The court of first instance of Abu Dhabi, United Arab Emirates considered two actions related to the dispute between City Mix and Armitage.
i.) Urgent Case 73/02 filed by City Mix to stop Armitage’s illegal actions of locking the City Mix’s factory site, preventing City Mix’s subcontractors, engineers and technical staff from accessing the site and preventing City Mix from completing installation and commissioning work. The court rendered its judgment in this case in favor of City Mix on December 23, 2003 and the Armitage’s actions were found illegal.
ii.) Main Action 422/02 which was initiated as Armitage had failed to complete the construction works on due time and rejected penalties for that stipulated by the contract. Armitage demanded that the final payment under the contract in the amount of $158,514 should be paid in full; however the consultant, who supervised execution of the contract as required by the UAE law, concluded that this payment should account for penalties for a period of delays in completion. Therefore in response to the claim filed by Armitage to recover from City Mix above amount of the final payment under the contract, City Mix filed a counter claim claiming penalties from Armitage for failing to complete the project on due time.
City Mix additionally claimed compensation in the amount of $739,048 plus a daily compensation of $4,924 for loss of daily profits resulting from City Mix being deprived from utilizing its factory from February 26, 2002 until a final judgment is rendered and $2,449 daily as fees for the consultant until a final judgment is rendered. Armitage additionally claimed moral damages from City Mix in the amount of $816,326.
On February 27, 2006 the court issued its judgment on main action 422/02, whereby it satisfied the City Mix’s claim for penalties partially in the amount of $25,404 and therefore reduced the final payment under the contract to $133,110. The additional compensation claimed by City Mix was not accounted for.
Al Tamimi & Company, an Abu Dhabi law firm and the City Mix’s lawyers analyzed the situation and the court’s decision and concluded and recommended that City Mix should seek compensation for damages in a court of a higher instance. For this purpose City Mix filed an appeal with the Abu Dhabi Court of Appeal on March 27, 2006. The appeal was accepted and the court referred the case to an expert. The next hearing is scheduled for September 19, 2006. The judgment of the court of appeal may or may not include an interest, which is totally at the court’s discretion including the amount of such interest.
In the event we are unsuccessful in our appeal we will sell a few transit mixers in order to make payments due.
We have a balance of $551,848 in a closed bank, Anglo American Bank, a Grenada Corporation (Bank). The Anglo American Bank is undergoing liquidation, which is supervised by the Ministry of Finance of Grenada. In our letters to the Ministry of May 30, 2004 and April 5, 2004, we requested the latest development of the situation, but have not yet received a response. Nevertheless, by telephone we were notified by Ms. Roth, Secretary of the Ministry of Finance, that the Ministry was supervising the process of liquidation of the bank and the issue of the return of the funds to the depositors. None of the funds deposited in the Anglo American bank are insured. During 2004, we recorded an allowance for doubtful collectibility in the amount of $275,924. Because we were unable to make any contact with the appropriate government officials during 2005 we provided allowance at December 31, 2005 of $275,924 thereby reducing the carrying value to zero.
Since inception, we have financed our operations through bank debt, loan from third party, equity from our shareholders and funds generated by our business. Cash and cash equivalents as at March 31, 2006 and December 31, 2005 totaled $24,760 and $14,638 respectively representing increase of $10,122 and reduction of $94,000 from their respective beginning of the period/year i.e.: January 1, 2006 and January 1, 2005. As we commence our ready-mix concrete activities, our revenues should come from the plant operation instead of truck rental activities.
Net Cash Flow from Operating Activities: Net cash flow from operating activities amounted to cash flow from $22,635 for the three month ended March 31, 2006 compared to cash used of $34,407 for the three months ended March 31, 2005. The net loss of $42,154 for the current three months period compared to $35,034 for corresponding previous three months period combining with almost similar adjusting transactions for similar comparative periods resulted in lower net profit before changes in operating assets and liabilities of $1,245 for the three months period compares to $14,250 for corresponding similar period in 2005 company manage to generate cash mainly due to decrease in deposits, advances and prepayments by $2,293 and increase of accruals and provisions by $19,096 for the three months period ended on March 31, 2006 against increase in deposits, advances and prepayments by $32,412 and decrease in accruals and provisions by $53,566 for the three months period ended on March 31, 2005. Also there was reduction in trade receivables of $37,320 in for the three months period ended on March 31, 2005 which is nil during the three months period ended on March 31 ,2006.
Net cash provided from operations amounted to $318 for the year ended December 31, 2005 compared to $78,222 for December 31, 2004. The principal cause of the reduction in cash provided was due to net loss of $446,132 and net loss before change in operating assets and liabilities of $7,264 in year 2005 compared to net loss of $293,910 and net profit before change in operating assets and liabilities of $127,964 in year 2004. Contributing to the out flow of cash were payments for accruals of $40,496 which were offset by decrease in accounts receivable of $37,320 and deposits, advances and prepayments of $10,758 against increase in accounts receivable and deposits, advances and prepayments by $37,320 and $9,717 respectively and further marginal increase in deposits, advances and prepayments of $2,705.
Net Cash Used In Investing Activities : We had no investing transaction for both the presented three months period ended on March 31, 2006 and 2005. Net cash used in investing activities amounted to $3,817 for the year ended December 31, 2005 compared to $15,519 in December 31, 2004. For the year 2005, there was no addition to plant and equipment but only payments of $3,817 made for patent cost whereas in similar corresponding year there was addition of plant and equipment by $5,502 and payments for patent cost of $10,017.
Net Cash Used In Financing Activities : Net cash used in financing activities reduced to $12,513 for the three months period ended on March 31, 2006 compared to $23,249 for the three months period ended on March 31, 2005. The principal caused is lower repayments of bank’s loan and offering cost of $10,888 and $1,625 respectively against $18,199 and $5,050 for the corresponding three months ended March 31, 2005.
Net cash used in financing activities for 2005 reduced to $90,501 comprise of net repayment of loan from FGB of $69,771 and payments for deferred offering cost $20,730 compared to cash outflow for the year 2004 was $119,707 caused by $52,000 spent for deferred offering costs and loan repayment of $67,707.
The liability to HSBC representing a post-dated check discounting arrangement was $Nil as of March 31, 2006 and $78,367 as at December 31, 2005. These were netted off against corresponding assets, i.e.: accounts receivables, trade, which was $Nil and $78,367 as of March 31, 2006 and December 31, 2005 respectively. Normal trade terms in the UAE are 90 days. At time of billing we are paid with a check post dated 90 days forward. If we require cash for operations these post dated checks are discounted at the HSBC at an annual rate of 9% much like a factoring arrangement. There is a cost of check discounting is 9% per annum.
As of July 25, 2006 cash on hand was $38,965. This will satisfy our cash requirements for approximately two months. We will need about $300,000 within the next 12 months to finance our liabilities and day-to-day costs and we will use our truck rental revenue for this purpose. All funds that may be raised from this offering within this period will be used to finance our projected cash requirements related to the development of the ready-mix concrete plant project.
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Our subsidiary City Mix, LLC is liable on a loan payable to the First Gulf Bank, Abu Dhabi, United Arab Emirates, which is collateralized by 16 concrete mixer trucks. The trucks will be released to the company once the loan is fully paid off. This loan had been obtained from First Gulf Bank by the former owners of City Mix LLC to finance the construction of the concrete plant before City Mix LLC was put for sale through a private auction in November 2000. The original loan amount was $1,061,225 and carried an interest rate of 10.5% per annum. The funds were used to finance the purchase of the plant machineries in Italy and shipment to Abu Dhabi and to cover local construction costs. The loan has no fixed maturity date and no covenants and/or restrictions. As of July 1, 2003 the interest rate on the loan was renegotiated with and accepted by the bank from 10.5% to 5% and at present, City Mix, LLC is paying $6,803 per month including approximately $6,000 of principal and about $800 of interest. Based on such repayments the loan is expected to be fully repaid by May 2008. The outstanding debt to First Gulf Bank was $92,673 as at June 30, 2006, $102,299 as at March 31, 2006 and $113,187 as at December 31, 2005. The approximate $310,000 in projected revenue will be used to repay the bank debt and finance our day-to-day expenses. Further development of the English language project or products will be funded by YZ Business Consulting subject to Agreement dated December 14, 2004.
Management anticipates that our primary uses of capital in the future periods will be allocated to pay off our bank loan and for working capital purposes. After we receive proceeds from this offering and put our ready-mix concrete plant into operation our business strategy will be to increase working capital by internal growth through sales of our products, and externally through the sale of potentially dilutive securities. We may also continue to incur debt as needed to meet our operating needs.
We are planning to proceed with the English language educational program in collaboration with YZ Business Consulting (YZ). YZ will carry out all planned activities as described above maintaining our exclusive rights to the registered trade mark and any and all educational aids. YZ will finance the costs associated with development of the educational program project pursuant to Agreement dated December 14, 2004 between us and YZ.
In the event that we are unable to raise $550,000 from this offering required to commission the first batching unit of the City Mix LLC concrete plant, we will consider other options to utilize our production facilities, including a lease arrangement, or an operating management agreement with one of the local producers, whereby our plant will be operated by a professional operator in the interest of both parties. In such case, the operating partner would bear the cost associated with the start-up of the plant.
We do not currently have material commitments for capital expenditures. However, we anticipate entering into such commitments for approximately $1,900,000 to ensure the start-up and the operation of our ready-mix concrete plant and provided the necessary funds are raised from public investors.
In the ordinary course of business, we enter into contracts that specify that we will purchase all or a portion of our requirements of a specific product, commodity, or service from a supplier or vendor. These contracts are generally entered into in order to secure pricing or other negotiated terms. They do not specify fixed or minimum quantities to be purchased and, therefore, we do not consider them to be purchase obligations.
Management anticipates that the capital requirements for operations and development for the next twelve months for the ready-mix concrete plant project, our main planned business, will be $3,600,000, based on cash flow projections.
• | $3,150,000 for the ready-mix concrete project ($1,800,000 for Stage 1 and $1,200,000 for Stage 2); |
• | $450,000 for general corporate purposes. |
After the ready-mix concrete plant is operational, our subsidiary, City Mix LLC will try to obtain debt financing as well as to receive raw materials such as cement on credit against signed contracts for supply of concrete products from its plant. In the event we are unable to raise enough funds from this offering, we will use any possible options to obtain debt financing including those against a lease arrangement, or an operating management agreement with a professional operator.
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BUSINESS - OUR COMPANY
A SUMMARY OF WHAT WE DO
About Us
We were incorporated under the laws of the State of New Jersey on January 11, 1994 as an international trade consulting firm and were rendering business consulting services until July 2002, when we commenced our activities in developing computer software products designed for teaching foreign languages, based on the technology for improved perception and memorization of information using electronic visual devices, such as a personal computer, which we acquired by virtue of a license agreement with YZ Business Consulting dated July 26, 2002. Based on the license agreement we have been developing the English educational software project in collaboration with YZ Business Consulting.
At the same time with entering into the license agreement with YZ Business Consulting we redistributed our shares in July 2002, and as a result, the following individuals were issued shares of our common stock: Yuli Ginzburg - 2,429,000; Yevsey Zilman - 1,493,790; Olga Safonova - 1,400,000; Eugene Gurevitch - 1,686,530; Vera Shatokhina - 609,270; Teresa Bergstrom - 220,000; Sonia Bromberg - 500,000; Nikita Sukhin - 20,000; Margarita Ginzburg - 10,000 and Anna Kanevsky - 20,000. Upon the issuance of these shares, this group obtained control of the company.
The material terms of the said license agreement are as follows.
• | Subject of the Agreement. YZ Business Consulting (“YZ”) provides us with the technical know-how and the intellectual property with a general ZS SuperTutor© designed to develop educational aids in form of a software program on CD’s used to study foreign languages with the help of using electronic visual devices, such as a personal computer (“the Technology”), and we develop, produce and market product(s) based on the Technology, provide legal protection for the Technology and pay royalties to YZ. |
• | Obligations. YZ grants to us an exclusive proprietary right to the Educational Aids developed on the basis of the Technology, as well as an exclusive right to develop, improve, upgrade and sell the Educational Aids. We undertake to develop, produce and sell Educational Aids for teaching the English language as a second language, and pay royalties to YZ in accordance with the terms of the contract. |
• | Royalties. We will make regular payments to YZ up to forty per cent (40%) of the total revenues (“Royalties”) from our sales of any product, services or any other activities utilizing the educational aids. The regular payments of the Royalties are reduced if necessary to insure that there is no loss for us in this type of activity. |
• | Term of the contract and termination. The term is unlimited with a termination clause by mutual consent or in the event of violation of the contract by either party. |
We specialize in development and management of a variety of business activities and diverse projects. We transact business operations as follows: (1) through our subsidiary, City Mix LLC, in Abu Dhabi, the United Arab Emirates, we own 49% we have full and exclusive rights to operate, manage and control 100% of the assets and business of City Mix LLC, consisting of a technology and equipment to produce a ready-to-use fresh concrete containing a few ingredients (sand, pebble, concrete, water) mixed to customer specifications; and (2) we develop a program for teaching American English as a second language with the aid of a personal computer and plan to market and distribute it in the countries where we are able to attract local partners and granting them licenses and exclusive marketing rights. We currently do not have operations in either of our two proposed businesses.
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On December 17, 2003, we acquired all the assets of City Mix Management Co. Inc. in exchange for 32,000,000 shares of Royal Capital Management Inc.. As a result of the transaction Royal Capital Management became the owner of 49% of City Mix LLC, in Abu Dhabi, the United Arab Emirates (City Mix) with a contractual right to exercise the exclusive rights to operate, manage and control 100% of the assets and business of City Mix LLC pursuant to the Power of Attorney granted by agreement of a UAE national Mubarak Al Ahbabi, the 51% owner. Under United Arab Emirates (UAE) Commercial Companies Law being Federal Law no. (8) of 1984 as amended, the minimum cumulative shareholding of UAE nationals in a limited liability company must be a 51% owner of the paid in capital.
City Mix LLC was originally established on November 13, 1997 with a license to produce and sell ready-mix concrete in Abu Dhabi, the United Arab Emirates. In March 1998 City Mix commenced the construction of a site for its future ready-mix concrete plant, but by early 2000 the then owners could not invest further to complete the project and the company was taken over by City Mix Management Inc. on November 18, 2000 through a private auction. In September 2001 the plant construction was resumed and City Mix was still in the construction stage when we acquired all the assets of City Mix Management Co. Inc. and effectively became the owner of 49% of City Mix LLC with contractual rights as described above. As we took over, the plant construction was fully completed and all the production machineries were erected.
City Mix Management Inc. was created to acquire 49% shares of City Mix LLC, complete the construction of its ready-mix concrete plant and to raise capital for its operation. Prior to the December 2003 acquisition City Mix Management Inc. was managing the construction of the plant of City Mix LLC in Abu Dhabi.
Our ownership, management and control rights in City Mix are fixed in and by the following shareholding documents of City Mix:
(1) Share Transfer and Amendment to the Memorandum of Associations of City Mix signed between us, the Management Company and Mubarak S. Jaber Al Ahbabi, the owner of the 51% shareholding in City Mix (the Partner) and dated 01/05/05 (the Share Transfer), whereby we acquired ownership of 49% of City Mix and are appointed manager of City Mix with all powers to exclusively operate and manage the business of City Mix;
(2) Power of Attorney issued by the Partner in our favor dated 01/05/05, whereby we are authorized to act on his behalf in connection with his 51% shareholding in City Mix, represented by 51 shares, and to vote in any manner we deem appropriate for and on his behalf at all meetings of the General Assembly of City Mix with full and unfettered authority, and to exercise all the rights whatsoever attached to the said 51% shares. The Power of Attorney cannot be revoked without our written consent; and
(3) | Agreement between the shareholders of City Mix dated November 26, 2000, whereby: |
We assumed the assets and liabilities, and the above ownership, management and operational rights in City Mix by virtue of this agreement and the above Share Transfer and Power of Attorney.
The Partner shall render all necessary assistance in all matters pertaining to the federal and Abu Dhabi authorities, arrange and be responsible for the official registration of the company with the federal and Abu Dhabi authorities, maintain a valid land lease, and not to sell, transfer, assign or otherwise dispose any of his shares in the company without a written consent of the other party, and not to have any role whatsoever in management and operation of City Mix. Pursuant to our agreement with Mr. Mubarak, our partner, confirmed in City Mix LLC’ letter to him dated January 6, 2005, he is entitled to receive 2% of gross revenues of City Mix LLC.
The term of the agreement and the Share Transfer is twenty (20) years and renewable. The agreement may be terminated by a mutual written consent of the parties or by any party in the event of material violations of terms and conditions thereof.
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Mr. Mubarak, our partner in City Mix LLC, is entitled to receive an annual sponsorship fee of approximately $55,000 and 2% of gross revenues of City Mix LLC, which we have paid in full to date.
