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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 5
TO FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
LLOYD VENTURES, INC.
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(Exact name of registrant as specified in its charter)
Delaware 6770 13-3812821
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(State or other (Primary Standard (IRS Employer
jurisdiction of Industrial Classification Identification No.)
incorporation Code Number)
or organization)
41 East 57th Street, 39th Floor, New York, New York 10022
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(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
41 East 57th Street, 39th Floor, New York, New York 10022
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(Address of principal place of business or intended principal place of
business)
Herbert Maxwell, 440 East 56th Street, New York, New York 10022 (212) 888-2997
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(Name, address, including zip code, and telephone number, including area code,
of agent for service)
Copy to:
Sierchio & Albert, P.C.
41 East 57th Street, 39th Floor
New York, New York 10022
(212) 446-9500
Approximate date of commencement of proposed sale to public:
As soon as practicable after the effective date of this Registration Statement.
If any of the securities being registered on this form are to be offered
on a continuous or delayed basis pursuant to Rule 415 of the
Securities Act of 1933, check the following box [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Maximum Maximum Aggregate Amount of
Title of Each Class of Amount to be Offering Price Offering Registration
Securities to be Registered Registered Per Share Price (1) Fee (2)
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<S> <C> <C> <C> <C>
Common Stock, $.001 par value
per share 1,000,000 $.10 $100,000 $ 21
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Total Registration Fee $100
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</TABLE>
(1) Estimated solely for the purpose of computing the registration fee
pursuant to Rule 457.
(2) The minimum filing fee payable is $100.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH
DATE AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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CROSS REFERENCE SHEET
Furnished Pursuant to Item 501(b) of Regulation S-K
under the Securities Act of 1933, as amended
ITEM NUMBER AND CAPTION
IN REGISTRATION STATEMENT CAPTION IN PROSPECTUS
1. Forepart of the Registration Statement and Front of Registration
Outside Front Cover Page of Prospectus Statement; Cover Page
2. Inside Front and Outside Back Cover Pages Inside Front and Outside
of Prospectus Back Cover Pages
3. Summary Information and Risk Factors Prospectus Summary; Risk
Factors
4. Use of Proceeds Use of Proceeds
5. Determination of Offering Price Cover Page;
Determination of
Offering Price
6. Dilution; Risk Factors Dilution; Risk Factors
7. Selling Security Holders Not Applicable
8. Plan of Distribution Cover Page; Distribution
of Securities
9. Legal Proceedings Legal Proceedings
10. Directors, Executive Officers, Directors, Executive
Promoters and Controlling Persons Officers, Promoters and
Controlling Persons
11. Security Ownership of Certain Principal Stockholders
Beneficial Owners and Management
12. Description of Securities Description of
Securities
13. Interest of Named Experts and Counsel Legal Opinions; Experts
14. Disclosure of Commissions Position on Distribution of
Indemnification of Securities Act Securities
Liabilities
15. Organization within Last Five Years The Company; Plan of
Operation; Risk Factors
16. Description of Business Plan of Operation
17. Management's Discussion and Plan of Operation
Analysis or Plan of Operation
18. Description of Property Proposed Business
19. Certain Relationships and Related Certain Transactions
Transactions
20. Market for Common Equity of Securities Cover Page; Description
and Related Stockholder Matters Risk Factors
21. Executive Compensation Directors, Executive
Officers, Promoters
and Control Persons
22. Financial Statements Financial Statements
23. Changes in and Disagreements with Not Applicable
Accountants on Accounting
and Financial Disclosure
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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>
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Price to the Proceeds to the
Public (1) Company (2)(3)
<S> <C> <C>
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Per Share $ .10 $ .10
Total - 250,000 Shares (Minimum) 25,000.00 22,500.00
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1,000,000 Shares (Maximum) 100,000.00 90,000.00
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</TABLE>
(See notes on following page)
____________________
The date of this Prospectus is _______ , 1996
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(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.
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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.
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_________________
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.
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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
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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
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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."
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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.
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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
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<PAGE> 12
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)
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<PAGE> 13
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.
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<PAGE> 14
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.
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<PAGE> 15
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> 16
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.
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<PAGE> 17
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
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<PAGE> 18
(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.")
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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>
As at As Adjusted
August 31, 1996 ---------------------
(unaudited) Minimum Maximum
-------------- ---------- --------
<S> <C> <C> <C>
Summary Balance Sheet Data:
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."
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<PAGE> 20
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
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<PAGE> 21
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.
