<PAGE>
As filed with the Securities and Exchange Commission on October ___, 1997
Registration No. 33-88270
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
______________________________
AMENDMENT NO. 3
FORM SB-2
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
________________________________
SCHUYLKILL ENTERPRISES, INC.
(Exact name of registrant as specified in its charter)
________________________________
Delaware 6770 23-2751054
(State or other (Primary Standard (I.R.S. Employer
jurisdiction of Classification Code Identification Number)
incorporation or Number)
organization)
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 LLP
1401 Walnut Street
Philadelphia, PA 19102
(215) 569-6060
___________________________________
Approximate date of proposed sale to the public: As soon as practicable
following the date on which this Registration Statement becomes effective.
___________________________________
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Acto of
1933, check the following box. /x/
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
Title of Each Class Proposed Maximum
of Securities to be Amount to be Proposed Maximum Aggregate Offering Amount of
Registered Registered Offering Price Price Registration Fee
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Units (1) 50,000 $2.00 $100,000 $34.48
- ---------------------------------------------------------------------------------------------------------------------------
Warrants 250,000 -- -- --
- ---------------------------------------------------------------------------------------------------------------------------
Common Stock 100,000 -- -- --
- ---------------------------------------------------------------------------------------------------------------------------
Common Stock (2) 500,000 $5.00 $1,250,000 $431.00
- ---------------------------------------------------------------------------------------------------------------------------
Total $1,350,000 $465.48
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Each Unit offered hereby consists of one share of Common Stock and five
Redeemable A Warrants.
(2) Consists of shares of Common Stock issuable upon the exercise of the
Redeemable A Warrants, if at all, upon payment of the per share exercise
price of $5.00.
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.
<PAGE>
SCHUYLKILL ENTERPRISES, INC.
CROSS REFERENCE SHEET
Pursuant to Item 501(b) of Regulation S-B
Registration Statement Item Number and Caption Location in
Prospectus or Page
1. Forepart of the Registration Statement and Forepart of the Registration
Outside Front Cover Page of Prospectus Statement; Outside Front Cover
Page of Prospectus
2. Inside Front and Outside Back Cover Pages Inside Front and Outside Bank
of Prospectus Cover Pages of 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 Management; Certain
and Control Persons Transactions
11. Security Ownership of Certain Beneficial Management; Principal
Owners and Management Stockholders
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;
Indemnification for Securities Act Part II; Item 24-
Liabilities 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 Management's Discussion and
Plan of Operation Analysis of Financial
Condition and Results of
Operations
18. Description of Property Proposed Business
19. Certain Relationships and Related Certain Transactions
Transactions
20. Market for Common Equity and Related N/A
Stockholder Matters
21. Executive Compensation Management
22. Financial Statements Capitalization; Summary
Financial Information;
Financial Statements;
Prospectus Summary
23. Changes in and Disagreements with N/A
Accountants on Accounting and Financial
Disclosure
2
<PAGE>
Subject to Completion __________________, 1997
SCHUYLKILL ENTERPRISES, INC.
50,000 Units
Offering price $2.00 per Unit
This prospectus (the "Prospectus") relates to the offer and sale by
Schuylkill Enterprises, Inc. (the "Company") of 50,000 Units (individually, a
"Unit", and collectively, the "Units"), each Unit consisting of one share (a
"Share") of Common Stock, $.001 par value (the "Common Stock"), and five
Redeemable A Warrants (the "Warrants"), at a price of $2.00 per Unit. The
minimum subscription hereunder is 100 Units.
This Prospectus also relates to the issuance to, and the offer and sale of
up to 250,000 shares of Common Stock (the "Warrant Shares") issuable upon the
exercise of Warrants, and, pursuant to Rule 416 under the Securities Act of
1933, as amended (the "Securities Act"), the issuance, sale and resale of any
shares of Common Stock issued with respect to the Warrants as a result of stock
splits, stock dividends and anti-dilution provisions. Subject to the
restrictions set forth below, the Warrants 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 Warrant Share at an exercise price of
$5.00 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 Units, the Shares, the Warrants and the
Warrant Shares are sometimes collectively referred to as the "Securities."
