-4
Statements of shareholders' equity, February 10, 1992
(inception) through December 31, 1996 (unaudited) F-5
Statements of cash flows, for the years ended
December 31, 1996 and 1995, and from February 10,
1992 (inception) through December 31, 1996 (unaudited) F-6
Summary of significant accounting policies F-8
Notes to financial statements F-9
F-1
<PAGE>
Board of Directors
Aurora Acquisitions, Inc.
INDEPENDENT AUDITORS' REPORT
We have audited the accompanying balance sheet of Aurora Acquisitions, Inc. (a
development stage company) as of December 31, 1996, and the related statements
of operations, shareholders' equity and cash flows for each of the years in the
period ended December 31, 1996 and 1995. 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 Aurora Acquisitions, Inc. as of
December 31, 1996, and the results of its operations and its cash flows for each
of the years in the period ended December 31, 1996 and 1995, in conformity with
generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note G to the
financial statements, the Company has suffered recurring losses from development
stage activities and has a net capital deficiency which raises substantial doubt
about its ability to continue as a going concern. Management's plans regarding
these matters are also described in Note G. The financial statements do not
include any adjustments that might result from the outcome of these
uncertainties.
Cordovano and Company, P.C.
Denver, Colorado
February 28, 1997
F-2
<PAGE>
AURORA ACQUISITIONS. INC.
-------------------------
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
December 31, 1996
ASSETS
CURRENT ASSETS
Cash ........................................................... $ 114
--------
TOTAL CURRENT ASSETS ............................. 114
Organization costs, net of accumulated
amortization of $983 ......................................... 17
--------
$ 131
========
LIABILITIES AND SHAREHOLDERS' DEFICIT
CURRENT LIABILITIES
Accounts payable, trade ........................................ $ 3,255
Accrued expenses ............................................... 672
--------
TOTAL CURRENT LIABILITIES ........................ 3,927
--------
Contingency (Note G) ............................................. --
SHAREHOLDERS' DEFICIT (Note D)
Preferred stock, 100,000 shares authorized, $1.00 par
value; none issued or outstanding ............................ --
Common stock, 10,000,000 shares authorized, $0.01 par
value; 1,060,000 shares issued and outstanding ............... 10,600
Additional paid-in capital ...................................... 18,550
Deficit accumulated during development stage .................... (32,946)
--------
TOTAL SHAREHOLDERS' DEFICIT ...................... (3,796)
--------
$ 131
========
See accompanying summary of significant accounting policies
and notes to financial statements.
F-3
<PAGE>
<TABLE>
<CAPTION>
AURORA ACQUISITIONS. INC.
-------------------------
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
February 10,
1992
Years Ended (Inception)
December 31, Through
------------------------------------- December 31,
1996 1995 1996
------------
(unaudited)
<S> <C> <C> <C>
COSTS AND EXPENSES
General and administrative $ 7,427 $ 1,088 $ 19,768
General and administrative,
related party (Note B) 3,000 -- 8,000
Amortization 200 200 983
------------ ------------ ------------
(10,627) (1,288) (28,751)
NON-OPERATING INCOME
Gain on forgiveness of debt
of debt (Notes B&E) -- -- 10,790
NON-OPERATING EXPENSES
Interest expense -- -- (1,846)
Failed stock offering costs
(Note A) -- -- (13,139)
------------ ------------ ------------
NET LOSS $ (10,627) $ (1,288) $ (32,946)
============ ============ ============
Weighted average shares
outstanding 10,600,000 10,600,000 10,600,000
============ ============ ============
Net income (loss) per
share $ * $ * $ *
============ ============ ============
* Less than $.01
See accompanying summary of significant accounting policies
and notes to financial statements.
F-4
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
AURORA ACQUISITIONS. INC.
-------------------------
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF SHAREHOLDERS' DEFICIT
(unaudited)
Deficit
Accumulated
Additional During Total
Common stock Paid-in Development Shareholders'
Shares Amount Capital Stage Deficit
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Common stock issued for cash to
officers and directors,
February 10, 1992 (unaudited) 104,064 $ 1,041 $ -- $ -- $ 1,041
Common stock issued for cash,
February 14, 1992 (unaudited) 32,812 328 12,181 -- 12,509
Common stock issued for cash to
officers and directors,
February 14, 1992 (unaudited) 13,124 131 4,869 -- 5,000
Net loss for the period
February 10, 1992 through
December 31, 1992 (unaudited) -- -- -- (22,759) (22,759)
--------- --------- --------- --------- ---------
BALANCE, December 31, 1992
(unaudited) 150,000 1,500 17,050 (22,759) (4,209)
Net loss (unaudited) -- -- -- (1,704) (1,704)
--------- --------- ---------
BALANCE, December 31, 1993
(unaudited) 150,000 1,500 17,050 (24,463) (5,913)
Net income -- -- -- 3,432 3,432
--------- --------- --------- --------- ---------
BALANCE, December 31, 1994 150,000 1,500 17,050 (21,031) (2,481)
Common stock issued for cash to officer
and director, December 31, 1995 150,000 1,500 -- -- 1,500
Net loss -- -- -- (1,288) (1,288)
--------- --------- --------- --------- ---------
BALANCE, December 31, 1995 300,000 3,000 17,050 (22,319) (2,269)
Common stock issued for cash to officers
and directors, January 6, 1996 760,000 7,600 -- -- 7,600
Capital contribution, July 1, 1996
(Note B) -- -- 1,500 -- 1,500
Net loss -- -- -- (10,627) (10,627)
--------- --------- --------- --------- ---------
BALANCE, December 31, 1996 1,060,000 $ 10,600 $ 18,550 $ (32,946) $ (3,796)
========= ========= ========= ========= =========
See accompanying summary of significant accounting policies and notes to financial statements.
