As filed with the U.S. Securities and Exchange Commission on October __, 2006
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
__________
SIGNATURE LEISURE, INC.
(Name of Registrant in Our Charter)
Colorado | | | | 50-0012982 |
| (State or Other Jurisdiction of Incorporation | | | | (I.R.S. Employer Identification No.) |
| or Organization) | | | | |
| | | | | Stephen W. Carnes |
100 Candace Drive | | | | 100 Candace Drive |
Suite 100 | | | | Suite 100 |
Maitland, Florida 32751 | | 5990 | | Maitland, Florida 32751 |
| (Address and telephone number of Principal | | (Primary Standard Industrial | | (Name, address and telephone number |
| Executive Offices and Principal Place of Business) | | Classification Code Number) | | of agent for service) |
| |
| Copy to: |
Alina S. Pastiu, Esq. Kirkpatrick & Lockhart Nicholson Graham LLP 201 S. Biscayne Boulevard, Suite 2000 Miami, Florida 33131 Telephone: (305)539-3300 Facsimile: (305)358-7095 |
Approximate date of commencement of proposed sale to the public: As soon as practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 check the following box. þ
If this Form is filed to register additional securities for an Offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act Registration Statement number of the earlier effective Registration Statement for the same Offering. o
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act Registration Statement number of the earlier effective Registration Statement for the same Offering. o
If delivery of the Prospectus is expected to be made pursuant to Rule 434, please check the following box. o
CALCULATION OF REGISTRATION FEE
| | | | | | | | | | |
Title Of Each Class Of Securities To Be Registered | | Amount To Be Registered | | Proposed Maximum Offering Price Per Share (1) | | Proposed Maximum Aggregate Offering Price | | Amount Of Registration Fee | |
| Common Stock, par value $0.0001 per share | | | 50,000,000 | | shares(2) | | $ | 0.0250 | | $ | 1,250,000 | | $ | 133.75 | |
| TOTAL | | | 50,000,000 | | shares(2) | | $ | 0.0250 | | $ | 1,250,000 | | $ | 133.75 | |
| | | | | | | | | | | | | | | |
| (1) | Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(c) under the Securities Act of 1933, as amended. For the purposes of this table, we have used the closing price of the common stock traded on the Over-the-Counter Bulletin Board within five days from the date hereof. |
| (2) | Of these shares, 50,000,000 shares of common stock are being registered under a Standby Equity Distribution Agreement. |
The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until this Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.
PROSPECTUS
Subject to completion, dated October __, 2006
SIGNATURE LEISURE, INC.
50,000,000 Shares of Common Stock
This Prospectus relates to the sale of up to 50,000,000 shares of common stock of Signature Leisure, Inc. (the “Company” or “Signature Leisure”) by Katalyst Capital Group, Ltd. (“Katalyst Capital Group”), which is our only stockholder that is selling shares of common stock under the accompanying Registration Statement. Please refer to page 13 to see further information regarding Katalyst Capital Group and its ownership of our common stock. Signature Leisure is not selling any shares of common stock in this offering and therefore will not receive any proceeds from this offering. Signature Leisure will, however, receive proceeds from the sale of common stock under the Standby Equity Distribution Agreement (the “Standby Equity Distribution Agreement”), which was entered into on January 20, 2005, by and between Signature Leisure and Katalyst Capital Group. All costs associated with the accompanying Registration Statement will be borne by us. Pursuant to the Standby Equity Distribution Agreement, we have agreed to allow Katalyst Capital Group to retain 1% of the proceeds raised under the Standby Equity Distribution Agreement.
Our common stock is quoted on the Over-the-Counter Bulletin Board (the “OTCBB”) under the symbol “SGLS.OB”. The shares of common stock are being offered for sale by the selling stockholder at prices established on the OTCBB during the term of this Offering. On September 19, 2006, the last reported sale price of our common stock was $0.0250 per share. These prices will fluctuate based on the demand for the shares of our common stock.
Please refer to “Risk Factors” beginning on page 7.
The U.S. Securities and Exchange Commission (the “SEC”) and state securities regulators have not approved or disapproved of these securities, or determined if this Prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
Katalyst Capital Group is an “underwriter” within the meaning of the Securities Act of 1933, as amended (the “1933 Act”), in connection with the sale of common stock under the Standby Equity Distribution Agreement. With the exception of Katalyst Capital Group, which is an “underwriter” within the meaning of the 1933 Act, no other underwriter or person has been engaged to facilitate the sale of shares of common stock in this offering. This offering will terminate twenty-four months after the accompanying registration statement is declared effective by the Securities and Exchange Commission. None of the proceeds from the sale of stock by the selling stockholders will be placed in escrow, trust or any similar account.
The information in this Prospectus is not complete and may be changed. Neither the selling stockholder nor we may sell these securities until the Registration Statement filed with the SEC is effective. This Prospectus is not an offer to sell these securities and we are not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.
The date of this Prospectus is October __, 2006
| 1 |
| 3 |
| 7 |
| 11 |
| 12 |
| 14 |
| 16 |
| 17 |
| 19 |
| 21 |
| 30 |
| 35 |
| 42 |
| 43 |
| 44 |
| 45 |
| 47 |
| 49 |
| 51 |
| 51 |
| 51 |
| 51 |
The following is intended only as a summary of the information, financial statements and notes included elsewhere in this Prospectus. You should read the entire Prospectus carefully, including “Risk Factors” and our Financial Statements and the notes thereto before making any investment in Signature Leisure.
Overview
Signature Leisure was incorporated in the State of Colorado on March 15, 2000 as JDLPhotos.com. We intend to generate revenue through our auto sales business and from the business operations of our subsidiary entities. Our subsidiaries are Parker Productions, Inc., Signature Auto and, E Cubed Technologies, Inc.
Parker Productions is a modeling and event staffing business that provides various clients with promotional and event services in order to assist those clients to market their products and services.
On July 21, 2005, Signature Leisure formally incorporated E Cubed Technologies, Inc. in the State of Florida in order to better organize and market its network and technology services Offerings. E Cubed Technologies is a network and technologies service company that generates revenue through the sale of information technology products and services. E Cubed Technologies markets computer and computer network hardware, software, and services. E Cubed Technologies is an authorized dealer of DocSTAR (Document Storage and Retrieval) which is a document imaging solutions company with whom we are currently working, and au authorized reseller of Dell product. DocSTAR’s has a contractual relationship with E Cubed Technologies which allows E Cubed Technologies to both sell and service DocSTAR products. The nature of this relationship is very similar to the typical manufacturer and retailer agreements in that E Cubed purchases the products directly from the manufacturer at wholesale prices in order to resell to those products to retail clients at a retail price suggest by DocSTAR but ultimately determined by E Cubed.
DocSTAR is a total document storage and retrieval system which takes paper documents, indexes them and stores them securely for later retrieval by end users either at the host system or a client workstation on the local computer network. After E Cubed Technologies installs a system sold to a client, the client’s employees are then trained in the usage of DocSTAR’s filing and retrieval process. The clients then use a high speed scanner connected to either the host machine or a computer attached to the organizations computer network designated as a scan station to scan paper documents and file them in the DocSTAR system. The filing process differs for every client, as each of the document types they use will have what is called a template setup for them to file the document and ease the retrieval process. The template is a set of instructions that have been specified by the client telling the DocSTAR system how to file each document and what information to use when indexing the document. Once retrieved by a client computer, the documents can be faxed, emailed, or printed to paper directly from the DocSTAR system.
In September 2005, through our wholly-owned subsidiary, Signature Auto, we restarted the pre-owned vehicle sales dealership in the form of wholesale sales. At present we are not retailing vehicles, which is to say that we are not holding inventory for the express purpose of selling to the retail public. We intend to purchase inventory with the sole purpose of wholesaling the vehicles to other dealers. As of the date of filing we had no vehicles in inventory and are carefully evaluating the business directions of Signature Auto.
Going Concern
Our consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. Management believes we will need to raise approximately $950,000 in order to operate over the next 12 month period. As shown in the accompanying financial statements, we have incurred significant losses since inception. During the year ended December 31, 2005, we had a net loss of $1,619,130, and a net loss of $1,240,199 for the six months ended June 30, 2006. As of December 31, 2005, our retained deficit was $4,964,579, and our retained deficit was $6,204,778 for the six months ended June 30, 2006. Our total assets for the year ended December 31, 2005 and for the six months ended June 30, 2006 were $87,420 and $210,449, respectively. Our losses, among others, may indicate that we will be unable to continue as a going concern for reasonable period of time. The financial statements do not include any adjustments relating to the recoverability and classification of liabilities that might be necessary should we be unable to continue as a going concern. Our continuation as a going concern is dependent upon our ability to generate sufficient cash flow to meet our obligations on a timely basis and ultimately to attain profitability. We have limited capital with which to pursue our business plan. There can be no assurance that our future
operations will be significant and profitable, or that we will have sufficient resources to meet our objectives. We may pursue either debt or equity financing or a combination of both, in order to raise sufficient capital in order to meet our financial requirements over the next 12 months and to fund our business plan. Notwithstanding the foregoing, our ability to raise capital is limited by the terms of the Standby Equity Distribution Agreement with Katalyst Capital Group. Specifically, Section 2.6 thereof prohibits us from issuing any equity for a price below the then-current market price of our common stock, as quoted by Bloomberg, LP, during the commitment period for Standby Equity Distribution Agreement.
Under the Standby Equity Distribution Agreement, we are prohibited from issuing our common stock at a discount to its market price at the time of issuance. This restriction could prevent us from privately placing our stock for the duration of the Standby Equity Distribution Agreement.
About Us
Our principal executive offices are located at 100 Candace Drive, Suite 100, Maitland, Florida 32751. Our telephone number is (407) 599-2886, and our consumer website is located at www.signatureleisure.com.
This Offering relates to the sale of common stock by certain persons who are, or will be, stockholders of Signature Leisure. Katalyst Capital Group is the only stockholder selling stock under the accompanying Registration Statement, and intends to sell up to 50,000,000 shares of common stock. All 50,000,000 shares of common stock are being registered for Katalyst Capital Group under the Standby Equity Distribution Agreement.
On January 20, 2005, we entered into the Standby Equity Distribution Agreement with Katalyst Capital Group. Under the Standby Equity Distribution Agreement, Signature Leisure may issue and sell to Katalyst Capital Group common stock for a total purchase price of up to $5,000,000. The purchase price for our shares is equal to 99%, or a 1% discount, of the offering price, which is defined in the Standby Equity Distribution Agreement as the lowest volume weighted-average price of the common stock during the five trading days following the notice date, as quoted by Bloomberg, LP. Katalyst Capital Group and Signature Leisure have agreed to use the services of Bloomberg, LP as an independent third-party source of information to determine the lowest volume weighted-average price. The amount of each cash advance is subject to a maximum advance amount of $200,000, with no cash advance occurring within seven trading days. Katalyst Capital Group received 1,000,000 shares of common stock issued as a one-time commitment fee under the Standby Equity Distribution Agreement on January 20, 2005. Katalyst Capital Group will be paid a cash fee equal to 1% of each advance, which will be retained by Katalyst Capital Group from each advance.
On July 7, 2005, Signature Leisure entered into a Placement Agent Agreement with Spencer-Clarke, LLC, a registered broker-dealer. Pursuant to the Placement Agent Agreement, Signature Leisure paid Spencer-Clarke a one-time placement agent fee of $10,000. Spencer-Clarke provided due diligence and financial consulting services to Signature Leisure and facilitated an introduction of the parties and a clarification of the terms of the financing for Signature Leisure. There are no affiliations among Spencer-Clarke, Katalyst Capital Group and Signature Leisure. Signature Leisure and Spencer-Clarke had an agreement to provide services that was not memorialized in writing until July 7, 2005.
The commitment amount of the Standby Equity Distribution Agreement with Katalyst Capital Group is $5,000,000. In connection with the Standby Equity Distribution Agreement, we filed a registration statement on Form SB-2 with the SEC on July 11, 2005 (No. 333-126509) (the “2005 Registration Statement”), registering 29,868,360 shares of our common stock on behalf of the selling stockholders. These selling stockholders included Katalyst Capital Group, on whose behalf we registered 28,868,360 shares of common stock under the Standby Equity Distribution Agreement and 1,000,000 shares of common stock received from us as a one-time commitment fee. The 2005 Registration Statement was declared effective on June 9, 2006. As of September 19, 2006, we had received $592,719 of gross proceeds since the 2005 Registration Statement was declared effective and issued 13,260,925 shares to Katalyst Capital Group under the Standby Equity Distribution Agreement.
As of September 19, 2006, the remaining gross proceeds that we may receive under the Standby Equity Distribution Agreement are $4,407,281. However, the amount of net proceeds that we may receive under the Standby Equity Distribution Agreement depends on our stock price at the time of requesting advances thereunder. For example, if our stock price declines, we would be required to issue a greater number of shares under the Standby Equity Distribution Agreement, otherwise, there will be a decrease in the amount of proceeds we may receive under the Standby Equity Distribution Agreement. This inverse relationship is demonstrated by the following tables, which show the net cash to be received by the Company and the number of shares to be issued under the Standby Equity Distribution Agreement. For example, based on the recent stock price of $0.0250 on September 19, 2006, the table below illustrates the changes in gross and net proceeds at 25%, 50% and 75% discounts to the recent price.
| | | | | | | | | | |
| Market Price: | | | 0.02500 | | | 0.01875 | | | 0.01250 | | | 0.00625 | |
| Assumed Offering: | | | 0.02475 | | | 0.18560 | | | 0.01237 | | | 0.00618 | |
Number of Shares(1): | | | 50,000,000 | | | 50,000,000 | | | 50,000,000 | | | 50,000,000 | |
Total Outstanding (2): | | | 202,533,218 | | | 202,533,218 | | | 202,533,218 | | | 202,533,218 | |
Percent Outstanding (3): | | | 24.68 | % | | 24.68 | % | | 24.68 | % | | 24.68 | % |
| Gross Proceeds to us: | | | 1,237,500 | | | 928,125 | | | 618,750 | | | 309,375 | |
| Net Proceeds to us: | | | 1,140,125 | | | 833,844 | | | 527,563 | | | 221,281 | |
| | | | | | | | | | | | | | |
| (1) | Represents the number of shares of common stock to be issued to Katalyst Capital Group under the Standby Equity Distribution Agreement. |
| (2) | Represents the total number of shares of common stock outstanding after the issuance of 50,000,000 shares of common stock to Katalyst Capital Group, under the Standby Equity Distribution Agreement, as registered hereunder. |
| (3) | Represents the shares of common stock to be issued as a percentage of the total number shares outstanding. |
Common Stock Offered | 50,000,000 shares by Katalyst Capital Group |
| | |
Offering Price | Market price |
| | |
Common Stock Outstanding Before the Offering1 | 152,533,218 shares as of September 19, 2006 |
| | |
Use of Proceeds | We will not receive any proceeds of the shares offered by the selling stockholder. Any proceeds we receive from the sale of common stock under the Standby Equity Distribution Agreement will be used for business development, infrastructure improvements and operating capital purposes. See “Use of Proceeds.” |
| | |
Risk Factors | The securities offered hereby involve a high degree of risk and immediate substantial dilution. See “Risk Factors” and “Dilution.” |
| | |
Over-the-Counter Bulletin Board Symbol | SGLS.OB |
| | |
| 1 | Excludes up to 50,000,000 our common stock that may be issued under the Standby Equity Distribution Agreement. |
SUMMARY FINANCIAL INFORMATION
FOR SIGNATURE LEISURE, INC.
CONSOLIDATED BALANCE SHEET
| | | June 30, 2006 | | December 31, 2005 | |
| | | | | | |
| Assets | | | | | |
| | | | | | |
| Current assets: | | | | | |
| Cash | | $ | 178,466 | | $ | 35,543 | |
| Accounts receivable, less allowance for doubtful accounts of $7,405 | | | 1,704 | | | 8,117 | |
| Inventory | | | 16,850 | | | 26,361 | |
| Total current assets | | | 197,020 | | | 70,021 | |
| | | | | | | | |
| Equipment, less accumulated depreciation | | | 2,595 | | | 3,233 | |
| | | | | | | | |
| Intangible assets: | | | | | | | |
| Website | | | 5,417 | | | 7,083 | |
| Contact list | | | 5,417 | | | 7,083 | |
| Total assets | | $ | 210,449 | | $ | 87,420 | |
| | | | | | | | |
| Liabilities and Shareholders’ Deficit | | | | | | | |
| | | | | | | | |
| Current liabilities: | | | | | | | |
| Accounts payable | | $ | 5,000 | | $ | 33,049 | |
| Accrued liabilities | | | 596 | | | 10,000 | |
| Customer deposits | | | 3,450 | | | | |
| Prepaid service contract | | | 1,500 | | | — | |
| Indebtedness to related parties | | | 1,001,610 | | | 824,827 | |
| Notes payable | | | 65,000 | | | 65,000 | |
| Accrued interest payable | | | 13,300 | | | 10,102 | |
| Total current liabilities | | | 1,090,456 | | | 942,978 | |
| | | | | | | | |
| | | | | | | | |
| Shareholders’ deficit: | | | | | | | |
| Retained deficit | | | (6,204,778 | ) | | (4,964,579 | ) |
| Total shareholders’ deficit | | | (880,007 | ) | | (855,558 | ) |
| Total liabilities and shareholders’ deficit | | $ | 210,449 | | $ | 87,420 | |
| | | | | | | |
| | | | | | | | |
The accompanying notes are an integral part of these financial statements.
SIGNATURE LEISURE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
| | | For The Three Months Ended June 30, | | For The Six Months Ended June 30, | | For The Year Ended December 31, | |
| | | 2006 | | 2005 | | 2006 | | 2005 | | 2005 | |
| | | | | | | | | | | | |
| Revenue: | | | | | | | | | | | |
| Vehicle sales | | $ | 50 | | $ | | | $ | 10,340 | | $ | | | $ | 45,182 | |
| Service revenues | | | 7,036 | | | 16,469 | | | 10,575 | | | 23,784 | | | 56,450 | |
| Total revenue | | | 7,086 | | | 16,469 | | | 20,915 | | | 23,784 | | | 101,632 | |
| | | | | | | | | | | | | | | | | |
| Operating expenses: | | | | | | | | | | | | | | | | |
| Cost of sales: | | | | | | | | | | | | | | | | |
| Vehicles | | | 7,054 | | | | | | 31,077 | | | - | | | 45,001 | |
| Contract services | | | | | | 3,535 | | | 80 | | | 8,205 | | | 28,809 | |
| | | | | | | | | | | | | | | | | |
| Stock based compensation : | | | | | | | | | | | | | | | | |
| Legal services | | | 14,500 | | | 34,000 | | | 14,500 | | | 84,000 | | | 95,875 | |
| Other business consulting | | | 323,750 | | | 175,500 | | | 986,750 | | | 169,925 | | | 802,898 | |
| Commitment fee | | | | | | 15,000 | | | | | | 15,000 | | | 15,000 | |
| Officer compensation | | | | | | | | | | | | 300,000 | | | | |
| Contributed rent | | | | | | 423 | | | | | | 1,694 | | | 1,694 | |
| Selling, general and administrative | | | 132,058 | | | 89,216 | | | 225,509 | | | 338,923 | | | 723,102 | |
| Total operating expenses | | | 477,362 | | | 317,674 | | | 1,257,916 | | | 917,747 | | | 1,712,379 | |
| | | | | | | | | | | | | | | | | |
| Operating loss | | | (470,276 | ) | | (301,205 | ) | | (1,237,001 | ) | | (893,963 | ) | | (1,619,130 | ) |
| | | | | | | | | | | | | | | | | |
| Interest expense | | | (1,599 | ) | | (1,515 | ) | | (3,198 | ) | | (2,459 | ) | | (8,383 | ) |
| | | | | | | | | | | | | | | | | |
| Loss before income taxes | | | (471,875 | ) | | (302,720 | ) | | (1,240,199 | ) | | (896,422 | ) | | (1,619,130 | ) |
| | | | | | | | | | | | | | | | | |
| Provision for income taxes | | | | | | | | | | | | | | | | |
| Net loss | | $ | (471,875 | ) | $ | (302,720 | ) | $ | (1,240,199 | ) | $ | (896,422 | ) | $ | (1,619,130 | ) |
| | | | | | | | | | | | | | | | |
| Weighted average loss per share: | | | | | | | | | | | | | | | | |
| Basic and diluted loss per share | | $ | (0.00 | ) | $ | (0.01 | ) | $ | (0.01 | ) | $ | (0.04 | ) | $ | (0.03 | ) |
| Weighted average number of shares of common shares outstanding | | | 112,533,140 | | | 24,220,294 | | | 108,660,578 | | | 22,376,681 | | | 46,459,033 | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
The accompanying notes are an integral part of these financial statements.
We are subject to various risks that may materially harm our business, financial condition and results of operations. You should carefully consider the risks and uncertainties described below and the other information in this filing before deciding to purchase our common stock. If any of these risks or uncertainties actually occurs, our business, financial condition or operating results could be materially harmed. In that case, the trading price of our common stock could decline and you could lose all or part of your entire investment.
Risks Related To Our Business
We Depend On The Efforts Of Mr. Stephen W. Carnes, Who Is Our Sole Officer and Director, And Who Is Also The CEO Of Another Publicly Traded Company And, Therefore, Does Not Devote All Of His Time To Signature Leisure.
Our success largely depends on the efforts and abilities of our President, Stephen W. Carnes. Mr. Carnes is solely responsible for the execution and success of our operation. Mr. Carnes is also an officer of another publicly traded company and therefore does not devote all of his time to Signature Leisure. Because Mr. Carnes is the sole officer and director of Signature Leisure, the loss of his services would divert attention away from operational issues to find a replacement for Mr. Carnes. We do not presently maintain key-man life insurance policies on our Chief Executive Officer. To the extent that we are smaller than our competitors and have fewer resources, we may not be able to attract a replacement for Mr. Carnes. In that event we would be forced to cease operations. Mr. Carnes has no direct prior experience in operating the various businesses we intend to develop. Because Mr. Carnes is our sole officer and director, he is primarily responsible for the filing of our periodic reports. Mr. Carnes’ attention could be diverted away from the primary operation of the business in order for him to focus on keeping Signature Leisure current on its periodic reports.
Signature Leisure Has Historically Lost Money And Losses May Continue In The Future, Which May Cause Us To Curtail Operations
Since our inception, we have not been profitable and have lost money on both a cash and non-cash basis. For the years ended December 31, 2005 and December 31, 2004, we incurred net losses of $1,619,130 and $1,902,537, respectively. For the year ended December 31, 2005, we had a retained operating deficit of $4,964,579. For the six months ended June 30, 2006, we incurred a net loss of $1,240,199, and had a retained deficit of $6,204,778. We believe we will need to raise approximately $950,000 in the next 12 months to continue operations. Future losses are likely to occur, as we are dependent on spending money to pay for our operations. No assurances can be given that we will be successful in reaching or maintaining profitable operations. Accordingly, we may experience liquidity and cash flow problems. If our losses continue, our ability to operate may be severely impacted.
We Are Subject To A Working Capital Deficit, Which Means That Our Current Assets On June 30, 2006, Were Not Sufficient To Satisfy Our Current Liabilities And, Therefore, Our Ability To Continue Operations Is At Risk
Since inception, we have been subject to a working capital deficit. We had a working capital deficit of $872,957 at December 31, 2005, which means that our current liabilities exceeded our current assets on December 31, 2005 by $872,957. At June 30, 2006, we had a working capital deficit of $893,436 which means that our total liabilities exceeded our current assets by $893,436. Current assets are assets that are expected to be converted to cash within one year and, therefore, may be used to pay current liabilities as they become due. Our working capital deficit means that our current assets on December 31, 2005, and June 30, 2006, were not sufficient to satisfy all of our current liabilities on those dates. If our ongoing operations do not begin to provide sufficient profitability to offset the working capital deficit, we may have to raise capital or debt to fund the deficit or curtail future operations. However, our ability to raise capital is limited by the terms of the Standby Equity Distribution Agreement with Katalyst Capital Group. Specifically, Section 2.6 thereof prohibits us from issuing any equity for a price below the then-current market price of our common stock, as quoted by Bloomberg, LP, during the commitment period for the equity line.