The United Arab Emirates law, and in particular, Article 237 of UAE Commercial Companies Law being Federal Law No. (8) of 1984 and Article 955 of the UAE Civil Transactions Law, provide that when a limited liability company is dissolved or sold, the disposal of the company assets will be controlled by the partners according to the actual status, i.e. the actual investments made in the company. Therefore, notwithstanding that City Mix LLC we own only 49% of the shareholding and the right to manage 100% of the assets, we will have the right to control the disposal of all the company assets and accordingly receive 100% proceeds as we paid up all the investments in and expenses of City Mix LLC with a zero contribution from our partner, the 51% owner.
Based on the above shareholding documents of City Mix LLC, our arrangement with Mr. Mubarak precludes him from creating any lien on his shares in City Mix LLC. In the event Mr. Mubarak’s shares somehow become subject to claims from his creditors, such claims will be dismissed by the appropriate UAE authorities because as per Article 237 of UAE Commercial Companies Law being Federal Law No. (8) of 1984 and Article 955 of the UAE Civil Transactions Law if a 49% owner of a limited liability company exercises all the rights attached to the 51% shares and has paid up all the investments in and expenses of the company, such company and such owner shall not be liable to any claims on the said 51% shares from a third party.
We have had losses in each fiscal year (we had a net profit in one interim period) since inception and rely upon either the sale of our securities or loans from management to fund any shortfalls in operations. The management did not make any commitments to provide the company with the funds.
Presently, we are not required to deliver annual reports to security holders and do not intend to do so. However, when this registration statement is declared effective, we will deliver annual reports to security holders.
There is a legal requirement for our subsidiary City Mix LLC in Abu Dhabi, UAE to maintain its legal status by renewing its licenses on an annual basis, namely the Abu Dhabi Municipality License and the Abu Dhabi Chamber of Commerce and Industry License. City Mix LLC is obligated to renew the licenses in order to maintain its offices in the city of Abu Dhabi (the Abu Dhabi Municipality License) and to confirm the land lease and the status, environmental and technical condition of the ready-mix concrete plant in the dedicated industrial area outside the city of Abu Dhabi (the Abu Dhabi Chamber of Commerce and Industry License). Each license costs an average of about $1,000. The licenses were renewed on December 27, 2004 and December 17, 2004 respectively.
There is no need for City Mix LLC to obtain any government approval of principal products or services, however, when the ready-mix concrete plant becomes operational and is ready to produce and supply ready-mix products to the market, the company will need to obtain approvals of its quality procedures, production techniques, technological set-up, and end product quality from a `consultant’, which is an engineering firm supervising construction and all materials supplies on behalf of an owner of a construction project. The institution of `consultants’ is mandatory in the construction sector and is maintained by the government to ensure that any construction project is completed in compliance with the standards of the International Federation of Consulting Engineers (FIDIC), British Standards Institute (BS), American Society for Testing and Materials (ASTM) and similar. Once our ready-mix concrete plant is commissioned and ready for operation, we will proceed with all the formalities required to obtain such approvals.
We are not presently required to deliver an annual report to our security holders. However, we will voluntarily mail an annual report to security holders that will include audited financial statements.
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We have filed with the Securities and Exchange Commission in Washington, DC, a registration statement on Form SB-2 under the Securities Act of 1933 with respect to the shares we are offering. Prior to the effective date of the registration statement, we are not subject to the information requirements of the Securities Exchange Act of 1934. This prospectus does not contain all of the information set forth in the registration statement, as permitted by the rules and regulations of the SEC. Reference is hereby made to the registration statement and exhibits thereto further information with respect to us and the shares to which this prospectus relates. Copies of the registration statement and other information filed by us with the SEC can be inspected and copied at the public reference facilities maintained by the SEC in Washington, DC at 100 F Street, Washington, DC 20549. In addition, the SEC maintains a World Wide Website that contains reports, proxy statements and other information regarding registrants such as us that file electronically with the SEC at the following Internet address: (http:www.sec.gov).
Commissioning, start-up and operation of the ready-mix concrete plant in Abu Dhabi, the United Arab Emirates
On December 17, 2003, we acquired all assets of City Mix in exchange for 32,000,000 shares which were issued to shareholders of City Mix Management Co., Inc., namely: Eugene Koupsin - 3,200,000; Alexander Shishkin - 6,400,000; RALY Partners - 22,400,000. RALY Partners distributed its shares to shareholders of RALY Partners as follows: Andrei Kharlanov - 2,531,200; Vladimir Davidov - 5,040,000; Yuli Ginzburg - 4,524,000, Yevsey Zilman - 4,480,000; Vera Shatokhina - 1,545,600 and Eugene Gurevich - 4,278,400.
Industry and Market
The United Arab Emirates is rapidly becoming an economic role model for the region with a business friendly environment, an open and liberal economic policy and ten years of solid GDP growth, which has averaged 5.8 per cent annually and 8% for the non-oil sector. The gross domestic product of the emirate of Abu Dhabi was $41 billion in 2002. The UAE maintained its high per capita income standing at $20,602 last year (`Abu Dhabi Economy’, Issues 374-376, 2003). Direct foreign investments into the country reached $4.1 billion in the year 2000 (`Abu Dhabi Economy’, Issues 359, 2002). The United Arab Emirates and the Emirate of Abu Dhabi in particular have attracted multi-billion dollar investments for the development of major construction projects. The construction and industrial sector is the second largest industry in the UAE after oil and gas. Abu Dhabi expects local and foreign investment to invest at least $10 billion into emerging industrial zones (`Abu Dhabi Economy’, Issue 381, March 2004).
All Abu Dhabi construction projects are based on concrete structures. Concrete is the only locally available, and thus widely used construction material.
Marketing Strategy
Our marketing strategy will focus on a number of basic principles. These are ranked in order of strategic importance for us as follows:
o | Technology and Product Quality |
o | Selective Job Portfolio | |
o | Price | |
o | Promotion | |
| | | | |
Technology and Product Quality
Our ready-mix plant in Abu Dhabi has not yet produced any finished products. It was manufactured in 1999 by CIFA, Italy, one of the major manufacturers of ready-mix plants in Europe. CIFA equipment is well-known in the region and is used by a number of concrete producers. The principal design elements of the production technology are as follows.
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(A) | Vertical Aggregate Automatic Feed System. The plant is equipped with a feeding unit, which allows fully automatic unloading of aggregate directly from supply trucks into storage silos by means of a fast automatic vertical-type covered belt conveyors, which requires no wheel loaders. |
(B) | Aggregate Storage System. The plant is equipped with a fully isolated and protected aggregate storage silos that provides protection of aggregate from direct sun and other environmental impacts such as winds, rain and dust. |
(C) | Water Cooling. The plant incorporates an underground concrete reservoir for technology water and two water chillers to provide temperature control at every stage of the production process. |
(D) | Mixing. The plant incorporates two automatic mixing units, each of a 85 cubic meters of concrete per hour. |
(E) | Concrete Recycling Unit. The plant is equipped with a special unit for utilization of concrete residues. |
(F) | Truck Mixer Washing Unit. This was designed for of truck drums before loading with concrete and washing of truck mixers before exiting the site. Waste water is recycled and used back in the production process. |
The plant is designed to provide product quality to international and local standards utilizing technology features as follows.
• | The technology equipment of the plant is designed to provide a fully automatic and an accurate feeding of ingredients (aggregate, concrete, water and additives) into the mixing units in accordance with a mix design (formula) to produce a variety of types of concrete. |
• | Temperature control at all stages of the production process and cooling of the ready-mix concrete during transportation (by means of adding ice into truck mixer drums). |
• | The plant is equipped with a laboratory, which allows a comprehensive quality control of ingredients and ready-mix concrete to BS and ASTM standards throughout the production process, as well as post-production tests of fresh and hardened concrete before delivery to customers. In addition, quality tests will be carried out upon delivery at the customers’ sites with vis-à-vis a mobile laboratory. |
Note. British Standards Institute standards (BS) and American Society for Testing and Materials (ASTM) standards are international quality control standards used worldwide in the construction sector and ready-mix production and the same are applied in Abu Dhabi, the United Arab Emirates.
Selective Job Portfolio
In our marketing activities, we will be very selective and will focus on entering into long-term relationships with reliable clients, who enjoy a very good reputation in the market regarding prompt and secured payment for the supplied concrete.
Pricing
Our pricing strategy will be based on existing local market prices. At the initial stage of the project we intend to offer competitive product selling prices in order to ensure the market entry.
Simultaneously, we will not lower prices to an extent that would jeopardize the operating margins or lead to a price war on the market. In the beginning, we will concentrate on supplying the most widely used types of ready-mix concrete with high market prices such as 40N SRC ($57 per cubic meter) and 40N SCC ($62 per cubic meter). Simultaneously, we plan to pursue and establish long-term relationships with suppliers of raw materials. We hope to offset our favorable receivables policy by negotiating favorable credit terms with our suppliers including discounted and post-dated payments for the supplies of raw materials. Common practice in Abu Dhabi is that concrete producers make 6 month post-dated payments for the raw materials. However, we do not have signed agreements with the suppliers, and therefore cannot guarantee such favorable credit terms.
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Promotion
We plan to pursue the following promotional activities:
o | Streamlined presentation of our products, technology and services to potential customers including governmental institutions; |
| |
o | Introduction of printed advertising materials to potential customers; |
o | An aggressive Internet presence, for which we are planning to develop and maintain our own web site to demonstrate and e-mail to clients promotion data on our company, specific production techniques and technology, etc.. We do not presently have a company web site. |
o | Advertising in printed media and industry publications focusing on the target market segment. |
| |
In order to organize, manage and carry out our marketing and promotional activities we will employ, once the necessary project funding is secured, a marketing manager and, if necessary, other marketing specialists having proper expertise in the concrete business. When the need arises we will use local employment agencies to assist us with staffing.
Raw Materials Sources
Aggregate. The main sources of aggregate are three biggest quarries and crushers in Al Ain (150 km from Abu Dhabi), Buraimi (200 km from Abu Dhabi) and Ras Al Khaima (300 km from Abu Dhabi), which supply aggregate to all concrete producers in the UAE including Abu Dhabi. These three crushers supply the best aggregate in terms of less dust, chloride and sulphate content and highest crushing and impact values. The price of the aggregate including supply costs from all the three sources varies insignificantly and on average is about $7 per cubic meter. There is a very well established contractual system of the aggregate supplies to concrete producers. The aggregate is transported to concrete plants in trucks as per purchase orders. There are different terms of payment including post-dated payments of up to 6 months and a range of discounts on cash payment.
Cement. The cement factory in Al Ain (150 km from Abu Dhabi) is the main source of cement for concrete producers of Abu Dhabi. It supplies all principal types of cement such as OPC, SRC and MSRC. The price of cement including transportation costs is about $60/t. Also there are different terms of payment including post-dated payments of up to 6 months and a range of discounts on cash payment.
Water. The City Mix plant is connected to the central water supply system of the Abu Dhabi Municipality, which supplies technical water to all factories and plants in Abu Dhabi. Water supplies from the system will commence upon commissioning of the City Mix plant. Water consumption will be managed as per daily production needs and the water will be pumped into the plant’s underground insulated concrete reservoir. Water supplies will cost about $0.5 per 1 cubic meter of concrete.”
Customers
The economic statistics and other information published in `The Abu Dhabi Economy’ a monthly magazine of the Abu Dhabi Chamber of Commerce and Industry (Issues 381 - March 2004, 376 - October 2003, 375 - September 2003, 374 - August 2003, 358 - April 2002), as well as professional opinions of local business professionals (see attached a letter by N.R. Doshi & Co.) confirm that the construction sector in the United Arab Emirates is the second largest industry after oil and gas. The UAE authorities, and the government of the Emirate of Abu Dhabi in particular, pursue a very active policy of establishing and developing new commercial, industrial, residential and entertainment zones to attract local and foreign investments in order to ensure permanent growth of the country. All Abu Dhabi investment and construction projects are based on concrete structures. Concrete is the only locally available, and thus widely used construction material. The construction projects include construction of commercial and industrial infrastructure objects, residential and office buildings, and bridges.
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Major construction projects in Abu Dhabi are managed by private construction companies contracted by various governmental institutions such as:
• | The Abu Dhabi Municipality | |
• | The Abu Dhabi Water and Electricity Authority |
• | The Abu Dhabi Sewage Authority | |
• | The Abu Dhabi Department of Public Works | |
• | The Abu Dhabi Defense Ministry | |
| | | | | |
There is also a large variety of private construction projects in Abu Dhabi owned by large and medium sized private companies. All of the construction projects are normally tender-based, which means that first project owners announce tenders and then the winner is selected and awarded with a construction project based on the best bid in terms of cost and quality of construction, products and services, term of construction, technical set-up, etc. In upcoming years, Abu Dhabi expects local and foreign investments to invest at least $10 billion only into emerging industrial zones (`Abu Dhabi Economy’, Issue 381, March 2004).
There is a need for concrete in the government and private sectors and our subsidiary, City Mix LLC, will participate in the bidding for these contracts once our ready-mix concrete factory is ready for production. We will need approximately $300,000 in order to have the plant ready for operation, which will enable City Mix LLC to submit bids for contracts.
How We Compete
A number of producers of ready mixed concrete are active in Abu Dhabi, but most of them are insignificant in terms of quality and production capacity. There are about five plants that produce quality output in terms of strict quality and uninterrupted delivery (Abu Dhabi Ready Mix, Tremix, Unibeton, RMC Supermix, and Trans Gulf). Some of them have been in business for in excess of 10-15 years.
Our plant represents a technology and a set of machineries manufactured by one of the world leading manufacturers of the ready-mix concrete equipment, which enjoys a good reputation in the are as a reliable and effective production equipment. To operate the plant we will seek and employ highly qualified personnel. We intend to offer our potential clients competitive product selling prices, standard quality and uninterrupted delivery.
Development, marketing and distribution of a program for teaching American English Purpose
Our purpose in this area is to establish a long-term commercial presence in a growing international market - education, and to develop a number of projects and activities in this area. We plan to achieve this strategic purpose in several stages, with the implementation of the Language Program project being the initial stage. The project will focus on entering the international market by introducing a technology and products providing advanced teaching materials and education services in teaching the American English as a second language.
The technology applied in our products will provide development of advanced educational aids, teaching programs and materials for educational purposes. It can be used to expand the range of our products to cover speakers of different languages, who study English as a second language based on variety of subjects. Such subjects will have a wide range from the level for beginners and higher and will include the English lexis of exact, natural sciences, arts, religion, etc. (i.e. chemistry and physics, law and medicine, aesthetics and architecture, theology, the Bible, etc.).
Product
The product offered by us is an educational aid named “American English. Primary Course. Part 1” in form of a computer software program designed to teach Russian speakers American English as a second/foreign language to non-English speakers, as well as to expand the vocabulary and improve general knowledge of the language of those who command American English in one degree or another. The educational aid is designed to help students to ensure memorization, correct pronunciation, spelling and practical utilization of about 2,000 most frequently used words and word expressions. The software program is designed to develop all language skills: listening, speaking, reading and writing. It includes the following components:
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o | Vocabulary (English words and expressions) |
o | Translation into native language |
o | Transcription and phonetics |
o | Audio material (standard pronunciation) |
o | Video material (images) |
o | Record and playback |
o | Practical exercises |
o | Grammar |
o | Help (user manual) |
The “American English. Primary Course. Part 1” educational aid will be followed Part 2. Part 1 and Part 2 of the primary course will comprise about 2,000 each most frequently used words and word expressions making the total vocabulary of the primary course of about 4,000 most frequently used words and word expressions. At later stages we intend to develop and issue other educational aids which will eventually form a full course of American English which will comprise three levels of training (courses) designed to promote memorization, correct pronunciation, spelling and practical utilization of the spoken English material of about 10,000 words, word and expressions, phrases and idioms to assist students in developing good command of American English helping them in preparation for the SAT examinations at US educational institutions. The three levels are:
• | Primary (for beginners). A student learns basic vocabulary (the most frequently used English words, word combinations and expressions), phonetics and grammar, as well as receives practical training how to use the vocabulary correctly in spoken language. At the end of the course a student should develop a capability of communicating with English speakers at the elementary level in most common day-to-day situations. |
• | Intermediate. A student expands his vocabulary and receives more practical knowledge and training in the English spoken and written language. At the end of the course a student should develop a capability of communicating with English speakers at intellectually higher level on a broader variety of subjects of human activity. |
• | Advanced (with extensive grammar). A student further expands his vocabulary and receives an extensive knowledge and practical training in the English spoken and written language, as well as the English grammar. At the end of the course a student should develop a good command of American English and a capability of communicating with English speakers on most of the subjects of modern human activity, which will help him sit for SAT examinations at US educational institutions. |
Each level is a separate product and will be offered to customers in the form of a set of compact disks. The first edition of the Primary Education product is for the speakers of the Russian language and is called `American English. Primary Course.’ It will contain Part I, which has already been developed, and Part II to follow. The Primary Course will be used to develop good command of about 4,000 most frequently used English words and word expressions. At later stages we will issue other editions for the speakers of Spanish, French, Arabic, Hindi, Chinese and other languages. The vocabulary, exercises and grammar of the educational aids will be translated into these languages by highly qualified translators - experts in the subject language, who will be contracted for this purpose. The translated material will then be put into the software product with the help of a special software program.