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<PAGE> 22
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
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<PAGE> 23
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
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<PAGE> 24
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
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<PAGE> 25
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".
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<PAGE> 26
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
</TABLE>
<TABLE>
<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
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<PAGE> 27
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;
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<PAGE> 28
* 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> 29
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> 30
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> 31
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
29
<PAGE> 32
companies, which although not engaged in blank check offerings nevertheless
consummated acquisitions of the type described in this Prospectus. These
include:
(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
30
<PAGE> 33
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 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.
31
<PAGE> 34
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 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> 35
<TABLE>
<CAPTION>
APPROXIMATE PERCENTAGE
TO BE OWNED
NAME OF SHARES OF COMMON APPROXIMATE AFTER OFFERING
BENEFICIAL STOCK BENEFICIALLY PERCENTAGE -----------------------
OWNER OWNED OWNED 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> 36
<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> 37
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> 38
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> 39
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> 40
LLOYD VENTURES, INC.
Index to Financial Statements
<TABLE>
<CAPTION>
Pages
-----
<S> <C>
Report of Independent Public Accountants F-2
Balance Sheets as of December 31, 1995 and
August 31, 1996 (Unaudited) F-3
Statements of Operations for the Period from Inception
(February 28, 1995) to December 31, 1995 and the
Eight Months Ended August 31, 1996 (Unaudited) F-4
Statements of Changes in Stockholders' Equity for the
Period from Inception (February 28, 1995) to
December 31, 1995 and the Eight Months Ended
August 31, 1996 (Unaudited) F-5
Statements of Cash Flows for the Period from Inception
(February 28, 1995) to December 31, 1995 and the
Eight Months Ended August 31, 1996 (Unaudited) F-6
Notes to Financial Statements F-7 - F-8
</TABLE>
F-1
<PAGE> 41
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors and Shareholders of
Lloyd Ventures, Inc.
We have audited the accompanying balance sheet of Lloyd
Ventures, Inc. as of December 31, 1995, and the related statements of
operations, changes in stockholders' equity and cash flows for the period from
inception (February 28, 1995) to December 31, 1995. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position of Lloyd
Ventures, Inc. as of December 31, 1995, and the results of its operations and
its cash flows for the period from inception (February 28, 1995) to December
31, 1995, in conformity with generally accepted accounting principles.
/s/Mahoney Cohen Rashba & Pokart, CPA, PC
-----------------------------------------
Mahoney Cohen Rashba & Pokart, CPA, PC
New York, New York
January 30, 1996
F-2
<PAGE> 42
LLOYD VENTURES, INC.
Balance Sheets
ASSETS
------
<TABLE>
<CAPTION>
December 31, August 31,
1995 1996
------------ ------------
(Unaudited)
<S> <C> <C>
Current assets:
Cash $ 8,859 $ 8,501
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
Accrued professional fees $ 3,003 $ 7,423
Stockholders' equity:
Common stock, $.001 par value:
Authorized - 35,000,000 shares
Issued and outstanding - 1,275,000 shares 1,275 1,275
Additional paid-in capital 31,225 31,225
Accumulated deficit (26,644) (31,422)
---------- ----------
Total stockholders' equity 5,856 1,078
---------- ----------
$ 8,859 $ 8,501
========== ==========
</TABLE>
See accompanying notes.
F-3
<PAGE> 43
LLOYD VENTURES, INC.
Statements of Operations
<TABLE>
<CAPTION>
Period from Eight
Inception Months
(February 28, 1995) to Ended
December 31, 1995 August 31, 1996
---------------------- ---------------
(Unaudited)
<S> <C> <C>
Expenses:
Professional fees $ 25,530 $ 4,698
Other 1,114 80
----------- -----------
Total expenses 26,644 4,778
----------- -----------
Net loss $ (26,644) $ (4,778)
=========== ===========
</TABLE>
See accompanying notes.
F-4
<PAGE> 44
LLOYD VENTURES, INC.