Management Recognizes That We Must Raise Additional Financing To Fund Our Ongoing Operations And Implement Our Business Plan Or We Could Be Forced To Curtail Or Cease Operations
It is imperative that we obtain debt and/or equity financing to implement our business plan and to finance ongoing operations. There can be no assurance that any new capital will be available or that adequate funds will be sufficient for our operations, whether from financial markets, or that other arrangements will be available when needed or on terms satisfactory
to our management. Our failure to obtain adequate additional financing may require us to delay, curtail or scale back some or all of our operations and may hinder our ability to expand our business. Any additional financing may involve dilution to our then-existing shareholders, which could result in a decrease in the price of our shares.
Currently, we are dependent upon external financing to fund our operations. Our financing needs are expected to be provided, in large part, by the Standby Equity Distribution Agreement. The amount of each advance under the Standby Equity Distribution Agreement is subject to a maximum amount equal to $200,000. Because of this maximum advance restriction, we may not be able to access sufficient funds when needed. If the market price of our shares of common stock declines, we would be required to issue more shares of common stock in order to draw down the same dollar amount of an advance than if our stock price were higher.
Signature Leisure has the ability to use the funds it receives under the Standby Equity Distribution Agreement to make acquisitions. Under his employment agreement, Mr. Carnes is entitled to receive an annual salary of $250,000 and a bonus of $150,000 for each acquisition made by Signature Leisure regardless of the value of the company being acquired. These bonuses may be funded from the funds Signature Leisure receives under the Standby Equity Distribution Agreement. As of September 19, 2006, we owe Mr. Carnes approximately $339,100.14 in total accrued compensation, which consists of $187,500.14 in accrued salary and $125,000 in accrued bonuses. Mr. Carnes is also owed an accrued automobile allowance of $26,600.
We Have Been The Subject of a Going Concern Opinion By Our Independent Auditors, Which Has Raised Substantial Doubt As To Our Ability To Continue As A Going Concern
Our consolidated financial statements have been prepared assuming we will continue as a going concern. Our net loss was $1,619,130 for the fiscal year ended December 31, 2005, and $1,240,199 for the six months ended June 30, 2006. Our retained deficit was $4,964,579 at December 31, 2005, and $5,742,824 for the six months ended June 30, 2006. These factors, among others, raise substantial doubt about our ability to continue as a going concern. Assurances cannot be given that adequate financing can be obtained to meet our capital needs. If we are unable to generate profits and unable to continue to obtain financing to meet our working capital requirements, we may have to curtail our business sharply or cease operations altogether. Our continuation as a going concern is dependent upon our ability to generate sufficient cash flow to meet our obligations on a timely basis, to retain our current financing, to obtain additional financing, and, ultimately, to attain profitability. Should any of these events not occur, the accompanying financial statements will be adversely effected and we may have to cease operations.
Signature Leisure Has Entered Into An Employment Agreement With Its CEO And Sole Director, Which Presents A Conflict Of Interest Regarding The Approval Of The Terms Of Such Employment Agreement
Mr. Carnes is the sole officer and director of Signature Leisure. As our sole director, Mr. Carnes is the only person responsible for approving his employment agreement with us. As such Mr. Carnes may approve any salary, or increase in salary, he believes he is entitled to receive without having to seek the approval of any other director of Signature Leisure. Such a position presents a conflict of interest. Under his employment agreement, Mr. Carnes is entitled to receive an annual salary of $250,000 and a bonus of $150,000 for each acquisition made by Signature Leisure regardless of the value of the Company being acquired. These bonuses may be funded from the funds Signature Leisure receives under the Standby Equity Distribution Agreement. Our payment to Mr. Carnes of $450,000 in accrued compensation was issued in stock at a 25% discount, and was worth $600,000, based on the then-current market price. On April 28, 2005, Signature Leisure issued 50,000,000 shares of common stock to Mr. Carnes. The stock was issued at a 50% discount to the market for a payment of $600,000 of salary.
Our Common Stock Has A Low Trading Volume, Which May Affect Our Shareholders’ Ability To Sell Shares Of Our Common Stock At A Time When Katalyst Capital Group Is Selling Shares Into The Market Resulting In A Loss of Investment To Our Shareholders
Prior to this filing, there has been a limited public market for our common stock and there can be no assurance that a more active trading market for our common stock will develop. Our current average daily trading volume for our common stock for the 30-day period in September was 1,230,754 shares. An absence of an active trading market could adversely affect our shareholders’ ability to sell our common stock in short time periods, or possibly at all. Our common stock has experienced, and is likely to experience in the future, significant price and volume fluctuations, which could adversely affect the market price of our common stock without regard to our operating performance. These factors may cause short sellers to enter the market from time to time in the belief that we will have poor results in the future. We cannot predict the actions of
market participants and, therefore, can offer no assurances that the market for our stock will be stable or appreciate over time. The factors may negatively impact shareholders’ ability to sell shares of our common stock.
As a result of the evolving nature of the markets in which we compete, as well as the current nature of the public markets and our current financial condition, we believe that our operating results may fluctuate materially, as a result of which quarter-to-quarter comparisons of our results of operations may not be meaningful. If in some future quarter, whether as a result of such fluctuations or otherwise, our results of operations fall below the expectations of investors, the trading price of our common stock would likely be materially and adversely affected. You should not rely on our result in the interim period as an indication of our future performance. Additionally, our quarterly results of operations may fluctuate significantly in the future as a result of a variety of factors, many of which are outside our control.
If we fail to manage our growth effectively, our business, financial condition or operating results could be materially harmed, and our stock price may decline.
Risks Related To This Offering
Future Sales By Our Stockholders May Negatively Affect Our Stock Price And Our Ability To Raise Funds In New Stock Offerings
Sales of our common stock in the public market following this Offering could lower the market price of our common stock. Sales may also make it more difficult for us to sell equity securities or equity-related securities in the future at a time and price that our management deems acceptable or at all. The sale of shares to Katalyst Capital Group under the Standby Equity Distribution Agreement will likely cause the market price of our stock to decline which will require us to issue increasing numbers of shares to Katalyst Capital Group. Of the 152,533,218 shares of common stock outstanding as of September 19, 2006, 65,769,271 shares are, or will be, freely tradable without restriction, unless held by our “affiliates.” The remaining 86,763,947of common stock, which will be held by existing stockholders, including the officer and director, are “restricted securities” and may be resold in the public market only if registered or pursuant to an exemption from registration. Some of these shares may be resold under Rule 144.
Existing Shareholders Will Experience Significant Dilution From Our Sale Of Shares Under The Standby Equity Distribution Agreement
The sale of shares pursuant to the Standby Equity Distribution Agreement will have a dilutive impact on our stockholders. For example, if the Offering occurred on September 19, 2006 at an assumed Offering price of $0.02475 per share, the new stockholders would experience an immediate dilution in the net tangible book value of $0.0177 per share. As a result the market price of our common stock could decline. In addition, the lower our stock price, the more shares of common stock we will have to issue in order to receive the maximum cash advance allowed under the Standby Equity Distribution Agreement. If our stock price is lower, then our existing stockholders would experience greater dilution.
Katalyst Capital Group Will Pay Less Than The Then-Prevailing Market Price And Will Have An Incentive To Sell Its Shares, Which May Cause The Price Of Our Common Stock To Decline
Katalyst Capital Group will purchase shares of our common stock pursuant to the Standby Equity Distribution Agreement at a purchase price that is less than the then-prevailing market price of our common stock. Katalyst Capital Group will have an incentive to immediately sell any shares of our common stock that it purchases pursuant to the Standby Equity Distribution Agreement to realize a gain on the difference between the purchase price and the then-prevailing market price of our common stock. To the extent Katalyst Capital Group sells its common stock, the common stock price may decrease due to the additional shares in the market. This could allow Katalyst Capital Group to sell greater amounts of common stock, the sales of which would further depress the stock price.
The Selling Stockholder Intends To Sell Their Shares Of Common Stock In The Market, Which Sales May Cause Our Stock Price To Decline
The selling stockholder intends to sell in the public market 50,000,000 shares of common stock being registered in this Offering. That means that up to 50,000,000 shares may be sold pursuant to this Registration Statement. Such sales may cause our stock price to decline.
The Sale Of Our Stock Under The Standby Equity Distribution Agreement Could Encourage Short Sales By Third Parties, Which Could Contribute To The Future Decline Of Our Stock Price
In many circumstances the provision of financing based on draw-downs under equity lines by companies that are traded on the OTCBB has the potential to cause a significant downward pressure on the price of common stock. This is especially the case if the shares being placed into the market exceed the market’s ability to take up the increased stock or if Signature Leisure has not performed in such a manner to show that the equity funds raised will be used to grow Signature Leisure. Such an event could place further downward pressure on the price of common stock. Under the terms of the Standby Equity Distribution Agreement, we may request numerous cash advances. Even if we use the cash advances to grow our revenues and profits or invest in assets that are materially beneficial to us, the opportunity exists for short sellers and others to contribute to the future decline of our stock price. If there are significant short sales of stock, the price decline that would result from this activity will cause the share price to decline more so which in turn may cause long holders of the stock to sell their shares thereby contributing to sales of stock in the market. If there is an imbalance on the sell side of the market for our stock, the price will likely decline.
Our Common Stock Is Deemed To Be “Penny Stock,” Which May Make It More Difficult For Investors To Sell Their Shares Due To Suitability Requirements
Our common stock is deemed to be “penny stock” as that term is defined in Rule 3a51-1 promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Penny stocks are stock:
| | · | with a price of less than $5.00 per share; |
| | · | that are not traded on a “recognized” national exchange; |
| | · | whose prices are not quoted on the NASDAQ automated quotation system (NASDAQ-listed stock must still have a price of not less than $5.00 per share); or |
| | · | stock in issuers with net tangible assets less than $2,000,000 (if the issuer has been in continuous operation for at least three years) or $5,000,000 (if in continuous operation for less than three years), or with average revenues of less than $6,000,000 for the last three years. |
Broker-dealers dealing in penny stocks are required to provide potential investors with a document disclosing the risks of penny stocks. Moreover, broker-dealers are required to determine whether an investment in a penny stock is a suitable investment for a prospective investor. These requirements may reduce the potential market for our common stock by reducing the number of potential investors. This may make it more difficult for investors in our common stock to sell shares to third parties or to otherwise dispose of them. This could cause our stock price to decline.
We May Not Be Able To Access Sufficient Funds Under The Standby Equity Distribution Agreement When Needed
We are dependent on external financing to fund our operations. Our financing needs are expected to be substantially provided from the Standby Equity Distribution Agreement we have signed with Katalyst Capital Group. No assurances can be given that such financing will be available in sufficient amounts or at all when needed, in part, because we are limited to a maximum cash advance of $200,000 during any seven trading day period. Based on an assumed market price of $0.02475 per share, we will be able to draw a total amount of $1,237,500 in gross proceeds under the Standby Equity Distribution Agreement. This amount will utilize all of the 50,000,000 shares of our common stock being registered for the Standby Equity Distribution Agreement under the accompanying Registration Statement.
We May Not Be Able To Obtain A Cash Advance Under The Standby Equity Distribution Agreement If Katalyst Capital Group Holds More Than 9.9% Of Our Common Stock
In the event Katalyst Capital Group holds more than 9.9% of our then-outstanding common stock, we will be unable to obtain a cash advance under the Standby Equity Distribution Agreement. A possibility exists that Katalyst Capital Group may own more than 9.9% of our outstanding common stock at a time when we would otherwise plan to make an advance under the Standby Equity Distribution Agreement. In that event, if we are unable to obtain additional external funding or generate revenue from the sale of our products, we could be forced to curtail or cease our operations. Pursuant to the Standby Equity Distribution Agreement, Katalyst Capital Group may not hold more than 9.9% of our common stock at one time;
however, this restriction does not prevent Katalyst Capital Group from selling some of its holdings and then receiving additional shares.
Information included or incorporated by reference in this Prospectus may contain forward-looking statements. This information may involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from the future results, performance or achievements expressed or implied by any forward-looking statements. Forward-looking statements, which involve assumptions and describe our future plans, strategies and expectations, are generally identifiable by use of the words “may,” “will,” “should,” “expect,” “anticipate,” “estimate,” “believe,” “intend” or “project” or the negative of these words or other variations on these words or comparable terminology.
This Prospectus contains forward-looking statements, including statements regarding, among other things, (a) our projected sales and profitability, (b) our growth strategies, (c) anticipated trends in our industry, (d) our future financing plans and (e) our anticipated needs for working capital. These statements may be found under “Management’s Discussion and Analysis” and “Description of Business,” as well as in this Prospectus generally. Actual events or results may differ materially from those discussed in forward-looking statements as a result of various factors, including, without limitation, the risks outlined under “Risk Factors” and matters described in this Prospectus generally. In light of these risks and uncertainties, there can be no assurance that the forward-looking statements contained in this Prospectus will in fact occur.
The following table presents information regarding Katalyst Capital Group, the only selling stockholder selling stock under the accompanying Registration Statement. The selling stockholder is the entity who has assisted in or provided financing to Signature Leisure. A description of the selling stockholder’s relationship to Signature Leisure and how the selling stockholder acquired the stocks to be sold in this Offering is detailed in the information immediately following this table.
Selling Stockholder | | Shares Beneficially Owned Before Offering | | Percentage of Outstanding Shares Beneficially Owned Before Offering (1) | | Shares to be Acquired under the Standby Equity Distribution Agreement | | Percentage of Outstanding Shares to Be Acquired under the Standby Equity Distribution Agreement | | Shares to be Sold in the Offering(2) | | Percentage of Shares Beneficially Owned After Offering (1) | |
Shares Acquired in Financing Transactions with Signature Leisure | |
| Katalyst Capital Group, Ltd. | | | | | | | % | | 50,000,000 | | | 32.78 | % | | 50,000,000 | | | 0 | % |
Total | | | 1,000,000 | | | 1.01 | % | | 50,000,000 | | | 32.79 | % | | 50,000,000 | | | 0 | % |
| | | | | | | | | | | | | | | | | | | | |
| (1) | Applicable percentage of ownership is based on 152,533,218 shares of common stock outstanding as of September 19, 2006, together with securities exercisable or convertible into shares of common stock within 60 days of September 19, 2006, for each stockholder. Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities. Shares of common stock subject to securities exercisable or convertible into shares of common stock that are currently exercisable or exercisable within 60 days of September 19, 2006 are deemed to be beneficially owned by the person holding such securities for the purpose of computing the percentage of ownership of such person, but are not treated as outstanding for the purpose of computing the percentage ownership of any other person. Note that affiliates are subject to Rule 144 and Insider trading regulations - percentage computation is for form purposes only. |
| (2) | Includes 50,000,000 shares of common stock to be acquired by Katalyst Capital Group under the Standby Equity Distribution Agreement. |
The following information contains a description of our selling stockholder’s relationship to Signature Leisure and how the selling stockholder acquired the stock to be sold in this offering is detailed below. The selling stockholder has not held a position or office, or had any other material relationship, with Signature Leisure, except as follows:
Stock Acquired In Financing Transactions With Signature Leisure
Katalyst Capital Group. Katalyst Capital Group is the investor under the Standby Equity Distribution Agreement. All investment decisions of, and control of, Katalyst Capital Group are held by Jason Tribeca. Katalyst Capital Group acquired all of the shares being registered in this Offering in financing transactions with Signature Leisure. Those transactions are explained below.
Standby Equity Distribution Agreement. On January 20, 2005, we entered into the Standby Equity Distribution Agreement with Katalyst Capital Group. Under the Standby Equity Distribution Agreement, Signature Leisure may issue and sell to Katalyst Capital Group common stock for a total purchase price of up to $5,000,000. The purchase price for the shares is equal to 99% of the market price, which is defined in the Standby Equity Distribution Agreement as the lowest volume weighted-average price of the common stock during the five trading days following the notice date. The amount of each advance is subject to an aggregate maximum advance amount of $200,000 within seven trading days. In connection with the Standby Equity Distribution Agreement, Katalyst Capital Group received 1,000,000 shares of our common stock as a one-time commitment fee. Katalyst Capital Group is entitled to retain a fee of 1% of each cash advance.
The commitment amount of the Standby Equity Distribution Agreement is $5,000,000. In connection with the Standby Equity Distribution Agreement, we filed the 2005 Registration Statement registering 29,868,360 shares of our common stock on behalf of the selling stockholders, which included Katalyst Capital Group, on whose behalf we registered 28,868,360 shares of common stock under the Standby Equity Distribution Agreement and 1,000,000 shares of common stock received as a one-time commitment fee under that certain Standby Equity Distribution Agreement. The 2005 Registration Statement was declared effective on June 9, 2006. As of September 19, 2006, the Company had received $592,719 of gross proceeds since the 2005 Registration Statement was declared effective and issued 13,260,925 shares to
Katalyst Capital Group under the Standby Equity Distribution Agreement. As of September 19, 2006, the remaining gross proceeds that we may receive under the Standby Equity Distribution Agreement are $4,407,281.
There are certain risks related to sales by Katalyst Capital Group, including:
| | · | The outstanding shares will be issued based on discount to the market rate. As a result, the lower the stock price around the time Katalyst Capital Group is issued shares, the greater likelihood that Katalyst Capital Group receives more shares. |
| | · | To the extent Katalyst Capital Group sells its common stock, the common stock price may decrease due to the additional shares in the market. This could allow Katalyst Capital Group to sell greater amounts of common stock, the sales of which would further depress the stock price. |
| | · | The significant downward pressure on the price of the common stock as Katalyst Capital Group sells material amounts of common stocks could encourage short sales by third parties. This could place further downward pressure on the price of the common stock. |
RECEIVED FROM DRAW-DOWN UNDER THE STANDBY EQUITY DISTRIBUTION AGREEMENT
This Prospectus relates to shares of our common stock that may be offered and sold from time to time by Katalyst Capital Group, our only stockholder selling stock under the accompanying Registration Statement. There will be no proceeds to us from the sale of shares of common stock in this offering. However, we will receive proceeds from the sale of 50,000,000 shares of common stock to Katalyst Capital Group under the Standby Equity Distribution Agreement. The purchase price of the shares purchased under the Standby Equity Distribution Agreement will be equal to 99% of the market price which is defined as the lowest volume weighted-average price of our common stock on the OTCBB for the five days immediately following the notice date. As an additional fee we will pay Katalyst Capital Group 1% of each cash advance we receive. In 2005, we paid Katalyst Capital Group a one-time escrow fee of $5,000 escrow fee.
Pursuant to the Standby Equity Distribution Agreement, we cannot receive a cash advance for more than $200,000 every seven trading days or more than $5,000,000 over 24 months. We are registering 50,000,000 shares of common stock under the accompanying Registration Statement in connection with the Standby Equity Distribution Agreement. Based on a recent stock price of $0.0250, the shares we are registering in this Registration Statement would be sufficient to allow us to draw a total amount of $1,237,500 in gross proceeds under the Standby Equity Distribution Agreement, which as of September 19, 2006, equal to $4,407,281.
For illustrative purposes only, we have set forth below our intended use of proceeds for the range of net proceeds indicated below to be received under the Standby Equity Distribution Agreement. The table below takes into account the 1% discount to the stock market price, estimated offering expenses of $85,000, as explained in the footnote, and a 1% retainer payable to Katalyst Capital Group under the Standby Equity Distribution Agreement. The figures below are estimates only, and may be changed due to various factors, including the stock price and the timing of the receipt of the proceeds.
Gross proceeds | | $ | 1,000,000 | |
| | | | | |
Net proceeds | | $ | 895,000 | |
| | | | | |
No. of shares issued required under the Standby Equity Distribution Agreement at an assumed offering price of $0.02475 to draw down the entire gross proceed | | | 40,404,040 | |
| | | | | |
USE OF PROCEEDS: | | | AMOUNT | |
| Business Development | | $ | 300,000 | |
| Infrastructure and Improvements | | | 100,000 | |
| Operating Capital | | | | |
| Payment of Debts | | | 100,000 | |
| Increase Vehicle Inventory | | | 100,000 | |
| Other Operating Expense | | | 295,500 | |
Total | | $ | 895,000 | |
| | | | | |
| (1) | The $85,000 in expenses consists of the following: an SEC registration fee of $134, printing expenses of $2,500, accounting fees of $15,000, legal fees of $50,000 and miscellaneous expenses of $19,366. |
The use of the proceeds we will receive under the Standby Equity Distribution Agreement has been disclosed in further detail below:
Business Development - The proceeds allotted for business development will be used for marketing materials and services for Signature Auto, Parker Productions, and E Cubed Technologies. Additionally, funds will be allocated to pay for fees and training expenses associated with the development of additional corporate partnerships for E Cubed Technologies, Inc.
Training Expenses - Expenses associated with the development of additional corporate partnerships simply means that as E Cubed Technologies progresses and takes on new products and types of products, whether by the direct need of an existing client, desire to broaden the client base by expanding the potential Offerings, etc. there will be training and costs
associated with the new product lines. Infrastructure improvements will affect the business markedly. Improved phone systems and messaging applications will help staff members communicate more effectively. Automated Customer Resource Management packages would ease the workflow of the business by making client contact much more reliable and simple for management and sales staff.
Infrastructure and improvements - The proceeds allotted for infrastructure and improvements will be used for computer and communications equipment and software to make more efficient and improve access to our business applications and communications. The initial phase would cover software and hardware additions and upgrades to improve control, configuration and reliability of both internal and external messaging and communication as well as business applications and data.
Operating Capital - The proceeds allocated for operating capital will be used to increase vehicle inventory for Signature Auto and to pay down our current debts. Those debts include rent, wages, attorney fees and day-to-day expenses for utilities and office supplies.
We may use proceeds that we receive under the Standby Equity Distribution Agreement to pay any accrued salaries we owe to our Chief Executive Officer, Mr. Carnes. We have not determined how much, if any, of these proceeds will be used for that purpose. Mr. Carnes, as the sole officer and director, will make the decision regarding how much of the proceeds will be used to pay himself this accrued amount. As of September 19, 2006, we owe Mr. Carnes approximately $339,100 in accrued compensation. This compensation consists of accrued salaries of $187,500 and accrued bonuses of $125,000. Additionally, we owe Mr. Carnes an accrued automobile allowance of $26,600.
Our net tangible book value as of June 30, 2006 was a deficit of $(16,850) or $0.001 per share of common stock. Net tangible book value per share is determined by dividing out tangible book value (total tangible assets less total liabilities) by the number of outstanding shares of our common stock. Since this Offering is being made solely by the selling stockholder and none of the proceeds will be paid to Signature Leisure, our net tangible book value will be unaffected by this Offering. Our net tangible book value and our net tangible book value per share, however, will be impacted by the common stock to be issued under the Standby Equity Distribution Agreement. The amount of dilution will depend on the offering price and number of shares to be issued under the Standby Equity Distribution Agreement. The following example shows the dilution to new investors at an assumed offering price of $0.02475 per share, which is in the range of the recent share price.
If we assume that we had issued 50,000,000 common stock under the Standby Equity Distribution Agreement (i.e., the number of shares registered in this Offering under the Standby Equity Distribution Agreement) at an assumed offering price of $0.02475 per share, less retention fees equal to 1% of the advances we will receive from Katalyst Capital Group and offering expenses of $85,000, our net tangible book value as of June 30, 2006 would have been $1,156,975 or $0.0070 per share. Katalyst Capital Group would receive a 1% discount to the per-share price on the purchase of 50,000,000 shares of common stock. Such an offering would represent an immediate increase in the net tangible book value to existing stockholders of $0.0069 per share and an immediate dilution to new stockholders of $0.0177 per share. The following table illustrates the per share dilution:
| Assumed Offering price per share | | | | | $ | 0.02475 | |
| Net tangible book value per share before this Offering | | $ | 0.0001 | | | | |
| Increase attributable to new investors | | $ | 0.0069 | | | | |
| Net tangible book value per share after this Offering | | | | | $ | 0.0070 | |
| Dilution per share to new stockholders | | | | | $ | 0.0177 | |
| | | | | | | | |
The dilution tables set forth on this page are used to show the dilution that will result to our shareholders caused by our draw-downs under the Standby Equity Distribution Agreement.