We have been carrying out research and development work on this project following the technology acquisition from YZ Business Consulting in July 2002. This work was related to legal protection of the intellectual property of the right holders, development of the vocabulary, grammar and exercises for our educational aids, and research and preparatory work with potential partners to organize future commercial sales of our end products. For this purpose we have spent $30,020 during the last two years. As of today, we have completed the development of the educational aid“American English, Primary Course, Part I.” The vocabulary, exercises, grammar, and methodological instructionsfor this educational aid has been developed. The product software has been developed and debugged. Necessary production facilities have been set up and the production technology has been developed and introduced together with the technical protection against unauthorized reproduction. The first version of the product prototype has been issued. The technology and the prototype are undergoing necessary finishing procedures. The trade name ZS SuperTutor has been developed for the technology. The logo and the trade name ZS for our products and services have been registered with the appropriate authorities of the Russian Federation.
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Product Features
The program for teaching the American English with the help of a personal computer developed by us incorporates a number of features. These can be summarized as follows:
o | The educational material (vocabulary) is presented by means of demonstrating vocabulary units in the subject language on the computer screen with a frequency of 25 frames per second, each unit together with an illustration in the same frame. No native language is used in this mode of program operation in order to create an associative link between a unit in the subject language and its image in form of an illustration. Then by means of practical exercises, in which the units equivalents in the native language are now introduced, and students study the subject units both in English and native language, listen to their standard pronunciation, learn to translate from one language to another and to use the units correctly in the spoken language. |
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o | All the vocabulary is displayed in form of images with English equivalents with frequency 25 frames per second. |
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o | Presentation of the material is accompanied by the Mozart music |
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o | The program is designed to train all types of human memory in attempt to develop all language skills: listening, speaking, reading and writing. |
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o | Any teaching function can be utilized momentarily any time during the learning process. o The program is highly ergonomic and requires no other teaching instruments or materials. |
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The effectiveness of our products has not been verified yet.
Our products are aimed at studying English as a second language utilizing resources of a personal computer. Our software program contains functions which allow a student to do the following:
1. Use illustrations in order to memorize English lexis.
2. Listen to the correct English pronunciation, record own pronunciation and compare it with the correct pronunciation.
3. Translate from the native language into English and backwards and verify against the correctness of the
translation.
4. Type in English using the English pronunciation playback or the text in the native language.
The development of our educational aids included the continuous analysis of the existing practice and professional expert opinions.
Marketing
Our marketing strategy for the sales of our educational aids may take different forms in the course of the project. One of the forms we are planning to implement is that we will establish agency and dealership agreements with educational institutions for the establishment of a network of English training centers in certain regions of the world, which will use our software products in their educational activities. Each of the agency and dealership contracts will provide for an extensive marketing effort, including but not limited to:
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o | Presentation of our products and services to potential customers including governmental and private educational institutions; |
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o | Introduction of printed advertising materials to potential customers; |
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o | Advertising in printed media and industry publications focusing on the target market segment. |
In addition, we are planning to carry out an advertising and promotion campaign through the Internet. For this purpose we are developing our web site dedicated to the English Learning Program. This activity is funded by YZ Business Consulting until the proceeds form this public offering are received. We are planning to have the web site functional in the third quarter of 2006. Our Internet-based marketing campaign will focus on the key principles as follows:
o | education of potential customers about the English Learning Program; |
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o | advertising publications in English and the native languages; |
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o | direct sales of our educational software products; |
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o | demo version with a download option; |
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o | technical support |
Our advertising campaign through Internet will be carried out initially in the English and Russian languages and then, at later stages, in other languages such as Spanish, Arabic, Hindi, Chinese, etc. prior to and in accordance with introduction to the market of our educational software products in such languages.
License Agreement with YZ Business Consulting
Effective August 9, 2005, we signed a license agreement with YZ Business Consulting. The License Agreement is of an unlimited term with a provision for termination by either party with a not less than one month notice. The License Agreement is the primary asset we are using to develop, market and distribute educational aids in the form of a computer program for teaching American English as a second language with the aid of a personal computer. Yevsey D.Zilman, our President and Deputy Chairman of the Board of Directors, owns YZ Business Consulting. In its essence the License Agreement provides us with the exclusive right to the ZS SuperTutor© Technology, development and sales of Technology-based products. At the same time the agreement allows YZ Business Consulting to engage in any kind of activities utilizing our educational aids, whereby YZ Business Consulting will buy our products contributing to the increase of sales.
Pursuant to the License Agreement, we were required to pay royalties to YZ Business Consulting as follows: 40% of the total revenues from our sales of any products, services or other activities utilizing the educational aids after complete recovery of all our initial stage operation costs, including legal fees, advertising and production. However, subject to Agreement dated December 14, 2005 YZ Business Consulting committed to finance all the costs associated with English language software project, and therefore is entitled to receive royalties without prior compensation our initial stage costs. The regular payments of the royalties will be reduced if necessary to insure that there is no loss for us in this type of activity. In such event the payments of royalties will represent final settlements between the parties and the reduced royalties will not accrue it this situation.
We also have a Consultancy Agreement dated January 6, 2004 between us and YZ Business Consulting, Inc., which is a separate arrangement from the above License Agreement. The main terms and conditions of the above Consultancy Agreement are as follows.
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• | Subject of Agreement. YZ renders to us business consulting services on all aspects of organization and conducting of our business. |
• | Remuneration. In consideration of the services provided thereunder, YZ receives from us remuneration as per invoices issued by YZ to us. |
• | Duration. The Agreement is in force until terminated either by a mutual consent of the parties or at any time by one party by giving the other party a one-month notice of termination.” |
Customers
Our software product is designed to teach American English as a second/foreign language to non-English speakers will be distributed to a variety of potential customers. The target audience falls into two major categories.
• | Individual customers of any sex, nationality, religion, social status and profession from fourteen years and older. |
• | Governmental and private educational institutions, including any type of training centers, schools, colleges and universities. |
Based on the fact that our product does not require any specific training means, materials or knowledge and that the learning techniques are very simple and easy-to-understand, it can be used effectively and is designed for any user.
How We Compete
There are various software products in the international markets related to teaching foreign languages and the English language in particular. These products are manufactured and marketed by different producers and differ substantially both in terms of quality and price. It should be noted though that the educational sector is one the world’s permanently growing business markets and has practically no limits in demand for effective educational material.
Our ability to successfully compete on the international arena is based on the following major factors:
Product features. In our marketing campaign, we will focus on educating our potential customers about our product features such as demonstration, with a 25 frames per second frequency, of the vocabulary in from of images and corresponding words, word combinations and phrases in English with no equivalents in the native language, use of Mozart music and others, which are designed to help students in developing all language skills (listening, speaking, reading and writing), etc.
Many of the educational software products currently available in the market do not provide for the subconscious mode of instruction. Those which do, normally require the use of additional technical means such as TV sets or overhead projectors or double-side cards. For example, the autogenic training, which requires a substantial amount of additional time and which is not effective with every individual. Our product makes a complex intellectual work of studying foreign languages a well-organized and easy activity. The studying process becomes spontaneous and reliable memorization of new information occurs much faster than under available learning techniques, offered by other products.
Balanced Marketing Strategy. In accordance with our strategy for the development of the English language teaching program, we are planning to market and distribute our products through a network of regional agents and dealers. These agents and dealers will enter into agreements with and supply our educational aids to education institutions in such countries of the world as, Russia, Ukraine and other countries of the former Soviet Union.
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Sound Price Policy. The selling prices for educational software products currently available in the markets, which are designed for teaching foreign languages, and the English language in particular, range from a few dozens to several thousand US dollars. In order to ensure the market entry and low entry barriers into this market, we are planning to maintain the selling prices for our product in average range of local market prices. Final determination of the actual and minimum selling price will be made in the course of the American English experimental training in one of the Russian education institutions by the end Of the first quarter of 2007.
RESEARCH AND DEVELOPMENT COSTS
We spent $30,020 during the last two years on research and development related primarily to the development and completion of our software product with necessary components, development of the vocabulary, grammar and exercises, legal protection of the intellectual property, as well as preparatory work to organize future sales of the end product. We have not incurred any research and development costs in our ready-mix concrete business.
INTELLECTUAL PROPERTY
On June 28, 2004 International Application No. PCT/US2004/02/07/64 was filed with the International Bureau of WIPO, Geneva, Switzerland and Confirmation No. 4543 was registered with the United States Patent and Trademark Office. However, we decided at present to change the way of protecting our intellectual property. We ensured the appropriate registration of our computer program instead of registering a patent for the software development technology. To date, protection of the right holders’ intellectual property has been completed. We ensured legal protection of the computer program by registering our copyright to the software program in the Russian Federation (Registration Certificate 2005610779 dated April 4, 2004), the country where we intend to start our product sales and which is a signatory to the WIPO Copyright Treaty of December 20, 1996 and the 1971 (Paris) Act of the Berne Convention for the Protection of Literary and Artistic Works. These provide that the registration of the copyright to a software program in one member-country ensures equal protection in all other member-countries. The above WIPO Copyright Treaty and the 1971 (Paris) Act of the Berne Convention cover all countries, including the USA, where we intend to market our computer program.
Employees
As of May 10, 2006, we have five (5) employees who are all full time. We consider our relations with our employees to be good. From time to time, we also utilize services of independent contractors for specific projects or to support our research and development effort. City Mix LLC, our subsidiary, currently has one employee, Andrey Kharlanov, its General Manager.
DESCRIPTION OF PROPERTY
New Jersey Corporate Headquarters: We presently utilize the home office of Eduard Klebanov located at 325 Flower Lane, Morganville, New Jersey as our corporate headquarters. Mr. Klebanov is our Vice President and Chairman of the Board of Directors. This is at no cost to us.
Abu Dhabi, UAE Lease: City Mix, LLC, our subsidiary, entered into a sublease agreement with our UAE national partner for sublease of land on which the concrete plant is constructed. The original agreement was dated November 26, 2000. Subject to this agreement, the term of the sublease is 20 years and renewable. The sublease payment is $13,605 per year. The Abu Dhabi Municipality registers the land sublease on an annual basis after an annual registration fee is paid.
City Mix, LLC, our subsidiary, has a lease agreement for office space. The annual lease payment is approximately $10,500. This amount is paid at the commencement of the lease. On June 14, 2005, we signed a new lease agreement for office space located in the center of the City of Abu Dhabi for the period from July 13, 2005 to July 12, 2006 with the same annual payment.
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LEGAL PROCEEDINGS
From time to time in the normal course of business, we have been involved in litigation. At present, we have one on-going litigation, which involves our subsidiary, City Mix LLC (“City Mix”). It is connected with our claims against Armitage Engineering Co., LLC (“Armitage”), the main contractor of City Mix. These claims are based on the fact that Armitage failed to complete its work on time in violation of its contractual agreement as per Contract of 03/28/99 and AnnexA-1 of 09/11/01 and has taken a series of illegal actions to thrust its unfair position upon City Mix, which has caused substantial damage to City Mix.
City Mix consulted Al Tamimi & Company, one of the leading law firms in the United Arab Emirates, who studied the situation and concluded that Armitage’s actions were illegal. City Mix filed Urgent Case 72/02 against Armitage seeking to hold Armitage liable for illegal actions and to stop Armitage from locking City Mix’s factory site so that City Mix can use its own property. On December 23, 2003 the Abu Dhabi Court of First Instance, Abu Dhabi, United Arab Emirates issued a judgment in case 72/02 in favor of City Mix and the Armitage’s actions were found illegal.
In the Main Action 422/02 which was initiated as Armitage had failed to complete the construction works on due time and rejected penalties for that stipulated by the contract. Armitage demanded that the final payment under the contract in the amount of $158,514 should be paid in full; however the consultant, who supervised execution of the contract as required by the UAE law, concluded that this payment should account for penalties for a period of delays in completion. Therefore in response to the claim filed by Armitage City Mix filed a counter claim claiming penalties from Armitage for failing to complete the project on due time. City Mix additionally claimed compensation in the amount of $739,048 plus a daily compensation of $4,924 for loss of daily profits resulting from City Mix being deprived from utilizing its factory from February 26, 2002 until a final judgment is rendered and $2,449 daily as fees for the consultant until a final judgment is rendered. Armitage additionally claimed moral damages from City Mix in the amount of $816,326. On February 27, 2006 the court issued its judgment on main action 422/02, whereby it satisfied the City Mix’s claim for penalties partially in the amount of $25,404 and therefore reduced the final payment under the contract to $133,110. The additional compensation claimed by City Mix was not accounted for. Al Tamimi & Company, an Abu Dhabi law firm and the City Mix’s lawyers analyzed the situation and the court’s decision and concluded and recommended that City Mix should seek compensation for damages in a court of a higher instance. For this purpose City Mix filed an appeal with the Abu Dhabi Court of Appeal on March 27, 2006. The appeal was accepted and the court referred the case to an expert. The next hearing is scheduled for September 19, 2006. The judgment of the court of appeal may or may not include an interest, which is totally at the court’s discretion including the amount of such interest.”
In addition, we have one claim regarding the Anglo American Bank. We have $551,848 cash restricted by the Anglo American Bank, a Grenada Corporation, which is undergoing liquidation supervised by the Ministry of Finance of Grenada. In our letters to the Ministry of May 30, 2004, April 5, 2004, February 15, 2005 we requested the latest development of the situation, but have not yet received a response. Nevertheless, by telephone we were notified by Ms. Roth, Secretary of the Ministry of Finance, that the Ministry was supervising the process of liquidation of the bank and the issue of the return of the funds to the depositors. None of the funds deposited in the Anglo American bank are insured. At this time, there is no intention to become a party to the case in order to reclaim our funds but such a determination can be made at a later date. At December 31, 2004, we set up a provision for loss on this account in the amount of $275,924, due to the age of the matter. Due to the age of this matter and the lack of response by the Ministry of Finance, we reserved the remaining balance due and reduced the carrying value of their asset to zero.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth information about our executive officers and directors.
Name | Age | Position |
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Yuli Ginzburg | 67 | Vice President and Director |
Yevsey D. Zilman | 60 | President, Principal Executive Officer and Deputy Chairman of the Board of Directors |
Eduard Klebanov | 41 | Vice President, Principal Financial Officer, Principal Accounting Officer and Chairman of the Board of Directors |
Leonard Khodorovsky | 52 | Director |
Andrei Kharlanov | 44 | General Manager, City Mix, L.L.C. |
All directors set forth above have terms that commenced January 1, 2006 and expire December 31, 2006.
Our officers, Messrs. Ginzburg, Zilman and Kharlanov devote 100% of their time to our business or approximately 40 hours per week. Messrs. Khodorovsky and Klebanov presently devote a minimal amount of time to our business, approximately 2 to 3 hours per week. Once we raised the proceeds of this offering, they each intend to devote more significant time to our business.
Set forth below is certain biographical information regarding our executive officers and directors:
On March 11, 2005, Yan Jacob Rusanov resigned as our President. Thereafter, Andrei Petrov was appointed our President and Principal Executive Officer. On June 7, 2005, Mr. Petrov resigned as our President. Yevsey D. Zilman was appointed our President and Principal Executive Officer.
Yuli Ginzburg has been our Vice President and Director since December 2003. He has been our advisor in the engineering and technology areas. Mr. Ginzburg has more than 40 years experience in development and implementation of highly complex projects in electronic, chemical and paper industries. He has been an independent engineering consultant for several industrial clients since 2000. From 1983 to 2000, he was a Project Engineer with Sweitzer-Mauduit In., Inc. (NYSE: SWM), based in Spotswood, New Jersey. Its principal activity is to produce specialty papers and supply fine papers to the tobacco industry. The activities are separated into two segments: tobacco products and non-tobacco products. The tobacco products segment includes cigarette, plug wrap and tipping papers used to wrap various parts of a cigarette, reconstituted tobacco leaf for use as filler in cigarettes, reconstituted tobacco wrappers and binders for cigars and paper products used in cigarette packaging. The non-tobacco products segment includes lightweight printing and writing papers, coated papers for packaging and labeling applications, business forms, furniture laminates, battery separator paper, drinking straw wrap, filter papers and other specialized papers. From 1965 to 1982,he was the Group Leader at the Leningrad Project Bureau, based in Leningrad, Russia. He supervised the development of new processes, equipment and machinery for the light industry. The Leningrad Project Bureau designed equipment and machinery for the textile and paper industry. In 1959, he received a Master of Science degree in Mechanical Engineering from Technological Institute, based in Leningrad, Russia. From 1962-63, he studied Electro-Measuring Instruments at Polytechnic Institute, Leningrad, Russia. Mr. Ginzburg is a holder of 12 patents in Russia, and a trade secret in the United States.