Statements of Changes in Stockholders' Equity
For the Period from Inception (February 28, 1995)
to December 31, 1995 and
the Eight Months Ended August 31, 1996 (Unaudited)
<TABLE>
<CAPTION>
Total Addi-
Stock- tional Accumu-
holders' Common Paid-in lated
Equity Stock Capital Deficit
--------- ---------- ------- -------
<S> <C> <C> <C> <C>
Issuance of 500,000 shares of
common stock at $.02 per share $ 10,000 $ 500 $9,500 $ -
Issuance of 700,000 shares of
common stock at $.03 per share 21,000 700 20,300 -
Issuance of 75,000 shares of
common stock at $.02 per share
for services provided by a
director/officer of the Company 1,500 75 1,425 -
Net loss for the period from inception
(February 28, 1995) to December 31, 1995 (26,644) - - (26,644)
--------- ---------- -------- --------
Balance, December 31, 1995 5,856 1,275 31,225 (26,644)
Net loss for the eight months
ended August 31, 1996 (4,778) - - (4,778)
--------- ---------- -------- --------
Balance, August 31, 1996
(Unaudited) $ 1,078 $ 1,275 $ 31,225 $(31,422)
========= ========== ======== ========
</TABLE>
See accompanying notes.
F-5
<PAGE> 45
LLOYD VENTURES, INC.
Statements of Cash Flows
<TABLE>
<CAPTION>
Period from Eight
Inception Months
(February 28, 1995) to Ended
December 31, 1995 August 31, 1996
--------------------- ---------------
(Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (26,644) $ (4,778)
Adjustments to reconcile net loss to net
cash used in operating activities:
Services provided for common stock 1,500 -
Change in assets and liabilities:
Accrued expenses 3,003 4,420
----------- -----------
Net cash used in operating activities (22,141) (358)
Cash flows from financing activities:
Issuance of common stock and cash
provided by financing activities 31,000 -
----------- -----------
Net increase (decrease) in cash 8,859 (358)
Cash, beginning of period - 8,859
----------- -----------
Cash, end of period $ 8,859 $ 8,501
=========== ===========
Supplemental Schedule of Non-Cash Investing
and Financing Activities
Issuance of common stock for services rendered
by a director/officer of the Company $ 1,500
===========
</TABLE>
See accompanying notes.
F-6
<PAGE> 46
LLOYD VENTURES, INC.
Notes to Financial Statements
Note 1 - The Company
-----------
Lloyd Ventures, Inc. (the "Company") was incorporated in February
1995 in the State of Delaware, and intends to effect a merger, exchange of
capital stock, asset acquisition or other similar business combination or
acquisition with a business entity. The Company has not identified any
specific business or company to fulfill its intentions.
The Company will register its securities with the Securities and
Exchange Commission and offer certain securities in a "blank check" offering
subject to Rule 419 of the Securities Act of 1933.
Note 2 - Summary of Significant Accounting Policies
------------------------------------------
Accounting Estimates
--------------------
The preparation of financial statements requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenue and expenses
during the reporting period. Actual results could differ from those estimates.
Income Taxes
------------
The Company files its income taxes on a calendar year basis. At
December 31, 1995, the Company has approximately $26,600 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.
Cash Flows
----------
The Company presents cash flows under the indirect method by
reconciling net loss to net cash flow.
Concentration of Credit Risk
----------------------------
The Company maintains cash balances at a bank. The account is
insured by the Federal Deposit Insurance Corporation up to $100,000.
F-7
<PAGE> 47
LLOYD VENTURES, INC.
Notes to Financial Statements
Note 3 - Related Party Transactions
--------------------------
The Company incurred approximately $20,300 of professional fees
which included reimbursable expenses of $5,300 to a shareholder of the Company
of which $1,500 was satisfied through the issuance of 75,000 shares of common
stock. At the time of this stock issuance, the shareholder was also an officer
and director of the Company.
This same shareholder is also providing office space to the
Company at no charge, pursuant to an oral agreement. The agreement remains in
effect until a business combination is consummated or until any escrow held
from the offering is terminated, upon 30 days prior written notice by either
party to the agreement.
Note 4 - Interim Periods (Unaudited)
---------------------------
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.
F-8
<PAGE> 48
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>
<S> <C>
Page
----
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-1
</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
<PAGE> 49
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Except as hereinafter set forth there is no charter provision, bylaw,
contract, arrangement or statute under which any officer or director of the
Registrant is insured or indemnified in any manner against any liability which
he may incur in his capacity as such.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of The Delaware General Corporation Law, as amended,
provides for the indemnification of the Company's officers, directors and
corporate employees and agents under certain circumstances as follows:
INDEMNIFICATION OF OFFICERS, DIRECTORS, EMPLOYEES AND AGENTS;
INSURANCE. - (a) A corporation may indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation) by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful.
The termination of any action, suit or proceeding, by judgment,order,
settlement, conviction, or upon a plea of nolo contendere or its equivalent,
shall not, of itself, create a presumption that the person did not act in good
faith and in a manner which he reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any criminal action
or proceeding, had reasonable cause to believe that his conduct was unlawful.