F-5
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
AURORA ACQUISITIONS INC.
------------------------
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
February 10,
1992
(Inception)
Years Ended Through
December 31, December 31,
------------------------------- 1996
1996 1995 ------------
(unaudited)
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $(10,627) $ (1,288) $(32,946)
Transactions not requiring cash:
Amortization 200 200 983
Changes in current assets
and current liabilities:
Accounts payable and
accrued expenses 1,427 (472) 3,927
-------- -------- --------
NET CASH (USED IN)
OPERATING ACTIVITIES (9,000) (1,560) (28,036)
-------- -------- --------
INVESTING ACTIVITIES Organization
costs incurred -- -- (1,000)
-------- -------- --------
NET CASH (USED IN)
INVESTING ACTIVITIES -- -- (1,000)
-------- -------- --------
FINANCING ACTIVITIES
Capital contribution 1,500 -- 1,500
Proceeds from issuance
of common stock (Note B) 7,600 1,500 27,650
-------- -------- --------
NET CASH PROVIDED BY
FINANCING ACTIVITIES 9,100 1,500 29,150
-------- -------- --------
NET INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS 100 (60) 114
Cash and cash equivalents at
beginning of period 14 74 --
-------- -------- --------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 114 $ 14 $ 114
======== ======== ========
See accompanying summary of significant accounting policies
and notes to financial statements.
F-6
</TABLE>
<PAGE>
AURORA ACQUISITIONS. INC.
-------------------------
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
February 10,
1992
Years Ended (Inception)
December 31, Through
-------------------------- December 31,
1996 1995 1996
------------
(unaudited)
SUPPLEMENTAL DISCLOSURE OF
CASH FLOW INFORMATION:
Cash paid during the year for:
Interest $ - $ - $ -
Income taxes $ - $ - $ -
See accompanying summary of significant accounting policies
and notes to financial statements.
F-7
<PAGE>
AURORA ACQUISITIONS INC.
------------------------
(A DEVELOPMENT STAGE COMPANY)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
December 31, 1996
Development stage company
Aurora Acquisitions, Inc. is in the development stage and its financial
statements are prepared in accordance with the applicable provision of
Statements of Financial Accounting Standard No. 7 "Accounting and Reporting for
Development Stage Enterprises".
Cash equivalents
For financial accounting purposes and the statement of cash flows, cash
equivalents include all highly liquid debt instruments with original maturities
of three months or less.
Organization costs
Organization costs have been capitalized and are being amortized over five years
using the straight-line method beginning in February 1992.
Net income (loss) per share
Net loss per share is based on the weighted average number of common shares
outstanding for the periods presented according to the rules of the Securities
and Exchange Commission. Such rules require that any shares sold at a nominal
value prior to a public offering, should be considered outstanding for all
periods presented.
Income taxes
The Company reports income taxes in accordance with SFAS No. 109, "Accounting
for Income Taxes", which requires the liability method in accounting for income
taxes. Deferred tax assets and liabilities arise from the difference between the
tax basis of an asset or liability and its reported amount on the financial
statements.
Deferred tax amounts are determined by using the tax rates expected to be in
effect when the taxes will actually be paid or refunds received, as provided
under currently enacted law. Valuation allowances are established when necessary
to reduce the deferred tax assets to the amounts expected to be realized. Income
tax expense or benefit is the tax payable or refundable, respectively, for the
period plus or minus the change during the period in deferred tax assets and
liabilities.
F-8
<PAGE>
AURORA ACQUISITIONS. INC.
-------------------------
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
Note A: Nature of organization
----------------------
Aurora Acquisitions, Inc. (the Company) was incorporated in Colorado
on February 10, 1992, for the purposes of obtaining capital to take
advantage of business opportunities which have potential for profit.
The Company is currently a development stage enterprise as defined in
Statement No. 7 of the Financial Accounting Standards Board. Since
inception, the Company has been engaged primarily in organizational
and fund raising activities.
During the period ended February 10, 1992 through December 31, 1992,
the Company proposed to file a registration statement in connection
with the proposed sale of its common stock. Subsequently, the Company
abandoned its effort to register and sell the common stock. Costs of
$13,139, incurred in connection with the proposed offering, were
charged to expense and included in the accompanying financial
statements under failed stock offering costs.