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.
Officers, directors or principal stockholders of the Company reserve
the right to purchase up to ten (10%) of the Units offered hereby or an
aggregate of 5,000 Units. 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. 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
<PAGE>
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 Funds (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 (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 SECURITIES 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.
- ------------------------------------------------------------------------------
Underwriting
Price to Public Commission (1) Proceeds to Company
- ------------------------------------------------------------------------------
Per Unit $2.00 $ 0 $2.00
Total Maximum $100,000 $ 0 $100,000
- ------------------------------------------------------------------------------
(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 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.
<PAGE>
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 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.
1
<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 50,000 Units, each Unit consisting of one share
of Common Stock and five Warrants at an Offering Price of $2.00 per Unit.
Each Warrant entitles the holder thereof to purchase one share of Common Stock
at an exercise price of $5.00 per share, at any time before the first
anniversary of the date 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 450,000 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 500,000
shares of Common Stock (750,000 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."
2
<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.
3
<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 "THE
OFFERING--The 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;
4
<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 statements 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.
5
<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.
6
<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 ^ $.105 per share, for the ^ 169,875
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 ^ 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.
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
7
<PAGE>
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 ^ $5.00 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.
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
8
<PAGE>
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 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."
9
<PAGE>
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 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
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<PAGE>
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."
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."
11
<PAGE>
SUMMARY FINANCIAL INFORMATION
Set forth below is certain summary financial information with respect to
the Company from inception (November 22, 1993) through ^ June 30, 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 ^ JUNE 30, 1997 (1)
<S> <C>
Statement of Operations Data:
Interest Income $ ^ 2,295
Net Loss $ ^(35,663)
Loss Per Share $ ^ 0.08
Weighted Average Number of Shares ^ 450,000
^ JUNE 30, 1997
Actual As Adjusted ^(2)
Balance Sheet Data:
Working Capital ^ $14,337 $ 91,337 (3)
Total Assets ^ 29,737 113,237
Total Liabilities ^ 15,400 21,900
Stockholders' Equity ^ 14,337 91,337
</TABLE>
__________________________________________
(1) Adjusted for the one for two reverse stock split effectuated on September
18, 1997.
(2) Adjusted to give effect to the consummation of the Offering and the receipt
of the net proceeds upon the sale of ^ 50,000 Units offered hereby, but
assuming no exercise of the Warrants.
^(3) 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".
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<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 ^ 450,000 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 ^
$5.00 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 ^ $200.
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. However, the officers, directors
and principal stockholders of the Company reserve the right to purchase up to
ten percent (10%) of the Units offered hereby, or an aggregate of 5,000
Units, and may purchase such Units in order to close the Offering. 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 ^
stockholders 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:
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<PAGE>
(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));
(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
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<PAGE>
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 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
^ On September 18, 1997, the Company effected a one for two reverse stock
split which reduced the number of shares issued and outstanding from 900,000 to
450,000.
As of ^ June 30, 1997, the Company had a net tangible book value of
approximately ^ $13,237, or a net tangible book value per share of
approximately ^ $.029. Without taking into account any additional changes in
net tangible book value after ^ June 30, 1997, other than to give effect to
the sale by the Company of the ^ 50,000 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 ^ $113,237 (before the deduction of expenses that will be incurred in
connection with this Offering), or approximately ^ $.23 per share,
representing an immediate dilution of ^ $1.77 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 ^ $ 2.00
Net Tangible Book Value Per Share (Before Offering) ^ $ .029
Net Tangible Book Value Per Share (After Offering) ^ $ 0.23
Increase Per Share to present stockholders ^ $ .201
Dilution to Investors in this Offering $ ^ 1.77
</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 ^ 250,000 shares reserved for
issuance upon the exercise of the Warrants. If the Exercise Price of ^ $5.00
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.
15
<PAGE>
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 ^ 450,000 (1) 90% $50,000 33.3% ^ $ .11 (2)
New Investors ^ 50,000 10% $100,000 66.7% ^ $2.00
</TABLE>
(1) Adjusted for the one for two reverse stock split effectuated on September
18, 1997.