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Yevsey D. Zilman has been our Vice President and Deputy Chairman of the Board of Directors since December 2003. On June 7, 2005, Mr. Zilman was appointed our President and Principal Executive Officer. Mr. Zilman is an expert in development and management of technological, production processes and commercial projects. He has 30 years experience as a Technical and Administrative Manager in major governmental and commercial institutions. He had been the President, and Vice President of R.A.L.Y. Partners, Inc. R.A.L.Y. Partners, Inc. owned 70% outstanding shares of City Mix Management Inc. and exercised control over City Mix LLC through its controlling interest in City Mix Management Inc. One of Mr. Zilman’s responsibilities as president of R.A.L.Y. Partners, Inc. was to oversee and advise on the management of City Mix LLC. He also was reviewing and analyzing additional projects for potential acquisition by R.A.L.Y. Partners, Inc. R.A.L.Y. Partners, Inc. ceased operations on October 31, 2004. It filed a certificate of dissolution with the New York State Department of State on January 14, 2005. From 2000 to the present, Mr. Zilman has been the President of Y.Z. Business Consulting, Inc., where he provides consulting services for a variety of commercial business projects. He also has significant experience in rail shipments, production of polyetheric garment accessories, and in cryogenic engineering. In 1968, he received his Masters in Mechanical Engineering from Russian Polytechnic Institute, Novocherkassk, Russia, and completed post-graduate education at the Russian Agricultural Institute. He also holds a Russian State Patent.
Eduard Klebanov has been our Vice President and Director since December 2003. In March 2005, he was appointed our Chairman of the Board of Directors. In May 2005, he became our Principal Financial Officer and Principal Accounting Officer. In May 2005, he became our Principal Accounting Officer. From 1998 to the present, he has been an Audit Manager at Shanholt Glassman Klein Kramer & Co., certified public accountants located in New York, New York. As an audit manager, he supervises, plans and performs certified audits, reviews and compilation engagements for medium sized public firms, with an emphasis on commercial and residential real estate. From 1990 to 1998, he was the Audit Supervisor at Ellenbogen Rubenstein Eisdorfer & Co., LLP. In 1986, he received his Bachelor of Science degree in Accounting from Brooklyn College, City University of New York.
Leonard Khodorovsky has been our director since December 2003. Since 1981, he has worked as an electrical engineer and support maintainer for the NYC Transit Authority. His responsibilities include testing different systems of a car, locating problems, repairing and testing electrical systems, wiring and installing electrical components, running tests of subway cars, tests and repairs of electrical motors and tests and repair of temperature control systems of cars. In 1983, he received his diploma in Business Management Administration from Touro College of New York, based in New York City. In 1976, he received his Masters Degree in Telecommunication Systems from the University of Telecommunications based in Odessa, Ukraine.
Andrei Kharlanov has been the General Manager of our subsidiary, City Mix, LLC since 2000. City Mix, LLC is located in Abu Dhabi, United Arab Emirates. He is responsible for managing the operations of City Mix, LLC. From 1978 to 1983, he attended the Foreign Languages Institute located in Moscow, Russia.
EXECUTIVE COMPENSATION
Compensation of Executive Officers
Summary Compensation Table. The following table sets forth information concerning the annual and long-term compensation awarded to, earned by, or paid to the named executive officer for all services rendered in all capacities to our company, or any of its subsidiaries, for the years ended December 31, 2005, 2004 and 2003. Since Mr. Zilman just became our President and Principal Executive officer on June 7, 2005, we have not included information for him for the years ended December 31, 2004 and 2003:
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SUMMARY COMPENSATION TABLE
| Annual Compensation | Long-Term Compensation | |
Name and Principal Position | Year | Salary (1)(3) | Bonus | Other Annual Compensation | Restricted Stock Award(s) | Securities Underlying Options |
Yevsey Zilman, President and Principal Executive Officer | 2005 2004 2003 | 0 0 0 | | | | |
Jacob Rusanov, Former President | 2005 2004 2003 | 0 0 0 | 0 0 0 | 0 0 0 | 0 0 0 | 0 0 0 |
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Andrei Kharlanov, General Manager of City Mix, LLC | 2005 2004 2003 2002 | $44,816 $59,755 $63,289 $51,812 | -0- $10,885 $30,281 $4,952 | 0 0 0 | 0 0 0 | 0 0 0 |
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Andrei Petrov, Former President and Principal Executive Officer (2) | 2005 2004 2003 | 0 0 0 | 0 0 0 | 50,000 Shares of of Common stock | 0 0 0 | 0 0 0 |
(1) | Since inception, the only person that has received salary is our general manager. We have paid our general manager, Andrei Kharlanov, for our subsidiary, City Mix LLC, the sum of $4,490 per month pursuant to a contract that commenced on November 27, 2001. |
(2) | Mr. Petrov was appointed President and Principal Executive Officer in March 2005. Pursuant to his agreement to become our President and Principal Executive Officer, he received 50,000 shares with an agreement that he shall receive an additional 50,000 shares every 3 months thereafter until he receives an aggregate of 300,000 shares. Since he resigned on June 7, 2005, he retained the initial 50,000 shares he received and the remainder of his agreement was nullified. Such 50,000 shares were valued at $0.25 per share for a total value of $12,500 |
(3) | In the fiscal year 2004, we paid Eduard Klebanov, our Chairman of the Board of Directors, the sum of $3,000 for his services to us for internal bookkeeping. In addition, in 2003, he received 150,000 shares of our common stock for his work on the Board of Directors. |
Option Grants Table. The following table sets forth information concerning individual grants of stock options to purchase our common stock made to the executive officer named in the Summary Compensation Table during fiscal 2003.
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OPTIONS GRANTS IN LAST FISCAL YEAR
(Individual Grants)
Name | Number of securities underlying options granted (#) | Percent of total options granted to employees in last fiscal year | Exercise or base Price ($/Share) | Expiration Date |
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None | | | | |
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
Aggregated Option Exercises and Fiscal Year-End Option Value Table. The following table sets forth certain information regarding stock options exercised during fiscal 2005 and held as of December 31, 2005, by the executive officer named in the Summary Compensation Table.
Name | Shares acquired on exercise (#) | Value realized ($) | Number of Securities Underlying Unexercised Options at Fiscal
Year-End(#)
Exercisable/ Unexercisable | Value of Unexercised In-the-Money Options at Fiscal Year-
End($)(1)
Exercisable/ Unexercisable |
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None | | | | |
Employment Contracts
We presently do not have any employment agreements with our officers except for Andrei Kharlanov, general manager of our subsidiary, City Mix LLC. His employment contract commenced on November 27, 2001. It is an unlimited period contract with an annual 30 days leave and a monthly salary of $4,490. The contract is terminable at any time by either party with one month prior notice. The contract can also be terminated immediately without any notice (a) by us if Mr. Kharlanov fails to perform his basic duties and continues to do so in spite of a written warning; is absent without a legitimate reason for more than seven continuous days; or commits other violations as per the labor laws of the UAE; and (b) by Mr. Kharlanov if we fail to perform our obligations as per the contract. Upon the contract termination for whatever reason, Mr. Kharlanov is entitled to severance equal to 21 days wages for each year of the first five years of employment and 30 days wages for each additional year of employment provided that the total severance payment does not exceed the wages of two years.
We recently agreed to give Mr. Klebanov the following shares based on his position as our Vice President: 100,000 shares of our restricted common stock which shall vest in four (4) quarterly installments of 25,000 shares each. The initial 25,000 shares vest on September 15, 2005.
Compensation of Directors
Directors are permitted to receive fixed fees and other compensation for their services as directors. The Board of Directors has the authority to fix the compensation of directors. No amounts have been paid to, or accrued to, directors in such capacity.
Stock Option and Stock Issuance Plans We presently do not have any stock option plans.
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PRINCIPAL STOCKHOLDERS
The following table sets forth certain information derived from the named person, or from the transfer agent, concerning the ownership of common stock as of August 8, 2006, of (i) each person who is known to us to be the beneficial owner of more than 5 percent of the common stock; (ii) all directors and executive officers; and (iii) directors and executive officers as a group:
Name and Address of
Beneficial Owner | Amount and Nature of
Beneficial Ownership | Percent of
Class (1) | Percent of
Class (2) |
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Andrei Petrov (former officer)
158C East Main Street
Ramsey, NJ 07446 | 50,000 | * | * |
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Yevsey Zilman (3)
182 Myrtle Ave
Mahwah, NJ 07430 | 7,473,790 | 17.50% | 12.74% |
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Yuli Ginzburg
4 Schindler Drive South
Old Bridge, NJ 08857 | 6,953,800 | 16.29% | 11.85% |
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Eduard Klebanov
325 Flower Lane
Morganville, NJ 07751 | 265,000 | * | * |
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Leonard Khodorovsky
2738 East 28th Street
Brooklyn, New York 11235 | 70,000 | * | * |
| | | |
Eugene Gurevich
2-01 50th Ave., Apt 28B
Long Island City, NY 11101 | 5,964,930 | 13.97% | 10.17% |
| | | |
Vladimir Davidov
23 Place
Karhula Finland 48601 | 5,040,000 | 11.80% | 8.59% |
| | | |
Andrey Kharlanov
1101, Sultan Tower, Liwa Street
Abu Dhabi, P.O.Box 47427,
United Arab Emirates | 2,531,200 | 5.93% | 4.31% |
| | | |
Alexander Shishkin
Apt. #310, 6 Bibliotechnaya,
Moscow, Russia 129090 | 6,400,000 | 14.99% | 10.91% |
| | | |
Eugene Koupsin
15-17 Rubinsteyn Street
St. Petersburg, Russia | 3,200,000 | 7.49% | 5.45% |
| | | |
Officers and Directors
as a Group (6 including Mr. Kharlanov, the general manager of City Mix, LLC ) | 17,273,790 | 40.45% | 29.39%% |
| | | |
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* - Less than 1%
(1) percent of class before offering based on 42,700,000 shares issued and outstanding after giving effect to a 1 for 10 forward split of our shares of common stock undertaken on October 20, 2004.
(2) percent of class after offering based on 58,700,000 shares issued and outstanding, assuming the maximum offering is sold .
(3) Includes 1,400,000 shares held by Olga Safanova, Mr. Zilman’s wife; and 100,000 shares held by Mikhail Safonova, Mr. Zilman’s minor son.
DILUTION
Royal Capital Management, Inc.
Dilution Table Under Regulation S-B, Item 506
Quarter Ended March 31, 2006
Net tangible book value (NTBV) as of March 31, 2006 was $2,370,217 or $.05 per share of common stock. NTBV per share represents tangible assets less liabilities divided by the number of shares of common stock outstanding. The following table illustrates the dilution to purchasers of common stock in this offering at various arbitrarily determined sales levels, at an assumed public offering price of $.25 per share. At sales levels indicated, our proforma net tangible book value at March 31, 2006 would have been $3,267,717, $4,267,717, $5,267,717 and $6,267,717 respectively.
| Number of Shares of Common Stock to be Sold in the Offering |
| 4,000,000
Shares | 8,000,000
Shares | 12,000,000
Shares | 16,000,000
Shares |
| | | | |
Public offering price per share | $0.25 | $0.25 | $0.25 | $0.25 |
| | | | |
NTBV per share before the offering | 0.05 | 0.05 | 0.05 | 0.05 |
| | | | |
| | | | |
Increase in NTBV per share attributable to new investors | 0.02 | 0.03 | 0.04 | 0.05 |
| | | | |
Pro forma NTBV per share after the offering | 0.07 | 0.08 | 0.10 | 0.11 |
| | | | |
Dilution per share to new public | $0.18 | $0.17 | $0.15 | $0.14 |
There were no sales to officers, directors, promoters and affiliated person of common stock in the past five years at prices significantly less than the offering price.
SELLING STOCKHOLDERS
The shares being offered for resale by the selling stockholders consist of the total of 2,331,410 shares of our common stock. None of the selling shareholders listed below are affiliates of broker-dealers.
The following table sets forth the name of the selling stockholders, the number of shares of common stock beneficially owned by each of the selling stockholders as of January 31, 2006 and the number of shares of common stock being offered by the selling stockholders. The shares being offered hereby are being registered to permit public secondary trading, and the selling stockholders may offer all or part of the shares for resale from time to time. However, the selling stockholders are under no obligation to sell all or any portion of such shares nor are the selling stockholders obligated to sell any shares immediately upon effectiveness of this prospectus. All information with respect to share ownership has been furnished by the selling stockholders.
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Name of selling stockholder | Shares of common stock owned prior to the offering | Percent of common shares owned prior to the offering(1) | Shares of common stock to be sold in the offering (1) | Number of shares owned after the offering | Percent of shares owned after offering |
| | | | | |
Anna Ginzburg (2) | 991,410 | 2.32% | 991,410 | 0 | 0 |
Nikita Sukhin | 20,000 | * | 20,000 | 0 | 0 |
Mikhail Khrakovsky | 10,000 | * | 10,000 | 0 | 0 |
Victoria Reznik | 10,000 | * | 10,000 | 0 | 0 |
Ilya Bykov | 20,000 | * | 20,000 | 0 | 0 |
Mark Filstein | 20,000 | * | 20,000 | 0 | 0 |
Margarita Ginzburg (2) | 10,000 | * | 10,000 | 0 | 0 |
Tatiana Klatz | 20,000 | * | 20,000 | 0 | 0 |
Julia Parsons | 50,000 | * | 50,000 | 0 | 0 |
Julie Litvinova | 10,000 | * | 10,000 | 0 | 0 |
Alla Shor | 30,000 | * | 30,000 | 0 | 0 |
Mikhail Kupsis | 10,000 | * | 10,000 | 0 | 0 |
Ekaterina Gavin | 10,000 | * | 10,000 | 0 | 0 |
Tigran Makarian | 10,000 | * | 10,000 | 0 | 0 |
Mikhail Shor | 10,000 | * | 10,000 | 0 | 0 |
Julian Parsons | 10,000 | * | 10,000 | 0 | 0 |
Elena Marcucci | 10,000 | * | 10,000 | 0 | 0 |
Boris Zavlin | 10,000 | * | 10,000 | 0 | 0 |
Larisa Garcia | 10,000 | * | 10,000 | 0 | 0 |
Walter Eizenberg | 10,000 | * | 10,000 | 0 | 0 |
Ashley Goodman | 30,000 | * | 30,000 | 0 | 0 |
Marina Ivanova | 10,000 | * | 10,000 | 0 | 0 |
Berci Cherpician | 10,000 | * | 10,000 | 0 | 0 |
Vadim Nebuchin | 10,000 | * | 10,000 | 0 | 0 |
Yury Rubinovich | 10,000 | * | 10,000 | 0 | 0 |
Elena Smirnova | 10,000 | * | 10,000 | 0 | 0 |
Dilbar Sultanova | 10,000 | * | 10,000 | 0 | 0 |
Gla Ni | 10,000 | * | 10,000 | 0 | 0 |
Lana Koifman | 20,000 | * | 20,000 | 0 | 0 |
Igor Sluzhevsky | 20,000 | * | 20,000 | 0 | 0 |
Zhana Kvetnaya | 10,000 | * | 10,000 | 0 | 0 |
Araz Khachatrian | 20,000 | * | 20,000 | 0 | 0 |
Oksana Tkachenko | 10,000 | * | 10,000 | 0 | 0 |
Natalia Sarafanova | 10,000 | * | 10,000 | 0 | 0 |
Teresa Bergstrom | 220,000 | * | 220,000 | 0 | 0 |
Galina Polina | 10,000 | * | 10,000 | 0 | 0 |
Marina Terletsky | 30,000 | * | 30,000 | 0 | 0 |
Alexander Terletsky | 20,000 | * | 20,000 | 0 | 0 |
Boris Magidenko | 20,000 | * | 20,000 | 0 | 0 |
Souren Soumbatov | 20,000 | * | 20,000 | 0 | 0 |
Sonia Bromberg | 500,000 | 1.17% | 500,000 | 0 | 0 |
Jacob Fortun | 20,000 | * | 20,000 | 0 | 0 |
Anna Kanevsky | 20,000 | * | 20,000 | 0 | 0 |
*-Less than 1%
(1) Based on 42,665,000 shares issued and outstanding as of May 10, 2006.
(2) Anna Ginzburg and Margarita Ginzburg are the adult daughters of Yuli Ginzburg, our officer and director.