Note B: Related party transactions
--------------------------
The Company utilized office space on a rent-free basis from its
president until January 1996. From January 1996 until June 1996 the
Company's Secretary/Treasurer provided the Company office space in his
home on a rent-free basis. Since July 1, 1996, the Company's counsel
has provided the Company with office space on a rent-free basis. It is
not anticipated that this arrangement will change until the Company
successfully concludes a merger or acquisition.
During the year ended December 31, 1996, a principal shareholder paid
an expense for the Company totalling $1,500. The $1,500 capital
contribution is reflected in the accompanying financial statements as
additional paid-in capital.
During 1996, the Company paid $3,000 to a shareholder for consulting
services. The $3,000 is included in the accompanying financial
statements under general and administrative expenses, related party.
During the year ended December 31, 1995, a principal shareholder paid
an expense for the Company totalling $1,500 in consideration for
150,000 shares of common stock.
F-9
<PAGE>
AURORA ACQUISITIONS. INC.
-------------------------
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
Note B: Related party transactions. continued
-------------------------------------
The Company's Board of Directors passed a resolution on March 9, 1992,
in which the Company would lease office space and clerical services
from the President of the Company at a cost of $300 per month from
February 1992 through January 1993. During the year ended December 31,
1993, the president forgave $2,417 due to him by the Company for
rental payments and other related expenses. This arrangement
terminated in January 1996. The Company is currently receiving office
space and clerical services on a rent-free basis from its counsel. The
Company does not anticipate changing this arrangement until the
Company is able to conclude a merger or acquisition.
During 1992, the Company paid $5,000 to a shareholder as compensation
for services provided in organizational and fund-raising activities.
The $5,000 is included in the accompanying financial statements under
general and administrative expenses, related party.
Note C: Income taxes
------------
At December 31, 1996 and 1995, deferred taxes consisted of the
following:
December 31,
---------------------------
1996 1995
---- ----
Deferred tax asset,
Net operating loss carryforward $ 4,372 $ 3,008
Valuation allowance (4,372) (3,008)
--------- ---------
Net deferred taxes $ - $ -
========= =========
The valuation allowance offsets the net deferred tax asset for which
there is no assurance of recovery. The loss carryforwards may not be
available to the Company should its ownership change substantially.
The Company has available, as of December 31, 1996, unused Federal and
State operating loss carryforwards of approximately $29,150 and
$29,150, respectively, which expire through the years 2011 and 2011,
respectively.
F-10
<PAGE>
AURORA ACQUISITIONS. INC.
-------------------------
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS, CONCLUDED
December 31, 1996
Note D: Shareholders' deficit
---------------------
Preferred stock
---------------
The Company is authorized to issue 100,000 shares of $1.00 par value
preferred stock. Preferred stock shareholders receive no cumulative
voting or preemptive rights. No preferred stock had been issued at
December 31, 1996.
Common Stock
------------
The Company is authorized to issue 10,000,000 shares of $0.01 par
value common stock. Common stock shareholders receive one vote for
each outstanding share but receive no cumulative voting or preemptive
rights.
Note E: Forgiveness of debt
-------------------
In addition to the $2,417 forgiven by the president (see Note B),
during the year ended December 31, 1993, $3,165 was forgiven for legal
expenses by the attorneys for the Company. Certain payment to the
attorneys by the Company was contingent on the success of the
Company's public stock offering.
During the year ended December 31, 1994, the former accountants of the
Company signed a note agreeing to accept $2,500 as full payment for
their services. The note reduced the amount owed by the Company by
$5,208, $3,362 for accounting services and $1,846 in accrued interest
on the debt. The $5,208 is included in the accompanying financial
statements as gain on forgiveness of debt.
Note F: Change of Control
-----------------
If the Company is successful in its effort to merge with or acquire an
existing privately held company, the majority of the controls of the
Company may rest with the former shareholders of the merged or
acquired company. Therefore, significant changes may be made to the
present slate of officers and directors of the Company.
F-11
<PAGE>
AURORA ACQUISITIONS INC.
------------------------
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS, CONCLUDED
December 31, 1996
Note G: Going concern
-------------
As of December 31, 1996, the Company had continuing losses from
operations and a deficit in working capital. Management is evaluating
a plan to raise working capital and search for and consummate a merger
with or acquisition of, a private company. There is no assurance that
a suitable candidate will be found.
Various shareholders inject cash into the Company, as needed, to pay
for operating expenses. Management plans to continue this arrangement
until such time as a merger or acquisition, if ever, is consummated.
F-12
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
registrant caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized.
AURORA ACQUISITIONS, INC.
(Registrant)
Date: September 18, 1997 By: /s/ Michael J. Delaney
---------------------------------
Michael J. Delaney,
President and a Director
Date: September 18, 1997 By: /s/ David J. Gregarek
----------------------------------
David J. Gregarek,
Secretary, Treasurer,
and a Director
Date: September 18, 1997 By: /s/ Derrin R. Smith
----------------------------------
Derrin R. Smith, Director
SCHLUETER & ASSOCIATES, P.C.
