As filed with the Securities and Exchange Commission on May 4, 2005
Registration No. 333-120928
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM SB-2 AMENDMENT #1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
FIC INVESTMENTS USA CORP.
(Name of Small Business Issuer in its Charter)
NEVADA | 6500 | N/A |
(State of incorporation) | (Primary Standard Industrial | (IRS Employer Identification #) |
Suite 3800 Wells Fargo Center, 999 3rd Avenue, Seattle WA 98104-4023 (206) 224-3714 | ||
Suite 3800 Wells Fargo Center, 999 3rd Avenue, Seattle WA 98104-4023 | ||
Eh? Clerical Services Inc., 3990 Warren Way, Reno, NV 89509; (775) 338-2598 | ||
APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC:__________________________
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 as amended (the "Securities Act"), check the following box. [ ]
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. [ ] _________________________.
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. [ ] _________________________.
If this Form is a post-effective amendment filed pursuant to Rule 462(d) 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. [ ] _________________________.
If delivery of the prospectus is expected to be made pursuant to Rule 434, check the following box. [ ]
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CALCULATION OF REGISTRATION FEE | ||||
Title of each class of securities to be registered |
| Proposed maximum offering price per unit | Proposed maximum aggregate offering price | Amount of registration fee(1) |
Common Stock: | 3,000,000 | $1.00 | $3,000,000 | $750 |
(1) Estimated solely for purposes of calculation the registration fee pursuant to Rule 457(o) of the Securities Act.
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, or until the registration statement shall become effective on such date as the commission, acting pursuant to said section 8(a), may determine.
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Prospectus
FIC INVESTMENTS USA CORP.
SHARES OF COMMON STOCK
No Minimum - 3,000,000 Maximum
Prior to this offering, there has been no public market for our common stock.
We are offering up to a total of 3,000,000 shares of our common stock. The offering price is $1.00 per share. There is no minimum number of shares that we have to sell. There will be no escrow account. All money received from the offering will be immediately used by us and there will be no refunds. The offering will be for a period of 90 days from the effective date and may be extended for an additional 90 days if we so choose to do so.
This offer is not being underwritten, and is a best-efforts, direct-participation offering. Michael Lathigee and Earle Pasquill, two of our senior officers and directors, will be the only people offering or selling our shares. Neither Mr. Lathigee nor Mr. Pasquill will receive any compensation for offering or selling our shares.
Investing in our common stock involves certain risks. See "Risk Factors" starting at page 7.
| Price Per Share | Aggregate Offering Price | Maximum Net Proceeds to Us |
Common Stock | $1.00 | $3,000,000 | $3,000,000 |
Because there is no minimum number of shares that has to be sold in this offering, there is no assurance that we will achieve the proceeds level described in the above table. If we do not raise the maximum we will be forced to proceed with a scaled back version of our business plan.
The information in this registration statement is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offence.
There will be no market for these shares.
The date of this registration statement is ___________________________..
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TABLE OF CONTENTS
| Page No. |
SUMMARY OF REGISTRATION STATEMENT | 5 |
RISK FACTORS | 7 |
RISKS ASSOCIATED WITH OUR COMPANY | 7 |
RISKS ASSOCIATED WITH THIS OFFERING | 11 |
USE OF PROCEEDS | 13 |
DETERMINATION OF OFFERING PRICE | 14 |
DILUTION OF THE PRICE YOU PAY FOR YOUR SHARES | 15 |
PLAN OF DISTRIBUTION; TERMS OF THE OFFERING | 16 |
BUSINESS | 18 |
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
|
MANAGEMENT | 36 |
EXECUTIVE COMPENSATION | 39 |
EMPLOYMENT AGREEMENTS | 40 |
PRINCIPAL STOCKHOLDERS | 41 |
DESCRIPTION OF SECURITIES | 42 |
CERTAIN TRANSACTIONS | 43 |
LITIGATION | 44 |
EXPERTS | 44 |
LEGAL MATTERS | 44 |
FINANCIAL STATEMENTS | F-1 - F-17 |
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SUMMARY OF OUR OFFERING
This summary provides an overview of selected information contained in this registration statement. It does not contain all the information you should consider before making a decision to purchase the shares we are offering. You should very carefully and thoroughly read the more detailed information in this registration statement, and particularly the Risk Factors section, review our financial statements and review all other information in this registration statement.
Summary Information About Us
We were incorporated on September 26, 2003. We are a development stage company that has recently commenced operations. We intend to be primarily engaged in the buying and selling of tax liens and tax deeds on real estate with an intended focus in the States of Oklahoma, Texas and Arizona. This will comprise approximately 70% of our business. We intend to target residential properties. In addition, we plan on investing up to a maximum of 30% of the offering proceeds in publicly traded and private companies. As disclosed in our financial statements, we have currently invested approximately $440,000 in private companies and $250,000 in payroll loans. In addition, we have invested $220,000 in publicly traded companies. We intend toand are currently in the process of liquidating the majority of our equity investments and purchasing tax liens and tax deeds on real estate.
We intend on acquiring such tax liens and tax deeds from the applicable County governments in the States mentioned above. We have no formal agreements with any governmental or other agency for the provision of such tax liens or tax deeds; however, we have several sources we believe will be able to provide us with an adequate supply of tax liens in the future. In addition, we may not make high interest loans to public companies.
One of our activities is to provide education to members and others - sometimes at regular meetings at no extra cost and sometimes at paid courses. One such paid course is "How to Buy Tax Liens and Tax Deeds." We have in-house expertise in this field, and we also contract out the teaching of these courses. Both our in-house experts and our independent contractor (Dean Childs) teach and buy on our behalf. All of our in-house people that buy tax liens and deeds on our behalf (Michael Lathigee, Greg Habstritt and Albert Koopman) do so with no further compensation. Mr. Childs, an independent contactor, is paid a per diem fee for his time.
Our administrative office is located at Suite 3800 Wells Fargo Center, 999 3rd Avenue, Seattle WA 98104-4023, telephone (206) 224-3714. In addition, we have a Canadian office located at Suite 314 - 2906 West Broadway, Vancouver, British Columbia V6K 1G8, telephone (604) 224-1269. To date, the majority of our administrative functions have been operated out of our Canadian office.
We intend to proceed with the implementation of our proposed business plan on completion of this offering .See the "Business" section for a more detailed description of our proposed plan.
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The Offering
Following is a brief summary of this offering. Full details are disclosed throughout the Prospectus.
Securities being offered | Up to 3,000,000 shares of Class "A" Common Voting shares. |
Offering price per share | $1.00 |
Offering period | The shares are being offered for a period not to exceed 90 days, unless extended by our board of directors for an additional 90 days. |
Maximum possible net proceeds to us | Up to $3,000,000 |
Use of proceeds | After deducting offering expenses of $100,000, we will use the proceeds of this offering mainly for the purchase of tax liens and tax deeds, with smaller amounts devoted to the purchase of other securities and for working capital. See "Use of Proceeds." |
Number of shares outstanding | 10,000,000 Class "B" Common Voting non-participating shares. |
Maximum possible number of shares outstanding after the offering | 3,000,000 Class "A" Common Voting participating shares; and |
Percentage of shares held by officers and directors after the offering, assuming all offered shares are sold | Our President and Treasurer, Earle Pasquill, and our Chief Executive Officer, Michael Lathigee, will own a total of 79% of our total issued stock after the offering, assuming that all 3,000,00 Class "A" shares are sold. Because Messrs. Lathigee and Pasquill are permitted to vote the Class "B" shares for directors and in certain other circumstances involving major corporate decisions,, they will continue to control us. |
We will sell the shares in this offering through our President and Treasurer, Earle Pasquill, and our Chief Executive Officer, Michael Lathigee, on a best-efforts, direct participating basis. Messrs. Lathigee and Pasquill intend to offer the shares through investment meetings and to friends of our officers and directors. Neither Mr. Lathigee nor Mr. Pasquill will be compensated for his efforts to offer and sell our shares.
There is no minimum number of shares that have to be sold in this offering and the shares will be sold on a best efforts basis only. However, if we do not raise the maximum offering we will proceed with a scaled back version of our business plan.
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We are not listed for trading on any exchange or an automated quotation system. Because we are not listed for trading on any exchange or automated quotation system, you may not be able to resell your shares. We have no intention of ever becoming listed for trading on any exchange or quotation system.
The following financial information for the period ended January 31, 2005 summarizes the more complete historical financial information at the end of this registration statement.
| For the Period Ended January 31, 2005 |
Balance Sheet |
|
Income Statement Net loss per share |
|
RISK FACTORS
Please consider the following risk factors before deciding to invest in the common stock.
RISKS ASSOCIATED WITH US:
1. We have a limited operating history and we do not know if we will be successful in this new venture.
We were incorporated on September 26, 2003. To date we have net losses of $216,060. We will incur costs with respect to researching tax deed and tax lien purchase opportunities and will be purchasing tax liens and tax deeds that we may be unable to sell quickly to realize a profit. We may fail to generate revenues in the future. Failure to generate revenues will cause us to go out of business.
2. We need financing from this offering to implement our proposed business plan and to provide sufficient working capital to purchase tax deed and tax lien investments. If we raise less than the maximum offering we will proceed with a scaled back version of our proposed operations.
We need financing from this offering to complete to implement our proposed business plan. If we raise less than the maximum offering we will be forced to undertake a scaled back version of our proposed business operation. Cash available on hand as of January 31, 2005 was $928,739.
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3. We may have unexpected costs in implementing our proposed business plan and/or the purchase and sale of profitable tax deeds and tax-liens on real estate properties. If we do not have sufficient money to cover these costs our business may fail and you will lose your investment.
We may have unexpected costs in implementing our proposed business plan and/or the purchase and sale of profitable tax deeds and tax-liens on real estate properties. If we do not have sufficient money to cover these costs our business may fail and you will lose your investment. We will depend exclusively on outside capital to pay for our tax lien and tax deed investment program. Such outside capital may include borrowing or leveraging our assets. Capital may not be available to meet these continuing costs or, if the capital is available, it may not be on terms acceptable to us. The issuance of additional equity securities by us would result in a significant dilution in the equity interests of our current stockholders. Obtaining loans, assuming those loans would be available, will increase our liabilities and future cash commitments. If we were unable to obtain financing in the amounts required our proposed business will fail and you will lose your entire investment.
4. We may be unable to locate sufficient revenue-generating tax deed and tax-lien real estate properties. If we are unable to locate sufficient revenue generating properties our business may fail and you will lose your entire investment.
We may be unable to locate sufficient revenue-generating tax deed and tax-lien real estate properties. If we are unable to locate sufficient revenue generating properties our business may fail and you will lose your entire investment.
5. We depend upon our current officers and directors to continue our business and if any of these officers or directors, and especially Messrs. Lathigee and Pasquill, leaves office or resigns, there will be no management to run our business and we will cease operations.
Our business is dependent upon our current officers and directors and, in particular our President, Treasurer and Director, Earle Pasquill, and our Chief Executive Officer and Director, Michael Lathigee. If either of these individuals leave office or resign, there will be little management remaining to run our business. If this happened we will likely discontinue our proposed business plan and go out of business and you could lose your entire investment.
6. We must generate sufficient revenues to operate our business profitably and if we do not we may have to cease operations.
We have nominal working capital to begin the new phase of our operations. We seek to raise operating capital to provide the necessary funds to locate and purchase suitable tax deed and tax-lien real estate properties. However if we do not generate sufficient revenues after this time we may not be able to operate profitably and if this happens we may have to cease operations beyond this initial period. If we cease operations you could lose your entire investment.
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7. The tax lien and tax deed market is very competitive and will make it difficult for us to successfully seek out and purchase profitable tax deeds and tax-liens.
The tax lien and tax deed market in the United States is very competitive and there are many well-established real estate investment companies and individuals with greater cash reserves than we will have. For example, the biggest buyers in the tax lien and tax deed business are state banks, that are protecting their interests against those persons and companies that do not pay their property taxes. There can be no assurance that our projected return targets will not be affected by our competition. If we are unable to compete we will go out of business and you will lose your entire investment.
8. Because our directors have foreign addresses this may create potential difficulties relating to service of process in the event that you wish to serve them with legal documents.
None of our current directors and officers have resident addresses in the United States. They are all resident in Canada. Because our officers and directors have foreign addresses this may create potential difficulties relating to the service of legal or other documents on any of them in the event that you wish to serve them with legal documents.
9.The landmaynot provide adequate security for the financial obligation owing on the property.
The land may not provide adequate security to for the financial obligation owing on the property. In other words, if the lien investment goes all the way to foreclosure, the property may not be worth the amount of all delinquent taxes accumulated on it.
10. The land may be subject to contamination, which may cause considerable expense to the property holder.
If we foreclose on a piece of property we will become the owner of the property. If the property is contaminated we may be required to pay for the environmental clean up of the property. While we will conduct preliminary due diligence to ensure the properties for which we purchase tax lines are not subject to environmental contamination, such contamination could arise at a later date. If we were required to clean up an environmentally contaminated property the costs could be significant.
11. If the property owner files a Chapter 7 Bankruptcy or has a bankruptcy converted to Chapter 7 we could lose our entire investment.
Under Chapter 7 statutes, the bankruptcy trustee may have the tax lien subordinated (effectively extinguished) to administrative expenses in the estate. In this case the tax lien investor would wind up as an unsecured priority creditor. This would mean that other creditors would receive funds prior to us and we may never receive payment. The Bankruptcy Courts could also order the reduction or removal of interest to be paid to the investor or provide extensions of time for making the payoff beyond the normal three-year redemption period.
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12. If the owner of the property is in military service it may limit our ability to terminate their right of redemption.
The Federal Soldier's and Sailor's Civil Relief Act provides that limitations periods are suspended for persons in military service during the time of their service. If the property owner is a soldier in military service it may be difficult to terminate his or her rights of redemption, i.e., foreclose that interest, until the military service is over. This would inhibit our ability to realize a profit on the sale of the property.
13. There is a lack of liquidity in an investment in a tax lien or deed. A lack of liquidity could lead to cash flow problems and inhibit our ability to operate our business.