47
PLAN OF DISTRIBUTION
We are offering our shares of common stock in a direct public offering basis through Messrs. Zilman and Ginzburg. There are no minimum purchase requirements. The offering shall be undertaken for a twelve (12) month period from the date of commencement. There is no minimum number of shares that we must sell before we can utilize the proceeds of the offering. Therefore, there is a possibility that no proceeds will be raised or that if any proceeds are raised, they may not be sufficient to cover the cost of this offering. Messrs. Zilman and Ginzburg will be the only people that will conduct the direct public offering. Investors purchasing the 16,000,000 shares that we are offering will be purchasing their shares from us and not from our selling security holders. Messrs. Zilman and Ginzburg intend to offer and sell the shares in the primary offering through their business and personal contacts. They will not be paid any commissions or other expenses incurred by him in connection with the offering. The shares may also be offered by participating broker-dealers which are members of the National Association of Securities Dealers, Inc. We may, in our discretion, pay commissions of up to 10%of the offering price to participating broker-dealers
who participate in the sale of shares. Our officers and directors may not purchase shares in this offering.
Messrs. Zilman and Ginzburg are the only persons that plan to sell our common stock. They are not registered broker-dealers. They intend to claim reliance on Exchange Act Rule 3a4-1 which provides an exemption from the broker-dealer registration requirements of the Exchange Act for persons associated with an issuer. Specifically, both Messrs. Zilman and Ginzburg (i) at the time of sale, will not be subject to a statutory disqualification as that term is defined in section 3(a)39 of the Securities Act; (ii) will not be compensated in connection with their participation in the offering by payment of commissions or other remuneration; at the time of participation in the sale of shares, they will not be an associated person of a broker or a dealer; (iii) pursuant to Rule3a4-1(a)(4)(ii), Messrs. Zilman and Ginzburg will meet all of the following requirements: at the end of the offering, they will perform substantial duties for us other than in connection with transactions in securities; they are not a broker or dealer, or an associated person of a broker or dealer within the last12 months; and they have not participated in, or do not intend to participate in, selling an offering of securities for any issuer more than once every 12 months other than in reliance on paragraph(a)(4)(i) or (iii) of Rule 3a4-1.
The selling security holder offering will run concurrently with the primary offering. All of the stock owned by the selling security holders will be registered by the registration statement of which this prospectus is a part. The selling security holders may sell some or all of their shares immediately after they are registered. There is no restriction on the selling security holders to address the negative effect on the price of your shares due to the concurrent primary and secondary offering. In the event that the selling security holders sell some or all of their shares, which could occur while we are still selling shares directly to investors in this offering, trading prices for the shares could fall below the offering price of the shares. In such event, we may be unable to sell all of the shares to investors, which would negatively impact the offering. As a result, our planned operations may suffer from inadequate working
capital.
The selling stockholders will sell their common stock at the price of $.25 per share until our shares of common stock are quoted on the OTC Bulletin Board (or any other recognized exchange). Thereafter, the selling stockholders may sell their shares at prevailing market prices or privately negotiated prices. Based on this, the purchasers in this offering may be receiving an illiquid security.
The selling security holders shares may be sold or distributed from time to time by the selling stockholders or by pledgees, donees or transferees of, or successors in interest to, the selling stockholders, directly to one or more purchasers (including pledgees) or through brokers, dealers or underwriters who may act solely as agents or may acquire shares as principals, at market prices prevailing at the time of sale, at prices related to such prevailing market prices, at negotiated prices or at fixed prices, which may be changed. The distribution of the shares may be effected in one or more of the following methods:
* | ordinary brokers transactions, which may include long or short sales, |
* | transactions involving cross or block trades on any securities or market where our common stock is trading, |
48
* | purchases by brokers, dealers or underwriters as principal and resale by such purchasers for their own accounts pursuant to this prospectus, “at the market” to or through market makers or into an existing market for the common stock, |
* | in other ways not involving market makers or established trading markets, including direct sales to purchasers or sales effected through agents, |
* | through transactions in options, swaps or other derivatives (whether exchange listed or otherwise), or |
* | any combination of the foregoing, or by any other legally available means. |
In addition, the selling stockholders may enter into hedging transactions with broker-dealers who may engage in short sales, if short sales were permitted, of shares in the course of hedging the positions they assume with the selling stockholders. The selling stockholders may also enter into option or other transactions with broker-dealers that require the delivery by such broker-dealers of the shares, which shares may be resold thereafter pursuant to this prospectus.
Brokers, dealers, underwriters or agents participating in the distribution of the shares may receive compensation in the form of discounts, concessions or commissions from the selling stockholders and/or the purchasers of shares for whom such broker-dealers may act as agent or to whom they may sell as principal, or both (which compensation as to a particular broker-dealer may be in excess of customary commissions). The selling stockholders and any broker-dealers acting in connection with the sale of the shares hereunder may be deemed to be underwriters within the meaning of Section 2(11) of the Securities Act of 1933,and any commissions received by them and any profit realized by them on there sale of shares as principals may be deemed underwriting compensation under the Securities Act of 1933. Neither the selling stockholders nor we can presently estimate the amount of such compensation. We know of no existing arrangements between the selling stockholders and any other stockholder, broker, dealer, underwriter or agent relating to the sale or distribution of the shares.
We will not receive any proceeds from the sale of the shares of the selling security holders pursuant to this prospectus. We have agreed to bear the expenses of the registration of the shares, including legal and accounting fees, and such expenses are estimated to be approximately $102,500.
We have informed the selling stockholders that certain anti-manipulative rules contained in Regulation M under the Securities Exchange Act of 1934 may apply to their sales in the market and have furnished the selling stockholders with a copy of such rules and have informed them of the need for delivery of copies of this prospectus. The selling stockholders may also use Rule 144 under the Securities Act of 1933 to sell the shares if they meet the criteria and conform to the requirements of such rule.
If there is any change in our selling security holders subsequent to the effectiveness of this registration statement, we will file either a 424 amendment or a psot-effective amendment to reflect such change.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Eduard Klebanov, our Vice President and Chairman of the Board of Directors, assists us with our internal accounting on a consultant basis.
Effective August 9, 2005, we signed a license agreement with YZ Business Consulting. The License Agreement is of an unlimited term with a provision for termination by either party with a not less than one month notice. The License Agreement is the primary asset we are using to develop, market and distribute educational aids in the form of a computer program for teaching American English as a second language with the aid of a personal computer. Yevsey D.Zilman, our President and Deputy Chairman of the Board of Directors, owns YZ Business Consulting. In its essence the License Agreement provides us with the exclusive right to the ZS SuperTutor© Technology, development and sales of Technology-based products. At the same time the agreement allows YZ Business Consulting to engage in any kind of activities utilizing our educational aids, whereby YZ Business Consulting will buy our products contributing to the increase of sales.
49
Pursuant to the License Agreement, we were required to pay royalties to YZ Business Consulting as follows: 40% of the total revenues from our sales of any products, services or other activities utilizing the educational aids after complete recovery of all our initial stage operation costs, including legal fees, advertising and production. However, subject to Agreement dated December 14, 2005 YZ Business Consulting committed to finance all the costs associated with English language software project, and therefore is entitled to receive royalties without prior compensation our initial stage costs. The regular payments of the royalties will be reduced if necessary to insure that there is no loss for us in this type of activity. In such event the payments of royalties will represent final settlements between the parties and the reduced royalties will not accrue it this situation.”
In City Mix LLC we have a partner, a U.A.E. national, Mubarak S. Jaber Al Ahbabi (“Mr. Mubarak”), who is a 51% ownership in City Mix LLC. It is a legal requirement in the United Arab Emirates for a non-resident entity to have a UAE national in a limited liability company. Our shareholding relationship with Mr. Mubarak with regard to City Mix LLC is based on and governed by the following:
o | Share Transfer and Amendment to the Memorandum of Associations, whereby we acquired ownership of 49% of City Mix LLC and are appointed manager of City Mix LLC; with all powers to exclusively operate and manage the business of City Mix LLC; |
o | Power of Attorney from Mr. Mubarak, whereby we are authorized to act on his behalf in connection with his 51% ownership, to vote for and on his behalf in any manner we deem appropriate at all meetings of the general assembly of City Mix LLC, and to exercise all the rights whatsoever attached to the said 51% ownership. The Power of Attorney cannot be revoked without our written consent; and |
o | Agreement dated November 26, 2000, whereby: |
o | We acquired all the assets and liabilities, and the above ownership, management and operational rights in City Mix LLC by virtue of the above Share Transfer, Power of Attorney and Agreement. |
o | Mr. Mubarak shall render all necessary assistance in all matters pertaining to the federal and Abu Dhabi authorities, arrange and be responsible for the official registration of the company with the federal and Abu Dhabi authorities, maintain a valid land lease, and not sell, transfer, assign or otherwise dispose of his ownership in the company without our written consent, and not to have any role whatsoever in the management and operation of City Mix LLC. Mr. Mubarak shall not be liable for any liabilities of City Mix LLC. |
o | Mr. Mubarak is entitled to receive, on an annual basis, a fixed fee (named `sponsorship fee’) of approximately $55,000 and 2% of gross revenues of the company. |
o | The term of the agreement and the Share Transfer is twenty (20) years and renewable. The agreement may be terminated by mutual written consent of the parties or by any party in the event of material violations of terms and conditions. |
In the fiscal year 2004, we paid:
(i) $49,000 to YZ Business Consulting, Inc. for business consulting services to us pursuant to a Consultancy Agreement dated January 6, 2004 between us and YZ Business Consulting, Inc., which is a separate arrangement from License Agreement between the same parties dated July 26, 2002, The maim terms and conditions of the above Consultancy Agreement are as follows.
50
o | Subject of Agreement. YZ renders to Royal Capital business consulting services on all aspects of organization and conducting of Royal Capital business. |
o | Remuneration. In consideration of the services provided thereunder, YZ receives from Royal Capital remuneration as per invoices issued by YZ to Royal Capital. |
o | Duration. The Agreement is in force until terminated either by a mutual consent of the parties or at any time by one party by giving the other party a one-month notice of termination. $3,000 to Eduard Klebanov, our Chairman of the Board of Directors, for his services to us for internal bookkeeping |
DESCRIPTION OF SECURITIES
The following is a summary description of our capital stock and certain provisions of our certificate of incorporation and by-laws, copies of which have been incorporated by reference as exhibits to the registration statement of which this prospectus forms a part. The following discussion is qualified in its entirety by reference to such exhibits.
Common Stock
We are presently authorized to issue 100,000,000 shares of $.0001 par value common stock. On October 20, 2004, we undertook a 1 for 10 forward split of our issued and outstanding stock. At May 10, 2006, we had 42,675,000 shares of common stock outstanding. The holders of our common stock are entitled to equal dividends and distributions when, as, and if declared by the Board of Directors from funds legally available therefore. No holder of any shares of common stock has a preemptive right to subscribe for any of our securities, nor are any common shares subject to redemption or convertible into other of our securities. Upon liquidation, dissolution or winding up, and after payment of creditors and preferred stockholders, if any, the assets will be divided pro-rata on a share-for-share basis among the holders of the shares of common stock. Each share of common stock is entitled to one vote with respect to the election of any director or any other matter upon which shareholders are required or permitted to vote. Holders of our common stock do not have cumulative voting rights, so the holders of more than 50% of the combined shares voting for the election of directors may elect all of the directors if they choose to do so, and, in that event, the holders of the remaining shares will not be able to elect any members to the Board of Directors.
Preferred Stock
We are presently authorized to issue up to 10,000,000 shares of $.0001 par value preferred stock upon such terms and conditions as the Board of Directors may determine at the time of issuance, without further action of the stockholders being required. At May 10, 2006, we had no shares of preferred stock outstanding. Such preferred shares may or may not be: issued in series, convertible into shares of common stock, redeemable by the corporation and entitled to cumulative dividends. Other terms and conditions may be imposed at the time of issuance. In the event that some or all of the preferred stock is issued with a conversion privilege, any future conversion will cause an increase in the number of issued and outstanding shares of common stock, and may or may not have a depressive effect on the market value of the common stock.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
During the most recent fiscal year and interim period subsequent to December 31, 2004, there have been no disagreements with Demetrius & Company, LLC, our independent auditor, on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure.
51
We engaged Gately & Associates as our independent public accountant on January 27, 2004 for the years ended December 31, 2003, December 31, 2002, and from inception (as restated) (December 11, 2000) through December 31, 2003. In February, 2005 we dismissed Gately & Associates, LLC (Gately) as our independent public accountant, which was approved by our board of directors, and selected Demetrius & Company, L.L.C. on March 4, 2005 to serve as our independent public accountant for the year ended December 31, 2004. We have had only these two independent accountants during the last two fiscal periods. Gately & Associates audited City Mix Management for the periods prior to the merger.
Our financial statements for the years ended December 31, 2003 and 2002 and the deficit accumulated from inception until December 31, 2003 were audited by Gately & Associates, LLC, whose report on such financial statements did not include any adverse opinion, or disclaimer of opinion, nor qualified or modified as to audit scope or accounting principles. Gately & Associates, LLC audited our financial statements since inception. There were no disagreements with Gately & Associates, LLC on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedures in connection with the audit of the years ended December 31, 2003 and 2002 and the deficit accumulated from inception until December 31, 2003 and subsequent interim periods preceding their dismissal in February, 2005.
No report of Gately & Associates on our financial statements for the past two fiscal years contained an adverse opinion, a disclaimer of opinion or a qualification or was modified as to uncertainty, audit, scope or accounting principles. During such fiscal periods, there was no “reportable events” within the meaning of item 304(a)(1) of Regulation S-B promulgated under the Securities Act of 1933.
TRANSFER AGENT
To date, we have not hired a transfer agent. We are in the process of retaining a transfer agent.
EXPERTS
The audited consolidated financial statements as of December 31, 2004 and the year then ended included in this prospectus have been audited by Demetrius & Company, LLC, independent registered public accounting firm, and are included herein in reliance upon the report of said firm given upon their authority as experts in accounting and auditing. The consolidated financial statements as of December 31, 2003 and for the period from inception (December 11, 2000 ) were audited by Gately & Associates, LLC, independent registered public accounting firm, and are also included herein in reliance upon their report upon their authority as experts in accounting and auditing.
LEGAL MATTERS
The validity of our common shares offered will be passed upon for us by Anslow & Jaclin, LLP, Manalapan, New Jersey 07726.
FINANCIAL STATEMENTS
We have attached to this prospectus copies of our audited balance sheet as of December 31, 2005 and the related statements of operations, stockholders’ equity and cash flows for the two years then ended and the period of December 2000 (Inception) to December 31, 2005.
52
ROYAL CAPITAL MANAGEMENT INC.
AND SUBSIDIARY
(A development stage company)
Audited Financial Statements
For the years ending on December 31, 2005 and 2004
Unaudited Financial Statements
For the three months ending on March 31, 2006 and 2005
Table of Contents
| Page |
Audited Financial Statements | |
Report of Independent Certified Public Accountants | F-1 |
Consolidated Balance Sheets | F-3 |
Consolidated Statements of Operations | F-4 |
Consolidated Statement of Stockholders Equity | F-5 |
Consolidated Statements of Cash Flows | F-6 |
Notes to Financial Statements | F-8 – 16 |
| |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and
Stockholders of Royal Capital Management Inc.
We have audited the accompanying consolidated balance sheet of Royal Capital Management Inc. (a development stage enterprise) as of December 31, 2005 and the related consolidated statements of operations, stockholders’ equity and cash flows for each of the two years in the ended December 31, 2005 and the period of December 11, 2000 (inception) to December 31, 2005. These financial statements are the responsibility of the company’s management. Our responsibility is to express an opinion on these financial statements based on our audit. The cumulative statements of operations, cash flows, and changes in stockholders’ equity for the period December 11, 2000 (inception) to December 31, 2003 which were audited by other auditors whose reports have been furnished to us, and our opinion, insofar as it relates to the amounts included for the period December 11, 2000 (inception) to December 31, 2003 is based solely on the reports of other auditors.
We conducted our audits 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. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining on a test basis, evidence supporting the amounts and disclosures in the financial statements and 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 audits provide a reasonable basis for our opinion.
In our opinion, and based upon the reports of other auditors, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Royal Capital Management Inc. (a development stage enterprise) as of the year ended December 31, 2005 and the consolidated results of its operations and its cash flows for each of the two years in the period ended December 31, 2005 and for the period of December 11, 2000 (inception) to December 31, 2005 in conformity with accounting principles generally accepted in the United States of America.
/s/Demetrius & Company, L.L.C.
Wayne, New Jersey
April 26, 2006
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and shareholder
Royal Capital Management, Inc.
(a development stage company)
Morganville, NJ USA
We have audited the accompanying consolidated balance sheets (as restated) of Royal Capital Management as of December 31, 2003 and 2002 and the related consolidated statements of operations, stockholders equity, and cash flows (as restated) for the years ended December 31, 2003, December 31, 2002, and from inception (as restated) (December 11, 2000) through December 31, 2003. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on the audit.