1050 Seventeenth Street, Suite 1700
Denver, Colorado 80265
(303) 292-3883
Facsimile (303) 296-8880
September 18, 1997
Via EDGAR and Federal Express
- -----------------------------
Richard K. Wulff, Chief
Office of Small Business Policy
Securities and Exchange Commission
450 Fifth Street, NW
Washington, D.C. 20549
Re: Aurora Acquisitions, Inc.
Amendment No. 1 to Registration Statement on Form 10-SB
SEC File No: 0-21025
Dear Mr Wulff:
This letter is in response to the Staff's letter of comment dated August
16, 1996 (the "Comment Letter"), relating to the Form 10-SB filed on behalf of
Aurora Acquisitions, Inc. The Staff's comments have been reproduced below and
numbered in order to facilitate the Staff's review. Please note that after
reviewing the Comment Letter, the Registrant has made extensive revisions to the
Registration Statement in order to more clearly address the issues and concerns
raised by the Staff. The Registrant's responses to those comments are set forth
immediately below each comment.
General Comment
1. To the extent that the registration statement states that it includes
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of 1934 (or otherwise
makes reference to such provisions or to the Litigation Reform Act generally),
please be advised that the staff is not making any determination as to whether
the disclosures (including, e.g., cautionary language or the placement of
disclosures) satisfy the requirements of such Sections.
The Registrant acknowledges the Staff's comment. Management of the
Registrant has represented that they understand that the Staff is not
making any determination as to whether the disclosures (including, e.g.,
cautionary language or the placement of disclosures) satisfy the
requirements of Section 27A of the Securities Act of 1933 and Section 21E
of the Securities Exchange Act of 1934, or the provisions of the Private
Securities Litigation Reform Act of 1995.
Description of Business
2. It is requested that the business section be revised and provide the
reader with full and clear disclosure pertaining to the history, organization
and change of control of the Company.
Under the control of former management, the Company was involved in an
effort to register securities with the Commission and raise funds for the
same purposes that have been set forth in the Form 10-SB. Initial efforts
failed and the Company was inactive for several years. Mr. David Gregarek
<PAGE>
Richard K. Wulff, Chief
Office of Small Business Policy
September 18, 1997
Page 2
was one of the initial shareholders and investors in the Company. After
former management of the Company failed to take steps to execute the
original business plan, Mr. Gregarek indicated to Mr. Jay Boisdrenghien
that he was willing to undertake to register the Company under the
Securities Exchange Act of 1934, as amended, to attempt to find an
appropriate candidate for a "reverse acquisition," to obtain counsel to
represent the Company, and to assemble a management team for the Company.
Mr. Boisdrenghien, a founder, promoter, and principal shareholder of the
Company, agreed to appoint Mr. Gregarek to the Board of Directors and to
bring Mr. Gregarek's proposal before the other members of the Board of
Directors for their consideration. Mr. Gregarek asked the undersigned to
serve as counsel to the Company and to assist with the Company's
registration under the Securities Exchange Act of 1934, as amended (the
"1934 Act") and with a reverse acquisition if a suitable candidate were
found and if satisfactory terms could be negotiated with such a candidate.
The former board of directors issued additional shares of stock to Mr.
Gregarek, Mr. Delaney, and the wife of the undersigned. These shares were
issued in exchange for cash, which was used by the Company to pay for
completion of the necessary audits for registration under the 1934 Act,
fees and expenses of counsel, and other expenses of the Company. As a
result of these issuances and the purchase of shares of common stock from
several of the original shareholders of the Company, control of the Company
has changed. The security ownership of the principal shareholders of the
Company and its officers and directors is set forth in Item 5 of the Form
10-SB.
The Company has added disclosure to the business section to reflect the
"change of control."
Operation of the Company
3. As supplemental information, describe any notices or advertisements
proposed to be used by the Company in its search for business opportunities.
Management of the Company has advised that they do not currently intend to
use any notices or advertisements in their search for business
opportunities. Management intends to contact directly brokerage firms and
business brokers and to solicit potential opportunities from those sources.
Further, Mr. Gregarek in the course of his investing activities is exposed
to various business opportunities that could be of interest to the Company.
It should be emphasized that Mr. Gregarek does not have any particular
opportunities that he intends to present to the Company at this time.
Further, the Company has no plans, arrangements, understandings or
commitments with respect to any such opportunity, and the Company is not
engaged in negotiations with respect to any such opportunity.
4. Consider whether any of the Company's officers, directors or has in the
past used particular consultants (or advisers) on a regular basis and, if so,
advise as to the probability that such officer, director will recommend that the
particular consultant be hired by the Company.
Management of the Company has advised that none of them have in the past
used particular consultants (or advisers) on a regular basis, and that they
do not currently intend to recommend that any particular consultants be
hired by the Company. It is expected that evaluation and analysis of
opportunities will be undertaken by existing management. With respect to
legal matters, each of the officers and directors has engaged Mr. Schlueter
to represent them as counsel in the past, and management expects to
continue to engage Mr. Schlueter as counsel to the Company.