Given that the tax lien cannot be foreclosed in most states for any where from 30 days to ten years following the date of its sale, the owner of the property encumbered by the lien has at least that much time to redeem the lien. Unless the investor has additional information about the property owner, it is difficult to predict when the lien will be redeemed, if at all. The nature of the purchase of tax lien and deeds business leads to difficulty in predicting cash flows.
14.There may be other liens on the property which have equal or better priority against the property subject to the lien and may delay or limit us receiving any return on the property.
There may be other State liens, which have equal or better priority against the property subject to the tax lien. Federal tax liens enjoy the federal government's special 120 day right of redemption. Under this right, even after the investor has successfully foreclosed on the tax lien, the Federal government has 120 days from the date of judgment to pay the investor the amount of the lien plus attorneys' fees and costs and any amounts necessarily incurred for the maintenance of the property. In doing so, the Federal government then succeeds to the tax lien investor's interest in the property. This delay in the payment to us could affect our ability to run our business.
15. There may be administrative problems and inefficiencies that reduce the return on our investment in tax liens and tax deeds.
If we fail to notify each Treasurer's Office in a county where we are holding a tax lien or tax-deed of a change in our company's address, we may fail to receive a Notice of Redemption, and thus we will no longer be earning any interest on the investment. A Notice of Redemption is a document sent by the Treasurer's Office indicating a property owner has redeemed a lien by paying all outstanding taxes and interest. In some counties the Treasurer's Office does not process the redemption quickly and thus substantial time may pass when our money is not earning interest.
16. There will be no liquidity in the shares purchased for at least three years.
The Class "A" Common Voting shares have a right of redemption arising three years from purchase.Until that time there will be no market for the shares.Prospective investors who will have need of recovering their capital within that three year period should not invest in this offering.
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The redemption price of our Class "A" Common Voting shares will be based on the market value per share at the time of redemption, which could be less than the original purchase price of the shares, depending on the performance of the investments. If a significant number of shareholders request redemption at the same time, we may have to liquidate some of our holdings in an untimely manner, which would affect the return on the investments or delay redemption.
RISKS ASSOCIATED WITH THIS OFFERING:
17. There is no minimum number of shares that must be sold and we will not refund any funds to you.
There is no minimum number of shares that must be sold in this offering, even if we raise a nominal amount of money. Any money we receive will be immediately appropriated by us. We may not raise enough money to successfully implement our real estate investment goals. No money will be refunded to you under any circumstances.
18. Because Messrs. Lathigee and Pasquill will own more than 50% of the outstanding voting shares after this offering, they will be able to decide who will be the directors and you may not be able to elect any directors.
Even if we sell all 3,000,000 shares of Class "A" Common Voting shares, Messrs. Lathigee and Pasquill will still own an aggregate of 10,000,000 Class "B" Common Voting shares. The Class "B" shares will continue to control us after completion of this offering, regardless of the number of Class "A" shares we sell. That is because the Class "B" shares are voteable for major corporate actions such as election and termination of directors, mergers, sales, dissolution, and other material transactions that are subject to a shareholders' vote.
19. You are risking up to $3,000,000 to fund our proposed operations and if we fail you will lose all of your investment.
You will be providing up to $3,000,000 to fund our proposed operations. As a result, if we cease proposed operations for any reason, you may lose your entire investment.
20. Messrs. Lathigee and Pasquill's control may prevent you from causing a change in the course of our operations.
Because Messrs. Lathigee and Pasquill will be able to vote the Class "B" Common Voting shares your ability to cause a change in the course of our operations may be eliminated. By 'course of our operations', we are referring to mergers, sales, election of directors and other material transactions. As such, the value attributable to the right to vote is gone. This could result in a reduction in value to the shares you own because of the ineffective voting power.
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19. There is no public trading market for our common stock and we have no intention of ever listing our shares on a stock market or quotation system, so you may be unable to sell your shares.
There is no public trading market for our common stock and we have no intention of ever listing our shares on a stock exchange or quotation system. As a result of this, it will be very difficult, if not impossible for you to resell your shares. We have no intention of listing our shares on any public market or quotation system.
20. Our shares will be subject to Penny Stock Rules, under Section 15(g) of the Securities Exchange Act of 1934, as amended, which imposes additional sales requirements on broker/dealers who may sell our shares under this offering or after this offering. These requirements may make our shares less attractive to broker-dealers and so you may have difficulty in reselling your shares.
Our shares qualify as penny stocks and are covered by Section 15(g) of the Securities Exchange Act of 1934 which imposes additional sales practice requirements on broker/dealers who sell our securities in this offering or in the aftermarket. Before they can sell penny stocks, broker/dealers must give prospective buyers a risk disclosure document that:
For sales of our shares, a broker/dealer must also make a special suitability determination and receive from you a written agreement before making a sale to you.
Because of the imposition of these sales practices, it is possible that broker/dealers will not want to make a market in our shares. This could prevent you from reselling your shares and may cause the price of the shares to decline.
CAUTIONARY STATEMENT REGARDING FORWARDING-LOOKING STATEMENTS
Some discussions in this registration statement may contain forward-looking statements that involve risks and uncertainties. A number of important factors could cause our actual results to differ materially from those expressed in any forward-looking statements made by us in this registration statement. Such factors include, those discussed in"Risk Factors," "Management's Discussion and Analysis of Financial Condition and Results of Operations"and "Business," as well as those discussed elsewhere in this registration statement. Forward-looking statements are often identified by words like: believe, expect, estimate, anticipate, intend, project and similar expressions, or words which, by their nature, refer to future events.
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USE OF PROCEEDS
The net proceeds to us after deducting offering expenses of $100,000 will be $2,900,000 if all of the shares are sold. The first $100,000 raised will be used for offering expenses. We will use the gross proceeds as follows:
Amount raised: | $750,000 | $1,500,000 | $2,250,000 | $3,000,000 |
Allocation
Offering expenses | $100,000 | $100,000 | $100,000 | $100,000 |
Purchase of tax liens and deeds | $385,000 | $980,000 | $1,365,000 | $1,855,000 |
Purchase of Securities | $165,000 | $270,000 | $585,000 | $795,000 |
Working capital | $100,000 | $150,000 | $200,000 | $250,000 |
Working capital will be used for general administrative expenses including the reimbursement of officers and directors for any of their out of pocket expenses made on our behalf.
The allocation of the net proceeds of the Offering set forth above represents our best estimates based upon our current plans and certain assumptions regarding industry and general economic conditions and our future revenues and expenditures.
If less than the maximum is raised in the offering, other expenses will be cut proportionately. Our plan of operations will fundamentally remain the same; however, we may be required to cut back in certain areas of our business such as limiting the geographical area for the purchase of tax liens and tax deeds in order to minimize travel and due diligence costs.
If 25% of the shares in this offering are sold we will proceed as follows:
If 50% of the offering is sold we will proceed as follows:
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If 75% of the offering is sold we will proceed as follows:
If 100% of the offering is sold we will proceeds as follows:
While we currently intend to use the proceeds of this offering substantially in the manner set forth above, we reserve the right to reassess and reassign such use if, in the judgement of our board of directors, such changes are necessary or advisable. At present, no material changes are contemplated. In no event shall we devote more than 30% of the offering to investments in equity securities and loans. Should there be any material changes in the above projected use of proceeds in connection with this offering, we will issue an amended registration statement reflecting the same. Working capital is the cost related to operating our office.
DETERMINATION OF OFFERING PRICE
The price of the shares we are offering was arbitrarily determined in order for us to raise up to a total of $3,000,000 in this offering. The offering price bears no relationship whatsoever to our assets, earnings, book value or other criteria of value. The factors considered were:
- our lack of operating history
- the proceeds to be raised by the offering
- the amount of capital to be contributed by purchasers in this offering in proportion to the amount of stock to be retained by our existing Stockholders
- our relative cash requirements
- the price we believe a purchaser is willing to pay for our stock
See "Plan of Distribution; Terms of the Offering."
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DILUTION OF THE PRICE YOU PAY FOR YOUR SHARES
"Dilution" represents the difference between the offering price and the net tangible book value per share immediately after completion of this offering. "Net tangible book value" is the amount that results from subtracting total liabilities and intangible assets from total assets. Dilution arises mainly as a result of our arbitrary determination of the offering price of the shares being offered. Dilution of the value of the shares new investors purchase is also a result of the lower book value of the shares held by our existing stockholders.
Readers should keep in mind when reading this section that the rights and restrictions of the Class "B" shares are significantly different than those of the Class "A" shares. See "Description of Securities". Pursuant to our Articles, the holders of the Class "B" shares are in no circumstances entitled to receive dividends. In addition, the Class "B" shares will only be used to vote on certain matters. Throughout this document, there are references to shareholders voting on various issues. It is management's intent to ensure that the participatory spirit of the investment club concept is maintained. The "B" shares will not be used to control votes on investments and routine Club decisions. The "B" shares are intended to protect the Club culture and to protect that culture against any hostile take-over bids. Only in such circumstances (culture protection and take-over bids)will the "B" shares voting rights be invoked. The "B" shares will be used to vote for the board of directors.
As of January 31, 2005 the net tangible book value of our shares of common stock was $0.10 per share based upon 1,474,728 Class "A" shares and 10,000,000 Class "B" shares outstanding. Upon completion of this offering, in the event that all of the shares are sold, the net tangible book value of the 14,474,728 shares to be outstanding will be $4,484,728 or approximately $0.31 per share. You will incur an immediate dilution from $1.00 per share to $0.31 per share.
After completion of this offering, if 3,000,000 shares are sold, you will own approximately 21% of the total number of voting shares then outstanding for which you will have made a cash investment of $3,000,000, or $1.00 per share. Our existing stockholders will own approximately 79% of the total number of voting (10,000,000 of which are non-participating) shares then outstanding, for which they have, or will have, made contributions of cash totaling $1,484,728, or approximately $0.13 per share.
After completion of this offering, if 2,250,000 shares are sold, you will own approximately 16% of the total number of voting shares then outstanding for which you will have made a cash investment of $2,250,000, or $1.00 per share. Our existing stockholders will own approximately 84% of the total number of voting (10,000,000 of which are non-participating) shares then outstanding, for which they have, or will have, made contributions of cash totaling $1,484,728, or approximately $0.13 per share.
After completion of this offering, if 1,500,000 shares are sold, you will own approximately 12% of the total number of voting shares then outstanding for which you will have made a cash investment of $1,500,000, or $1.00 per share. Our existing stockholders will own approximately 88% of the total number of voting (10,000,000 of which are non-participating) shares then outstanding, for which they have, or will have, made contributions of cash totaling $1,484,728, or approximately $0.13 per share.
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After completion of this offering, if 750,000 shares are sold, you will own approximately 6% of the total number of voting shares then outstanding for which you will have made a cash investment of $750,000, or $1.00 per share. Our existing stockholders will own approximately 94% of the total number of voting (10,000,000 of which are non-participating) shares then outstanding, for which they have, or will have, made contributions of cash totaling $1,484,728, or approximately $0.13 per share.
Our investment club (the "Club") is a fee based entitlement that subscribers buy when they subscribe for shares. All subscribers are members of the Club, but not all members are subscribers (since people can pay the membership fees to attend Club meetings without purchasing shares). Membership in the Club entitles the member to attend Club meetings. When members join, they acknowledge that meetings will be held in major cities where there are sufficient members to warrant meetings and that members accept that, in order to participate in the meetings, they will have to travel to the nearest meeting site. The term "Club" refers to that collection of members whose membership fees are fully paid up.
PLAN OF DISTRIBUTION; TERMS OF THE OFFERING
The offering price is $1.00 per share. There is no minimum number of shares that we have to sell. There will be no escrow account. All money received from the offering will be immediately used by us and there will be no refunds. The offering will be for a maximum period of 90 days from the effective date and may be extended for an additional 90 days if we choose to do so.
There is no minimum number of shares that must be sold in this offering. Any money we receive will be immediately appropriated by us for the uses set forth in the Use of Proceeds section of this registration statement. No funds will be placed in an escrow account during the offering period and no money will be returned once the subscription has been accepted by us.
We will sell the shares in this offering through Messrs. Michael Lathigee and Earle Pasquill, two of our senior officers and directors. Messrs. Lathigee and Pasquill will contact individuals and corporations with whom they have an existing or past pre-existing business or personal relationship and will attempt to sell them our common stock. Neither Mr. Lathigee nor Mr. Pasquill will receive commission from the sale of any shares. Neither Mr. Lathigee nor Mr. Pasquill will register as a broker-dealer pursuant to Section 15 of the Securities Exchange Act of 1934 in reliance upon Rule 3a4-1.
Rule 3a4-1 sets forth those conditions under which a person associated with an issuer may participate in the offering of the issuer's securities and not be deemed to be a broker-dealer. The conditions are that:
1. The person is not subject to a statutory disqualification, as that term is defined in Section 3(a)(39) of the Act, at the time of his participation; and,
2. The person is not compensated in connection with his participation by the payment of commissions or other remuneration based either directly or indirectly on transactions in securities; and
3. The person is not at the time of their participation, an associated person of a broker-dealer; and,
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4. The person meets the conditions of Paragraph (a)(4)(ii) of Rule 3a4-1 of the Exchange Act, in that he (A) primarily performs, or is intended primarily to perform at the end of the offering, substantial duties for or on behalf of the Issuer otherwise than in connection with transactions in securities; and (B) is not a broker or dealer, or an associated person of a broker or dealer, within the preceding twelve (12) months; and (C) do not participate in selling and offering of securities for any Issuer more than once every twelve (12) months other than in reliance on Paragraphs (a)(4)(i) or (a)(4)(iii).
Messrs. Lathigee and Pasquill have not sold and will not sell our securities during the periods described, except pursuant to this offering. Neither Mr. Lathigee nor Mr. Pasquill is subject to disqualification, is being compensated or is associated with a broker-dealer. Messrs. Lathigee and Pasquill are and will continue to be two of our officers and directors at the end of the offering and have not been during the last twelve months nor are either of them currently a broker/dealer or associated with a broker/dealer. Neither Mr. Lathigee nor Mr. Pasquill has during the last twelve months or will in the next twelve months offer or sell securities for another corporation more than once. Messrs. Lathigee and Pasquill intend to contact persons with whom they have a past or have a current personal or business relationship and solicit those persons to invest in this offering.
