U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 2
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 Identification No.)
incorporation or organization)
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
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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 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.
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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
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.
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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
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
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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.
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 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
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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
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.
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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
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.
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<PAGE>
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
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.
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<PAGE>
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.
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.
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<PAGE>
Percent
Name and address Number of of
of owner shares Class
-------- ------ -----
David J. Gregarek 570,208 53.79%
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 0.94%
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 640,208 60.40%
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:
<TABLE>
Tenure as Officer
Name Age Position(s) or Director
---- --- ----------- -----------
<S> <C> <C> <C>
Michael J. Delaney 40 President January 6, 1996
and a Director to Present
David J. Gregarek 43 Secretary, Treasurer January 6, 1996
and a Director Present
Derrin R. Smith, Ph.D. 42 Director January 6, 1996
to Present
</TABLE>
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.
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<PAGE>
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
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. Mr. Delaney also has served
on the Boards of Directors of the following blank check companies:
Maui Capital Corporation ("Maui") conducted its initial public offering in
May 1989 and raised gross proceeds of $250,000 through the sale of 50,000,000
units at $0.005 per unit, with each unit consisting of one share of common stock
and one warrant to purchase common stock. Mr. Delaney served as Vice President
and a director of Maui from May 1990 until his resignation in September 1995
when Maui, through a wholly owned subsidiary, merged with Charter Communications
International, Inc. In January 1996, Maui acquired 90% of the stock of Phoenix
DataNet, Inc. ("PDN"). In March 1996, Maui merged with Phoenix Data Systems,
Inc. ("Phoenix"), the former parent of PDN, and in conjunction with that merger,
Maui acquired the remaining 10% of the stock of PDN. In May 1996, Maui changed
its name to Charter Communications International, Inc. ("Charter") which
currently trades on the Nasdaq Bulletin Board under the symbol CHTD.
Parkway Capital Corporation ("Parkway") conducted its initial public
offering in February 1988 and raised gross proceeds of $200,000 through the sale
of 20,000,000 units at $0.01 per unit, each unit consisting of one share of
common stock and two warrants to purchase common stock. Mr. Delaney served as
secretary/treasurer and a director of Parkway for a very brief period in 1994.
In October 1994, Parkway was merged into QCS Corporation, which currently trades
on the Nasdaq Bulletin Board under the symbol QCSC.
David J. Gregarek has served as Secretary, Treasurer and a Director of the
Company since January 6, 1996. Mr. Gregarek only devotes such time as is
available to the business of the Company. Mr. Gregarek also has served on the
Boards of Directors of the following blank check companies:
Bellview Capital Corporation ("Bellview") conducted its initial public
offering in August 1986 and raised gross proceeds of $150,000 through the sale
of 15,000,000 units at $0.01 per unit, each unit consisting of one share of
common stock and one warrant to purchase common stock. On February 27, 1987,
Bellview acquired the assets of Associated Ancillary Service, Inc., and changed
its name to Medical Ancillary Services, Inc. Mr. Gregarek served as a director
of Medical Ancillary Services, Inc. until his resignation in August 1987.
Medical Ancillary Services, Inc. is not a 1934 Act reporting company.
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<PAGE>
Clearview Capital Corporation ("Clearview") conducted its initial public
offering in June 1987 and raised gross proceeds of $200,000 through the sale of
20,000,000 units at $0.01 per unit, with each unit consisting of one share of
common stock and two warrants to purchase common stock. Effective January 19,
1988, Clearview merged with Arriba Fajita, Inc., the operator 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. in June 1988. Arriba Fajita Holdings, Inc. is not a 1934 Act
reporting company.
Ferrari Capital, Ltd. ("Ferrari") conducted its initial public offering in
1987 or early 1988 and raised gross proceeds of $125,000 through the sale of
12,500,000 units at $0.01 per unit, each unit consisting of one share of common
stock and one warrant to purchase common stock. Mr. Gregarek resigned from the
Board of Directors of Ferrari in 1989. Ferrari has been administratively
dissolved by the Colorado Secretary of State.
Parkway Capital Corporation ("Parkway") is described above in the resume of
Michael J. Delaney. Mr. Gregarek served as President and a director of Parkway
from inception until March 1994 when Mr. Gregarek sold 19,160,000 shares of
Parkway for a price of $0.001 per share, or $19,491, thereby effecting a change
in control of Parkway, and resigned from its Board of Directors.
Maui Capital Corporation ("Maui") is described above in the resume of
Michael J. Delaney. Mr. Gregarek served as President and a director of Maui from
inception until September 1995 when Maui, through a wholly owned subsidiary,
merged with Charter Communications International, Inc. and Mr. Gregarek resigned
from its Board of Directors.
JNS Marketing, Inc. ("JNS") conducted its initial public offering in July
1984 and raised gross proceeds of $283,320 through the sale of 283,320 units at
$1.00 per unit, with each unit consisting of one share of common stock and two
warrants to purchase common stock. From inception through the fiscal year ended
September 30, 1988, JNS was engaged in the business of searching for and
obtaining, on a buyout basis or a right to market basis, products to be sold to
the general public primarily through the television media. Since 1989, JNS has
not engaged in any business or had any revenues, and its sole activity has been
to seek to acquire assets of or an interest in a company or venture actively
engaged in a business generating revenues or having immediate prospects of
generating revenues. JNS is a 1934 Act reporting 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.
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<PAGE>
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.
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
-15-
<PAGE>
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.
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.
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<PAGE>
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.
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.
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<PAGE>
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
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
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<PAGE>
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 twelve (12) 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.
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.
-19-
<PAGE>
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.
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
-20-
<PAGE>
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
- ----------------------
* Previously filed.
-21-
<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: January 27, 1998 By: /s/ Michael J. Delaney
----------------------
Michael J. Delaney, President
and a Director
Date: January 27, 1998 By: /s/ David J. Gregarek
----------------------
David J. Gregarek, Secretary,
Treasurer, and a Director
Date: January 27, 1998 By: /s/ Derrin R. Smith
---------------------
Derrin R. Smith, Director
-22-