<PAGE>
Richard K. Wulff, Chief
Office of Small Business Policy
September 18, 1997
Page 3
The Registrant has added extensive disclosure to the Registration Statement
to address various matters relating to the evaluation and analysis of
opportunities.
5. Consider the criteria that will be used to hire independent consultants
regarding their experience, the services to be provided, the term of service,
etc. and add appropriate disclosure.
The Company does not currently intend to hire business consultants to
evaluate and analyze business opportunities. It is anticipated that such
evaluation and analysis will be conducted by management of the Company and
its shareholders. Additional disclosure has been included in the
Registration Statement to clarify these matters.
6. Please advise, if the Company has had any discussions and if there are
any agreements or understandings with a particular consultant.
The Company has not had any discussions with, and there are no plans,
arrangements, understandings, commitments or agreements with any
consultants.
7. Please disclose the name of the shareholder who served as a consultant
for the Company in June 1996.
Mr. A. Jay Boisdrenghien was paid $3,000 for providing consulting services
to the Company. Additional disclosure has been added to Item 7 of the
Company's Form 10-SB to address this point, and to include disclosure
concerning the other matters noted in Note B to the financial statements.
Form of Acquisition
8. According to the filing the Company currently has insufficient liquid
asset to pay such costs, certain officers, directors, and affiliates of the
Company have indicated that they will advance such costs on behalf of the
Company in exchange for the issuance of shares of the Company's Common Stock to
such persons or an agreement to repay such costs. Please disclose the names of
the parties that are expected to continue funding the Company's operations
including providing funds necessary to search for acquisition candidates. If
funding is expected to continue, please disclose if there is a dollar cap on the
maximum amount of cash resources available. If there is a cap, please discuss
the Company's plans to obtain alternate cash resources once the cap is reached.
Messrs. David Gregarek and Michael Delaney, who constitute the present
management of the Company, and the Company's counsel-Henry F. Schlueter and
his wife (collectively the "Lending Parties") have advised that they will
pay certain costs and expenses of the Company from their personal funds as
interest free loans. There has been no specific agreement upon a dollar cap
of any such loans by the Lending Parties. Further, the Lending Parties
recognize that the only opportunity to have these loans repaid will be from
a prospective merger or acquisition candidate. The Lending Parties have
agreed among themselves that the repayment of any loans made on behalf of
the Company will not impede, or be made conditional in any manner, to
consummation of a proposed transaction. If the prospective merger or
acquisition candidate either has insufficient capital with which to repay
any such loans or advances or if the Lending Parties are willing to convert
such loans or advances into stock, then such advances or loans may be
converted into stock in whole or in part rather than being repaid by the
acquisition candidate. The Registrant has added additional disclosure to
the Form 10-SB in order to more clearly disclose this information and to
address the Staff's comment. Further, the Registrant has added a risk
factor that points out that the Company has only minimal assets.
<PAGE>
Richard K. Wulff, Chief
Office of Small Business Policy
September 18, 1997
Page 4
9. Please disclose the terms of any loan agreements or understandings.
Copies of any agreements should be filed as an exhibit.
The understandings with respect to any loans made are that such loans will
be non-interest bearing. Since the Company has only minimal assets it is
expected that repayment of any such loans will have to come from the
company or entity that engages in a "reverse acquisition" with the Company.
Additional disclosure has been added to the Registration Statement in
response to this comment. Further, please be advised that there are no loan
agreements or documents. It should be noted that to the extent that shares
are issued to Messrs. Gregarek, Delaney, or Mr. and Mrs. Schlueter for
funds advanced to the Company, such shares will be issued under appropriate
exemptions from federal and state securities laws. Further, the Staff's
attention is directed to the response to Comment No. 8 above.
10. Please disclose if the Company intends to raise the necessary capital
by private placements of restricted stock and/or a public offering of its common
stock. Please advise if the Company contemplates a Reg. S offering.
The Company does not currently intend to raise capital through private
placement of restricted stock, any public offerings of its common stock, or
any off-shore offerings under Regulation S adopted under the Securities Act
of 1933, as amended, prior to the consummation of a transaction with a
merger or acquisition candidate. Appropriate disclosure of these matters
has been made in the amended Form 10-SB in response to this comment.
11. Please indicate, whether or not there are any plans, proposals,
arrangements or understandings with respect to the sale or issuance of
additional securities by the Company prior to the location of an acquisition or
merger candidate.
As noted in the previous responses and in the Registration Statement, there
are no specific plans, arrangements, understandings, or commitments with
respect to the sale or issuance of additional securities by the Company
prior to the location of an acquisition or merger candidate. However, it is
possible that additional securities could be issued to the shareholders of
the proposed merger or acquisition candidate or under some circumstances to
the Lending Parties for advancing funds on behalf of the Company. The
Registrant has added significant additional disclosures in response to this
comment.
12. Consider the probability that there will be a change in control upon
consummation of an acquisition or merger transaction and amend or advise
accordingly. If management plans to offer a controlling interest, this should be
clearly stated.
