<PAGE> 1
Filed Pursuant to Rule 424(b)(2)
Registration No. 33-94470
PROSPECTUS
LLOYD VENTURES, INC.
(A Delaware Corporation)
THE OFFER AND SALE OF UP TO 1,000,000 SHARES OF COMMON STOCK
OFFERING PRICE - $.10 PER SHARE
LLOYD VENTURES, INC. (THE "COMPANY") IS A RECENTLY ORGANIZED CORPORATION, FORMED
FOR THE PURPOSE OF ACQUIRING OR MERGING WITH AN UNSPECIFIED OPERATING BUSINESS.
THIS PROSPECTUS RELATES TO THE OFFER AND SALE BY THE COMPANY OF A MAXIMUM OF
1,000,000 AND A MINIMUM OF 250,000 SHARES (THE "SHARES") OF COMMON STOCK, $.001
PAR VALUE ("COMMON STOCK"). SEE "DESCRIPTION OF SECURITIES".
THIS BLANK CHECK OFFERING IS SUBJECT TO THE PROVISIONS OF RULE 419 OF
REGULATION C("RULE 419") AS PROMULGATED BY THE SECURITIES AND EXCHANGE
COMMISSION (THE "COMMISSION") UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"). ACCORDINGLY, THE OFFERING PROCEEDS AND THE SECURITIES PURCHASED BY
INVESTORS (RESPECTIVELY, THE "DEPOSITED FUNDS" AND "DEPOSITED SECURITIES") WILL
BE HELD IN ESCROW (THE "RULE 419 ESCROW") SUBJECT TO THE SATISFACTION OF THE
PROVISIONS OF THE RULE 419 ESCROW.
The Deposited Funds and the Deposited Securities may not be released
until an acquisition meeting certain specified criteria has been made and a
sufficient number of investors reconfirm their investment in accordance with the
procedures set forth in Rule 419. Pursuant to these procedures, a new
prospectus, which describes an acquisition candidate and its business and
includes audited financial statements, will be delivered to all investors. The
Company must return the pro-rata portion of the Deposited Funds (and any
interest earned or dividends paid thereon) to any investor who does not elect to
remain an investor. Unless a sufficient number of investors (representing at
least 80% of the maximum Offering Proceeds) elect to remain investors, all
investors will be entitled to the return of a pro-rata portion of the Deposited
Funds (and any interest earned or dividends paid 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 of the Registration
Statement of which this prospectus is a part, the Deposited Funds (and any
interest earned or dividends paid thereon) will be returned on a pro-rata basis
to all investors. See "Investors' Rights and Substantive Protection under Rule
419."
THESE SECURITIES ARE HIGHLY SPECULATIVE, INVOLVE A HIGH DEGREE OF RISK AND
IMMEDIATE SUBSTANTIAL DILUTION. SEE "RISK FACTORS"
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
Price to the Proceeds to the
Public (1) Company (2)(3)
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Per Share $ .10 $ .10
Total - 250,000 Shares (Minimum) 25,000.00 22,500.00
1,000,000 Shares (Maximum) 100,000.00 90,000.00
- --------------------------------------------------------------------------------------------------------------
</TABLE>
(See notes on following page)
The date of this Prospectus is November 12, 1996
<PAGE> 2
(Footnotes for cover page)
(1) The Shares are being offered (sometimes referred to herein as the
"Offering" or this "Blank Check Offering") directly by the Company on a
"best efforts, all or none basis" with respect to the first 250,000 Shares
and on a "best efforts basis" with respect to the remaining 750,000 Shares.
Proceeds of the offering will be held in escrow pursuant to the terms of
the Rule 419 Escrow (as defined below). See "Plan of Distribution".
Unless at least 250,000 Shares are sold within 150 days of the date of this
Prospectus, which period may be extended for an additional 30 days
(collectively, the "Offering Period") in the sole discretion of the
Company, the Offering will terminate and all funds theretofore received
from subscribers will be promptly returned (along with any interest earned
or dividends paid thereon). Therefore, in the event that the minimum number
of Shares is not sold, prospective investors' funds may be held in escrow
for as long as 180 days before they are returned by the Escrow Agent.
The terms of the Escrow Agreement which have been included therein to
comply with Rule 419 (the "Rule 419 Escrow Provisions") will govern the
treatment of the Shares purchased by investors and the investors's funds
tendered in payment thereof. Pursuant to the Rule 419 Escrow Provisions,
the certificates evidencing the Shares are to be issued in the respective
names of the investors and promptly deposited into the Rule 419 Escrow upon
issuance. The proceeds of the offering, after the release to the Company of
an amount equal to 10% on an aggregate basis of the proceeds of the
offering (up to an aggregate of $10,000 if the maximum number of Shares is
sold), will remain deposited in the Rule 419 Escrow. See "Investors' Rights
and Substantive Protection Under Rule 419". Consequently, since the Company
will not be paying commissions with respect to the offer and sale of Shares
after delivery to the Company of 10% of the proceeds, as permitted by Rule
419, the net amount to be maintained in the Rule 419 Escrow is $22,500 if
the minimum number of Shares is sold and $90,000 if the maximum number of
Shares is sold (plus any interest earned or dividends paid thereon).
(2) All offer and sales of Shares will be effected through the Company's
officers and directors. The Company's officers and directors will not
receive any compensation for their services in connection therewith. The
Company's officers and directors may, but are not obligated to, purchase
Shares on the same terms and conditions as all other investors. However,
any Shares purchased by the Company's officers and directors will not be
included in determining whether the minimum offering criteria has been
satisfied. Hence, the maximum number of Shares that the officers and
directors of the Company may purchase is 750,000 or 75% of the maximum
offering. See "Risk Factors".
(3) To date the Company has incurred organizational costs of approximately
$3,000 and expects to incur filing, printing, legal, accounting and
miscellaneous expenses relating to the offering estimated at $28,600.
Preincorporation, incorporation and private placement professional fees of
$1,500 were paid for by issuance of 75,000 shares of common stock at a
price of $.02 per share. Except for up to ten (10%) percent of the proceeds
of the offering ($2,500 if the minimum number of Shares is sold and $10,000
if the maximum number of Shares is sold) to be delivered to the Company as
permitted by Rule 419, the proceeds of this offering will not be used to
pay these amounts. The balance of the expenses will be paid from the
Company's working capital derived from private placements of equity
securities previously consummated; or if necessary from borrowed funds, if
the Company can obtain the same on terms and conditions acceptable to it.
2
<PAGE> 3
RULE 15g-8 PROMULGATED PURSUANT TO THE EXCHANGE ACT MAKES IT UNLAWFUL FOR ANY
PERSON TO SELL OR OFFER TO SELL THE DEPOSITED SECURITIES (OR ANY INTEREST IN OR
RELATED TO THE DEPOSITED SECURITIES). THUS, INVESTORS ARE PROHIBITED FROM MAKING
ANY ARRANGEMENTS TO SELL THE DEPOSITED SECURITIES UNTIL THEY ARE RELEASED FROM
THE ESCROW ACCOUNT (SEE "RISK FACTORS" AND "PROHIBITIONS AGAINST SALE OF
SECURITIES BEFORE RELEASE FROM ESCROW.")
Prior to this offering there has been no public market for the Shares. No
trading in the Shares can be effected during the term of the Rule 419 Escrow.
There can be no assurance that any trading market in the Shares will develop
hereafter or if it does develop that it will be sustained. The Company has no
present plans, proposals, arrangements or understandings with any person with
regard to the development of a trading marking for the Shares of Common Stock
offered hereby.
The public offering price has been arbitrarily determined by the Company and
bears no relationship to the Company's assets, prospective earnings, book value
or any other recognized criteria of value. This offering will be conducted by
the Company without use of a professional underwriter or securities dealer.
See "Risk Factors" and "Distribution".
STATE SECURITIES REGULATION
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF ANY
OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY
PERSON TO WHICH IT IS UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION IN SUCH
JURISDICTION.
THE COMPANY HAS REGISTERED THE SHARES ONLY IN THE STATE OF NEW YORK. SUBJECT TO
THE RULE 419 ESCROW, THE SHARES MAY ONLY BE TRADED IN SUCH JURISDICTION.
PURCHASERS OF THE SHARES EITHER IN THIS OFFERING OR IN ANY SUBSEQUENT TRADING
MARKET WHICH MAY DEVELOP MUST BE RESIDENTS OF THE STATE OF NEW YORK UNLESS AN
APPLICABLE EXEMPTION IS AVAILABLE OR A BLUE SKY APPLICATION HAS BEEN FILED AND
ACCEPTED. THE COMPANY WILL AMEND THIS PROSPECTUS FOR THE PURPOSE OF DISCLOSING
ADDITIONAL STATES OR JURISDICTIONS, IF ANY, IN WHICH THE SHARES WILL HAVE BEEN
REGISTERED OR AN EXEMPTION IS AVAILABLE.
THE SHARES ARE OFFERED BY THE COMPANY SUBJECT TO PRIOR SALE, ACCEPTANCE OF AN
OFFER TO PURCHASE, WITHDRAWAL, CANCELLATION OR MODIFICATION OF THE OFFER,
WITHOUT NOTICE. THE COMPANY RESERVES THE RIGHT TO REJECT ANY OFFER IN WHOLE OR
IN PART, FOR THE PURCHASE OF ANY OF THE SHARES OFFERED HEREBY.
3
<PAGE> 4
IN ORDER TO SUBSCRIBE FOR SHARES, A SUBSCRIPTION APPLICATION IN THE FORM
ATTACHED TO THIS PROSPECTUS AND A CHECK MADE PAYABLE TO THE "LLOYD VENTURES,
INC., ESCROW ACCOUNT" SHOULD BE FORWARDED TO BERNARD HEROLD & CO., INC., (THE
"ESCROW AGENT") AT 555 MADISON AVENUE, NEW YORK, NEW YORK 10022, ATTN: RENATO
VALENTE. THE ESCROW AGENT IS A MEMBER OF THE NATIONAL ASSOCIATION OF SECURITIES
DEALERS, INC. ("NASD"), NEW YORK STOCK EXCHANGE ("NYSE") AND SECURITIES
INVESTORS PROTECTION CORPORATION ("SIPC"), WILL ACT AS ESCROW AGENT PURSUANT TO
RULE 419.
AVAILABLE INFORMATION
The Company intends to furnish to its stockholders annual reports containing
financial statements audited and reported upon by its independent public
accounting firm and intends to make available quarterly reports for the first
three quarters of each year containing unaudited financial information.
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form SB-2 (the "Registration
Statement") under the Securities Act with respect to the Shares. This Prospectus
does not contain all of the information set forth in the Registration Statement,
certain parts of which are omitted in accordance with the rules and regulations
of the Commission. For further information with respect to the Company and this
offering, reference is made to the Registration Statement, including the
exhibits filed therewith, which may be examined at the Commission's principal
office, Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, the
Northeast Regional Office of the Commission at 7 World Trade Center, Suite 1300,
New York, New York 10048 and the Midwest Regional Office of the Commission,
Northwest Atrium, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661-2511 where copies may be obtained upon payment of the fees prescribed by
the Commission. Descriptions contained in this Prospectus as to the contents of
any contract or other documents filed as an exhibit to the Registration
Statement are not necessarily complete and each such description is qualified by
reference to such contract or document. The Company will provide without charge
to each person who receives a Prospectus, upon written request of such person, a
copy of any of the information that is incorporated by reference in the
Prospectus.
4
<PAGE> 5
PROSPECTUS SUMMARY
THE FOLLOWING IS A SUMMARY OF CERTAIN INFORMATION CONTAINED IN THIS PROSPECTUS
AND IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED INFORMATION AND FINANCIAL
STATEMENTS (INCLUDING THE NOTES THERETO) APPEARING ELSEWHERE IN THE PROSPECTUS
AND IN THE REGISTRATION STATEMENT.
THE COMPANY
Lloyd Ventures, Inc. (the "Company") was organized under the laws of the
State of Delaware on February 28, 1995 for the purpose of acquiring or merging
with an unspecified operating business. The Company, since its incorporation,
has not been engaged in any business activities, other than those described
herein. The Company intends to effect a merger, exchange of capital stock, asset
acquisition or other similar business combination or acquisition (a "Business
Combination") with as yet an unidentified business entity (the "Acquired
Business"). Other than general corporate activities, including but not limited
to the negotiation and consummation of a Business Combination, the Company will
not engage in any substantive commercial business immediately following this
offering until such time as it has effected a Business Combination. The Company
has no plan, proposal, agreement, understanding or arrangement to acquire or
merge with any specific business or company and the Company has not identified
any specific business or company for investigation and evaluation. It is likely
that the Company will have the ability to effect only a single Business
Combination. None of the Company's officers and directors, their affiliates or
associates have had any preliminary contact or discussions and there are no
present plans, proposals, arrangements, or understandings with any
representative of the owners of any Acquired Business regarding the possibility
of a Business Combination.