We will not utilize the Internet to advertise our offering, however, prospective investors may visit our website,www.freedominvestmentclub.ca, to learn more about us. However, prospective investors should note that this website currently contains information mainly for our Canadian sister Club, Freedom Investment Club of Canada. We are working to update our website to provide information specific to our U.S.-based club.
We will also distribute the registration statement to potential investors at the meetings and to our friends and relatives who are interested in us and in a possible investment in the offering.
Offering Period and Expiration Date
This offering will commence on the date of this registration statement and continue for a period of 90 days. We may extend the offering period for an additional 90 days, or unless the offering is completed or otherwise terminated by us.
Procedures for Subscribing
If you decide to subscribe for any shares in this offering, you must:
All checks for subscriptions must be made payable to "FIC INVESTMENTS USA CORP."
Right to Reject Subscriptions
We have the right to accept or reject subscriptions in whole or in part, for any reason or for no reason. All monies from rejected subscriptions will be returned immediately by us to the subscriber, without interest or deductions. Subscriptions for securities will be accepted or rejected within 48 hours after we receive them.
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Regulation M
Our officers and directors will not be purchasing any of the shares of common stock offered by us in this offering. We and our distribution participants will comply with the provisions of Regulation M. Other than the foregoing, no consideration has been given to the compliance of Regulation M of the Exchange Act. Regulation M is intended to preclude manipulative conduct by persons with an interest in the outcome of an offering, while easing regulatory burdens on offering participants.
BUSINESS
General
We were incorporated in the State of Nevada on September 26, 2004. Our administrative office is located at Suite 3800 Wells Fargo Center, 999 3rd Avenue, Seattle WA 98104-4023. Our telephone number is (206) 224-3714. In addition, we have an office located Suite 314-2906 West Broadway, Vancouver, BC, V6K 1G8. Our offices are leased on a month-to-month basis and our monthly rental is $900.
Background
THE PURCHASING OF TAX LIENS AND TAX DEEDS-INVESTMENTS IN INTERESTS IN REAL ESTATE
We are a development stage company that intends to be primarily engaged in the buying and selling of tax liens and tax deeds on real estate. We intend to target on the purchase of tax liens and tax deeds in the States of Arizona, Oklahoma and Texas. This will comprise approximately 70% of our business. We intend to target liens and deeds on residential properties. The State tax lien and tax deed sale process provides a mechanism for the state to collect its property tax revenues with minimal delay, while preserving the property owner's rights in the property against immediate or unfair deprivation.
To date we have invested approximately $900,000 in public and private companies. We intend to devote the majority of these funds to tax deeds and liens. Until we complete the necessary due diligence (a process which we are currently actively undertaking) on tax liens and deeds we have invested a larger portion of our funds in equity investments. It is our intention to devote at least 70% of these funds to tax liens and tax deeds. We are currently liquidating our equity investments and purchasing tax liens and tax deeds.
DESCRIPTION OF REAL ESTATE
We intend to purchase tax liens and tax deeds on residential properties in the States of Arizona, Texas and Oklahoma. We have acquired such interests in the State of Oklahoma.
What is a Tax Lien?
A Lien is a right on a property or other asset to keep or take possession of it till the debt due in respect of it is discharged.
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A Tax Lien is a lien that is registered against a property for outstanding amounts of taxes owing on a property at the time of the auction. It is registered in the name of the County. A Tax Lien Certificate is a document a purchaser receives when paying off outstanding taxes on behalf of a property owner, and thus takes over the rights of the Lien from the County. The Lien evokes the right to foreclosure and taking Title of the property.
What is a Tax Deed?
A tax deed is a written or printed instrument affecting legal disposition of a property and bearing the disposer's signature and seal. The Deed allows the possessor, or Tax Deed buyer, to convey or transfer the property by legal deed.
In the case of a Tax Deed we actually bid on the property or a percentage ownership of the property, for the value of the Taxes that are owing to the County or Municipality. The owner retains a statutory Right of Redemption (in some States).
For those States that do offer redemption, the Right of Redemption is a legally established period that the owner retains in order to pay off the back taxes and all penalties if he or she does not wish to lose his or her property. This is essentially the ability to reclaim the Tax Deed. In some Counties this period could be as short as 30-60 days whereas in others it could be 10 years, the expiry of which allows us, the investor, to immediately start legal foreclosure and to apply for the deed to the property.
Our Competitive Position
The tax lien/tax deed market is unlike most other financial markets. A substantial amount of capital can be required to successfully bid and in addition to having to attend public auctions, detailed up-front research is required to determine the best properties for bidding and their respective market values. Also, since the rules regarding the sales are different for every state, it is difficult to keep up with the regulations regarding each sale.
Considering these factors, there are two principal ways we believe our club provides a competitive advantage over smaller investors. The first method is through our knowledge base regarding the tax lien and tax deed market. In addition to our in-house real estate investing expertise, our club recently secured the services of a tax lien/tax deed advisor, Bryan Rundell. Bryan Rundell and his company Rogue Investor, LLC travel across the county researching the best tax lien and tax deed markets. As part of their efforts, Rogue Investor LLC researches tax sale regulations, real estate market values and bidding opportunities for tax sales in all 50 states. This amount of detailed research is not possible for the small investor.
Our second competitive advantage is our larger pool of funds to invest collectively as a club. Many small investors can only find the time and money to go to one or two tax sales per year. This presents a problem for the small investor because traveling to a county to buy a few thousand dollars worth of tax liens can end up costing more than the investment dollars he or she will earn. In contrast, the club can research all the sales in one state, travel to the best areas for investment and buy $500,000 worth of tax liens or tax deeds at one time. Thus with the club, the cost of the travel has very little effect on the overall return while the benefit of detailed research over a large geographical area gives the club insight into the best markets for investing, something that would not be possible for most small investors.
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Also, another important factor that gives the club's larger pool of funds an advantage is in the tax deed market. On average, tax deeds cost more than tax liens because tax deeds represent ownership in the property, not just the tax debt. Therefore, it is not uncommon for the winning bid on a single tax deed to exceed $50,000 or $100,000 and for commercial properties; the winning bids can reach $500,000 or more. Without pooling money, most small investors cannot effectively compete in the tax deed market.
Given the financial resources of the club, the club will concentrate in the tax deed market. On average, the club expects that tax lien investing will constitute about 25% of our investing capital and tax deed investing will constitute about 75% of our investing capital.
Our main competition at the sales will be regional banks and other investment clubs, often the largest buyers of tax liens and tax deeds. Both of these entities recognize the advantage of pooled funds in the tax sale market and provide credibility that the pooled fund approach is lucrative and successful in this market. However, since over 50,000 tax sales are conducted every year, at most sales, the number of available liens and deeds still exceeds the capacity of some of the most deep pocketed investors. Also, outside of the most densely populated metropolitan areas, few bidders attend the sales. This is because sales in the same state are often conducted concurrently during working hours and few bidders can attend. With pooled funds and an experienced research staff that can find the best areas for investment, our club can offer a competitive advantage in this market.
How the Process Works - An Overview
In most states the sale of tax liens and tax deeds is actually the culmination of the governmental tax assessment and collection process, and occurs approximately three years after the process begins. Typically a county property tax assessor sends out a Notice of Valuation. The Notice indicates what assessed value the assessor intends to assign to the owner's property for the following year's tax roll.
When buying a lien we acquire the rights of the County to (1) give proper notice to foreclosure (in the event that there is no redemption or 'saving of the situation'), (2) obtain possession of the property by court eviction, (3) lease, rent or sell the property as we see fit, and (4) the title of the property. These rights are contained in the State's Statutes (recorded laws passed by the government of the State) they transfer to us, as the purchaser of the Lien upon foreclosure.
The Right to Ownership (property title) thus only passes to the Lien buyer (us) in the event of the owner not having redeemed (paid off) the back taxes and the Lien buyer forecloses on the property.
Usually a lien for taxes attaches to the property as of January 1 of the tax year, even though the amount of taxes due will not be determined until the following August or September, when the County Board of Supervisors has set tax rates and when the county treasurer calculates and sends out the tax bills. The first half of the tax bill, if not paid, is delinquent after November first, and the second half, if not paid, becomes delinquent after the following May first. If an owner is delinquent, most States have Statutes that afford the property owner several notices from the county treasurer of the delinquency and the impending sale. Usually by December of the year following the tax year, if there is any tax payment delinquency, the County Treasurer compiles a list of all the property upon which taxes are delinquent and then publishes the list the following January or February - typically no more than three weeks nor less than two weeks prior to the sale - in an officially designated newspaper of the Coun ty. The newspaper may also be required to publish the list on the Internet.
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The sale is usually held in an auction format. The Treasurer's Office Auctioneer reads off the property's tax parcel number, and then interested buyers cry out their bidder numbers. The bidder numbers are assigned by the County Treasurer's Office prior to the sale. Unlike an auction where the bid price goes up, the bidders yell out lower and lower interest rates for the amount of interest they are willing to receive on their investment. The bidding typically starts at sixteen percent depending on the State in which the auction takes place.
Basics of the Process
Upon payment of the back taxes, penalties and charges, the winning bidder will be issued a Certificate of Purchase ("CP") by the Treasurer's Office evidencing the sold tax lien. The Certificate of Purchase is evidence of the debt from the property. The CP is similar to a promissory note, but because it arises from an involuntary obligation of the property owner, it is issued by the County Treasurer, not the owner, after the sale. The priority lien on the real estate that secures the debt is created by operation of law, and is not evidenced by any separate documentation to accompany the CP. It is not necessary to record the CP, but this is the practice by some county treasurers. It is the practice of some county treasurers to require the purchaser of the most recent delinquent tax also "buy out" any prior year tax liens outstanding on the same parcel of land. These purchases are treated like a redemption for the earlier year CP holder. Any liens not sold to investors at the auction are deemed sold to the State. After the auction these CPs are available for purchase from the treasurer's office "on assignment" from the State. The interest rates range from 8% to 25%.
Tax sales are handled differently in every state. For example in Oklahoma, tax lien certificates or certificates of purchase as they are commonly called, pay an annual interest rate of 8% per year. However, in Illinois, tax lien certificates pay an annual interest rate of 36% per year. Tax lien certificate interest rates in most other states fall within this range.
A High Priority Lien
By law, the property tax lien is made senior to other liens on the property such as mortgages, deeds of trust, judgment liens, and even IRS liens. Thus, because taxes usually are only a fraction of the value of property, this makes the CP a very well-secured investment. However, the statutory priority does not apply to other state liens such as mortgages held by the State, or other property tax and improvement district assessment liens on the same parcel.
Redemption, Investment Payoff
The CP investment pays off through redemption or foreclosure. If the property owner or another interested party (including holders of other liens on the property) pays off the taxes ("redeems" the tax lien) the investor receives a return of the principal invested plus accumulated interest. If the CP is not redeemed and the owner succeeds in foreclosing the right of redemption of all interested parties, the investor secures ownership of the property that the lien was on (see "Foreclosure").
The CP may be redeemed at any time up to the moment a judgment is entered foreclosing the right to redeem. Thus, it may be difficult to predict when the investment will be paid off, and accordingly what the return on investment will be. In most states, the foreclosure action on the lien may not be commenced until three years after the date of the sale of the lien at the public auction. Liens sold at the 2004 auction, therefore, will not be subject to foreclosure until 2007.
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"Subtaxes"
Normally the lien sold at the auction is for one year of delinquent taxes only. If the property owner fails to pay his or her taxes in subsequent years, it is possible for the CP holder to pay those taxes and have them added to the CP and earn interest at the same rate as the initial CP. The treasurer's office under most State's statute is required to accept payment of the subsequent taxes after June 1 of any year by any holder of a CP on the property.
Accordingly, the CP buyer at the February 2004 auction of liens for tax year 2002 may as early as June 2004 return to the treasurer's office to pay delinquent taxes from tax year 2003 on the same property and have those amounts endorsed onto the CP. Assuming the owner's continuing delinquency, the investor can then return to the treasurer's office after June 1 of each succeeding year that the lien has not been redeemed or foreclosed, and may pay the subsequent delinquent taxes, having them added to the lien represented by the CP.
If the county treasurer who has sold the tax lien is one who requires payment of earlier year liens as a condition of selling a tax lien, the failure to pay subtax may make the buyer's investment vulnerable to an involuntary transfer to the next delinquent tax lien purchaser.
Foreclosure
The foreclosure process varies in every state. On average, for tax deeds, the foreclosure process is fairly straightforward and involves a title search that costs about $300 and the process of clearing the title, which typically requires an attorney and can range from $1,000 to $5,000 depending on the complexity of the foreclosure process and the condition of the title. For tax lien certificates, the process is similar but more time consuming because the redemption period must expire before the foreclosure process can begin. Although the costs for foreclosure proceedings are not reimbursable, often these costs are small compared to the overall value of the property.
As mentioned above, a lawsuit may be brought three years after the sale of the lien at the county auction to foreclose the CP. Such a lawsuit will often require the use of an attorney. Most states have statutes that provide that property owners who redeem their tax liens after having been served in the judicial foreclosure lawsuit are responsible for the investor's attorney's fees, and costs of the action. This statutory protection enhances the attractiveness of the judicial foreclosure and removes a potential detraction from the investor's return on investment, in the event the CP is redeemed.
To obtain title depends on the time limit set by individual jurisdictions (the statutory redemption period - or the legally established time limit by the State), the attractive feature being the discount at which the property will be passed on to the investor in the case of default (the cost of outstanding taxes).
Redeemed liens can pay investors between 5% and 25% interest while liens that mature into foreclosed properties can result in cost multipliers of three to 15 times the amount of the investment being returned to the investor in cash.There is no guarantee we will obtain these types of returns on our investments.