In order to give prospective investors an idea of the dilution per share they may experience, we have prepared the following table showing the dilution per share at various assumed market prices:
ASSUMED OFFERING PRICE | | NO. OF SHARES TO BE ISSUED | | DILUTION PER SHARE TO NEW INVESTORS | |
| $0.02475 | | | 50,000,000(1) | | $ | 0.0177 | |
| $0.0186 | | | 50,000,000 | | $ | 0.0134 | |
| $0.0124 | | | 50,000,000 | | $ | 0.0091 | |
| $0.0062 | | | 50,000,000 | | $ | 0.0047 | |
| | | | | | | |
| (1) | This represents the maximum number of shares of common stock that are being registered under the Standby Equity Distribution Agreement at this time. |
Summary
On January 20, 2005, we entered into a Standby Equity Distribution Agreement with Katalyst Capital Group, a private limited partnership. Pursuant to the Standby Equity Distribution Agreement, we may, at our discretion, periodically sell to Katalyst Capital Group shares of common stock for a total purchase price of up to $5,000,000. For each share of common stock purchased under the Standby Equity Distribution Agreement, Katalyst Capital Group will pay us 99% of the lowest volume weighted-average price of our common stock on the OTCBB or other principal market on which our common stock is traded for the five days immediately following the notice date. The number of shares purchased by Katalyst Capital Group for each cash advance is determined by dividing the amount of each advance by the purchase price for the shares of common stock. Further, Katalyst Capital Group will retain 1% of each cash advance we receive under the Standby Equity Distribution Agreement. In addition, we engaged Spencer-Clarke, an unaffiliated registered broker-dealer, as our placement agent in connection with the Standby Equity Distribution Agreement. For its services, Spencer-Clarke received $10,000. The effectiveness of the sale of the shares under the Standby Equity Distribution Agreement is conditioned upon us registering the shares of common stock with the SEC and obtaining all necessary permits or qualifying for exemptions under applicable state laws. The costs associated with this registration will be borne by us. There are no other significant closing conditions to draws under the equity line. The commitment amount of the Standby Equity Distribution Agreement is $5,000,000.
In connection with the Standby Equity Distribution Agreement, we filed the 2005 Registration Statement registering 29,868,360 shares of our common stock on behalf of the selling stockholders. On behalf of Katalyst Capital Group, we registered 28,868,360 shares of common stock under the Standby Equity Distribution Agreement and 1,000,000 shares of common stock received from us on October 26, 2004 as a one-time commitment fee under that certain Standby Equity Distribution Agreement, dated October 26, 2004. The 2005 Registration Statement was declared effective on June 9, 2006. As of September 19, 2006, we received $592,719 of gross proceeds since the 2005 Registration Statement was declared effective and issued 13,260,925 shares to Katalyst Capital Group under the Standby Equity Distribution Agreement. As of September 19, 2006, the remaining gross proceeds that we may receive under the Standby Equity Distribution Agreement are $4,407,281.
Standby Equity Distribution Agreement Explained
Pursuant to the Standby Equity Distribution Agreement, we may periodically sell shares of common stock to Katalyst Capital Group to raise capital to fund our working capital needs. Notwithstanding the foregoing, our ability to raise capital is limited by the terms of the Standby Equity Distribution Agreement with Katalyst Capital Corp. Specifically, Section 2.6 thereof prohibits us from issuing any equity for a price below the then-current market price of our common stock, as quoted by Bloomberg, LP, during the commitment period for the Standby Equity Distribution Agreement. The periodic sale of shares is known as an advance. We may request an advance every seven trading days. A closing will be held the first trading day after the pricing period at which time we will deliver shares of common stock and Katalyst Capital Group will pay the advance amount. We may request cash advances under the Standby Equity Distribution Agreement once the underlying shares are registered with the SEC. Thereafter, we may continue to request cash advances until Katalyst Capital Group has advanced us a total amount of $5,000,000 or June 9, 2008, whichever occurs first.
The amount of each advance is subject to a maximum amount of $200,000, and we may not submit a request for an advance within seven trading days of a prior advance. The amount available under the Standby Equity Distribution Agreement is not dependent on the price or volume of our common stock. Our ability to request advances is conditioned upon us registering the shares of common stock with the SEC. In addition, we may not request cash advances if the shares to be issued in connection with such advances would result in Katalyst Capital Group owning more than 9.9% of our outstanding common stock. We would be permitted to make draw-downs under Standby Equity Distribution Agreement only so long as Katalyst Capital Group’s beneficial ownership of our common stock remains lower than 9.9% and, therefore, a possibility exists that Katalyst Capital Group may own more than 9.9% of our outstanding common stock at a time when we would otherwise plan to make an advance under the Standby Equity Distribution Agreement.
We do not have any agreements with Katalyst Capital Group regarding the distribution of such stock, although Katalyst Capital Group has indicated that it intends to promptly sell any stock received under the Standby Equity Distribution Agreement.
We cannot predict the actual number of shares of common stock that will be issued pursuant to the Standby Equity Distribution Agreement, in part, because the purchase price of the shares will fluctuate based on prevailing market conditions and we have not determined the total amount of advances we intend to draw. Nonetheless, we can estimate the number of shares of our common stock that will be issued using certain assumptions. We are registering 50,000,000 shares of common stock for sale under the Standby Equity Distribution Agreement. Assuming we issued the number of shares of common stock being registered in the accompanying Registration Statement at an assumed offering price of $0.02475 per share, we would issue 50,000,000 shares of common stock to Katalyst Capital Group for net proceeds of $1,140,124. These shares would represent 32.77% of our outstanding common stock upon issuance.
Proceeds used under the Standby Equity Distribution Agreement will be used in the manner set forth in the “Use of Proceeds” section of this Prospectus. We cannot predict the total amount of proceeds to be raised in this transaction because we have not determined the total amount of the advances we intend to receive. Katalyst Capital Group has the ability to permanently terminate its obligation to purchase shares of our common stock under the Standby Equity Distribution Agreement if there shall occur any stop order or suspension of the effectiveness of the accompanying Registration Statement for an aggregate of fifty (50) trading days other than due to acts by Katalyst Capital Group or if we fail materially to comply with certain terms of the Standby Equity Distribution Agreement, which remain unsecured for thirty (30) days after notice from Katalyst Capital Group.
All fees and expenses under the Standby Equity Distribution Agreement will be borne by us. We expect to incur expenses of approximately $85,000 in connection with this registration, consisting primarily of professional fees. In connection with the Standby Equity Distribution Agreement, on January 20, 2005, Katalyst Capital Group received 1,000,000 shares of common stock as a one-time commitment fee.
Katalyst Capital Group, our only selling stockholder, has advised us that the sale or distribution of our common stock owned by them may be effected by them as principals or through one or more underwriters, brokers, dealers or agents from time to time in one or more transactions (which may involve crosses or block transactions) (i) on the over-the-counter market or on any other market in which the price of our shares of common stock are quoted or (ii) in transactions otherwise than in the over-the-counter market or in any other market on which the price of our shares of common stock are quoted. Any of such transactions may be effected at market prices prevailing at the time of sale, at prices related to such prevailing market prices, at varying prices determined at the time of sale or at negotiated or fixed prices, in each case as determined by Katalyst Capital Group or by agreement between Katalyst Capital Group and underwriters, brokers, dealers or agents, or purchasers. If Katalyst Capital Group effects such transactions by selling their shares of common stock to or through underwriters, brokers, dealers or agents, such underwriters, brokers, dealers or agents may receive compensation in the form of discounts, concessions or commissions from Katalyst Capital Group or commissions from purchasers of common stock for whom they may act as agent (which discounts, concessions or commissions as to particular underwriters, brokers, dealers or agents may be in excess of those customary in the types of transactions involved).
Katalyst Capital Group is an “underwriter” within the meaning of the 1933 Act in connection with the sale of common stock under the Standby Equity Distribution Agreement. Katalyst Capital Group will pay us 99% of the lowest volume weighted-average price of our common stock on the OTCBB or other principal trading market on which our common stock is traded for the five days immediately following our request for an advance. In addition, Katalyst Capital Group will retain 1% of the proceeds received by us under the Standby Equity Distribution Agreement, and received 1,000,000 of our common stock as a one-time commitment fee. The 1% retainage and the commitment fee are underwriting discounts. In addition, we engaged Spencer-Clarke, an unaffiliated registered broker-dealer, to act as our placement agent in connection with the Standby Equity Distribution Agreement. Under the Standby Equity Distribution Agreement Katalyst has represented to us and agreed not to engage in any short-selling of our stock and that its affiliates also will not engage in any short selling of our stock.
We will pay all the expenses incident to the registration, Offering and sale of the shares of common stock to the public other than commissions, fees and discounts of underwriters, brokers, dealers and agents. If any of these other expenses exists, we expect the selling stockholder to pay these expenses. We have agreed to indemnify Katalyst Capital Group and its controlling persons against certain liabilities, including liabilities under the 1933 Act. We estimate that the expenses of the Offering to be borne by us will be approximately $85,000. The Offering expenses consist of: an SEC registration fee of $134, printing expenses of $2,500, accounting fees of $15,000, legal fees of $50,000 and miscellaneous expenses of $19,366. We will not receive any proceeds from the sale of any of the shares of common stock by the selling stockholder. We will, however, receive proceeds from the sale of common stock under the Standby Equity Distribution Agreement resulting from draw-downs by the Company.
Katalyst Capital Group is a corporation based in Turks and Caicos, BWI. Katalyst Capital Group is in the business of investing in and financing public and private companies. Katalyst Capital Group does not intend to make a market in our stock or to otherwise engage in stabilizing or other transactions intended to help support the stock price. Prospective investors should take these factors into consideration before purchasing our common stock.
Under the securities laws of certain states, the shares of common stock may be sold in such states only through registered or licensed brokers or dealers. Katalyst Capital Group is advised to ensure that any underwriters, brokers, dealers or agents effecting transactions on behalf of Katalyst Capital Group are registered to sell securities in all 50 states. In addition, in certain states the shares of common stock may not be sold unless the shares have been registered or qualified for sale in such state or an exemption from registration or qualification is available and we have complied with them.
As of September 19, 2006, the remaining gross proceeds that we may receive under the Standby Equity Distribution Agreement are $4,407,281. However, the amount of net proceeds that we may receive under the Standby Equity Distribution Agreement depends on our stock price at the time of requesting advances thereunder. For example, if our stock price declines, we would be required to issue a greater number of shares under the Standby Equity Distribution Agreement, otherwise, there will be a decrease in the amount of proceeds we may receive under the Standby Equity Distribution Agreement. This inverse relationship is demonstrated by the following tables, which show the net cash to be received by the Company and the number of shares to be issued under the Standby Equity Distribution Agreement. For example, based on the recent stock price of $0.0250 on September 19, 2006, the table below illustrates the changes in gross and net proceeds at 25%, 50% and 75% discounts to the recent price.
| | | | | | | | | | |
| Market Price: | | | 0.02500 | | | 0.01875 | | | 0.01250 | | | 0.00625 | |
| Assumed Offering: | | | 0.02475 | | | 0.18560 | | | 0.01237 | | | 0.00618 | |
Number of Shares(1): | | | 50,000,000 | | | 50,000,000 | | | 50,000,000 | | | 50,000,000 | |
Total Outstanding (2): | | | 202,533,218 | | | 202,533,218 | | | 202,533,218 | | | 202,533,218 | |
Percent Outstanding (3): | | | 24.68 | % | | 24.68 | % | | 24.68 | % | | 24.68 | % |
| Gross Proceeds to us: | | | 1,237,500 | | | 928,125 | | | 618,750 | | | 309,375 | |
| Net Proceeds to us: | | | 1,140,125 | | | 833,844 | | | 527,563 | | | 221,281 | |
| | | | | | | | | | | | | | |
| (1) | Represents the number of shares of common stock to be issued to Katalyst Capital Group under the Standby Equity Distribution Agreement. |
| (2) | Represents the total number of shares of common stock outstanding after the issuance of 50,000,000 shares of common stock to Katalyst Capital Group, under the Standby Equity Distribution Agreement, as registered hereunder. |
| (3) | Represents the shares of common stock to be issued as a percentage of the total number shares outstanding |
Katalyst Capital Group should be aware that the anti-manipulation provisions of Regulation M under the Securities Exchange will apply to purchases and sales of shares of common stock by Katalyst Capital Group, and that there are restrictions on market-making activities by persons engaged in the distribution of the shares. Under Regulation M, Katalyst Capital Group or their agents may not bid for, purchase, or attempt to induce any person to bid for or purchase, shares of our common stock while Katalyst Capital Group is distributing shares covered by this Prospectus. Katalyst Capital Group is advised that if a particular offer of common stock is to be made on terms constituting a material change from the information set forth above with respect to the Plan of Distribution, then, to the extent required, a post-effective amendment to the accompanying Registration Statement must be filed with the SEC.
Overview
The current business of Signature Leisure includes the operations of Parker Productions, a modeling and event staffing business, Signature Auto, an independent dealer in motor vehicles, and E Cubed Technologies, a computer and computer network hardware, software, and services consulting firm. Our primary focus of operations for the next 12-month period will be E Cubed Technologies’ and Parker Productions’ operations, as these are our currently functioning entities that are expected to generate revenues. We cannot give any assurance that Signature Leisure will be able to generate a profit. In the event that Signature Leisure does generate a profit it will use those profits to maintain and grow our operations. To date we have not generated profits from our operations.
Our focus of operations for the next 12-month period will be to develop our business segments focusing on growing operations in each entity to generate revenues. We intend to use profits from operations to maintain and grow each business segment. We will continue our efforts to raise additional capital to expanded operations. To date we have not generated any significant profits from operations in any of our business segments.
Signature Auto
During the quarter ended September 30, 2005, we restarted the pre-owned vehicle sales dealership in the form of wholesale sales. At present Signature Auto is not retailing vehicles, which is to say that Signature Auto is not holding inventory for the express purpose of selling to the retail public. Signature Auto intends to purchase inventory with the sole purpose of wholesaling the vehicles to other dealers. Signature Auto is currently evaluating the present market for pre-owned vehicle sales in an effort to determine where to best position the Company. As of June 2006, Signature Auto had no vehicles in inventory and experienced significant losses on the last two vehicles sold from our inventory.
Parker Productions
Parker Productions is being developed as a modeling and event staffing business. Parker Productions intends to provide customers with two basic forms of service. The first type of service intends to provide staff (models) for area conventions. Such type of services would include providing staff members to assist in managing the Company’s booth at a convention. The staff member would assist the client with visitors to the client’s booth. The second form of service is in the form of beverage promotions. Such promotions take place in area bars, in which Parker Productions staff assist the client to gain product awareness from the bar patrons. Parker Productions continues to attempt to build its list of clients. During the six month period ended June 30, 2006, Parker Productions did not produce any revenue from our event staffing operations. Parker Productions is evaluating how best to apply available capital to stimulate revenues in our modeling and event staffing business.
E Cubed Technologies
Through E Cubed Technologies, we intend to build a full service IT, network/server, and computer services firm. We are focused on building a consulting-oriented value added reseller (“VAR”) and intend to emphasize service and support to differentiate our Company from more price-oriented national chains and enterprise focused service firms. In 2005, E Cubed Technologies started business operations in the greater Orlando, Florida area. E Cubed Technologies is also an authorized reseller of Dell products.
E Cubed Technologies intends to provide both computer and network software and hardware products and services to make them useful to small businesses. The systems include both PC-based LAN systems and server-based systems. E Cubed Technologies services will include design and installation of network systems, training, support, and administration. E Cubed Technologies is an authorized dealer for DocStar. DocSTAR, which is a product of AuthentiDate, Inc., provides clients with a document imaging and retrieval solution. DocSTAR (Document Storage and Retrieval) offers software products for the document imaging industry with a suite of software solutions that securely scans, stores and retrieves documents. E Cubed Technologies is an authorized reseller of Dell products, which means that it has the ability to purchase computer and network hardware and software at reseller pricing for resale to our clients.
DocSTAR’s relationship is contract-based, which means that E Cubed Technologies has the opportunity to both sell and service DocSTAR products. Pursuant to E Cubed Technologies’ agreement with DocSTAR, sales staff is to be trained by DocSTAR in a short product application course. Representatives servicing DocSTAR must be trained in a more intensive
technical course. The agreement specifies the counties of Orange, Seminole, Volusia, Brevard, Lake, and Osceola in the state of Florida as our direct market territories. Clients outside of that area would require us to involve DocSTAR corporate and, in many cases, another DocSTAR partner. E Cubed Technologies is not prohibited from selling and servicing other products. The agreement can be terminated by either party at any time for any reason. In the event that DocSTAR terminates the agreement, E Cubed Technologies will have a period of 12 months to continue servicing clients owing to the incidental fact that any particular client may have an existing service contract in place with us that may not have yet expired.
Recent Developments
Revenge LLC, Loan And Equity Purchase
On July 18, 2006, we entered into a Loan and Stock Purchase Agreement (the “Agreement”) with Revenge Designs, LLC (“Revenge”), Thomas Cress and Peter Collorafi (collectively the “Owners”). Pursuant to the Stock Purchase Agreement, we agreed to loan Revenge $100,000, (the “Loan”) as follows: $50,000 upon execution of the Agreement by all parties, with the balance on or before July 31, 2006. Revenge agreed to repay the loan based on a repayment schedule ending on October 1, 2008. Before July 31, 2006, we paid Revenge an additional $100,000 and received the following as consideration: (i) an ownership interest in Revenge equal to 25% of the equity of Revenge, and (ii) $1,000 from the proceeds of each of the first one hundred (100) cars sold by Revenge hereafter, as return on investment, such sums being due upon receipt and collection of good funds by Revenge.
We believe that the transaction with Revenge was a unique opportunity. We were able to act on that opportunity and have no plans to seek other similar opportunities.
Going Concern
Our consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. Management believes we will need to raise approximately $950,000 in order to fund operations for the 12-month period commencing on the date on which we anticipate the accompanying Registration Statement will be declared effective by the SEC. As shown in the accompanying financial statements, we have incurred significant losses since inception. During the year ended December 31, 2005 we had a net loss of $1,619,130, and a net loss of $1,240,199 for the six months ended June 30, 2006. As of December 31, 2005, our retained deficit was $4,964,579, and our retained deficit $6,204,778 for the six months ended June 30, 2006. Our total assets for the year ended December 31, 2005 and for the six months ended June 30, 2006 were $87,420 and $210,449, respectively. Our losses, among others, may indicate that we will be unable to continue as a going concern for reasonable period of time. The financial statements do not include any adjustments relating to the recoverability and classification of liabilities that might be necessary should we be unable to continue as a going concern. Our continuation as a going concern is dependent upon our ability to generate sufficient cash flow to meet our obligations on a timely basis and ultimately to attain profitability. We have limited capital with which to pursue our business plan. There can be no assurance that our future operations will be significant and profitable, or that we will have sufficient resources to meet our objectives. We may pursue either debt or equity financing or a combination of both, in order to raise sufficient capital in order to meet our financial requirements over the next 12 months and to fund our business plan. Notwithstanding the foregoing, our ability to raise capital is limited by the terms of the Standby Equity Distribution Agreement with Katalyst Capital Group. Specifically, Section 2.6 thereof prohibits us from issuing any equity for a price below the then-current market price of our common stock, as quoted by Bloomberg, LP, during the commitment period for the Standby Equity Distribution Agreement. There is no assurance that we will be successful in raising additional funds. At this time, our only plan regarding the pursuit of financing is the financing under the Standby Equity Distribution Agreement we have with Katalyst Capital Group.
Results Of Operations For The Six-Months Ended June 30, 2006 Compared to the Six-Months Ended June 30, 2005
Revenues
Revenues during this period were $20,915 compared to $23,784 for the comparative prior period.
Net Loss
We reported a net loss of $1,240,199 for the six months ended June 30, 2006 or a $0.01 loss per share; versus a net loss of $896,422 for the 6-months ended June 30, 2005 or a $0.04 loss per share.
The net loss for the six months ended June 30, 2006 of $1,240,199 is comprised of loss from operations of $1,237,001; plus interest expense of $3,198. Primary contributors to loss from operations for the period included stock-based compensation for other business consulting of $986,750 and general and administrative expenses of $225,509. The comparative net loss for the 6-months ended June 30, 2005 of $896,422 is comprised of loss from operations of $893,963 and interest expenses of $2,459.
Results of Operations For The Three-Months Ended June 30, 2006 Compared to the Three-Months Ended June 30, 2005
Revenues
Revenues during this period were $7,086 compared to $16,469 for the comparative prior period, or a decrease of 56% percent. This was attributable to a reduction in revenues from Parker Productions and E Cubed Technologies.
Net Loss
We reported a net loss of $471,875 for the 3-months ended June 30, 2006 or a $0.00 loss per share; versus a net loss of $302,720 for the 3-months ended June 30, 2005 or a $0.01 loss per share.
The net loss for the 3-months ended June 30, 2006 of $471,875 is comprised of loss from operations of $470,276; plus interest expense of $1,599. Primary contributors to loss from operations for the period included stock-based compensation for other business consulting of $323,750 and general and administrative expenses of $132,058. The comparative net loss for the 3-months ended June 30, 2005 of $302,720 is comprised of loss from operations of $301,205 and interest expenses of $1,515.
Results Of Operations For The Year Ended December 31, 2005, Compared To The Year Ended December 31, 2004
Revenues
During the fiscal year ending December 31, 2005, we had revenues of $101,632 and experienced a net operating loss of $1,619,130 compared to revenues of $228,867 and a net operating loss of $1,902,537 for the fiscal year ending December 31, 2004. This represents a decrease of 127,235 in revenues, or 55% and a decrease in net operating loss of $283,407, or 14% over the year ended December 2004. Cost of sales for the fiscal year ending December 31, 2005 totaled $73,810, compared to cost of sales for the fiscal year ending December 31, 2004 of $232,168, or a decrease of $158,358 (68%). For the fiscal year ended December 2005, general and administrative expenses of $723,102 and stock-based compensation totaling $913,773 were primary contributors to the net operating loss. For the fiscal year ended 2004, general and administrative expenses of $1,183,019 and stock-based compensation totaling $714,100 were primary contributors to the net operating loss. The significant difference in net operating loss for the fiscal years ending December 31, 2005 and 2004 is primarily due to a significant decrease in general and administrative expenses for the period ending December 31, 2005.
Cost of Services
For year ended December 31, 2005, the cost of our services was $73,810, as compared to $232,168 for the year ended December 31, 2004. This was a decrease in costs to us of $158,358 or 68%, primarily based on expenses related to the reduced operations of the auto sales business. We believe our cost of services will increase for the next year if we are able to increase the level of our operations.
Expenses
For the 12 months ended December 31, 2005, our general and administrative expenses were $723,102, as compared to $1,183,019 for the 12 months ended December 31, 2004. Our general and administrative expenses decreased $540,083 or 46% as a result of a reduction of officer’s bonuses. Specifically, in 2004, Mr. Carnes received a bonus of $750,000. In 2005 Mr. Carnes received a bonus of $300,000 resulting in an expense reduction of $450, 000.
Net Loss
We incurred a net loss of $1,619,130 for the year ended December 31, 2005, compared to a net loss of $1,902,537 for the year ended December 31, 2004. The decreased loss or $283,407 or 14% was due primarily to a decrease in administrative expenses primarily related to a decrease in stock based compensation. On December 31, 2005, we had current assets of $70,021 and current liabilities of $942,978, resulting in a working capital deficit of $872,957.