We conducted the audits in accordance with United States of America generally accepted auditing standards. These 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 the audits provide a reasonable basis for our opinion.
As discussed in Note 17 to the consolidated financial statements, the Company has restated its financial statements from December 1, 2000 (date of inception through December 31, 2003.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position (as restated) of Royal Capital Management as of December 31, 2003 and 2002 and the related consolidated statements of operations, stockholders equity, and cash flows (as restated) for the years ended December 31, 2003, 2002 and from inception (as restated) (December 11, 2000) through December 31, 2003 in conformity with United States of America generally accepted accounting principles.
Gately & Associates, LLC
Altamonte Springs, FL
April 15, 2004, except for Note 17, this is as of September 27, 2005
F-2
ROYAL CAPITAL MANAGEMENT INC. | | | | | | | | |
(A Development Stage Company) | | | | | | | | | | |
| | | | | | | | | | | |
Consolidated Balance Sheet | | | | | | | | | | |
| | | | | | | | | | | |
As at March 31, 2006 | | | | | | | | | | |
| | | | | | | | | | | |
All figures are expressed in U.S. Dollars | | | | | | | | |
| | | | | | | | As at March 31, 2006 | | As at December 31, 2005 | |
| | | | | | | | | | | |
| | | | | | | | (Unaudited) | | | |
ASSETS | | | | | | | | | | | |
| | | | | | | | | | | |
Current Assets | | | | | | | | | | | |
Cash | | | | | | | $ | 24,760 | $ | 14,638 | |
Deposits, advances and prepayments | | | | | | 14,897 | | 17,188 | |
Total Current Assets | | | | | | | 39,656 | | 31,826 | |
| | | | | | | | | | | |
Vehicles and office equipment, net | | | | | | | 199,769 | | 230,481 | |
Construction in progress (plant and equipment), at cost | | | 2,637,683 | | 2,637,683 | |
Patent cost | | | | | | | | 13,834 | | 13,834 | |
Deferred offering costs | | | | | | | 74,355 | | 72,730 | |
| | | | | | | | | | | |
Total Assets | | | | | | | $ | 2,965,297 | $ | 2,986,554 | |
| | | | | | | | | | | |
LIABILITIES AND STOCKHOLDERS’ EQUITY | | | | | | |
| | | | | | | | | | | |
Current Liabilities | | | | | | | | | | | |
Accruals and provisions | | | | | | $ | 57,074 | $ | 37,978 | |
Bank loan payable, current portion | | | | | | | 74,169 | | 74,169 | |
Total Current Liabilities | | | | | | | 131,243 | | 112,147 | |
| | | | | | | | | | | |
Long term debt: | | | | | | | | | | | |
Long term loan | | | | | | | | 435,707 | | 429,268 | |
Bank loan payable, less current portion | | | | | 28,130 | | 39,018 | |
| | | | | | | | | | | |
Equity | | | | | | | | | | | |
| | | | | | | | | | | |
Common stock - $.0001 par value; | | | | | | | | | | |
authorized 100,000,000 shares; | | | | | | | | | | |
issued and outstanding:42,700,000 (42,675,000) | | | 4,270 | | 4,267 | |
Additional paid-in-capital | | | | | | | 4,305,782 | | 4,299,535 | |
Deficit accumulated during development stage | | | (1,939,835) | | (1,897,681) | |
| | | | | | | | | | | |
Total Equity | | | | | | | | 2,370,217 | | 2,406,121 | |
| | | | | | | | | | | |
Total Liabilities and Equity | | | | | | $ | 2,965,297 | $ | 2,986,554 | |
| | | | | | | | 0 | | 0 | |
. | | | | | | |
| | | | | | | | | | | | | | | | |
The accompanying notes are an integral part of these financial statements
F-3
ROYAL CAPITAL MANAGEMENT INC. | | | | | | | | | | |
(A Development Stage Company) | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Consolidated Statement of Operations | | | | | | | | | | |
| | | | | | | | | | | | | |
For the three months ended March 31, 2006 and for the period from inception (December 11, 2000) through March 31, 2006 | | | | | | | | |
| | | | | | | | | | | | | |
All figures are expressed in U.S. Dollars | | | | | | | | | | |
| | | | | Year Ended December 31, | | Three Months Ended March 31, | | Period from Inception Through March 31, 2006 |
| | | | | 2005 | | 2004 | | 2006 | | 2005 | | |
| | | | | | | | | (Unaudited) | | |
| | | | | | | | | | | | | |
Revenue, truck rentals | | | $ | 359,914 | $ | 447,837 | $ | 78,367 | $ | 111,959 | $ | 1,445,567 |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Costs and general and administrative expenses | | | | | | | | |
Depreciation on vehicles and office equipment | 119,896 | | 123,027 | | 30,710 | | 30,710 | | 650,966 |
Salary and benefits | | | | | 59,755 | | 76,081 | | 14,939 | | 14,939 | | 630,214 |
Stock Base Compensation | | | | 18,750 | | | | 6,250 | | 12,500 | | 33,969 |
Management fees | | | | | | | | | | | | | 139,408 |
Sponsorship fees | | | | | 78,949 | | 54,422 | | 15,173 | | 33,174 | | 347,477 |
Legal fees | | | | | 33,024 | | 19,028 | | 10,379 | | 125 | | 131,403 |
Consultancy fees | | | | | 54,000 | | 49,500 | | 9,000 | | 13,500 | | 117,360 |
Other expenses | | | | | 125,096 | | 127,444 | | 30,261 | | 31,220 | | 600,148 |
| | | | | (489,470) | | (449,502) | | (116,712) | | (136,168) | | (2,650,945) |
| | | | | | | | | | | | | |
Operating Income (Loss) | | | | (129,556) | | (1,665) | | (38,345) | | (24,209) | | (1,205,378) |
| | | | | | | | | | | | | |
Other income (expense) | | | | | | | | | | | | |
Provision for loss - cash in closed bank | | (275,924) | | (275,924) | | | | | | (551,848) |
Finance costs - interest | | | | (31,859) | | (34,128) | | (7,797) | | (8,343) | | (249,274) |
- check discounting | | | | (8,793) | | (4,590) | | (1,515) | | (2,482) | | (37,134) |
Other non-operating Income / (Expense) | | | | 22,397 | | 5,502 | | | | 103,798 |
| | | | | | | | | | | | | |
| | | | | (316,576) | | (292,245) | | (3,810) | | (10,825) | | (734,458) |
| | | | | | | | | | | | | |
Net Loss | | | | $ | (446,132) | $ | (293,910) | $ | (42,154) | $ | (35,034) | $ | (1,939,835) |
| | | | | | | | | | | | | |
Basic Net Loss Per Common Share | | $ | (0.01) | $ | (0.01) | $ | (0.00) | $ | (0.00) | | |
| | | | | | | | | | | | | |
Weighted Average Common Shares Outstanding | | 42,647,610 | | 42,600,000 | | 42,700,000 | | 42,650,000 | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
The accompanying notes are an integral part of these financial statements
F-4
ROYAL CAPITAL MANAGEMENT INC. | | | | | | | | | | |
(A Development Stage Company) | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Consolidated Statement of Changes in Equity | | | | | | | | |
| | | | | | | | | | | | | |
For the three months ended March 31, 2006 and for the period from inception (December 11, 2000) through March 31, 2006 | | | | | | | | |
| | | | | | | | | | | | | |
All figures are expressed in U.S. Dollars | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | Common Stock | | | | | | |
| | | | | Shares | | Amount | | Additional Paid In Capital | | Accumulated Deficit | | Total |
| | | | | | | | | | | | | |
Initial Capital at December 11, 2000 | | 32,991,410 | $ | 3,299 | $ | 4,242,964 | | | $ | 4,246,263 |
| | | | | | | | | | | | | |
Shares issued in connection with merger | | 640,000 | | 64 | | 82,304 | | | | 82,368 |
| | | | | | | | | | | | | |
Cost of merger | | | | | | | | | (82,368) | | | | (82,368) |
| | | | | | | | | | | | | |
Issuance of shares for services in 2002 | | 8,968,590 | | 897 | | 8,072 | | | | 8,969 |
| | | | | | | | | | | | | |
Net loss for period of December 11, 2000 to December 31, 2002 | | | | | | | $ | (1,128,460) | | (1,128,460) |
| | | | | | | | | | | | | |
Balance as at January 1, 2003 | | | | 42,600,000 | | 4,260 | | 4,250,972 | | (1,128,460) | | 3,126,772 |
| | | | | | | | | | | | | |
Additional capital contributed | | | | | | | | 29,820 | | | | 29,820 |
| | | | | | | | | | | | | |
Net loss for 2003 | | | | | | | | | | | (29,179) | | |
| | | | | | | | | | | | | |
Balance as at December 31, 2003 | | | | 42,600,000 | | 4,260 | | 4,280,792 | | (1,157,639) | | 3,127,413 |
| | | | | | | | | | | | | |
Net loss for 2004 | | | | | | | | | | | (293,910) | | (293,910) |
| | | | | | | | | | | | | |
Balance as at December 31, 2004 | | | | 42,600,000 | | 4,260 | | 4,280,792 | | (1,451,549) | | 2,833,503 |
| | | | | | | | | | | | | |
Stock Base compensation | | | | 75,000 | | 7 | | 18,743 | | | | 18,750 |
| | | | | | | | | | | | | |
Net loss for 2005 | | | | | | | | | | | (446,132) | | (446,132) |
| | | | | | | | | | | | | |
Balance as at December 31, 2005 | | | | 42,675,000 | | 4,267 | | 4,299,535 | | (1,897,681) | | 2,406,121 |
| | | | | | | | | | | | | |
Stock Base compensation | | | | 25,000 | | 3 | | 6,247 | | | | 6,250 |
| | | | | | | | | | | | | |
Net loss | | | | | | | | | | | (42,154) | | (42,154) |
| | | | | | | | | | | | | |
Balance as at March 31, 2006 (Unaudited ) | 42,700,000 | | 4,270 | | 4,305,782 | | (1,939,835) | | 2,370,217 |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
The accompanying notes are an integral part of these financial statements
F-5
ROYAL CAPITAL MANAGEMENT INC. | | | | | | | | | | |
(A Development Stage Company) | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Consolidated Cash Flow Statement | | | | | | | | | | |
| | | | | | | | | | | | | |
All figures are expressed in U.S. Dollars | | | | | | | | | | |
| | | | | Year Ended December 31, | | Three Months Ended March 31, | | Period from Inception Through Mar. 31, 2006 |
| | | | | 2005 | | 2004 | | 2006 | | 2005 | | |
| | | | | | | | | (Unaudited) | | |
Cash Flow from Operating Activities | | | | | | | | | | |
Net Loss | | | | $ | (446,132) | $ | (293,910) | $ | (42,154) | $ | (35,034) | $ | (1,939,835) |
Adjustments : | | | | | | | | | | | | | |
Depreciation | | | | | 119,896 | | 123,027 | | 30,710 | | 30,710 | | 650,966 |
Accretion on long-term debt | | | | 24,298 | | 22,923 | | 6,439 | | 6,074 | | 133,090 |
Cash in closed bank | | | | | | | | | | | | | (551,847) |
Stock based compensation | | | | 18,750 | | | | 6,250 | | 12,500 | | 33,969 |
Provision for loss - cash in closed bank | | 275,924 | | 275,924 | | | | | | 551,848 |
Gain on disposal of plant & equipment | | | | | | | | | | | (25,048) |
Net profit before changes in operating assets and liabilities | | (7,264) | | 127,964 | | 1,245 | | 14,250 | | (1,146,857) |
Decrease / (Increase) in accounts receivables | 37,320 | | (37,320) | | 0 | | 37,320 | | - |
Decrease / (Increase) in deposits, advances and prepayments | | 10,758 | | (9,717) | | 2,293 | | (32,412) | | (14,895) |
(Decrease) in accounts payable | | | | | | | | | | | | |
(Decrease) / Increase in accruals and provisions | (40,496) | | (2,705) | | 19,096 | | (53,566) | | 57,074 |
Net cash flow from / (used in) operating activities | | 318 | | 78,222 | | 22,635 | | (34,408) | | (1,104,677) |
| | | | | | | | | | | | | |
Cash flow from investing activities | | | | | | | | | | | |
| | | | | | | | | | | | | |
Purchase of plant and equipment | | | | | | (5,502) | | | | | | (3,189,054) |
Proceeds from disposal of plant and equipment | | | | | | | | | | 28,298 |
Increase In patent cost | | | | (3,817) | | (10,017) | | | | | | (13,834) |
Net cash used in investing activities | | (3,817) | | (15,519) | | 0 | | 0 | | (3,174,590) |
| | | | | | | | | | | | | |
Cash flow from financing activities | | | | | | | | | | | |
Cash receipts for loan payable | 7,561 | | 11,205 | | 1,358 | | 2,269 | | 436,434 |
Cash payments for loan payable | (77,332) | | (78,912) | | (12,246) | | (20,468) | | (334,135) |
Increase In deferred offering cost | | | | (20,730) | | (52,000) | | (1,625) | | (5,050) | | (74,355) |
Proceeds from issuance of common shares | | | | | | | | | | 4,276,083 |
Net cash (used in) / flow from financing activities | | (90,501) | | (119,707) | | (12,513) | | (23,249) | | 4,304,027 |
(Decrease) / Increase in cash and cash equivalents | | (94,000) | | (57,004) | | 10,122 | | (57,657) | | 24,760 |
Cash as at beginning | | | | 108,638 | | 165,642 | | 14,638 | | 108,638 | | |
Cash and cash equivalents as at end | | | $ | 14,638 | $ | 108,638 | $ | 24,760 | $ | 50,981 | $ | 24,760 |
| | | | | | | | | | | | | |
F-6
Supplemental Cash Flow Statement Information | | - | | | | | | |
Cash paid for interest - On Borrowed Fund | $ | 7,561 | $ | 11,205 | $ | 1,358 | $ | 2,269 | $ | 116,184 |
Imputed Interest on Long-term Loan | | | $ | 24,298 | $ | 22,923 | $ | 6,439 | $ | 6,074 | | 133,090 |
Cash paid for check discounting fee | | | $ | 8,793 | $ | 4,590 | $ | 1,515 | $ | 2,482 | | 37,134 |
| | | | | | | | | | | | | |
Non cash investing and financing activities | | | | | | | | |
Trucks acquired by assumption of debt | | | | | | | | | $ | 302,617 |
Stock Based Compensation | | | $ | 18,750 | | | $ | 6,250 | $ | 12,500 | $ | 33,969 |
Stock issued in merger | | | | | | | | | | | $ | 82,368 |
| | | | | | | | | | | | | |
The accompanying notes are an integral part of these financial statements
F-7
ROYAL CAPITAL MANAGEMENT INC.
AND SUBSIDIARY
(A development stage company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Unaudited with respect to the three months ended March 31, 2006
(Please read the independent auditors report.)
NOTE 1 --- NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
Royal Capital Management, Inc. (the “Company”), a development stage company, was established on January 11, 1994 under the laws of the State of New Jersey, a USA company. The Company is the parent company of a development stage business in the “ready mix cement industry” and “English as a second Language Education Software”. The Company has established its intended operations in the Abu Dhabi, United Arab Emirates (UAE). For accounting purposes, the subsidiary corporation (City Mix) is considered the accounting acquirer of the Company.
The Company also holds certain computer program technology, English as a second Language Education Software that is being developed into Educational Software application “English as a second Language this is intended to be a separate business from City Mix, the subsidiary.
All inter-company account balances and transactions have been eliminated in the accounting consolidation of these companies as guided by the US Generally Accepted Accounting Principle under Financial Accounting Standard No. 94 “Consolidation of All Majority-Owned Subsidiaries”.
Basis of Presentation
On December 17, 2003, the Company issued 32,000,000 shares and acquired 49% of the outstanding securities of City Mix LLC (City Mix), a private development stage enterprise (the Merger). Although Royal Capital Management Inc. (RMC) is the legal survivor in the Merger and will be the registrant with Securities and Exchange Commission, the owners and management of City Mix have operating control of the Company as a result of the exchange of stock. Therefore this transaction is a capital transaction in substance, other than a business combination. That is the transaction is the equivalent to the issuance of stock by a private company for the net monetary assets, accompanied by the recapitalization of City Mix. Under accounting principles generally accepted in the United States, the acquisition was accounted for as a reverse acquisition, no goodwill or other intangible assets are recorded, whereby City Mix is considered the “Acquirer” of RMC for financial reporting purposes as its shareholders controlled more than 50% of the post transaction combined company. This requires RMC to present the financial statements and other public information filings, after completion of the merger prior historical information of City Mix and requires retroactive restatement of City Mix historical shareholders investment for the equivalent number of shares received in the Merger. Accordingly, the accompanying consolidated financial statements present the results of operations of City Mix (a development stage company) from December 11, 2000 (date of inception) to March 31, 2006 and for the three months ended March 31, 2006 and reflect the acquisition of RMC on December 17, 2003. The operations reflect the combined operations of RMC and City Mix since that date.