It is not only possible but likely that a change in control will occur upon
consummation of an acquisition of merger transaction. Appropriate revisions
have been made in the Registration Statement to clarify this point.
13. Consider whether the Company may borrow funds and use the proceeds
therefrom to make payments to the Company's promoters, management or their
affiliates or associates.
<PAGE>
Richard K. Wulff, Chief
Office of Small Business Policy
September 18, 1997
Page 5
Although management of the Company has no present intention to do so, the
Company could borrow funds and use the proceeds therefrom to make payments
to the Company's promoters, management or their affiliates or associates.
An additional risk factor has been included in the Registration Statement
under Part 1, Item 1, to clarify this point. See the risk factor captioned
"Possible Borrowings to Benefit Management, Promoters, or their Affiliates
or Associates.
14. Please disclose, whether or not there is a present potential that the
Company may acquire or merge with a business or company in which the Company's
management or their affiliates or associates directly or indirectly have an
ownership interest. Please consider and disclose whether or not existing
corporate policy permits such transactions. Further, add disclosure as to
whether management is aware of any circumstances under which this policy,
through their own initiative, may be changed.
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
serves 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. A risk factor captioned "Conflicts of
Interest-General" has been added to the Registration Statement in response
to this comment which addresses potential conflicts of interest and the
policy adopted by management in response to this comment. In addition,
disclosures concerning conflicts of interest have been included in Item 5,
under the caption "Conflicts of Interest" in response to this comment.
15. If there is a present potential for the related party transactions
referred to above, it should be set forth. Please explain fully the
circumstances under which a related party transaction may occur. Please discuss
fully the non-arms length nature of such transactions and disclose whether or
not an independent appraisal of the value of the business or company will be
obtained in the event a related party transaction is contemplated. The potential
for management's fiduciary duties to be compromised should be highlighted.
The Staff's attention is directed to the response to comment 14 above and
to the additional disclosures included in the Registration Statement that
address potential conflicts of interest. The Registrant submits that the
additional disclosure in the Registration Statement adequately addresses
the concerns raised by the Staff.
16. Please disclose, if any terms of sale of the shares presently held by
officers and/or directors of the Company will also be afforded to all other
shareholders of the Company on similar terms and conditions.
It is management's present intention to make all reasonable efforts to
afford all shareholders of the Company the opportunity to sell their shares
upon similar terms and conditions of sale as are negotiated by the officers
and directors of the Company for the sale of their own shares. Any and all
such sales will only be made in compliance with the securities laws of the
United States and any applicable state securities laws. Additional
disclosure has been included in the Registration Statement in Item 2, under
the caption " Acquisition of Opportunities" to reflect these facts.
Rights of Dissenting Shareholders
<PAGE>
Richard K. Wulff, Chief
Office of Small Business Policy
September 18, 1997
Page 6
17. Please clarify, if the Company intends to provide the Company's
shareholders with complete disclosure documentation, including audited financial
statements, concerning a target company and its business prior to any merger or
acquisition.
Additional disclosure has been added in the second paragraph under Item 2.
"Plan of Operation" as set forth in the remainder of this paragraph in
response to this comment. The Company's Board of Directors intends to
provide the Company's shareholders with complete disclosure documentation
concerning a potential business opportunity and the structure of the
proposed business combination prior to consummation of the same, which
disclosure is expected to be in the form of a proxy or information
statement. While such disclosure may include audited financial statements
of such a target entity, there is no assurance that such audited financial
statements will be available. The Board of Directors does intend to obtain
certain assurances of value of the target entity assets prior to
consummating such a transaction, with further assurances that an audited
statement would be provided within sixty days after closing of such a
transaction. Closing documents relative thereto will include
representations that the value of the assets conveyed to or otherwise
transferred will not materially differ from the representations included in
such closing documents, or the transaction will be voidable. Further, the
Company will not acquire or merge with any company for which audited
financial statements cannot be obtained within a reasonable period of time
after closing of the proposed transaction. Further, additional disclosure
has been included in the risk factors section and at other places in the
Registration Statement concerning the requirement of audited financial
statements and the fact that the Company will not acquire or merge with any
company for which audited financial statements cannot be obtained within a
reasonable period of time after closing of the proposed transaction.
Employees
18. It is not clear why the discussion of the Company's present address is
in this location. Please revise.
The disclosure has been revised in response to this comment.
Description of Property
19. According to the filing the Company's present address is at the
business address and telephone number of the Company's legal counsel-Schlueter &
Associates, P.C. Please discuss the salient issues of a lease agreement, if any.
A copy of such written agreement should be filed as an exhibit.
The Company operates from the offices of Schlueter & Associates, P.C. at
1050 Seventeenth Street, Suite 1700, Denver, Colorado 80265. This space is
provided to the Company on a rent free basis by Henry F. Schlueter, counsel
to the Company. It is anticipated that this arrangement will remain until
such time as the Company successfully consummates a merger or acquisition.
Management believes that this space will meet the Company's needs for the
foreseeable future. Appropriate disclosure has been included in the
Registration Statement to reflect this arrangement.