Revenue and Cost by Segment
Signature Auto
Revenues from auto sales for year ended December 31, 2005, were $45,182 and the related costs of auto sales were $45,001 or approximately 99% of revenue. Our average sale of a vehicle is $3,800, which consists of vehicles ranging in sale price from $500 to $8,000. Revenues from auto sales for the six months ended June, 2006 was $10,765. We believe that our sales will increase once we have funding available to purchase a larger volume of vehicles. We currently have the ability to purchase only one or two vehicles for inventory and once sold may not be able to purchase replacements until the transactions have cleared which could take 10 days or more. As of September 19, 2006, we had no vehicles in inventory and do not intend to spend resources to purchase customer lists. No formal direct marketing program has been initiated by us.
Parker Productions
Revenues from services for the year ended December 31, 2005, were $26,575 and the related costs of contracted services were $16,076 or approximately 60% of revenue. There were no revenues from services for the six months ended June 30, 2006.
E Cubed Technologies
Revenues from sales and services for the year ended December 31, 2005 were $29,206 and the related costs were $12,733 or approximately 44% of revenue. There were no revenues from sales and services for the six month period ended June 30, 2006.
Stock-based Compensation
The following individuals received stock-based compensation in connection with services performed for us or our subsidiaries, in the following amounts and reported dollar values.
Date | | Shareholder | | Description of Services | | No. of Number of Shares | | Dollar Amount | |
| 01/04/2005 | | | Edward Miers | | | Consulting services | | | 375,000 | | | 75,000.00 | |
| 01/04/2005 | | | Evan Weybright | | | Consulting services | | | 375,000 | | | 75,000.00 | |
| 01/17/2005 | | | Loren Brown | | | Consulting services | | | 18,750 | | | 4,800.00 | |
| 01/17/2005 | | | Carla Rissell | | | Consulting services | | | 25,000 | | | 6,500.00 | |
| 01/17/2005 | | | Evan Weybright | | | Consulting services | | | 12,500 | | | 3,250.00 | |
| 02/07/2005 | | | Evan Weybright | | | Consulting services | | | 500,000 | | | 30,000.00 | |
| 02/07/2005 | | | Edward Miers | | | Consulting services | | | 500,000 | | | 30,000.00 | |
| 02/07/2005 | | | Carla Rissell | | | Consulting services | | | 30,000 | | | 1,800.00 | |
| 02/07/2005 | | | Russ Rollins | | | Consulting services | | | 20,000 | | | 1,200.00 | |
| 03/03/2005 | | | John Wray | | | Legal services | | | 300,000 | | | 30,000.00 | |
| 03/03/2005 | | | Alberto Buckeridge | | | Consulting services | | | 1,312 | | | 131.00 | |
| 03/03/2005 | | | Carla Rissell | | | Consulting services | | | 100,000 | | | 10,000.00 | |
Date | | Shareholder | | Description of Services | | No. of Number of Shares | | Dollar Amount | |
| 03/03/2005 | | | Cynthia Wainwright | | | Consulting services | | | 117,438 | | | 11,743.00 | |
| 03/03/2005 | | | Matt Lettau | | | Consulting services | | | 100,000 | | | 10,000.00 | |
| 03/03/2005 | | | Irving M. Einhorn | | | Legal services | | | 200,000 | | | 20,000.00 | |
| 03/03/2005 | | | Marc Mero | | | Consulting services | | | 50,000 | | | 5,000.00 | |
| 03/03/2005 | | | Evan Weybright | | | Consulting services | | | 300,000 | | | 30,000.00 | |
| 04/28/05 | | | Katalyst Capital Group | | | Commitment fee | | | 1,000,000 | | | 15,000.00 | |
| 04/29/05 | | | Benard Woods | | | Consulting services | | | 2,300,000 | | | 34,500.00 | |
| 04/29/05 | | | Carla Rissell | | | Consulting services | | | 300,000 | | | 4,500.00 | |
| 04/29/05 | | | Cynthia Wainwright | | | Consulting services | | | 300,000 | | | 4,500.00 | |
| 04/29/05 | | | Edward Miers | | | Consulting services | | | 2,300,000 | | | 34,500.00 | |
| 04/29/05 | | | Matt Lettau | | | Consulting services | | | 300,000 | | | 4,500.00 | |
| 04/29/05 | | | Evan Weybright | | | Consulting services | | | 2,300,000 | | | 34,500.00 | |
| 06/06/05 | | | Jeff Mackay | | | Legal services | | | 600,000 | | | 24,000.00 | |
| 06/06/05 | | | John Wray | | | Legal services | | | 250,000 | | | 10,000.00 | |
| 06/17/05 | | | Andra Espinoza | | | Consulting services | | | 2,000,000 | | | 30,000.00 | |
| 06/17/05 | | | Evan Weybright | | | Consulting services | | | 1,000,000 | | | 15,000.00 | |
| 06/27/05 | | | Andra Espinoza | | | Consulting services | | | 900,000 | | | 13,500.00 | |
| 07/14/05 | | | Andra Espinoza | | | Consulting services | | | 1,500,000 | | | 28,500.00 | |
| 07/14/05 | | | Evan Weybright | | | Consulting services | | | 500,000 | | | 9,500.00 | |
| 08/02/05 | | | Matt Lettau | | | Consulting services | | | 1,200,000 | | | 42,000.00 | |
| 08/02/05 | | | Joe Barrett | | | Consulting services | | | 85,700 | | | 3,000.00 | |
| 08/02/05 | | | Jeff Mackay | | | Legal services | | | 400,000 | | | 14,000.00 | |
| 08/17/05 | | | Edward Meirs | | | Consulting services | | | 2,000,000 | | | 45,560.00 | |
| 08/29/05 | | | Andra Espinoza | | | Consulting services | | | 3,000,000 | | | 22,500.00 | |
| 08/29/05 | | | Evan Weybright | | | Consulting services | | | 2,000,000 | | | 15,000.00 | |
| 08/29/05 | | | Cynthia Wainwright | | | Consulting services | | | 1,000,000 | | | 7,500.00 | |
| 09/15/05 | | | Edward Miers | | | Consulting services | | | 1,000,000 | | | 12,500.00 | |
| 09/15/05 | | | Joe Barrett | | | Consulting services | | | 500,000 | | | 6,250.00 | |
| 09/20/05 | | | Joe Barrett | | | Consulting services | | | 250,000 | | | 5,000.00 | |
| 10/07/05 | | | Joe Barett | | | Consulting services | | | 2,500,000 | | | 20,625.00 | |
| 10/07/05 | | | July Tomasi | | | Consulting services | | | 200,000 | | | 1,650.00 | |
| 10/25/05 | | | Andra Epinoza | | | Consulting services | | | 3,000,000 | | | 23,250.00 | |
| 10/25/05 | | | Edward Miers | | | Consulting services | | | 2,500,000 | | | 19,375.00 | |
| 10/25/05 | | | Cynthia Wainwright | | | Consulting services | | | 1,000,000 | | | 7,750.00 | |
| 10/25/05 | | | Matt Lettau | | | Consulting services | | | 1,000,000 | | | 7,750.00 | |
| 10/25/05 | | | Irving Einhorn | | | Legal services | | | 500,000 | | | 3,875.00 | |
Date | | Shareholder | | Description of Services | | No. of Number of Shares | | Dollar Amount | |
| 10/25/05 | | | Robert Thomas | | | Consulting services | | | 250,000 | | | 1,937.00 | |
| 11/07/05 | | | Evan Weybright | | | Consulting services | | | 3,000,000 | | | 24,000.00 | |
| 12/15/05 | | | Matt Lettau | | | Consulting services | | | 1,000,000 | | | 13,000.00 | |
| 12/15/05 | | | Evan Weybright | | | Consulting services | | | 500,000 | | | 6,500.00 | |
| 12/15/05 | | | Andra Espinoza | | | Consulting services | | | 500,000 | | | 6,500.00 | |
| 12/20/05 | | | Andra Espinoza | | | Consulting services | | | 995,550 | | | 17,422.00 | |
| 12/20/05 | | | Andra Espinoza | | | Consulting services | | | 1,000,000 | | | 17,500.00 | |
| 12/20/05 | | | Robert Thomas | | | Consulting services | | | 100,000 | | | 1,750.00 | |
| 12/20/05 | | | Evan Weybright | | | Consulting services | | | 500,000 | | | 8,750.00 | |
| 01/27/06 | | | Cynthia Wainwright | | | Consulting services | | | 500,000 | | | 92,500.00 | |
| 01/27/06 | | | Edward Miers | | | Consulting services | | | 750,000 | | | 138,750.00 | |
| 01/27/06 | | | Jeff Mackay | | | Legal services | | | 156,756 | | | 29,000.00 | |
| 01/27/06 | | | July Tomasi | | | Consulting services | | | 500,000 | | | 92,500.00 | |
| Ending balance | | | | | | | | | 50,463,006 | | | 1,314,618.00 | |
| | | | | | | | | | | | | |
Liquidity And Capital Resources
2006
Periodically, Mr. Carnes, our sole officer and director, will advance cash to Signature Leisure to pay expenses for operations. Mr. Carnes is under no obligation to finance operations. For the fiscal year ended December 31, 2005, Mr. Carnes advanced us a total of $51,362 and paid expenses on behalf of Signature Leisure totaling $41,725. During the six months ended June 30, 2006, Mr. Carnes advanced the Company $70,783.47
During the six months ended June 30, 2006, our cash position increased by $142,923. Net cash used in operating activities totaled $104,661; net cash used for investing activities was $0; and, $247,584 was provided through financing activities primarily from proceeds from borrowings.
On August 30, 2006, we sold to Stephen W. Carnes, the Company’s President, CEO and sole Director, 22,727,272 shares of our common stock at a price of $0.22 per share for a total of $500,000. This amount was paid in exchange for the satisfaction of $500,000 of accrued bonus and salary owed by the Company to Mr. Carnes in the amount of $750,000. This issuance is subject to forfeiture in that the Company may revoke the shares within two years of issuance for cause, at its discretion.
On January 20, 2005, we entered into the Standby Equity Distribution Agreement with Katalyst Capital Group. Under the Standby Equity Distribution Agreement, Signature Leisure may issue and sell to Katalyst Capital Group common stock for a total purchase price of up to $5,000,000. The purchase price for the shares is equal to 99% of the market price, which is defined in the Standby Equity Distribution Agreement as the lowest volume weighted-average price of the common stock during the five trading days following the notice date. The amount of each advance is subject to an aggregate maximum advance amount of $200,000 within seven trading days. In connection with the Standby Equity Distribution Agreement, Katalyst Capital Group received 1,000,000 shares of our common stock as a one-time commitment fee. Katalyst Capital Group is entitled to retain a fee of 1% of each cash advance.
In connection with the Standby Equity Distribution Agreement, we filed the 2005 Registration Statement, registering 29,868,360 shares of our common stock on behalf of Katalyst Capital Group. The 2005 Registration Statement was declared effective on June 9, 2006. As of September 19, 2006, the Company had received $592,719 of gross proceeds
since the 2005 Registration Statement was declared effective and issued $13,260,925 shares to Katalyst Capital Group under the Standby Equity Distribution Agreement. As of September 19, 2006, the remaining gross proceeds that we may receive under the Standby Equity Distribution Agreement are $4,407,281.
2005
During the fiscal year ending December 31, 2005, we received $195,859 net cash provided by financing activities primarily from proceeds from loans to related parties. Net cash used in operating activities totaled $147,242. Cash used in investing activities was $23,823. The resultant overall net increase in cash for the period was $24,794; where the beginning balance for the period was $10,749, the resultant balance cash balance at the end of the period was $35,543.
During the fiscal year ending December 31, 2004, we received $67,968 net cash provided by financing activities from the issuance of notes payable and officer advances. Net cash used in operating activities totaled $158,732. No cash was used in investing activities. The resultant overall net decrease in cash for the period was $90,764; where the beginning balance for the period was $101,513, the resultant balance cash balance at the end of the period was $10,749.
In 2005, the majority of our operations were funded through loans and from the issuance of our common stock. We have not generated sufficient revenue to pay for our operations. At December 31, 2005, we had a working capital deficit of $872,957, and at December 31, 2004, we had a working capital deficit of $770,200, which means that we did not have sufficient assets to meet our liabilities. As a result we did not have sufficient revenue to pay our debts as they became due.
Cash used in operating activities for the 12 months ended December 31, 2005 was $147,242 compared to $158,732 for the same period a year earlier. The cash used in operating activities was mainly a result of our net loss and operating expenses. Net cash provided by financing activities was $195,859 for the 12 months ended December 31, 2005 compared to $67,968 in the same period for 2004. The cash provided in 2005 was mainly from the proceeds of notes and the issuance of common stock.
We continue to experience substantial cash flow difficulties and we expect to experience cash flow difficulties for an indefinite period. Although no assurances can be given, we believe that our cash flow deficit will improve as revenues and sales increase. In addition, although no assurances can be given, we believe that we may be able to secure additional equity and/or debt financing.
A critical component of our operating plan impacting our continued existence is the ability to obtain additional capital through additional equity and/or debt financing. Notwithstanding the foregoing, our ability to raise capital is limited by the terms of the Standby Equity Distribution Agreement with Katalyst Capital Group. Specifically, Section 2.6 thereof prohibits us from issuing any equity for a price below the then-current market price of our common stock, as quoted by Bloomberg, LP, during the commitment period for the Standby Equity Distribution Agreement. We do not anticipate enough positive internal operating cash flow until such time as we can generate substantial revenues, which may take the next few years to fully realize. In the event we cannot obtain the necessary capital to pursue our strategic plan, we may have to cease or significantly curtail our operations. This would materially impact our ability to continue operations.
Since inception, we have financed cash flow requirements through debt financing and issuance of common stock for cash and services. As we expand operational activities, we may continue to experience net negative cash flows from operations, pending receipt of servicing or licensing fees, and will be required to obtain additional financing to fund operations through common stock offerings and bank borrowings to the extent necessary to provide working capital.
Over the next 12 months we believe that existing capital and anticipated funds from operations will not be sufficient to sustain operations and planned expansion. Consequently, we will be required to seek additional capital in the future to fund growth and expansion through additional equity or debt financing or credit facilities. No assurance can be made that such financing would be available, and if available it may take either the form of debt or equity. In either case, the financing could have a negative impact on our financial condition and our stockholders. We anticipate incurring operating losses over the next twelve months. Our lack of operating history makes predictions of future operating results difficult to ascertain. Our prospects must be considered in light of the risks, expenses and difficulties frequently encountered by companies in their early stage of development. Such risks include, but are not limited to, an evolving and unpredictable business model and the management of growth. To address these risks we must, among other things, obtain a customer base, implement and successfully execute our business and marketing strategy, continue to develop and upgrade technology and products, respond to competitive developments, and attract, retain and motivate qualified personnel. There can be no assurance that we will be successful in addressing such risks, and the failure to do so can have a material adverse effect on our business prospects, financial condition and results of operations.
Our continuation as a going concern is dependent upon our ability to generate sufficient cash flow to meet our obligations on a timely basis and ultimately to attain profitability. We have limited capital with which to pursue our business plan. There can be no assurance that our future operations will be significant and profitable, or that we will have sufficient resources to meet our objectives. We may pursue either the option of debt or equity financing or a combination of both in order to raise sufficient capital in order to meet our financial requirements over the next 12 months and to fund our business plan. Notwithstanding the foregoing, our ability to raise capital is limited by the terms of the Standby Equity Distribution Agreement with Katalyst Capital Group. Specifically, Section 2.6 thereof prohibits us from issuing any equity for a price below the then-current market price of our common stock, as quoted by Bloomberg, LP, during the commitment period for the Standby Equity Distribution Agreement. There is no assurance that we will be successful in raising additional funds. At this present time, our only definite plan regarding the pursuit of any form of financing is that of the Standby Equity Distribution Agreement with Katalyst Capital Group. We intend to use the advances under the Standby Equity Distribution Agreement to assist in the offset of our current cash flow difficulties.
Notes payable
In 2005 and 2006, the following notes were issued to our president and sole director:
| | · | On December 31, 2005 the Company executed a $128,558 promissory note. The note was due on July 15, 2006. Interest began to accrue at 12% on that date if the note is not paid. |
| | · | During the six months ended June 30, 2006, we executed promissory notes totaling $33,667 in exchange for the payment of expenses. The notes were due on July 15, 2006. Interest began to accrue at 12% on that date. |
In 2005 and 2006, the following notes were issued to our vice president
| | · | On December 31, 2005, we executed a promissory note totaling $33,507 in exchange for the payment of expenses. The note was due on July 15, 2006. |
| | · | During the six months ended June 30, 2006, we executed promissory notes totaling $15,918 in exchange for the payment of expenses. The notes were due on July 15, 2006. |
During July 2006, the above loans were consolidated into one promissory note for both the president and vice president. The president’s note will begin accruing interest at July 15, 2006. The vice president’s note will start accruing interest on July 15, 2007.
During the six months ended June 30, 2006, the Company paid a shareholder $2,500 toward an outstanding promissory note. The remaining principal balance on the promissory note is $12,435. Accrued interest expense on the note totaled $3,287 at June 30, 2006.
Profitability
We intend to attempt to achieve profitability by allocating funds for business development to be used for marketing materials and services for Signature Auto, Parker Productions, and E Cubed Technologies. Funds will also be allocated to pay for fees and training expenses associated with the development of additional corporate partnerships for E Cubed Technologies.
By allocating funds to business development, we believe we will be able to grow our level of business and increase revenues. The additional funding will allow us to fund marketing programs to hire additional staff, such as an additional event coordinator for Parker Productions. We are also working to rebuild our auto sales business that was disrupted by the hurricanes that hit Central Florida in 2004. Additional funding will assist Signature Auto operations in this effort.
Additionally, in an effort to achieve profitability, we will allocate funds for infrastructure and improvements will be used for computer and communications equipment and software to make more efficient and improve access to our business applications and communications. The initial phase would cover software and hardware additions and upgrades to improve control, configuration and reliability of both internal and external messaging and communication as well as business applications and data.
We will also allocate funds for operating capital to be used to increase our vehicle inventory for Signature Auto and to pay down our current debts for rent, wages, attorney fees, as well as every day expenses such as telephone service, electricity, transfer agent fees, and office supplies. At the present time, we do not have access to adequate funding. By using equity to finance vehicle purchases, rather than financing inventory, we will reduce the cost of holding vehicle inventory and thereby improve profitability in the Signature Auto division. This will provide additional net income to cover the fixed corporate expenses and assist in our efforts to achieve profitability.
We anticipate having continued significant operating losses for the next 24 months. We will require approximately $950,000 in to fund our operations for the 12-month period. The following table illustrates how we would use the $950,000 in funding:
USE OF PROCEEDS: | | AMOUNT | |
| Business Development | | $ | 300,000 | |
| Infrastructure and Improvements | | | 100,000 | |
| Operating Capital | | | | |
| Payment of Debts | | | 100,000 | |
| Increase Vehicle Inventory | | | 100,000 | |
| Other Operating Expense | | | 350,000 | |
Total | | $ | 950,000 | |
| | | | | |
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.
Overview
We were incorporated in the State of Colorado on March 15, 2000 as JDLPhotos.com, Inc. Through January 20, 2003, JDLPhotos.com, Inc. was located in Longmont, Colorado and was a retailer of matted and framed photographs. Due to the continuing losses from operations and the increasing expense related to the public entity, a new management and business opportunities were sought. On January 20, 2003, we transferred its business back to James DeLutes, its majority shareholder and underwent a change of control. As a result of this transfer and the change in control, we became a public shell.
In February of 2003, we changed our name from JDLPhotos.com, Inc. to Valde Connections, Inc. We began pursuing a business strategy of identifying profitable clinical day spa and salons for potential acquisitions, as well as considering future company growth through building new facilities in selected locations. In August of 2003, we changed our name to Signature Leisure, Inc., to more closely relate with our business direction.
In February 2004, we completed the registration process to become buyers and sellers of vehicles at five Central Florida vehicle auction facilities. We also announced the receipt of a line of credit from Automotive Finance Corporation, an Allete Company. We began participating in automobile auctions and the establishment of an inventory. Signature Leisure d/b/a Signature Auto operated Signature Auto as a pre-owned automobile dealership at 1111 N. Orlando Avenue, Winter Park, Florida 32789. Due to the destruction of these premises from the hurricanes that hit Central Florida in August and September 2004, we and the landlord agreed to terminate the lease early on September 30, 2004. Subsequently, we relocated to office and warehouse space located at 100 Candace Drive, Suite 100, Maitland, Florida 32751, which is presently being provided to us at no cost by Renovo Holdings. The CEO of Renovo Holdings is Stephen Carnes, the CEO of Signature Leisure.
In 2005, we expanded out business operations in several areas. On February 15, 2005, we acquired certain assets from Parker Productions, a sole proprietorship operating in the State of Florid, which operates modeling and event staffing services. Shortly after the acquisition of Parker Productions, we transferred it assets into Parker Productions, Inc., a wholly-owned subsidiary of Signature Leisure.
On July 21, 2005, we incorporated E Cubed Technologies, Inc., a Florida corporation, in order to better organize and market its network and technology services offerings. E Cubed Technologies, Inc. is an authorized dealer DocSTAR, a document imaging-solutions company with whom we currently have a contractual relationship.
Personnel
We presently have five primary consultants/employees. Ed Miers assists us with corporate strategy and evaluation. Additionally, Mr. Miers provides consulting services for Signature Auto’s operations. Matt Lettau assists with both sales and operations for all three business units. Andra Espinoza assists us with corporate strategy and evaluation. Evan Weybright assists E Cubed Technologies with sales and marketing. Cynthia Wainwright assists us with administrative matters for Signature Leisure. Parker Productions maintains a large list of independent contractors for use at tradeshows and promotional events, these contractors used on a random basis wholly dependent upon client need. All independent contractors are contracted on an as needed basis.
Business
The current business of Signature Leisure includes the operations of E Cubed Technologies, Inc., a network and technologies service company; Parker Productions, Inc., a modeling and event staffing business; and Signature Auto, an independent dealer in motor vehicles. The focus of operations for the next 12-month period will be the operations of E Cubed Technologies, Parker Productions and Signature Auto. Management has begun to attempt to rebuild the auto sales business; however additional working capital will be required in order to fully ramp-up operations of auto sales. Parker Productions is being developed as a modeling and event staffing business. The individual models and staff that we provide to our clients operate as independent contractors. E Cubed Technologies is being developed as a network and technology services company. Presently, sales revenues from the operations of all three operating units are very limited, though we continue to work on building the list of clients for all three units.
Signature Auto - The automotive dealership is presently operating on funds from credit lines established from MAFS and AFC, in addition to a loan of $35,000 from an officer of the company. Our management desires to have the
dealership achieve growth to a level of possessing $250,000 in company-owned inventory (as opposed to financed inventory). As of September 19, 2006, we have no available inventory. In order to build our inventory, we will need to have access to adequate funding.
E Cubed Technologies, Inc. - We have already entered the initial stage of the development of E Cubed Technologies, which consists of the initial investment and training related to identified product offerings. We estimate that we are within months from the completion of this step. The second phase, roll-out of marketing and sales campaign, is in the initial planning stages. We believe this process will take approximately 90 days to reach satisfactory performance of operation and will require an estimated $20,000 of development capital. The first two stages are ongoing processes that do not necessarily end with the beginning of a new phase as we intend to constantly enter into marketing and directives geared for new verticals, which will require us to adapt and generate new marketing avenues as well as garner knowledge of new client business models and systems. The third phase, expansion of existing business, will be undertaken once suitable business operations are reached and your receipt of necessary capital. This will encompass undertaking more aggressive advertising campaign strategies, evaluation of future expansion to new vertical markets, potential partnership with new vendors and service providers, expansion of sales and service personnel, and furthering internal infrastructure. An estimated $50,000 would be necessary to ideally implement phase three elements under anticipated business conditions and we forecast an estimated nine months to fully implement this phase.
Parker Productions - Parker Productions intends to operate as a modeling and event staffing business. We estimate $75,000 in order for Parker Productions to achieve growth over the next 12 months. The funds would be used as follows: $35,000 for a full time event coordinator, $15,000 for a part-time event assistant and $25,000 for a marketing budget. The event coordinator and assistant would provide Parker Productions with the flexibility and focus to expand business with our current client list. Additionally, the marketing budget will be used to enhance visibility and name recognition in the Central Florida marketplace in an effort to expand our portfolio of clients.
