<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 17, 1997
REGISTRATION NO. 33-88270
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 1
FORM SB-2
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
------------------------
SCHUYLKILL ENTERPRISES, INC.
(Exact name of registrant as specified in its charter)
------------------------
<TABLE>
<S> <C> <C>
DELAWARE 6770 23-2751054
(State or other jurisdiction of (Primary Standard (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification
Number)
</TABLE>
401 CITY AVENUE
SUITE 725
BALA CYNWYD, PA 19004
(610) 660-5900
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive officer and principal place of business)
MR. LEONARD LINSKER
PRESIDENT
SCHUYLKILL ENTERPRISES, INC.
401 CITY AVENUE
SUITE 725
BALA CYNWYD, PA 19004
(610) 660-5900
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
WITH COPY TO:
MICHAEL C. FORMAN, ESQUIRE
KLEHR, HARRISON, HARVEY, BRANZBURG & ELLERS
1401 WALNUT STREET
PHILADELPHIA, PA 19102
(215) 569-6060
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APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC: As soon as practicable
following the date on which this Registration Statement becomes effective.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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<PAGE>
SCHUYLKILL ENTERPRISES, INC.
CROSS REFERENCE SHEET
PURSUANT TO ITEM 501(B) OF REGULATION S-B
<TABLE>
<CAPTION>
REGISTRATION STATEMENT ITEM NUMBER AND CAPTION LOCATION IN PROSPECTUS OR PAGE
- ------------------------------------------------------ ------------------------------------------------------
<S> <C>
1. Forepart of the Registration Statement and Outside Forepart of the Registration Statement; Outside Front
Front Cover Page of Prospectus Cover Page of Prospectus
2. Inside Front and Outside Back Cover Pages of Inside Front and Outside Bank Cover Pages of
Prospectus Prospectus
3. Summary Information and Risk Factors Prospectus Summary; Risk Factors; Plan of Distribution
4. Use of Proceeds Prospectus Summary; Use of Proceeds
5. Determination of Offering Price Cover Page of Prospectus; Risk Factors; Plan of
Distribution
6. Dilution Dilution; Risk Factors
7. Selling Security Holders N/A
8. Plan of Distribution Cover Page of Prospectus; Description of Securities;
Risk Factors; Plan of Distribution
9. Legal Proceedings N/A
10. Directors, Executive Officers, Promoters and Management; Certain Transactions
Control Persons
11. Security Ownership of Certain Beneficial Owners Management; Principal Stockholders
and Management
12. Description of Securities Description of Securities
13. Interest of Named Experts and Counsel N/A
14. Disclosure of Commission position on Statement on Indemnification; Part II; Item
Indemnification for Securities Act Liabilities 24-Indemnification of Directors and Officers
15. Organization within Last Five Years Certain Transactions
16. Description of Business Proposed Business
17. Management's Discussion and Analysis of Plan of Management's Discussion and Analysis of Financial
Operation Condition and Results of Operations
18. Description of Property Proposed Business
19. Certain Relationships and Related Transactions Certain Transactions
20. Market for Common Equity and Related Stockholder N/A
Matters
21. Executive Compensation Management
22. Financial Statements Capitalization; Summary Financial Information;
Financial Statements; Prospectus Summary
23. Changes in and Disagreements with Accountants on N/A
Accounting and Financial Disclosure
</TABLE>
<PAGE>
SUBJECT TO COMPLETION July 17, 1997
SCHUYLKILL ENTERPRISES, INC.
100,000 UNITS
OFFERING PRICE $1.00 PER UNIT
Each Unit (individually, a "Unit", and collectively, the "Units") offered
hereby by Schuylkill Enterprises, Inc. (the "Company") consists of one share of
Common Stock, $.001 par value (the "Common Stock"), and five Redeemable A
Warrants (the "Warrants"), which , subject to the restrictions set forth below,
are immediately detachable and transferable separately upon issuance. Each
Warrant entitles the holder to purchase at any time, until the first anniversary
of the date of this Prospectus (the "Warrant Expiration Date"), one share of
Common Stock at an exercise price of $2.50 per share (the "Exercise Price"). The
Warrants are subject to redemption by the Company at any time at a price of
$.001 per Warrant upon 30 days' prior written notice to the holders thereof. Any
Warrant not exercised by the Warrant Expiration Date will expire. The minimum
subscription hereunder is 100 Units.
The Units are being offered on a "all or none" basis. Accordingly, unless
all of the Units offered hereby are sold by , 1997 (90 days after the
Effective Date (as hereinafter defined)), all proceeds will be promptly returned
to investors hereunder without deductions for commissions or expenses (the
"Offering Expenses") but including interest as provided herein; provided,
however, such offering period may be extended for an additional 60 days until
, 1997 in the sole discretion of the Company. Such offering period,
including any extension thereof, is referred to herein as the "Offering Period."
Proceeds from the sale of the Units will be transmitted by 12:00 P.M. noon of
the business day following receipt to the Company's Escrow Account at
Bank, the Company's escrow agent (the "Escrow Agent"). During the Offering
Period, subscribers will not have the right to have their subscriptions
returned.
No Units may be purchased by the officers, directors or principal
shareholders of the Company and the Company knows of no person or group of
persons who is likely to purchase, beneficially own or control any portion of
the securities offered hereunder.
The Company is conducting a blank check or blind pool offering (the
"Offering") pursuant to Rule 419 ("Rule 419") of Regulation C, promulgated under
the Securities Act of 1933, as amended (the "Securities Act"). Pursuant to Rule
419, (i) the Company is required to deposit in an escrow or trust account (the
"Escrow Account") the net proceeds of the Offering (after deduction for
underwriting compensation, and underwriting expenses, if any, of the Offering)
(the "Deposited Funds"), and (ii) the Units to be issued to investors (the
"Deposited Securities"). No underwriting commissions or expenses will be paid by
the Company. See -"PLAN OF DISTRIBUTION." Assuming that all Units offered
hereunder are sold, the proceeds of the Offering will be $100,000. While held in
the Escrow Account, the Deposited Securities may not be traded or transferred.
Except for an amount equal to up to 10% of the Deposited Funds ($10,000), which
is otherwise releasable to the Company under Rule 419, the Deposited Funds and
the Deposited Securities may not be released until an acquisition meeting
certain specified criteria described herein has been made and a sufficient
number of investors reconfirm their investment in accordance with the procedures
set forth in Rule 419 (the "Escrow Period"). Pursuant to Rule 419, a new
prospectus, which describes an acquisition candidate and its business and
includes audited financial statements of such candidate, will be delivered to
all investors hereunder. The Company will return the pro rata portion of the
Deposited Funds to any investor who does not elect to remain an investor. Unless
a sufficient number of investors elect to remain investors, all investors will
be entitled to the return of a pro rata portion of the Deposited Proceeds
(including any interest earned thereon) and none of the Deposited Securities
will be issued to investors. In the event an acquisition is not consummated
within 18 months of the effective date (the "Effective Date") of the
registration statement of which this Prospectus is a part
1
<PAGE>
(the "Registration Statement"), the Deposited Funds will be returned on a pro
rata basis to all investors. See "RISK FACTORS" and "PLAN OF DISTRIBUTION".
THE SECURITIES OFFERED HEREBY ARE SPECULATIVE AND INVOLVE A HIGH DEGREE OF
RISK. SEE "RISK FACTORS".
There is no public market for the securities offered hereby and no assurance
can be given that a trading market will develop following the completion of this
Offering or if developed, will be sustained. The Company currently has no plans
to list the Common Stock for quotation on any stock exchange or automated
quotation system. The Offering Price of the Units has been arbitrarily
determined by the Company and may bear no relation to the assets, book value of
the Company or any other recognized indicia of value. See "PLAN OF DISTRIBUTION"
for information regarding the factors considered in determining such Offering
Price.
THE UNITS HAVE BEEN REGISTERED ONLY UNDER THE SECURITIES LAW OF THE STATE OF
NEW YORK, AND MAY ONLY BE TRADED IN SUCH STATE. PURCHASERS OF SUCH SECURITIES,
EITHER IN THIS OFFERING OR IN ANY SUBSEQUENT TRADING MARKET THAT MAY DEVELOP,
MUST BE RESIDENTS OF THE STATE OF NEW YORK. THE COMPANY WILL AMEND THIS
PROSPECTUS FOR THE PURPOSE OF DISCLOSING ADDITIONAL STATES, IF ANY, IN WHICH THE
COMPANY'S SECURITIES HAVE BEEN REGISTERED OR ARE EXEMPT FROM REGISTRATION.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION (THE "COMMISSION") NOR HAS THE COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
PRICE TO UNDERWRITING
PUBLIC COMMISSION (1) PROCEEDS TO COMPANY
-------------- ------------------- --------------------
<S> <C> <C> <C>
Per Unit................................................... $ 1.00 $ 0 $ 1.00
Total Maximum.............................................. $ 100,000 $ 0 $ 100,000
</TABLE>
- ------------------------
(1) The Units are being offered by the Company through its directors and
officers, who will not receive any separate compensation therefor. No
underwriter, broker or dealer has been retained or is under any obligation
to purchase any of the Units being offered hereby. The Units are offered on
a "all or none" basis. Proceeds from the sale of the Units will be
transmitted by 12:00 P.M. noon of the business day following the receipt
thereof to the Escrow Agent. During the Offering Period, subscribers will
not have the right to have their subscriptions returned.
The Units are being offered subject to prior sale, allotment and withdrawal,
cancellation or modification of the Offering, without notice and subject to the
approval of legal matters by counsel, and to certain other conditions. The
Company reserves the right to reject any orders , in whole or in part, for the
purchase of the Units.
THE DATE OF THIS PROSPECTUS IS ___________, 1997.
THIS OFFERING IS BEING CONDUCTED DIRECTLY BY THE COMPANY WITHOUT THE USE OF AN
UNDERWRITER. NO DEALER, SALESPERSON OR OTHER PERSON IS AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THIS OFFERING , AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION
OF AN OFFER TO BUY ANY OF THE SECURITIES
2
<PAGE>
OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE
SUCH AN OFFER OR SOLICITATION IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE ANY
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE
THE EFFECTIVE DATE.
IN THE EVENT ANY MATERIAL CHANGES OR TRANSACTIONS NOT MENTIONED HEREIN
ARISE, THE COMPANY WILL AMEND THIS PROSPECTUS AND THE REGISTRATION STATEMENT, OF
WHICH THIS PROSPECTUS IS A PART, THROUGH THE FILING OF POST-EFFECTIVE
AMENDMENTS, INDICATING THE EXISTENCE OF ANY SUCH MATERIAL CHANGES OR
TRANSACTIONS THAT ARE NOT REFLECTED OR CONTAINED HEREIN.
NONE OF THE COMPANY'S OFFICERS, DIRECTORS, PROMOTERS, OR AFFILIATES HAVE HAD
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. THE COMPANY SHALL, AS REQUIRED BY LAW, PROVIDE
ITS SHAREHOLDERS WITH COMPLETE DISCLOSURE DOCUMENTATION, INCLUDING AUDITED
FINANCIAL STATEMENTS, CONCERNING A PROPOSED BUSINESS COMBINATION PRIOR TO THE
CONSUMMATION OF ANY SUCH PROPOSED BUSINESS COMBINATION.
The Company intends to distribute to its stockholders' annual reports
containing financial statements that have been certified by its independent
accountant and may, in its discretion, distribute quarterly reports containing
unaudited financial information for each of the first three quarters of each
year.
3
<PAGE>
PROSPECTUS SUMMARY
The following summary is not intended to include all material information
relating to the Offering and is qualified in its entirety by reference to the
detailed information, including financial statements, contained elsewhere in
this Prospectus.
THE COMPANY AND ITS PROPOSED BUSINESS
The Company was organized under the laws of the State of Delaware on
November 22, 1993. The Offering is a blind pool or blank check offering (a
"Blank Check Offering") in that neither the Company's business nor the specific
use of the proceeds of this Offering (the "Offering Proceeds") have been
identified (other than, generally, to enter into a Business Combination (as
hereinafter defined)). Since the Company was organized in 1993, it has conducted
no business activities and its future development depends entirely upon its
ability to participate in Business Combinations, none of which have yet been
identified. The Company intends, upon the completion of this Offering, to seek
potential Business Combinations that, in the opinion of management, will be in
the best interests of the Company. Such potential Business Combinations may be
carried out in the form of the acquisition of an existing business and/or the
acquisition of assets to establish a business for the Company. The Company may
acquire, be acquired, merge into, be merged with (as an acquiring company or as
a target company), invest in or participate in any business combination with
corporations, partnerships, trusts, individuals or other entities (collectively,
"Business Combinations"). As of the date hereof, the Company has no plan,
proposal, agreement, understanding or arrangement to enter into any specific
Business Combination and has not identified any specific business, type of
business or company for evaluation for a possible Business Combination.
SECURITIES OFFERED
The Offering consists of 100,000 Units, each Unit consisting of one share of
Common Stock and five Warrants at an Offering Price of $1.00 per Unit. Each
Warrant entitles the holder thereof to purchase one share of Common Stock at an
exercise price of $2.50 per share, at any time before the first anniversary of
this Prospectus. Each Warrant is immediately detachable and transferable
separately following the release thereof by the Escrow Agent upon completion of
this Offering.