20. The salient features of any preliminary agreements or understandings
with respect to the office facility in the future, should be provided.
<PAGE>
Richard K. Wulff, Chief
Office of Small Business Policy
September 18, 1997
Page 7
The Staff's attention is directed to the response to comment 19 set forth
above and to the disclosure included in the Registration Statement.
21. According to Note B to the financial statements the Company is
currently receiving office space and clerical services on a rent-free basis from
the president. Please reconcile this to the disclosure throughout the filing.
The footnote to the financial statements is in part correct, and in part
incorrect. Prior to Mr. Gregarek becoming a director and secretary and
treasurer of the Registrant, the Company's former president, Jay
Boisdrenghien was providing such space on a rent free basis. After assuming
control of the Company Mr. Gregarek provided the Company with office space
at his home on a rent free basis until June 30, 1996, and then commencing
in July of 1996, Henry F. Schlueter, the Company's counsel began to provide
the Company with office space on a rent free basis. The disclosure in the
Registration Statement has been revised to reflect this information.
22. This section should be expanded to note that the president forgave
$2,417 due to him by the Company for rental payments and other related expenses.
Additional disclosure has been included in the Registration Statement in
response to this comment.
Directors, Executive Officers, Promoters and Control Persons
23. Michael J. Delaney is listed as president of the Company in the table,
however the five year history discussion states he is the Vice President and
Director of the Company since January 6, 1996. Please revise.
Mr. Delaney has served as the Company's President since January 6, 1996.
The Registration Statement has been revised to properly reflect this fact.
24. According to the filing Mr. Delaney has served as the owner and
president of a sales representative and consulting firm. Please identify the
firm.
The name of Mr. Delaney's firm is MD Sales.
25. According to the filing the officers and directors have been involved
with several blank check companies over the years. Please provide supplemental
information and a discussion to include for each blank check company the date of
the initial public offering, offering price, aggregate dollar amount raised,
purpose of the offering, any mergers or acquisitions that have occurred, dates
of such transactions, consideration given and received and management's
subsequent involvement in each company.
The Staff will be provided with the information requested on a supplemental
basis.
Market Price of and Dividends on the Registrant's Common Equity
26. Please disclose, if correct, that there are no plans, proposals,
arrangements or understandings with any person with regard to the development of
a trading market in any of the Company's securities.
<PAGE>
Richard K. Wulff, Chief
Office of Small Business Policy
September 18, 1997
Page 8
The Staff's attention is directed to Part II, Item 1, which has been
extensively revised in response to this comment. Further, additional
changes have been made to certain other parts of the Registration Statement
in response to this comment. There is no trading market for the Company's
Common Stock at present and there has been no trading market to date.
Management has not undertaken any discussions, preliminary or otherwise,
with any prospective market maker concerning the participation of such
market maker in the aftermarket for the Company's securities and management
does not intend to initiate any such discussions until such time as the
Company has consummated a merger or acquisition. There is no assurance that
a trading market will ever develop or, if such a market does develop, that
it will continue.
27. According to the filing the Company has 10 holders of record of its
common stock. Please provide as supplemental information a copy of the Company's
Shareholders List with the following information:
l. The identification and location (by state) of each shareholder. The
shareholders list should provide the name, address and the number of
shares owned.
2. The identification and location (by state) of each shareholder who
received securities; Please indicate if such securities were
purchased, gifted or issued as a payment of debt for services rendered
for the company etc.
3. A tabulation, state by state, of the number of security holders.
4. It is requested that the shareholders information be updated to the
most recent possible date.
The supplemental information requested above will be provided under
separate cover to the Staff.
Directors and Officers of Registrant
28. State the nature of any family relationship between any director or
executive officer and any other director or executive officer.
There are no family relationships between any director or executive officer
and any other director or executive officer. A statement to this effect has
been included in the Registration Statement.
29. Please advise, supplementally how present management became acquainted
with former management and promoters of the Company and their affiliation if any
should be provided.
The Staff's attention is directed to the response to comment 2 above for
information concerning Mr. Gregarek's involvement, and the participation of
the other officers and directors. As noted in response 2 above, Mr.
Gregarek approached Mr. Delaney to serve on the Board of Directors and as
an officer of the Company. Mr. Gregarek approached Mr. Schlueter about
serving as counsel to the Company, and at Mr. Gregarek's request, Mr.
Schlueter approached Mr. Smith about serving on the Board of Directors.
Messrs. Gregarek, Delaney, and Smith all were and are clients of Mr.
Schlueter's law firm.
30. Please confirm, that there are no agreements or understandings for any
officer or director to resign at the request of another person and that none of
the officers or directors are acting on behalf of or will act at the direction
of any other person.
<PAGE>
Richard K. Wulff, Chief
Office of Small Business Policy
September 18, 1997
Page 9
Management has advised that there are no agreements or understandings for
any officer or director to resign at the request of another person and that
none of the officers or directors are acting on behalf of or will act at
the direction of any other person.