Present management (the "Management") of the Company does not expect to
become involved as management in the aforementioned businesses and will hire
presently unknown and unidentified individuals as management for the
aforementioned ventures. Management will have complete and absolute discretion
in selecting the business activities in which the Company will engage. No
assurance can be given that Management will be able to locate or acquire an
attractive business or property or that the Company will be able to operate or
acquire such on a profitable basis. The Company has not yet engaged in any
operations.
No assurance can be given that the net proceeds of the maximum offering of
this Blank Check Offering or any lesser net amount will be sufficient to
accomplish the Company's goals or that any Acquired Business will become
profitable. In the event that substantially less than the net proceeds from the
maximum offering are raised, the Company's plans may be materially and adversely
effected in that the Company may find it even more difficult, if not impossible,
to realize its goals. If such proceeds are insufficient, the Company may be
required to seek additional capital. No assurance can be given that the Company
will be able to obtain such additional capital, or even if available, that such
additional capital will be available on terms acceptable to the Company. In the
event that Management determines that the Company is unable to conduct any
business whatsoever, Management, subject to the requirements of Rule 419, which
provides that the Deposited Funds will be returned on a pro-rata basis if an
acquisition meeting certain prescribed criteria is not consummated within 18
months of the date of this Prospectus, will, in its sole discretion, seek
stockholder approval to liquidate the Company. In the event such a liquidation
were to occur at some point in time after the Company's compliance with the
provisions of Rule 419, all stockholders of the Company including those owning
shares purchased privately at less than the public offering price (see
"Dilution"), will receive the liquidated assets on a pro-rata basis (as opposed
to being based on the amounts paid for such shares). While Management has not
established any
5
<PAGE> 6
guidelines for determining at what point in time it might elect to discontinue
its efforts to engage in a business and seek stockholder approval to liquidate
the Company, Management is subject to the 18 month time frame set forth in Rule
419 in which to effect an acquisition.
The Company's address is 41 East 57th Street, 39th Floor, New York, New
York 10022.
THE OFFERING
The Offering is being conducted as a blank check offering in accordance
with Rule 419. A maximum of 1,000,000 and a minimum of 250,000 Shares are being
offered for sale hereby at a price of $.10 per Share. The Shares are offered on
an all or none basis with respect to the first 250,000 Shares and on a best
efforts basis as to the balance of the 750,000 Shares. To subscribe for Shares,
a Subscription Application in the form attached to this prospectus and a check
made payable to "Lloyd Ventures, Inc., Escrow Account" should be forwarded to
"Bernard Herold & Co., Inc., 555 Madison Avenue, New York, New York 10022, Attn:
Renato Valente". All offer and sales of Shares will be effected through the
Company's officers and directors. The Company's officers and directors will not
receive any compensation for their services in connection therewith. However,
they will be reimbursed for reasonable expenses incurred by them on behalf of
the Company. Directors and officers of the Company, may purchase Shares on the
same terms and conditions as all other investors; however, any such purchases
will not be included in calculating whether the minimum number of Shares have
been sold.
Presently there are 1,275,000 shares of Common Stock issued and
outstanding; after the completion of this offering there may be a maximum of
2,275,000 shares and a minimum of 1,525,000 shares of Common Stock issued and
outstanding.
At the completion of this offering, the present officers and directors of
the Company will own approximately 20% of the then outstanding shares if the
maximum number of Shares is sold and 30% of the then outstanding shares if the
minimum number of Shares is sold.
The Company may, in its sole discretion, terminate this offering at any
time prior to the sale of the minimum number of shares and thereafter conclude
the offer prior to the sale of the maximum number of shares.
RULE 419
The Company is conducting this offering as a blank check offering subject
to compliance with the Rule 419. Under Rule 419, investors have certain rights
and will receive certain substantive protection. Accordingly, the Deposited
Securities and the Deposited Funds will be deposited and held in Rule 419 Escrow
until an acquisition meeting specific criteria is completed. Before the
acquisition can be completed and before the Deposited Funds and Deposited
Securities can be released from escrow, the Company is required to amend the
registration statement of which this Prospectus is part, with a post-effective
amendment, and within the five days after the effective date thereof, the
Company is required to furnish investors with the prospectus produced thereby
containing the terms of a reconfirmation offer (the "Reconfirmation Offer") and
information regarding the proposed acquisition candidate and its business,
including audited financial statements.
Pursuant to Rule 419, an investor must have no fewer than 20 and no more
than 45 business days from the effective date of the post-effective amendment to
decide to reconfirm his investment and remain
6
<PAGE> 7
an investor or alternately, require the return of his investment (plus any
interest earned or dividends paid thereon), less any amounts delivered to the
Company as permitted under Rule 419. Any investor not making any decision within
said 45 day period will automatically have his investment funds returned. Rule
419 further provides that if the Company does not complete an acquisition
meeting the specified criteria within 18 months of the Effective Date, all of
the Deposited Funds (and any interest earned or dividends paid thereon) in the
Rule 419 Escrow must be returned to investors. If the offering period is
extended to its limit (180 days), the Company will have only 12 months in which
to consummate a merger or acquisition. See "Investors' Rights and Substantive
Protection Under Rule 419".
DETERMINATION OF OFFERING PRICE
The offering price of $.10 per Share has been arbitrarily determined by the
Company. This price bears no relation to the Company's assets, book value, or
any other customary investment criteria, including the Company's prior operating
history. Among the factors considered by the Company in determining the offering
price were estimates of the Company's business potential, the limited financial
resources of the Company, the amount of dilution to public investors and the
general conditions of the securities market.
RISK FACTORS
The Company is presently in the development stage and consequently has not
generated any income nor incurred any expenses except those incurred in its
formation and in connection with this offering. The Company does not expect to
receive any revenues from operations until it consummates a Business
Combination.
Accordingly, an investment in the securities of the Company is highly
speculative and involves extremely high risks, and potential investors should
carefully review the entire Prospectus and, particularly, the sections relating
to "Risk Factors", "Dilution" and "Use of Proceeds".
USE OF PROCEEDS
Under Rule 419, ten (10%) percent of the offering proceeds may be, and in
this instance will be, delivered to the Company; said ten (10%) percent of the
offering proceeds, up to an aggregate of $10,000 if the maximum number of Shares
is sold, will be used to defray the cost incurred in connection with the
Offering and in locating and/or identifying an Acquired Business. In addition,
commissions, underwriting expenses and dealer allowances, if any, are also
deductible.
The Company will receive the balance of the Deposited Funds in the event a
Business Combination is consummated pursuant to the provisions of Rule 419. The
Deposited Funds will remain in the Rule 419 Escrow Account maintained by Bernard
Herold & Co., Inc., as Escrow Agent until the consummation of a Business
Combination.
The Company intends to apply the Net Proceeds of this offering in payment
of the costs and expenses incurred in attempting to effect a Business
Combination, including selecting and evaluating an Acquired Business and,
structuring and consummating a Business Combination. Rule 419 requires that the
fair value of any Acquired Business be equal to at least 80% of the maximum
offering proceeds. See "Use of Proceeds."
7
<PAGE> 8
TRANSFER AGENT
The Company will act as its own transfer agent.
ESCROW AGENT
The Escrow Agent is Bernard Herold & Co., Inc., 555 Madison Avenue, New
York, New York 10022, a registered broker/dealer and member of NASD, SIPC and
the NYSE.
RISK FACTORS
THE SHARES OFFERED HEREBY ARE HIGHLY SPECULATIVE IN NATURE AND INVOLVE AN
EXTREMELY HIGH DEGREE OF RISK. EACH PROSPECTIVE INVESTOR SHOULD, PRIOR TO
PURCHASE, CONSIDER VERY CAREFULLY THE FOLLOWING RISK FACTORS, AS WELL AS ALL OF
THE OTHER INFORMATION SET FORTH ELSEWHERE IN THIS PROSPECTUS.
1. RULE 419 GENERALLY. Rule 419 generally requires that the securities to
be issued and the funds received in a blank check offering be deposited and held
in an escrow account until an acquisition meeting specified criteria is
completed. Before the acquisition can be completed and before the funds and
securities can be released, the blank check company is required to update the
registration statement with a post-effective amendment; after the effective date
of any such post-effective amendment, the Company is required to furnish
investors with the prospectus produced thereby containing information, including
audited financial statements, regarding the proposed acquisition candidate and
its business. According to the rule, the investors must have no fewer than 20
and no more than 45 days from the effective date of the post-effective amendment
to decide to remain an investor or require the return of their investment funds.
Any investor not making any decision within said 45-day period is to
automatically receive a return of his investment funds. Unless investors
representing 80% of the maximum offering proceeds elect to remain investors, the
consummation of an acquisition of or merger with a target business would be
prevented, all of the deposited funds in the escrow must be returned to all
investors and none of the securities will be issued. Although not considered
likely, officers and directors could acquire on the same terms and conditions as
other investors up to 75% of the Shares being offered; if they were to do so, of
the remaining unaffiliated shareholders, only those holding 20% in value of the
Shares offered would be required to vote in favor of a proposed acquisition.
Rule 419 further provides that if the blank check company does not complete an
acquisition meeting specified criteria within 18 months of the effectiveness of
the initial registration statement of which this Prospectus comprises a part
thereof, all of the Deposited Funds, less amounts deducted therefrom pursuant to
Rule 419, in the Rule 419 Escrow must be returned to investors.
2. PROHIBITION PURSUANT TO RULE 15g-8 UNDER EXCHANGE ACT TO SELL OR OFFER
TO SELL SHARES IN RULE 419 ACCOUNT. Rule 15g-8 of the Exchange Act provides that
it is unlawful for any person to sell or offer to sell the Shares (or any
interest in or related to the Shares) held in the Rule 419 account other than
pursuant to a qualified domestic relations order as contemplated by the Act,
which term the Company believes includes an order of a court of competent
jurisdiction incorporating in an order of support or judgment of divorce
provisions for property distribution and/or support. However, each investor is
urged to consult with his own tax and legal counsel to determine the
applicability of such exemption to his particular circumstances. As a result,
contracts for sale to be satisfied by delivery of the Deposited Securities (e.g.
contracts for sale on a when, as, and if issued basis) are prohibited. Such rule
prohibits sales of other interests based on or in the Shares, whether or not
physical delivery is required.
8
<PAGE> 9
3. NO ASSURANCE NET PROCEEDS FROM MAXIMUM OFFERING OR LESSER AMOUNT TO BE
SUFFICIENT TO REALIZE COMPANY'S GOALS. No assurance may be given that the net
proceeds from the Offering, if the maximum number of Shares is sold or if any
lesser amount is sold, will be sufficient to allow the Company to realize its
goals and engage in a business venture chosen by the Company's management.
Further, in the event that less than the net proceeds from the maximum offering
are raised, the Company's plans may be materially and adversely effected in that
the Company may find it even more difficult, if not impossible, to realize its
goals.
4. RECENTLY ORGANIZED COMPANY. The Company was only recently organized and
has no operating history. The Company, therefore, must be considered promotional
and in its early formative and development stage. Potential investors should be
aware of the difficulties normally encountered by a new enterprise, especially
in view of the relatively small size of this offering. There is nothing at this
time upon which to base an assumption that the Company's business plan will
prove successful, and there is no assurance that the Company will be able to
operate profitably. The Company has limited resources and has had no revenues to
date. Upon completion of this offering the present stockholders, assuming the
sale of the maximum number of Shares, will own, in the aggregate, 56% of the
then issued and outstanding shares of Common Stock. See "Risk Factors - Control
by Present Stockholders".
5. MINIMAL TIME SPENT BY MANAGEMENT. All of the Company's officers and
directors (sometimes collectively referred to herein as "Management") are
engaged full-time in other activities; and, therefore, prior to the conclusion
of the Offering, whether or not the maximum number of shares is sold, devote
only a minimal amount of time (not to exceed, in the aggregate, approximately 10
hours per week) to the Company's business. It is unlikely that the lack of
full-time management may have a materially adverse effect upon the Company's
business. At present, the Company has no employees. Even upon completion of this
offering, the present intention of the Company is to limit its employees to
part-time secretarial and clerical help, except for management and employees of
any Acquired Business that it may acquire. See "Directors, Executive Officers,
Promoters and Control Persons".
6. EXPERIENCE OF MANAGEMENT. Although Management has general business
experience, potential investors should be aware that Management has limited
experience in business combinations and may not have any significant experience
in acquiring or operating certain business interests that the Company might
choose to acquire. Mr. Maxwell, however, has been involved as a principal
stockholder, director and officer of publicly held corporations engaged in
"reverse acquisition/merger activities". Management does not have, nor does it
presently intend to enter into, any contracts or agreements with any consultants
or advisors with respect to its proposed business activities. Consequently,
Management has not established the criteria that will be used to hire
independent consultants regarding their experience, the services to be provided,
the term of service, etc., and no assurance can be made that the Company will be
able to obtain such assistance on terms acceptable to the Company. See "Plan of
Operation".