As of the date hereof, the Company had 10,000,000 shares of authorized
Common Stock, of which 900,000 shares were issued and outstanding, and 2,000,000
shares of authorized Preferred Stock, par value $.001 per share (the "Preferred
Stock"), of which none were issued and outstanding. Following the consummation
of this Offering, there will be an aggregate total of 1,000,000 shares of Common
Stock (1,500,000 shares in the event that all Warrants issued hereunder are
exercised prior to the Warrant Expiration Date) and no shares of Preferred stock
issued and outstanding. See "Capitalization."
The Company has no plans, proposals, arrangements or understanding with
regard to the development of a trading market in any of the Company's
securities. See "Risk Factors--Risks Related to Penny Stocks" and "Risk
Factors--Lack of Trading Market."
DIVIDENDS
The Company does not anticipate paying dividends on its Common Stock in the
foreseeable future. Future dividends will depend on earnings, if any, of the
Company, its financial requirements and other factors. The Company's management
intends to retain all earnings, if any, for use in the Company's operation.
Investors who anticipate the need of an immediate income from their investment
in the Company's Common Stock should not purchase the securities offered hereby.
See "DIVIDEND POLICY."
4
<PAGE>
USE OF PROCEEDS
Pursuant to Rule 419, and subject to certain limited exceptions, the net
proceeds of this Offering will be held in an Escrow Account by the Escrow Agent.
Once released from the Escrow Account in accordance with Rule 419, the net
proceeds will be utilized to defray the costs of preparing and filing periodic
reports under the Securities Exchange Act of 1934 (the "Exchange Act") and for
working capital of the Company to be used to identify and effect one or more
Business Combinations. See "RISK FACTORS," "PROPOSED BUSINESS" and "USE OF
PROCEEDS."
RIGHT OF INVESTORS TO RECONFIRM INVESTMENT UNDER RULE 419
DEPOSIT OF DEPOSITED FUNDS AND DEPOSITED SECURITIES
Pursuant to Rule 419, the Deposited Funds and the Deposited Securities will
be held in an Escrow Account governed by an escrow agreement (the "Escrow
Agreement") that contains certain terms and provisions specified by Rule 419.
The Deposited Funds and Deposited Securities will be released to the Company and
to investors, respectively, only after the Company has met the following three
conditions:
(1) The Company has executed an agreement for a Business Combination meeting
certain prescribed criteria;
(2) The Company has successfully completed a reconfirmation offering
pursuant to which investors holding at least 80% of the Units reconfirm their
desire to remain as investors after evaluation of the proposed Business
Combination (the "Reconfirmation Offering"); and
(3) The Business Combination has been consummated.
See "Prescribed Acquisition Criteria" and "Reconfirmation Offering".
Accordingly, the Company has entered into an Escrow Agreement with the
Escrow Agent, which provides, among other things, that:
(1) The net proceeds of this Offering will be deposited into the Escrow
Account after the consummation of this Offering. The Deposited Funds and
interest or dividends thereon, if any, will be held for the sole benefit of the
investors hereunder and may be invested by the Escrow Agent only in bank
deposits, money market funds or federal government securities or securities for
which the principal or interest is guaranteed by the federal government.
(2) All securities issued in connection with this Offering and any other
securities issued with respect thereto (including securities issued with respect
to stock splits, stock dividends or similar rights, if any) will be (a)
certificated in the name of the investors and (b) deposited directly into the
Escrow Account promptly after issuance and held for the sole benefit of the
investors, who shall retain the voting rights, if any, with respect to the
securities held in their respective names. Neither the Deposited Securities nor
any interest therein held in the Escrow Account may be transferred or disposed
of other than by will or the laws of descent and distribution, or pursuant to a
qualified domestic relations order as defined by the Internal Revenue Code of
1986, as amended (the "Code") or Table 1 of the Employee Retirement Income
Security Act ("ERISA").
(3) The Warrants issued to investors as part of the Units hereunder may be
exercised in accordance with their terms during the escrow period; provided,
however, that the Common Stock received upon exercise of any such Warrants,
together with the Exercise Price, must be promptly deposited into the Escrow
Account.
5
<PAGE>
PRESCRIBED ACQUISITION CRITERIA
Rule 419 requires that before the Deposited Funds and the Deposited
Securities may be released to the Company and the investors, respectively,
the Company must first execute an agreement or agreements with respect to a
Business Combination meeting certain specified criteria. Such agreement or
agreements must provide for the acquisition of a business or the assets of a
business with a fair value representing at least 80% of the maximum Offering
Proceeds (including funds received or to be received from the exercise of
Warrants, but excluding underwriting commissions, underwriting expenses and
dealer allowances payable to non-affiliates, none of which commissions,
expenses or allowances are expected in this Offering, which is being
conducted directly by the Company). Therefore, for purposes of Rule 419 and
the Offering, the fair value of the business or assets to be acquired by the
Company must be at least $1,080,000. The acquisition agreement will provide
as a conditions precedent to consummating the Business Combination, investors
representing at least 80% of the maximum Offering Proceeds must elect to
reconfirm their investment. See " --Reconfirmation Offering." Once an
acquisition agreement (or agreements) meeting the above criteria has been
executed, the Company must successfully complete the required Reconfirmation
Offering and consummate such Business Combination. The net proceeds from this
Offering, even assuming the exercise of all of the Warrants, are not expected
to be sufficient to fund a Business Combination, unless the Company is
acquired by another company. Consequently, it is likely that the Company will
be required to raise substantial additional financing in order to consummate
a Business Combination. There can be no assurance that the Company will be
able to obtain such financing in a timely manner or on acceptable terms. See
"RISK FACTORS--Need for Additional Financing."
POST-EFFECTIVE AMENDMENT
Once the agreement or agreements governing the acquisition of a business or
businesses meeting the above criteria has been executed, Rule 419 requires the
Company to update the Registration Statement with a post-effective amendment
(the "Post Effective Amendment"). The Post Effective Amendment must contain
certain information regarding (i) the proposed acquisition candidate and its
business ( including audited financial statements); (ii) the results of this
Offering; and (iii) the use of funds disbursed from the Escrow Account. The Post
Effective Amendment must also describe the terms of the Reconfirmation Offer
required by Rule 419. The Reconfirmation Offer must include certain prescribed
conditions, each of which must be satisfied before the Deposited Funds and
Deposited Securities can be released from escrow. The Post Effective Amendment
is subject to prior review by the Securities and Exchange Commission (the
"Commission") and must be declared effective by the Commission before the
Company can proceed with the Reconfirmation Offer.
RECONFIRMATION OFFERING
The Reconfirmation Offer must commence within five business days after the
effective date of the Post Effective Amendment. Pursuant to Rule 419, the terms
of the Reconfirmation Offer must include the following conditions:
(1) The prospectus contained in the Post Effective Amendment will be sent to
each investor whose securities are held in the Escrow Account within five
business days after the effective date of the Post Effective Amendment;
(2) Each investor will have not less than 20, and not more than 45, business
days from the effective date of the Post Effective Amendment to notify the
Company in writing that the investor elects to remain an investor;
(3) If the Company does not receive written notification from any investor
within 45 business days following the effective date of the Post Effective
Amendment, the investor's pro rata portion of the Deposited Funds (and any
related interest or dividends) will be returned to the investor within five
business days by first class mail or other equally prompt means;
6
<PAGE>
(4) The Business Combination will be consummated only if investors
representing 80% of the maximum Offering Proceeds (including funds received or
to be received from the exercise of Warrants, or an aggregate of $1,080,000)
elect to reconfirm their investments; and
(5) If a Business Combination has not been consummated by [ ,
1998] (18 months after the date of this Prospectus), each investor's pro rata
portion of the Deposited Funds will be returned within five business days by
first class mail or other equally prompt means.
RELEASE OF DEPOSITED SECURITIES AND DEPOSITED FUNDS
The Deposited Funds and Deposited Securities will be released to the Company
and the investors, respectively, only after:
(1) The Escrow Agent has received a signed representation from the Company
and any other evidence acceptable by the Escrow Agent that:
(a) The Company has executed an agreement for the acquisition of a
business or businesses with a fair value representing at least 80% of the
maximum Offering Proceeds and has filed the required Post Effective
Amendment; and
(b) The Post Effective Amendment has been declared effective, the
required Reconfirmation Offer has been completed and the Company has
satisfied all of the requirements of the Reconfirmation Offer.
(2) The Business Combination has been consummated.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
The securities offered hereby involve a substantial degree of risk. The
following factors, in addition to those discussed elsewhere in this Prospectus,
should be carefully considered in evaluating the Company and its business
prospects before purchasing any of such securities. This Prospectus contains
forward-looking statements with the meaning of the Private Securities Litigation
Reform Act of 1995. Such statement relate to, among other things, (i) the
identification of potential candidates for a Business Combination, (ii) the
consummation of a Business Combination and (iii) the availability of additional
financing necessary to operate the Company and to consummate a Business
Combination. The prediction of future results is inherently subject to various
risks and uncertainties, including those discussed under "RISK FACTORS" and
elsewhere in this Prospectus. Accordingly, actual results may differ materially
from those expressed or implied by the forward-looking statements included in
and incorporated by reference into this Prospectus.
7
<PAGE>
RISK FACTORS
THE SECURITIES OFFERED HEREBY REPRESENT AN EXTREMELY SPECULATIVE INVESTMENT
AND INVOLVE A HIGH DEGREE OF RISK. THE SECURITIES ARE A SUITABLE INVESTMENT ONLY
FOR INVESTORS WHO CAN AFFORD A TOTAL LOSS OF THEIR INVESTMENT OR WHO ARE NOT, IN
ANY WAY, DEPENDENT UPON THE FUNDS BEING INVESTED. BEFORE MAKING A DECISION TO
PURCHASE THE SECURITIES OFFERED HEREBY, A PROSPECTIVE INVESTOR SHOULD CONSIDER
CAREFULLY, AMONG OTHER THINGS, THE RISK FACTORS DISCUSSED BELOW.
BLANK CHECK OFFERING
This Offering constitutes a Blank Check Offering in which the use of the
Offering Proceeds has not been specifically identified. Thus, investors will
entrust their funds to management (on whose judgment the investors must depend)
without any information about management's intentions and without having the
opportunity to evaluate the relevant economic, financial and other information
that will be used and considered by management in deciding whether or not to
enter into a particular Business Combination. The Company has not established,
and is not obligated to follow, any particular operating, financial, geographic
or other criteria in evaluating candidates for potential Business Combinations.
Such candidates may include businesses from industries in which the Company's
management has little or no prior experience. The Company may consider or enter
into Business Combinations with businesses that have a history of operating or
financial difficulties, a Business Combination with such an entity could
significantly increase the risks to the Company and therefor the investors.
The Company will have up to 18 months following the Effective Date in which
to consummate a Business Combination. There can be no assurance that the Company
will identify any suitable acquisition candidates or enter into a Business
Combination within such 18 month period.
The securities laws of certain states do not permit the offer and sale of
securities issued in a Blank Check Offering. As of the date hereof, the Units to
be issued hereunder have been registered only under the securities laws of the
State of New York. Purchasers of Units in this Offering, or in any subsequent
trading market which may develop, must be residents of the State of New York.
There can be no assurance that the Units will be registered under the securities
laws of any state other than New York or that any trading market will develop or
in the event such trading market does develop, could be sustained.
NEED FOR ADDITIONAL FINANCING
The Company anticipates that substantially all of the Offering Proceeds will
be utilized to identify potential candidates for Business Combinations and
negotiate the terms thereof. Even assuming the exercise of all of the Warrants
and receipt by the Company of the aggregate exercise price therefor
($1,250,000), the Company will be required to obtain substantial additional
financing in order to consummate a Business Combination, unless another entity
acquires control of the Company. The Company intends to seek such additional
financing through the sale of debt or equity securities in one or more
transactions on terms to be negotiated. The Company currently has no commitments
from any prospective investors to provide any such financing and there can be no
assurance that such financing will be available in a timely manner or on terms
acceptable to the Company. Failure to obtain such financing could have a
material adverse effect on the ability of the Company to complete a Business
Combination.
If acquisition financing is not available for any reason, the Company may
seek a Business Combination in which another entity acquires control of the
Company. In such event, the stockholders of the Company would be minority
stockholders in the combined entity.
8
<PAGE>
CONFLICTS OF INTEREST
The Company and its directors and executive officers do not currently intend
that the shares of the Company's Common Stock held by such directors, executive
officers or holders of more than 10% of the Company's Common Stock will be sold
in a proposed Business Combination, unless all shareholders of the Company are
afforded a similar opportunity to sell their shares. Nevertheless, in certain
situations management may actively negotiate or otherwise consent to the
purchase of some or all of management's Common Stock as a condition to or in
connection with a proposed Business Combination. Members of the Company's
management paid an aggregate cash consideration of approximately $17,920, or an
average of $.053 per share, for the 339,750 shares they currently own. In
connection with a possible Business Combination, it is possible that a premium
may be paid for the shares held by management and that purchasers of Units in
this Offering may not be offered or receive any such premium. Any transaction
structured to offer such a premium may present management with a potential
conflict of interest, which could compromise management's fiduciary duties to
stockholders under state law. Under such circumstances, the potential might
exist for members of management to consider their own personal pecuniary benefit
rather than the best interests of the Company shareholders as a whole. While
investors may request the return of their funds in connection with a
Reconfirmation Offering, they will not be afforded an opportunity specifically
to approve or disapprove any particular transaction involving the buy-out of
shares owned by members of the Company's management. No part of the Offering
Proceeds will be used, directly or indirectly, by the Company to repurchase
shares of Common Stock from management or to make loans to any person.