31. Please provide, full and clear disclosure concerning all persons whose
activities will be material to the operations of the Company.
The Registrant believes that it has provided full and clear disclosure
concerning all persons whose activities will be material to the operation
of the Company.
32. Identify all promoters of the Company and indicate that these are the
only promoters of the Company.
Disclosure has been included to the effect that Messrs. Gregarek, Delaney,
Smith, and the Company's legal counsel and his wife may be deemed promoters
and parents of the Company. The additional disclosure with respect to Mr.
Schlueter and his wife has been made in order to avoid any possibility that
the Staff or a third party might argue that Mr. Schlueter and his wife were
undisclosed promoters or parents of the Registrant. In this regard, the
Staff's attention is directed to the response to comment 35 below.
Securities Ownership of Management and Certain Securityholders
33. Please advise why the officers and directors are listed as having the
same address, inasmuch as the address is not the Company's address.
The Registrant is aware of numerous filings made with the Commission under
the Securities Act of 1933, as amended, and under the Securities Exchange
Act of 1934, as amended, in which the officers and directors of the Company
list the Company's address as their addresses. However, the mailing
addresses of each of the officers and directors have been included in the
filing in response to this comment.
34. It is interesting to note that Mr. Delaney, is listed as President of
the Company and yet he holds the least amount of stock, appears to have least
amount of working experience, will devote only such time as is available to the
Company and finally it would appear that the day to day activities of the
Company will be conducted at Mr. Schlueter's office.
We assume that the thrust of these questions is whether Mr. Delaney will be
able to adequately perform his duties within the Company because he is
physically located in California, and the other two directors are residents
of the Denver area. Management believes that through the use of fax,
telephone, e-mail, and when appropriate Mr. Delaney traveling to Denver he
will be able to adequately perform his duties. Please note that neither of
the Company's two officers will be devoting full-time to the business and
affairs of the Company. Appropriate disclosure of the part-time involvement
of management has been made in the Registration Statement.
35. Please clarify Mr. and Mrs. Schlueter's involvement in the day to day
activities with the Company. Please advise if they may be deemed promoters. Upon
receipt we will have further comments.
The Staff's attention is directed to the response to comment 32 above. Mr.
Schlueter is counsel to the Company, and he is not an officer or director
of the Company. As counsel to a Company whose primary activity during the
current fiscal year has involved registration under the Securities Exchange
<PAGE>
Richard K. Wulff, Chief
Office of Small Business Policy
September 18, 1997
Page 10
Act of 1934, he has worked closely with management of the Company in this
process and rendered the legal advice to management in connection with this
process. Mr. Schlueter's wife is a significant shareholder. However, she
has no involvement with the day to day activities of the Company. She holds
her shares for investment purposes only. Management decisions are made by
the Board of Directors and the officers of the Company. Mrs. Schlueter has
no involvement with any of those decisions, and Mr. Schlueter's involvement
is as counsel to the Company, providing management with legal advice and
counsel. Mr. Schlueter may be deemed to be the beneficial owner of Mrs.
Schlueter's shares, based upon their relationship as husband and wife and
the fact that she may be expected to solicit Mr. Schlueter's views in
connection with the voting of her shares. The additional disclosure with
respect to Mr. Schlueter and his wife as promoters and parents of the
Registrant has been made in order to avoid any possibility that the Staff
or a third party might argue that Mr. Schlueter and his wife were
undisclosed promoters or parents of the Registrant.
Description of Securities to be Registered
36. Please consider, the circumstances under which the Company's securities
may be issued to management, promoters or their affiliates or associates, and
amend or advise accordingly. We note the very large amount of authorized but
unissued common stock which may be issued without further shareholder approval
or notice.
Revisions have been made in the Registration Statement to reflect the fact
that additional shares of stock may be issued without shareholder approval.
Shares Eligible for Future Sale
37. Supplementally, please furnish the staff copies of the executed lock-up
agreements.
Copies of the executed lock-up agreements will be furnished to the Staff
supplementally.
Recent Sales of Unregistered Securities
38. The number of shares owned by various individuals in this section do
not reconcile to other portions of the filing. Please revise and advise.
Certain of the individuals noted in the principal shareholders section
acquired some or all of their shares in private transactions from other
shareholders of the Company. Accordingly, this information will not
reconcile to the information about prior unregistered sales by the Company.
General Comment
39. An amendment to the Form 10-SB should be filed in response to these
comments. You should be aware that we may have additional comments based upon
your response.
Management is aware that the Staff may have further comments upon review of
this filing.
<PAGE>
Richard K. Wulff, Chief
Office of Small Business Policy
September 18, 1997
Page 11
If you have any further questions or if we may be of any further
assistance, please do not hesitate to contact the undersigned at the Denver
address and telephone number set forth above.
Sincerely,
SCHLUETER & ASSOCIATES P.C.
/s/ Henry F. Schlueter
---------------------------------------------
Henry F. Schlueter
HFS/emd
Enclosures
c: Aurora Acquisitions, Inc.
Cordavano and Company, P.C.