Parker Productions attempts to generate revenues by contracting models and event staff for client companies and organizations to utilize for special events and promotions. Some projects get billed as a flat fee for the entire promotional project; however, the majority of projects involve single event contracts which we charge the client a premium rate per hour for the contracted staff.
Revenues from services for the year ended December 31, 2005 were $26,575 and the related costs of contracted services were $16,076 or approximately 60% of revenue. These costs of contracted services were due to the fact that Parker Productions was paid up front during prior quarters for services rendered during subsequent periods. The client prepaid the project and the costs were incurred over the course of several months to follow. There were no revenues from services for the six months ended June 30, 2006.
Competitive Business Conditions
Signature Auto - Car Dealership
We operate in a very competitive local market. Within the pre-owned vehicle sales marketplace there are three distinct categories of dealerships. The first is the franchise dealer, which is a dealership that sells pre-owned vehicles in addition to new cars and the business is operated under a franchise from a major manufacturer such as Chrysler, Ford, Chevrolet, Toyota or Nissan. The second category is that of the major regional or nationwide pre-owned vehicle dealer, such as a Carmax as well as Budget Auto Sales. The third category is the independent retailer, which typically consists of a single location, and it is within this third category that we compete. Our competitors include such dealerships as Contemporary Cars Incorporated and MacKey Auto Broker, both local and independently pre-owned dealers.
This is a highly competitive business, and we expect competition to increase in the future. Increased competition could result in:
| | · | price reductions, decreased revenue and lower profit margins; |
| | · | inability to gain market share; |
| | · | loss of market share once, and if gained; and |
| | · | increased marketing expenditures. |
Parker Productions - Modeling and Event Staffing Business
The modeling and event staffing business is another industry characterized by intense competition. Our main competition in the region is Axis Talent and Promotions. Competition is intense and we expect it to increase. Increased competition could result in:
| | · | price reductions, decreased revenue and lower profit margins; |
| | · | inability to gain market share; |
| | · | loss of market share once, and if gained; and |
| | · | increased marketing expenditures. |
As a result of our competition targeting our same market; namely, individuals and corporate entities interested in modeling and event staffing services, we will only be able to distinguish our services as the result of our advertising programs and ultimately quality and efficiency of service. Our goal is to determine methods by which we can maximize contacts with national clients. We do not anticipate distinguishing our services from other like services available in the market in the near future.
E Cubed Technologies - Networked Technology Services
E Cubed Technologies focuses on maintaining evaluating our clients and helping them to acquire, configure, and maintain systems that we believe make sense in their business environments. We also target clients in vertical markets which have been identified, either through direct experience or survey data, as ideal candidates for such services and products. The competitors for E Cubed Technologies include: hardware-focused dealers; storefront computer resellers, chain stores and computer super stores which include major chains such as CompUSA and Best Buy. Our average competitor has more than 10,000 square feet of space and usually offers walk-in service.
Consultants/Employees
Signature Leisure currently utilizes five consultant/employees, in addition to our sole officer and director Mr. Carnes, for operations in our business segments. Additional services required for our operations are provided by subcontractors engaged as required.
Signature Leisure, Inc. (Parent)
- Cynthia Wainwright, Administrative Assistant
- Evan Weybright, V.P. Operations
- Andrea Espinoza, Operations Assistant
- Ed Miers, Special Advisor
Parker Productions (event staffing)
- Matt Lettau, Operations Coordinator
- Evan Weybright, Operations Coordinator
- Andrea Espinoza, Operations Coordinator
Signature Auto (auto sales)
- Matt Lettau, Operations Coordinator
E Cubed Technologies (information technology services)
- Evan Weybright, Operations Director
- Matt Lettau, Sales Director
Marketing
Signature Auto
No formal direct marketing program has been initiated by the Company. The Company does not intend to spend resources to purchase customer lists.
E Cubed
Matt Lettau, our operations coordinator, performs cold call prospecting of potential clients in our general geographic area. The roll-out of marketing and sales campaign is in the initial planning stages. We believe this process will take approximately 90 days to reach satisfactory performance of operation and will require an estimated $20,000 of development capital. The first two stages are ongoing processes that do not necessarily end with the beginning of a new phase as we intend to constantly enter into marketing and directives geared for new verticals, which will require us to adapt and generate new marketing avenues as well as garner knowledge of new client business models and systems. The third phase, expansion of existing business, will be undertaken once suitable business operations are reached. This will encompass undertaking more aggressive advertising campaign strategies, evaluation of future expansion to new vertical markets, potential partnership with new vendors and service providers, expansion of sales and service personnel, and furthering internal infrastructure. An estimated $50,000 would be necessary to ideally implement phase three elements under anticipated business conditions and we forecast an estimated nine months to fully implement this phase.
Parker Productions
Parker Productions utilizes a continually adaptive sales and marketing model to attract clients from the highest potential income segments. An attractive, flexible, and client goal tailored program allows us to market ourselves to any business category in any area.
We currently focus on business segments, whose needs generally match our offerings, outlining several benefits to potential clients including fiscal and time efficiencies as well as more effective exposure and campaign results.
We believe clients rarely compare promotional groups directly, looking for two, or more, possible providers of a proposed project or job. We believe they typically follow word-of-mouth recommendations, rather than selecting from a menu of possible providers.
To increase list of clients, Parker Productions manages a lead generation program. This lead generation program is maintained by Evan Weybright, Vice President of Operations, through a network that consists of referrals to Parker Productions made by the Orlando Convention and Visitors Bureau.
E Cubed Technologies
The ideal target E Cubed Technologies customer is a small business with five to 25 employees using network and computer based applications. We believe that this type of entity will generally have a small number of decision-makers and will be cost-effective and service-conscious. We believe that the particular advantage of this customer is the fact that most small business owners and decision-makers know and align themselves with other small business owners and decision makers. We believe that this presents us with an ideal scenario for word-of-mouth marketing. We will focus most of our marketing efforts on personal contacts and leads generated through one of various sources which we believe will pre-qualify clients, have a general understanding of the needs and products, and be able to make a direct reference and introduction for us to the client, usually through an existing business relationship in another arena.
Government Regulation
We are not aware of any government regulations that we need to comply with in order to operate our businesses other than those applicable to businesses generally operating on a local level (e.g., local business license).
Sole Officer and Director
The following table sets forth the name and position of our sole executive officer and sole director. Our director is elected at our annual meeting of stockholders and serves for one year or until a successor is elected and qualified.
As of September 19, 2006, our sole director and executive officer, his age, positions, the dates of his initial election or appointment as director and executive officer, and the expiration of his term, are as follows:
Name of Director/Executive Officer | | Age | | Position | | Period Served |
| Stephen W. Carnes | | 42 | | President and Sole Director | | January 20, 2003 to present |
| | | | | | | |
Set forth below is a brief description of the background and business experience of our sole executive officer and director, Stephen W. Carnes:
Stephen W. Carnes | President and Sole Director | January 20, 2003 to present |
| | | |
Stephen W. Carnes serves as the President and CEO of Signature Leisure, Inc. and is the Company’s sole director and sole executive officer.
Employment History
Employer | | Title | | Dates of Position |
| Signature Leisure, Inc. (OTC BB: SGLS) | | President and CEO | | February 2003 to Present |
| Renovo Holdings, Inc. (OTC BB: RNVO) | | President and CEO | | July 2003 to Present |
| | | | | |
Renovo Holdings is a publicly traded company listed on the OTCBB under the symbol “RNVO”. Renovo Holdings is presently a development stage company that intends to capitalize upon the niche market opportunities within the commercial and residential restoration service markets.
| Self-employed as an independent manufacturers representative acting as an outside sales representative for various companies | | 1998 through 2003 |
| | | |
| Founder and co-owner of a private public relations firm that assisted companies with marketing and public relations | | 2000 through 2003 |
| | | |
Education
In 1986, Mr. Carnes received a B.S. degree in Business Administration from Indiana University at Fort Wayne, Indiana.
Significant Employees
The following is a list of our significant employees including the details of their employment and work history:
Evan Weybright | Vice President, Operations | October 2004 to present |
| | | |
Evan Weybright was promoted to Vice President of Operations of Signature Leisure, Inc. in June 2005.
Employment History
Employer | | Title | | Dates of Position |
| Bob Rohrman Nissan-Infiniti | | Service Consultant | | 9/2002 through 8/2004 |
| | Self-employed as a Network and Systems Engineer Consultant | | 1999 through 2002 |
| | | | | |
Education
No formal degrees conferred.
Ed Miers | Special Advisor, Consultant | June 2004 to present |
| | | |
Ed Miers assists us with corporate strategy and evaluation. Additionally, Mr. Miers provides consulting services for Signature Auto’s operations.
Employment History
Employer | | Title | | Dates of Position |
| GREM USA | | President/CEO | | August 2003 to Present |
| | | Founder and co-owner of a private public relations firm that assisted companies with marketing and public relations | | 2000 through 2003 |
| | | | | |
Education
No formal degrees conferred.
Andra Espinoza | Operations Coordinator | June 2005 to present |
| | | |
Andra Espinoza assists us with corporate strategy and evaluation.
Employment History
Employer | | Title | | Dates of Position |
| Self-employed owner of a private consulting firm that assisted small businesses develop advertising and marketing campaigns | | | | 9/2000 through 5/2005 |
| Sprint Communications | | Customer Service | | 8/2000 to 11/2003 |
| | | | | |
Education
No formal degrees conferred.
Election of Directors
Directors shall be elected at an annual meeting of the stockholders and except as otherwise provided by the Bylaws of Signature Leisure as pertaining to vacancies, shall hold office until this successor is elected and qualified. The directors serve in such capacity for one year or until a successor is elected and qualified.
Committees Of The Board
Currently, Signature Leisure does not have any executive or standing committees of the board.
Family Relationships
There are no familial relationships nor are there any arrangements or understanding between any of our director or officer or any other person pursuant to which the officer or director was or is to be selected as an officer or director.
Involvement In Certain Legal Proceedings
The director of Signature Leisure is aware of no petitions or receivership actions having been filed or court appointed as to the business activities, the officer, director, or key personnel of Signature Leisure.
None of our officer, director, promoters or control persons have been involved in the past five years in any of the following:
(1) any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time;
(2) any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses);
(3) Being subject to any order, judgment or decree, not subsequently reversed, suspended or vacated, or any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities; or
(4) Being found by a court of competent jurisdiction (in a civil action), the Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated.
Audit Committee And Financial Expert
We do not have an audit committee. Stephen W. Carnes performs some of the same functions of an audit committee, such as: recommending a firm of independent certified public accountants to audit the annual financial statements; reviewing the independent auditors’ independence, the financial statements and their audit report; and reviewing management’s administration of the system of internal accounting controls. We do not currently have a written audit committee charter or similar document. We currently do not generate sufficient revenue to hire a financial expert for an audit committee.
Code Of Ethics
On June 6, 2005, our Board of Directors (the “Board”) adopted a written Code of Ethics designed to deter wrongdoing and promote honest and ethical conduct, full, fair and accurate disclosure, compliance with laws, prompt internal reporting and accountability to adherence to the Code of Ethics. This Code of Ethics was filed with the SEC as an exhibit to our Registration Statement filed on July 13, 2005 (file No. 333-126509).
Executive Compensation
The following table sets forth information regarding the compensation earned by our Chief Executive Officer whose aggregate annual salary and bonus exceeded $100,000, for each of the years indicated (the “Named Executive Officer”), with respect to services rendered by such persons to Signature Leisure and its subsidiaries.
SUMMARY COMPENSATION TABLE
| | | | | | | Annual Compensation | | | | Awards | | Payouts | | | |
| | | | | Salary | | Bonus | | Other Annual Compensation | | Restricted Award(s) | | Securities Underlying Options/ SARs | | LTIP Payouts | | All Other Compensation | |
Position | | Year | | ($) | | ($) | | ($) | | ($) | | (#) | | ($) | | ($) | |
| | | | | | | | | | | | | | | | | | |
| Stephen W. Carnes* | | | 2005 | | $ | 250,000 | | | 300,000 | | | 8,400 | | | 0 | | | 0 | | | 0 | | | 0 | |
| President and | | | 2004 | | | 250,000 | | | 750,000 | | | 8,400 | | | 0 | | | 0 | | | 0 | | | 0 | |
| Director | | | 2003 | | | 125,000 | | | 0 | | | 4,200 | | | 0 | | | 0 | | | 0 | | | 10,800 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Notes:
| * | Stephen W. Carnes is the sole officer and director of Signature Leisure |
On January 20, 2003, we issued 27,000 shares of common stock to Mr. Stephen W. Carnes as consideration for his serving on the Board, assuming the liability of being an officer and director of a public trading and reporting company, his business expertise and leadership. On the transaction date, the Company’s common stock had no reliable market value. The value of the transaction could not be objectively measured as the services were rendered by related parties. The shares were valued by the Board at $0.01 per share based on the estimated fair value of the services. Stock-based compensation expense of $10,800 was recognized for the year ended December 31, 2003.
Commencing July 1, 2003, we began accruing an annual salary of $250,000 for Mr. Carnes based on an employment agreement executed during the three months ended September 30, 2003. In addition, under the terms of the employment agreement, he was awarded a monthly auto allowance of $700 and given the opportunity to receive performance-based bonuses. As of December 31, 2004, he had not received any payments toward the auto allowance. The balance owed at December 31, 2004 for the auto allowance totaled $12,600 ($8,400 accrued in fiscal year 2004 and $4,200 accrued in fiscal year 2003).
Mr. Carnes was given the opportunity to earn a bonus of $750,000 upon the successful completion of (1) raising a minimum of $200,000, and (2) the opening or acquisition of our first business unit. During 2003, he raised $250,000 through the sale of our common stock and in 2004, he opened Signature Auto, our first business unit. As a result, we accrued $750,000 in officer compensation to recognize the bonus earned Mr. Carnes during the year ended December 31, 2004. In February 2005, Mr. Carnes also earned a $150,000 bonus for initiating our Parker Productions operations.
During October 2004, Mr. Carnes approved the issuance of 7,500,000 shares of our restricted common stock as payment of $450,000 of his accrued compensation. On the date of issuance, our common stock had a traded market value of approximately $0.08. Mr. Carnes valued the stock issuance at $0.06 per share (a 25% discount from the traded market value). Of the total $450,000 in stock issued to Mr. Carnes, $375,000 was allocated to his accrued salary, which reduced the salary accrual to $0 as of December 31, 2004. The remaining $75,000 was allocated to his $750,000 bonus, which reduced the bonus accrual to $675,000 as of December 31, 2004. As of March 31, 2005, accrued salaries and bonuses of Mr. Carnes totaled $62,500 and $825,000, respectively.
On April 28, 2005, Mr. Carnes approved the issuance of 50,000,000 shares of our restricted common stock as payment of $600,000 of his accrued compensation (consisting of accrued bonuses). On the date of issuance, our common stock had a traded market value of approximately $0.03. Mr. Carnes valued the stock issuance at $.015 per share (a 50% discount from the traded market value).
As of September 15, 2006, we owe Mr. Carnes approximately $339,100.14 in accrued compensation. This compensation consists of accrued salaries of $187,500.14 and accrued bonuses of $125,000.0. Additionally, we owe Mr. Carnes an accrued automobile allowance of $26,600.00. As of June 30, 2006, Signature Leisure had no group life, health, hospitalization, medical reimbursement or relocation plans in effect. Further, we have no pension plans or plans or agreements which provide compensation on the event of termination of employment or change in control.
Compensation to Employees/Consultants:
We have paid significant stock-based compensation for business consulting services to employees and consultants, as described below:
On August 30, 2006, we sold to Stephen W. Carnes, the Company’s President, CEO and sole Director, 22,727,272 shares of our common stock at a price of $0.22 per share for a total of $500,000. This amount was paid in exchange for the satisfaction of $500,000 of accrued bonus and salary owed by the Company to Mr. Carnes in the amount of $750,000. This issuance is subject to forfeiture in that the company may revoke the shares within two years of issuance for cause, at its discretion.
During the period ending June 30, 2006, the Company issued:
| | · | 500,000 shares of our $0.001 par value common stock to Cynthia Wainwright as compensation for services. The shares issued were unrestricted pursuant to an S-8 Registration filed with the SEC on January 27, 2006 and valued at $92,500. |
| | · | 750,000 shares of our $0.001 par value common stock to Edward Miers as compensation for services. The shares issued were unrestricted pursuant to an S-8 Registration filed with the SEC on January 27, 2006 and valued at $138,750. |
| | · | 156,756 shares of our $0.001 par value common stock to Jeff Mackay as compensation for services. The shares issued were unrestricted pursuant to an S-8 Registration filed with the SEC on January 27, 2006 and valued at $29,000. |
| | · | 500,000 shares of our $0.001 par value common stock to July Tomasi as compensation for services. The shares issued were unrestricted pursuant to an S-8 Registration filed with the SEC on January 27, 2006 and valued at $92,500. |
During the three months ended March 31, 2006, the Company issued 10,500,000 shares of its common stock to consultants in exchange for business consulting services. The stock-based compensation expense was valued at $663,000, as described in more detail the accompanying financial statements for the three months ended March 31, 2006.
During the three month period ended March 31, 2006, we issued:
| | · | 6,000,000 shares of our $0.001 par value common stock to Andra Espinoza as compensation for services. The shares issued were unrestricted pursuant to an S-8 Registration filed with the SEC on April 27, 2005 and valued at $373,200. |
| | · | 500,000 shares of our $0.001 par value common stock to Evan Weybright as compensation for services. The shares issued were unrestricted pursuant to an S-8 Registration filed with the SEC on April 27, 2005 and valued at $30,000. |
| | · | 1,000,000 shares of our $0.001 par value common stock to Cynthia Wainwright as compensation for services. The shares issued were unrestricted pursuant to an S-8 Registration filed with the SEC on April 27, 2005 and valued at $63,300. |
| | · | 500,000 shares of our $0.001 par value common stock to Matt Lettau as compensation for services. The shares issued were unrestricted pursuant to an S-8 Registration filed with the SEC on April 27, 2005 and valued at $30,000. |
| | · | 2,000,000 shares of our $0.001 par value common stock to Edward Miers as compensation for services. The shares issued were unrestricted pursuant to an S-8 Registration filed with the SEC on April 27, 2005 and valued at $133,200. |
| | · | 500,000 shares of our $0.001 par value common stock to July Tomasi as compensation for services. The shares issued were unrestricted pursuant to an S-8 Registration filed with the SEC on April 27, 2005 and valued at $33,300. |
During the 12-month period ended December 31, 2005, we issued:
| · | 12,895,550 shares of our $0.001 par value common stock to Andra Espinoza, a consultant, as compensation for services. The shares issued were unrestricted pursuant to an S-8 Registrations filed with the SEC, as amended, on April 27, 2005 and valued at $154,672. |
| | · | 8,675,000 shares of our $0.001 par value common stock to Ed Miers, a consultant, as compensation for services. The shares issued were unrestricted pursuant to an S-8 Registrations filed with the SEC, as amended, on April 27, 2005 and valued at $204,875. |
| | · | 10,975,000 shares of our $0.001 par value common stock to Evan Weybright, a consultant, as compensation for services. The shares issued were unrestricted pursuant to an S-8 Registrations filed with the SEC, as amended, on April 27, 2005 and valued at $245,250. |
On December 30, 2005, we issued 1,142,851 shares of common stock to Matt Lettau, a consultant, for a total cash sales price of $20,000 resulting in a price of $0.0175 per share. The market price of the Company’s common stock on the transaction date was a low of $0.105, high of $0.146 per share with a volume of 7,683,800 shares traded. The shares were issued as an exempt transaction under Section 4(2) of the 1933 Act and are subject to Rule 144 thereunder. The recipient of our stock took his shares for investment purposes without a view to distribution. Furthermore, we had access to information concerning our Company and our business prospects; there was no general solicitation or advertising for the purchase of our shares; there were no commissions paid; and the securities are restricted pursuant to Rule 144.
During the three month period ended December 31, 2005, we have issued
| | · | 1,000,000 shares of our $0.001 par value common stock to Cynthia Wainwright as compensation for consulting services. The shares issued were unrestricted pursuant to an S-8 Registration filed with the SEC on April 27, 2005 and valued at $7,750. |
| | · | 1,200,000 shares of our $0.001 par value common stock to Matt Lettau as compensation for consulting services. The shares issued were unrestricted pursuant to an S-8 Registration filed with the SEC on April 27, 2005 and valued at $20,750. |
| | · | 2,500,000 shares of our $0.001 par value common stock to Joe Barrett as compensation for consulting services. The shares issued were unrestricted pursuant to an S-8 Registration filed with the SEC on April 27, 2005 and valued at $20,625. |
| | · | 350,000 shares of our $0.001 par value common stock to Robert Thomas as compensation for consulting services. The shares issued were unrestricted pursuant to an S-8 Registration filed with the SEC on April 27, 2005 and valued at $3,687. |
| | · | 200,000 shares of our $0.001 par value common stock to July Tomasi as compensation for consulting services. The shares issued were unrestricted pursuant to an S-8 Registration filed with the SEC on April 27, 2005 and valued at $1,650. |
Compensation of the Director
We do not pay members of our Board any fees for attendance or similar remuneration or reimburse them for any out-of-pocket expenses incurred by them in connection with our business.
Employment Agreements
On September 3, 2003, we executed an employment agreement (the “Employment Agreement”) with Stephen Carnes. Under the terms of the Employment Agreement, Mr. Carnes is entitled to a salary of $250,000 per year and an automobile allowance of $700 per month. In addition, he has the opportunity to earn the following bonuses: (a) up to $750,000 upon the successful completion of (1) raising a minimum of $200,000 for Signature Leisure, and (2) the opening or acquisition of our first business unit; and (b) a bonus of $150,000 for each additional merger and/or acquisition and/or business unit start-up brought to Signature Leisure. Eligible bonuses will be triggered upon a merger and/or acquisition and/or business start-up. Such bonus “triggering events” are not dependent upon a minimum value of the merger, acquisition or start-up, and the potential exists for the bonus paid to be an amount greater than the value at closing of the merger, acquisition or start-up.
The following are acquisitions and business unit start-up operations for which Mr. Carnes has qualified for a bonus pursuant to the terms of his Employment Agreement:
| | · | Parker Productions. Signature Leisure purchased the assets of Parker Productions. These assets were purchased for a price of $20,000. |
| | · | E Cubed Technologies. E Cubed was a start-up corporation that Mr. Carnes incorporated and organized as a subsidiary of Signature Leisure. |
| | · | Signature Auto. Signature Auto is registered in the State of Florida. Mr. Carnes operates the car dealership business for Signature Leisure d/b/a Signature Auto. Mr. Carnes is responsible for developing this business on behalf of Signature Leisure. |
Signature Leisure has office and warehouse space located at 100 Candace Drive, Suite 100, Maitland, Florida 32751. These facilities are presently being provided to Signature Leisure by Renovo Holdings. The Chief Executive Officer of Renovo Holdings is Stephen Carnes, the Chief Executive Officer of Signature Leisure. The facility is approximately 3,600 square feet. Currently, we lease this office space on a month-to-month basis for $3,049.50 per month. Management believes these facilities are sufficient for our current operations.
There are no pending legal proceedings involving Signature Leisure.