In addition, the Company's officers and directors have extensive business
interests and may engage in other business activities similar to those engaged
in by the Company. To the extent that such officers and directors engage in such
other activities, they will have potential conflicts of interest in diverting
opportunities to other companies, entities or persons with which they are or may
be associated or in which they may have an interest, rather than directing such
opportunities to the Company. See "Management." The Company has not adopted any
formal policy or procedure for the resolution of potential conflicts of interest
involving the Company and its officers and directors.
It is possible that the Company will consider Business Combinations with
entities that are owned or controlled by affiliates or associates of the
Company. In such event, the Company will seek to negotiate terms that are no
less favorable to the Company than terms available in a transaction between
unrelated parties. In this regard, the Company does not currently intend to
engage in a Business Combination in which securities owned or controlled by its
affiliates or associates would be sold without affording all stockholders of the
Company a similar opportunity.
Finder's fees, consulting fees or other acquisition-related compensation may
be paid to the Company's officers and directors or their affiliates or
associates from revenues or other funds of an acquisition or merger candidate,
which may include debt or equity securities of such an entity. In addition, in
connection with a Business Combination, directors and officers of the Company
may enter into employment agreements or arrangements providing for the payment
of salaries and bonuses in cash, stock, options or other forms of consideration.
As a result, the possibility exists that such fees may become a factor in
negotiations and present conflicts of interest.
PROHIBITION ON OFFER AND SALE OF DEPOSITED SECURITIES
Pursuant to Rule 15g-8 under the Exchange Act, it is unlawful to sell or
offer for sale any securities (or any interest in or related to such securities)
held in an escrow account under Rule 419 may not be offered or sold other than
pursuant to a Qualified Domestic Relations Order or Title 1 of ERISA or the
rules thereunder. As a result, investors will be prohibited from entering into
contracts or arrangements for sale that are satisfied by the delivery of the
Deposited Shares until such shares are released from escrow.
9
<PAGE>
ESCROW OF STOCK AND OFFERING PROCEEDS
The Offering is being conducted in accordance with Rule 419. Rule 419 was
adopted by the Commission to strengthen the regulation of Blank Check Offerings,
which historically have been common vehicles for fraud and manipulation in the
penny stock market. Rule 419 requires that the Deposited Securities and the
Deposited Funds be held in an Escrow Account until an acquisition is completed
in which the fair value of the business or assets acquired represents at least
80% of the Offering Proceeds. The Company will be permitted to withdraw up to
10% of the Offering Proceeds for the payment of expenses. Before the Deposited
Securities and the Deposited Funds can be released from the Escrow Account, the
Company is required to file a Post Effective Amendment in order to update the
Registration Statement. Within five days after the effective date of such Post
Effective Amendment, the Company is required to furnish investors with a
prospectus containing certain information regarding the proposed Business
Combination, including audited financial statements of the acquisition
candidate. Investors then will have not less than 20 nor more than 45 days from
the effective date of the Post Effective Amendment to decide to remain an
investor or to require the return of their investment funds (less certain
deductions allowed by Rule 419). All funds will be returned automatically to
each investor who does not make a decision within such 45 day period. Unless a
sufficient number of investors (representing 80% of the Offering Proceeds, or
$1,080,000) elect to remain investors, all of the Deposited Funds will be
returned to investors and none of the Deposited Securities will be issued. Rule
419 further provides that if the Company does not complete an acquisition
meeting the certain criteria described above within 18 months following the
Effective Date, all of the Deposited Funds must be returned to investors.
Therefore, investors may have their funds held in escrow for up to 18 months,
with no ability to use them. Further, although all Deposited Funds are required
under Rule 419 to be invested in certain specified investments, and all interest
and dividends earned thereon, if any, are required to be returned to the
investor if the Deposited Funds are returned, there can be no assurance that
such interest or dividends, if any, will equal or exceed alternative investments
that may have been available to investors.
EXPIRATION OF WARRANTS
Any Warrants that have not been exercised on or before , 1998, the
first anniversary of the date of this Prospectus, will expire and become
worthless. Since the Company will have up to 18 months following the Effective
Date to consummate a Business Combination, Warrant holders may be required to
decide whether to exercise their Warrants, at an exercise price of $2.50 per
share of Common Stock, or allow their Warrants to expire unexercised before the
Company has identified or consummated a Business Combination. Further, due to
the higher exercise price of the Warrants relative to the initial price of the
Units, the lack of a trading market for the Common Stock and the uncertain
potential of the Company's business, it may not be desirable for investors to
exercise the Warrants before the Warrant Expiration Date. The Warrants may only
be exercised at a time when a registration statement with respect to the
underlying Common Stock is currently in effect. Although the Company has
undertaken to utilize its best efforts to amend the Registration Statement to
maintain its effectiveness, there is no assurance that it will be able to do so.
If the Warrants are not exercised, the Company will not receive the exercise
price therefor, which will increase the Company's need for working capital.
RESTRICTED REGISTRATION AND TRANSFERABILITY
The Units have been registered only under the securities laws of the State
of New York and may only be offered and sold in such state. Purchasers of the
Units in this Offering, or in any subsequent trading market that may develop,
must be residents of New York. As a result, investors hereunder may be unable to
sell or otherwise transfer the Units follow their release from the Escrow
Account. The Company will amend this Prospectus for the purpose of disclosing
additional states, if any, in which the Company's securities are registered.
However, there can be no assurance that the Units will be registered under the
securities laws of any states other than New York.
10
<PAGE>
The Units will not knowingly be sold by the Company to investors in
jurisdictions in which they are not registered or otherwise qualified for sale.
However, investors may relocate to jurisdictions in which the Common Stock
underlying the Warrants is not so registered or qualified during the period in
which the Warrants are exercisable. In such event, the Company would be unable
to, and would not, issue shares of Common Stock to those persons desiring to
exercise their Warrants unless the Common Stock was first registered or
otherwise qualified for sale in the jurisdictions in which such purchasers
reside. The Company is not obligated to register or otherwise qualify the Common
Stock for sale in any jurisdiction other than New York. In the event that the
Company did not or was unable to register or otherwise qualify Common Stock for
sale, the Warrants held by persons who were not New York residents would have no
value.
RISKS RELATED TO PENNY STOCKS
Until such time as the Company consummates a Business Combination and
otherwise satisfies the requirements of Rule 419, the Units purchased in this
Offering will be held in an Escrow Account. The Units will be deemed to be
"Penny Stocks" under the Exchange Act because neither the price of the Common
Stock nor the exercise price of the Warrants exceeds $5.00 per share.
Accordingly, during such escrow period, no trading of the Units will occur.
Assuming a Business Combination is consummated and the Deposited Securities are
released from the Escrow Account, trading will be subject to certain material
limitations due to the status of such securities as Penny Stocks. For example,
resales of the Units generally will be more difficult than in the case of
securities that are not Penny Stocks because broker-dealers may not solicit
sales unless they first: (i) obtain from the purchaser information concerning
his financial situation, investment experience and investment objectives; (ii)
reasonably determine that the purchaser has sufficient knowledge and experience
in financial matters such that the person is capable of evaluating the risks of
investing in Penny Stocks; and (iii) receive from the purchaser a manually
signed written statement acknowledging the purchaser's investment experience and
financial sophistication.
While the Company's securities remain Penny Stocks, any trading that occurs,
will be in the over-the-counter market in the "Pink Sheets" or on the NASDAQ
"Electronic Bulletin Board". Such market tends to be highly illiquid, in part
because there is no national quotation system by which potential investors can
track the market price of shares except through information received or
generated by certain selected broker-dealers that make a market in that
particular stock. There are currently no plans, proposals, arrangements or
understandings with any person with regard to the development of a trading
market in the Units, the Common Stock or the Warrants. There can be no
assurances that when trading is permitted under Rule 419 following a Business
Combination, an active trading market in the Units, the Common Stock or the
Warrants will develop or, if such a market develops, that it will be sustained.
In addition, there is a greater chance for market volatility for securities that
trade in the Pink Sheets or on the Electronic Bulletin Board as opposed to a
national exchange or quotation system. This volatility may be caused by a
variety of factors , including the lack of readily available quotations, the
absence of consistent administrative supervision of "bid" and "ask" quotations,
and generally lower trading volume.
NO OPERATING HISTORY; DEPENDENCE UPON OFFERING AND NEED FOR WORKING CAPITAL
Since its formation in 1993, the Company has conducted no operations and
therefore has not generated any revenues or income. The Company's only working
capital to date has consisted of approximately $50,000 invested by its current
stockholders , which will be utilized to pay the expenses of this Offering
(estimated to be approximately $49,000). The Company's ability to commence
operations and to operate as a going concern is entirely dependent upon (i) the
completion of this Offering and receipt of the Offering Proceeds and (ii) the
Company's ability to identify and consummate a Business Combination in
compliance with Rule 419. Consummation of a Business Combination in all
likelihood will require the Company to obtain substantial additional financing.
See "Need for Additional Financing."
Moreover, after payment of the expenses of this Offering, the Company
expects to have only approximately $11,000 of working capital available to pay
operating costs and expenses ($1,000 of initial
11
<PAGE>
working capital remaining following the payment of expenses of the Offering and
$10,000 from the proceeds of the Offering, the maximum amount permitted to be
utilized by the Company under to Rule 419). Management expects that its costs
of operation, including the preparation of periodic reports filed under the
Exchange Act, as well as administrative expenses and the costs associated with
the identification and selection of target companies, may exceed $25,000. The
extent of these costs will depend upon the amount of time that elapses prior to
completion of a Business Combination (if any), the number of potential Business
Combinations reviewed and analyzed by management and the nature and complexity
of such Business Combinations. See "USE OF PROCEEDS."
Management intends to seek financing sufficient to satisfy its costs of
operations either through: (i) the sale of additional debt or equity securities
in one or more private placement transactions; (ii) short-term loans provided by
directors, officers or principal stockholders; or (iii) other debt financing
provided by third parties. As of the date hereof, management has secured no
commitments to provide such financing and there can be no assurances that any
such additional financing can be obtained on favorable terms or at all. Since
the Company has no operations, revenues or operating history, and only minimal
assets, it is extremely unlikely that the Company would be able to obtain
financing from a bank or other financial institution. Accordingly, the Company's
ability to pay its operating expenses as they arise or to consummate a Business
Combination is uncertain.
IDENTIFICATION OF PROSPECTIVE ACQUISITION CANDIDATES
None of the Company's officers, directors, promoters, affiliates or
associates have had any preliminary contact or discussions with any prospects
for a Business Combination, or obtained any commitments from any person, firm or
business entity in that regard. Management of the Company has not established
the terms of any specific business combination or other transaction and has
conducted no feasibility studies of suitable acquisition candidates or of
suitable industries for the identification of such candidates. Subject to Rule
419, the Company will have sole discretion to determine the form and terms of
any Potential Business Combination. See "The Offering--Rule 419." Although the
Company currently has no intention of doing so, it is possible that the Company
will create or acquire subsidiary entities with a view to distributing the
securities of such entities to the Company's stockholders.
RISKS OF ACQUISITION CANDIDATES
Although there are no specific Business Combinations or other transactions
contemplated by management, it is expected that any acquisition candidate
selected by the Company will involve such a high level of risk that conventional
private or public offerings of securities or conventional bank financing would
not be available.
RELIANCE UPON OFFICERS AND DIRECTORS
The Company is wholly dependent upon the personal efforts and abilities of
its officers and directors, all of whom have agreed to serve the Company without
compensation until a Business Combination is consummated. All such persons have
other business interests and none currently anticipates devoting a substantial
amount of time to the Company's proposed business activities, even after the
Offering is completed. See "MANAGEMENT-DIRECTORS AND EXECUTIVE OFFICERS" and
"RISK FACTORS--Conflicts of Interest" The loss or unavailability to the Company
of the services of any of these officers and directors could have a material
adverse effect on the Company's ability to locate or consummate a Business
Combination. The Company does not, at present, have any insurance to compensate
for any such loss, nor does it intend to obtain any such insurance.
Furthermore, because the Offering Proceeds will be held in escrow (except
for $10,000 permitted to be used by the Company pursuant to Rule 419), the
Company is likely to require certain advances from its
12
<PAGE>
directors or officers in order to fund its efforts to identify potential
Business Combinations. There can be no assurance that such advances will be made
available as or when needed or on favorable terms.
DILUTION
Purchasers in this Offering will incur immediate and substantial dilution in
net tangible book value per share as a result of the higher price per share to
be paid in this Offering compared to the price paid by the current shareholders.
See "DILUTION."
LACK OF TRADING MARKET
There is no public trading market for the Company's Common Stock. The
Company currently has no plans to list the Common Stock for quotation on any
stock exchange or automated quotation system although trading may occur in the
Pink Sheets or on the Electronic bulletin Board. See "--Certain Risks Related to
Penny Stocks." There can be no assurance that any active trading market will
develop or, in the event that a trading market does develop, that it will be
sustained. No public market for the Company's securities will develop until the
Common Stock sold hereunder is released from escrow, if at all. In the event
that a public trading market does not develop, an investor hereunder may be
unable to liquidate his or her investment in the Company.