F-8
Results of Operations, Liquidity, Capital Resources and Going Concern
The Company’s financial statements have been presented on the basis that it is a going concern in the development stage, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company, a development stage company, is considered to be an ongoing entity. The Company’s shareholders may fund, at their discretion, any shortfalls in the Company’s cash flow on a day to day basis during the time period that the Company is in the development stage. The Company may also seek both private and public debt and/or equity funding during this time period. There are no guarantees that the Company will be successful in raising debt or equity in the public or private market.
While in the development stage, City Mix is making use of its 16 cement mixer trucks by renting them to a single company.
Basis of Accounting
The Company’s financial statements are prepared in accordance with the US Generally Accepted Accounting Principles.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates --- Management uses estimates and assumptions in preparing these financial statements in accordance with generally accepted accounting principles. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. Actual results could vary from those estimates.
Cash and Cash Equivalents --- Cash and cash and equivalent includes cash on hand, demand deposits and short term investments with initial maturities of three months or less.
Trade Receivable --- Trade receivables are carried at anticipated realizable value. A provision is made for doubtful receivables based on a review of all outstanding amounts at the year-end. Bad debts are written off during the year in which they are identified.
Property and Equipment --- Property and equipment are stated at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the assets. Expenditures for repairs and maintenance are charged to expense as incurred, as are any items purchased which are below the Company’s capitalization threshold of $1,000.
For assets sold or otherwise disposed of, the cost and related accumulated depreciation are removed from the accounts, and any related gain or loss is reflected in income for the period. Repairs and maintenance costs are expenses as incurred.
Impairment of Long Lived Assets—In accordance with the provisions of SFAS -- 121 “Accounting for the impairment of long—lived assets and for long-lived assets to be disposed of” , company reviews long-lived assets, such as property and equipment, for impairment whenever event or changes in circumstances indicate that the carrying amount of the assets may not be fully recoverable. Under SFAS 121, an impairment loss would be recognized for assets to be held and used when estimated undiscounted future cash flows expected to result from the use of the asset and its eventual disposition is less than its carrying amount. Impairment, if any, is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less cost to sell. There have been no impairment losses through March 31, 2006.
Revenue and Cost Recognition --- Revenue from rental of truck mixer is recognized monthly in accordance with terms of rental agreement.
F-9
Historical Net Income Per Share —The Company computes net income per common share in accordance with SFAS No. 128, “Earnings per Share” and SEC Staff Accounting Bulletin No. 98 (“SAB/ 98”). Under the provisions of SFAS No. 128 and SAB 98, basic and diluted net income per common share is computed by dividing the net income available to common shareholders for the period by the weighted average number of shares of common stock outstanding during the period. Accordingly, the numbers of weighted average shares outstanding as well as the amount of net income per share are the same for basic and diluted per share calculations for all periods reflected in the accompanying financial statements.
Stock-based compensation --- The Company accounts for stock based compensation in accordance with SFAS 123, “Accounting for Stock-Based Compensation”.
Under the provision of SFAS 123, employee stock awards under the company’s compensation plan can be either expense based on the fair value of stock options or to use intrinsic value method set forth in Accounting Principles Board Opinion 25, “Accounting for Stock issued to Employees” (APB 25), and related interpretations. The company has elected to measures compensation expense for cost of services received from employees in a share-based payment transaction using fair market value of the underlying stock awarded on the date of grant net of any amount employees pay (or obligated to pay) for the stock granted.
The Company measures compensation expense for its non-employee stock-based compensation under the Financial Accounting Standards Board (FASB) Emerging Issues Task Force (EITF) Issue No. 96-18, “Accounting for Equity Instruments that are Issued to Other Than Employees for Acquiring, or in conjunction with Selling, Goods or Services”. The fair value of the stock awarded is used to measure the transaction, as this is more reliable than the fair value of services received. Fair value is measured as the value of the Company’s common stock on the date that the commitment for performance by the counterparty has been reached or the counterparty’s performance is complete. The fair value of the stock award is charged directly to compensation expense and additional paid-in-capital.
Income Taxes --- The Company utilizes the asset and liability method to measure and record deferred income tax assets and liabilities for USA taxes. Deferred tax assets and liabilities reflect the future income tax effects of temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and are measured using enacted tax rates that apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized.
Foreign Currencies --- The Company’s subsidiary operates with its functional currency in UAE Dirhams at rates ruling when entered. The translation of the financial statements is done at USD 1 = AED 3.675. The exchange rate between US dollars and UAE Dirhams are fixed, hence there are no translation adjustments. The Company uses Financial Accounting Standard No. 52 “Foreign Currency Translation” to account for foreign currencies.
Fair Value of Financial Instruments --- The carrying amounts of the Company’s financial instruments, which include cash equivalents, accounts receivable, deferred offering cost, accounts payable, accrued expenses, long term-loan payable and installment bank loan payables approximate to their fair values at December 31, 2005.
New Authoritative Accounting Pronouncements --- The Company does not anticipate the adoption of recently issued accounting pronouncements will have a significant impact on its results of operations, financial position or cash flows.
NOTE 2 --- RECEIVABLES IN A CLOSED BANK
The Company has a receivable in the amount of $551,848 from a closed bank, the Anglo American Bank, a Grenada Corporation. On July 23, 2002, the government appointed controllers to take over the affairs of the bank. At that time, the Company was notified by the Ministry of Finance that return of the funds to the account holders was being supervised by the Ministry. During 2004, the Company made a provision for
F-10
doubtful recovery of $275,924 due to the uncertainty involved. Since then all attempted communication by the Company and the Ministry has had no response. Due to the age of this matter and the lack of response by the Ministry of Finance, the Company has reserve the remaining balance due and reduced the carrying value of their asset to zero.
NOTE 3 --- ACCOUNTS RECEIVABLE
The customary trade terms in the UAE are 90 days. When we bill our customer they give us a post dated check, due in 90 days. These checks may be deposited by us at the end of the 90 day period or discounted at a bank with recourse, similar to a factoring arrangement. The balance in accounts receivable represents billings for which the post dated checks have not been discounted. Management has determined that an allowance for uncollectible accounts is not required.
NOTE 4 --- DEPOSITS, ADVANCES AND PREPAYMENTS
| December 31, 2005 | March 31, 2006 |
Deposits | $ | 1,497 | $ | 1,497 |
Advances to contractor | | 8,669 | | 8,963 |
Prepaid insurance, rent and license fees | | 7,022 | $ | 4,437 |
| $ | 17,188 | $ | 14,897 |
NOTE 5 --- PROPERTY, PLANT AND EQUIPMENT
City Mix Management Co., Inc. (the Management Company) acquired the assets and liabilities (the majority of assets held) of City Mix L.L.C. (City Mix) in a private auction on November 18, 2000. The Management Company took over the factory being setup as the previous owners could not invest further to complete the project and commence commercial production. The cost of property acquired in the auction is the purchase cost together with any incidental expenses of acquisition. Subsequent costs are included in the asset’s carrying amount or recognized as separate assets. All other repairs and maintenance are charged to the income statement during the financial period in which they are incurred.
Depreciation on property, plant and equipment has been computed using the straight-line method at the annual rates estimated to write off the assets over its expected useful lives. Depreciation has not been charged on assets which have not been put to use except for vehicles (truck mixers) that are being rented, office furniture and office equipment in use from the date of acquisition.
Assets (Assets Life) | | December 31,
2005 | | March 31,
2005 |
| | | | |
Vehicles (7 years) | $ | 781,551 | $ | 781,551 |
Furniture and office equipment (4 years) | | 26,352 | | 26,352
|
| | | | |
| | 807,903 | | 807,903 |
Less : Accumulated depreciation | | (577,422) | | (608,134)
|
| | | | |
| $ | 230,481 | $ | 199,769 |
| | | | |
F-11
NOTE 6 --- PATENT COST
These amounts of $13,834 are incurred for registration of world wide patent of our English as second Language Educational software. The patent cost is not being amortized as of March 31, 2006.
NOTE 7 --- DEFERRED OFFERING COST
In connection with a proposed IPO, the company has recorded $72,730 and $74,355 as at December 31, 2005 and March 31, 2006 respectively of deferred offering costs, principally accounting and legal.
NOTE 8 --- LONG TERM DEBT
When the Company purchased the assets of the ready mix cement plant, including 16 transit cement mixer trucks, it assumed a loan payable to Ramoil Engineering S.R.L (an Italian company) for the purchase of the trucks in the amount of $652,071. The loan is payable in installments of operating income once the plant is operational and has profits. Based on our projections repayments will not begin until the year 2007. This loan does not include a stated interest rate and accordingly interest has been imputed at 6% or $349,454 over the life of the loan. Therefore, the original loan after imputed interest was $302,617. At March 31, 2006 the discounted balance due was $435,707 (As at December 31, 2005 - $ 429,268). There are no loan covenants or collateral.
The Company is liable on a loan payable to the First Gulf Bank that was also assumed as part of the auction purchase. The loan as renegotiated calls for interest at 5% per annum and is repayable in monthly installments of $6,803, including interest and is collateralized by 16 transit cement mixer trucks. Based on the repayment terms the loan the final payment will be made in May, 2007.
Based on our estimates of required payments, long-term debt will mature over the next five years as follows:
Year ended | |
December 31 | |
| |
2006 | $74,169 |
2007 | 128,130 |
2008 | 100,000 |
2009 | 100,000 |
20010 | 100,000 |
NOTE 9--- EQUITY
Common Stock
In October, 2004 the shares of the company were split 10 for 1. The accompanying financial statements have been retroactively adjusted to reflect the split in all periods presented.
The Company has authorized 100,000,000 of common stock with a par value of $0.0001 per share. As of March 31, 2006, the Company had issued and outstanding 42,700,000 common shares and 42,675,000 as of December 31, 2005 which are as follows :
a.) | In December 17, 2003, the Company has issued 32,000,000 shares of restricted common stock in consideration for acquisition of Citymix Management’s assets. Accordingly, above shares were exchanged with the Citymix Management’s shareholders having par value of $0.0001 per share at agreed price of $0.1287 per share or $4,118,400. |
F-12
“City Mix” shall be considered the name of the collective subsidiary relationships of the City Mix Management Co. Inc. and City Mix L.L.C., related companies whereby the board of directors have dissolved City Mix Management simultaneously with the share and asset exchange with the parent company.
The Company acquired an effective 100% interest in City Mix L.L.C. (City Mix), a development stage company through the acquisition of assets of City Mix Management Co. Inc. (the Management Company), a Grenada West Indies corporation incorporated on December 11, 2000 by the Commonwealth of London. The Management Company was created to first acquire the development stage company, City Mix, in a private auction, to raise capital for this transaction, and to make certain contractual agreements with the UAE national. On November 18, 2000 the Management Company acquired a 49% ownership of City Mix with a contractual right to exercise 100% beneficial ownership and control in City Mix pursuant to the Power of Attorney granted by agreement of the 51% owner, a UAE national. In essence the agreement states that the Management Company shall exercise 100% beneficial ownership of City Mix by virtue of a power of attorney granted to it by Mubarak Al Ahbabi, the 51% owner. Under United Arab Emirates (UAE) Commercial Companies Law being Federal Law no. (8) Of 1984 as amended, the minimum cumulative shareholding of UAE nationals in a limited liability company must be a 51% owner of the paid in capital. As a result of the acquisition of assets of the Management Company, the Company assumed the above ownership and control rights in City Mix from the Management Company, and for this purpose on January 5, 2005 the Company registered with the competent UAE authorities a Share Transfer and Amendment to the Memorandum of Association of City Mix (Share Transfer) reflecting the Company being a 49% owner of City Mix, and a new power of attorney granted to the Company by the 51% owner of City Mix, authorizing the Company to exercise 100% beneficial ownership of City Mix. The term of the Share Transfer is twenty years and renewable. The Management Company was later dissolved simultaneously with the parent Company’s exchange of common shares for the assets of City Mix. The shareholders of the Management Company also became shareholders in the parent Company.
b.) | On similar footage, initial issuance of 991,410 shares of restricted common stock to the founding shareholder, Ms. Anna Ginzburg’s with par value of $0.0001 were assigned per share value of $0.1287 or $127,863. Also see note 1 above, for basis of presentation. |
c.) | In December 2003, the Company has issued 640,000 shares of restricted common stock in consideration for services rendered to us for assistance with the City Mix transaction for exchange of stock and assets. The issuance was valued at $0.1287 per share or $82,368. See note 1 above, for basis of presentation. |
d.) | Between May 2002 to November 2002, Company has issued 8,968,590 shares of restricted common stock in consideration for services rendered with analysis of company’s English language software. The issuance was valued at $0.001 per share or $8,969. |
e.) | On March 11, 2005, Company issued 50,000 shares of restricted common stock to Mr. Andrei Petrov in consideration for his agreement to become company’s President and Principal Executive Officer. The issuance was valued at $0.25 per share or $12,500. |
f.) | On September 2005, Company issued 25,000 shares of restricted common stock to Mr. Edward Klebanov in consideration for his service as a new president of the company. The issuance was valued at $0.25 per share or $ 6,250. |
g.) | As committed in September 2005 by the Company, to issue another 75,000 shares to Mr. Klebanov in 2006, as long as he stays in the employment of the Company. This shares vest at the rate of 25,000 shares a quarter. In first quarter of 2006, Company has issued further 25,000 shares of restricted common stock to him. The issuance was valued at $0.25 per share or $6,250. |
The share value assigned to the above various issues was determined arbitrarily by the Company based on reasonable estimate of fair market value in absence of present market value of their shares.
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NOTE 10 --- REVENUE CONTRACT
The Company has an operating lease agreement, including amendments with RMC Super Mix (RMC), whereby all 16 of its Astra, Italy Concrete Transit Mixer Trucks are rented by RMC. The agreement as amended is for various six month periods with a 30 day termination clause. Rentals range from $1,986 to $2,290 a truck per month. During the term of the leases, RMC will engage drivers and other technical personnel. In addition, RMC will install their own tires before the agreement and at the end of each lease reinstall the Company’s tires. Payment is to be made on the first of the month with a 90 day post dated check issued in the name of the Company. Failure to issue the check on a timely basis will result in a penalty of 1/30th of the total monthly payment for each day of delay.
NOTE 11 --- LITIGATION
From time to time in the normal course of business the Company has been involved in litigation. The Company’s management has determined that past and current litigation will not have a material effect on the financial statements.
City Mix LLC vs. Armitage Engineering LLC:
The basis for the dispute of City Mix LLC (“City Mix”) and their main contractor Armitage Engineering Co. LLC (“Armitage”) is the fact that Armitage failed to complete its work in time as was specified by Contract dated March 28, 1999 and Annex A-1 dated September 11, 2001. Armitage disputed this fact and has taken a series of illegal actions to thrust its unfair position upon City Mix, which has caused substantial damage to City Mix.
The court of first instance of Abu Dhabi, United Arab Emirates considered two actions related to the dispute between City Mix and Armitage.
Currently there are two court actions related to the dispute between City Mix and Armitage.
1. Urgent Case 73/02, filed by City Mix to stop Armitage’s illegal actions of locking the City Mix’s factory site, preventing City Mix’s subcontractors, engineers and technical staff from accessing the site and preventing City Mix from completing installation and commissioning work. The court rendered its judgment in this case in favor of City Mix on December 23, 2003 and the Armitage’s actions were found illegal.
2. Main Action 422/02, which was initiated as Armitage had failed to complete the construction works on due time and rejected penalties for that stipulated by the contract. Armitage demanded that the final payment under the contract in the amount of $158,514 should be paid in full; however the consultant, who supervised execution of the contract as required by the UAE law, concluded that this payment should account for penalties for a period of delays in completion. Therefore in response to the claim filed by Armitage to recover from City Mix above amount of the final payment under the contract, City Mix filed a counter claim claiming penalties from Armitage for failing to complete the project on due time.
City Mix additionally claimed compensation in the amount of $739,048 plus a daily compensation of $4,942 for loss of daily profits resulting from City Mix being deprived from utilizing its factory from February 26, 2002 until a final judgment is rendered and $2,449 daily as fees for the consultant until a final judgment is rendered. Armitage additionally claimed moral damages from City Mix in the amount of $816,326.
On February 27, 2006 the court issued its judgment on main action 422/02, whereby it satisfied the City Mix’s claim for penalties partially in the amount of $25,404 and therefore reduced the final payment under the contract to $133,110. The additional compensation claimed by City Mix was not accounted for.