Security Ownership Of Certain Beneficial Owners And Management
The table below sets forth information with respect to the beneficial ownership of our common stock as of September 19, 2006, for (i) any person who we know is the beneficial owner of more than 5% of our outstanding common stock; and (ii) those nominated to be a director or our directors and executive officers.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS |
Title of Class | Name and Address of Beneficial Owner | Amount and Nature of Beneficial Ownership | Percentage of Class(1) |
| | | | |
| Common | Stephen W. Carnes | 65,769,271 | 43.09% |
| Stock | 4185 W. Lake Mary Blvd. #137 | | |
| | Lake Mary, Florida | | |
| | | | |
SECURITY OWNERSHIP OF MANAGEMENT |
Title of Class | Name and address of Beneficial Owner | Amount and Nature of Beneficial Ownership | Percentage of Class (1) |
| | | | |
| Common | Stephen W. Carnes | 65,769,271 | 43.09% |
| Stock | 4185 W. Lake Mary Blvd. #137 | | |
| | Lake Mary, Florida | | |
| | | | |
| (1) | Applicable percentage of ownership is based on 152,533,218 shares of common stock outstanding as of September 19, 2006 for each stockholder. Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting of investment power with respect to securities. Shares of common stock subject to securities exercisable or convertible into shares of common stock that are currently exercisable or exercisable within 60 days of September 19, 2006 are deemed to be beneficially owned by the person holding such options for the purpose of computing the percentage of ownership of such persons, but are not treated as outstanding for the purpose of computing the percentage ownership of any other person. |
Leases and Contributed Rent
In December 2004, Renovo Holdings, an affiliate under common control, began contributing office space, located in facilities at 100 Candace Drive, Suite 100, Maitland, Florida 32751, to the Company on a month-to-month basis. The CEO of Renovo Holdings is Stephen Carnes, which is our President and CEO. During the years ended December 31, 2005 and 2004, the affiliate contributed office space valued at $1,694 and $424, respectively, based on the affiliate’s rent payments and the percentage of office space utilized by the Company. The Company executed a lease for the same office space in 2005. Payments under the lease are approximately $3,140 per month. The lease terminates on October 31, 2006.
The future minimum lease payments are $21,980 for the year ending December 31, 2006.
Note Payable
In 2005 and 2006, the following notes were issued to Steve Carnes, our president and sole director:
| | · | On December 31, 2005, the Company executed a $128,558 promissory note. The note was due on July 15, 2006. |
| | · | During the six months ended June 30, 2006, we executed promissory notes totaling $33,667 in exchange for the payment of expenses. The notes were due on July 15, 2006. |
In 2005 and 2006, the following notes were issued to Matt Lettau, our vice president
| | · | On December 31, 2005, we executed a promissory note totaling $33,507 in exchange for the payment of expenses. The note was due on July 15, 2006. |
| | · | During the six months ended June 30, 2006, we executed promissory notes totaling $15,918 in exchange for the payment of expenses. The notes were due on July 15, 2006. |
During July 2006 the above loans were consolidated into one promissory note for both the president and vice president. The president’s note began accruing interest at 12% at July 15, 2006. The vice president’s note will start accruing interest on July 15, 2007.
During the six months ended June 30, 2006, the Company paid a shareholder $2,500 toward an outstanding promissory note. The remaining principal balance on the promissory note is $12,435. Accrued interest expense on the note totaled $3,287 at June 30, 2006.
Accrued Compensation And Common Stock
2003
Commencing July 1, 2003, we began accruing an annual salary of $250,000 for Stephen Carnes, our sole officer and director, based on an Employment agreement executed in 2003. In addition, under the terms of the Employment Agreement, Mr. Carnes was awarded a monthly auto allowance of $700 per month and opportunities to receive performance-based bonuses. Pursuant to the terms of the Employment Agreement, Mr. Carnes earned a $750,000 bonus for the successful completion of (1) raising a minimum of $200,000 for us, and (2) the opening or acquisition of the Company’s first business unit (Signature Auto). We accrued $750,000 in officer compensation to recognize the bonus earned by Mr. Carnes during the year ended December 31, 2004. In February 2005, Mr. Carnes also earned a $150,000 bonus for initiating Parker Productions operations.
2004
During October 2004, Mr. Carnes approved the issuance of 7,500,000 shares of our restricted common stock as payment of $450,000 of his accrued compensation. The stock was issued at a 25% discount to the market price. Of the total $450,000 in stock issued to Mr. Carnes, $375,000 was allocated to his salary accrued through December 31, 2004. The
remaining $75,000 was allocated to his $750,000 bonus, which reduced the bonus accrual to $675,000 as of December 31, 2004.
2005
In February 2005, Mr. Carnes also earned a $150,000 bonus for initiating the Company’s Parker Productions operations. In addition, in September 2005, Mr. Carnes earned a $150,000 bonus for initiating the Company’s E Cubed Technologies, Inc. operations.
On April 28, 2005, the Company issued 1,000,000 shares of common stock to Katalyst Capital Group as payment of $15,000 for a commitment fee. The market price of the Company's common stock on the transaction date was $0.03 per share with a volume of no shares traded.
On April 28, 2005, we issued Mr. Carnes 50,000,000 shares of common stock for a $600,000 payment of accrued bonuses since June 30, 2004. The stock was issued to Mr. Carnes at a 50% discount to the market price.
In September 2005, the president and sole director earned a $150,000 bonus for initiating the Company’s E Cubed Technologies, Inc. operations.
On December 30, 2005, the Company issued 1,142,851 shares of common stock to Matt Lettau, a consultant, for a total cash sales price of $20,000 resulting in a price of $0.0175 per share. The market price of the Company's common stock on the transaction date was a low of $0.105, high of $0.146 per share with a volume of 7,683,800 shares traded.
As of December 31, 2005, accrued salaries and bonuses of Mr. Carnes totaled $250,000 and $375,000, respectively. The balance owed to Mr. Carnes at December 31, 2005 for the auto allowance totaled $21,000.
2006
On August 30, 2006, we sold to Stephen W. Carnes, the Company’s President, CEO and sole Director, 22,727,272 shares of our common stock at a price of $0.22 per share for a total of $500,000. This amount was paid in exchange for the satisfaction of $500,000 of accrued bonus and salary owed by the Company to Mr. Carnes in the amount of $750,000. This issuance is subject to forfeiture in that the company may revoke the shares within two years of issuance for cause, at its discretion.
As of September 19, 2006, we owe Mr. Carnes approximately $339,100.14 in total accrued compensation, which consists of $187,500.14 in accrued salary and $125,000 in accrued bonuses. Mr. Carnes is also owed an accrued automobile allowance of $26,600.
COMMON EQUITY AND OTHER STOCKHOLDER MATTERS
(a) Market Information
Signature Leisure’s common stock is listed on the OTCBB under the symbol “SGLS.OB”. Previously, the common stock was listed under the symbol “VLDE” (effective February 14, 2003). Prior to that, the common stock was listed under the symbol “JDLP” (effective May 24, 2002). The quotations provided are for the over the counter market which reflect interdealer prices without retail mark-up, mark-down or commissions, and may not represent actual transactions.
The following table sets forth the high and low bid prices for our common stock for the periods indicated as reported by the OTCBB. The quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not represent actual transactions.
YEAR 2004 | | High Bid | | Low Bid | |
| Quarter Ended March 31, 2004 | | $ | 0.060 | | $ | 0.014 | |
| Quarter Ended June 30, 2004 | | $ | 0.018 | | $ | 0.005 | |
| Quarter Ended September 30, 2004 | | $ | 0.006 | | $ | 0.002 | |
| Quarter Ended December 31, 2004 | | $ | 0.017 | | $ | 0.002 | |
| | | | | | | | |
YEAR 2005 | | | High Bid | | | Low Bid | |
| Quarter Ended March 31, 2005 (After a 1 for 40 reverse split) | | $ | 0.175 | | $ | 0.055 | |
| Quarter Ended June 30, 2005 | | $ | 0.065 | | $ | 0.027 | |
| Quarter Ended September 30, 2005 | | $ | 0.053 | | $ | 0.013 | |
| Quarter Ended December 31, 2005 | | $ | 0.144 | | $ | 0.015 | |
| | | | | | | | |
YEAR 2006 | | | High Bid | | | Low Bid | |
| Quarter Ended March 31, 2006 | | $ | 0.255 | | $ | 0.063 | |
| Quarter Ended June 30, 2006 | | $ | 0.299 | | $ | 0.082 | |
| Interim period from thru September 19, 2006 | | $ | 0.087 | | $ | 0.02 | |
| | | | | | | |
(b) Holders Of Common Stock
As of September 19, 2006, we had approximately 49 shareholders of our common stock and 152,533,218 shares of our common stock were issued and outstanding.
(c) Dividend
We have never declared or paid a cash dividend. There are no restrictions on the common stock or otherwise that limit the ability of us to pay cash dividends if declared by the Board. The holders of common stock are entitled to receive dividends if and when declared by the Board, out of funds legally available therefore and to share pro-rata in any distribution to the shareholders. Generally, we are not able to pay dividends if after payment of the dividends, we would be unable to pay our liabilities as they become due or if the value of our assets, after payment of the liabilities, is less than the aggregate of our liabilities and stated capital of all classes. We do not anticipate declaring or paying any cash dividends in the foreseeable future.
(d) Equity Compensation Plan
| | | Number of securities to be issued upon exercise of outstanding options, warrants and rights | | Weighted-average exercise price of outstanding options, warrants and rights | | Number of securities available for future issuance under equity compensation plans (excluding securities shown in first column) | |
| Plan Category | | | | | | | |
| Equity compensation plans approved by shareholders | | | 0 | | $ | 0.0 | | | 0 | |
Equity compensation plans not approved by shareholders (1)(2) | | | 0 | | $ | 0.0 | | | 20,000,000 | |
| | | | 0 | | $ | 0.0 | | | 20,000,000 | |
| | | | | | | | | | | |
| (1) | Consists of shares of our common stock issued or remaining available for issuance under our Second Amended Signature Leisure Stock Compensation Plan dated January 24, 2006. |
| (2) | Our Second Amended Signature Leisure Stock Compensation Plan dated January 24, 2006 authorized 20,000,000 common shares and was registered on Form S-8 Effective January 27, 2006. This plan authorizes the board to issue common stock as compensation to employees, advisors and consultants. |
General
Our Articles of Incorporation authorize the issuance of 500,000,000 shares of common stock, $0.01 par value per share. As of September 19, 2006, there were 152,533,218 outstanding shares of common stock. We are authorized to issue 10,000,000 shares of preferred stock but to date we have not issued any. Set forth below is a description of certain provisions relating to our capital stock. For additional information, regarding our stock please refer to our Articles of Incorporation and Bylaws. On January 18, 2005, Signature Leisure’s shareholders approved a 40-to-1 reverse split of its outstanding common stock. The split was declared effective February 4, 2005. The split reduced the number of outstanding from 449,815,190 to 11,245,380.
Common Stock
Each outstanding share of common stock has one vote on all matters requiring a vote of the stockholders. There is no right to cumulative voting; thus, the holder(s) of 50.1% or more of the shares outstanding can, if they choose to do so, elect all of the directors. In the event of a voluntary of involuntary liquidation, all stockholders are entitled to a pro rata distribution after payment of liabilities and after provision has been made for each class of stock, if any, having preference over the common stock. The holders of the common stock have no preemptive rights with respect to future Offerings of shares of common stock. Holders of common stock are entitled to dividends if, as and when declared by the Board out of the funds legally available therefore. It is our present intention to retain earnings, if any, for use in its business. The payment of dividends on the common stock are, therefore, unlikely in the foreseeable future.
Preferred Stock
We have 10,000,000 authorized shares of preferred stock with a par value of $0.0001 per share, issuable in such series and bearing such voting, dividend, conversion, liquidation and other rights and preferences as the Board may determine. As of September 19, 2006, none of our preferred shares were outstanding.
Limitation Of Liability: Indemnification
Our Articles of Incorporation include an indemnification provision under which we have agreed to indemnify our Board and officers from and against certain claims arising from or related to future acts or omissions as a director or officer of Signature Leisure. Insofar as indemnification for liabilities arising under the 1933 Act may be permitted to the director, officer and controlling persons of Signature Leisure pursuant to the foregoing, or otherwise, we have been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the 1933 Act and is, therefore, unenforceable.
Anti-Takeover Effects Of Provisions Of The Articles Of Incorporation
Authorized And Unissued Stock
The authorized but unissued shares of our common stock are available for future issuance without our stockholders’ approval. These additional shares may be utilized for a variety of corporate purposes including but not limited to future public or direct Offerings to raise additional capital, corporate acquisitions and employee incentive plans. However, our ability to raise capital is limited by the terms of the Standby Equity Distribution Agreement with Katalyst Capital Group. Specifically, Section 2.6 thereof prohibits us from issuing any equity for a price below the then-current market price of our common stock, as quoted by Bloomberg, LP, during the commitment period for the Standby Equity Distribution Agreement. The issuance of such shares may also be used to deter a potential takeover of Signature Leisure that may otherwise be beneficial to stockholders by diluting the shares held by a potential suitor or issuing shares to a stockholder that will vote in accordance with the Boards desires. A takeover may be beneficial to stockholders because, among other reasons, a potential suitor may offer stockholders a premium for their shares of stock compared to the then-existing market price.
The existence of authorized but unissued and unreserved shares of preferred stock may enable the Board to issue shares to persons friendly to current management which would render more difficult or discourage an attempt to obtain control of Signature Leisure by means of a proxy contest, tender offer, merger or otherwise, and thereby protect the continuity of our management.
ON ACCOUNTING AND FINANCIAL DISCLOSURE
We have had no changes or disagreements with our accountants.
The consolidated financial statements for the fiscal years ended December 31, 2005 and December 31, 2004, included in this Prospectus, and incorporated by reference in the accompanying Registration Statement, have been audited by Cordovano and Honeck, LLP, respectively, as stated in their independent auditors’ reports appearing with the financial statements and incorporated by reference in the accompanying Registration Statement. These financial statements are included in reliance upon their reports, given upon their authority as experts in accounting and auditing.
Transfer Agent
The transfer agent for our common stock is Corporate Stock Transfer. Their address is 3200 Cherry Creek Drive South, Suite 430, Denver, CO 80209. Their telephone number is (303) 282-4800.
The validity of the shares of common stock offered hereby is passed on by Michael A. Littman, Esq., located at 7609 Ralston Road, Arvada, Colorado 80002.
We have filed with the SEC in Washington, DC, a Registration Statement on Form SB-2 under the 1933 Act with respect to the shares we are registering in this Offering. This Prospectus does not contain all of the information set forth in the Registration Statement, as permitted by the rules and regulations of the SEC. Reference is hereby made to the Registration Statement and exhibits thereto for further information with respect to Signature Leisure and the shares to which this Prospectus relates. Copies of the Registration Statement and other information filed by Signature Leisure with the SEC can be inspected and copied at the public reference facilities maintained by the SEC in Washington, DC at 100 F Street, NE, Washington, DC 20549. Investors may obtain information on the operation of the Public Reference Room by calling the SEC at (800) SEC-0330. In addition, the SEC maintains a World Wide Website that contains reports, proxy statements and other information regarding registrants, such as Signature Leisure, which filed electronically with the SEC at the following Internet address: (www.sec.gov).
FINANCIAL STATEMENTS
CONTENTS
| | Page |
FINANCIAL REPORT FOR THE THREE MONTHS ENDED JUNE 30, 2006 | |
| | |
| Condensed Consolidated Balance Sheet as of June 30, 2006 (unaudited) | F-1 |
| Condensed Consolidated Statements of Operations, for the three months ended June 30, 2006 (unaudited) | F-2 |
| Condensed Consolidated Statement of Changes in Shareholders’ Deficit as of June 30, 2006 | F-3 |
| Condensed Consolidated Statements of Cash Flows, for the three months ended June 30, 2006 (unaudited) | F-4 |
| Notes to Condensed Consolidated Financial Statements | F-5 - F-10 |
| | |
FINANCIAL REPORT FOR THE YEAR ENDED DECEMBER 31, 2005 AND DECEMBER 31, 2004 | |
| | |
| Report of Independent Registered Public Accounting Firm | F-11 |
| Balance Sheet for the Year Ended December 31, 2005 | F-12 |
| Statements of Operations for the Year Ended December 31, 2005 and 2004 | F-13 |
| Statement of Changes In Shareholders’ Deficit for the Year Ended December 31, 2005 and 2004 | F-14 |
| Statements of Cash Flows for the Year Ended December 31, 2005 and 2004 | F-15 |
| Notes to Financial Statements | F-16 - F-28 |
| | |
SIGNATURE LEISURE, INC.
Consolidated Balance Sheet
June 30, 2006
(Unaudited)
| | | |
Assets | | | |
| | | | |
| Current assets: | | | |
| Cash | | $ | 178,466 | |
| Accounts receivable, less allowance for doubtful accounts of $7,405 | | | 1,704 | |
| Inventory (Note 1) | | | 16,850 | |
| Total current assets | | | 197,020 | |
| | | | | |
| Equipment, less accumulated depreciation of $1,228 | | | 2,595 | |
| | | | | |
| Intangible assets: | | | | |
| Website, net (Note 8) | | | 5,417 | |
| Contact list, net (Note 8) | | | 5,417 | |
| Total assets | | $ | 210,449 | |
| | | | | |
Liabilities and Shareholders’ Deficit | | | | |
| | | | | |
| Current liabilities: | | | | |
| Accounts payable | | $ | 5,000 | |
| Accrued liabilities | | | 596 | |
| Customer deposits | | | 3,450 | |
| Prepaid service contracts | | | 1,500 | |
| Indebtedness to related parties (Note 3) | | | 1,001,610 | |
| Notes payable (Note 2) | | | 65,000 | |
| Accrued interest payable | | | 13,300 | |
| Total current liabilities | | | 1,090,456 | |
| | | | | |
| Shareholders’ deficit (Note 5): | | | | |
| Preferred stock, $.001 par value; 10,000,000 shares authorized, no shares issued and outstanding | | | — | |
| Common stock, $.0001 par value; 500,000,000 shares authorized, 114,384,947 shares issued and outstanding | | | 11,439 | |
| Additional paid-in capital | | | 5,313,332 | |
| Retained deficit | | | (6,204,778 | ) |
| Total shareholders’ deficit | | | (880,007 | ) |
| Total liabilities and shareholders’ deficit | | $ | 210,449 | |
| | | | |
| | | | | |
See accompanying notes to consolidated financial statements.
SIGNATURE LEISURE, INC.
Consolidated Statements of Operations
(Unaudited)
| | | | | | |
| | | For The Three Months Ended | | For The Six Months Ended | |
| | | June 30, | | June 30, | |
| | | 2006 | | 2005 | | 2006 | | 2005 | |
| | | | | | | | | | |
| Revenue: | | | | | | | | | |
| Vehicle sales | | $ | 50 | | $ | | | $ | 10,340 | | $ | | |
| Service revenues | | | 7,036 | | | 16,469 | | | 10,575 | | | 23,784 | |
| | | | | | | | | | | | | | |
| Total revenue | | | 7,086 | | | 16,469 | | | 20,915 | | | 23,784 | |
| | | | | | | | | | | | | | |
| Operating expenses: | | | | | | | | | | | | | |
| Cost of sales: | | | | | | | | | | | | | |
| Vehicles | | | 7,054 | | | — | | | 31,077 | | | | |
| Contract services | | | | | | 3,535 | | | 80 | | | 8,205 | |
| | | | | | | | | | | | | | |
| Stock based compensation (Note 5): | | | | | | | | | | | | | |
| Legal services | | | 14,500 | | | 34,000 | | | 14,500 | | | 84,000 | |
| Other business consulting | | | 323,750 | | | 175,500 | | | 986,750 | | | 169,925 | |
| Commitment fee | | | | | | 15,000 | | | | | | 15,000 | |
| Officer compensation | | | | | | | | | | | | 300,000 | |
| Contributed rent (Note 7) | | | | | | 423 | | | | | | 1,694 | |
| Selling, general and administrative | | | 132,058 | | | 89,216 | | | 225,509 | | | 338,923 | |
| Total operating expenses | | | 477,362 | | | 317,674 | | | 1,257,916 | | | 917,747 | |
| | | | | | | | | | | | | | |
| Operating loss | | | (470,276 | ) | | (301,205 | ) | | (1,237,001 | ) | | (893,963 | ) |
| | | | | | | | | | | | | | |
| Interest expense | | | (1,599 | ) | | (1,515 | ) | | (3,198 | ) | | (2,459 | ) |
| | | | | | | | | | | | | | |
| Loss before income taxes | | | (471,875 | ) | | (302,720 | ) | | (1,240,199 | ) | | (896,422 | ) |
| | | | | | | | | | | | | | |
| Provision for income taxes (Note 4) | | | | | | | | | | | | | |
| Net loss | | $ | (471,875 | ) | $ | (302,720 | ) | $ | (1,240,199 | ) | $ | (896,422 | ) |
| | | | | | | | | | | | | | |
| Weighted average loss per share: | | | | | | | | | | | | | |
| Basic and diluted loss per share | | $ | (0.00 | ) | $ | (0.01 | ) | $ | (0.01 | ) | $ | (0.04 | ) |
| Weighted average number of shares of common shares outstanding | | | 112,533,140 | | | 24,220,294 | | | 108,660,578 | | | 22,376,681 | |
| | | | | | | | | | | | | | |
See accompanying notes to consolidated financial statements.
SIGNATURE LEISURE, INC.
Consolidated Statements of Changes in Shareholder’s Deficit
(Unaudited)
| | | | | | | | | | | | |
| | | Shares | | Common Stock Par Value | | Additional Paid-In Capital | | Retained Deficit | | Total | |
| | | | | | | | | | | | |
| Balance, December 31, 2005 | | | 100,138,265 | | $ | 10,014 | | $ | 4,099,007 | | $ | (4,964,579 | ) | $ | (855,558 | ) |
| | | | | | | | | | | | | | | | | |
| Common stock issued in exchange for | | | | | | | | | | | | | | | | |
consulting services (Note 5) | | | 12,250,000 | | | 1,225 | | | 985,525 | | | | | | 986,750 | |
| Common stock issued in exchange for | | | | | | | | | | | | | | | | |
legal services (Note 5) | | | 78,378 | | | 8 | | | 14,492 | | | | | | 14,500 | |
| Common stock issued in payment for | | | | | | | | | | | | | | | | |
accounts payable (Note 5) | | | 78,378 | | | 8 | | | 14,492 | | | | | | 14,500 | |
| Common stock issued in equity | | | | | | | | | | | | | | | | |
distribution agreement (Note 5) | | | 1,839,926 | | | 184 | | | 199,816 | | | | | | 200,000 | |
| Net loss | | | | | | | | | | | | (1,240,199 | ) | | (1,240,199 | ) |
| Balance, June 30, 2006 | | | 114,384,947 | | $ | 11,439 | | $ | 5,313,332 | | $ | (6,202,778 | ) | $ | (880,007 | ) |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
See accompanying notes to consolidated financial statements.
SIGNATURE LEISURE, INC.
Consolidated Statements of Cash Flows
(Unaudited)
| | | For The Six Months Ended | |
| | | June 30, | |
| | | 2006 | | 2005 | |
| | | | | | |
| CASH FLOWS FROM OPERATIONS | | | | | |
| Net loss | | $ | (1,240,199 | ) | $ | (896,422 | ) |
| Adjustments to reconcile net loss to net cash used in operating activities: | | | | | | | |
| Stock issued for services (Note 5) | | | 1,001,250 | | | 714,100 | |
| Depreciation and amortization expense | | | 3,970 | | | | |
| Changes in assets and liabilities: | | | | | | | |
| Accounts receivable | | | 6,413 | | | 10,800 | |
| Inventory and other current assets | | | 9,511 | | | | |
| Accounts payable and accrued liabilities | | | (18,004 | ) | | 3,704 | |
| Accrued interest | | | 3,198 | | | 372 | |
| Accrued salaries and related expenses | | | 129,200 | | | 143,702 | |
| Net cash used in operating activities | | $ | (104,661 | ) | $ | (23,744 | ) |
| | | | | | | | |
| CASH FLOWS USED IN INVESTING ACTIVITIES: | | | | | | | |
| Purchase of equipment | | | | | | (1,994 | ) |
| Purchase of Website | | | | | | (10,000 | ) |
| Purchase of Customer List | | | | | | (10,000 | ) |
| Net cash used in investing activities | | | | | | (21,994 | ) |
| | | | | | | | |
| CASH FLOWS FROM FINANCING ACTIVITIES: | | | | | | | |
| Proceeds from borrowings (Note 2) | | | 200,000 | | | 40,000 | |
| Proceeds from loans to related parties (Note 3) | | | 50,084 | | | 4,000 | |
| Repayments of loans to related parties | | | (2,500 | ) | | | |
| Net cash provided by financing activities | | | 247,584 | | | 44,000 | |
| | | | | | | | |
| Net change in cash | | | 142,923 | | | (1,738 | ) |
| | | | | | | | |
| Cash at beginning of period | | | 35,543 | | | 10,749 | |
| Cash at end of period | | $ | 178,466 | | $ | 9,011 | |
| | | | | | | |
| | | | | | | | |
See accompanying notes to consolidated financial statements.