7. NO PRESENT IDENTIFICATION OF INDUSTRY. The Company has neither conducted
nor have others made available to it results of market research concerning the
feasibility of a Business Combination with an Acquired Business. Therefore,
management has no assurance that market demand exists for an acquisition or
merger as contemplated by the Company. Management has not identified any
particular industry or specific business within an industry for evaluation by
the Company. There is no assurance the Company will be able to consummate a
Business Combination on terms favorable to the Company. (See "Plan of
Operation"). The Company has not yet identified a prospective Acquired Business.
There can be no assurance that an investment in the securities offered hereby
will not ultimately prove to be less favorable to investors in this offering
than a direct investment, if such opportunity were available, in an
9
<PAGE> 10
Acquired Business. Purchasers of the Shares offered hereby, will have an
opportunity to evaluate an Acquired Business to the extent permitted by Rule
419.
To the extent the Company consummates a Business Combination with a
financially unstable company or an entity in its early stage of development or
growth (including entities without established records of sales or earnings),
the Company will become subject to numerous risks inherent in the business
operations of financially unstable and early stage or potential emerging growth
companies. In addition, to the extent that the company effects a Business
Combination with an entity in an industry characterized by a high level of risk,
the Company will become subject to the currently unascertainable risk of that
industry. It is likely that the Company will have the ability to effect only a
single Business Combination. Accordingly, the prospects for the Company's
success will be entirely dependent upon the future performance of a single
business. Unlike certain entities which have the resources to consummate several
Business Combinations of entities operating in multiple industries or multiple
areas of a single industry, it is highly likely that the Company will not have
the resources to diversify its operations or benefits from the possible
spreading of risks or offsetting of losses. In addition, by consummating a
Business Combination with only a single entity, the prospects for the Company's
success may become dependent upon the development or market acceptance of a
single or limited number of products, processes or services. Consequently, there
can be no assurance that the Acquired Business will prove to be commercially
viable.
The Company's business may involve the acquisition of or merger with a
company which does not need substantial additional capital but which desires to
establish a public trading market for its shares. A company which seeks the
Company's participation in attempting to consolidate its operations through a
merger, reorganization, asset acquisition, or some other form of combination may
desire to do so to avoid what they may deem to be adverse consequences of
themselves undertaking a public offering. Factors considered may include time
delays, significant expense and loss of voting control.
8. STOCKHOLDER APPROVAL FOR CERTAIN BUSINESS ACQUISITIONS OR TRANSACTIONS.
Ninety (90%) percent of the proceeds of this Offering, pursuant to Rule 419,
will be held in the Rule 419 Escrow pending, among other things, the
consummation of a Business Combination which transaction must occur within
eighteen (18) months of the Effective Date hereof. Rule 419 permits 10% of the
net proceeds to be disbursed to the Company from the Rule 419 Escrow prior to
the consummation of a Business Combination, which amount will, in fact be
dispensed to the Company; accordingly, the investors herein may lose 10% or more
of their investment if a significant number of investors do not confirm their
investment so as to preclude the consummation of a Business Combination
satisfying the criteria of Rule 419.
9. INTENSE COMPETITION. There are numerous firms which are larger than the
Company, and which are also seeking to effect business acquisitions similar to
those contemplated by the Company. Such companies may be in a better position to
finance such subsidiaries and to offer incentives to management to run the
subsidiaries and to supervise them. The Company will thus encounter intense
competition in the organizing or purchasing of businesses which it hopes may
prove to be profitable.
10. POTENTIAL FUTURE 144 SALES. Of the 35,000,000 shares of the Company's
Common Stock authorized, there are presently issued and outstanding 1,275,000
none of which are being registered pursuant hereto; all are "restricted
securities" as that term is defined under the Act, and in the future may be sold
in compliance with Rule 144 of the Act, or pursuant to a Registration Statement
filed under the Act. Rule 144 provides, in essence, that a person holding
restricted securities for a period of two (2)
10
<PAGE> 11
years may sell those securities in unsolicited brokerage transactions or in
transactions with a market maker, in an amount equal to one percent (1%) of the
Company's outstanding Common Stock every three (3) months. Additionally, Rule
144 requires that an issuer of securities make available adequate current public
information with respect to the issuer. Such information is deemed available if
the issuer satisfies the reporting requirements of Sections 13 or 15(d) of the
Exchange Act and of Rule 15c2-11 thereunder. Rule 144 also permits, under
certain circumstances, the sale of shares by a person who is not an affiliate of
the Company and who has satisfied a three year holding period without any
quantity limitation and whether or not there is adequate current public
information available. Investors should be aware that sales under Rule 144, or
pursuant to a Registration Statement filed under the Act, may have a depressive
effect on the market price of the Company's securities in any market that may
develop for such shares. None of the presently outstanding shares will be
available for sale under Rule 144 until at least March, 1997.
11. POSSIBLE ISSUANCE OF ADDITIONAL SHARES. The Company's Certificate of
Incorporation, authorizes the issuance of 35,000,000 shares of Common Stock.
Upon the sale of the maximum number of Shares offered hereby, approximately 94%
of the Company's authorized shares will remain unissued. The Company's Board of
Directors has the power to issue any or all of such additional shares without
stockholder approval. Management presently anticipates that it may choose to
issue a substantial amount of such shares to acquire business interests or other
types of property in the future, or may, following a Business Combination issue
Shares for the purpose of raising additional capital. However, the Company
presently has no commitments, contracts or intentions to issue any additional
shares. Potential investors should be aware that any such stock issuances may
result in a reduction of the book value or market price, if any, of the then
outstanding shares. If the Company issues additional shares, such issuance will
reduce the proportionate ownership and voting power of the other stockholders.
Also, any new issuance of shares may result in a change of control of the
Company. See "Plan of Operation-Form and Structure of Acquisition."
12. CONFLICTS OF INTEREST. Officers and directors of the Company including,
but not limited to Mr. Maxwell may engage in other business activities similar
or dissimilar to those engaged in by the Company, including the formation of
other blind pool companies. To the extent that such officers and directors
engage in such other activities, they will have possible conflicts of interest
in diverting opportunities to other companies, entities or persons with which
they are or may be associated or have an interest in, rather than diverting such
opportunities to the Company. Such potential conflicts of interest include,
among other things, time, effort and corporate opportunity involved in their
participation in other business transactions. As no policy has been established
for the resolution of such a conflict, the Company may be adversely affected
should these individuals choose to place their other business interests before
those of the Company. No assurance can be given that such potential conflicts of
interest will not cause the Company to lose potential opportunities. However,
the failure by Management to resolve conflicts of interest in favor of the
Company may result in liability of Management to the Company. Generally, under
Delaware law, directors and officers have a fiduciary responsibility to
discharge their duties in good faith and with that degree of diligence, care and
skill which an ordinarily prudent person would exercise under similar
circumstances in like positions. Directors and officers may not acquire or
divert to themselves property or opportunities which they are under a duty to
acquire for the corporation. This duty does not apply to all acquisitions or
opportunities; it does not affect acquisitions or opportunities that the
corporation has refused, that it would not have been able to take advantage of
or that are not appropriate or logically related to the corporation's business.
11
<PAGE> 12
In addition, Mr. Maxwell and other stockholders of the Company or their
affiliates may receive personal financial gain, other than from the proceeds of
this Blank Check Offering, by means of (i) payment of consulting fees; (ii)
sales of affiliates' stock; or (iii) payment of salaries.
Except as disclosed herein the Company has not entered or negotiated any
agreement with Mr. Maxwell, any of the respective affiliates, or any other third
party regarding any such person acting as a consultant to the Company; nor, will
it do so prior to the consummation of a Business Combination. However, following
a Business Combination, if the then management of the Company or the Acquired
Business, as the case may be, elect to engage such persons as consultants, on
such terms and conditions as may then be negotiated then, any compensation
payable to such persons will be paid by the Acquired Business.
While the Company and its Management intend that no shares of the Company's
Common Stock will be sold by any officers, directors or greater than 10%
stockholders or persons who may be deemed promoters of the Company without
affording all stockholders of the Company a similar opportunity, Management may,
nevertheless, actively negotiate or otherwise consent to the purchase of all or
a portion of their shares of Common Stock as a condition to or in connection
with a proposed merger or acquisition transaction. It is noted that Management
may be deemed to have paid approximately $.02 per share of Common Stock owned by
Management. In connection with any such stock purchase transaction, it is
possible that a premium may be paid for Management's share of Common Stock and
that public investors in the Company may not receive any portion thereof in the
event such premium may be paid. Any transaction structured in such manner may
present Management with conflicts of interest and as a result of such conflicts,
may possibly compromise Management's fiduciary duties to the Company's
stockholders, as the potential would therefore exist for members of Management
to consider their own personal pecuniary benefit rather than the best interest
of the Company's other stockholders. Further, the Company's other stockholders
may not be afforded an opportunity to otherwise participate in any particular
stock buy-out transaction. Additionally, in any such transaction, it is
possible, although not presently intended, that the Company may borrow funds to
be used directly or indirectly to purchase Management's shares. Proceeds from
this Blank Check Offering will not be utilized directly or indirectly to
purchase Management's shares.
13. NO UNDERWRITER OR SELECTED BROKER/DEALERS. The Company has not retained
an underwriter or any selected broker/dealers to assist in this offering. The
officers and directors of the Company have limited experience in the offer and
sale of securities on behalf of an issuer, and, consequently, they may be unable
to effect the sale of a sufficient number of Shares to meet the minimum or
maximum offerings. In the event that an underwriter or selected broker/dealers
are retained by the Company, the offering would be suspended until such time as
the Company's Registration Statement, including this Prospectus, is amended to
reflect such retention. The Registration Statement would then require additional
review by the Securities and Exchange Commission, the NASD, and, if necessary,
state regulatory authorities. The Company would be expected to incur significant
additional expenses in the form of selling commissions, legal fees, and printing
and accounting costs. The Company and officers and directors who are offering
the Shares on behalf of the Company, are not registered as brokers or dealers
under Section 15 of the Securities Exchange Act of 1934, as amended and are
relying on exemption from such registration provided by Rule 3a4-1.
14. RISKS OF LEVERAGE; DEBT OF AN ACQUIRED BUSINESS. There are currently no
limitations relating to the Company's ability to borrow funds to increase the
amount of capital available to the company to effect a business combination or
otherwise finance the operations of any acquired business.
12
<PAGE> 13
The amount and nature of any borrowings by the Company will depend on numerous
consideration, including the Company's capital requirements, the Company's
perceived ability to meet debt services on any such borrowings, and
then-prevailing conditions in the financial markets, as well as general economic
conditions. There can be no assurance that debt financing, if required or
otherwise sought, will be available on terms deemed to be commercially
acceptable and in the best interest of the Company. The inability of the Company
to borrow funds required to effect or facilitate a business combination, or to
provide funds for an additional infusion of capital into an acquired business,
may have a material adverse effect on the Company's financial condition and
future prospects. Additionally, to the extent that debt financing ultimately
proves to be available, any borrowings may subject the Company to various risks
traditionally associated with incurring of indebtedness, including (i) if the
Company's operating revenues after the Business Combination were to be
insufficient to pay debt service, there would be a risk of default and
foreclosure on the Company's assets; (ii) if a loan agreement contains covenants
that require the maintenance of certain financial ratios or reserves, and any
such covenant is breached without a waiver or renegotiation of the terms of that
covenant, then the lender could have the right to accelerate the payment of the
indebtedness even if the Company has made all principal and interest payments
when due; (iii) if the interest rate on a loan fluctuated or the loan was
payable on demand, the Company would bear the risk of variations in the interest
rate or demand for payment; and (iv) if the terms of a loan did not provide for
amortization prior to maturity of the full amount borrowed and the "balloon"
payment could not be refinanced at maturity on acceptable terms, the Company
might be required to seek additional financing and, to the extent that
additional financing is not available on acceptable terms, to liquidate its
assets. Furthermore, an acquired business may already have previously incurred
debt financing and, therefore, the risks inherent thereto, as discussed above.
See "Use of Proceeds" and "Plan of Operation - Form and Structure of
Acquisitions".
15. POSSIBLE NEED FOR ADDITIONAL FINANCING OF ACQUIRED BUSINESS. In the
event of a consummation of a Business Combination, the Company cannot ascertain
with any degree of certainty the capital requirements for any particular
acquired business inasmuch as the Company has not yet identified any prospective
acquired business candidates. To the extent the Business Combination results in
the acquired business requiring additional financing, such additional financing
(which, among other forms, could be derived from the public or private offering
of securities or from the acquisition of debt through conventional bank
financing), may not be available, due to, among other things, the acquired
business not having sufficient (i) credit or operating history; (ii) income
stream; (iii) profit level; (iv) asset base eligible to be collateralized; or
(v) market for its securities. Although there are no agreements between the
Company and any of its officers and/or directors pursuant to which the Company
may borrow and such officers and/or directors are obligated to lend the Company
monies, there are no restrictions on the Company to borrow money, including, but
not limited to, loans from officers and directors. No stockholder approval is
required in connection with any such loans.