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Annual tax lien certificate interest rates vary between a low of about 8% to a high of 36% depending on the state. However, if the taxpayer does not redeem the tax lien certificate within the state mandated redemption period, the property can be foreclosed on and the investor can obtain marketable title to the property for only the property taxes owed. Since in most counties, the amount of property taxes is based on a fraction of the property value, typically 10%, sometimes less, especially if the property is homesteaded, then tax lien foreclosure properties can be obtained for 50%, 75% or is some cases more than 90% below market value. With these discounts to market value and the potential for the county to underestimate the true market value, it is not uncommon to multiply the dollars invested by 3, 5 or in some cases more than 15 times the original amount.
In certain States and Counties, there may also be penalties between 10% - 50% added to the amount of the lien. Not only does the property owner have to pay the investor say, 15%, for the Lien at the time of redemption, but also an additional say 25%, on top of this in order to clear the title of the lien. This penalty could amount to 50% over two years providing the tax lien investor with a higher yield. As most taxes are a small fraction of the value of the property on which they are levied, we are of the view that the leverage works well in favor of the tax lien investor.
There a several ways in which the foreclosure process starts. In some States you simply apply for the Deed at the treasurer's office. In other States you may need to go to a 'second bid' auction to procure the property. In States where the foreclosure process is applicable it generally works as described below.
When the foreclosure process starts it typically starts at 60 days before the Deed Date as it appears on the Certificate. Some Counties have different periods (30 days) but the principle is the same. We have familiarized ourselves with the procedures of foreclosure in the Counties in which we intend to invest. These procedures differ from State to State and even between Counties within the same State.
Generally, the investor first has to give Notice by certified mail (for proof of delivery) to anyone who has an interest in the property: the owner, the occupier, other mortgage lenders or lien holders and sometimes even heirs to the property. The notice gives all of these parties an opportunity to redeem within, normally, 60 days. The Notice should at all times contain the property's tax parcel identification number. This is a number unique to each piece of property that permits it to be accurately transferred.
Some Counties require that you publish these notices in the local newspaper whereas others will require that you list them in the County court house. We will ensure that we follow the right procedure in each County. Neglecting to do so could result in the court throwing out the foreclosure proceeding. We will seek local legal advice in each County in which we purchase tax liens and deeds. In some Counties, if it is homestead property (properties with preferential treatment for people of age or war veterans), the investor also has to post a Notice of Application for Deed on the front door of the property.
Our representative then goes to the County Clerk's office to get verification that all requirements involving the notice have been met and recorded. A fee is usually charged. At this stage in the proceedings, the Clerk gives us the original certificate and affidavit of proof of service. From there we proceed to the Treasurer's office to pick up the Deed.
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The Property may have more than one lien or deed on it with the oldest taking priority. To retain our position, we intend to purchase the older certificates first and remain current on Taxes. Even though we will receive the property Fee Simple Title (straightforward property ownership), we will have to have the title 'quieted'. This involves an action to establish or 'quiet' title to or an interest in the property as between adverse claimants. The action is an appropriate remedy to establish any kind of legal or equitable right, title, estate, lien or interest in real property as against any adverse claim or cloud on title. Getting "Quiet Title" helps minimize the risk of the previous owner wanting to challenge the process. We intend to engage legal counsel to facilitate this.
The final hurdle involves the legal right of the original owner to set the Deed aside by way of a filed lawsuit. This can arise as a result of us not having followed the proper procedures. During this process of dispute the Courts will decide whether the property reverts back to the original owner.
In many states, any amount that is bid over the minimum bid is scheduled for payment to the taxpayer. However, the tax lien or tax deed investor does not get involved in this process because the county handles it and in most states the taxpayer must notify the county to get their money. After foreclosure, in some states, there is a legal challenge period where the owner can contest the sale but unless the challenge is successful, the owner retains no interest in the property. Legal challenges are rare and are usually only successful if the prior owner can demonstrate that the sale was invalid either because of an improper legal description or failure to notify all individuals with a prior interest in the property. In the event a legal challenge is successful, the tax lien or tax deed investor is refunded their money.
In some instances after foreclosure ownership will pass to us. However in 90%-95% of cases, we anticipate that the owner will redeem the taxes. It is highly unlikely that a property with a residence on it will be forfeited by the owner for the sake of back taxes. When Liens are redeemed, we receive only the Government-backed interest rate for the period of the investment, whereas if the Lien allows foreclosure on the property (non-redemption), ownership passes to us along with gains on realization or sale.
While the tax lien certificate foreclosure process can be very lucrative, the likelihood that a single tax lien will be redeemed before the redemption period expires is greater than 90%. This is because the owner will lose their home or other property if they do not redeem the certificate. Across the United States, redemption rates vary and in a rough way they are proportional to the value of the real estate in an area. In areas where real estate values are high like New York, redemption rates can exceed 98%, however in areas where property values are lower, redemption rates can be less than 90%. Homes also have a higher redemption rate than land or commercial property.
In Oklahoma, where our Canadian Club purchased 24 liens, we were successful in acquiring two deeds (8.3%). This is about average. Beyond this rough rule of thumb it is difficult to gauge the redemption rate from properties bought at any one sale. The high rate of tax lien certificate redemption is another reason why the club will focus most of its financial resources on tax deeds rather than tax liens.
We may also invest in 'Over the Counter' opportunities. These are Tax Liens that were not bid on at the Auction and are left over after the sale. These liens can be purchased by paying the overdue taxes thereby receiving the prevailing interest rate. The rates are as follows: Arizona 16%, Oklahoma 8% and Texas 25%.
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The Process-Due Diligence
There are risks involved in the purchase and sale of tax liens and deeds. The "Risk Factors" section highlights some of the risk areas of property tax lien investing. Those risks arise from problems with the real estate under the lien, other liens on the property, bankruptcy of the property owner, and risks associated with administrative inefficiencies and the general costs of litigation. Not all of these risks can avoided through pre-purchase investigation ("due diligence"), but many can. Before acquiring any tax liens or deeds, we conduct thorough due diligence to reduce the possible risks associated with the acquisition of tax liens and deeds in order to enhance the potential return on each investment and minimize any losses.
Due Diligence Strategy
As stated above there are two strategies for investing in tax liens and deeds. First, investing for interest return and second, buying for lien foreclosure. We plan to incorporate both strategies.
When investing for interest return we look for parcels more likely to be redeemed, and when we are buying for lien foreclosure, we identify and buy liens not likely to be redeemed. Liens more likely not to be redeemed would be those where: the property has been abandoned; the owner of record has died; there is free and clear ownership (otherwise mortgage holders on property also have the right to redeem the lien to protect their interest); several years of taxes are delinquent; and the tax bill mailing address for the property owner is outside the state.
By contrast, liens more likely to be redeemed will be on properties that: are improved; are owner occupied or rented out; have other liens (such as mortgages or deeds of trust) encumbering them; or the tax delinquency arises simply from a failure to send the tax bills to the correct address (e.g., where the property changes hands shortly after the tax roll is finalized).
Due Diligence Research Tools
We intend to utilize the following tools to accomplish our chosen objectives and to avoid the tax lien risk areas:
Assessment information. The assessor's office has tax parcel maps that will help us visualize the location and dimensions of the tax lien parcel. A review of the assessment will also provide some indication of the tax lien leverage to property value, depending on the use classification the assessor has assigned to the property. For example, because the assessment ratio for commercial property is typically approximately 25% and the typical assessment ratio for residential property is 10%, comparably valued properties of the two classes would have different tax burdens. The assessment ratio is one variable in how the county determines what the property taxes should be for a property. In many states, the assessment ratio for residential property is 10% and the assessment ratio for commercial property is 25%. This means that when the county levies property taxes, it will be based on the percentage included in the assessment ratio and any other factors the county uses to calculate the property taxes due each year. Because the taxes on the residential property would be lower in relation to the property's market value, in general tax lien investments in residential property are better leveraged than in commercial property. We intend to focus primarily on investments in tax liens in residential property.
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A review of the assessed valuation would also indicate whether the assessor has assigned value to improvements, that is, buildings or other structures on the property. Some factors we would consider are whether the property is used as a personal residence, is raw land, is developed commercial or industrial property or is a strip of real estate. Other criteria often employed are examination of the tax bill to see if the listed property owner has an out-of-state address. Finally, the assessor's office will have information on neighboring parcels which may suggest what values and uses exist on properties comparable to the liened parcel, or whether the subject parcel is one of several that comprise a single economic unit.
Recorder's Office. With the name of the property owner according to the assessor's records, it is possible to do a lien search on that individual at the county recorder's office. Using the name, we can determine if there are federal income tax liens or other liens, such as court judgments, against the named owner. Unfortunately, names used on titles to real estate and thus the tax roll are not always identical to those used by government authorities when they record liens. In tax sale investing, the legal description, including the name of the property owner, is how the properties included in the sale are recognized. The county assessor is the county department that is often responsible for assessing the value of all real estate in a particular county. Both of these items can provide valuable information when you are preparing to attend a tax sale auction.
The recorder's office will also have a copy of the vesting deed for the current owner.
It may be possible to tell from this deed, especially if the property is located in a subdivision or condominium complex, whether there are deed restrictions affecting the property. If document references are available in the vesting deed, it will then be possible to double check those deed restrictions directly. Otherwise, a title search or report could be ordered from a title company to determine this information, although the expenses would probably be unwarranted given the preliminary nature of the due diligence.
Bankruptcy Court. To investigate the potential bankruptcy risk, we can call or travel to the office of Bankruptcy Court Clerk for the district in which the property is located and in the district, if different, where the owner is located. The automatic stay against tax lien foreclosure would be effective even if the owner is out of state and filed in a different district's court. Bankruptcy court jurisdiction is national.
FDIC. The Federal Deposit Insurance Corporation. The FDIC makes lists of properties it owns available in paper and electronic format. These lists could be double-checked if there is any concern a financial institution owner of property is in receivership or conservatorship. The name of any financial institution mortgage holder on the property could also be reviewed against the FDIC list of institutions. Recent case law developments (July, 1999) cast a shadow on the validity of tax liens against parcels where there is such a RTC or FDIC interest.
Other Sources of Property Information. We also consider whether the property liened is something worth owning, or at least adequate security for the back tax debt. To address any potential or suspected environmental problems, the applicable State Department of Environmental Quality can be contacted. Zoning of the property can also be checked with the applicable town or county zoning authority. Also, the city or county highway (or streets) and engineering departments would be able to provide information on whether there is public roadway access to the property, whether the property is in a flood plain, and whether an engineer's water report is available. The engineering or health department might further have information of any percolation test results on the soil of the property.
Site Visit.It is always best to visit the property in person to see if any other questions (or opportunities) associated with the investment are apparent, such as neighboring off-site conditions that might affect the value or use of the property.
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Market Information. An indication of comparable values to that of the liened property might be available in the assessor's tax roll, by looking at neighboring parcels (if they are similar) and finding recent sales information. Besides contacting a real estate broker for the same information, the investor could also determine preferred geographic areas of investment (depending on his or her investment criteria) by consulting various sources of market information.
U.S. Census Bureau data.Census data and tract maps are available at U.S. Government Document Depositories(at most large or university libraries) or through the applicable State Department of EconomicSecurity. Data compilations in the census include reports on median home values in the
tract, as well as other potentially relevant demographic information.
Internet. Many of the government offices and other sources of property-related information described above have made some or all of the records available over the Internet.
All deals are forwarded to our deal flow committee prior to purchase. See "Deal Flow Committee" under the heading "Due Diligence".
Due diligence in tax sale investing involves three main areas: market value; risk analysis; and property location. First, all properties must be screened in order to determine if they have a market value that exceeds the minimum bid. This requires an evaluation of the local market value of other properties in the area and a regional evaluation of future trends in the area. For example, to research the current market value for a property in the sale, the county assessor would be contacted to determine the counties assessment of the market value and local realtors would be contacted to determine the value of like/kind properties. Then a competitive market analysis would be conducted to determine a suitable value for the property. Next, regional trends would be evaluated to determine if there is reason to believe based on future trends that the market value will increase or decrease in the future.
Second, a risk analysis would be conducted. The property would be screened for potential environmental contamination based on proximity to undesirable neighbors that might produce, store or transport hazardous wastes and historical uses of the property would be evaluated to determine how past owners used the property. The property would also be compared to known landfills, superfund sites, wastewater treatment facilities and other environmentally impacted areas. Also, the known property owners would be screened to determine if they have declared bankruptcy. Bankrupt properties can delay the foreclosure process, reducing the potential investment return over time.
Finally, the property would be located. For many tax sale properties this can be a difficult task since it may only be noted by a legal description and no "for sale sign" will be present at the property. This drive by view is often the final check on the research performed and any assumptions made regarding the property. Following this comprehensive process, we are usually prepared for the tax sale auction.
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The Parameters in Which We Operate
Before considering the purchase of any tax lien or tax deeds we will ensure the prospective investment meets the following criteria. There is no guarantee we will obtain these types of projected returns.
Like most investing methods, there are no guarantees in tax sale investing. However, since government agencies control the sales and monitor the process, tax sale investing is more regulated than some of the other common investing methods. Also, since the states mandate the starting interest rate for the sales, estimating potential investment returns is possible. For example, in Texas, tax deeds that are redeemed pay a flat interest rate of 25%, while in Arizona, the starting annual interest rate for tax lien certificates is 16%. For Oklahoma, the starting interest rate on tax lien certificates is 8%. Given an assumed investment of $100,000 in each of the 3 states and assumed expenses of $1,000 per state, the return would be $25,000 + $16,000 + $8,000 less expenses of $3,000 = $46,000. On a $300,000 investment, the final return in these three states is 15.33% , which is within the range stated. The actual return will largely be a function of the proportions invested in each state. The club may also invest in Florida where tax lien certificates pay 18% annually, Illinois, where tax lien certificates pay 36% annually, Missouri where tax lien certificates pay 10% annually or Iowa, where tax lien certificates pay 24% annually.