(b) A corporation may indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or completed action
or suit by or in the right of the corporation to procure a judgment in its
favor by reason of the fact that he is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation and except that no indemnification shall
be made in respect of any claim, issue or matter as to which such person shall
have been adjudged to be liable to the corporation unless and only to the
extent that the Court of Chancery or the court in which such action or suit was
brought shall determine upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses which the Court
of Chancery or such court shall deem proper.
II-1
<PAGE> 50
(c) To the extent that a director, officer, employee or agent of a
corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in subsections (a) and (b) of this
section, or in defense of any claim, issue or matter therein, he shall be
indemnified against expenses (including attorney's fees) actually and
reasonably incurred by him in connection therewith.
(d) Any indemnification under subsections (a) and (b) of this section
(unless ordered by a court) shall be made by the corporation only as authorized
in the specific case upon a determination that indemnification of the director,
officer, employee or agent is proper in the circumstances because he has met
the applicable standard of conduct set forth in subsections (a) and (b) of this
section. Such determination shall be made (1) by the board of directors by a
majority vote of a quorum consisting of the directors who were not parties to
such action, suit or proceeding, or (2) if such a quorum is not obtainable, or,
even if obtainable a quorum of disinterested director so directs, by
independent legal counsel in a written opinion, or (3) by the stockholders.
(e) Expenses (including attorneys' fees) incurred by an officer or
director in defending any civil, criminal, administrative or investigative
action, suit or proceeding may be paid by the corporation in advance of the
final disposition of such action, suit or proceeding upon receipt of any
undertaking by or on behalf of such director to repay such amount if it shall
ultimately be determined that he is not entitled to be indemnified by the
corporation as authorized in this section. Such expenses including attorneys'
fees incurred by other employees and agents may be so paid upon such terms and
conditions, if any, as the board of directors deems appropriate.
(f) The indemnification and advancement expenses provided by, or
granted pursuant to, the other subsections of this section shall not be deemed
exclusive of any other rights to which those seeking indemnification or
advancement expenses may be entitled under any bylaw, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in his
official capacity and as to action in another capacity while holding such
office.
(g) A corporation shall have power to purchase and maintain insurance
on behalf of any person who is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee, or agent of another corporation, partnership,
joint venture, trust or other enterprise against any liability asserted against
him and incurred by him in any such capacity or arising out of his status as
such, whether or not the corporation would have the power to indemnify him
against such liability under this section.
(h) For purposes of this Section, references to "the corporation"
shall include, in addition to the resulting corporation, any constituent
corporation including (any constituent of a constituent) absorbed in a
consolidation or merger which, if separate existence had continued, would have
had power and authority to indemnify its directors, officers and employees or
agents so that any person who is or was a director, officer, employee or agent
of such constituent corporation, or is or was serving at the request of such
constituent corporation as a director, officer, employee, or agent of another
corporation, partnership, joint venture, trust or other enterprise, shall stand
in the same position under this section with respect to the resulting or
surviving corporation as he would have with respect to such constituent
corporation if its separate existence had continued.
II-2
<PAGE> 51
(i) For purposes of this section, reference to "other enterprises"
shall include employee benefit plans; references to "fines" shall include any
excise taxes assessed on a person with respect to an employee benefit plan; and
references to "serving at the request of the corporation" shall include any
service as a director, officer, employee or agent of the corporation which
imposes duties on, or involve services by, such director, officer, employee, or
agent with respect to an employee benefit plan, its participants, or
beneficiaries; and a person who acted in good faith and in a manner he
reasonably believed to be in the interest of the participants and beneficiaries
of an employee benefit plan shall be deemed to have acted in a manner "not
opposed to the best interests of the corporation" as referred to in this
section.
(j) The indemnification and advancement of expenses provided by, or
granted pursuant to, this section shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of the
heirs, executors, and administrators of such person.
THE SECURITIES AND EXCHANGE COMMISSION'S POLICY ON INDEMNIFICATION
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.
Item 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The estimated expenses in connection with this offering are as
follows:
<TABLE>
<CAPTION>
Item Amount
---- ------
<S> <C>
Securities and Exchange Commission
Registration Fee $ 100.00
Cost of Printing and Engraving 1,000.00
Escrow Fees 3,000.00
Legal Fees 20,000.00
Accountants' Services and Expenses 2,500.00
"Blue Sky" Fees and Expenses 500.00
Miscellaneous Expenses 1,500.00
TOTAL $28,600.00
</TABLE>
II-3
<PAGE> 52
Item 26. RECENT SALES OF UNREGISTERED SECURITIES
During the past three years, the Registrant has sold securities in the
manner set forth below without registration under the Securities Act of 1933,
as amended (the "Act").