As no specific Business Combination or industry has been targeted, it is
not possible to predict the specific reasons why conventional private or public
financing or conventional bank financing might not become available. There can
be no assurance that, in the event of a consummation of a Business Combination,
sufficient financing to fund the operations or growth of the acquired business
will be available upon terms satisfactory to the Company, nor can there be any
assurance that financing would be available at all.
16. INVESTMENT COMPANY ACT CONSIDERATIONS. The regulatory scope of the
Investment Company Act of 1940, as amended (the "Investment Company Act"), which
was enacted principally for the purpose of regulating vehicles for pooled
investments in securities, extends generally to companies
13
<PAGE> 14
engaged primarily in the business of investing, reinvesting, owning, holding or
trading in securities. The Investment Company Act may, however, also be deemed
to be applicable to a company which does not intend to be characterized as an
investment company but which, nevertheless, engages in activities which may be
deemed to be within the definitional scope of certain provisions of the
Investment Company Act. There can be no assurance that the Company will not be
deemed to be an investment company, especially during the period prior to a
Business Combination although the Company intends to take all measures possible
to avoid such classification. In the event the Company is deemed to be an
investment company, the Company may become subject to certain restrictions
relating to the Company's activities, including restrictions on the nature of
its Investments and the issuance of securities. In addition, the Investment
Company Act imposes certain requirements on companies deemed to be within its
regulatory scope, including registration as an investment company, adoption of a
specific form of corporate structure and compliance with certain burdensome
reporting, record keeping, voting, proxy, disclosure and other rules and
regulations. In the event of characterization of the Company as an investment
company, the failure by the Company to satisfy regulatory requirements, whether
on a timely basis or at all, would, under certain circumstances, have a material
adverse effect on the Company. The Company intends to take all measures possible
to avoid such characterization of the Company. See "Plan of Operation".
17. TAX CONSIDERATIONS. As a general rule, Federal and state tax laws and
regulations have a significant impact upon the structuring of business
combinations. The Company will evaluate the possible tax consequences of any
prospective Business Combination and will endeavor to structure the Business
Combination so as to achieve the most favorable tax treatment to the Company,
the Acquired Business and their respective stockholders. There can be no
assurance, however, that the Internal Revenue Service (the "IRS") or appropriate
state tax authorities will ultimately assent to the Company's tax treatment of a
consummated Business Combination. To the extent the IRS or state tax authorities
ultimately prevail in recharacterizing the tax treatment of a Business
Combination, there may be adverse tax consequences to the Company, the Acquired
Business and their respective stockholders. The Company files its income taxes
on a calendar year basis. At December 31, 1995, the Company had approximately
$26,000 of net operating losses available to reduce future taxable income
through 2010. In accordance with certain provisions of Financial Accounting
Standards Board Statement No. 109, "Accounting for Income Taxes", a valuation
allowance has been established equal to the tax benefit of the net operating
loss through December 31, 1995. See "Financial Statements". The Company does not
believe that the potential tax benefit of its net operating loss carry forward
or loss thereof as a result of a Business Combination will be a material element
in its effecting a Business Combination.
18. CHANGE OF CONTROL. In the event that the Company effects a Business
Combination by issuing additional common stock, the present stockholders of the
Company may no longer have control of the Company. Although the Company has no
present plans, understandings or arrangements respecting any Business
Combination, the successful completion of such a transaction could result in a
change in control of the Company. This could result from the issuance of a large
percentage of the Company's authorized securities or the sale by the present
stockholders of all or a portion of their stock or a combination thereof. Any
change in control may also result in the resignation or removal of the Company's
present officers and directors. If there is a change in management, no assurance
can be given as to the experience or qualifications of the persons who replace
present management respecting either the operation of the Company's activities
or the operation of the business, assets or property being acquired.
19. NO DIVIDENDS. The Company has not paid any dividends on its Common
Stock to date and does not presently intend to pay cash dividends prior to the
consummation of a Business Combination.
14
<PAGE> 15
The payment of dividends after any such Business Combination, if any, will be
contingent upon the Company's revenues and earnings, if any, capital
requirements and general financial condition subsequent to consummation of a
Business Combination. The payment of any dividends subsequent to a Business
Combination will be within the discretion of the Company's then Board of
Directors.
20. CONTROL BY PRESENT STOCKHOLDERS. Upon consummation of the offering,
assuming the sale of the maximum number of Shares, present stockholders,
including the present management of the Company, will collectively own
approximately 56% of the then issued and outstanding shares of Common Stock. In
the election of directors, stockholders are not entitled to cumulate their votes
for nominees. Accordingly, it is likely that the current stockholders will be
able to substantially impact the election of all of the Company's directors and
the other affairs of the Company. See "Principal Stockholders", and "Description
of Securities".
21. ARBITRARY DETERMINATION OF OFFERING PRICE. Prior to this offering,
there has been no public trading market for the Shares. The initial public
offering price of the Shares has been arbitrarily determined by the Company and
does not bear any relationship to such established valuation criteria such as
assets, book value or prospective earnings. Among the factors considered by the
Company were the lack of operating history of the Company, the proceeds to be
raised by the offering, the amount of capital to be contributed by the public in
proportion to the amount of stock to be retained by present stockholders, the
relative requirements of the Company, and the current market conditions in the
over-the-counter market.
22. IMMEDIATE SUBSTANTIAL DILUTION; DISPARITY OF CONSIDERATION. Assuming
the sale of the maximum number of Shares (based on the Company's unaudited
financial statements as of August 31, 1996) new investors will incur an
immediate and substantial dilution of approximately $.06 per share after the
offering of the maximum number of Shares is consummated. The existing
stockholders of the Company acquired their shares of Common Stock at a price
substantially lower than the offering price of the Shares and accordingly, new
investors will bear virtually all of the risks inherent in an investment in the
Company. See "Dilution".
23. STATE BLUE SKY REGISTRATION; RESTRICTED RESALES OF THE SHARES. The
Company has registered the Shares and intends to conduct its selling efforts
only in New York. Purchasers of the Shares in this offering must be residents of
New York. In order to prevent resale transactions in violation of states'
securities laws, public stockholders may only engage in resale transactions in
New York and such other jurisdictions (there are none now) in which an
applicable exemption is available or a blue sky application has been filed and
accepted. As a matter of notice to the holders thereof, the Common Stock
certificates shall contain information with respect to resale of the Shares.
Further, the Company will advise its market makers in the Shares, if any, of
such restriction on resale. Such restriction on resales may limit the ability of
investors to resell the Shares purchased in this offering.
No resale of the Shares can be effected until the same are released from
the Rule 419 Escrow.
24. PENNY STOCK RULES.
Under Rule 15g-9 a broker or dealer may not sell a "penny stock" (as
defined in Rule 3a51-1) to or effect the purchase of a penny stock by any person
unless:
(1) such sale or purchase is exempt from Rule 15g-9; or
15
<PAGE> 16
(2) prior to the transaction the broker or dealer has (a) approved the
person's account for transaction in penny stocks in accordance with
Rule 15g-9 and (b) received from the person a written agreement to the
transaction setting forth the identity and quantity of the penny stock
to be purchased.
The Commission adopted regulations that generally define a penny stock to
be any equity security other than a security excluded from such definition by
Rule 3a51-1. Such exemptions include, but are not limited to (a) an equity
security issued by an issuer that has (i) net tangible assets of at least
$2,000,000, if such issuer has been in continuous operations for at least three
years; (ii) net tangible assets of at least $5,000,000, if such issuer has been
in continuous operation for less than three years; or (iii) average revenue of
at least $6,000,000 for the preceding three years; (b) except for purposes of
Section 7(b) of the Exchange Act and Rule 419, any security that has a price of
$5.00 or more; (c) and a security that is authorized or approved for
authorization upon notice of issuance for quotation on the National Association
of Securities Dealers Automated Quotation System.
It is likely that the Company's Common Stock will be subject to the
regulations on penny stocks; consequently, the market liquidity for the
Company's Common Stock may be adversely affected by such regulations limiting
the ability of broker/dealers to sell the Company's Common Stock and the ability
of purchasers in this offering to sell their securities in the secondary market
(following termination of the Rule 419 Escrow).
25. NO ASSURANCE OF A PUBLIC MARKET. There is no current trading market for
the Shares and there can be no assurance that a trading market will develop, or,
if such a trading market does develop, that it will be sustained. The Shares, to
the extent that a market develops for the Shares at all, of which there can be
no assurance, will likely appear in what is customarily known as the "pink
sheets" or on the NASD Bulletin Board, which may limit the marketability and
liquidity of the Shares. Pursuant to Rule 419, all shares purchased by a blank
check company, must be placed in the Rule 419 Escrow Account. These shares will
not be released from escrow until the consummation of a merger or acquisition as
provided for in Rule 419. There is no present market for the Common Stock of the
Company and there is no likelihood of any active and liquid public trading
market developing following the release of securities from the Rule 419 Escrow.
Thus, stockholders may find it difficult to sell their shares. To date, neither
the Company nor anyone acting on its behalf has taken any affirmative steps to
request or encourage any broker/dealer to act as a market maker for the
company's Common Stock. Further, there have been no discussions or
understandings, preliminary or otherwise, between the Company or anyone acting
on its behalf and any market maker regarding the participation of any such
market maker in the future trading market, if any, for the company's Common
Stock. Present management of the Company has no intention of seeking a market
maker for the Company's Common Stock at any time prior to the reconfirmation
offer to be conducted prior to the consummation of a Business Combination. The
officers of the Company after the consummation of a Business Combination may
employ consultants or advisors to obtain such market makers. Management expects
that discussions in this area will ultimately be initiated by the management of
the Company in control of the entity after a Business Combination is reconfirmed
by the stockholders. There is no likelihood of any active and liquid trading
market for the Company's Common Stock developing. (See "Market for the Company's
Common Stock" and "Investors' Rights and Substantive Protection Under Rule
419.")
16
<PAGE> 17
SELECTED FINANCIAL INFORMATION
Summary Earnings Data:
The Company is a start-up company and has no operating history. The Company
has had no revenues or earnings from operations to date.
<TABLE>
<CAPTION>
Summary Balance As at As Adjusted
Sheet Data: August 31, 1996 Minimum Maximum
(unaudited) ------- -------
---------------
<S> <C> <C> <C>
Total Assets $ 8,501 $ 33,501 $ 108,501
Accrued Expenses 7,423 7,423 7,423
Accumulated Deficit (31,422) (31,422) (31,422)
Stockholders' Equity 1,078 26,078 101,078
</TABLE>
In the opinion of the Company, the accompanying unaudited financial
statements include all adjustments (which consist only of normal recurring
items) necessary to present fairly the financial position as of August 31, 1996,
and the results of operations and cash flows for the eight months ended August
31, 1996. The results for the eight months ended August 31, 1996, are not
necessarily indicative of the results to be expected for the year.
INVESTOR'S RIGHTS AND SUBSTANTIVE PROTECTION UNDER RULE 419
DEPOSITED FUNDS AND DEPOSITED SECURITIES
Pursuant to Rule 419, the Deposited Funds, after deduction for permitted
underwriting commissions, underwriting expenses, dealer allowances and certain
other amounts (equal to 10% of the proceeds) which will be delivered to the
Company and the Deposited Securities are to be deposited into and held in the
Rule 419 Escrow, which escrow is governed by an agreement which contains certain
terms and provisions specified by the Rule 419. Under Rule 419, the Deposited
Funds and Deposited Securities will be released to the Company and to the
investors, respectively, only after the Company has:
(1) Executed an agreement, for the consummation of a Business Combination,
meeting certain prescribed criteria. See "Post Effective Amendment";
(2) Filed a post-effective amendment to this Registration Statement which
includes the terms of a Reconfirmation Offer, and other prescribed information
regarding the Acquired Business including audited financial statements. See
"Prescribed Acquisition Criteria";
(3) Conducted the Reconfirmation Offer in accordance with the provisions of
Rule 419 and the requisite number of investors (sufficient in number to permit
an acquisition of a business or asset having a value of 80% of the maximum
offering proceeds) have elected to remain stockholders. See "Reconfirmation
Offer." Although not considered likely, officers and directors could acquire on
the same terms and conditions as other investors up to 75% of the Shares being
offered; if they were to do so, of the remaining unaffiliated shareholders, only
those holding 20% in value of the Shares offered would be required to vote in
favor of a proposed acquisition. After the foregoing conditions have been
satisfied the Company will submit a signed representation to the Escrow Agent
that the requirements of Rule 419 have been satisfied and that the Business
Combination has been (or is being) consummated. The Escrow Agent can then
release the Deposited Funds and Deposited Securities. See "Release of Deposited
Securities and Deposited Funds."