(2) Represents the average price per share.
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
16
<PAGE>
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.
17
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
June 30, 1997 adjusted to give effect to (i) the one for two reverse
stock split effectuated on September 18, 1997 and (ii) the issuance and
sale of the Units offered hereby:
SHAREHOLDERS' EQUITY
As
Actual Adjusted (1)
Preferred stock, $.001 par value, $ - $ -
2,000,000 shares authorized, none issued
Common stock, $.001 par value,
10,000,000 shares authorized, 450,000
shares issued and outstanding; as adjusted
500,000 shares 450 500
Additional paid-in capital 49,550 126,500
Deficit accumulated during the
development stage (35,663) (35,663)
TOTAL SHAREHOLDERS' EQUITY AND
CAPITALIZATION $14,337 $91,337
___________________________________________
(1) Giving effect to the completion of this Offering and the receipt of the
net proceeds therefrom.
18
<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 June 30, 1997, the Company's assets were $29,737,
consisting of cash of $4,173, accrued interest receivable of
$2,107 and a receivable from affiliated entities of $6,957 and deferred
offering costs of $16,500. 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, 450,000 Shares of its
Common Stock (adjusted for the one for two reverse stock split effectuated
on September 18, 1997) 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
$237 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
$237. 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.
19
<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
20
<PAGE>
the Company may acquire or in which the Company may participate. In
addition, the 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.
21
<PAGE>
MANAGEMENT
Directors and Executive Officers
The directors and executive officers of the Company and their ages and
business backgrounds are as follows:
Name and Address Age Position(s) Held
Leonard Linsker 30 Chairman, Chief Executive
Officer
David Alperin 31 Treasurer, Secretary, ^ Director
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 revenues or other
funds of an acquisition or merger candidate, or by the issuance of debt or
equity securities of such an entity.
22
<PAGE>
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 June 30, 1997, the amount outstanding was
$6,957 plus accrued interest of $2,107.00.
23
<PAGE>
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.
<TABLE>
<CAPTION>
Percentage of Outstanding Shares:
Shares Owned
Beneficially and of
Record (1) Before Offering After Offering(2)
<S> <C> <C> <C>
Andrew Panzo
2138 Lombard Street
Unit 4B
Philadelphia, PA 19146 263,250 58.5% 52.6%
Leonard Linsker(3)(4)
541 College Avenue
Haverford, PA 19041 147,375 32.7% 29.4%
David Alperin(3)
2301 Cherry Street
Unit 5C
Philadelphia, PA 19103 22,500 5.0% 4.5%
Officers and directors
as a group (two persons) 174,875 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.
Share amounts have been adjusted for the one for two reverse stock split
effectuated on September 18, 1997.
(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 $5.00 at any time on or before the first
24
<PAGE>
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
450,000 shares of Common Stock issued and outstanding. Following the
completion of this Offering there will be 500,000 shares of Common
Stock issued and outstanding and 250,000 Shares reserved for issuance upon
the exercise of the Warrants.
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 effectuation of a Business Combination without the
concurrence of minority stockholders. See "RISK FACTORS--Operating
Control of Company to Remain with Present Stockholders".
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--Dividends" 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, 1998.
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.
25
<PAGE>
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
$5.00 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.
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. The officers, directors
and principal stockholders of the Company reserve the right to purchase up to
ten percent (10%) of the units offered hereby, or up to 5,000 Units, and may
purchase such Units in order to close the Offering.
26
<PAGE>
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.
Units will be sold only for cash in the amount of $2.00 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. 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 LLP, 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.
27
<PAGE>
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 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.
28
<PAGE>
SCHUYLKILL ENTERPRISES, INC.