ARBITRARY OFFERING AND EXERCISE PRICES
Since the Company has never conducted any operations, the valuation of
its securities is inherently speculative. The offering price for the Units
and the exercise price for the Warrants were negotiated with prospective
investors but rather were determined arbitrarily by the Company and do not
necessarily reflect the fair market value of such securities. See "PLAN OF
DISTRIBUTION--DETERMINATION OF OFFERING PRICE."
RIGHTS OF FUTURE HOLDERS OF PREFERRED STOCK
The Company's Certificate of Incorporation authorizes the Board of
Directors, without stockholder approval, to issue up to an aggregate of
2,000,000 shares of Preferred Stock in one or more series and to designate such
liquidation preferences , dividends, voting and other rights for each series as
the Board of Directors may determine in its sole discretion. If the Company were
to issue Preferred Stock, the holders of such Preferred Stock may be entitled to
receive dividends, if any, and distributions on liquidation before the holders
of the Common Stock receive any such payments. The rights and preferences of any
such Preferred Stock may have a dilutive or adverse effect upon the dividend,
liquidation, voting and other rights of the holders of the outstanding Common
Stock and could have the effect of delaying, deferring or preventing a change in
control of the Company in the event of an extraordinary corporate transaction,
such as a tender offer or a proposed merger or acquisition, which could be at a
higher price than the then prevailing market price of the Common Stock. See
"DESCRIPTION OF SECURITIES--Preferred Stock."
NO COMMITMENTS TO PURCHASE UNITS
The Offering Period initially will extend to , 1997, subject to the
right of the Company to further extend such period of an additional 60 days. As
a result, subscribers' funds could be on deposit and unavailable for other
purposes, without accruing any interest, for up to 150 days from the date of
this Prospectus. During this period, investors will have no right to demand
return of their subscription price. See "PLAN OF DISTRIBUTION."
13
<PAGE>
OPERATING CONTROL OF THE COMPANY TO REMAIN WITH PRESENT STOCKHOLDERS
Upon consummation of this Offering (and assuming that the Warrants are not
exercised), present stockholders of the Company would own 90% of the outstanding
Common Stock. Consequently, such stockholders will be able to the Company's
control policies and operations, to elect the Company's Board of Directors and
to determine the outcome of all matters submitted to a vote of the Company's
stockholders.
COMPETITION
The identification and acquisition of privately held enterprises is the
primary focus of a significant number of companies, many of which have
significantly greater experience and financial, managerial and other resources
than the Company. These resources provide such companies with a competitive
advantage relative to the Company.
DIVIDENDS
The Company has never paid dividends on its Common Stock and does not intend
to pay dividends on its Common Stock in the foreseeable future. See "DIVIDEND
POLICY."
14
<PAGE>
SUMMARY FINANCIAL INFORMATION
Set forth below is certain summary financial information with respect to the
Company from inception (November 22, 1993) through March 31, 1997. Such summary
financial information should be read in conjunction with the financial
statements of the Company and notes thereto included elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
PERIOD FROM NOVEMBER 22,1993
(INCEPTION DATE)
TO MARCH 31, 1997
----------------------------------
<S> <C>
Statement of Operations Data:
Interest Income......................................... $ 2,138
Net Loss................................................ $ (35,820)
Loss Per Share.......................................... $ 0.04
Weighted Average Number of Shares....................... 900,000
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, 1997
-------------------------
ACTUAL AS ADJUSTED(1)
--------- --------------
<S> <C> <C>
Balance Sheet Data:
Working Capital.................................................. $ 14,180 $ 91,180(2)
Total Assets..................................................... 29,682 114,682
Total Liabilities................................................ 15,502 23,502
Stockholders' Equity............................................. 14,180 91,180
</TABLE>
- ------------------------
(1) Adjusted to give effect to the consummation of the Offering and the receipt
of the net proceeds upon the sale of 100,000 Units offered hereby, but
assuming no exercise of the Warrants.
(2) Includes $90,000 of cash proceeds to be held in Escrow Account. These funds
will not be available for general corporate use until such time, if any, as
the conditions of Rule 419 are satisfied. See "RISK FACTORS--Escrow of Stock
and Offering Proceeds", "The Offering--Rule 419" and "PLAN OF DISTRIBUTION".
15
<PAGE>
THE COMPANY
The Company was incorporated under the laws of the state of Delaware on
November 22, 1993. The Company has no operating history and does not intend to
commence any business activities until the consummation of this Offering and the
identification of a Business Combination. The Company's current management may
manage any business developed or acquired by the Company or may employ
qualified, but as yet unidentified, individuals to manage such business. In the
event that management determines that the Company is unable to effect a Business
Combination or to conduct any business whatsoever, management in its sole
discretion, but subject to the requirements of Rule 419, may seek shareholder
approval to liquidate the Company. In the event such a liquidation were to occur
prior to the consummation of a Business Combination, Rule 419 requires that each
investor's investment be returned on a pro rata basis. In the event such a
liquidation were to occur following the Company's compliance with Rule 419, all
shareholders of the Company (including the holders of 900,000 shares issued
previously to this Offering), will receive the liquidated assets on a pro rata
basis. While management has not established any guidelines for determining when
it might elect to discontinue its efforts to engage in a Business Combination
and seek shareholder approval to liquidate the Company, the Company is subject
to the 18 month limitation set forth in Rule 419 in which to effect an
acquisition.
The Company's principal office is located at 401 City Avenue, Suite 725,
Bala Cynwyd, PA 19004. Its telephone number is 610-660-5900.
THE OFFERING
THE UNITS
Each Unit offered hereby consists of one share of Common Stock and five
Warrants. The Warrants, subject to the restrictions set forth below, are
immediately deliverable and transferable separately from the Common Stock upon
issuance but subject to the escrow provisions described herein. Each Warrant
entitles the holder thereof to purchase, at any time before the Warrant
Expiration Date, one share of Common Stock at an Exercise Price of $2.50 per
share. The Warrants are redeemable at any time, at the option of the Company, at
a price of $.001 per Warrant upon 30 days' prior written notice to the holders
thereof. Any Warrant not exercised before the Warrant Expiration Date will
expire. The minimum subscription hereunder is 100 Units at an aggregate price of
$100.
The Units are being offered on a "all or none" basis. Unless all of the
Units offered hereby are sold by the end of the Offering Period, all proceeds
will be promptly returned to investors hereunder without deduction of Offering
Expenses but including interest. Proceeds from the sale of the Units will be
transmitted to the Company's Escrow Account by 12:00 P.M. noon of the business
day following receipt thereof. During the Offering Period, subscribers will not
have the right to require the return of their subscriptions.
No Units may be purchased by the officers, directors or principal
shareholders of the Company. The Company knows of no person or group of persons
who is likely to purchase, beneficially own or control any portion of the
securities offered hereby.
RULE 419
DEPOSIT OF DEPOSITED FUNDS AND DEPOSITED SECURITIES. The Company is
conducting the Offering pursuant to Rule 419 under the Securities Act. Pursuant
to the terms of Rule 419, the Deposited Funds and the Deposited Securities must
be deposited in the Escrow Account.
THE ESCROW AGREEMENT. The Company has entered into an Escrow Agreement with
, Escrow Agent. Pursuant to the terms of the Escrow Agreement:
(1) The Deposited Funds (and interest or dividends thereon, if any) will
be held by the Escrow Agent for the sole benefit of the investors hereunder.
The Deposited Funds may only be invested in:
(a) an obligation that constitutes a "deposit," as that term is
defined in Section 3(1) of the Federal Deposit Insurance Act (12 U.S.C.
1813(1) (1991));
16
<PAGE>
(b) securities of an open-end investment company registered under the
Investment Company Act of 1940 (15 U.S.C. 800-1 et seq.) that holds
itself out as a money market fund, meeting the conditions of paragraph
(c)(2), (c)(3) and (c)(4) of Rule 2a-7 (17 CFR 270.2a-7) under the
Investment Company Act of 1940; or
(c) securities that are direct obligations of, or obligations
guaranteed as to principal or interest by, the United States.
(2) The Deposited Securities (and any other securities issued with
respect to such securities, including securities issued with respect to
stock splits, stock dividends or similar rights) will be (a) certificated in
the name of the investors and (b) deposited directly into the Escrow Account
following issuance and held therein for the sole benefit of the investors
(who shall retain the voting rights, if any, with respect to the securities
held in their respective names). The Deposited Securities held in the Escrow
Account may not be transferred, disposed of (nor any interest created
therein) other than by will or the laws of descent and distribution, or
pursuant to a Qualified Domestic Relations Order or Title I of ERISA.
(3) In the event that the Warrants are exercised in accordance with
their terms, the Common Stock issued upon exercise of such Warrants and the
Exercise Price will be deposited in the Escrow Account.
RELEASE OF THE DEPOSITED FUNDS AND DEPOSITED SECURITIES. The Deposited
Funds will not be released to the Company and the Deposited Securities will not
be released to investors until the Company has (i) entered into an agreement
with respect to a Business Combination meeting certain prescribed criteria, (ii)
and successfully conducted the Reconfirmation Offering and (iii) consummated the
Business Combination. See "Prescribed Acquisition Criteria" and "Reconfirmation
Offering". In addition, prior to releasing the Deposited Funds and the Deposited
Securities, the Escrow Agent must receive a signed representation from the
Company (and any other evidence required by the Escrow Agent) to the effect that
the Company has met the requirements set forth above.
PRESCRIBED ACQUISITION CRITERIA. Rule 419 requires that an agreement with
respect to a Business Combination must provide for the acquisition of a business
or the assets of a business for which the fair value of such business or assets
represents at least 80% of the maximum Offering Proceeds. For this purpose,
Offering Proceeds includes funds received or to be received from the exercise of
the Warrants but excludes underwriting commissions, underwriting expenses and
dealer allowances payable to non-affiliates, none of which commissions, expenses
or allowances is expected since the Company is offering the Units directly and
not through underwriters, brokers or dealers. The maximum Offering Proceeds
hereunder is $1,350,000 ($100,000 from the sale of the Units and $1,250,000 upon
payment of the Exercise Price). Therefore, for purposes of the Offering, the
fair value of the business or assets to be acquired must be equal to at least
$1,080,000.
Once an agreement with respect to a Business Combination meeting the above
criteria has been executed, Rule 419 requires the Company to update the
Registration Statement, of which this Prospectus forms a part, with a Post
Effective Amendment. The Post Effective Amendment must contain information about
(i) the proposed Business Combination (including audited financial statements of
the acquisition candidate), (ii) the results of this Offering and (iii) the use
of the funds disbursed from the Escrow Account. The Post Effective Amendment
must also include the terms of the Reconfirmation Offer required by Rule 419.
THE RECONFIRMATION OFFERING. Rule 419 requires that the Reconfirmation
Offer commence and the prospectus contained in the Post Effective Amendment be
sent to each investor within five business days after the date that the Post
Effective Amendment is declared effective by the Commission. Each investor will
have not less than 20, and not more than 45, business days to notify the Company
in writing that the investor elects to remain as an investor. If the Company
does not receive written notification from an investor within 45 business days,
such investor's pro rata portion of the Deposited Funds (and any related
interest or dividends) held in the Escrow Account will be returned to the
investor within five business days
17
<PAGE>
by first class mail or other equally prompt means. The affirmative election of
investors representing 80% of the maximum Offering Proceeds (including funds
received or to be received from the exercise of Warrants) is required.
Therefore, for the purposes of the Offering, investors representing at least
$1,080,000 of the Offering Proceeds must reconfirm their intentions to
participate in the Offering. In the event that the Reconfirmation Offering is
successfully completed but a Business Combination has not been consummated by
, 199 (18 months from the effective date of the Post Effective
Amendment), the Deposited Funds will be returned to all investors on a pro rata
basis within five business days.
DILUTION
As of the date of this Prospectus, the Company had 900,000 shares of Common
Stock issued and outstanding.
As of March 31, 1997, the Company had a net tangible book value of
approximately $14,180, or a net tangible book value per share of approximately
$.016. Without taking into account any additional changes in net tangible book
value after March 31, 1997, other than to give effect to the sale by the Company
of the 100,000 Units offered hereby, and assuming that no part of the public
offering price is attributable to the Warrants, the net tangible book value of
the Company upon the completion hereof would be $114,180 (before the deduction
of expenses that will be incurred in connection with this Offering), or
approximately $.11 per share, representing an immediate dilution of $.89 per
share to investors in this Offering. Net tangible book value per share is
determined by dividing the number of shares of Common Stock outstanding into the
tangible net worth of the Company (tangible assets less liabilities). Dilution
is determined by subtracting net tangible book value per share after the
Offering from the amount of cash paid by an investor in the Offering for a share
of Common Stock.
The following table illustrates the dilution to investors:
<TABLE>
<S> <C>
Offering Price Per Share of Common Stock........................ $ 1.00
Net Tangible Book Value Per Share (Before Offering)............. $ .016
Net Tangible Book Value Per Share (After Offering).............. $ .114
Increase Per Share to present stockholders...................... $ .098
Dilution to Investors in this Offering.......................... $ .89
</TABLE>
The foregoing figures do not reflect that the expenses of this Offering most
likely will be paid prior to the date of this prospectus from the Company's
existing funds. Following the payment of such expenses, estimated at $49,000,
the net tangible book value of the Company, as of the date of this Prospectus,
will be approximately $1,000. The foregoing dilution table does not reflect the
possible issuance of up to 500,000 shares reserved for issuance upon the
exercise of the Warrants. If the Exercise Price of $2.50 per share were lower
than the then-current net tangible book value per share of the Company's Common
Stock , the Exercise Price would have the effect of further diluting the
interests of the holders of the Company's Common Stock. The Company may find
that the terms on which it could obtain additional capital may be adversely
affected while the Warrants are outstanding.