17
<PAGE> 18
Accordingly, the Company has entered into the Rule 419 Escrow which
provides, among other things, that:
(1) The Deposited Funds are to be deposited into the Rule 419 Escrow
maintained by the Escrow Agent promptly. The Deposited Funds and interest or
dividends thereon, if any, are to be held for the sole benefit of the investors
and can only be invested in bank deposits, in money market mutual funds or
federal government securities or securities for which the principal or interest
is guaranteed by the federal government.
(2) All Shares and any other securities issued during the escrow period,
with respect to such Shares including securities issued with respect to stock
splits, stock dividends or similar rights are to be deposited directly into the
Rule 419 Escrow promptly upon issuance. The identity of the investors are to be
included on the stock certificates or other documents evidencing the Deposited
Securities. The Deposited Securities held in the Rule 419 Escrow are to remain
as issued and deposited and are to be held for the sole benefit of the investors
who retain the voting rights, if any, with respect to the Deposited Securities
held in their names. The Deposited Securities held in the Rule 419 Escrow 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 court order
issued in conjunction with or as part of a divorce judgment.
(3) Warrants, convertible securities or other derivative securities
relating to Deposited Securities held in the Rule 419 Escrow may be exercised or
converted in accordance with their terms; provided that, however, the securities
received upon exercise or conversion together with any cash or other
consideration paid in connection with the exercise or conversion are to be
promptly deposited into the Rule 419 Escrow.
PRESCRIBED ACQUISITION CRITERIA
Rule 419 requires that before the Deposited Funds and the Deposited
Securities can be released, the Company must execute an agreement to acquire an
acquisition candidate(s) meeting specified criteria. The agreement(s) must
provide for the acquisition(s) of a business(es) or assets for which the fair
value of the business represents at least 80% of the maximum offering proceeds,
but excluding underwriting commissions, underwriting expenses, dealer allowances
payable to non-affiliates and amounts permitted to be delivered to the Company.
The agreement(s) must include, as a condition precedent to their consummation, a
requirement that a sufficient number of investors confirm their investment so as
to permit consummation of a Business Combination satisfying the criteria of Rule
419. Consequently, for purposes of this Offering, the fair value of the
business(es) or assets to be acquired must be at least 80% of $100,000 or
$80,000.
POST EFFECTIVE AMENDMENT
Once the agreement governing a Business Combination 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 must contain information required by the applicable registration form,
concerning: the Acquired Business, including financial statements of the Company
and the Acquired Business as required thereby, the results of this offering,
and, the use of the funds disbursed from the Rule 419 Escrow. The post-effective
amendment must also include the terms of the reconfirmation offer (the
"Reconfirmation Offer") mandated by Rule 419. The Reconfirmation Offer must
include certain
18
<PAGE> 19
prescribed conditions which must be satisfied before the Deposited Funds and
Deposited Securities can be released from the Rule 419 Escrow.
RECONFIRMATION OFFER
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 Rule 419 Escrow within 5
business days after the effective date of the post-effective amendment.
(2) Each investor will have no fewer than 20 and no 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, the pro-rata portion of
the Deposited Funds (and any related interest or dividends) held in the Rule 419
Escrow on such investor's behalf will be returned to the investor within 5
business days by first class mail or other equally prompt means.
(4) The Business Combination may be consummated only if a minimum number of
investors representing 80% of the maximum offering proceeds elect to reconfirm
their investment.
(5) If a Business Combination is not consummated within 18 months from the
date of this prospectus, the Deposited Funds and any related interest or
dividends held in the Rule 419 Escrow shall be returned to all investors on a
pro-rata basis within 5 business days by first class mail or other equally
prompt means and the Deposited Securities will be returned to the Company.
RELEASE OF DEPOSITED SECURITIES AND DEPOSITED FUNDS
The Deposited Funds and Deposited Securities may be released to the Company
and the investors, respectively, after:
The Escrow Agent has received a signed representation from the Company or
other evidence acceptable by the Escrow Agent that:
(a) the Company has executed an agreement for a Business Combination
for which the fair market value of the business represents at least 80% of the
maximum offering proceeds and has filed the required post-effective amendment;
(b) the post-effective amendment has been declared effective, that the
mandated Reconfirmation Offer having the conditions prescribed by Rule 419 has
been completed and that the Company has satisfied all of the prescribed
conditions of the Reconfirmation Offer; and
(c) the Business Combination described in paragraph (a) above has been
consummated.
19
<PAGE> 20
If either an investor elects not to reconfirm this investment his
subscription amount (less any amount permitted to be and actually delivered to
the Company) plus any interest earned thereon will be returned to such Investor;
if a Business Combination is not consummated within 18 months of the date of the
prospectus, the Deposited Funds his subscription amount (less any amount
permitted to be and actually delivered to the Company) together with interest
earned thereon will be returned to each investor in accordance with his
subscription agreement.
THE COMPANY
Lloyd Ventures, Inc. (the "Company") is a Delaware corporation incorporated
on February 28, 1995. Upon completion of this offering the Company intends to
effect a Business Combination with an Acquired Business which the Company
believes has significant growth potential. The Company will not engage in any
substantive commercial business immediately following this offering. The Company
has no plan, proposal, agreement, understanding or arrangement to acquire or
merge with any specific business or company and the Company has not identified
any specific business or company for investigation and evaluation. The Company
intends to utilize either cash (to be derived from the proceeds of this
offering), equity, debt or a combination thereof in effecting a Business
Combination. It is likely that the Company will have the ability to effect only
a single Business Combination.
Since its organization, the Company's activities have been limited to the
sale of initial shares in connection with its organization, general corporate
matters, and its preparation of a registration statement and prospectus for its
initial public offering. See "PROPOSED BUSINESS". The Company does not intend to
engage in the business of investing, reinvesting or trading in securities as its
primary business or pursue any business which would render the Company an
"investment company" pursuant to the Investment Company Act. See "RISK FACTORS".
The Company is in the development stage and has no operating history. No
representation is made, nor is any intended, that the Company will be able to
carry on its activities profitably. The viability of the Company is dependent
upon sufficient funds being realized by the Company from this offering, of which
there is no assurance. Proceeds of this offering may be insufficient to enable
the Company to engage in potentially profitable operations, or to otherwise
engage in any business endeavors. The likelihood of the success of the Company
must be considered in light of the expenses, difficulties, and delays frequently
encountered in connection with the formation of a new business. Further, no
assurance can be given that the Company will have the ability to acquire assets,
businesses, or properties with any value to the Company.
No assurance can be given that the net proceeds of the maximum offering of
this Blank Check Offering or any lesser net amount will be sufficient to
accomplish the Company's goals or that any business acquired or developed by the
Company will become profitable. In the event that substantially less than the
net proceeds from the maximum offering are raised, the Company's plans may be
materially and adversely effected in that the Company may find it even more
difficult, if not impossible, to realize its goals. If such proceeds are
insufficient, the Company may be required to seek additional capital. No
assurance can be given that the Company will be able to obtain such additional
capital, or even if available, that such additional capital will be available on
terms acceptable to the Company. In the event that Management (as defined below)
determines that the Company is unable to conduct any business whatsoever,
Management, subject to the requirements of Rule 419, which provides that the
Deposited Funds will be returned on a pro-rata basis if an acquisition meeting
certain prescribed criteria is not consummated within 18 months of the date of
this Prospectus, will, in its sole discretion, seek stockholder
20
<PAGE> 21
approval to liquidate the Company. In the event such a liquidation were to occur
at some point in time after the Company's compliance with the provisions of Rule
419, all stockholders of the Company including those owning shares purchased
privately at less than the public offering price (see "Dilution"), will receive
the liquidated assets on a pro-rata basis (as opposed to being based on the
amounts paid for such shares). While Management has not established any
guidelines for determining at what point in time it might elect to discontinue
its efforts to engage in a business and seek stockholder approval to liquidate
the Company, Management is subject to the 18 month time frame set forth in Rule
419 in which to effect an acquisition.
The Company's office is located at c/o Sierchio & Albert, P.C., 41 East
57th Street, 39th Floor, New York, New York 10022.
DILUTION
As of the date of this Prospectus, the following table sets forth the
percentage of equity to be purchased by public investors in this offering
compared to the percentage of equity to be owned by the present stockholders,
and the comparative amounts paid for the shares by the public investors as
compared to the total consideration paid by the present stockholders of the
Company. See "CERTAIN TRANSACTIONS" and Notes to "FINANCIAL STATEMENTS."
ASSUMING THE MINIMUM NUMBER OF SHARES SOLD
<TABLE>
<CAPTION>
APPROXIMATE APPROXIMATE
PERCENTAGE PERCENTAGE
SHARES OF TOTAL TOTAL OF TOTAL
PURCHASED SHARES CONSIDERATION CONSIDERATION
--------- ----------- ------------- -------------
<S> <C> <C> <C> <C>
Public Stockholders 250,000 16% $ 25,000 44%
Present Stockholders 1,275,000 84% 32,500 56%
--------- --------- --------- ---------
Total 1,525.000 100% $ 57,500 100%
========= ========= ========= =========
</TABLE>
ASSUMING THE MAXIMUM NUMBER OF SHARES SOLD
<TABLE>
<CAPTION>
APPROXIMATE APPROXIMATE
PERCENTAGE PERCENTAGE
SHARES OF TOTAL TOTAL OF TOTAL
PURCHASED SHARES CONSIDERATION CONSIDERATION
--------- ----------- ------------- -------------
<S> <C> <C> <C> <C>
Public Stockholders 1,000,000 44% $ 100,000 76%
Present Stockholders 1,275,000 56% 32,500 24%
--------- --------- --------- ---------
Total 2,275,000 100% 132,500 100%
========= ========= ========= =========
</TABLE>
The difference between the public offering price per share and the pro
forma net tangible book value per share of Common Stock of the Company after
this offering constitutes the dilution to investors in this offering. Net
tangible book value per share is determined by dividing the net tangible book
value of the Company (total tangible assets less total liabilities) by the
number of outstanding shares of Common Stock. Dilution arises mainly from the
arbitrary decision by the Company as to the offering price per share. Dilution
of the value of the shares purchased by the public in this offering will also be
due, in
21
<PAGE> 22
part, to the lower book value of the shares presently outstanding, and in part,
to expenses incurred in connection with the public offering.
Net tangible book value is the net tangible assets of the Company (total
assets less total liabilities and intangible assets; see "Financial
Statements"). As of August 31, 1996 there were 1,275,000 shares of the Company's
common stock outstanding (see "CERTAIN TRANSACTIONS"). Therefore, the net
tangible book value of the Company's common stock as of August 31, 1996 was
approximately $.001 per share. The following table illustrates this dilution
based upon the book value as at August 31, 1996 and the receipt by the Company
of the estimated proceeds from the sale of the minimum number of Shares
($25,000) and the maximum number of Shares ($100,000):
<TABLE>
<CAPTION>
Minimum Maximum
------- -------
<S> <C> <C>
Public Offering Price Per Share $ .10 $ .10
Net Tangible Book Value Per Share,
Before Offering $.001 $.001
Net Tangible Book Value Per Share
After Offering $ .02 $ .04
Increase Per Share Attributable to
Payment by Public Investors $.019 $.039
Dilution Per Share to Public Investors $ .08 $ .06
==== ====
</TABLE>
USE OF PROCEEDS
The gross proceeds of this offering will be $25,000 if the minimum number
of Shares is sold and $100,000 if the maximum number of Shares is sold. Pursuant
to applicable rules the Deposited Funds must be held in escrow pending
consummation of a Business Combination satisfying the criteria of Rule 419.
Pursuant to Rule 419, 10% of the Deposited Funds may be released from escrow to
the Company. These funds will only be released after the minimum number of
shares are sold. The Company will use these funds to offset the costs and
expenses of this Offering and/or to effect a Business Combination. Upon the
consummation of a Business Combination and the reconfirmation of the investors
purchase of Shares, which reconfirmation must precede such consummation,
pursuant to Rule 419, the balance of the Deposited Funds will be released to the
Company and may be used to offset the expenses of consummating a Business
Combination.
The net proceeds (the "Net Proceeds") to be received by the Company, after
deducting an amount equal to 10% of the proceeds which is to be delivered to the
Company prior to the consummation of the Business Combination, will total
approximately $22,500 if the minimum number of Shares is sold and $90,000 if the
maximum number of Shares is sold. The Net Proceeds received in this offering
will be promptly deposited into the Rule 419 Escrow Account pending consummation
of a Business Combination and satisfaction of the Rule 419 Escrow Provisions,
including but not limited to the investors reconfirmation. See "Investors'
Rights and Substantive Protection Under Rule 419."
The Net Proceeds are intended to be utilized for the purpose of
investigating and, if a suitable opportunity is found, for acquiring or
investing in a business, the nature and extent of which is presently unknown.
Investigation costs with respect to any specific business opportunity will
consist primarily of costs for attorneys and accountants. There is no limit on
the amount of such costs, and they may be
22
<PAGE> 23
substantial. If a decision is made not to proceed with any given specific
business opportunity, such costs would not be recoverable. Pending use of the
proceeds of this offering, which may not occur for an extended period of time
(up to 18 months from the date hereof) the Company will deposit the proceeds
into the Rule 419 Escrow; ten (10%) percent of the proceeds will be delivered to
the Company in accordance with Rule 419.