(A Development Stage Company)
CONTENTS
PAGE
INDEPENDENT AUDITORS' REPORT.................................... F-2
BALANCE SHEETS AS OF SEPTEMBER 30, 1996
AND JUNE 30, 1997............................................ F-3
STATEMENTS OF OPERATIONS FOR THE YEARS
ENDED SEPTEMBER 30, 1995 AND 1996; NINE
MONTHS ENDED JUNE 30, 1997; AND
FROM NOVEMBER 22, 1993 (INCEPTION DATE)
TO JUNE 30, 1997............................................. F-4
STATEMENT OF SHAREHOLDERS' EQUITY FROM
NOVEMBER 22, 1993 (INCEPTION DATE) TO
JUNE 30, 1997................................................ F-5
STATEMENTS OF CASH FLOWS FOR THE YEARS
ENDED SEPTEMBER 30, 1995 AND 1996; NINE
MONTHS ENDED JUNE 30, 1997; AND
FROM NOVEMBER 22, 1993 (INCEPTION DATE)
TO JUNE 30, 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 June 30, 1997 and the
related statements of operations and cash flows for the years ended September
30, 1995 and 1996, the nine months ended June 30, 1997 and the period from
November 22, 1993 (inception date) to June 30, 1997 and statement of
shareholders' equity for the period from November 22, 1993 (inception date) to
June 30, 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 June 30, 1997, and the results of its operations and
cash flows for the years ended September 30, 1995 and 1996, the nine months
ended June 30, 1997 and the period from November 22, 1993 (inception date) to
June 30, 1997 in conformity with generally accepted accounting principles.
COGEN SKLAR LLP
Bala Cynwyd, Pennsylvania
September 18, 1997
F-2
<PAGE>
SCHUYLKILL ENTERPRISES, INC.
(A Development Stage Company)
BALANCE SHEETS
September 30, 1996 June 30, 1997
------------------ -------------
ASSETS
CURRENT ASSETS
Cash $ 7,588 $ 4,173
Accrued interest receivable 1,825 2,107
Receivable from affiliated company 6,957 6,957
Deferred offering costs - 16,500
--------- ---------
TOTAL ASSETS $ 16,370 $ 29,737
--------- ---------
--------- ---------
LIABILITIES
CURRENT LIABILITIES
Accrued expenses $ 700 $ 15,400
--------- ---------
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
450,000 shares
450 450
ADDITIONAL PAID-IN CAPITAL 49,550 49,550
DEFICIT ACCUMULATED DURING THE
DEVELOPMENT STAGE
(34,330) (35,663)
--------- ---------
TOTAL SHAREHOLDERS' EQUITY 15,670 14,337
--------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY
$ 16,370 $ 29,737
--------- ---------
--------- ---------
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>
Year Ended
-------------------------------------------
Nine Months November 22, 1993
Ended (Inception Date) to
September 30, 1995 September 30, 1996 June 30, 1997 June 30, 1997
------------------ ------------------ ------------- -------------------
<S> <C> <C> <C> <C>
INTEREST INCOME $ 925 $ 900 $ 470 $ 2,295
----------- ---------- -------- ---------
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 $ (1,333) $ (35,663)
----------- ---------- -------- ---------
----------- ---------- -------- ---------
INCOME (LOSS) PER
SHARE .......................... $ (0.08) $ - $ - $ (0.08)
----------- ---------- -------- ---------
----------- ---------- -------- ---------
WEIGHTED AVERAGE
NUMBER OF SHARES................ 450,000 450,000 450,000 450,000
----------- ---------- -------- ---------
----------- ---------- -------- ---------
</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 JUNE 30, 1997
<TABLE>
Deficit
Accumulated
Additional During the Total
Common Paid-In Development Shareholders'
Stock Capital Stage Equity
------ ---------- ------------- -------------
<S> <C> <C> <C> <C>
Issuance of 900,000 shares of common stock $ 900 $49,100 $ - $ 50,000
One for two reverse stock split (450) 450 - -
Net loss from inception to September 30, 1994 - - (160) (160)
----- ------- -------- --------
Balance, September 30, 1994 450 49,550 (160) 49,840
Net loss for the year ended September 30, 1995 - - (34,370) (34,370)
----- ------- -------- --------
Balance, September 30, 1995 450 49,550 (34,530) 15,470
Net income for the year ended September 30, 1996 - - 200 200
----- ------- -------- --------
Balance, September 30, 1996 450 49,550 (34,330) 15,670
Net loss for the nine months ended June 30, 1997 - - (1,333) (1,333)
----- ------- -------- --------
Balance, June 30, 1997 $450 $49,550 $(35,663) $ 14,337
----- ------- -------- --------
----- ------- -------- --------
</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>
Year Ended
-----------------------------------------
Nine Months November 22, 1993
Ended (Inception Date) to
September 30, 1995 September 30, 1996 June 30, 1997 June 30, 1997
------------------ ------------------ ------------- -------------------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $(34,370) $ 200 $ (1,333) $(35,663)
Adjustments to reconcile net income
(loss) to net cash provided by
(used in) operating activities
Increase in accrued interest (925) (900) (282) (2,107)
Increase (decrease) in accrued