SIGNATURE LEISURE, INC.
NOTES TO THE FINANCIAL STATEMENTS
(Unaudited)
Note 1 - Basis of Presentation
Description of organization
Signature Leisure, Inc. (referred to as “Signature” or the “Company”) has been focused on the following operations during the three months ended June 30, 2006 and 2005: Signature Leisure, d.b.a Signature Auto, operates as an independent dealer in motor vehicles within the State of Florida. Parker Productions provides modeling and event staffing services.
E Cubed Technologies, Inc. provides information technology consulting operations. Additionally, E Cubed is an authorized dealer for a company that provides a document imaging and retrieval solutions through software products that securely scan, store, and retrieve documents.
Management may also consider other opportunities as additional or alternative means to develop revenue for the company.
Inventory
Inventory is stated at the lower of cost (specific identification) or market. Market is generally considered to be net realizable value. Inventory consists of the following at June 30, 2006:
| Computer equipment | | $ | 16,850 | |
| Total inventory | | $ | 16,850 | |
| | | | | |
Intangible assets
The intangible assets are stated at cost and amortized over an estimated useful life of three years using the straight-line method. Amortization commenced on February 15, 2005 and amortization expense for the three months ended June 30, 2006 and 2005 totaled $3,333 and $2,500, respectively.
Major classes of intangible assets consist of the following at June 30, 2006 and 2005:
| | | June 30, | |
| | | 2006 | | 2005 | |
| Web site | | $ | 10,000 | | $ | 10,000 | |
| Customer list | | | 10,000 | | | 10,000 | |
| Accumulated amortization | | | (9,167 | ) | | (2,500 | ) |
| | | $ | 10,833 | | $ | 17,500 | |
| | | | | | | | |
SIGNATURE LEISURE, INC.
NOTES TO THE FINANCIAL STATEMENTS
(Unaudited)
Note 1 - Basis of Presentation (continued)
Cash and cash equivalents
For the purpose of the statements of cash flows, all highly liquid investments with a maturity of three months or less are considered to be cash equivalents.
General and administrative expenses
General and administrative expenses consist of the following for the three months ended June 30, 2006 and 2005:
| | | 2006 | | 2005 | |
| Officer compensation | | $ | 125,000 | | $ | 125,000 | |
| Officer bonus | | | | | | 150,000 | |
| Other G & A expense | | | 105,509 | | | 63,923 | |
| | | $ | 230,509 | | $ | 338,923 | |
| | | | | | | | |
Note 2 Notes payable
On December 31, 2005, the company executed a note with Katalyst combining promissory notes and accrued interest into one in the amount of $69,689. The note carries an eight percent interest rate and matures on December 31, 2006.
Accrued interest on this note payable totaled $7,287 at June 30, 2006.
Note 3 - Related Party Transactions
Notes payable
The following notes were issued to the Company’s president and sole director and are included in the accompanying financial statements as “Indebtedness to related parties”.
On December 31, 2005 the Company executed a $128,558 promissory note. The note is due on July 15, 2006. Interest begins to accrue at 12% at that date if the note is not paid.
During the six months ended June 30, 2006, the Company executed promissory notes totaling $33,667 in exchange for the payment of expenses. The notes are due on July 15, 2006. Interest begins to accrue at 12% at that date if the note is not paid.
No interest was paid during the six months ended June 30, 2006.
The following notes were issued to the Company’s vice president and are included in the accompanying financial statements as “Indebtedness to related parties”.
On December 31, 2005, the Company executed a promissory note totaling $33,507 in exchange for the payment of expenses. The note is due on July 15, 2006. Interest begins to accrue at 12% at that date if the note is not paid. During the six months ended June 30, 2006, the Company executed promissory notes totaling $15,918 in exchange for the payment of expenses. The notes are due on July 15, 2006. Interest begins to accrue at 12% at that date if the note is not paid.
SIGNATURE LEISURE, INC.
NOTES TO THE FINANCIAL STATEMENTS
(Unaudited)
Note 3 - Related Party Transactions (continued)
No interest was paid during the six months ended June 30, 2006.
During July 2006 the above loans were consolidated into one promissory note for both the president and vice president. The president’s note will begin accruing interest at July 15, 2006. The vice president’s note will start accruing interest on July 15, 2007.
During the six months ended June 30, 2006 the company paid a shareholder $2,500 toward an outstanding promissory note. The remaining principal balance of $12,435 is included in the accompanying financial statements as “Indebtedness to related parties”. Accrued interest expense on the note totaled $3,287 at June 30, 2006 and is included in “Accrued interest payable” on the balance sheet.
Accrued compensation and common stock
Commencing July 1, 2003, the Company began accruing an annual salary of $250,000 for its president and sole director based on an employment agreement executed in 2003. In addition, under the terms of the employment agreement, the president and sole director was awarded a monthly auto allowance of $700 per month and opportunities to receive performance-based bonuses. As of June 30, 2006, the president and sole director had not received any payments toward the auto allowance. The balance owed at June 30, 2006 for the auto allowance totaled $25,200, which is included in the accompanying condensed consolidated financial statements as “Indebtedness to related parties”.
No additional bonuses were authorized or accrued for the six months ended June 30, 2006.
As of June 30, 2006, accrued salaries and bonuses of the president and sole director totaled $750,000. These accruals are included in the accompanying condensed consolidated financial statements as “Indebtedness to related parties”.
Note 4: Income Taxes
The Company records its income taxes in accordance with Statement of Financial Accounting Standard No. 109, “Accounting for Income Taxes”. The Company incurred net operating losses during all periods presented resulting in a deferred tax asset, which was fully allowed for; therefore, the net benefit and expense resulted in no income taxes.
Note 5 - Stockholder’s Equity
Preferred stock
Preferred stock may be issued in series as determined by the Board of Directors. As required by law, each series must designate the number of shares in the series and each share of a series must have identical rights of (1) dividend, (2) redemption, (3) rights in liquidation, (4) sinking fund provisions for the redemption of the shares, (5) terms of conversion and (6) voting rights. The Company is authorized to issue 10,000,000 of its $0.001 par value preferred stock. No preferred stock was issued and outstanding at June 30, 2006.
Common stock
During the six months ended June 30, 2006, the Company issued 12,406,756 shares of its common stock to consultants in exchange for business consulting services. Stock-based compensation expense of $1,001,250 was recognized in the accompanying financial statements for the six months ended June 30, 2006. The stock is valued using a regression analysis. The analysis uses the prior months mean price on a normal curve to predict decreases in volume.
SIGNATURE LEISURE, INC.
NOTES TO THE FINANCIAL STATEMENTS
(Unaudited)
Note 5 - Stockholder’s Equity (continued)
Standby Equity Distribution Agreement
During October 2004, the Company entered into a Standby Equity Distribution Agreement (the “Agreement”) with Katalyst. Under the terms of the Agreement, Katalyst has committed to purchase up to $5 million of the Company’s common stock over the course of 24 months after an effective registration of the Company’s common stock. Any purchases are to be issued under the securities laws of the United States under Regulation D. The purchase price has been set at 99% of the market price, which is to be calculated based on the lowest daily volume weighted average price of the stock over the five trading days following the Company’s funding request. 1,839,926 shares have been issued under the Agreement through the date of this report. By the terms of this agreement the effective date occurs on the date on which the SEC first declares effective a related registration statement or by mutual written agreement of the parties. Neither of these conditions has occurred.
Note 6 - Going Concern
The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. As shown in the accompanying financial statements, the Company has incurred recurring losses, used significant cash in support of its operating activities and, based upon current operating levels, requires additional capital or significant reconfiguration of its operations to sustain its operations for the foreseeable future. These factors, among others, may indicate that the Company will be unable to continue as a going concern.
The financial statements do not include any adjustments relating to the recoverability and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. The Company’s continuation as a going concern is dependent upon its ability to generate sufficient cash flow to meet its obligations on a timely basis and ultimately to attain profitability. The Company has limited capital with which to pursue its business plan. There can be no assurance that the Company’s future operations will be significant and profitable, or that the Company will have sufficient resources to meet its objectives. During the six months ended June 30, 2006 and 2005, the Company has been dependent upon its officers and other insiders to provide working capital. However, there is no assurance that these loans and capital advances will continue in the future. The Company intends to complete a private placement offering of its common stock to raise sufficient financing in order to meet its financial requirements over the next twelve months and to fund its business plan. There is no assurance that the Company will be successful in raising additional funds.
Note 7 - Commitments and Contingencies
Leases - The Company executed a lease for office space in 2005. Payments under the lease are approximately $3,140 per month. The lease terminates on October 31, 2006. The future minimum lease payments are as follows:
| Year end December 31, 2006 | | $ | 21,980 | |
| | | | | |
Legal Matters - The Company is occasionally party to litigation or threat of litigation arising in the normal course of business. Management, after consultation with legal counsel, does not believe that the resolution of any such matters will have a material effect on the Company’s financial position or results of operations.
Employment Agreement - On September 3, 2003, the Company executed an Employment Agreement (the “Agreement”) with its president. Under the terms of the Agreement, the president is to receive a salary of $250,000 per year and an automobile allowance of $700 per month. In addition, the president has the opportunity to a bonus of $150,000 for each additional merger and/or acquisition and/or business unit start-up brought to the Company.
SIGNATURE LEISURE, INC.
NOTES TO THE FINANCIAL STATEMENTS
(Unaudited)
Note 7 - Commitments and Contingencies (continued)
Note 8: Segment Reporting
Company’s method of internal reporting segregates its business by product/service. Effective February 15, 2005, in accordance with the Company’s internal reporting, the Company changed its segment reporting from one reportable segment to two. Effective September 21, 2005, in accordance with the Company’s internal reporting, the Company changed its segment reporting from two reportable segments to three.
The Company’s reportable segments are as follows:
Modeling and Event Staffing Services - A full service modeling, event staffing and promotion company.
Information Technology consulting operations - an authorized dealer for DocSTAR (Document Storage and Retrieval) which provides clients with a document imaging and retrieval solution and offers software products for the document imaging industry with a suite of software solutions that securely scans, stores and retrieves documents.
Vehicle Sales - The Company specializes in both retail and wholesale sales of quality pre-owned cars, trucks and S.U.V.’s. The accounting policies of the segments are the same as those described in “Significant Accounting Policies,” except that segment data includes intersegment revenues. The Company has no intersegment sales during the six months ended June 30, 2006 and 2005. All sales of products and services were to third parties at current market prices. The Company evaluates the performance of its segments and allocates resources to them based on a variety of indicators including revenues, cost of goods sold, operating income, and total identifiable assets.
The table below presents information about the net income (loss) and segment assets used by the chief operating decision makers of the Company as of and for the six months ended June 30, 2006:
| | | Corporate Division | | Vehicle Sales | | and Events | | Technology Services | | Total | |
| Revenues | | | | | | | | | | | |
| Vehicle sales | | $ | | | $ | 10,765 | | $ | | | $ | | | $ | 10,765 | |
| Service Revenues | | | | | | | | | | | | 10,150 | | | 10,150 | |
| | | | — | | | 10,765 | | | | | | 10,150 | | | 20,915 | |
| | | | | | | | | | | | | | | | | |
| Cost of sales | | | | | | 20,639 | | | 80 | | | 10,438 | | | 31,157 | |
| Gross profit | | | | | | (9,874 | ) | | (80 | ) | | (288 | ) | | (10,242 | ) |
| | | | | | | | | | | | | | | | | |
| Stock based Legal | | | | | | | | | | | | | | | | |
| Stock based consulting | | | 1,001,250 | | | | | | | | | | | | 1,001,250 | |
| Stock based commitment fee | | | | | | | | | | | | | | | | |
| Contributed Rent | | | | | | | | | | | | | | | | |
| Interest Expense | | | 3,198 | | | | | | | | | | | | 3,198 | |
| General and administrative | | | 209,099 | | | 7,202 | | | 4,218 | | | 4,990 | | | 225,509 | |
| | | | 1,213,547 | | | 7,202 | | | 4,218 | | | 4,990 | | | 1,229,957 | |
| Net Loss | | $ | (1,213,547 | ) | $ | (17,076 | ) | $ | (4,298 | ) | $ | (5,278 | ) | $ | (1,240,199 | ) |
| | | | | | | | | | | | | | | | | |
SIGNATURE LEISURE, INC.
NOTES TO THE FINANCIAL STATEMENTS
(Unaudited)
NOTE 4 - INCOME TAXES (CONTINUED
Net deferred tax assets consist of the following:
| | | For the years ending December 31, | |
| | | 2005 | | 2004 | |
| Gross deferred tax asset | | $ | 1,726,550 | | $ | 1,117,909 | |
| Gross deferred tax liability | | | | | | | |
| Valuation allowance | | | (1,726,550 | ) | | (1,117,909 | ) |
| Net deferred tax asset | | $ | | | $ | | |
| | | | | | | | |
At December 31, 2005, the Company’s current tax benefit consisted of a net tax asset of $1,726,550, due to operating loss carryforwards of $4,630,360, which was fully allowed for, in the valuation allowance of $1,726,550. The valuation allowance results in deferred tax expense, which offsets the net deferred tax asset for which there is no assurance of recovery. The changes in the valuation allowance for the years ended December 31, 2005 and 2004 totaled $608,641 and $710,121, respectively. Net operating loss carryforwards will expire through 2025. The Company did not pay any income taxes during the year ended December 31, 2005 or 2004.
The valuation allowance will be evaluated at the end of each year, considering positive and negative evidence about whether the asset will be realized. At that time, the allowance will either be increased or reduced; reduction could result in the complete elimination of the allowance if positive evidence indicates that the value of the deferred tax asset is no longer impaired and the allowance is no longer required.
Should the Company undergo an ownership change, as defined in Section 382 of the Internal Revenue Code, the Company’s tax net operating loss carry forwards generated prior to the ownership change will be subject to an annual limitation which could reduce or defer the utilization of these losses.
NOTE 5 - STOCKHOLDER’S EQUITY
Preferred stock
Preferred stock may be issued in series as determined by the Board. As required by law, each series must designate the number of shares in the series and each share of a series must have identical rights of (1) dividend, (2) redemption, (3) rights in liquidation, (4) sinking fund provisions for the redemption of the shares, (5) terms of conversion and (6) voting rights. The Company is authorized to issue 10,000,000 of its $0.001 par value preferred stock. No preferred stock was issued and outstanding at December 31, 2005.
Stock-based compensation plan
During the year ended December 31, 2004, the Company adopted a stock compensation plan in order to provide compensation to consultants, advisors and employees. This plan will terminate when the last of the 150,000,000 allocated shares is granted or August of 2014, whichever is earlier. Shares granted as compensation to non-employees are recorded at the fair value of the services provided since that provides a more objective source of information. The transactions were recorded based on the fair value of the services provided, ranging from $.001 to $1.00 per share.
During 2005, the Company issued 48,556,284 share of common stock to attorneys and consultants in exchange for legal and consulting services. Stock-based compensation expense of $912,079 was recognized in the accompanying financial statements for the year ended December 31, 2005.
SIGNATURE LEISURE, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 5 - STOCKHOLDER’S EQUITY (CONTINUED)
Common stock
During the year ended December 31, 2004, the Company issued 1,977,500 shares of its common stock to consultants in exchange for business consulting services. Stock-based compensation expense of $714,100 was recognized in the accompanying financial statements for the year ended December 31, 2004.
During 2004, the Company issued 7,500,000 shares of common stock to its president as payment for $450,000 in accrued salary On January 18, 2005, the Company held a Special Shareholders Meeting and ratified a 40:1 reverse stock split. This proportionately decreased the number of shares of common stock of the corporation. This resulted in outstanding shares and January 1, 2005 of 10,439,164. Shares issued prior to January 18, 2005 have been restated to reflect the reverse stock split.
During 2005, the Company issued 50,000,000 shares of common stock to its president as payment for $600,000 in accrued bonuses.
SEDA
During October 2004, the Company entered into a Standby Equity Distribution Agreement (the “Agreement”) with Katalyst Capital Group, Ltd.. Under the terms of the Agreement, Katalyst Capital Group has committed to purchase up to $5 million of the Company’s common stock over the course of 24 months after an effective registration of the Company’s common stock. Any purchases are to be issued under the securities laws of the United States under Regulation D. The purchase price has been set at 99% of the market price, which is to be calculated based on the lowest daily volume weighted-average price of the stock over the five trading days following the Company’s funding request. No shares have been issued under the Agreement through the date of this report. By the terms of this agreement the effective date occurs on the date on which the SEC first declares effective a related Registration Statement or by mutual written agreement of the parties. Neither of these conditions has occurred.
Common stock options
Effective April 28, 2003, the Company granted a consultant options to purchase 15,000 shares of the Company’s common stock. The options’ exercise prices range from $12.00 to $30.00 and expired on April 28, 2005. The Company determined the fair value of the options in accordance with SFAS 123 and recorded stock-based compensation expense of $125,000 in the accompanying financial statements.
The following schedule summarizes the changes in the Company’s outstanding stock options for the years ended December 31, 2005 and 2004:
| | | Options Outstanding and Exercisable | | | |
| | Number of Shares | | Exercise Price Per Share | | Weighted Average Exercise Price Per Share | |
| Balance at December 31, 2003 | | | 15,000 | | $ | 12.00 to $30.00 | | $ | 20.80 | |
| Options granted | | | | | $ | | | $ | | |
| Options exercised | | | | | $ | | | $ | | |
| Options expired | | | | | $ | | | $ | | |
| Balance at December 31, 2004 | | | 15,000 | | $ | 12.00 to $30.00 | | $ | 20.80 | |
| Options granted | | | | | $ | | | $ | | |
| Options exercised | | | | | $ | | | $ | | |
| Options expired | | | (15,000 | ) | $ | 12.00 to $30.00 | | $ | 20.80 | |
| Balance at December 31, 2005 | | | | | $ | | | $ | | |
| | | | | | | | | | | |
SIGNATURE LEISURE, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 6 - GOING CONCERN
The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. As shown in the accompanying financial statements, the Company has incurred recurring losses, has used significant cash in support of its operating activities and, based upon current operating levels, requires additional capital or significant reconfiguration of its operations to sustain its operations for the foreseeable future. These factors, among others, may indicate that the Company will be unable to continue as a going concern.
The financial statements do not include any adjustments relating to the recoverability and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. The Company’s continuation as a going concern is dependent upon its ability to generate sufficient cash flow to meet its obligations on a timely basis and ultimately to attain profitability. The Company has limited capital with which to pursue its business plan. There can be no assurance that the Company’s future operations will be significant and profitable, or that the Company will have sufficient resources to meet its objectives.
During the years ended December 31, 2005 and 2004, the Company has been dependent upon its officer and other insiders to provide working capital. However, there is no assurance that these loans and capital advances will continue in the future.
The Company intends to complete a private placement offering of its common stock to raise sufficient financing in order to meet its financial requirements over the next twelve months and to fund its business plan. There is no assurance that the Company will be successful in raising additional funds.
NOTE 7 - COMMITMENTS AND CONTINGENCIES
Leases - In December 2004, Renovo Holdings, an affiliate under common control, began contributing office space to the Company on a month-to-month basis. During the year ended December 31, 2005 and 2004, the affiliate contributed office space valued at $1,694 and $424, respectively, based on the affiliate’s rent payments and the percentage of office space utilized by the Company. The Company executed a lease for the same office space in 2005. Payments under the lease are approximately $3,140 per month. The lease terminates on October 31, 2006.
The future minimum lease payments are as follows:
| Year end December 31, 2006 | | $ | 31,410 | |
| | | | | |
Legal matters - The Company is occasionally party to litigation or threat of litigation arising in the normal course of business. Management, after consultation with legal counsel, does not believe that the resolution of any such matters will have a material effect on the Company’s financial position or results of operations.
SIGNATURE LEISURE, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 7 - COMMITMENTS AND CONTINGENCIES (CONTINUED)
Employment Agreement - On September 3, 2003, the Company executed an Employment Agreement (the “Agreement”) with its president. Under the terms of the Agreement, the president is to receive a salary of $250,000 per year and an automobile allowance of $700 per month. In addition, the president has the opportunity to earn the following bonuses:
A bonus of $750,000 upon the successful completion of (1) raising a minimum of $200,000 for the
a) Company, and (2) the opening or acquisition of the Company’s first business unit. (Executed in 2004)
b) A bonus of $150,000 for each additional merger and/or acquisition and/or business unit start-up brought to the Company. (Two bonuses executed in 2005)
NOTE 8 - ASSET ACQUISITION
On February 15, 2005, the Company acquired assets from Parker Productions (“Parker”), a sole proprietorship operating in the State of Florida. Parker’s operations consisted of modeling and event staffing services. The Company acquired the assets (including website www.parkerproductions.com, a contact list of models and clients, and use of the name Parker Productions) in exchange for the following:
1. $20,000 cash;
2. A structured agreement to pay 2% of the net profits of the Parker Productions division to Jill Reynolds (former owner of the Parker assets) for as long as the Company operates the Parker Productions division or for a minimum of ten years, whichever period is longer.
3. Ear-marked $20,000 cash as “seed capital” for use within the Parker Productions division.
During February 2005, Signature incorporated a new company with the name Parker Productions, Inc. (“PPI”). PPI is a wholly owned subsidiary of Signature. Following Signature’s acquisition of the Parker assets, Signature placed the assets in PPI.
Website and contact list are stated at cost and amortized over an estimated useful life of three years using the straight-line method. Amortization commenced on February 15, 2005 and amortization expense for the nine months ended December 31, 2005 totaled $5,834 Estimated aggregate amortization in future years is as follows:
| Year ended December 31, | | | |
| 2006 | | $ | 6,667 | |
| 2007 | | | 6,667 | |
| 2008 | | | 832 | |
| Total | | $ | 14,166 | |
| | | | | |
SIGNATURE LEISURE, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 9 - SEGMENT REPORTING
Company’s method of internal reporting segregates its business by product/service. Effective February 15, 2005, in accordance with the Company’s internal reporting, the Company changed its segment reporting from one reportable segment to two. Effective September 21, 2005, in accordance with the Company’s internal reporting, the Company changed its segment reporting from two reportable segments to three.
The Company’s reportable segments are as follows:
Modeling and Event Staffing Services - A full service modeling, event staffing and promotion company.
Information Technology consulting operations - an authorized dealer for DocSTAR (Document Storage and Retrieval) which provides clients with a document imaging and retrieval solution and offers software products for the document imaging industry with a suite of software solutions that securely scans, stores and retrieves documents. Vehicle Sales - The Company specializes in both retail and wholesale sales of quality pre-owned cars, trucks and S.U.Vs.
The accounting policies of the segments are the same as those described in “Significant Accounting Policies,” except that segment data includes intersegment revenues. The Company has no intersegment sales during the years ended December 31, 2005 and 2004. All sales of products and services were to third parties at current market prices. The Company evaluates the performance of its segments and allocates resources to them based on a variety of indicators including revenues, cost of goods sold, operating income, and total identifiable assets.