The following table summarizes, as of the date of this Prospectus, the
differences in total consideration and the average price per share to be paid by
new investors and by present stockholders who include officers and directors:
<TABLE>
<CAPTION>
SHARES PERCENT OF PERCENT TOTAL PRICE
PURCHASED TOTAL SHARES CONSIDERATION CONSIDERATION PER SHARE
----------- ----------------- ------------- --------------- -----------
<S> <C> <C> <C> <C> <C>
Current Stockholders..... 900,000 90% $ 50,000 33.3% $ .055(1)
New Investors............ 100,000 10% $ 100,000 66.7% $ 1.00
</TABLE>
- ------------------------
(1) Represents the average price per share.
18
<PAGE>
DIVIDEND POLICY
The Company has not paid any dividends and anticipates that no dividends
will be paid on its Common Stock for the foreseeable future. Payment of future
dividends, if any, will be determined by the Company's Board of Directors based
on conditions then existing, including the Company's financial condition,
capital requirements, cash flow, profitability, business outlook and other
factors.
USE OF PROCEEDS
The proceeds to be realized by the Company from the sale of the Units
offered hereby will be $100,000. No sales commissions, underwriting discounts or
other fees will be paid and the expenses of this Offering will be paid from the
Company's existing working capital.
Pursuant to Rule 419, the Company intends to utilize up to 10% percent of
the Offering Proceeds ($10,000) for the payment of operating expenses. The
remainder of the Offering Proceeds will be held in the Escrow Account until a
suitable Business Combination is undertaken. See "THE OFFERING."
The Company's expenses are expected to be limited to the following: (i)
legal and accounting fees necessary to prepare the Company's periodic reports
under the Exchange Act; (ii) office and administrative expenses incurred in the
operation of the Company; and (iii) direct expenses incurred in the
identification and consummation of a Business Combination. The Company will not
incur any obligation for the payment of rent, secretarial or administrative
personnel, or for any executive or non-executive salaries or directors' fees.
The Company may, however, pay a finder's, investment banking or consulting fee
to a third party in connection with identifying or completing a Business
Combination. The Company has the discretion to pay these fees, if any, from
revenues or other funds of an acquisition or merger candidate or by the issuance
of debt or equity securities of such an entity. These fees may be paid to a
director, officer or principal stockholder of the Company if that person was
responsible for identifying and assisting in the completion of the Business
Combination. The Company intends that any consultants or advisers retained by
the Company will have significant experience in investigating, analyzing and
establishing the value of business as potential acquisition candidates. The
Company currently has no agreements or understanding with respect to the
retention of any consultants or advisers.
The expenses that will be incurred by the Company while the principal
portion of the Offering Proceeds remains in escrow may exceed the Company's
existing resources as well as the 10% percent portion of such proceeds permitted
to be withdrawn from the Escrow Account. Management intends to secure financing
sufficient to satisfy its costs of operation either through: (i) the sale of
additional securities in one or more private placement transactions; (ii)
short-term loans provided by directors, officers or principal stockholders; or
(iii) debt financing provided by third parties. There are currently no plans,
proposals, arrangements or understandings with respect to the sale or issuance
of any such additional securities. The extent of the Company's expenses will
depend principally upon: (i) the amount of time that elapses until a Business
Combination is located and completed; (ii) the relative ease or difficulty in
completing a Business Combination; and (iii) the number of target opportunities
that must be reviewed by management until an appropriate Business Combination is
located.
None of the Offering Proceeds will be used to make any loans to the
Company's management or their affiliates or associates or any of the Company's
existing shareholders. Further, the Company may not borrow funds and use the
proceeds therefrom to make payments to the Company's management or their
affiliates or associates.
19
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of March
31, 1997 adjusted to give effect to the issuance and sale of the Units offered
hereby:
<TABLE>
<CAPTION>
AS
ACTUAL ADJUSTED(1)
---------- -----------
<S> <C> <C>
SHAREHOLDERS' EQUITY
Preferred stock, $.001 par value, 2,000,000 shares authorized, none issued..... $ -- $ --
Common stock, $.001 par value, 10,000,000 shares authorized, 900,000 shares
issued and outstanding; as adjusted 1,000,000 shares......................... 900 1,000
Additional paid-in capital..................................................... 49,100 126,000
Deficit accumulated during the development stage............................... (35,820) (35,820)
---------- ---------
TOTAL SHAREHOLDERS' EQUITY AND CAPITALIZATION.................................. $ 14,180 $ 91,180
</TABLE>
- ------------------------
(1) Giving effect to the completion of this Offering and the receipt of the net
proceeds therefrom.
20
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATION
BACKGROUND
The Company was incorporated under the laws of the State of Delaware on
November 22, 1993 for the purpose of seeking Business Combinations that in the
opinion of management would be in the best interests of the Company and its
stockholders. Such Business Combinations may be carried out in the form of the
acquisition of an existing business and/or the acquisition of assets to
establish a business for the Company. The Company may acquire, be acquired,
merge into, be merged with (as an acquiring company or as a target company),
invest in or participate in any Business Combination with one or more
corporations, partnerships, trust, individuals or other entities. The Company
will most likely seek to engage in a Business Combination with a private
enterprise that is seeking to develop a public trading market for its
securities, although there can be no assurance in this regard.
As of the date hereof, the Company has not yet begun to investigate any
potential Business Combinations, and does not intend to do so until after the
completion of this Offering.
RESULTS OF OPERATIONS
The Company has not commenced any operations and does not intend to do so
until after the consummation of this Offering.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1997, the Company's assets were $29,682, consisting of cash of
$5,775, accrued interest receivable of $1,950 and a receivable from affiliated
entities of $6,957 and deferred offering costs of $15,000. During October 1994,
available cash had been reduced by $16,619 representing advances made to an
affiliate. See "CERTAIN TRANSACTIONS." From November 22, 1993 through September
30, 1994, the Company issued and sold to six individuals, 900,000 Shares of its
Common Stock for an aggregate purchase price of approximately $50,000.
The Company's liquidity and capital resources will be enhanced upon the
completion of this Offering; however, 90% of the Offering Proceeds will be held
in the Escrow Account in accordance with Rule 419. See "The Offering."
After the remaining expenses of this Offering have been paid, which are
estimated to be approximately $23,000, and 10% of the Offering Proceeds have
been received by the Company, the Company will have only approximately $1,682 of
available working capital with which to pay operating costs and expenses. See
"USE OF PROCEEDS." Management expects that its costs of operation, including the
preparation of periodic reports filed under the Exchange Act, as well as
administrative expenses and the costs associated with the identification and
selection of a Business Combination, may exceed $1,682. The extent of these
costs will depend upon the amount of time that elapses prior to completion of a
Business Combination, the complexity of Business Combinations reviewed for
completion and the number of business opportunities reviewed by management.
Management intends to secure financing sufficient to satisfy its costs of
operations either through: (i) the sale of additional securities in one or more
private placement transactions; (ii) short term loans provided by directors,
officers or principal stockholders; or (iii) debt financing provided by third
parties. As of the date hereof, management has secured no commitments to provide
such financing There can be no assurances that the Company will be able to
acquire such financing on terms advantageous to the Company or at all.
21
<PAGE>
PROPOSED BUSINESS
This Offering constitutes a Blank Check Offering in which: (1) the funds to
be raised are not allocated with respect to any specific or predetermined source
of investment; (2) the Company has no specific plans for operation and has no
assets other than approximately $30,000; and (3) investors will entrust their
funds to management on whose judgment they must depend. As of the date hereof,
the Company has engaged in no business and has no operating history. The Company
will not commence business activities until after the Offering. The Company has
no employees and does not expect to have any until after the consummation of a
Business Combination. Until such time, the Company intends to rely on the
services of its officers, directors and other professionals retained from time
to time for particular projects.
In general, upon the completion of this Offering, the Company intends to
seek Business Combinations which, in the opinion of management, will be in the
best interests of the Company and its stockholders. Such Business Combinations
may be in the form of the acquisition of an existing business and/or the
acquisition of assets to establish a business for the Company. The Company may
acquire, be acquired, merge into, be merged with (as an acquiring company or a
target company) , invest in or participate in any Business Combination with
corporations, partnerships, trusts, individuals or other entities. The Company
may also acquire assets or securities of another business in the form of a
reverse acquisition.
In a reverse acquisition, the Company may acquire assets or stock of another
company, however, in doing so, would issue more than 50% percent of its Common
Stock. While the Company would be the surviving entity in such a transaction, it
would in effect be the "acquired" company rather than the "acquiring" company.
As a result, the stockholders or principals of such other entity would control a
majority of the Common Stock of the Company. There can be no assurance that the
Company will consummate any Business Combination. Many companies with active
management and considerably more resources available to them may bid to acquire
or participate in the same Business Combinations being sought by the Company. In
addition, any business acquired by the Company may have experienced financial or
operational difficulties, or may be subject to significant competition. See
"RISK FACTORS-- Competition."
In some instances, a Business Combination may involve the acquisition of or
merger or other transaction with a privately held corporation that does not need
substantial additional funds, but that desires to establish a public trading
market for its stock while avoiding the perceived adverse consequences of
undertaking its own public offering. Such a transaction would avoid the time
delays involved in a public offering; potentially enable the corporation to
retain a larger share of voting control of the publicly held company; reduce the
cost factors incurred in undertaking a public offering; and avoid any dilution
requirements set forth under the blue sky laws of various states. Prospective
purchasers of Units in the Company may invest on terms that eventually may prove
to be less favorable than the terms available from a company with a specified
business purpose that was undertaking its own public offering.
The Bylaws of the Company do not permit the Company, using the proceeds of
this Offering, to acquire a business (either through the purchase of stock,
merger, the purchase of assets or otherwise), directly or indirectly, from the
Company's promoters, management or their affiliates or associates. This
provision of the Bylaws may be amended only by the affirmative vote of both (i)
the holders of a majority of all outstanding shares of the Company and (ii) the
holders of a majority of all outstanding shares of the Company that are not
owned by promoters, directors or officers of the Company.
The Company does not intend to restrict its search for Business Combinations
to any particular industry or any particular geographic area, and may therefore
engage in essentially any business, to the extent of its limited resources. The
Company may investigate businesses offering a wide variety of products or
services, including but not limited to finance, technology, manufacturing,
service, research and development, communications insurance and transportation.
The analysis of potential Business Combinations will be undertaken by or
under the supervision of management, which will rely on its own business
judgment in formulating decisions as to the types of businesses that the Company
may acquire or in which the Company may participate. In addition, the
22
<PAGE>
Company's management may seek to obtain outside independent professionals to
assist in assessing the merits and risks of any proposed Business Combination.
Management has not yet established any criteria that it will use to hire
independent consultants regarding their experience, the services to be provided,
the term of service or compensation.
In analyzing a prospective Business Combination, the Company will consider,
among others, such factors as available technical, financial and managerial
resources; principal products or services and their markets; distribution
methods of products or services; sources and availability of raw materials and
suppliers; dependence upon customers; need for governmental approval of products
or services; effect of existing or probable governmental regulation on the
business; costs and effects or compliance with applicable environmental laws;
working capital and other financial requirements; history of operations, if any,
and future prospects; the nature of present and expected competition; the
quality and experience of management that may be available; the potential for
further research, development or exploration; the potential for growth and
expansion; the potential for profit; the perceived public recognition or
acceptance of such business' products, services and trade or service marks; and
its name identification. Although the Company intends to consider all factors
that management deems relevant to the particular business and industry, there
can be no assurances that management has or will have any experience or
expertise in the business being considered.
As part of the Company's investigation of a business, management expects
that it will meet personally with such business' management and personnel, visit
and inspect such business' facilities, obtain independent analyses or
verification of certain information provided, check references of such business'
management and key personnel, and conduct other reasonable due diligence, to the
extent of the Company's limited resources and management's technical expertise,
if any. Generally, management intends to analyze all available information and
make a determination based upon all available facts, without reliance upon any
single factor.
The Company does not have any plans to advertise or promote the Company. It
is anticipated that potential Business Combinations may be made known to the
Company by various sources, including its officers and directors, principal
stockholders, professional advisers, venture capitalists, securities broker
dealers, members of the financial community and others who present unsolicited
proposals. There can be no assurances, however, that any such Business
Combinations will come to the attention of the Company. Furthermore, because the
Company, its directors, officers and principal stockholders are involved in
other businesses, they do not intend to devote more than a minimal amount of
time to the business affairs of the Company. Conflicts of interest may exist
with respect to the selection of or participation in Business Combinations. See
"RISK FACTORS--CONFLICTS OF INTEREST."
The Company does not intend to operate as an investment company and subject
itself to regulation under the Investment Company Act of 1940. Accordingly, the
Company will not, among other things, engage in the business of investing,
reinvesting, owning, holding or trading in securities or own or acquire
investment securities (defined in the Investment Company Act as all securities
other than government securities, securities issued by employees, securities
companies, and securities issued by majority-owned subsidiaries of the owner
which are not investment companies) having value exceeding 40% of the value of
the Company's total assets (exclusive of government securities and cash items)
on an unconsolidated basis.