Pursuant to an oral agreement, which may be terminated by either party on
30 days prior written notice, the Company will use the business office of its
legal counsel, rent free, until such time as it consummates a Business
Combination or the Rule 419 Escrow is otherwise terminated. However, it may be
necessary to incur some administrative costs for clerical help, office supplies
and related items, the amount of which is not expected to be significant. It is
expected that such costs would be covered by existing working capital.
The Company has not entered into any negotiations or discussions with any
person or entity regarding any possible establishment or acquisition of assets
or businesses, and has not at this time identified the area or areas of business
which may be suitable for acquisitions. No assurance can be given that the
Company will be able to identify and acquire a business or that if such a
business is acquired that it can be operated profitably. See "Risk Factors".
While the Company presently anticipates that it will be able to locate and
consummate a Business Combination, which adheres to the criteria discussed under
"Investors' Rights and Substantive Protection Under Rule 419", if the Company
determines that a Business Combination requires additional funds, it may seek
such additional financing through loans, issuance of additional securities or
through other financing arrangements. No such financial arrangements presently
exist, and no assurance can be given that such additional financing will be
available or, if available, whether such additional financing will be on terms
acceptable to the Company. Persons purchasing Shares in this offering will not,
unless required by law, participate in the determination of whether to obtain
additional financing or as to the terms of such financing. Because of the
Company's limited resources, it is likely that the Company will become involved
in only one Business Combination.
Except as described herein no portion of the proceeds of the offering will
be paid to officers, directors and/or their affiliates or associates. In
connection with this offering, expenses of approximately $28,600 consisting of
(1) a legal fee of $20,000 to be paid to the Law Firm of Joseph Sierchio and (2)
reimbursement of out-of-pocket expenses incurred and paid by officers and
directors on behalf of the Company in connection with the offering (not expected
to exceed $2,500) and (3) other costs associated with this offering estimated at
$6,100 will be incurred by the Company. It is anticipated that these expenses
will be paid from the Company's working capital. If such working capital is
insufficient, the Company may seek to obtain additional financing through
offerings of equity and/or debt securities or borrowings. No assurance can be
given that such financing will be available or if available that it will be on
terms acceptable to the Company. There are no agreements between any existing
stockholder and the Company as to any such financing. See "Risk Factors".
23
<PAGE> 24
CAPITALIZATION
The following table sets forth the capitalization of the Company as of the
date of this Prospectus and as adjusted to reflect the sale of the Shares
offered hereby. See "DESCRIPTION OF SECURITIES."
<TABLE>
<CAPTION>
As Adjusted
-----------
Authorized Outstanding Minimum Maximum
---------- ----------- ------- -------
<S> <C> <C> <C> <C>
Common Stock,
$.001 par value 35,000,000 1,275,000 1,525,000 2,275,000
<CAPTION>
As Adjusted
As of -----------
August 31, 1996 Minimum Maximum
--------------- ------- -------
(unaudited)
-----------
<S> <C> <C> <C>
Stockholders' Equity:
Common Stock $ 1,275 $ 1,525 $ 2,275
Additional Paid-
In Capital 31,225 55,975 130,225
Accumulated Deficit (31,422) (31,422) (31,422)
Total Stockholders'
Equity $ 1,078 $ 26,078 $ 101,078
</TABLE>
MARKET FOR THE COMPANY'S COMMON STOCK
Prior to the date hereof, there has been no trading market for the
Company's Common Stock. Pursuant to the requirements of Rule 15g-8 of the
Exchange Act, a trading market will not develop prior to or after the
effectiveness of this prospectus or while the Deposited Securities remain in the
Rule 419 Escrow. The Deposited Securities under this offering will remain in the
Rule 419 Escrow until, among other things, the Company's consummation of a
Business Combination pursuant to the requirements of Rule 419. There can be no
assurance that a trading market will develop upon the consummation of a Business
Combination and the subsequent release of the Deposited Securities from the Rule
419 Escrow.
PLAN OF OPERATION
BUSINESS OBJECTIVES
The Company's business plan is to seek to acquire or merge with potential
businesses that may, in the opinion of Management, warrant the Company's
involvement. Management's discretion is unrestricted, and the Company may
participate in any business whatsoever that may in the opinion of Management
meet the business objectives discussed herein.
The Company recognizes that as a result of its limited financial,
managerial or other resources, the number of suitable potential businesses that
may be available to it will be extremely limited. The Company's principal
business objective will be to seek long-term growth potential in the business in
which it participates rather than immediate, short-term earnings. In seeking to
attain its business objectives, the Company will not restrict its search to any
particular industry. Rather, the Company
24
<PAGE> 25
may investigate businesses of essentially any kind or nature, including but not
limited to finance, high technology, manufacturing, service, research and
development, communications, insurance, brokerage, transportation, and others.
Management may also seek to become involved with other development stage
companies or companies that could be categorized as "financially troubled." At
the present time, the Company has not chosen the particular area of business in
which it proposes to engage and has not conducted any market studies with
respect to any business, property or industry.
Businesses that seek the Company's participation in their operations may
desire to do so to avoid what such businesses deem to be adverse factors related
to undertaking a public offering. Such factors include substantial time
requirements, market conditions, legal costs, conditions or requirements imposed
by federal and state securities laws and possible loss of voting control. In
making an investment in the Company, investors should recognize that the terms
of their purchase of the Company's securities may ultimately prove to be less
favorable than if such persons had invested in the securities of a specific
business that was undertaking its own public offering.
EVALUATION CRITERIA
The analysis of potential business endeavors will be undertaken by or under
the supervision of Management, no member of which is a professional business
analyst. Management is comprised of individuals of varying business experiences,
and Management will rely on its own business judgment in formulating decisions
as to the types of businesses that the Company may acquire or in which the
Company may participate. It is quite possible that Management will not have any
business experience or expertise in the type of business engaged in by the
company ultimately acquired. Management will seek to examine those factors
described herein when making a business decision; however, the mention of such
factors to be examined by Management with regard to its determining the
potential of a business endeavor should not be read as implying any experience
or expertise on behalf of Management as to the business chosen. These factors
are merely illustrative of the types of factors that Management may consider in
evaluating a potential acquisition.
Management anticipates that the selection of an Acquired Business will be
complex and risky because of the competition for such business opportunities
among all segments of the financial community. The nature of the Company's
search for the acquisition of an Acquired Business requires maximum flexibility
inasmuch as the company will be required to consider various factors and
divergent circumstances which may preclude meaningful direct comparison among
the various business enterprises, products or services investigated. Investors
should recognize that the possible lack of diversification among the Company's
acquisition may not permit the Company to offset potential losses from one
venture against profits from another. This should be considered a negative
factor affecting any decision to purchase the Shares. Management of the Company
will have virtually unrestricted flexibility in identifying and selecting a
prospective Acquired Business. Management will consider, among other factors in
evaluating a prospective acquired business and determining the "fair market
value" thereof, the following:
* the Acquired Business' net worth;
* the Acquired Business' total assets;
* the Acquired Business' cash flow;
25
<PAGE> 26
* costs associated with effecting the Business Combination;
* equity interest in and possible management participation in the Acquired
Business;
* earnings and financial condition of the Acquired Business;
* growth potential of the Acquired Business and the industry in which it
operates;
* experience and skill of management and availability of additional
personnel of the Acquired Business;
* capital requirements of the Acquired Business;
* competitive position of the Acquired Business;
* stage of development of the product, process or service of the Acquired
Business;
* degree of current or potential market acceptance of the product, process
or service of the Acquired Business;
* possible proprietary features and possible other protection of the
product, process or service of Acquired Business; and
* regulatory environment of the industry in which the Acquired Business
operates.
The foregoing criteria is not intended to be exhaustive; any evaluation
relating to the merits of a particular Business Combination will be based, to
the extent relevant, on the above factors as well as other considerations deemed
relevant by management in connection with effecting a Business Combination
consistent with the Company's business objectives.
It is anticipated that locating and investigating specific business
proposals will take at least several months, although the time such process will
take can by no means be assured. However, such process cannot exceed, in any
event, the 18 month time schedule set forth in Rule 419. See "Investors' Rights
and Substantive Protection Under Rule 419. The time and costs required to select
and evaluate an Acquired Business candidate (including conducting a due
diligence review) and to structure and consummate the Business Combination
(including negotiating relevant agreements and preparing requisite documents for
filing pursuant to applicable securities laws and state corporate laws) cannot
presently be ascertained with any degree of certainty.
The Company anticipates that it will make contact with business prospects
primarily through the efforts of its officers, who will meet personally with
existing management and key personnel, visit and inspect material facilities,
assets, products and services belonging to such prospects, and undertake such
further reasonable investigation as management deems appropriate, to the extent
of its limited financial resources. The Company anticipates that certain
Acquired Business candidates may be brought to its attention from various
unaffiliated sources, including securities broker/dealers, investment bankers,
venture capitalists, bankers, other members of the financial community, and
affiliated sources. While the Company does not presently anticipate engaging the
services of professional firms that specialize in business acquisitions on any
formal basis, the Company may engage such firms in the future, in
26
<PAGE> 27
which event the Company may pay a finder's fee or other compensation. See
"Directors, Executive Officers, Promoters and Control Persons - Finders Fees and
Other Compensation".
To date, the Company has not selected any particular industry or any
Acquired Business in which to concentrate its Business Combination efforts. See
"Risk Factors".
TAX CONSIDERATIONS.
As a general rule, Federal and state tax laws and regulations have a
significant impact upon the structuring of business combinations. The Company
will evaluate the possible tax consequences of any prospective Business
Combination and will endeavor to structure the Business Combination so as to
achieve the most favorable tax treatment to the Company, the Acquired Business
and their respective stockholders. The IRS or other appropriate state tax
authorities may attempt to recharacterize the tax treatment of a particular
Business Combination; and, as a result there may be adverse tax consequences to
the Company, the Acquired Business and their respective stockholders.
FORM AND STRUCTURE OF ACQUISITION
Of the various methods and forms by which the Company may structure a
transaction acquiring another business, Management is likely to use, without
limitation, one of the following forms: (i) a leveraged buyout transaction in
which most of the purchase price is provided by borrowings (typically secured by
the assets of the acquired business and intended to be repaid out of the cash
flow of the business) from one or more lenders or from the sellers in the form
of a deferred purchase price; (ii) a merger or consolidation of the acquired
corporation into or with the Company; (iii) a merger or consolidation of the
acquired corporation into or with a subsidiary of the Company organized to
facilitate the acquisition (a "subsidiary merger"), or a merger or consolidation
of such a subsidiary into or with the acquired corporation (a "reverse
subsidiary merger"); (iv) an acquisition of all or a controlling amount of the
stock of the acquired corporation followed by a merger of the Acquired Business
into the Company; (v) an acquisition of the assets of a business by the Company
or a subsidiary organized for such purpose; (vi) a merger or consolidation of
the Company with or into the acquired Business or subsidiary thereof; or (vii) a
combination of any of the foregoing. The actual form and structure of a Business
Combination may be also dependent upon numerous other factors pertaining to the
Acquired Business and its stockholders as well as potential tax and accounting
treatments afforded the Business Combination.
The Company may utilize cash (derived from the proceeds of this offering),
equity, debt or a combination of these as consideration in effecting a Business
Combination. Although the Company has no commitments as of the date of this
prospectus to issue any shares of Common Stock other than as described in this
Prospectus, the Company will, in all likelihood, issue a substantial number of
additional shares in connection with a Business Combination. To the extent that
such additional shares are issued, dilution to the interest of the Company's
stockholders may occur. Additionally, if a substantial number of shares of
Common Stock are issued in connection with a Business Combination, a change in
control of the Company may occur.
If securities of the Company are issued as part of an acquisition, it
cannot be predicted whether such securities will be issued in reliance upon
exemptions from registration under applicable federal or state securities laws
or will be registered for public distribution. When registration of securities
is required, substantial cost may be incurred and time delays encountered. In
addition, the issuance of
27
<PAGE> 28
additional securities and their potential sale in any trading market which may
develop in the Company's Common Stock, of which there is no assurance, may
depress the price of the Company's Common Stock in any market which may develop
in the Company's Common Stock. Additionally, such issuance of additional
securities of the company would result in a decrease in the percentage ownership
of the Company of purchasers of the Common Stock being offered hereby.
The Company's operations may be limited by the Investment Company Act of
1940. While the Company will attempt to conduct its operations so as not to
require registration under the Investment Company Act of 1940, there can be no
assurance that the Company will not be deemed to be subject to the Investment
Company Act of 1940.