The redemption period for liens varies from state to state. However, in most cases, owners will redeem their liens in six months or less to avoid further interest and penalties. Given this fact, a large percentage of the liens will be redeemed in 3 to 5 months. However, in most states, it is also possible to purchase liens from prior sales. This means that once a property has been in the sale before, the redemption clock starts and the redemption period is compressed. Thus the foreclosure process on liens that are purchased from a prior sale can be started sooner. For example in Missouri, liens from prior sales can be foreclosed on in as little as 90 days. By balancing these factors, on average, the lien portfolio can be turned over in less than six months.
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The Process:
The following outlines our process of making acquisitions:
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User - Friendly Counties:
Some States and Counties, more than others, have greatly streamlined the process of Tax Lien and Deed sales for the collection of back taxes. We will focus on Counties in States that have:
We intend to focus our attention on Harris County, Texas, Tulsa County, Oklahoma and Maricopa County, Arizona, because these Counties meet our user-friendly criteria.
All three counties in Texas, Oklahoma and Arizona have complete online systems that show the lien or deed available, the price, a map of location, and a picture of the property in some but not all cases. For the other states recommended by Rogue Investor, LLC, the state either has a computer system in place with the above information or the staff at Rogue Investor, LLC are already familiar with the county process and local market values
However, we have also determined through research and consultation that there are other tax deed investment opportunities in South Central Texas, Northern Arkansas, and Southwestern Florida. For tax liens, in addition to Arizona and Oklahoma, Illinois, Iowa, Florida and Missouri also offer investing opportunities.
Investment in Publicly Traded and Private Companies
In addition to investing in tax liens and tax deeds, we also intend to designate up to 30% of the funds raised from this offering to the business of investing in publicly traded and private companies on the following US and Canadian exchanges: NASDQ, NYSE; TSX and TSX-V. We will not be investing in either the OTC or the OTCBB. In addition, we may consider cash flow opportunities whereby fixed rates of return and, when possible, high degrees of security (including personal guarantees or other covenants) are negotiated. This would include high interest loans to private companies. We have entered into a loan agreement with Payroll Loans First Lender's Corp., shown as an investment note receivable, whereby we invest $250,000 for a period of two years. The borrower is a large, well established private company that is in the business of advancing funds, under strict guidelines, to employed borrowers for a maximum of two weeks, with the advance secured by a pledge against the borrower's next paycheck. This inves tment pays us 2% per month and is secured with a General Security Agreement on the assets of Payroll Loans First Lender's Corp.
Once the fund has grown to its target of $3.0 million, we intend to be diversified in its investments, with no investment exceeding 10% of the portfolio value. However, in the early stages, while the fund is growing, and it may be necessary to negotiate a fixed dollar investment that is in excess of 10% of the portfolio value at that time.
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Management believes we have the capacity to identify undervalued publicly traded companies. Management also believes we have the necessary network and skills to locate opportunities that are fiscally secure and have a good rate of return, to conduct the due diligence that will be needed, and to manage the appropriate exit strategies. Individual investments will be in the range of $25,000 to $250,000.
The primary emphasis will be on cash flow with secondary emphasis on undervalued publicly traded companies.
For our investments in the small-cap market, we will be diligent to ensure that micro-cap companies have enough capital to execute their business plan and that the stock has liquidity.
History
We have a limited history and have not implemented our investment. However, our management has the experience of having founded and successfully operated two operations in Canada that were structured the same as us. These were WBIC Canada Ltd (The Wealthbuilders Investment Club) and FIC Investments Ltd. (The Freedom Investment Club of Canada). In both cases the Club concept of providing education and shared leaning through regular Club meetings and through an education division was combined with the concept of pooled funds for re-investing, structured as a corporation.
It is this concept of bringing shareholders together to enhance their knowledge as investors that makes this club culture unique.
Management believes its unique"Investment Club" concept provides two attractive features, namely:
1.Interaction through:
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All subscribers under this offering are required to join the Club and pay the $1,000 Membership fee, plus the $200 yearly maintenance fee commencing in January of their second year of Membership.
The fees are levied to offset costs of meetings, communication to Members, accounting, legal and other non-salary administration costs of operating the Club. In exchange, Members have the opportunity to attend meetings, the benefits of which are sharing information about investing; guest speakers and other educational information; networking with like-minded people and, for shareholders, updates on our performance and activities.
Management has established strict evaluation criteria for assessing cash-flow opportunities. We look for:
'
The first of these four criteria is a firm requirement. The other three are guidelines to be approximated as closely as possible. In the end, opportunities are assessed on how closely they match all four criteria in aggregate.
Contractually stated returns are those that are legally due to a company by virtue of a contract or agreement. That would include, as examples, such things as the defined rate of interest in a corporate loan, contractually defined interest rate on a second mortgage or County regulated interest rates on tax liens.
Management has established strict evaluation criteria for "pre-screening" publicly traded companies, namely:
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Any director, officer or shareholder is welcome to refer potential investment opportunities for pre-screening. Those "target" investment opportunities which meet the initial pre-screening criteria are referred to our officers and shareholders for further due diligence. Any investments in excess of $100,000 require prior approval of our shareholders.
Management has established strict due-diligence processes for evaluating cash-flow opportunities, namely:
Likewise, due diligence processes have been established for evaluating equity investments in publicly traded companies, namely:
Registered trader review is an assessment of the merits of the investment by one or more of the certified stock brokers and/or by the certified financial analysts that we have relationships with.
Selection Process
Any opportunities which are approved by our deal flow committee and which pass the due diligence test will, in the case of publicly traded companies, be reviewed by a registered trader, before an investment decision is made. Substantial investments in excess of $100,000 are considered "core relationship positions", and these target investment opportunities must be voted upon and approved by our shareholders. Normally, shareholders will vote based upon information that results from the due diligence of management. On certain occasions the target company's management will make a presentation at a special meeting of shareholders, at which time our shareholders will be invited to participate in discussion with the target company's management. Following discussion, a vote will be held to effect a resolution accepting or rejecting the core position. Investment decisions of under $100,000 may be made by management.
Deal Flow Committee
The Deal Flow Committee Members are: Michael Lathigee, our CEO, Earle Pasquill, our President and Treasurer, Canadian registered brokers Brent Todd and Patrick Lecky, Certified Financial Analyst Romeo D'Angela and Albert Koopman who is our Vice President of Education and an Officer of FIC Investment Ltd. Members of the Deal Flow Committee are not employees and are not compensated beyond the standard commission to which they are entitled on those trades which they process.
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Investing strategy and specific investment opportunities are reviewed by this committee to screen for appropriateness to our objectives and for likelihood of meeting our returns objectives. Decisions are made to continue with or abandon opportunities in both the early stages (before due diligence) and after the completion of due diligence.
Participation
Throughout this document, there are references to shareholders voting on various issues. It is management's intent to ensure that the participatory spirit of the investment club concept is maintained. The Class "B" Common Voting shares (see "Share Structure") will not be used to control votes on investment and routine Club decisions. The B shares are intended to protect the Club culture and to protect that culture against any hostile take-over bids. Only in such circumstances (culture protection and take-over bids) will the B shares voting rights be invoked. The B shares will not be voted for investment and our routine decisions. The B shares will however, be used to vote for our directors.
We are pursuing the long term objectives of:
The anticipated target investment mix is summarized more or less below:
Type of Investment | Percentage of Total Investments |
Liquid Trading Positions (mainly public companies) | 30 % |
Tax Liens and Tax Deeds | 70 % |
TOTAL | 100 % |
Management intends to monitor and reassess the target investment mix periodically, and furthermore expects that the target investment mix will be adjusted from time to time to reflect changes in the investment climate, the dynamics of the market, and the wishes of the shareholders. Therefore, the actual investment mix may vary from the original target. However, in no event shall the portion of the investment mix allotted to tax liens and tax deeds comprise less than 70% of the percentage of total investments.
Employees and Employment Agreements
At present, we have no employees. Mr. Pasquill, our President, Treasurer and Director, and Mr. Lathigee, our Chief Executive Officer and Director are treated as independent contractors. Mr. Lathigee has been paid approximately $17,440 (CDN$21,000) to date. Mr. Pasquill has been paid approximately $8,700 (CDN$10,500) to date for the provision of part-time administrative services. We presently do not have pension, health, annuity, insurance, profit sharing or similar benefit plans; however, we may adopt such plans in the future. There are presently no personal benefits available to any employees or contractors.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
We have only just completed our business plan and commenced operations. We have generated minimal revenues from our proposed business operations.
In order to meet our need for additional cash we are attempting to raise money from this offering. If we do not raise all of the money we need from this offering, we may have to find alternative sources, such as a second public offering, a private placement of securities. At the present time, we have not made any arrangements to raise additional cash, other than through this offering. If we need additional cash and cannot raise it we will either have to suspend operations until we do raise the cash, or cease operations entirely.
Operating History; Need for Additional Capital
There is minimal historical financial information about us upon which to base a current evaluation of our performance. We have just commenced new operations but have generated minimal revenues so far. We may not be successful in fully implementing our proposed business operations. Our business is subject to risks inherent in the establishment of a new business enterprise, including limited capital resources, possible delays in the research and/or development of our interests, and possible cost overruns due to rising real estate markets.
We are seeking equity financing in this offering in order to provide sufficient working capital to allow us to continue investing in tax deeds and tax-lien on real estate properties and to invest in public and private equities. We have no assurance that future financing will be available to us on acceptable terms. If such financing is not available on satisfactory terms, we may be unable to continue, develop or expand our operations. Equity financing could result in additional dilution to existing shareholders.
Plan of Operation
Subject to financing from this offering, over the next twelve months, we intend to develop our tax lien and tax deed purchasing business along with developing our business of investing in public and private companies.
We do not expect to purchase or sell any plant or significant equipment. We expect that we will only increase our number of employees by one during the next twelve months.
Liquidity and Capital Resources
As of the date of this registration statement, we have just commenced business operations and have generated limited revenues from our business operations.
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We issued 10,000,000 shares of our Class "B" Common Voting non-participating shares to Messrs. Lathigee and Pasquill on April 13, 2004 for aggregate consideration of $10,000, or $.001 per share.
We issued 1,474,728 shares of Class "A" Common Voting participating shares to various accredited investors on September 25, 2004 for aggregate consideration of $1,474, 728.
Our material commitments for capital expenditures include offering expenses in the estimated amount of $100,000. Approximately $50,000 of these costs have been paid on our behalf by 669997 BC Ltd. in the form of a loan (see "Certain Relationships and Transactions"). 669997 B.C. Ltd. is a private company incorporated in British Columbia, Canada for the purpose of accumulating seed funding to enable us to get started. We do not require funds from this offering to pay these costs. Any administrative or other costs such as legal and accounting fees, rent, printing, phone services and so forth which must be paid prior to completion of this offering will be paid from our remaining working capital.
We require proceeds from this offering to pay the costs that will be associated with the location and purchase of suitable tax deeds and tax liens on real estate properties and for the investment in public and private equities. If we are not able to raise money to pay these costs we will go out of business
If we raise less than the maximum offering amount we will commence a scaled back version of our proposed business plan.
As of January 31, 2005 our total assets were $1,889,114 and our total liabilities were $1,018,535.
MANAGEMENT
Officers and Directors
Each of our directors is elected by the Stockholders to a term of one (1) year and serves until his or her successor is elected and qualified. Each of our officers is elected by the board of directors to a term of one (1) year and serves until his or her successor is duly elected and qualified, or until he or she is removed from office. The board of directors has no nominating, auditing or compensation committees. The names, addresses, ages and positions of our present officers and directors are set forth below:
Name and Address: | Age: | Position(s): |
Earle Pasquill | 61 | President, Treasurer and member of the Board of Directors |
Michael Lathigee | 40 | Chief Executive Officer and member of the Board of Directors |
Paul Weir | 45 | Secretary |
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The persons named above have held their offices/positions and are expected to hold their offices and/or positions until the next annual meeting of our stockholders.
Background of Officers and Directors
Earle Pasquill has been our President, Treasurer, and a member of our board of directors since inception. Mr. Pasquill has devoted approximately 35% of his professional time to our business and intends to devote a greater amount of time in the future.
Since September 2002, Mr. Pasquill has been President of FIC Investment Inc., a Canadian investment club specializing in small venture companies and the purchase of tax liens and tax deeds.
Since 2000, Mr. Pasquill has been President of WBIC Canada Inc., a Canadian investment company specializing in small venture companies.
From 2000 to 2002, Mr. Pasquill has been President of PCG Ventures Inc., a TSX Venture Exchange listed company involved in the consolidation of dental practices.
Since 1993, Mr. Pasquill has been President of Pasquill & Associates, a Vancouver based management consulting firm.
From 1997 to 1999 Mr. Pasquill was Vice-President of Sealand International Trading Inc., a Vancouver, based exporting company.
From 1987 to 1993 Mr. Pasquill was Senior General Manager for British Columbia and Alberta for Eaton's, a Canadian national department store chain.
In 1972 Mr. Pasquill obtained his Master's of Business Administration from the University of Western Ontario, located in London, Ontario, Canada.
In 1968 Mr. Pasquill obtained his Bachelor of Commerce from the University of British Columbia, located in Vancouver, British Columbia, Canada.
Michael Lathigee has been our Chief Executive Officer and a founding member of our board of directors since inception.Mr. Lathigee has devoted approximately 35% of his professional time to our business and intends to devote a greater amount of time in the future.
Since September 2002, Mr. Lathigee has been Chief Executive Officer of FIC Investments Inc., a Canadian investment company specializing in small venture companies and the purchase of tax liens and tax deeds.
Since 2000, Mr. Lathigee has been Chief Executive Officer of WBIC Canada Inc., a Canadian investment company specializing in small venture companies.
From 2000 to 2001 Mr. Lathigee was a director of Olympic Resources Limited, a Vancouver, British Columbia based exploration company listed on the TSX Venture Exchange.
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From 2000 to 2002 Mr. Lathigee was Vice President, Administration of PCG Ventures Inc., PCG Ventures Inc., a TSX Venture Exchange listed company involved in the consolidation of dental practices.
Mr. Lathigee was named in the 1999 edition of Who's Who in Business as one of Canada's rising stars.