PROPERTIES OF THE COMPANY
The Company maintains its executive office, on an interim basis and at no
cost to the Company, at the offices of the Chairman of the Board of Directors at
401 City Avenue, Suite 725, Bala Cynwyd, PA 19004. The Company does not intend
to incur any rental obligations until after the consummation of a Business
Combination.
23
<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The directors and executive officers of the Company and their ages and
business backgrounds are as follows:
<TABLE>
<CAPTION>
NAME AND ADDRESS AGE POSITION(S) HELD
- ------------------------------------------ --------- ------------------------------------------
Leonard Linsker........................... 30 Chairman, Chief Executive Officer
<S> <C> <C>
David Alperin............................. 31 Treasurer, Secretary, Director
</TABLE>
Directors are elected to serve until the next annual meeting of stockholders
and until their successors have been elected and have qualified. Officers are
appointed to serve until the meeting of the Board of Directors following the
next annual meeting of stockholders and until their successors have been elected
and have qualified.
The following is a brief summary of the business experience of the Company's
Directors and Executive Officers during the past five years:
LEONARD LINSKER has been the Company's Chairman and Chief Executive Officer
since its inception. Mr. Linsker is the Chief Executive Officer of American
Maple Leaf Financial Corporation, a Philadelphia, Pennsylvania-based investment
banking firm where he specializes in corporate finance and analysis for
development stage companies. Mr. Linsker is an officer and/or director of
several closely held corporations, including IHN, Inc. which serves as an
investment vehicle for Mr. Linsker's personal investments in development stage
and growth companies.
DAVID ALPERIN has been the Company's Treasurer, Secretary and a director
since its inception. Mr. Alperin is an associate at American Maple Leaf
Financial Corporation where he specializes in the analysis of development stage
companies and determines their suitability for the public equity markets. He is
also the President of Enertia Sport, an upscale retail clothing store serving
the greater Philadelphia market, and Enertia Printing, a commercial screen
printing company. Mr. Alperin also has an interest in various private companies,
including Alperin, Inc., a domestic apparel manufacturer and contractor.
The Company has not retained any promoters or consultants and intends to
rely on the services of Messrs. Linsker and Alperin, neither of whom is acting
as a nominee or agent for any other person or entity.
The Company has been advised by Messrs. Linsker and Alperin that neither of
them intends to recommend, encourage or advise investors to open brokerage
accounts with any broker-dealer that makes a market in the Company's securities.
COMPENSATION POLICIES
The Company has not paid or accrued any directors' fees or officers'
salaries. The Company will reimburse its officers and directors for
out-of-pocket expenses and travel expenses if travel is necessary in order to
evaluate a Business Combination. Pursuant to oral understandings, the Company
does not intend to provide cash compensation to any of its directors or officers
for services provided in connection with the operation of the Company. Bonuses
in the form of finders', consulting or investment banking fees may be paid in
connection with the identification and completion of a Business Combination.
These bonuses may be paid in cash or shares of the Company's securities, in
amounts that may vary based upon the size and complexity of the Business
Combination and would, in the discretion of management, be viewed as reasonable
if paid to unrelated third parties. The Company has the discretion to pay these
fees, if any, from
24
<PAGE>
revenues or other funds of an acquisition or merger candidate, or by the
issuance of debt or equity securities of such an entity.
CONFLICTS OF INTEREST
Each director and officer has other business interests to which he devotes
his primary attention. Accordingly, it is unlikely that any of such officers or
directors will spend more than 10% of their working hours in connection with the
business affairs of the Company. In addition, certain of the directors and/or
officers, as well as principal stockholders of the Company, upon whose
collective efforts the Company is relying in order to identify potential
Business Combinations, may hold similar positions in other companies that are
also seeking to engage in Business Combinations, or in other companies, in
general. Therefore, should a Business Combination come to the attention of any
such individuals, there can be no assurance that such Business Combination would
be directed to the Company. See "RISK FACTORS--Conflicts of Interest."
Additional conflicts of interest may be present to the extent that the
Company elects to provide ' compensation to a director, officer or principal
stockholder in connection with his efforts in identifying and completing a
Business Combination. Any such payments, however, will only be made in amounts
that would be viewed as reasonable by management if paid to unrelated third
parties. In general, should any conflicts of interest arise, the Company's
management will attempt to resolve such conflicts in a manner that it believes
is in the best interests of the Company.
PROMOTION OF OTHER BLANK CHECK COMPANIES
Neither the Company nor its directors or officers have any current intention
to promote other entities engaged in a Blank Check Offering.
CERTAIN TRANSACTIONS
During October 1994, the Company advanced the sum of $10,619.10 to American
Maple Leaf Financial Corporation ("AML"). AML is a Philadelphia,
Pennsylvania-based investment banking firm that specializes in corporate finance
and analysis of development stage companies. A majority of the outstanding stock
of AML is owned by the directors and certain of the principal stockholders of
the Company. The advance provides for interest at the rate of 9% per annum. At
March 31, 1997, the amount outstanding was $6,957 plus accrued interest of
$1950.00.
PRINCIPAL STOCKHOLDERS
The following table sets forth, as of the date of this Prospectus, the
record and beneficial ownership, before and after the Offering, of each officer
and director and all officers and directors as a group and of each holder of
five percent or more of the outstanding shares of the Common Stock of the
Company.
25
<PAGE>
Percentage of Outstanding Shares:
<TABLE>
<CAPTION>
SHARES OWNED BENEFICIALLY
AND BEFORE
OF RECORD(1) OFFERING AFTER OFFERING(2)
---------------------------- ----------- -------------------
<S> <C> <C> <C>
Andrew Panzo(3)......................................... 526,500 58.5% 52.6%
2138 Lombard Street
Unit 4B
Philadelphia, PA 19146
Leonard Linsker(3)(4)................................... 294,750 32.7% 29.4%
541 College Avenue
Haverford, PA 19041
David Alperin........................................... 45,000 5.0% 4.5%
2301 Cherry Street
Unit 5C
Philadelphia, PA 19103
Officers and directors as a group (two persons)......... 339,750 37.7% 33.9%
</TABLE>
- ------------------------
(1) Determined in accordance with the Rule 13-d of the Securities Exchange Act.
Except as otherwise indicated, shares are owned of record and beneficially.
(2) Assumes no exercise of the Warrants.
(3) These individuals are the officers and directors of the Company, and may be
deemed "parents" of the Company and/or "promoters", as those terms are
defined under the Rules and Regulations promulgated under the Securities
Act.
(4) Shares are owned of record by IHN Partnership, a general partnership owned
by Leonard and Lauren Linsker as tenants by the entireties and IHN, Inc., a
company controlled by Leonard and Lauren Linsker. Lauren Linsker is the wife
of Leonard Linsker.
DESCRIPTION OF SECURITIES
UNITS
The Units offered hereby consist of one share of Common Stock and five
Warrants. Each Warrant entitles its holder to purchase one share of Common Stock
at an exercise price of $2.50 at any time on or before the first anniversary of
the date of this Prospectus. The Warrants are immediately detachable and
transferable separately (subject to the limitations imposed by Rule 419).
COMMON STOCK
The Company is authorized to issue 10,000,000 shares of Common Stock.
Immediately prior to the completion of this Offering there will be 900,000
shares of Common Stock issued and outstanding. Following the completion of this
Offering there will be 1,000,000 shares of Common Stock issued and outstanding.
The holders of Common Stock have one vote per share for the election of
directors and on all other matters on which stockholders are entitled to vote
under Delaware law. Cumulative voting is not permitted. Thus, holders of a
majority of the shares present and voting for the election of directors can
elect all of the directors. Upon completion of this Offering, the current
stockholders of the Company will own 90% of the outstanding Common Stock
(without giving effect to the exercise of the Warrants), and will be in a
position to elect all of the directors or, subject to the restrictions of Rule
419, approve the
26
<PAGE>
effectuation of a Business Combination without the concurrence of minority
stockholders. (See "RISK FACTORS").
Holders of shares of Common Stock are entitled to receive such dividends as
the Board of Directors may from time to time declare out of funds of the Company
legally available for the payment of dividends. The Company has never paid any
dividends, and does not anticipate paying any in the foreseeable future.
Earnings, if any, will be used to finance the Company's operations. See "RISK
FACTORS-- " and "DIVIDEND POLICY". Upon any liquidation, dissolution or
winding up of the Company, holders of shares of Common Stock are entitled to
receive pro rata all of the assets of the Company available for distribution to
holders of the Common Stock. Stockholders of the Company do not have any
preemptive rights to subscribe for or purchase any stock, obligations, warrants
or other securities of the Company. The Company will distribute to stockholders
annual reports containing audited financial statements, commencing with the
fiscal year ending September 30, 1997.
PREFERRED STOCK
The Company is authorized to issue 2,000,000 shares of Preferred Stock, par
value $.001 per share (the "Preferred Stock") , which may be issued in one or
more series. No shares of Preferred Stock have been issued. The dividends,
liquidation preferences, voting rights and other rights and preferences of each
series of the Preferred stock may be established from time to time by the Board
of Directors.
The Board of Directors of the Company is authorized to issue the Preferred
Stock, from time to time, in one or more series without obtaining stockholder
consent. The Preferred Stock, when and if issued, will be entitled to a
liquidation preference over the Common Stock. The dividends, liquidation
preferences, voting rights and other rights of each series of Preferred Stock
will be designated by the Board of Directors prior to the issuance of each such
series , and such designations may have a dilutive or prejudicial effect upon
the rights of the holders of the outstanding Common Stock.
The Company has no present intention or plan to issue shares of Preferred
Stock or to establish their terms and conditions. The Company may, however,
issue these shares in connection with an acquisition or Business Combination in
which the issuance of such shares is deemed appropriate, in the sole discretion
of the Board of Directors. The ability of the Board of Directors to designate
the various rights, preferences, limitations and restrictions of any such
Preferred Stock enables the Board to adopt provisions, if it so elects, which
may make it more difficult to secure operating control of the Company or
purchase a high percentage of the Company's stock without cooperation of current
management. Such provisions may have an anti-takeover effect and discourage
tender offers or other open market acquisitions of the Company's stock, which
often are made at prices above the prevailing market price of the Company's
stock. In addition, the issuance of any such Preferred Stock may adversely
effect the rights of the holders of Common Stock of the Company.
WARRANTS
The Warrants are immediately detachable but, pursuant to Rule 419, may not
be sold or otherwise transferred until released from the Escrow Account. Each
Warrant entitles the holder thereof to purchase, at any time until the
Termination Date, one share of Common Stock at an Exercise Price of $2.50 per
share. The Warrants may be redeemed by the Company , at its option, at any time
at a price of $.001 per Warrant upon 30 days' prior written notice to the
holders thereof. Any Warrant not exercised by the Warrant Expiration Date will
be terminated.
The Warrants may be exercised by completing filling out and signing the
appropriate form attached to the Warrant and mailing or delivering the Warrant
to the Warrant Agent (as hereinafter defined) in time to reach the Warrant Agent
by the Termination Date, accompanied by payment of the full Warrant Price
thereof. Payment of the Warrant Price must be made in United States currency (by
check, cash or bank draft) payable to the order of the Company.
27
<PAGE>
A Warrant Agreement will be entered into by the Company and Stock Trans,
Inc. who will be serving as the Warrant Agent hereunder. Copies of the Warrant
Agreement are available for inspection upon request. As long as any of the
Warrants remain outstanding, the number of shares of Common Stock issuable upon
the exercise of the Warrants will be proportionately adjusted in the event of
stock splits, reverse splits or reclassifications.
The Company has reserved a sufficient number of shares of Common Stock for
issuance upon exercise of the Warrants and such shares, when issued, will be
fully paid and non-assessable. The shares so reserved are included in the
Registration Statement of which this Prospectus is a part, and the Company will
utilize its best efforts to maintain the effectiveness thereof, by filing any
necessary post effective amendments or supplements to the Registration
Statement, throughout the term of the Warrants with respect to the Warrants and
the shares of Common Stock issuable upon exercise thereof. There can be no
assurance, however, that the Company will be able to maintain such
effectiveness.
The holders of the Warrants are not entitled to vote, to receive dividends
or to exercise any of the rights of the holders of shares of Common Stock for
any purpose until such Warrants have been duly exercised and payment of the
purchase price has been made. There is no market for the Warrants and there is
no assurance that any such market will ever develop.
TRANSFER AGENT AND WARRANT AGENT--ANNUAL REPORT
The Transfer Agent and Warrant Agent for the Company is StockTrans, Inc., 7
East Lancaster Avenue, Ardmore, PA 19003.
Each year the Company will prepare and distribute to stockholders an annual
report that describes the nature and scope of the Company's business and
operations for the prior year and contains a copy of the Company's audited
financial statements for its most recent fiscal year. The Company's fiscal year
ends on September 30.
PLAN OF DISTRIBUTION
The Units are being offered by the Company on a "all or none" basis. The
Units are offered subject to prior sale, allotment and withdrawal, cancellation
or modification of the offer without notice and subject to the approval of legal
matters by counsel, and to certain further conditions. The Company reserves the
right, at its sole discretion, to reject any orders for the purchase of the
Units in whole or in part.
DETERMINATION OF OFFERING PRICE
The Offering Price of the Units and the exercise prices of the Warrants have
been arbitrarily determined by the Company. These prices may bear no relation to
the Company's assets, book value or any other customary investment criteria.
Among the factors considered by the Company in determining these prices were the
blank check nature of this Offering, the absence of any operating history of the
Company, the financial condition of the Company, the Company's management,
estimates of the Company's business potential and the general condition of the
securities market.