There are currently no limitations relating to the Company's ability to
borrow funds to increase the amount of capital available to the Company to
effect a Business Combination or otherwise finance the operations of the
Acquired Business. The amount and nature of any borrowings by the Company will
depend on numerous considerations, including the Company's capital requirements,
the Company's perceived ability to meet debt service on such borrowings and then
prevailing conditions in the financial markets, as well as general economic
conditions. There can be no assurance that debt financing, if required or
otherwise sought, would be available on terms deemed to be commercially
acceptable and in the best interest of the Company. The inability of the Company
to borrow funds for an additional infusion of capital into an Acquired Business
may have material adverse effects on the Company's financial condition and
future prospects. To the extent that debt financing ultimately proves to be
available, any borrowings may subject the Company to various risks traditionally
associated with incurring indebtedness, including the risks of interest rate
fluctuations and insufficiency of cash flow to pay principal and interest.
Furthermore, an Acquired Business may have already incurred debt financing and,
therefore, all the risks inherent thereto.
Because of the Company's small size, investors in the Company should
carefully consider the business constraints on its ability to raise additional
capital when needed. Until such time as any enterprise, product or service which
the Company acquires generates revenues sufficient to cover operating costs, it
is conceivable that the Company could find itself in a situation where it needs
additional funds in order to continue its operations. This need could arise at a
time when the Company is unable to borrow funds and/or market acceptance for the
sale of additional shares of the Company's Common Stock does not exist.
The Company's stockholders are relying upon the business judgment of
Management in connection with the proper expenditure of the funds raised in this
offering and in the future operations of the Company. It is not expected that
stockholders of the Company will be consulted with respect to the expenditure of
the proceeds of this offering or in connection with any acquisition engaged in
by the Company, unless required by law.
DAILY OPERATIONS.
The Company expects to use attorneys and accountants as necessary, and does
not anticipate a need to engage any full-time employees so long as it is seeking
and evaluating business opportunities. The need for employees and their
availability will be addressed in connection with the decision whether or not to
acquire or participate in a specific business opportunity. The Company has
allocated a portion of the offering proceeds for general overhead. Although
there is no current plan to hire employees on
28
<PAGE> 29
a full-time or part-time basis, some portion of working capital may be used to
pay any part-time employees hired.
Until an active business is commenced or acquired the Company will have no
employees or day-to-day operations. The Company is unable to make any estimate
as to the future number of employees which may be necessary, if any, to work for
the Company. If an existing business is acquired it is possible that its
existing staff would be hired by the Company. At the present time it is the
intention of Management to meet or be in telephone contact at least once a week
and more frequently if needed to review business opportunities, evaluate
potential acquisitions and otherwise operate the affairs of the Company. Except
for reimbursement of reasonable expenses incurred on behalf of the Company,
Management will not be compensated for these services rendered on behalf of the
Company.
LEGAL PROCEEDINGS
The Company is not a party to any litigation, and has no knowledge of any
threatened litigation against the Company.
OFFICE FACILITIES
The Company will maintain its business address at 41 East 57th Street, 39th
Floor, New York, New York. Pursuant to an oral agreement, which agreement may be
terminated by either party on 30 days prior written notice, the Company will use
these offices on a rent free basis until such time as it consummates a Business
Combination or the Rule 419 Escrow is otherwise terminated. The Company is a
development stage company and currently has no employees other than certain of
its officers and directors.
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
DIRECTORS AND EXECUTIVE OFFICERS
The following persons are the directors and executive officers of the
Company:
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Herbert Maxwell 72 President and Director (since February 28, 1995)
Anthony R. Russo 52 Vice President and Director (since June 30, 1995)
A. Paul Shapansky 44 Secretary and Director (since June 30, 1995)
</TABLE>
All directors and officers of the Company are elected annually to serve for
one year or until their successors are duly elected and qualified.
Management's business experience during the past five years is as follows:
Herbert Maxwell has been an independent businessman for the past five
years. He has been a consultant for troubled companies and a principal in
investment groups for the past two decades. Mr. Maxwell has served as a director
and officer (and was a principal stockholder) of four publicly held companies,
which although not engaged in blank check offerings nevertheless consummated
acquisitions of the type described in this Prospectus. These include:
29
<PAGE> 30
(1) Zachary Ventures, Inc. was organized in December, 1993. It conducted an
offering pursuant to Rule 419 which offering was concluded in March,
1994. Zachary Ventures, Inc. did not effect a Business Combination
pursuant to Rule 419 and in June, 1996 returned the deposited proceeds
to the investors as required by such Rule. Mr. Maxwell has been a
director and officer of Zachary Ventures, Inc. since its formation.
(2) C.S. Primo Corp. was organized in 1986 initially as an inactive
publicly held corporation pursuing a business acquisition. Mr. Maxwell
became a principal stockholder and a director of C.S. Primo Corp. on or
about June 3, 1988. On or about March 4, 1991, C.S. Primo Corp.
acquired approximately 98% of the issued and outstanding common stock
of Dynasty World Express, Inc. in exchange for approximately 90% of
C.S. Primo Corp.'s common stock; since then, C.S. Primo Corp. has
changed its name to Phoenix Information Systems Corp. and its common
stock trades on the over-the-counter market. Mr. Maxwell served as a
director from June, 1988 to March, 1991.
(3) Lewis Resources, Inc. was organized in 1987, initially through a stock
dividend distribution, as an inactive publicly held corporation
pursuing a business acquisition. Mr. Maxwell was one of the initial
stockholders and directors of Lewis Resources, Inc. On September 28,
1993, Lewis Resources, Inc. acquired from Lema Investments Ltd. all of
the outstanding shares of Gallium Arsenide Industries Ltd., a
development stage Israeli company. Since then, Lewis Resources, Inc.
has changed its name to Israel Semiconductor Corporation and its common
stock trades on the over-the-counter market. Mr. Maxwell served as a
director from its formation through September, 1993.
(4) Lewison Enterprises Inc. was organized in 1988 initially, through a
stock dividend distribution, as an inactive publicly held corporation
pursuing a business acquisition. Mr. Maxwell was one of the initial
stockholders and directors of Lewison Enterprises Inc. In July, 1993
the Company issued 8,000,000 shares of common stock to the stockholders
of Omega Development Corp. ("Omega") in exchange for all of the issued
and outstanding shares of common stock of Omega. Since then, Lewison
Enterprises Inc. has changed its name to Omega Development, Inc. To
date, no trading market has developed for shares of its common stock.
Mr. Maxwell has been a director since its formation.
Except for Zachary Ventures, Inc. and Omega Development, Inc. Mr. Maxwell
is no longer a principal stockholder, director or officer of any of the
foregoing corporations. Except as set forth above, Mr. Maxwell does not
presently serve as a director of any public company. He is an active investor
and writes a newsletter on the New York theater. Mr. Maxwell has been a director
and officer of the Company since February 28, 1995.
Anthony R. Russo is President, Chairman, Chief Executive Officer and a
co-founder of Cartilage Technologies, Inc. since its inception in 1989.
Cartilage is a privately held corporation engaged in the manufacture and sale of
food supplements. Prior thereto he was Chairman and Chief Executive of Sherwood
Corporation ("Sherwood"), a NASDAQ listed diversified financial services company
since 1973. Prior to joining Sherwood, Mr. Russo was employed by Arthur Andersen
& Co.; he is a Certified Public Accountant having received his B.B.A. in
Accountancy Practice with honors from Pace University in 1967. Concurrent with
developing his professional and business experience, Mr. Russo served in the New
York Air National Guard from 1961 through 1967; was a director of Lloyds
Electronics, Inc., an AMEX listed consumer electronics company from 1980 through
1984 and has
30
<PAGE> 31
served the boards of several Sherwood portfolio companies; Mr. Russo has been an
officer and director of the Company since June 30, 1995.
Mr. Shapansky has been President and controlling stockholder of A. G. Group
Inc., an investment banking firm since 1988. Mr. Shapansky also has been the
Chairman, President and Chief Executive Officer of Omega Development, Inc.
("Omega") for the past year. Omega is primarily engaged in real estate
financings activities. Mr. Shapansky also was President of Struthers Industries,
Inc. (SIR-AMEX), a company in the aerospace industry, from May, 1991 to
January, 1992. He was formerly Vice-President Finance, Secretary and a Director
of C.I.S. Technologies, Inc. (CISI-NASDAQ National Market System) from January,
1985 to January, 1988. Mr. Shapansky has a Bachelor of Commerce (Honours) degree
in actuarial mathematics and finance, from the University of Manitoba in
Winnipeg, Canada. Mr. Shapansky has been a director of the Company since June
30, 1995.
There are no agreements, arrangements or understandings between management
and anyone else pursuant to which other management is to be selected for a
particular office or position. It is estimated that management of the Company
will devote only such time as they deem necessary to the activities of the
Company. The Company has not entered into any agreement or contract with any
outside consultant or advisor; nor, does it intend to enter into any such
agreements or contracts pending consummation of a Business Combination.
FINDERS FEES AND OTHER COMPENSATION
No officer or director presently receives a salary. Except as described
herein it is not anticipated that any director or officer will receive any fee
or salary pending consummation of a Business Combination. However, directors
and/or officers will receive expense reimbursement for expenses reasonably
incurred on behalf of the Company.
In addition, Mr. Maxwell as a stockholder of the Company or his affiliates
may receive personal financial gain, other than from the proceeds of this Blank
Check Offering, by (i) payment of consulting fees; (ii) sales of affiliates'
stock; and (iii) payments of salaries. See "Conflicts of Interest" and Risk
Factors No. 13, Conflicts of Interest. However, no finders fees will be paid to
an officer, director or principal stockholder of their affiliates by virtue of
their initiation of, or the identification of an Acquired Business with which, a
Business Combination is consummated.
CONFLICTS OF INTEREST
The proposed business of the Company raises potential conflicts of interest
between the Company and its officers and directors. The Company has been formed
for the purpose of locating a suitable business opportunity in which to
participate. The officers and directors of the Company, who will not devote full
time to the Company, are engaged in various other business activities. See "RISK
FACTORS". From time to time, in the course of such activities, they may become
aware of investment and business opportunities and may be faced with the issue
of whether to bring such opportunities to the attention of the Company for its
participation.
Officers and directors of Delaware corporations are required to bring
business opportunities to their corporation if the corporation could financially
undertake the opportunity and the opportunity is within the corporation's line
of business. Because the business of the Company is to locate a suitable
business venture, Management may be required to bring such business
opportunities to the Company. Potential
31
<PAGE> 32
conflicts may arise in the determinations by Management as to whether these
potential business opportunities are within the financial means and proposed
business plans of the Company.
Other than Mr. Maxwell, none of the officers and directors are involved as
promoters, directors or stockholders of other blank check companies. Mr. Maxwell
in particular may organize other companies as blank check companies and offer
their securities to the public.
Management may have conflicts in the event that another "blank check" or
"blind pool" associated with Management is actively seeking the acquisition of
properties and businesses that are identical or similar to those that the
Company may seek, should the Company complete this Blank Check Offering. A
conflict will not be present as between the Company and another affiliated
"blank check" or "blind pool" if, before the Company begins seeking
acquisitions, such other "blank check" or "blind pool": (i) enters into any
understanding, arrangement or contractual commitment to participate in, or
acquire, any business or property; or (ii) ceases its search for additional
properties or businesses identical or similar to those the Company may seek.
Conflicts also may not be present to the extent that potential business
opportunities are appropriate for the Company but not for other affiliated
"blank check" or "blind pools" (or vice versa), because of such factors as the
difference in working capital available to the Company. If, however, at any time
the Company and any other firms affiliated with Management are simultaneously
seeking business opportunities, Management may face the conflict of whether to
submit a potential business acquisition to the Company or to such other firms.
See "Risk Factors".
The Company will not invest the proceeds of this Blank Check Offering in
any entity affiliated with Management without approval of a majority of the
disinterested directors. Further, and in any event, the Company must comply with
the reconfirmation offering requirements of Rule 419. However, no finders fees
will be paid to an officer, director or principal stockholder for initiating, or
locating an Acquired Business with which, a Business Combination is consummated.
The Company has established no other guidelines or procedures for resolving
potential conflicts. Failure by Management to resolve conflicts of interest in
favor of the Company may result in liability of Management to the Company.
Management has and will continue to have an affirmative obligation to disclose
conflicts of interest to the Company's Board of Directors or stockholders.
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of the Company's common stock as of August 31, 1996 and as adjusted to
reflect the sale of the Shares offered hereby, by (i) each person who is known
by the Company to own beneficially more than five percent (5%) of the Company's
outstanding common stock; (ii) each of the Company's officers and directors; and
(iii) all directors and officers of the Company as a group.