Paul Weir has been our Secretary since inception. In this role Mr. Weir has devoted approximately 5% of his professional time to our business and intends to continue to devote a greater amount of time in the future.
Since 1988, Mr. Weir has been a lawyer operating a private practice in North Vancouver, British Columbia, Canada focusing on business law - corporate and commercial transactions, real estate and advising businesses.
From 1999 to present, Mr. Weir was the Principal and President of Paul C. Weir Law Corporation, Barrister & Solicitor, North Vancouver, British Columbia.
From 1993 to 1999, Mr. Weir was the Principal of Paul C. Weir, Barrister & Solicitor, North Vancouver, British Columbia.
From 1990 to 1993, Mr. Weir was a Partner with Weir & Soga, Barristers & Solicitors, Vancouver, British Columbia.
From 1988 to 1990, Mr. Weir was an Associate Lawyer with Harper, Grey & Easton, Barristers & Solicitors, Vancouver, British Columbia.
From 1987 to 1988, Mr. Weir was an Articled Student with Harper, Grey & Easton, Barristers & Solicitors, Vancouver, British Columbia.
From 1988 to present, Mr. Weir has been a Member of the Law Society of British Columbia.
In 1987 Mr. Weir obtained a Bachelor of Laws Degree from Osgood Hall Law School (York University) Toronto, Ontario. In 1982 Mr. Weir obtained his Bachelor of Arts Degree from the University of British Columbia (Economics Major) Vancouver, British Columbia.
Mr. Weir is a director and corporate secretary of Joule Microsystems Canada Inc., Delta, British Columbia and the corporate secretary of WBIC Canada Ltd., and FIC Investment Ltd., Vancouver, British Columbia.
Conflicts of Interest
We believe that Messrs. Lathigee and Pasquill may be subject to conflicts of interest. The conflicts of interest arise from Messrs. Lathigee and Pasquill's relationships with other investment corporations that are listed above. In the future, Messrs. Lathigee and Pasquill will continue to be involved in the investment business for the other entities that may result in the conflicts of interest. The only conflicts that we foresee is Messrs. Lathigee and Pasquill's devotion of time to other investment projects that do not involve us.
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Specifically, Michael Lathigee is an officer and director of FIC Investments Inc. and WBIC Canada Inc., both of which are engaged in the business of investing in public and private companies. This is a potential conflict of interest because Mr. Lathigee devotes approximately 10% of his professional time to each of those companies which could he could otherwise devote to us and because that company is engaged a business similar to us. Mr. Pasquill is also an officer and director of FIC Investments Inc. and WBIC Canada Inc., both of which are involved in the business of investing in public and private companies. This is a potential conflict of interest with us because Mr. Pasquill devotes approximately 30% of his professional time to each of those companies which he could otherwise devote to us and because that company is engaged in a business similar to us. Our Articles of Incorporation and Bylaws do not contain any procedures for resolving conflicts of interest.
There may be a conflict over investments in public and private companies and tax liens and tax deeds. Any conflicts of interest will be handled on a case by case basis. We have no formal policy to handle conflicts of interest.
EXECUTIVE COMPENSATION
The following salaries are being paid at the present time to our directors and officers. There were grants of options given to our directors and officers during the current fiscal year. See the term of the options set out below. Since inception, the only compensation that has been awarded to, earned by, or paid is as follows:
|
|
| Long Term Compensation |
| ||||
|
| Annual Compensation | Awards |
| ||||
|
|
|
|
| Restricted Stock Award(s) | Securities Underlying Options / SARs (#) |
|
|
Michael Lathigee, Chief Executive Officer and Director | 2004 2003 | $17,440 0 | 0 0 | 0 0 | 0 0 | 7.5% of number of shares sold in offering 0 | 0 0 | 0 0 |
Earle Pasquill, President, Treasurer and Director | 2004 2003 | $8,700 0 | 0 0 | 0 0 | 0 0 | 7.5% of number of shares sold in offering 0 | 0 0 | 0 0 |
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In addition, we have entered into an option agreement with Harv Eker, a consultant, to purchase up to 7.5% of the subscribed shares in any offering, exercisable for 10 years from the date of issue at the issue price of the particular offering.
EMPLOYMENT AGREEMENTS
We have not entered into any employment agreements with any of our employees, and employment arrangements are all subject to the discretion of our board of directors.
With the exception of the compensation paid to Messrs. Pasquill and Lathigee our officers and directors have received no compensation to date and there are no plans to compensate them in the near future, unless and until we begin to realize revenues and become profitable in our business operations.
There are no retirement, pension, or profit sharing plans in place for the benefit of our officers and directors.
Long-Term Incentive Plan Awards
Other than the option agreements described above, we do not have any long-term incentive plans that provide compensation intended to serve as incentive for performance to occur over a period longer than one fiscal year, whether such performance is measured by reference to our financial performance, our stock price, or any other measure.
Compensation of Directors
No compensation has been awarded to our officers and directors other than has been disclosed. We do not have any plans to pay our directors any money. No options have been awarded to any of our officers and directors other than has been disclosed. We have no other contractual arrangements with any member of our board of directors that we have not already disclosed.
Indemnification
Pursuant to our Articles of Incorporation and Bylaws, we may indemnify an officer or director who is made a party to any proceeding, including a lawsuit, because of his position, if he acted in good faith and in a manner he reasonably believed to be in our best interest. In certain cases, we may advance expenses incurred in defending any such proceeding. To the extent that the officer or director is successful on the merits in any such proceeding as to which such person is to be indemnified, we must indemnify him against all expenses incurred, including attorney's fees.
Regarding indemnification for liabilities arising under the Securities Act of 1933, as amended, which may be permitted to directors or officers pursuant to the foregoing provisions, we are informed that, in the opinion of the Securities and Exchange Commission, such indemnification is against public policy, as expressed in the Act and is, therefore, unenforceable.
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PRINCIPAL STOCKHOLDERS
The following table sets forth, as of the date of this registration statement, the total number of shares owned beneficially by each of our directors, officers and key employees, individually and as a group, and the present owners of 5% or more of our total outstanding shares. The table also reflects what such ownership will be, assuming completion of the sale of all shares in this offering. Shares will be sold on a best efforts basis only and it may be the case that less than all or even no shares will be sold in this offering. The stockholder listed below has direct ownership of his shares and possesses sole voting and dispositive power with respect to the shares.
Name and Address of Beneficial Owner(1) | Number of Shares Before Offering | Number of Shares After Offering | Percentage of Ownership After Offering | Percentage of Ownership If No Shares Sold in the Offering |
Michael Lathigee | 5,000,000 Class B shares | 5,000,000 | 35% of all Common shares 50% Class B Shares | 44% of all Common Shares 50 % Class B shares |
Earle Pasquill | 5,000,000 Class B Shares | 5,000,000 | 35% of all Common Shares 50% Class B Shares | 44% of all Common Shares 50% Class B Shares |
All Officers and Directors as a Group | 100% of all Class B shares | 10,000,000 Class B Common Shares | 70% of the combined Class "A" and "B" shares | 88% of the combined Class "A" and "B" shares |
(1) The persons named above may be deemed to be a "promoter" of our company, within the meaning of such terms under the Securities Act of 1933, as amended, by virtue of his/its direct and indirect stock holdings. Messrs. Lathigee and Pasquill are the only "promoters" of our company.
Future Sales by Existing Stockholders
A total of 10,000,000 shares of common stock were issued to the existing stockholders, all of which are "restricted securities," as that term is defined in Rule 144 of the Rules and Regulations of the SEC promulgated under the Securities Act. Under Rule 144, such shares can be publicly sold, subject to volume restrictions and certain restrictions on the manner of sale, commencing one (1) year after their acquisition.
Shares purchased in this offering, which will be immediately resalable, and sales of all of our other shares after applicable restrictions expire, could have a depressive effect on the market price, if any, of our common stock and the shares we are offering.
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DESCRIPTION OF SECURITIES
Common Stock
Our authorized capital stock consists of 25,000,000 common shares designated as follows: 10,000,000 Class "A" Common Voting shares and 15,000,000 Class "B" Common Voting. The holders of our Class "A" common stock:
The holders of our Class "B" common stock:
All our shares of Class "A" and "B" common stock now outstanding are fully paid for and non-assessable and all shares of our common stock which are the subject of this offering, when issued, will be fully paid for and non-assessable. We refer you to our Articles of Incorporation, Bylaws and the applicable statutes of the State of Nevada for a more complete description of the rights and liabilities of holders of our securities.
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Non-cumulative Voting
Holders of shares of our Class "A" and "B" common stock do not have cumulative voting rights, which means that the holders of more than 50% of the outstanding shares, voting for the election of directors, can elect all of the directors to be elected, if they so choose, and, in such event, the holders of the remaining shares will not be able to elect any of our directors. After this offering is completed, assuming the maximum number of shares are sold, the present stockholders will own approximately 77% of our issued and outstanding shares. If no shares are sold under the offering, the present stockholders will own 100% of our outstanding shares.
Cash Dividends
As of the date of this registration statement, we have not paid any cash dividends to stockholders. The declaration of any future cash dividend will be at the discretion of our board of directors and will depend upon our earnings, if any, our capital requirements and financial position, our general economic conditions, and other pertinent conditions. It is our present intention not to pay any cash dividends in the foreseeable future, but rather to reinvest earnings, if any, in our business operations.
Reports
After we complete this offering, we will not be required to furnish you with an annual report. Further, we will not voluntarily send you an annual report. We will be required to file reports with the SEC under section 15(d) of the Securities Act. The reports will be filed electronically. The reports we will be required to file are Forms 10-KSB, 10-QSB, and 8-K. You may read copies of any materials we file with the SEC at the SEC's Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also maintains an Internet site that will contain copies of the reports we file electronically. The address for the Internet site is www.sec.gov.
Our common stock is defined as a "penny stock" under the Securities and Exchange Act of 1934, and its rules. Because we are a penny stock, you may be unable to resell our shares. Also, the Exchange Act and the penny stock rules impose additional sales practice and disclosure requirements on broker-dealers who sell our securities to persons other than certain accredited investors. As a result, fewer broker-dealers are willing to make a market in our stock and it may effect the level of news coverage you receive.
Stock Transfer Agent
We have not yet appointed a stock transfer agent for our securities. We do not intend to appoint a stock transfer agent for our securities.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
We were incorporated in the State of Nevada on September 26, 2003. On April 13, 2004, we issued a total of 10,000,000 shares of restricted common stock to Messrs. Lathigee and Pasquill , officers and directors of our company. The shares were issued for aggregate consideration of $10,000.
We issued 1,474,728 shares of Class "A" Common Voting participating shares to various accredited investors on September 25, 2004 for aggregate consideration of $1,474, 728.
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Since our inception, 669997 BC Ltd. has advanced loans to us in the total sum of $212,333CDN, which were used for organizational and start-up costs, legal and auditor fees, operating capital and for working capital to start our business purchasing tax deeds and tax liens and investing in public and private companies. The loan is repayable as follows:
669997 BC Ltd. is entitled to receive 10% of the our net profits for a period of 5 years. If the entire amount of the loan has not been repaid upon the expiration of the 5 year period, 669997 BC Ltd., is entitled to receive 10% of our net profits until such time as the entire principal has been repaid. The loan agreement is attached as an exhibit to this registration statement.
The option agreement with 441824 BC Ltd. is a related party transaction. Michael Lathigee, one of our directors is a shareholder of 441824 BC Ltd.
We have month to month service agreements with the two shareholders of the company who are also officers. Currently, one officer receives $3,000 CDN per month and one officer receives $1,500 CDN per month for services performed on our behalf.
The prepaid services are for management fees that are paid monthly to the chief executive officer of FIC Investments.
In the opinion of management, the terms of the above-described transactions were as favorable as those that could have been obtained in arms' length transactions with unaffiliated third parties.
LITIGATION
We are not a party to any pending litigation and none is contemplated or threatened.
EXPERTS
Our financial statements for the period from inception to April 30, 2004 included in this registration statement have been audited by Lopez, Blevins, Bork & Associates as set forth in their report included in this registration statement.
FINANCIAL STATEMENTS
Our fiscal year end is April 30. Our audited financial statement from inception to April 30, 2004 and for the interim period ended January 31, 2005 immediately follows.
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____________________________________________________________________________________________________
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
FIC Investments USA Corp.
(A Development Stage Company)
Seattle, WA
We have audited the accompanying balance sheet of FIC Investments USA Corp. as of April 30, 2004, and the related statements of operations, stockholders' deficit, and cash flows for the year then ended and for the period from September 26, 2003 (Inception) through April 30, 2004. These financial statements are the responsibility of FIC Investments USA Corp.'s management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of FIC Investments USA Corp. as of April 30, 2004, and the results of its operations and its cash flows for the periods described in conformity with accounting principles generally accepted in the United States of America.