TERMS OF THE OFFERING
Subject to applicable federal and state securities laws, the Units will be
offered and sold by the Company's officers and directors, Messrs. Linsker and
Alperin, neither of whom will receive any underwriting discounts, commissions or
other compensation from the Company in connection with the Offering. No
broker/dealer has been retained or is under any obligation to purchase any
Units. The Company has made no arrangements with any broker/dealers, and in view
of the absence of any sales commission payable, among other reasons, it is
unlikely that broker/dealers will participate in the sale of any Units.
28
<PAGE>
Units will be sold only for cash in the amount of $1.00 per Unit. Persons
who desire to purchase Units should complete, date and sign the Subscription
Agreement provided with this Prospectus, and mail the form to the Company at its
address indicated on the Subscription Agreement. Units will be sold on a first
subscribed, first sold basis. Payments should be made by check, bank draft, or
postal or express money order payable in United States dollars, to "Schuylkill
Enterprises, Inc.--Escrow Account". The minimum subscription hereunder is 100
Units.
The subscription payments will be transmitted by the Company, no later than
12:00 P.M. n of the next business day following receipt thereof, to an escrow
account maintained by . is only acting as Escrow Agent in connection
with this Offering, has made no investigation of the Company or this Offering
and does not make any recommendation with respect thereto. Unless the Units
offered hereby are sold before the expiration of the Offering Period, all
proceeds will be promptly returned to the subscribers without deduction for
commissions or expenses but will include such interest as has been earned from
the date the Escrow Agent received the proceeds, to the extent thereof. DURING
THE ESCROW PERIOD, SUBSCRIBERS WILL NOT HAVE THE RIGHT TO ANY RETURN OF
SUBSCRIPTIONS.
LEGAL OPINIONS
The legality of the securities offered hereby is being passed upon by
Klehr, Harrison, Harvey, Branzburg & Ellers, 1401 Walnut Street,
Philadelphia, Pennsylvania 19102.
CERTAIN PROVISIONS OF THE COMPANY'S
CERTIFICATE OF INCORPORATION AND BYLAWS
LIMITATIONS ON DIRECTOR LIABILITY
As permitted by the Delaware General Corporation Law (the "DGCL"), the
Company's Certificate of Incorporation provides that no directors of the Company
will be personally liable to the Company or its stockholders for monetary
damages for breach of fiduciary duty as a director except for (i) any beach of
the director's duty of loyalty to the Company or its stockholders, (ii) acts or
omissions not in good faith or that involve intentional misconduct or an knowing
violation of law, (iii) the unlawful payment of dividends or purchase or
redemption of stocks under Section 174 of the DGCL, and (iv) any transaction
from which the director derived an improper personal benefit.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Under the Company's By-laws, the Company is required to indemnify each of
its directors and officers against expenses (including reasonable costs,
disbursements and counsel fees) incurred in connection with any proceeding
involving such person by reason of such person having been an officer or
director to the extent he acted in good faith and in a manner he reasonably
believed to be in, or not opposed to, the best interests of the Company, and,
with respect to any criminal action or proceeding, had no reasonable cause to
believe his conduct was unlawful. The determination of whether indemnification
is proper under the circumstances, unless made by a court, shall be determined
by a Board of Directors.
Insofar as indemnification for liabilities under the Securities Act of 1933
may be permitted to directors, officers and controlling persons of the Company
pursuant to the foregoing provisions or otherwise, the Company has been advised
that in the opinion of the Commission such indemnification is against public
policy as expressed in the Securities Act of 1933 and is, therefore,
unenforceable.
EXPERTS
The financial statements of the Company included in this Prospectus have
been examined by Cogen Sklar LLP, independent certified public accountants, 150
Monument Avenue, Bala Cynwyd, PA 19004, and
29
<PAGE>
have been so included in reliance upon the opinion of such accountants given
upon their authority as experts in auditing and accounting.
ADDITIONAL INFORMATION
The Company has filed with the Commission a Registration Statement on Form
SB-2 with respect to the securities being offered hereby. This Prospectus does
not contain all the information contained in such Registration Statement and the
exhibits thereto. The Registration Statement, including exhibits thereto, may be
inspected without charge and copies of all or any part thereof may be obtained
from the Commission's principal office in Washington, D.C. at 450 Fifth Street
N.W., Washington. DC. 20549, upon payment of the Commission charge for copying.
For further information with respect to the Company and the securities offered
hereby, reference is made to the Registration Statement and the exhibits
thereto.
30
<PAGE>
SCHUYLKILL ENTERPRISES, INC.
(A Development Stage Company)
CONTENTS
PAGE
-----------
INDEPENDENT AUDITORS REPORT F-2
BALANCE SHEETS AS OF SEPTEMBER 30, 1996
AND MARCH 31, 1997 F-3
STATEMENTS OF OPERATIONS FOR THE YEARS
ENDED SEPTEMBER 30, 1995 AND 1996; SIX
MONTHS ENDED MARCH 31, 1997; AND
FROM NOVEMBER 22, 1993 (INCEPTION DATE)
TO MARCH 31, 1997 F-4
STATEMENT OF SHAREHOLDERS' EQUITY FROM
NOVEMBER 22, 1993 (INCEPTION DATE) TO
MARCH 31, 1997 F-5
STATEMENTS OF CASH FLOWS FOR THE YEARS
ENDED SEPTEMBER 30, 1995 AND 1996; SIX
MONTHS ENDED MARCH 31, 1997; AND
FROM NOVEMBER 22, 1993 (INCEPTION DATE)
TO MARCH 31, 1997 F-6
NOTES TO FINANCIAL STATEMENTS F-7
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Shareholders and Board of Directors
Schuylkill Enterprises, Inc.
Bala Cynwyd, Pennsylvania
We have audited the accompanying balance sheets of Schuylkill
Enterprises, Inc. (a development stage company) as of September 30, 1996 and
March 31, 1997 and the related statements of operations and cash flows for
the years ended September 30, 1995 and 1996, the six months ended March 31,
1997 and the period from November 22, 1993 (inception date) to March 31, 1997
and statement of shareholders' equity for the period from November 22, 1993
(inception date) to March 31, 1997. 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 audit 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 out 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 Schuylkill Enterprises, Inc.
as of September 30, 1996 and March 31, 1997, and the results of its operations
and cash flows for the years ended September 30, 1995 and 1996, the six months
ended March 31, 1997 and the period from November 22, 1993 (inception date) to
March 31, 1997 in conformity with generally accepted accounting principles.
COGEN SKLAR LLP
Bala Cynwyd, Pennsylvania
May 29, 1997
F-2
<PAGE>
SCHUYLKILL ENTERPRISES, INC.
(A Development Stage Company)
BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996 MARCH 31, 1997
------------------ --------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash.................................. $7,588 $5,775
Accrued interest receivable........... 1,825 1,950
Receivable from affiliated company.... 6,957 6,957
Deferred offering costs............... -- 15,000
---------- --------
TOTAL ASSETS............................ $16,370 $29,682
---------- --------
---------- --------
LIABILITIES
CURRENT LIABILITIES
Accrued expenses...................... $700 $15,502
--------- --------
SHAREHOLDERS' EQUITY
PREFERRED STOCK--$.001 par value, authorized;
2,000,000 shares, none issued........... -- --
COMMON STOCK--$.001 par value, authorized
10,000,000 shares, issued and outstanding
900,000 shares.......................... 900 900
ADDITIONAL PAID-IN CAPITAL............... 49,100 49,100
DEFICIT ACCUMULATED DURING THE
DEVELOPMENT STAGE....................... (34,330) (35,820)
--------- --------
TOTAL SHAREHOLDERS' EQUITY............... 15,670 14,180
--------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY.................................. $16,370 $29,682
--------- --------
--------- --------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
SCHUYLKILL ENTERPRISES, INC.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED
--------------------------------------
<S> <C> <C> <C> <C>
NOVEMBER 22, 1993
(INCEPTION DATE)
SIX MONTHS ENDED TO
SEPTEMBER 30, 1995 SEPTEMBER 30, 1996 MARCH 31, 1997 MARCH 31, 1997
------------------ ------------------ ----------------- -----------------
INTEREST INCOME.................... $ 925 $ 900 $ 313 $ 2,138
-------- ------- ------- --------
COSTS AND EXPENSES
Aborted offering costs........... 26,487 -- -- 26,487
Legal fees....................... 6,000 -- -- 6,000
Accounting fees.................. 633 -- 900 1,533
Franchise tax.................... 2,069 700 903 3,751
Other............................ 106 -- -- 187
-------- ------- ------- --------
35,295 700 1,803 37,958
-------- ------- ------- --------
NET INCOME (LOSS).................. $ (34,370) $ 200 $ (1,490) $ (35,820)
-------- ------- ------- --------
-------- ------- ------- --------
INCOME (LOSS) PER SHARE............ $ (0.04) $ -- $ -- $ (0.04)
-------- ------- ------- --------
-------- ------- ------- --------
WEIGHTED AVERAGE NUMBER OF
SHARES........................... 900,000 900,000 900,000 900,000
-------- ------- ------- --------
-------- ------- ------- --------
</TABLE>
The accompanying notes are an integral part to these financial statements.
F-4
<PAGE>
SCHUYLKILL ENTERPRISES, INC.
(A Development Stage Company)
STATEMENT OF SHAREHOLDERS' EQUITY
NOVEMBER 22, 1993 (INCEPTION DATE) TO MARCH 31, 1997
<TABLE>
<CAPTION>
DEFICIT
ACCUMULATED
ADDITIONAL DURING THE TOTAL
PAID-IN DEVELOPMENT SHAREHOLDERS'
COMMON STOCK CAPITAL STAGE EQUITY
----------------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
Issuance of 900,000 shares of common stock............... $ 900 $ 49,100 $ -- $ 50,000
Net loss from inception to September 30, 1994............ -- -- (160) (160)
----- ----------- ------------ ------------
Balance, September 30, 1994.............................. 900 49,100 (160) 49,840
Net loss for the year ended September 30, 1995........... -- -- (34,370) (34,370)
----- ----------- ------------ ------------
Balance, September 30, 1995.............................. 900 49,100 (34,530) 15,470
Net income for the year ended September 30, 1996......... -- -- 200 200
----- ----------- ------------ ------------
Balance, September 30, 1996.............................. 900 49,100 (34,330) 15,670
Net loss for the six months ended March 31, 1997......... -- -- (1,490) (1,490)
----- ----------- ------------ ------------
Balance, March 31, 1997.................................. $ 900 $ 49,100 $ (35,820) $ 14,180
----- ----------- ------------ ------------
----- ----------- ------------ ------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
SCHUYLKILL ENTERPRISES, INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NOVEMBER 22, 1993
YEAR ENDED (INCEPTION DATE)
--------------------------------------- SIX MONTHS ENDED TO
SEPTEMBER 30, 1995 SEPTEMBER 30, 1996 MARCH 31, 1997 MARCH 31, 1997
------------------ ------------------- ----------------- -----------------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES
Net income (loss)................ $ (34,370) $ 200 $ (1,490) $ (35,820)
Adjustments to reconcile net income
(loss) to net cash used in
operating activities
Increase in accrued interest..... (925) (900) (125) (1,950)
Increase (decrease) in accrued
expenses........................ (2,500) (1,800) 14,802 15,502
-------- ------ ------- --------
Net cash used in operating
activities...................... (37,795) (2,500) 13,187 (22,268)
-------- ------ ------- --------
CASH FLOWS FROM FINANCING
ACTIVITIES
Advance (repayment) of receivable
from affiliated companies....... (12,619) 5,662 -- (6,957)
Proceeds from issuance of common
stock........................... 606 -- -- 50,000
Deferred offering costs.......... 15,522 -- (15,000) (15,000)
-------- ------ ------- --------
Net cash provided by financing
activities...................... 3,509 5,662 (15,000) 28,043
-------- ------ ------- --------
NET INCREASE (DECREASE) IN CASH.... (34,286) 3,162 (1,813) 5,775
CASH--BEGINNING OF PERIOD.......... 38,712 4,426 7,588 --
-------- ------ ------- --------
CASH--END OF PERIOD................ $ 4,426 $ 7,588 $ 5,775 $ 5,775
-------- ------ ------- --------
-------- ------ ------- --------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
SCHUYLKILL ENTERPRISES, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 22, 1993 (INCEPTION DATE) TO MARCH 31, 1997
NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
The company was incorporated in Delaware on November 22, 1993. The company
intends, upon completion of a public offering, to seek potential business
combinations. Since planned principal operations have not commenced, the company
is considered a development stage company, as defined in the Statement of
Financial Accounting Standards No. 7 (SFAS 7).
CASH EQUIVALENTS
The company considers all highly liquid instruments with a maturity of six
months or less to be cash equivalents.
FAIR VALUE OF FINANCIAL INSTRUMENTS
Financial instruments consist of cash, accrued interest, receivables and
accrued expenses. The carrying amount approximates fair value because of the
short maturity of these instruments.
ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires the use of estimates based on
management's knowledge and experience. Accordingly, actual results could
differ from those estimates.
DEFERRED OFFERING COSTS
Amounts paid or accrued for costs related to the anticipated public offering
will be expensed and not recorded as a reduction of the proceeds, if the
offering is not completed.
In early 1995, the company filed a registration statement under Form SB-2
with the Securities and Exchange Commission. The filing never became effective,
therefore deferred offering costs of $26,487 were expensed during the year ended
September 30, 1995.