expenses (2,500) (1,800) 14,700 15,400
-------- ------- -------- --------
Net cash provided by (used in)
operating activities (37,795) (2,500) 13,085 (22,370)
-------- ------- -------- --------
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 - (16,500) (16,500)
-------- ------- -------- --------
Net cash provided by (used in)
financing activities 3,509 5,662 (16,500) 26,543
-------- ------- -------- --------
NET INCREASE (DECREASE) IN CASH (34,286) 3,162 (3,415) 4,173
CASH - BEGINNING OF PERIOD 38,712 4,426 7,588 -
-------- ------- -------- --------
CASH - END OF PERIOD $ 4,426 $ 7,588 $ 4,173 $ 4,173
-------- ------- -------- --------
-------- ------- -------- --------
</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 JUNE 30, 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 three
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", SFAS 123, "Accounting for Stock-Based Compensation" and SFAS
130, "Reporting of Comprehensive Income". 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 JUNE 30, 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 $470 has been accrued for the years ended September 1995 and 1996
and the nine months ended June 30, 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 450,000 shares
of common stock (after effect of one for two reverse stock split) for cash of
$50,000.
The company has reserved 250,000 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.
On September 18, 1997, the Board of Directors approved a two for one reverse
stock split. All references to number of shares and per share amounts in the
financial statements and notes have been adjusted to give retroactive effect to
the stock split.
NOTE 4 - CONTEMPLATED PUBLIC OFFERING
The company is in the process of filing a registration statement offering for
sale 50,000 units at $2.00 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 $5.00.
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
Page
Prospectus Summary.....................................................
Risk Factors ..........................................................
Summary Financial Information..........................................
The Company ...........................................................
The Offering
Dilution..............................................................
Dividend Policy........................................................
Use of Proceeds........................................................
Capitalization.........................................................
Management's Discussion and Analysis of
Financial Condition and Results of Operations........................
Business of the Company................................................
Management.............................................................
Certain Transactions...................................................
Principal Stockholders.................................................
Description of Securities..............................................
Plan of Distribution...................................................
Legal Matters..........................................................
Certain Provisions of the Company's
Certificate of Incorporation and Bylaws...............................
Experts................................................................
Additional Information.................................................
Financial Statements...................................................
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.
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
--------------------
^ 50,000 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 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.
II-1
<PAGE>
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:
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
Item 26. Recent Sale of Unregistered Securities
From July through November 19, 1994, following its formation, the Company
issued a total of ^ 450,000 shares of Common Stock, $.001 par value (adjusted
for a one for two reverse stock split effectuated on September 18, 1997), to
the following subscribers:
Name Shares Cash Consideration
---- ------ ------------------
Andrew Panzo 263,250 $28,080
IHN Partnership 147,375 15,520
David Alperin 22,500 2,400
Jere Dumanic 5,625 1,200
Steve Levin 5,625 600
Steve Funk 5,625 2,200
------- -------
TOTAL 450,000 $50,000
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:
Exhibit No.
-----------
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
LLP
10 Form of Subscription Agreement
24.1 Consent of Cogen Sklar LLP
24.2 Consent of Klehr, Harrison, Harvey, Branzburg & Ellers
LLP
27.1 Financial Data Schedule
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 Amendment No. 3 to the Registration Statement on Form SB-2 to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Philadelphia, on the 7th day of October, 1997.