Lopez, Blevins, Bork & Associates, LLP
Houston, Texas
August 26, 2004
F-1
FIC INVESTMENTS USA CORP.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
April 30, 2004
ASSETS |
|
Current assets |
|
Cash | $ 100,551 |
Prepaid services | 2,189 |
TOTAL ASSETS | $ 102,740 |
LIABILITIES AND STOCKHOLDERS' DEFICIT |
|
Current liabilities |
|
Accrued interest | $ 3,084 |
Note payable-related party | 155,540 |
Total current liabilities | 158,624 |
STOCKHOLDERS' DEFICIT: |
|
Common Stock - Class A, $.001 par value, 10,000,000 share authorized, none issued and outstanding | - |
Common stock - Class B, $.001 par value, 15,000,000 shares authorized, 10,000,000 shares issued and outstanding | 10,000 |
Accumulated other comprehensive income | 1,587 |
Deficit accumulated during the development stage | (67,471) |
Total Stockholders' Deficit | (55,884) |
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT | $ 102,740 |
See accompanying summary of accounting policies ad notes to financial statements
F-2
FIC INVESTMENTS USA CORP.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF OPERATIONS
Period from September 26, 2003 (Inception)
Through April 30, 2004
General and administrative | $ (67,471) |
Net loss | (67,471) |
Other Comprehensive Income |
|
Gain on foreign currency translation | 1,587 |
Total Comprehensive Loss | $ (65,884) |
Net loss per share: |
|
Basic and diluted | $ (0.01) |
Weighted average shares outstanding: | |
Basic and diluted | 10,000,000 |
See accompanying summary of accounting policies ad notes to financial statements
F-3
FIC INVESTMENTS USA CORP.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF STOCKHOLDERS' DEFICIT
Period from September 26, 2004 (Inception) through April 30, 2004
|
| Deficit accumulated during the development stage | Accumulated Other Comprehensive Income |
| ||
| Shares |
| Amount | |||
Issuance of common stock for cash |
10,000,000 |
$ 10,000 |
$ - |
$ - |
$ 10,000 | |
Foreign currency translation | - | - | - | 1,587 | 1,587 | |
Net loss | - | - | (67,471) | - | (67,471) | |
Balance, April 30, 2004 | 10,000,000 | $ 10,000 | $ (67,471) | $ 1,587 | $ (55,884) | |
See accompanying summary of accounting policies ad notes to financial statements
F-4
FIC INVESTMENTS USA CORP.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS
Period from September 26, 2004 (Inception) Through April 30, 2004
CASH FLOWS FROM OPERATING ACTIVITIES: | |
Net loss | $ (67,471) |
Net changes in: |
|
Prepaid expenses | (2,189) |
Accrued interest | 3,084 |
NET CASH USED IN OPERATING ACTIVITIES | (66,576) |
CASH FLOWS FROM FINANCING ACTIVITIES: | |
Proceeds form note payable - related party | 155,540 |
Shares issued for cash | 10,000 |
NET CASH PROVIDED BY FINANCING ACTIVITIES | 165,540 |
Effect of exchange rate changes on cash | 1,587 |
NET CHANGE IN CASH | 100,551 |
Cash, beginning of period | - |
Cash, end of period | $ 100,551 |
See accompanying summary of accounting policies ad notes to financial statements
F-5
FIC INVESTMENTS USA CORP.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF ACCOUNTING POLICIES
FIC Investments USA Corp. ("FIC Investments") was incorporated on September 26, 2003 under the laws of Nevada to engage in any lawful business or activity for which corporations may be organized under the laws of the State of Nevada. FIC Investments is primarily engaged in the buying and selling of tax liens and tax deeds on real estate with an intended focus in the States of Oklahoma, Texas, and Arizona.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the balance sheet. Actual results could differ from those estimates.
Foreign Currency Translation
The Canadian dollar is the functional currency of FIC Investments. Transactions in foreign currency are translated at rates of exchange rates ruling at the transaction date. Monetary assets and liabilities denominated in foreign currencies are retranslated at rates ruling at the balance sheet date. Exchange differences are recognize in the in the statement of operations.
Basic Loss Per Share
Basic loss per share has been calculated based on the weighted average number of shares of common stock outstanding during the period.
Recent Accounting Pronouncements
FIC Investments does not expect the adoption of recently issued accounting pronouncements to have a significant impact on FIC Investments USA Corp.'s results of operations, financial position or cash flow.
NOTE 2 - RELATED PARTIES
FIC Investments has month to month service agreements with the two shareholders of the company who are also officers. Currently, one officer receives $3,000 CDN per month and one officer receives $1,500 CDN per month for services performed on behalf of FIC Investments.
NOTE 3 - INCOME TAXES
For the year ended April 30, 2004, FIC has incurred net losses and, therefore, has no tax liability. The net deferred tax asset generated by the loss carry-forward has been fully reserved. The cumulative net operating loss carry-forward is approximately $67,000 at April 30, 2004, and will expire in the year 2024.
F-6
NOTE 4 - COMMON STOCK
FIC Investments issued 10,000,000 Class B Common shares of stock to its two founding shareholders for $10,000 cash.
NOTE 5 - SUBSEQUENT EVENT
In May 2004 FIC Investments transferred $100,000 CDN into a term deposit account. The deposit earns interest at a rate of prime - 2.45% and matures May 5, 2005.
FIC Investments entered into an office lease that begins July 1, 2004. The lease term is one year with monthly rent payments being $900. FIC Investments is also required to pay a security deposit of $450.
F-7
FIC INVESTMENTS USA CORP.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
July 31, 2004
ASSETS |
|
Current assets |
|
Cash | $ 18,448 |
Certificate of deposit | 75,113 |
Other current assets | 921 |
TOTAL ASSETS | $ 94,482 |
LIABILITIES AND STOCKHOLDERS' DEFICIT |
|
Current liabilities |
|
Accrued interest | $ 7,048 |
Note payable-related party | 159,937 |
Total current liabilities | 166,985 |
Commitments |
|
STOCKHOLDERS' DEFICIT: |
|
Common Stock - Class A, $.001 par value, 10,000,000 share authorized, none issued and outstanding | - |
Common stock - Class B, $.001 par value, 15,000,000 shares authorized, 10,000,000 shares issued and outstanding | 10,000 |
Accumulated other comprehensive income | (579) |
Deficit accumulated during the development stage | (81,924) |
Total Stockholders' Deficit | (72,503) |
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT | $ 94,482 |
F-8
FIC INVESTMENTS USA CORP.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
Three Months Ended July 31, 2004
Period from September 26, 2003 (Inception) Through July 31, 2004
| Three Months Ended | Inception through |
General and administrative | $ (10,594) | $ (75,347) |
Interest expense | (3,964) | (7,048) |
Interest income | 471 | 471 |
Net loss | (14,087) | (81,924) |
Foreign Currency Translation | (2,166) | (579) |
Total Comprehensive Loss | $ (16,253) | $ (82,503) |
Net loss per share: |
|
|
Basic and diluted | $ (0.00) |
|
Weighted average shares outstanding: | ||
Basic and diluted | 10,000,000 |
|
F-9
FIC INVESTMENTS USA CORP.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS
Three Months Ended July 31, 2004
Period from September 26, 2003 (Inception) Through July 31, 2004
Three Months Ended | Inception through | |
CASH FLOWS FROM OPERATING ACTIVITIES: | ||
Net loss | $ (14,087) | $ (81,924) |
Adjustments to reconcile net loss to cash used in operation activities: |
|
|
Net changes in: |
|
|
Prepaid expenses | 2,189 | - |
Other current assets | (971) | (450) |
Accrued interest | 3,964 | 7,048 |
NET CASH USED IN OPERATING ACTIVITIES | (9,221) | (75,797) |
CASH FLOWS FROM INVESTING ACTIVITIES: |
| |
Purchase of certificate of deposit | (73,070) | (73,070) |
NET CASH USED IN INVESTING ACTIVITIES | (73,070) | (73,070) |
CASH FLOWS FROM FINANCING ACTIVITIES: | ||
Proceeds from note payable - related party | - | 155,540 |
Shares issued for cash | - | 10,000 |
NET CASH PROVIDED BY FINANCING ACTIVITIES | - | 165,540 |
Effect of exchange rate changes on cash | 188 | 1,775 |
NET CHANGE IN CASH | (82,103) | 18,448 |
Cash, beginning of period | 100,551 | - |
Cash, end of period | $ 18,448 | $ 18,448 |
F-10
FIC INVESTMENTS USA CORP.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited interim financial statements of FIC Investments USA Corp. have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission ("SEC"), and should be read in conjunction with the audited financial statements and notes thereto contained in the Company's registration statement filed with the SEC on Form SB-2. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim periods presented have been reflected herein. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. Notes to the financial statements which would substantially duplicate the disclosure contained in the audited financial statements for the most recent fiscal year 2004 as reported in Form SB-2, have been omitted.
NOTE 2 - RELATED PARTIES
FIC Investments has month to month service agreements with the two shareholders of the company who are also officers. Currently, one officer receives $3,000 CDN per month and one officer receives $1,500 CDN per month for services performed on behalf of FIC Investments.
The prepaid services are for management fees that are paid monthly to the chief executive officer of FIC Investments.
NOTE 3 - CERTIFICATE OF DEPOSIT
In May 2004 FIC Investments transferred $100,000 CDN into a term deposit account. The deposit earns interest at a rate of prime - 2.45% and matures May 5, 2005.
NOTE 4 - NOTE PAYABLE
As of April 30, 2004, 666997 BC Ltd. advanced $212,333 CDN to the company. The note is due on demand and bears interest at the rate of 10% of net profits per annum. The interest payments of 10% of net profits are due to 666997 BC Ltd. for a minimum of five years regardless of when the principle is paid back. Due to no profits for the period ending April 30, 2004, 10% of the outstanding balance was accrued as interest. The principle balance remains at $212,333 CDN as of July 31, 2004.
NOTE 5 - COMMITMENTS
FIC Investments entered into an office lease that begins July 1, 2004. The lease term is one year with monthly rent payments being $900. FIC Investments is also required to pay a security deposit of $450.
F-11
FIC INVESTMENTS USA CORP.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
January 31, 2005
ASSETS |
|
Current assets | |
Cash | $ 928,739 |
Receivables - related parties | 72,985 |
Prepaid services | 13,238 |
Marketable securities | 171,134 |
Investments | 453,018 |
Total Current Assets | 1,639,114 |
Note receivable | 250,000 |
Total Assets | $ 1,889,114 |
LIABILITIES AND STOCKHOLDERS' EQUITY |
|
Current liabilities |
|
Accrued interest | $ 16,387 |
Accounts payable | 4,306 |
Due to related party | 671,858 |
Notes payable - related party | 171,609 |
Deferred membership revenues | 154,375 |
Total current liabilities | 1,018,535 |
STOCKHOLDERS' EQUITY |
|
Common stock - Class A, $.001 par value, 10,000,000 share authorized, 1,147,963 issued and outstanding | 1,048 |
Common stock - Class B, $.001 par value, 15,000,000 shares authorized,10,000,000 shares issued and outstanding | 10,000 |
Additional paid in capital | 1,046,915 |
Unrealized gain on marketable securities | 28,676 |
Deficit accumulated during the development stage | (216,060) |
Total Stockholders' Equity | 870,579 |
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ 1,889,114 |
F-12
FIC INVESTMENTS USA CORP.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF OPERATIONS
Three Months Ended January 31, 2005 and 2004 and
Nine Months Ended January 31, 2005 and
Period from September 26, 2003 (Inception)Through January 31, 2004 and
Period from September 26, 2003 (Inception)Through January 31, 2005
|
Three months ended January 31, | Nine months ended January 31, 2005 | Inception through January 31, 2004 | Inception through January 31, 2005 | ||
| ||||||
| 2005 |
| 2004 | |||
Interest Income | $ 6,544 |
| $ - | $7,444 | $ - | $ 7,444 |
Membership Fees | 50,613 |
| - | 64,136 | - | 64,136 |
Total Income | 57,157 |
| - | 71,580 | - | 71,580 |
Expenses: |
|
|
|
|
|
|
Commission expense | 33,888 |
| - | 101,508 | - | 101,508 |
General and administrative | 39,582 |
| - | 70,395 | - | 137,866 |
Management contracts | 2,966 |
| - | 21,277 | - | 21,277 |
Interest expense | 5,035 |
| - | 13,176 | - | 13,176 |
Total Expenses | 81,471 |
| - | 206,356 | - | 273,827 |
Net operating loss | (24,314) |
| - | (134,776) | - | (202,247) |
Foreign currency | (2,704) |
| - | (15,399) | - | (13,812) |
Net loss | $ (27,018) |
| $ - | $(150,175) | $ - | $ (216,059) |
Net loss per share: |
|
|
|
|
|
|
Basic and diluted | $ 0.0258 |
| $ (0.00) | $ (0.143) | $ (0.00) | $ 0.206 |
Weighted average shares outstanding: | ||||||
Basic and diluted | 1,057,963 | 10,000,000 | 1,057,963 | 10,000,000 | 1,057,963 | |
F-13
FIC INVESTMENTS USA CORP.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS
Nine Months Ended January 31, 2005 and
Period from September 26, 2003 (Inception)Through January 31, 2004
Period from September 26, 2003 (Inception)Through January 31, 2005
Nine months ended |
|
| |
CASH FLOWS FROM OPERATING ACTIVITIES: | |||
Net loss | $(150,175) | $ 0 | $ (216,060) |
Adjustments to reconcile net loss to net cash used in operating |
|
|
|
Depreciation and amortization | - | - | - |
Unrealized gain on securities | 28,676 | - | 28,676 |
Net changes in: | |||
Receivables-related parties | (72,985) | - | (72,985) |
Prepaid services | (11,050) | - | (13,238) |
Accrued interest | 13,303 | - | 16,387 |
Accounts payable | 10,375 | - | 10,375 |
Due to related parties | 671,858 | - | 671,858 |
Deferred membership revenues | 154,375 | - | 154,375 |
NET CASH USED IN OPERATING ACTIVITIES | 644,377 | 0 | 579,388 |
CASH FLOWS FROM INVESTING ACTIVITIES: |
|
|
|
Investments | (874,152) | 0 | (874,152) |
NET CASH FLOWS FROM INVESTING ACTIVITIES | (874,152) | 0 | (874,152) |
CASH FLOWS FROM FINANCING ACTIVITIES: |
|
| |
Proceeds from sale of stock | 1,057,963 | 0 | 1,223,503 |
NET CASH FLOWS FROM FINANCING ACTIVITIES | 1,057,963 | 0 | 1,223,503 |
NET CHANGE IN CASH | 828,188 | 0 | 928,739 |
Cash, beginning of period | 100,551 | 0 | 0 |
Cash, end of period | $ 928,739 | $ 0 | $ 928,739 |
F-14
FIC INVESTMENTS USA CORP.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited interim financial statements of FIC Investments USA Corp. have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission ("SEC"), and should be read in conjunction with the audited financial statements and notes thereto contained in the Company's registration statement filed with the SEC on Form SB-2. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim periods presented have been reflected herein. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. Notes to the financial statements which would substantially duplicate the disclosure contained in the audited financial statements for the most recent fiscal year 2004 as reported in Form SB-2, have been omitted.