The table below presents information about the net income (loss) and segment assets used by the chief operating decision makers of the Company as of and for the years ended December 31, 2005 and 2004:
| | | Corporate Division | | Vehicle Sales | | Modeling and Events | | Technology Services | | Total | |
| Revenues | | | | | | | | | | | |
| Vehicle Sales | | $ | | | $ | 45,182 | | $ | | | $ | | | $ | 45,182 | |
| Service Revenues | | | 669 | | | | | | 26,575 | | | 29,206 | | | 56,450 | |
| | | | 669 | | | 45,182 | | | 26,575 | | | 29,206 | | | 101,632 | |
| Cost of Sales | | | | | | 45,001 | | | 16,076 | | | 12,733 | | | 73,810 | |
| Gross Profit | | | 669 | | | 181 | | | 10,499 | | | 16,473 | | | 27,822 | |
| Stock based legal | | | 95,875 | | | | | | | | | | | | 95,875 | |
| Stock based consulting | | | 802,898 | | | | | | | | | | | | 802,898 | |
| Stock based commitment fee | | | 15,000 | | | | | | | | | | | | 15,000 | |
| Contributed rent | | | 1,694 | | | | | | | | | | | | 1,694 | |
| Interest expense | | | 8,383 | | | | | | | | | | | | 8,383 | |
| General and administrative | | | 672,861 | | | 19,921 | | | 12,469 | | | 17,851 | | | 723,102 | |
| | | | 1,596,711 | | | 19,921 | | | 12,469 | | | 17,851 | | | 1,646,952 | |
| | | | | | | | | | | | | | | | | |
| Net Loss | | $ | (1,596,042 | ) | $ | (19,740 | ) | $ | (1,970 | ) | $ | (1,378 | ) | $ | (1,619,130 | ) |
| | | | | | | | | | | | | | | | | |
SIGNATURE LEISURE, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 10 - SUBSEQUENT EVENT
The Company had established two $50,000 floor plans. These credit lines were approved for financing pre-owned vehicle inventory purchases. One line carried a 4.50% interest rate and the second carried a variable interest rate equal to 3.00% over the prime rate. Advances under the floor plans were payable within 30 days of disbursement and were collateralized by the Company’s vehicle inventory and other Company-owned assets.
In February 2005 the company elected not to renew one of the floor plans as in was deemed that it was not needed to finance any vehicles. No amounts were outstanding at December 31, 2005.
In February of 2006 the second floor plan was canceled at the Company’s discretion as it was deemed that it was not needed to finance any vehicles.
We have not authorized any dealer, salesperson or other person to provide any information or make any representations about Signature Leisure, Inc., except the information or representations contained in this Prospectus. You should not rely on any additional information or representations if made. | |
| | |
----------------------- | |
| | |
This Prospectus does not constitute an offer to sell, or a solicitation of an offer to buy any securities: o except the common stock offered by this Prospectus; o in any jurisdiction in which the offer or solicitation is not authorized; o in any jurisdiction where the dealer or other salesperson is not qualified to make the offer or solicitation; o to any person to whom it is unlawful to make the offer or solicitation; or o to any person who is not a United States resident or who is outside the jurisdiction of the United States. The delivery of this Prospectus or any accompanying sale does not imply that: o there have been no changes in the affairs of Signature Leisure after the date of this Prospectus; or o the information contained in this Prospectus is correct after the date of this Prospectus. | ---------------------- PROSPECTUS --------------------- 50,000,000 Shares of Common Stock SIGNATURE LEISURE, INC. October __, 2006 |
| | |
----------------------- | |
| | |
| Until _________, 2006, all dealers effecting transactions in the registered securities, whether or not participating in this distribution, may be required to deliver a Prospectus. This is in addition to the obligation of dealers to deliver a Prospectus when acting as underwriters. | |
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Indemnification Of Our Directors And Officers
Our Articles of Incorporation include an indemnification provision under which we have agreed to indemnify our director and officer from and against certain claims arising from or related to future acts or omissions as a director or officer of Signature Leisure. Insofar as indemnification for liabilities arising under the 1933 Act may be permitted to director, officer and controlling persons of Signature Leisure pursuant to the foregoing, or otherwise, we have been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the 1933 Act and is, therefore, unenforceable.
Other Expenses Of Issuance And Distribution
The following table sets forth estimated expenses expected to be incurred in connection with the issuance and distribution of the securities being registered. We will pay all of the expenses in connection with this Offering.
| Securities and Exchange Commission Registration Fee | | $ | 134.00 | |
| Printing and Engraving Expenses | | $ | 2,500.00 | |
| Accounting Fees and Expenses | | $ | 15,000.00 | |
| Legal Fees and Expenses | | $ | 50,000.00 | |
| Miscellaneous | | $ | 19,366.00 | |
TOTAL | | $ | 87,000.00 | |
| | | | |
Recent Sales Of Unregistered Securities
We have issued the following securities in the past three years without registering them under the 1933 Act:
2006
On January 20, 2005, we entered into the Standby Equity Distribution Agreement with Katalyst Capital Group. Under the Standby Equity Distribution Agreement, Signature Leisure may issue and sell to Katalyst Capital Group common stock for a total purchase price of up to $5,000,000. The purchase price for the shares is equal to 99% of the market price, which is defined in the Standby Equity Distribution Agreement as the lowest volume weighted-average price of the common stock during the five trading days following the notice date. The amount of each advance is subject to an aggregate maximum advance amount of $200,000 within seven trading days. In connection with the Standby Equity Distribution Agreement, Katalyst Capital Group received 1,000,000 shares of our common stock as a one-time commitment fee. Katalyst Capital Group is entitled to retain a fee of 1% of each cash advance. In connection with the Standby Equity Distribution Agreement, we filed the 2005 Registration Statement, registering 29,868,360 shares of our common stock on behalf of Katalyst Capital Group. The 2005 Registration Statement was declared effective on June 9, 2006. As of September 19, 2006, the Company had received $592,719 of gross proceeds since the 2005 Registration Statement was declared effective and issued $13,260,925 shares to Katalyst Capital Group under the Standby Equity Distribution Agreement. As of September 19, 2006, the remaining gross proceeds that we may receive under the Standby Equity Distribution Agreement are $4,407,281.
During the three month period ended March 31, 2006, we issued:
| | · | 600,000 shares of our $0.001 par value common stock to Andra Espinoza as compensation for services. The shares issued were unrestricted pursuant to an S-8 Registration filed with the SEC on April 27, 2005 and valued at $373,200. |
| | · | 500,000 shares of our $0.001 par value common stock to Evan Weybright as compensation for services. The shares issued were unrestricted pursuant to an S-8 Registration filed with the SEC on April 27, 2005 and valued at $30,000. |
| | · | 1,000,000 shares of our $0.001 par value common stock to Cynthia Wainwright as compensation for services. The shares issued were unrestricted pursuant to an S-8 Registration filed with the SEC on April 27, 2005 and valued at $63,300. |
| | · | 500,000 shares of our $0.001 par value common stock to Matt Lettau as compensation for services. The shares issued were unrestricted pursuant to an S-8 Registration filed with the SEC on April 27, 2005 and valued at $30,000. |
| | · | 2,000,000 shares of our $0.001 par value common stock to Edward Miers as compensation for services. The shares issued were unrestricted pursuant to an S-8 Registration filed with the SEC on April 27, 2005 and valued at $133,200. |
| | · | 500,000 shares of our $0.001 par value common stock to July Tomasi as compensation for services. The shares issued were unrestricted pursuant to an S-8 Registration filed with the SEC on April 27, 2005 and valued at $33,300. |
During the three month period ending June 30, 2006, the Company issued:
| | · | 500,000 shares of our $0.001 par value common stock to Cynthia Wainwright as compensation for services. The shares issued were unrestricted pursuant to an S-8 Registration filed with the SEC on January 27, 2006 and valued at $92,500. |
| | · | 750,000 shares of our $0.001 par value common stock to Edward Miers as compensation for services. The shares issued were unrestricted pursuant to an S-8 Registration filed with the SEC on January 27, 2006 and valued at $138,750. |
| | · | 156,756 shares of our $0.001 par value common stock to Jeff Mackay as compensation for services. The shares issued were unrestricted pursuant to an S-8 Registration filed with the SEC on January 27, 2006 and valued at $29,000. |
| | · | 500,000 shares of our $0.001 par value common stock to July Tomasi as compensation for services. The shares issued were unrestricted pursuant to an S-8 Registration filed with the SEC on January 27, 2006 and valued at $92,500. |
On August 30, 2006, we sold to Stephen W. Carnes, the Company’s President, CEO and sole Director, 22,727,272 shares of our common stock at a price of $0.22 per share for a total of $500,000. This amount was paid in exchange for the satisfaction of $500,000 of accrued bonus and salary owed by the Company to Mr. Carnes in the amount of $750,000. This issuance is subject to forfeiture in that the company may revoke the shares within two years of issuance for cause, at its discretion.
2005
On April 28, 2005, the Company issued 1,000,000 shares of common stock to Katalyst Capital Group as payment of $15,000 for a commitment fee in connection with the Standby Equity Distribution Agreement. The market price of the Company's common stock on the transaction date was $0.03 per share with a volume of no shares traded.
On April 28, 2005, Mr. Carnes approved the issuance of 50,000,000 shares of our restricted common stock as payment of $600,000 of his accrued compensation (consisting of accrued bonuses). On the date of issuance, our common stock had a traded market value of approximately $0.03. Mr. Carnes valued the stock issuance at $0.015 per share (a 50% discount from the traded market value).
On December 30, 2005, the Company issued 1,142,851 shares of common stock to Matt Lettau, a consultant, for a total cash sales price of $20,000 resulting in a price of $0.0175 per share. The market price of the Company’s common stock on the transaction date was a low of $0.105, high of $0.146 per share with a volume of 7,683,800 shares traded.
The shares were issued as exempted transactions under Section 4(2) of the 1933 Act and are subject to Rule 144 thereunder. The recipient(s) of our stock took their shares for investment purposes without a view to distribution. Furthermore, they had access to information concerning our Company and our business prospects; there was no general
solicitation or advertising for the purchase of our shares; there were no commissions paid; and the securities are restricted pursuant to Rule 144.
Additionally, the Company issued the following shares in 2005:
During the 12-month period ended December 31, 2005, we issued 12,895,550 shares of our $0.001 par value common stock to Andra Espinoza, a consultant, as compensation for services. The shares issued were unrestricted pursuant to an S-8 Registrations filed with the SEC, as amended, on April 27, 2005 and valued at $154,672.
During the 12-month period ended December 31, 2005, we issued 8,675,000 shares of our $0.001 par value common stock to Ed Miers, a consultant, as compensation for services. The shares issued were unrestricted pursuant to an S-8 Registrations filed with the SEC, as amended, on April 27, 2005 and valued at $204,875.
During the 12-month period ended December 31, 2005, we issued 10,975,000 shares of our $0.001 par value common stock to Evan Weybright, a consultant, as compensation for services. The shares issued were unrestricted pursuant to an S-8 Registrations filed with the SEC, as amended, on April 27, 2005 and valued at $245,250.
During the three month period ended December 31, 2005, we issued 1,000,000 shares of our $0.001 par value common stock to Cynthia Wainwright as compensation for services. The shares issued were unrestricted pursuant to an S-8 Registration filed with the SEC on April 27, 2005 and valued at $7,750.
During the three month period ended December 31, 2005, we issued 1,200,000 shares of our $0.001 par value common stock to Matt Lettau as compensation for services. The shares issued were unrestricted pursuant to an S-8 Registration filed with the SEC on April 27, 2005 and valued at $20,750.
During the three month period ended December 31, 2005, we issued 2,500,000 shares of our $0.001 par value common stock to Joe Barrett as compensation for services. The shares issued were unrestricted pursuant to an S-8 Registration filed with the SEC on April 27, 2005 and valued at $20,625.
During the three month period ended December 31, 2005, we issued 350,000 shares of our $0.001 par value common stock to Robert Thomas as compensation for services. The shares issued were unrestricted pursuant to an S-8 Registration filed with the SEC on April 27, 2005 and valued at $3,687.
During the three month period ended December 31, 2005, we issued 500,000 shares of our $0.001 par value common stock to Irving Einhorn as compensation for services. The shares issued were unrestricted pursuant to an S-8 Registration filed with the SEC on April 27, 2005 and valued at $3,875.
During the three month period ended December 31, 2005, we issued 200,000 shares of our $0.001 par value common stock to July Tomasi as compensation for services. The shares issued were unrestricted pursuant to an S-8 Registration filed with the SEC on April 27, 2005 and valued at $1,650.
2004
On January 20, 2004, we issued 1,000,000 shares of common stock to Katalyst Capital Group as a commitment fee related to the Standby Equity Distribution Agreement. With respect to the sale of unregistered securities referenced herein, this transaction was exempt from registration pursuant to Section 4(2) of the 1933 Act, and Regulation D promulgated under the 1933 Act.
On January 30, 2004, Mr. Carnes approved the issuance of 2,500 common shares issued at $2.00 a share on January 30, 2004 valued at $5,000 issued to Equitilink, LLC for investor relations services provided to Signature Leisure Inc.
During October 2004, Mr. Carnes approved the issuance of 7,500,000 shares of our restricted common stock as payment of $450,000 of his accrued compensation.
2003
During the year ended December 31, 2003, we issued 9,375 shares of its common stock to attorneys in exchange for legal services. The shares issued were valued based on the market value of our common stock on the transaction dates,
ranging from $8.40 to $10.40 per share. Stock-based compensation expense of $90,000 was recognized in the financial statements for the year ended December 31, 2003.
During the year ended December 31, 2003, Signature Leisure entered into a securities purchase agreement for the sale of $500,000 of our common stock. The initial purchase was for $250,000 resulting in the issuance of 1,472,320 common $.0001 par value shares to a single foreign purchaser.
During the year ended December 31, 2003, we issued 12,500 shares of our common stock in exchange for stock Offering costs. The shares issued were valued based on the market value of our common stock on the transaction dates, or approximately $8.40 per share. Offering costs of $105,000 were recognized as an offset to common stock sale proceeds for the year ended December 31, 2003.
During the year ended December 31, 2003, we issued 1,625 shares of its common stock to consultants in exchange for health and fitness consulting services. The shares issued were valued based on the market value of our common stock on the transaction dates, ranging from $8.40 to $10.40 per share. Stock-based compensation expense of $16,138 was recognized in the financial statements for the year ended December 31, 2003.
During the year ended December 31, 2003, we issued 24,872 shares of its common stock to consultants in exchange for public relations services. The shares issued were valued based on the market value of our common stock on the transaction dates, ranging from $6.80 to $10.40 per share. Stock-based compensation expense of $238,692 was recognized in the financial statements for the year ended December 31, 2003.
During the year ended December 31, 2003, we issued 67,950 shares of its common stock to consultants in exchange for business consulting services. The shares issued were valued based on the market value of our common stock on the transaction dates, ranging from $2.40 to $10.40 per share. Stock-based compensation expense of $430,240 was recognized in the financial statements for the year ended December 31, 2003.
Except as otherwise indicated above, the above transactions were completed pursuant to Section 4(2) of the Securities Act. With respect to issuances made pursuant to Section 4(2) of the Securities Act, the transactions did not involve any public offering and were sold to a limited group of persons. Each recipient either received adequate information about the Company or had access, through employment or other relationships, to such information, and the Company determined that each recipient had such knowledge and experience in financial and business matters that they were able to evaluate the merits and risks of an investment in the Company.
Index to Exhibits
Exhibit No. | | Description | | Location |
| 2.0 | | Form of Common Stock Share Certificate of Signature Leisure, Inc. | | Incorporated by reference filed as an exhibit to Registration Statement on Form 10-SB filed on May 6, 2004 |
| 3.0 | | Amended and Restated Articles of Incorporation of Signature Leisure, Inc. | | Incorporated by reference filed as an exhibit to Registration Statement on Form 10-SB filed on May 6, 2004 |
| 3.1 | | Amended and Restated Bylaws of Signature Leisure, Inc. | | Incorporated by reference filed as an exhibit to Registration Statement on Form 10-SB filed on May 6, 2004 |
| 3.1 | | Articles of Incorporation as amended, Amendment to Articles of Incorporation as filed with the Colorado Secretary of State on July 14, 2004 | | Incorporated by reference filed as an exhibit to Registration Statement on Form 10-SB filed on May 6, 2004 |
| 3.2 | | Bylaws | | Incorporated by reference filed as an exhibit to Registration Statement on Form 10-SB filed on May 6, 2004 |
Exhibit No. | | Description | | Location |
| 5.1 | | Opinion re: Legality | | Provided herewith |
| 10.1 | | Closing Document for Parker Productions - by and between Signature Leisure, Inc. and Parker Productions, February 15, 2005 | | Incorporated by reference filed as an exhibit to Registration Statement on Form 10-SB filed on May 6, 2004 |
| 10.2 | | Letter of Intent - Acquisition of Assets of Parker Productions, by and between Signature Leisure, Inc. and Jill Reynolds, Parker Productions, November 12, 2004 | | Incorporated by reference filed as an exhibit to Registration Statement on Form 10-SB filed on May 6, 2004 |
| 10.3 | | Standby Equity Distribution Agreement, dated January 20, 2005 between Katalyst Capital Group, Ltd. and Signature Leisure, Inc. | | Incorporated by reference to the Company’s form SB-2 filed on February 14, 2005 |
| 10.4 | | Placement Agent Agreement dated July 7, 2005 between Spencer - Clarke, LLC, and Signature Leisure, Inc. | | Incorporated by reference to the Company’s form SB-2 filed on July 11,2005 |
| 10.5 | | Escrow Agreement dated January 20, 2005 between Signature Leisure, Inc. and Marchena and Graham | | Incorporated by reference to the Company’s form SB-2 filed on February 14, 2005 |
| 10.6 | | Promissory Note dated August 31, 2005 issued to Evan R. Weybright | | Incorporated by reference to the Company’s Amendment No. 2 to Form SB-2 filed on December 1, 2005 |
| 10.7 | | Promissory Note dated March 25, 2004 issued to Edward Miers | | Incorporated by reference to the Company’s Amendment No. 2 to Form SB-2 filed on December 1, 2005 |
| 10.8 | | Promissory Note dated September 22, 2005 issued to Edward Miers | | Incorporated by reference to the Company’s Amendment No. 2 to Form SB-2 filed on December 1, 2005 |
| 10.9 | | Promissory Note dated September 6, 2005 issued to Stephen W. Carnes | | Incorporated by reference to the Company’s Amendment No. 2 to Form SB-2 filed on December 1, 2005 |
| 10.10 | | Promissory Note dated September 6, 2005 issued to Stephen W. Carnes | | Incorporated by reference to the Company’s Amendment No. 2 to Form SB-2 filed on December 1, 2005 |
| 10.11 | | Promissory Note dated February 9, 2005 issued to Katalyst Capital Group, Ltd. | | Incorporated by reference to the Company’s Amendment No. 2 to Form SB-2 filed on December 1, 2005 |
| 10.12 | | Promissory Note dated April 19, 2005 issued to Katalyst Capital Group, Ltd. | | Incorporated by reference to the Company’s Amendment No. 2 to Form SB-2 filed on December 1, 2005 |
Exhibit No. | | Description | | Location |
| 10.13 | | Promissory Note dated December 2, 2004 issued to Katalyst Capital Group, Ltd. | | Incorporated by reference to the Company’s Amendment No. 2 to Form SB-2 filed on December 1, 2005 |
| 10.14 | | Employment Agreement with Stephen W. Carnes dated September 3, 2003 | | Incorporated by reference to the Company’s Amendment No. 2 to Form SB-2 filed on December 1, 2005 |
| 10.15 | | DocSTAR Domestic Dealer Agreement between DocSTAR and E Cubed Technologies, Inc. dated August, 2005 | | Incorporated by reference to the Company’s Amendment No. 2 to Form SB-2 filed on December 1, 2005 |
| 10.16 | | Manheim Automotive Financial Services, Inc. Credit Agreement dated March, 29 2004 | | Incorporated by reference to the Company’s Amendment No. 4 to Form SB-2 filed on April 27, 2006 |
| 10.17 | | Manheim Automotive Financial Services, Inc. Subordination Agreement dated March, 29 2004 | | Incorporated by reference to the Company’s Amendment No. 4 to Form SB-2 filed on April 27, 2006 |
| 10.18 | | Individual Guaranty between Stephen W. Carnes and Manheim Automotive Financial Services Inc. dated March, 29 2004 | | Incorporated by reference to the Company’s Amendment No. 4 to Form SB-2 filed on April 27, 2006 |
| 10.19 | | Promissory Note dated March, 29 2004 issued to Manheim Automotive Financial Services, Inc. | | Incorporated by reference to the Company’s Amendment No. 4 to Form SB-2 filed on April 27, 2006 |
| 10.20 | | American Finance Corporation Credit Agreement dated February, 16 2004 | | Incorporated by reference to the Company’s Amendment No. 4 to Form SB-2 filed on April 27, 2006 |
| 10.21 | | American Finance Corporation Guaranty dated February, 17 2004 | | Incorporated by reference to the Company’s Amendment No. 4 to Form SB-2 filed on April 27, 2006 |
| 10.22 | | Loan and Stock Purchase Agreement, by and between Signature Leisure, Inc., Revenge Designs, LLC Thomas Cress and Peter Collorafi | | Incorporated by reference to the Company’s Form 8-K filed on July 24, 2006 |
| 14 | | Code of Ethics | | Incorporated by reference to the Company’s Form SB-2 filed on July 11, 2005 |
| 23.1 | | Consent of Counsel | | Provided herewith as Exhibit 5.1 |
| 23.2 | | Consent of Cordovano and Honeck, LLP | | Provided herewith |
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which it offers or sells securities, a post-effective amendment to this Registration Statement to:
(i) Include any Prospectus required by Section 10(a)(3) of the 1933 Act;
(ii) Reflect in the Prospectus any facts or events which, individually or together, represent a fundamental change in the information set forth in the Registration Statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum Offering range may be reflected in the form of Prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate Offering price set forth in the “Calculation of Registration Fee” table in the effective Registration Statement;
(iii) Include any additional or changed information on the plan of distribution.
(2) For determining liability under the 1933 Act, the Company will treat each such post-effective amendment as a new Registration Statement of the securities offered, and the Offering of such securities at that time to be the initial bona fide Offering.
(3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the Offering.
(4) For determining liability of the undersigned small business issuer under the 1933 Act to any purchaser in the initial distribution of the securities, the undersigned small business issuer undertakes that in a primary Offering of securities of the undersigned small business issuer pursuant to this Registration Statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned small business issuer will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:
(i) Any preliminary Prospectus or Prospectus of the undersigned small business issuer relating to the Offering required to be filed pursuant to Rule 424;
(ii) Any free writing Prospectus relating to the Offering prepared by or on behalf of the undersigned small business issuer or used or referred to by the undersigned small business issuer;
(iii) The portion of any other free writing Prospectus relating to the Offering containing material information about the undersigned small business issuer or its securities provided by or on behalf of the undersigned small business issuer; and
(iv) Any other communication that is an offer in the Offering made by the undersigned small business issuer to the purchaser.
Insofar as indemnification for liabilities arising under the 1933 Act may be permitted to our director, officer and controlling persons of the small business issuer pursuant to the foregoing provisions, or otherwise, the small business issuer has been advised that in the opinion of the Commission such indemnification is against public policy as expressed in the 1933 Act, and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other than the payment by the small business issuer of expenses incurred or paid by a director, officer or controlling person of the small business issuer 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 small business issuer will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the 1933 Act, and will be governed by the final adjudication of such issue.
Each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be
part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use.
SIGNATURES
In accordance with the requirements of the 1933 Act, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form SB-2 and authorized this Registration Statement to be signed on our behalf by the undersigned, on October 2, 2006.
Date: October 2, 2006 | SIGNATURE LEISURE, INC. |
| | |
| | By: /s/ Stephen W. Carnes |
| | Name: Stephen W. Carnes |
| | Title: President, Principal Accounting Officer and Principal Financial Officer |
| | |
Pursuant to the requirements of the 1933 Act, this Registration Statement has been duly signed by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
Date: October 2, 2006 | SIGNATURE LEISURE, INC. |
| | |
| | By: /s/ Stephen W. Carnes |
| | Name: Stephen W. Carnes |
| | Title: Sole Director |
| | |