INCOME TAXES
The company has adopted SFAS 109, "Accounting for Income Taxes", which
requires an asset and liability approach to financial accounting and
reporting for income taxes. Deferred income tax assets and liabilities are
computed annually for temporary differences between the financial statement
and tax bases of assets and liabilities that will result in taxable or
deductible amounts in the future based on enacted tax laws and rates
applicable to the periods in which the differences are expected to affect
taxable income. Valuation allowances are established when necessary to reduce
deferred tax assets to the amount expected to be realized. Income tax expense
is the tax payable or refundable for the period plus or minus the change
during the period in deferred tax assets and liabilities.
INCOME (LOSS) PER SHARE
Income (loss) per share has been computed as if the common shares were
outstanding from inception since their issuance was in contemplation of the
initial public offering.
NEW AUTHORITATIVE PRONOUNCEMENTS
The Financial Accounting Standards Board has recently issued SFAS 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to be Disposed Of" and SFAS 123, "Accounting for Stock-Based Compensation".
These statements are not applicable to the company at this time.
Subsequent to December 31, 1996, the Financial Accounting Standards Board
issued SFAS 128, "Earnings Per Share". The adoption of SFAS 128 did not have
an effect on the computation of earnings per share because of the company's
simple capital structure.
F-7
<PAGE>
SCHUYLKILL ENTERPRISES, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 22, 1993 (INCEPTION DATE) TO MARCH 31, 1997
NOTE 2--RECEIVABLE FROM AFFILIATES
During October 1994, the company advanced the sum of $10,619 to American
Maple Leaf Financial Corporation ("AML"). AML is a Philadelphia, Pennsylvania
based investment banking firm that specializes in corporate finance and analysis
of development stage companies. A majority of the outstanding stock of AML is
owned by the directors and certain of the principal stockholders of the company.
The loan provides for repayment upon demand with an interest rate of 9%. In
August 1996, AML repaid $3,662. Interest income of $925, $900 and $313 has been
accrued for the years ended September 1995 and 1996 and the six months ended
March 31, 1997.
Also in October 1994, the company advanced the sum of $2,000 to LMI
Acquisition Corporation ("LMI") related through common ownership and
management, which was repaid in August 1996.
NOTE 3--CAPITAL STOCK
During the period July through November 1994, the company issued 900,000
shares of common stock for cash of $50,000.
The company has reserved 500,000 shares of common stock for issuance upon
the exercise of warrants (Note 4).
The company originally had authorized but not issued 50,000,000 shares of a
class of preferred stock, par value $.001 per share which may be issued in one
or more series. The dividends, liquidation preferences and other rights and
preferences of each series of the preferred stock may be established from time
to time by the Board of Directors.
On January 21, 1997, the Board of Directors approved a decrease in the
number of authorized shares from 150,000,000 to 12,000,000 shares consisting of
10,000,000 shares of common stock with a par value of $.001 per share and
2,000,000 shares of preferred stock with a par value of $.001 per share.
NOTE 4--CONTEMPLATED PUBLIC OFFERING
The company is in the process of filing a registration statement offering
for sale 100,000 units at $1.00 per unit. Each unit consisting of one share of
common stock and five Redeemable A Warrants. Each Redeemable A Warrant entitles
the holder to purchase at any time until the first anniversary of the date of
the Prospectus, one share of common stock at an exercise price of $2.50.
F-8
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED IN CONNECTION
WITH THIS OFFERING TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER
THAN THOSE CONTAINED IN THIS PROSPECTUS. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER OR A SOLICITATION IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL
TO MAKE SUCH AN OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS
NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE CIRCUMSTANCES OF THE COMPANY OR
THE FACTS HEREIN SET FORTH SINCE THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Prospectus Summary............................ 4
Risk Factors.................................. 8
Summary Financial Information................. 15
The Company................................... 16
The Offering.................................. 16
Dilution...................................... 18
Dividend Policy............................... 19
Use of Proceeds............................... 19
Capitalization................................ 20
Management's Discussion and Analysis of
Financial Condition and Results of
Operations.................................. 21
Business of the Company....................... 22
Management.................................... 24
Certain Transactions.......................... 25
Principal Stockholders........................ 25
Description of Securities..................... 26
Plan of Distribution.......................... 28
Legal Matters................................. 29
Certain Provisions of the Company's
Certificate of Incorporation and Bylaws..... 29
Experts..................................... 29
Additional Information........................ 30
Financial Statements.......................... F-1
</TABLE>
THE COMPANY HAS NOT, PRIOR TO THE DATE OF THIS PROSPECTUS BEEN SUBJECT TO
THE REPORTING REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934. UPON THE
COMPLETION OF THE OFFERING COVERED BY THIS PROSPECTUS, THE COMPANY WILL BECOME
SUBJECT TO THE REPORTING REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934.
100,000 UNITS
CONSISTING OF
ONE SHARE OF COMMON STOCK AND
FIVE REDEEMABLE WARRANTS
SCHUYLKILL
ENTERPRISES, INC.
---------------------
PROSPECTUS
---------------------
, 1997
UNTIL 90 DAYS FROM THE DATE THAT FUNDS AND
SECURITIES ARE RELEASED FROM THE RULE 419 ACCOUNT,
ALL DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED
SECURITIES ARE REQUIRED TO DELIVER A PROSPECTUS.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company may indemnify any person who was or is a party or is threatened
to be made a party to any threatened, pending or completed action, suit or
proceeding (other than an action by or in the right of the Company) by reason of
the fact that he is or was a director or officer of the Company, or is or was
serving as a director, officer, employee or agent of another entity, against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement in connection with such action, suit or proceeding if he acted in
good faith and in a manner he reasonably believed to be in, or not opposed to,
the best interests of the Company, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement or
conviction, or upon a plea of nolo contendere or its equivalent, will not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in, or not opposed to, the best
interests of the Company, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
The Company may indemnify any person who was or is a party, or is threatened
to be made a party, to any threatened, pending or completed action or suit by or
in the right of the Company to procure a judgment in its favor by reason of the
fact that he is or was a director or officer of the Company, or is or was
serving as a director, officer, employee or agent of another entity, against
expenses (including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in, or not opposed to,
the best interests of the Company and except that no indemnification shall be
made in respect of any claim, issue or matter as to which such person shall have
been adjudged to be liable to the Company unless and only to the extent that the
Court of Chancery of the State of Delaware or the court in which such action or
suit was brought shall determine upon application that, despite the adjudication
of liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses that the Court of
Chancery or such other court shall deem proper.
To the extent that a director or officer of the Company has been successful
on the merits or otherwise in the defense of any action, suit or proceeding
referred to in the preceding two paragraphs, or in the defense of any claim,
issue or matter therein, the Company is required to indemnify such person
against expenses (including attorney's fees) actually and reasonably incurred in
connection therewith.
The indemnification described in the preceding paragraphs (unless ordered by
a court) shall be provided by the Company only as authorized in the specific
case upon a determination that indemnification of the director or officer is
proper under the circumstances because he has met the applicable standard of
conduct set forth in each section. Such determination will be made by (i) a
majority vote of directors who were not parties to such action, suit or
proceeding, even though less than a quorum, (ii) if there are no such directors,
or if such directors so direct, by independent legal counsel in a written
opinion, or (iii) by the stockholders. Notwithstanding the foregoing, to the
extent that a director or officer has been successful on the merits or otherwise
in defense of any such proceeding, he shall be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection therewith.
Expenses incurred in defending a civil or criminal proceeding may be paid by
the Company in advance of the final disposition of such proceeding upon receipt
of an undertaking by or on behalf of the director or officer to repay such
amount if it shall be ultimately determined that he is not entitled to be
indemnified by the Company.
The Company may purchase and maintain insurance on behalf of any person who
is or was a director or officer against any liability asserted against him and
incurred by him in any such capacity, or arising out
II-1
<PAGE>
of his status as such, whether or not the Company would have the power to
indemnify him against such liability under the foregoing indemnification
provisions.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The estimated expenses to be incurred by the Company in connection with the
issuance and distribution of the Units is as follows:
<TABLE>
<S> <C>
SEC Registration Fee............................................ $ 465.48
Printing and Engraving.......................................... 10,000.00
Accountants' Fees and Expenses.................................. 6,000.00
Blue Sky Filing Fees and Expense................................ 2,500.00
Legal Fees and Expenses......................................... 28,000.00
Transfer Agent's and Registrar's Fees........................... 2,034.52
---------
TOTAL........................................................... $49,000.00
---------
---------
</TABLE>
ITEM 26. RECENT SALE OF UNREGISTERED SECURITIES
From July through November 19, 1994, following its formation, the Company
issued a total of 900,000 shares of common stock, $.001 par value, to the
following subscribers:
<TABLE>
<CAPTION>
NAME SHARES CASH CONSIDERATION
- --------------------------------------------------------------- --------- ------------------
<S> <C> <C>
Andrew Panzo................................................... 526,500 $ 28,080
IHN Partnership................................................ 294,750 15,520
David Alperin.................................................. 45,000 2,400
Jere Dumanic................................................... 11,250 1,200
Steve Levin.................................................... 11,250 600
Steve Funk..................................................... 11,250 2,200
--------- -------
TOTAL.......................................................... 900,000 $ 50,000
--------- -------
--------- -------
</TABLE>
Such sales were made in reliance on Section 4 (2) of the Securities Act, and
applicable state securities laws for transactions by an issuer not involving a
public offering. No advertising or general solicitation was employed in offering
the stock. Securities were offered to officers, directors and others who had
access to information concerning the Company by virtue of their relationship
with officers and directors of the Company. The securities were offered for
investment only and not for the purpose of resale or distribution, and the
transfer thereof was appropriately restricted by the Company.
II-2
<PAGE>
ITEM 27. EXHIBITS
The following Exhibits are filed as part of this Registration Statement:
<TABLE>
<CAPTION>
EXHIBIT NO.
- -------------
<C> <S>
3.1 Certificate of Incorporation
3.2 By-Laws of the Registrant
4.1 Copy of Specimen Stock Certificate
4.2 Form of Escrow Agreement
4.3 Form of Warrant Agreement
4.4 Form of Class A Warrant
5.1 Opinion of Klehr, Harrison, Harvey, Branzburg & Ellers
10 Form of Subscription Agreement
24.1 Consent of Cogen Sklar LLP
24.2 Consent of Klehr, Harrison, Harvey, Branzburg & Ellers
</TABLE>
- ------------------------
* To be provided upon amendment.
ITEM 28. UNDERTAKINGS
The undersigned registrant hereby undertakes:
1. To file, during any period in which offers or sales are being made,
a post effective amendment to this Registration Statement to: (i) include
any prospectus required by Section 10 (a) (3) of the Securities Act; (ii)
reflect in the prospectus any facts or events which, individually or
together, represent a fundamental change in the information set forth in the
Registration Statement, and (iii) include any additional or changed material
information with respect to the plan of distribution.
2. That for the purpose of determining any liability under the
Securities Act, each post effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
3. To remove from registration by means of a post effective amendment
any of the securities being registered which remain unsold at the
termination of the Offering.
Insofar as indemnification for liabilities under the Securities Act may be
permitted to directors, officers and controlling persons of the Registrant
pursuant to the foregoing provisions or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in a successful defense of any action, suit or proceeding) is asserted by a
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issuer.
II-3
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, as
amended, the Registrant certifies that it has reasonable grounds to believe that
it meets all of the requirements for filing on Form SB-2 and authorized this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Philadelphia, on the 15th day of July,
1997.
SCHUYLKILL ENTERPRISES, INC.
By: /s/ Lenoard Linsker
-----------------------------------------
Leonard Linsker
CHIEF EXECUTIVE OFFICER
In accordance with the requirements of the Securities Act of 1933, this
Registration Statement was signed by the following persons in the capacities and
on the dates stated.
SIGNATURE TITLE DATE
- ------------------------------ -------------------------- -------------------
/s/ David Alperin
- ------------------------------ Director, Chief Financial July 15, 1997
David Alperin Officer
/s/ Leonard Linsker
- ------------------------------ Chairman, Chief Executive July 15, 1997
Leonard Linsker Officer
II-4
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. ITEM METHOD OF FILING PAGE
- ------------- ------------------------ ---------------- -----------
<C> <S> <C> <C>
3.1 Certificate of *
Incorporation filed
November 22, 1993
3.2 By-Laws of the *
Registrant
4.1 Copy of Specimen *
Stock Certificate
4.2 Form of Escrow *
Agreement
4.3 Form of Warrant *
Agreement
4.4 Form of Class A *
Warrant
5.1 Opinion of Klehr, *
Harrison, Harvey,
Branzburg & Ellers
10 Form of Subscription *
Agreement
24.1 Consent of Cogen Filed herewith
Sklar LLP
24.2 Consent of Klehr, (Filed as part
Harrison, Harvey of Exhibit 5.1)
Branzburg & Ellers
</TABLE>
* To be filed by amendment
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Exhibit 24.1
CONSENT OF INDEPENDENT AUDITOR
We consent to the reference to our firm as "EXPERTS" and to the use of our
report dated May 29, 1997, in the registration Statement on Form SB-2 and the
related Prospects of Schuylkill Enterprises, Inc.
/s/ Cogen Sklar LLP
COGEN SKLAR LLP
Bala Cynwyd, Pennsylvania
June 19, 1997