NOTE 2 - RELATED PARTIES
FIC Investments has month to month service agreements with the two shareholders of the company who are also officers. Currently, one officer receives $3,000 CDN per month and one officer receives $1,500 CDN per month for services performed on behalf of FIC Investments.
The prepaid services are for management fees that are paid monthly to the chief executive officer of FIC Investments.
During FIC Investment's start-up of operations and prior to having its own credit card merchant services arrangement, FIC Investment had an agreement with a related party (the Canadian investment club: FIC Investment Ltd. of Canada) to process credit card payments of FIC Investment Membership fees. This resulted in Accounts Receivable from a related party which, at January 31, 2005 totalled $72,985.
NOTE 3 - DUE TO RELATED PARTIES
As of January 31, 2005 $671,858 was deposited into a bank account of FIC Investments USA incorrectly. They money was actually owed to a related entity and was transferred out of FIC Investments USA's bank account in a subsequent month.
NOTE 4 - NOTE PAYABLE
As of April 30, 2004, the 6699777 B.C. Ltd. advanced $212,333 CDN to the company. The note is due on demand and bears interest at the rate of 10% of net profits per annum. The interest payments of 10% of net profits are due to the shareholders for a minimum of five years regardless of when the principal is paid back. Interest is being imputed as a rate of 10% of the principle due to no stated interest rate on the note. If in the future 10% of net profits are accrued as interest they will first be offset against the accrual made on 10% of the principle. As of January 31, 2005 imputed interest of the note is $16,387.
F-15
NOTE 5 - DEFERRED REVENUES
Revenues that are billed in advance of services being completed are deferred until the conclusion of the period of the service for which the advance billing relates. Deferred revenues are included on the balance sheet as a current liability until the service is performed and then recognized in the period in which the service is completed. FIC Investments' deferred revenues consist of annual membership fees being deferred over the twelve month period and recognized monthly as earned. FIC Investments had deferred revenues of $154,375 as of January 31, 2005.
NOTE 6 - MARKETABLE SECURITIES
FIC Investments holds various minority equity investments in companies that meet FIC Investments' investment criteria. FIC Investments applies the equity method of accounting for minority investments when FIC Investments has the ability to exert significant influence over the operating and financial policies of an investment. In the absence of such ability, FIC Investments accounts for these minority investments under the cost method. Certain investments carry restrictions on immediate disposition. Investments in public companies (excluding those accounted for under the equity method) with restrictions of less than one year are classified as available-for-sale and are adjusted to their fair market value with unrealized gains and losses, net of tax, recorded as a component of accumulated other comprehensive income. Upon disposition of these investments, the specific identification method is used to determine the cost basis in computing realized gains or losses, which are reported in other income and ex pense. Declines in value that are judged to be other than temporary are reported in other income and expense.
NOTE 7 - SECURITIES AVAILABLE FOR SALE
As discussed in Note 6, the Company adopted the provisions of SFAS No. 115, "Accounting for Certain Investments in Debt and Equity Securities" and SFAS No. 130, "Accounting for Other Comprehensive Income." At January 31, 2005 all of the Company's marketable equity securities are classified as available-for-sale; they were acquired with the intent to dispose of them within the next year.
At January 31, 2005, securities available for sale include 140,000 shares of Amarac resources Ltd. with a cost basis of $ 74,144 and a fair market value of $71,400.
At January 31, 2005, securities available for sale include 20,000 shares of US Energy Corp Wyoming with a cost basis of $ 56,139 and a fair market value of $59,200
At January 31, 2005, securities available for sale include 50,000 shares of Uranium Resources Inc. New, with a cost basis of $ 41,420 and a fair market value of $36,250
NOTE 8 - PRIVATE INVESTMENTS
The portfolio of investments includes the following investments which are not publicly traded.
F-16
Perpetual Learning: A related company that invests in an LLP Investment Fund of public equities -- mostly in resources sector. FIC Investments can buy additional units at its option at the current valuation (determined monthly). FIC Investments may not sell units for 60 days following their purchase, after which FIC Investments may opt at any time to retract the units at the then current market value. Units cost $400,000 and, at January 31, 2005 they had a market value of $462,529.
Tax Liens: Located in Tulsa County, Oklahoma, these pay interest (by state legislation) of 8% on money invested until taxes are paid and, if taxes are not paid by the county deadline dates, FIC Investments will get title to the property. Amount invested in Tax Liens, at cost,as of January 31, 2005 was $13,605.
Market value can not be determined as there is no market for the liens per se and value is a function of the indeterminate time on which interest is earned and the likelihood of acquiring title to the property.
Payroll Loans: FIC Investments has entered into a loan agreement with Payroll Loans First Lender's Corp., shown as an investment note receivable, whereby FIC Investments invested $250,000 for a period of two years, commencing October 31, 2004. The borrower is a large, well established private company that is in the business of advancing funds, under strict guidelines, to employed borrowers for a maximum of two weeks, with the advance secured by a pledge against the borrower's next paycheck. This investment pays FIC Investments 2% per month and is secured with a General Security Agreement on the assets of Payroll Loans First Lender's Corp.
NOTE 9 - COMMON STOCK
FIC Investments issued 10,000,000 Class B Common shares of stock to its two founding shareholders for $10,000 cash. The cash was not paid to the company until February 2004.
FIC Investments USA Corp. issued 689,300 shares of stock for $689,300 cash in the quarter ending 10/31/04.
FIC Investments USA Corp. issued 358,663 shares of stock for $358,663 cash in the quarter ending 1/31/05.
NOTE 9 - LEASE
FIC Investments entered into an office lease that begins July 1, 2004. The lease term is one year with monthly rent payments being $900. FIC Investments is also required to pay a security deposit of $450.
F-17
____________________________________________________________________________________________________
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The only statute, charter provision, bylaw, contract, or other arrangement under which any controlling person, director or officer of us is insured or indemnified in any manner against any liability which he may incur in his capacity as such, is as follows:
1. Article XII of our Articles of Incorporation, filed as Exhibit 3.1 to the Registration Statement.
2. Article XI of our Bylaws, filed as Exhibit 3.2 to the Registration Statement.
3. Nevada Revised Statutes, Chapter 78.
The general effect of the foregoing is to indemnify a control person, officer or director from liability, thereby making us responsible for any expenses or damages incurred by such control person, officer or director in any action brought against them based on their conduct in such capacity, provided they did not engage in fraud or criminal activity.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The estimated expenses of the offering (assuming all shares are sold), all of which are to be paid by the registrant, are as follows:
SEC Registration Fee
| $ 750.00
|
TOTAL | $ 95,250 |
II-1
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.
During the past three years, the Registrant has sold the following securities that were not registered under the Securities Act of 1933, as amended.
Name and Address | Date | Shares | Consideration |
Michael Lathigee | April 13, 2004 | 5,000,000 Class B Shares | $0.001 per share |
Earle Pasquill | April 13, 2004 | 5,000,000 Class B Shares | $0.01 per share |
We issued the foregoing restricted shares of common stock to Messrs. Lathigee and Pasquill pursuant to Section 4(2) of the Securities Act of 1933. Messrs. Lathigee and Pasquill are sophisticated investors, are our officers and directors, and where in possession of all material information relating to the company. Further, no commissions were paid to anyone in connection with the sale of the shares and general solicitation was made to anyone.
In addition, on September 25, 2004 we issued an aggregate of 1,474,728 Class "A" Common Voting shares were issued to 55 accredited investors at a price of $1.00 per share pursuant to Rule 506 of the Securities Act of 1933. The shares were issued to the following individuals:
Name and Address | Number of Shares | Consideration |
Mary D. Bart | 17,000 | $17,000 |
John Basdakis | 15,000 | $15,000 |
Nancy Burcham | 5,000 | $5,000 |
Dr. Lisa L. Buttaro | 10,000 | $10,000 |
Douglas Champion | 200,000 | $200,000 |
Tianna Conte | 5,000 | $5,000 |
II-2
Name and Address | Number of Shares | Consideration |
Eugene Crofut | 5,000 | $5,000 |
Douglas R. Daehlin | 20,000 | $20,000 |
Marie D'Ambrosio | 3,000 | $3,000 |
Lucretia Danner | 5,000 | $5,000 |
Kathryn DeMeritt | 30,000 | $30,000 |
Gilles Dubellay | 10,000 | $10,000 |
Marc Eccher | 15,000 | $15,000 |
Elizabeth Everett | 20,000 | $20,000 |
Michele A. Fecteau | 7,500 | $7,500 |
Glenda L. Feilen | 10,000 | $10,000 |
Sarah A. Ferman | 5,000 | $5,000 |
Gwen Field | 5,000 | $5,000 |
Dawn Frankwick | 45,500 | $45,500 |
David Fuchs | 5,000 | $5,000 |
Richard Galyon | 100,000 | $100,000 |
John L. Gelber | 10,000 | $10,000 |
II-3
Name and Address | Number of Shares | Consideration |
Nanci Grube | 66,000 | $66,000 |
Hermann Grunbaum | 15,000 | $15,000 |
Gary Haggerty | 5,000 | $5,000 |
George Heinrich | 10,000 | $10,000 |
Cheryl Ann Hughes | 15,000 | $15,000 |
Jimm Hughey | 5,000 | $5,000 |
Kurt Jacobson | 5,000 | $5,000 |
Tony Jackson | 15,000 | $15,000 |
Jay Jolly | 10,000 | $10,000 |
William A. Jones | 50,000 | $50,000 |
Paulette E. (Pepe) Kahn | 8,000 | $8,000 |
Jon Kawai | 20,000 | $20,000 |
Dave (David E.) Klunder | 10,000 | $10,000 |
William R. (Bill) Knutson II | 50,000 | $50,000 |
Joseph LACount | 5,000 | $5,000 |
Kathleen Letterie | 5,000 | $5,000 |
II-4
Name and Address | Number of Shares | Consideration |
Joanne Lithgow | 4,563 | $4,563 |
Leonard C. Lumas | 12,000 | $12,000 |
Eileen C. McCabe | 5,000 | $5,000 |
Brian McFadin | 5,000 | $5,000 |
Frank Neuhaus | 16,000 | $16,000 |
Maria Novel | 7,000 | $7,000 |
Livia Perez-Borrero | 5,000 | $5,000 |
Craig Rice | 26,500 | $26,500 |
Barbara Robinson | 15,000 | $15,000 |
Michael Rodgers | 20,000 | $20,000 |
Eileen Joyce Roth | 20,000 | $20,000 |
Katharine Schmidt | 11,100 | $11,100 |
Katharine Schmidt | 100,000 | $100,000 |
Katharine Schmidt | 46,460 | $46,460 |
Kay Shepard | 18,000 | $18,000 |
Lisa Sieverling | 15,000 | $15,000 |
II-5
Name and Address | Number of Shares | Consideration |
David Silver | 180,000 | $180,000 |
Rosemary Sneeringer | 5,000 | $5,000 |
Vickie Sober | 5,105 | $5,105 |
John W. Spicer Jr. | 25,000 | $25,000 |
John Stevens | 15,000 | $15,000 |
Thomas T. Taylor | 20,000 | $20,000 |
Ron Troutman | 20,000 | $20,000 |
Rebecca Williams | 5,000 | $5,000 |
Jimmy Williams | 30,000 | $30,000 |
Jack Wingerter | 1,000 | $1,000 |
TOTAL: | 1,474,728 | $1,474,728 |
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ITEM 27. EXHIBITS.
The following Exhibits are filed as part of this Registration Statement, pursuant to Item 601 of Regulation K.
Exhibit No. | Document Description |
*3.1 | Articles of Incorporation |
3.1.1 | Revised Articles of Incorporation |
*3.3 | Bylaws |
*4.1 | Specimen Stock Certificate |
*5.1 | Opinion of Clark, Wilson regarding the legality of the Securities being registered |
*10.1 | Loan Agreement with 669997 BC Ltd. |
*23.1 | Consent of Lopez, Blevins, Bork and Associates LLP |
23.1.2 | Consent of Lopez, Blevins, Bork and Associates LLP |
*23.2 | Consent of Clark, Wilson (included in Exhibit 5.1) |
*99.1 | Subscription Agreement |
99.2 | Option Agreement (Earle Pasquill) |
99.,3 | Option Agreement (Michael Lathigee) |
* Originally filed with our SB-2 submission on December 1, 2004. | |
ITEM 28. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against publi c policy as expressed in the Act and will be governed by the final adjudication of such issue.
Pursuant to Item 512 of Regulation S-B, the undersigned registrant hereby undertakes:
1. To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:
a. To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933;
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b. To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement; and notwithstanding the forgoing, 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 prospects filed with the Commission pursuant toRule 424(b) if, in the aggregate, the changes in the 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.
c. To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any change to such information in the registration statement.
2. That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
3. To remove from registration by means of a post-effective amendment any of the securities being registered that remain unsold at the termination of the offering.
Pursuant to the requirements of the Securities Act of 1933, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing of this Form SB-2 Registration Statement and has duly caused this Form SB-2 Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in Vancouver, British Columbia, on this 4thday of May, 2005.
FIC INVESTMENTS USA CORP.
BY:/s/ Earle Pasquill_______
Earle Pasquill, President
KNOW ALL MEN BY THESE PRESENT, that each person whose signature appears below constitutes and appoints Earle Pasquill, as true and lawful attorney-in-fact and agent, with full power of substitution, for his and in his name, place and stead, in any and all capacities, to sign any and all amendment (including post-effective amendments) to this registration statement, and to file the same, therewith, with the Securities and Exchange Commission, and to make any and all state securities law or blue sky filings, granting unto said attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite or necessary to be done in about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying the confirming all that said attorney-in-fact and agent, or any substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
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Pursuant to the requirements of the Securities Act of 1933, this Form SB-2 Registration Statement has been signed by the following persons in the capacities and on the dates indicated:
Signature | Title | Date |
/s/ Earle Pasquill__________ | President, Treasurer, and member of Board of Directors | May 4, 2005 |
/s/ Michael Lathigee______ | Chief Executive Officer and member of Board of Directors | May 4, 2005 |
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