<TABLE>
<CAPTION>
Number of Shares Purchase Price
Name of Investor Acquired Per Share Aggregate
---------------- ---------------- ------------- ---------
<S> <C> <C> <C>
Herbert Maxwell 250,000 $ .02 $ 5,000
Leo Bloom 160,000 .02 3,200
Woodsher Resolution Corp. 100,000 .03 3,000
Abraham Mittelman, M.D. 100,000 .03 3,000
H.J. Petrocelly 100,000 .03 3,000
Richard N. Daniel 100,000 .03 3,000
Victoria Maxwell 100,000 .03 3,000
Xin Ming Mu 100,000 .03 3,000
A. Paul Shapansky 100,000 .03 3,000
Renato Valente 90,000 .02 1,800
Joseph Sierchio 75,000 .02 1,500
1,275,000
</TABLE>
Except for the securities being registered hereunder, such shares are
"restricted securities," as that term is defined in the rules and regulations
promulgated under the Securities Act of 1933, as amended, subject to certain
restrictions regarding resale. Certificates evidencing all of the
above-referenced securities have been stamped with a restrictive legend and
will be subject to stop transfer orders.
The Registrant believes that each of the above-referenced transaction
was exempt from registration under the Act, pursuant to Section 4(2) of the Act
and the rules and regulations promulgated thereunder as a transaction by an
issuer not involving any public offering.
II-4
<PAGE> 53
Item 27. EXHIBITS
3(i)(1) Certificate of Incorporation*
3(ii) By-Laws*
4(i)(1) Form of Escrow Agreement*
4(i)(2) Form of Subscription Agreement*
4(i)(3) Specimen Stock Certificate*
5(i) Opinion of Joseph Sierchio, Esq.*
23(i)(1) Consent of Joseph Sierchio (included in Exhibit 5(i))*
23(i)(2) Consent of Mahoney Cohen Rashba & Pokart, CPA, PC
24 Power of Attorney**
_________________________
* Previously filed.
** Included on the Signature Page to the Registration Statement on Form SB-2
II-5
<PAGE> 54
Item 28. UNDERTAKINGS
(1) To file, during any period in which offers and sales of the
securities offered hereby are made, a post-effective amendment to this
Registration Statement:
(i) to include any prospectus required by Section
10(a)(3) of the Securities Act of 1933, as amended
(the "Act"); and
(ii) to reflect in the prospectus any facts or events
arising after the effective date of the Registration
Statement (or the most recent post-effective
amendment thereof) that, individually or in the
aggregate, represent a fundamental change in the
information set forth in the Registration Statement;
and
(iii) to include any material information with respect to
the plan of distribution not previously disclosed in
the Registration Statement or any material change to
such information in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered that remain unsold at the
termination of the offering.
(4) That all such post-effective amendments will comply with the
applicable form, rules and regulations of the Securities and Exchange
Commission in effect at the time of the filing thereof.
(5) 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 of transactions which are not reflected or
contained herein, if such changes occurs within 90 days of the Effective Date.
(6) To file a post-effective amendment or a supplement to the
Registration Statement to reflect a probable acquisition as contemplated by
Rule 419 and/or to reflect the offering of shares in any state other than New
York.
II-6
<PAGE> 55
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form SB-2 and has duly caused this Amendment
No. 5 to the Registration Statement to be signed on its behalf by the
undersigned hereunto duly authorized in the City of New York, on the 28th of
October, 1996.
LLOYD VENTURES, INC.
(Registrant)
By: /s/ Herbert Maxwell
--------------------------
Herbert Maxwell, President
and Director
<PAGE> 56
LLOYD VENTURES, INC.
AMENDMENT NO. 5 TO FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
_______________
INDEX TO EXHIBITS
Document
Consent of Mahoney Cohen Rashba & Pokart, CPA, PC
<PAGE> 1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Amendment No. 5 to
Form SB-2 of our report dated January 30, 1996, on our audit of the financial
statements of Lloyd Ventures, Inc. as of December 31, 1995, and for the period
from inception (February 28, 1995) to December 31, 1995. We also consent to the
reference to our firm under the caption "Experts".
/s/ Mahoney Cohen Rashba & Pokart, CPA, PC
------------------------------------------
Mahoney Cohen Rashba & Pokart, CPA, PC
New York, New York
October 23, 1996