32
<PAGE> 33
<TABLE>
<CAPTION>
NAME OF SHARES OF COMMON APPROXIMATE APPROXIMATE PERCENTAGE
BENEFICIAL STOCK BENEFICIALLY PERCENTAGE TO BE OWNED
OWNER OWNED OWNED AFTER OFFERING
----- ----- ----- --------------
MINIMUM MAXIMUM
------- -------
<S> <C> <C> <C> <C>
Herbert Maxwell (1) 250,000 20% 16% 11%
440 East 56th Street
New York, N.Y. 10022
Leo Bloom 160,000 13% 11% 7%
484 West 43rd Street,
Apt. 37N
New York, N. Y. 10036
Woodsher Resolution
Corp.(2) 100,000 8% 6% 4%
200 Clearbrook Road
Elmsford, New York 10523
H.J. Petrocelly 100,000 8% 6% 4%
35 Lenox Avenue
White Plains, N. Y. 10603
Abraham Mittelman, M.D 100,000 8% 6% 4%
c/o Cartilage Technologies
200 Clearbrook Road
Elmsford, N.Y. 10523
Richard N. Daniel 100,000 8% 6% 4%
91 Hawthorn Place
Briarcliff Manor, N. Y. 10510
Victoria Maxwell 100,000 8% 6% 4%
202 East 21st Street,
Apt. 2B
New York, N. Y. 10010
Xin Ming Mu 100,000 8% 6% 4%
Patron America, Inc.
375 Park Avenue
New York, N.Y. 10152
A. Paul Shapansky 100,000 8% 6% 4%
Omega Capital Corporation
4200 East Shelly Drive
Suite 150
Tulsa, Oklahoma 74135
</TABLE>
33
<PAGE> 34
<TABLE>
<S> <C> <C> <C> <C>
Joseph Sierchio (3) 75,000 6% 5% 3%
41 East 57th Street
New York, N. Y. 10022
Renato Valente (4) 90,000 7% 6% 4%
40 Central Park South
New York, N. Y. 10019
All Officers and
Directors as a
Group (3 persons) 450,000 35% 30% 20%
</TABLE>
(1) Mr. Maxwell may be deemed a "parent" or a "promoter" as those terms are
defined in the rules and regulations adopted pursuant to the Act. Mr.
Maxwell disclaims any beneficial interest in shares owned of record and
beneficially by his daughter, Victoria Maxwell.
(2) Mr. Russo who is a vice president and director of the Company is the sole
stockholder of Woodsher Resolution Corp.
(3) Mr. Sierchio was a former officer and director of the Company. He
resigned shortly after the organization of the Company and prior to its
filing the registration statement of which this prospectus forms a part.
(4) Mr. Valente is a registered sales representative with Bernard Herold &
Co., Inc., the Escrow Agent. Mr. Valente is not a stockholder, director
or officer of Bernard Herold & Co., Inc. Consequently, the Company does
not believe any conflict of interest exists on the part of the Escrow
Agent because of Mr. Valente's position as a registered sales
representative.
PRIVATE OFFERINGS OF SECURITIES
On March 9, 1995, the Company issued an aggregate of 575,000 shares of
Common Stock for an aggregate consideration of $11,500 as follows:
(1) 250,000 shares to Herbert Maxwell at $.02 per share;
(2) 160,000 shares to Leo Bloom at $.02 per share;
(3) 90,000 shares to Renato Valente at $.02 per share;
(4) 75,000 shares to Joseph Sierchio at $.02 per share (issued in payment
of legal fees in the amount of $1,500);
On May 31, 1995 the Company issued an aggregate of 600,000 shares of
Common Stock for an aggregate consideration of $18,000 as follows:
(1) 100,000 shares to Victoria Maxwell at $.03 per share;
(2) 100,000 shares to Woodsher Resolution Corp. at $.03 per share.
(3) 100,000 shares to Abraham Mittelman, M.D. at $.03 per share;
(4) 100,000 shares to H.J. Petrocelly at $.03 per share;
(5) 100,000 shares to Richard N. Daniel at $.03 per share; and
(6) 100,000 shares to Xin Ming Mu at $.03 per share.
On June 29, 1995, the Company issued an additional 100,000 shares for an
aggregate consideration of $3,000 to A. Paul Shapansky.
34
<PAGE> 35
None of these shares will be available for resale pursuant to Rule 144 of
the Act until at least March, 1997.
The Company believes that each of the above referenced private offering
transactions was exempt from registration under the Act pursuant to Section 4(2)
thereof and the rules and regulations promulgated thereunder as a transaction by
an issuer not involving a public offering.
Except for the securities being registered pursuant hereto, such shares
are "restricted securities", as that term is defined in the rules and
regulations promulgated under the Act, subject to certain restrictions regarding
resale. See "RISK FACTORS". Certificates evidencing all of the above-referenced
securities, except for the securities being registered pursuant hereto, have
been stamped with a restrictive legend and will be subject to stop transfer
orders.
CERTAIN TRANSACTIONS
The Company was incorporated in the State of Delaware on February 28,
1995. The Company subsequently issued 1,275,000 shares for an aggregate price of
$32,500 (see "PRINCIPAL STOCKHOLDERS").
Mr. Maxwell may be deemed a "parent" or "promoter" as those terms are
defined in the rules and regulations adopted pursuant to the Act.
DESCRIPTION OF SECURITIES
COMMON STOCK
The Company is authorized to issue thirty-five million (35,000,000)
shares of common stock, $.001 par value per share, of which 1,275,000 shares
were issued and outstanding as of the date of this Prospectus. Each outstanding
share of common stock entitles the holder to one vote, either in person or by
proxy, on all matters that may be voted upon by the owners thereof at meetings
of the stockholders.
The holders of common stock (i) have equal rights to dividends from funds
legally available therefor, when, as and if declared by the Board of Directors
of the Company; (ii) are entitled to share ratably in all of the assets of the
Company available for distribution to holders of common stock upon liquidation,
dissolution or winding up of the affairs of the Company; (iii) do not have
preemptive, subscription or conversion rights, and (iv) are entitled to one
non-cumulative vote per share on all matters on which stockholders may vote at
all meetings of stockholders.
All shares of common stock which are the subject of this offering, when
issued, will be fully paid for and non-assessable, with no personal liability
attaching to the ownership thereof. The holders of shares of common stock of the
Company do not have cumulative voting rights, which means that the holders of
more than 50% of such outstanding shares, voting for the election of directors,
can elect all directors of the Company if they so choose and, in such event, the
holders of the remaining shares will not be able to elect any of the Company's
directors. At the completion of this offering, the present officers and
directors of the Company will own approximately 20% of the then outstanding
shares if the maximum number of Shares is sold and 30% of the then outstanding
shares if the minimum number of shares is sold.
35
<PAGE> 36
REPORTS TO STOCKHOLDERS
The Company intends to furnish its stockholders with annual reports
containing audited financial statements as soon as practicable after the end of
each fiscal year. The Company's fiscal year ends on December 31. In addition,
the Company intends to issue unaudited interim reports and financial statements
on a quarterly basis.
DIVIDENDS
The Company has not declared any dividends since inception, and has no
present intention of paying any cash dividends on its common stock in the
foreseeable future. The payment by the Company of dividends, if any, in the
future, rests within the discretion of its Board of Directors and will depend,
among other things, upon the Company's earnings, its capital requirements and
its financial condition, as well as other relevant factors.
DISTRIBUTION OF SECURITIES
The Company is offering a minimum of 250,000 and a maximum of 1,000,000
Shares at the purchase price of $.10 per Share on a "best efforts all or none
basis" as to the first 250,000 Shares and on a "best efforts" basis with regard
to the remaining 750,000 Shares. If the minimum number of shares is not sold
during the Offering Period, the proceeds received will be promptly returned to
investors with interest. The Company may allocate among or reject any offers to
purchase, in whole or in part. Moreover, the Company's directors and officers
may purchase Shares on the same terms and conditions as all other investors
provided, however, that any such Shares so purchased will not be included in
calculating the minimum number of Shares to be sold.
The Shares will be offered and sold by the Company's officers and
directors without compensation, (although the Company will reimburse certain
out-of-pocket expenses). These officers and directors have limited experience in
the sale of securities. None of the officers or directors of the Company nor the
Company is registered as a broker or dealer under Section 15 of the Securities
Exchange Act of 1934.
The Company is conducting this offering as a blank check offering subject
to the provisions of Rule 419. However, until the earlier to occur of (i) the
sale of at least 250,000 Shares or (ii) the expiration of the Offering Period,
the Escrow Agent will maintain all proceeds in an escrow account pursuant to the
requirements of Rule 419. If at least 250,000 Shares (exclusive of Shares, if
any, acquired by the Company's officers and directors), are not sold during the
Offering Period, the proceeds therefrom will be returned to the investors with
interest. At such time as at least 250,000 Shares (exclusive of Shares, if any,
acquired by the Company's officers and directors) are sold during the Offering
Period the proceeds from such sale, as well as the proceeds of from the sale of
up to an additional 750,000 Shares (except as to 10% thereof which will be
released to the Company pursuant to Rule 419) will then continue to be deposited
and held pursuant to the provisions of Rule 419 Escrow. See "Investor's Rights
and Substantive Protection Under Rule 419 - Deposited Funds and Deposited
Securities".
The funds received by the Company with respect to the Shares that may be
sold, less the amount permitted by Rule 419 (an amount equal to up to 10% of the
proceeds) to be delivered to the Company, will be deposited and maintained in
the Rule 419 Escrow pursuant to the terms of an
36
<PAGE> 37
escrow agreement entered into between the Company and the Escrow Agent. Shares
will be issued to purchasers only if at least 250,000 Shares are sold by the
Company; after the sale of at least 250,000 Shares, all Shares sold pursuant
hereto will be held in escrow in accordance with the provisions of Rule 419.
METHOD OF SUBSCRIBING
Prospective investors should make their checks payable to "Lloyd
Ventures, Inc. Escrow Account" and remit the checks and subscription agreement
to "Bernard Herold & Co., Inc., 555 Madison Avenue, New York, New York 10022,
Attn: Renato Valente. Subscriptions may not be withdrawn once made except in
accordance with applicable law. See Investors' Rights and Substantive Protection
under Rule 419. The Company reserves the right to reject any subscription in
whole or in part in its sole discretion for any reason whatsoever
notwithstanding tender of payment and to withdraw this Blank Check Offering at
any time prior to acceptance by the Company of the subscriptions received.
Funds will be held by the Escrow Agent, as described herein. There can be
no assurance that any or all of the Shares being offered hereby will be sold.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to any provisions contained in its Certificate of
Incorporation, or by-laws, 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 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 the successful defense of any
action, suit or proceeding) is asserted by such 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
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
LEGAL OPINIONS
Sierchio & Albert, P.C., 41 East 57th Street, 39th Floor, New York, New
York 10022, have acted as Counsel to the Company, in connection with the
offering and will render an opinion as to the legality of the securities being
offered hereby. Mr. Sierchio owns 75,000 shares of the Company's common stock.
See "Principal Stockholders".
EXPERTS
The Financial Statements included in this Prospectus and elsewhere in the
Registration Statement as of December 31, 1995 and for the period from inception
(February 28, 1995) to December 31, 1995 have been audited by Mahoney Cohen
Rashba & Pokart, CPA, PC, independent public accountants as indicated in their
report with respect thereto and are included in reliance upon the authority of
said firm as an expert in accounting and auditing in giving said report.
37
<PAGE> 38
NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS, 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 ANY OFFER TO BUY ANY
SECURITIES IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION WOULD BE
UNLAWFUL. THE DELIVERY OF THIS PROSPECTUS SHALL NOT UNDER ANY CIRCUMSTANCES
CREATE ANY IMPLICATION THAT THERE HAS NOT BEEN ANY CHANGE IN THE AFFAIRS OF THE
COMPANY SINCE THE DATE HEREOF. IN THE EVENT ANY MATERIAL CHANGES OR TRANSACTIONS
NOT MENTIONED HEREIN ARISE, THE COMPANY HAS UNDERTAKEN THE RESPONSIBILITY TO
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 WHICH ARE NOT REFLECTIVE
OR CONTAINED HEREIN.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Available Information 4
Prospectus Summary 5
Risk Factors 8
Selected Financial Information 17
Investor's Rights and Substantive
Protection Under Rule 419 17
The Company 20
Dilution 21
Use of Proceeds 22
Capitalization 24
Market For the Company's Common Stock 24
Plan of Operation 24
Directors, Executive Officers, Promoters
Control Persons 29
Conflicts of Interest 31
Principal Stockholders 32
Certain Transactions 35
Description of Securities 35
Distribution of Securities 36
Legal Opinions 37
Experts 37
Financial Statements F-(i)
</TABLE>
LLOYD VENTURES, INC.
1,000,000 Shares
of Common Stock, $.001 par value per Share
Until 90 days after the registered securities are released from escrow pursuant
to Rule 419 of Regulation C, promulgated under the 1933 Securities Act, as
amended, all dealers effecting transactions in the securities whether or not
participating in this distribution, may be required to deliver a prospectus.
This is in addition to the obligations of the dealers to deliver a prospectus
when acting as underwriters with respect to their unsold allotments or
subscriptions.
PROSPECTUS
Lloyd Ventures, Inc.
39th Floor
41 East 57th Street
New York, New York 10022