SCHUYLKILL ENTERPRISES, INC.
By: /s/Leonard 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 October 7, 1997
David Alperin Financial Officer
/s/Leonard Linsker
_____________________________ Chairman, Chief October 7, 1997
Leonard Linsker Executive Officer
II-4
<PAGE>
INDEX TO EXHIBITS
Exhibit No. Item Method of Filing Page
----------- ---- ---------------- ----
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 *
Sklar LLP
24.2 Consent of Klehr, (Filed as part
Harrison, Harvey of Exhibit 5.1)
Branzburg & Ellers
27.1 Financial Data Filed herewith
Schedule
____________________________
* Previously filed
<PAGE>
[KLEHR, HARRISON, HARVEY, BRANZBURG & ELLERS LLP LETTERHEAD]
September 26, 1997
Board of Directors
Schuylkill Enterprises, Inc.
401 City Line Avenue, Suite 725
Bala Cynwyd, PA 19004
Gentlemen:
We have acted as special counsel to Schuylkill Enterprises, Inc., a
Delaware corporation (the "Company"), and have served in such capacity in
connection with the preparation of the Company's Registration Statement on Form
SB-2 (Registration No. 33-88270) (the Registration Statement, together with
Amendments No. 1 and 2 thereto, the "Registration Statement") as filed with the
Securities and Exchange Commission (the "SEC") in connection with the
registration under the Securities Act of 1933, as amended, for the offer and
sale of up to 100,000 Units (each a "Unit" and collectively the "Units"), each
Unit consisting of one share of the Company's common stock, par value $.001 per
share (the "Common Shares"), and 5 Class A Redeemable Warrants ("Warrants"),
each Warrant exercisable to purchase one Common Share (the "Warrant Shares").
For purposes of this opinion, we have made such investigations of law, and
have examined such originals, or copies certified or otherwise identified to our
satisfaction, of such documents, corporate records and other instruments as we
have deemed necessary. We have assumed the genuineness of all signatures, the
authenticity of all documents submitted to us as originals, the conformity to
originals of all documents submitted to us as certified, photostatic or
conformed copies, and the authenticity of originals of all such latter
documents. We have also assumed the due execution and delivery of all documents
where due execution and delivery are prerequisites to the
<PAGE>
Board of Directors
September 26, 1997
Page 2
effectiveness thereof. We have relied upon certificates of public officials and
certificates of officers of the Company for the accuracy of material factual
matters contained therein which were not independently established.
Based upon and subject to the foregoing, and the qualifications hereinafter
set forth, we are of the opinion that (i) the Units, the Common Shares and the
Warrants are duly and validly authorized and (ii) upon the sale and issuance of
the Units in accordance with the Registration Statement, (a) the Common Shares
will be validly issued, fully paid and non-assessable and (b) the Warrant
Shares, when issued in accordance with the terms of the Warrants will be validly
issued, fully paid and non-assessable.
Our opinion is limited to the General Corporation Law of the State of
Delaware and the laws of the United States specifically referred to herein. No
opinion is expressed on any matters other than those expressly referred to
herein. The opinion set forth herein is as of the date of this letter and we do
not render any opinion as to the effect of any matter which may occur subsequent
to the date hereof, and specifically disclaim any obligation to do so.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and the reference to us under the caption "Legal Matters"
in the Prospectus forming a part of the Registration Statement. In giving such
consent, we do not thereby admit that we come within the category of persons
whose consent is required under Section 7 of the Act, or the Rules and
Regulations of the SEC promulgated thereunder.
Very truly yours,
<PAGE>
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 September 18, 1997, in the registration Statement on Form SB-2
and the related Prospects of Schuylkill Enterprises, Inc.
COGEN SKLAR LLP
Bala Cynwyd, Pennsylvania
September 23, 1997
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<PAGE>
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<FISCAL-YEAR-END> SEP-30-1996 SEP-30-1996
<PERIOD-START> OCT-01-1996 OCT-01-1996
<PERIOD-END> AUG-31-1996 JUN-30-1997
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