Al Tamimi & Company, an Abu Dhabi law firm and the City Mix’s lawyers analyzed the situation and the court’s decision and concluded and recommended that City Mix should seek compensation for damages in a court of a higher instance. For this purpose City Mix filed an appeal with the Abu Dhabi Court of
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Appeal on March 27, 2006. The appeal was accepted and the court referred the matter to the expert. The next hearing is scheduled for September 19, 2006.
NOTE 12 --- OPERATING LEASE
The Company has entered into an annual renewable sub-lease agreement with the UAE national partner/sponsor for sub-lease of land on which the plant is constructed as per the side agreement dated November 26, 2000. The sub-lease amount is $13,000 per year.
On July 13, 2004 the Company entered into an annual renewable lease for office space for an amount of approximately $10,500 that would be payable at the beginning of the tenancy period.
NOTE 13 --- RELATED PARTY TRANSACTIONS
As per the Share Transfer and Amendment to the Memorandum of Association of City Mix LLC dated January 5, 2005 the UAE national partner is entitled to distribution of profits and losses at 20% as this is a standard form used in memoranda of associations of limited liability companies in the UAE. However, this is overridden by the provisions of the Agreement with the national partner dated November 26, 2000, whereby it is provided that the national partner will share profits at a rate of 12% of annual profits of City Mix LLC after the setoff of accumulated losses and will not share in losses. This is common practice in the UAE and it is fully allowed and enforceable pursuant to Article 126 of the UAE Civil Transactions Law being Federal Law No.8 of 1985. The national partner is the 51% owner as required in the UAE of City Mix who has given, under this contract, power of attorney to the Company for 100% effective ownership and control per this contract. The national partner will not be liable for any liabilities of the Company. An annual fee of approximately $41,000 for services and annual rent of approximately $13,000 for the land leased.
The Company in year 2005, agreed to pay their UAE national partner in addition to the above annual service fee and lease rent a sum equivalent to 2% of their truck rental revenues effective from the date the truck rent commenced in September 2002 until to date. Accordingly, an amount of $1,567 was paid for the three months ended March 31, 2006. (In year 2005 - $17,329 was paid for the period prior to December 31, 2004 and another $7,198 was paid for the year ended December 31, 2005).
The Company has also paid consulting fees to YZ Business Consulting Inc., a company owned by a shareholder for the three months ended March 31, 2006 an amounts of $9,000 (For year ended December 31, 2005 an amount of $54,000).
The Company also has license agreement with YZ Consultants (YZ). Mr. Zilman is the owner of YZ has patent applications pending for the technology for English as a second Language Educational Software (ESL). The license grants the Company an exclusive license to further develop and utilize the technology and market the product. When the product is commercially developed and there are sales the Company will pay royalties to YZ of 40% of sales. YZ shall repay the Company initial operation costs, which include costs for legal protection, advertising and production. This one time costs shall not exceed $150,000. To date there have been no sales and accordingly no royalties have been paid nor have any costs been reimbursed.
In March 2006, we issued 25,000 shares of common stock to our new president, Edward Klebanov for compensation valued at $0.25 a share or $6,250. The Company is further commitment to issue another 50,000 shares to Mr. Klebanov in 2006, as long as he stays in the employment of the Company. The shares vest at the rate of 25,000 shares a quarter.
NOTE 14 --- INCOME TAXES
The Company is not subject to income taxes in the UAE. Accordingly, no provision for income taxes or tax benefits has been provided. In addition, the parent’s taxable losses in the United States are minimal. Also, No provision for the tax benefits for those losses has been provided.
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NOTE 15 --- CONTINGENT LIABILITY
The company was contingently liable for post dated checks discounted with a bank for an amount of $78,367 as of December 31, 2005 and nothing as of March 31, 2006.
NOTE 16 --- COMPARATIVE FIGURES
Previous period’s figures have been regrouped or rearranged wherever necessary so as to conform to the current period’s presentation.
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ROYAL CAPITAL MANAGEMENT, INC.
16,000,000 Shares of Common Stock
2,331,410 Selling Security Holder Shares of Common Stock
PROSPECTUS
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT. WE HAVE NOT
AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION THAT IS DIFFERENT. THIS
PROSPECTUS IS NOT AN OFFER TO SELL COMMON STOCK AND IS NOT SOLICITING AN OFFER
TO BUY COMMON STOCK IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
Until __________, all dealers that effect transactions in these securities, whether or not participating in this offering, may be required to deliver prospectus. This is in addition to the dealers’ obligation to deliver prospectus when acting as underwriters and with respect to their unsol allotments or subscriptions.
PART I
INFORMATION NOT REQUIRED IN PROSPECTU
ITEM 24. INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS.
The General Corporation Law of the State of New Jersey expressly authorizes New Jersey corporation to indemnify its officers, directors, employees, an agents against claims or liabilities arising out of such persons’ conduct a officers, directors, employees, or agents for the corporation if they acted i good faith and in a manner they reasonably believed to be in or not opposed t the best interests of the Company. Neither the articles of incorporation nor th Bylaws of the Company provide for indemnification of the directors, officers, employees, or agents of the Company. The Company has not adopted a policy abou indemnification. Insofar as indemnification for liabilities arising under th Securities Act of 1933 (the “Act”) may be permitted to directors, officers an controlling persons of the Company pursuant to the foregoing provisions, o otherwise, the Company has been advised that in the opinion of the Securitie and Exchange Commission, such indemnification is against public policy a expressed in the Act and is, therefore, unenforceable.
The eighth article of our Certificate of Incorporation includes provisions t eliminate, to the fullest extent permitted by New Jersey General Corporation La as in effect from time to time, the personal liability of our directors fo monetary damages arising from a breach of their fiduciary duties as directors.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the expenses in connection with the issuance an distribution of the securities being registered hereby. All such expenses wil be borne by the registrant; none shall be borne by any selling stockholders.
SEC registration fee | $ | 581 |
Legal fees and expenses (1) | $ | 50,000 |
Accounting fees and expenses (1) | $ | 25,000 |
Miscellaneous and Printing fees(1) | $ | 26,919 |
Total (1) | $ | 102,500 |
(1) Estimated.
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ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.
On May 9, 2002, we issued 50,000 shares of our restricted common stock to Juli Parsons in consideration for services rendered with the analysis of our Englis language software. The issuance was valued at $.001 per share or $50.00. Ou shares were issued in reliance on the exemption from registration provided b Section 4(2) of the Securities Act of 1933. No commissions were paid for th issuance of such shares. The above issuance of shares of our common stoc qualified for exemption under Section 4(2) of the Securities Act of 1933 sinc the issuance of such shares by us did not involve a public offering. Ms. Parson was a sophisticated investor and had access to information normally provided i a prospectus regarding us. The offering was not a “public offering” as define in Section 4(2) due to the insubstantial number of persons involved in the deal, size of the offering, manner of the offering and number of shares offered. W did not undertake an offering in which we sold a high number of shares to a hig number of investors. In addition, Ms. Parsons had the necessary investmen intent as required by Section 4(2) since she agreed to and received a shar certificate bearing a legend stating that such shares are restricted pursuant t Rule 144 of the 1933 Securities Act. These restrictions ensure that these share would not be immediately redistributed into the market and therefore not be par of a “public offering.” Based on an analysis of the above factors, we have me the requirements to qualify for exemption under Section 4(2) of the Securitie Act of 1933 for the above transaction.
On May 9, 2002, we issued 30,000 shares of our restricted common stock to All Shor in consideration for services rendered with the analysis of our Englis language software. The issuance was valued at $.001per share or $30.00. Ou shares were issued in reliance on the exemption from registration provided b Section 4(2) of the Securities Act of 1933. No commissions were paid for th issuance of such shares. The above issuance of shares of our common stoc qualified for exemption under Section 4(2) of the Securities Act of 1933 sinc the issuance of such shares by us did not involve a public offering. Ms. Sho was a sophisticated investor and had access to information normally provided i a prospectus regarding us. The offering was not a “public offering” as define in Section 4(2) due to the insubstantial number of persons involved in the deal, size of the offering, manner of the offering and number of shares offered. W did not undertake an offering in which we sold a high number of shares to a hig number of investors. In addition, Ms. Shor had the necessary investment inten as required by Section 4(2) since she agreed to and received a share certificat bearing a legend stating that such shares are restricted pursuant to Rule 144 o the 1933 Securities Act. These restrictions ensure that these shares would no be immediately redistributed into the market and therefore not be part of “public offering.” Based on an analysis of the above factors, we have met th requirements to qualify for exemption under Section 4(2) of the Securities Ac of 1933 for the above transaction.
On May 9, 2002, we issued 10,000 shares of our restricted common stock to Bori Zavlin in consideration for services rendered with the analysis of our Englis language software. The issuance was valued at $.001per share or $10.00. Ou shares were issued in reliance on the exemption from registration provided b Section 4(2) of the Securities Act of 1933. No commissions were paid for th issuance of such shares. The above issuance of shares of our common stoc qualified for exemption under Section 4(2) of the Securities Act of 1933 sinc the issuance of such shares by us did not involve a public offering. Mr. Zavli was a sophisticated investor and had access to information normally provided i a prospectus regarding us. The offering was not a “public offering” as define in Section 4(2) due to the insubstantial number of persons involved in the deal, size of the offering, manner of the offering and number of shares offered. W did not undertake an offering in which we sold a high number of shares to a hig number of investors. In addition, Mr. Zavlin had the necessary investment inten as required by Section 4(2) since he agreed to and received a share certificat bearing a legend stating that such shares are restricted pursuant to Rule 144 o the 1933 Securities Act. These restrictions ensure that these shares would no be immediately redistributed into the market and therefore not be part of “public offering.” Based on an analysis of the above factors, we have met th requirements to qualify for exemption under Section 4(2) of the Securities Ac of 1933 for the above transaction.
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On May 9, 2002, we issued 10,000 shares of our restricted common stock t Mikhail Khrakovsky in consideration for services rendered with the analysis o our English language software. The issuance was valued at $.001per share o $10.00. Our shares were issued in reliance on the exemption from registratio provided by Section 4(2) of the Securities Act of 1933. No commissions were pai for the issuance of such shares. The above issuance of shares of our commo stock qualified for exemption under Section 4(2) of the Securities Act of 1933 since the issuance of such shares by us did not involve a public offering. Mr.Khrakovsky was a sophisticated investor and had access to informatio normally provided in a prospectus regarding us. The offering was not a “publi offering” as defined in Section 4(2) due to the insubstantial number of person involved in the deal, size of the offering, manner of the offering and number o shares offered. We did not undertake an offering in which we sold a high numbe of shares to a high number of investors. In addition, Mr. Khrakovsky had th necessary investment intent as required by Section 4(2) since he agreed to an received a share certificate bearing a legend stating that such shares ar restricted pursuant to Rule 144 of the 1933 Securities Act. These restriction ensure that these shares would not be immediately redistributed into the marke and therefore not be part of a “public offering.” Based on an analysis of th above factors, we have met the requirements to qualify for exemption unde Section 4(2) of the Securities Act of 1933 for the above transaction.
On May 9, 2002, we issued 30,000 shares of our restricted common stock to Marin Terletsky in consideration for services rendered with the analysis of ou English language software. The issuance was valued at $.001 per share or $30.00.
Our shares were issued in reliance on the exemption from registration provide by Section 4(2) of the Securities Act of 1933. No commissions were paid for th issuance of such shares. The above issuance of shares of our common stoc qualified for exemption under Section 4(2) of the Securities Act of 1933 sinc the issuance of such shares by us did not involve a public offering. Ms.Terletsky was a sophisticated investor and had access to information normall provided in a prospectus regarding us. The offering was not a “public offering” as defined in Section 4(2) due to the insubstantial number of persons involve in the deal, size of the offering, manner of the offering and number of share offered. We did not undertake an offering in which we sold a high number o shares to a high number of investors. In addition, Ms. Terletsky had th necessary investment intent as required by Section 4(2) since she agreed to an received a share certificate bearing a legend stating that such shares ar restricted pursuant to Rule 144 of the 1933 Securities Act. These restriction ensure that these shares would not be immediately redistributed into the marke and therefore not be part of a “public offering.” Based on an analysis of th above factors, we have met the requirements to qualify for exemption unde Section 4(2) of the Securities Act of 1933 for the above transaction
On May 9, 2002, we issued 70,000 shares of our restricted common stock t Leonard Khodorovsky in consideration for services rendered with the analysis o our English language software. The issuance was valued at $.001per share o $70.00. Our shares were issued in reliance on the exemption from registratio provided by Section 4(2) of the Securities Act of 1933. No commissions were pai for the issuance of such shares. The above issuance of shares of our commo stock qualified for exemption under Section 4(2) of the Securities Act of 193 since the issuance of such shares by us did not involve a public offering Mr.Khodorovsky was a sophisticated investor and had access to informatio normally provided in a prospectus regarding us. The offering was not a “publi offering” as defined in Section 4(2) due to the insubstantial number of person involved in the deal, size of the offering, manner of the offering and number o shares offered. We did not undertake an offering in which we sold a high numbe of shares to a high number of investors. In addition, Mr. Khodorovsky had th necessary investment intent as required by Section 4(2) since he agreed to an received a share certificate bearing a legend stating that such shares ar restricted pursuant to Rule 144 of the 1933 Securities Act. These restriction ensure that these shares would not be immediately redistributed into the marke and therefore not be part of a “public offering.” Based on an analysis of th above factors, we have met the requirements to qualify for exemption unde Section 4(2) of the Securities Act of 1933 for the above transaction
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On July 26, 2002, we issued 2,429,000 shares of our restricted common stock t Yuli Ginzburg in consideration for the license agreement entered into between u and YZ Business Consulting. The issuance was valued at $.001per share o $2,429.00. Our shares were issued in reliance on the exemption from registratio provided by Section 4(2) of the Securities Act of 1933. No commissions were pai for the issuance of such shares. The above issuance of shares of our commo stock qualified for exemption under Section 4(2) of the Securities Act o 1933since the issuance of such shares by us did not involve a public offering Mr.Ginzburg was a sophisticated investor and had access to information normall provided in a prospectus regarding us. The offering was not a “public offering as defined in Section 4(2) due to the insubstantial number of persons involve in the deal, size of the offering, manner of the offering and number of share offered. We did not undertake an offering in which we sold a high number o shares to a high number of investors. In addition, Mr. Ginzburg had th necessary investment intent as required by Section 4(2) since he agreed to an received a share certificate bearing a legend stating that such shares ar restricted pursuant to Rule 144 of the 1933 Securities Act. These restriction ensure that these shares would not be immediately redistributed into the marke and therefore not be part of a “public offering.” Based on an analysis of th above factors, we have met the requirements to qualify for exemption unde Section 4(2) of the Securities Act of 1933 for the above transaction
On July 26, 2002, we issued 1,493,790 shares of our restricted common stock t Yevsey Zilman in consideration for the license agreement entered into between u and YZ Business Consulting. The issuance was valued at $.001 per share o $1,493.00. Our shares were issued in reliance on the exemption from registratio provided by Section 4(2) of the Securities Act of 1933. No commissions were pai for the issuance of such shares. The above issuance of shares of our commo stock qualified for exemption under Section 4(2) of the Securities Act o 1933since the issuance of such shares by us did not involve a public offering Mr. Zilman was a sophisticated investor and had access to information normall provided in a prospectus regarding us. The offering was not a “public offering as defined in Section 4(2) due to the insubstantial number of persons involve in the deal, size of the offering, manner of the offering and number of share offered. We did not undertake an offering in which we sold a high number o shares to a high number of investors. In addition, Mr. Zilman had the necessar investment intent as required by Section 4(2) since he agreed to and received share certificate bearing a legend stating that such shares are restricte pursuant to Rule 144 of the 1933 Securities Act. These restrictions ensure tha these shares would not be immediately redistributed into the market an therefore not be part of a “public offering.” Based on an analysis of the abov factors, we have met the requirements to qualify for exemption under Sectio 4(2) of the Securities Act of 1933 for the above transaction
On July 26, 2002, we issued 1,400,000 shares of our restricted common stock t Olga Savanova in consideration for the license agreement entered into between u and YZ Business Consulting. The issuance was valued at $.001per share o $1,400.00. Our shares were issued in reliance on the exemption from registratio provided by Section 4(2) of the Securities Act of 1933. No commissions were pai for the issuance of such shares. The above issuance of shares of our commo stock qualified for exemption under Section 4(2) of the Securities Act o 1933since the issuance of such shares by us did not involve a public offering Ms.Safanova was a sophisticated investor and had access to information normall provided in a prospectus regarding us. The offering was not a “public offering as defined in Section 4(2) due to the insubstantial number of persons involve in the deal, size of the offering, manner of the offering and number of share offered. We did not undertake an offering in which we sold a high number o shares to a high number of investors. In addition, Ms. Safanova had th necessary investment intent as required by Section 4(2) since he agreed to an received a share certificate bearing a legend stating that such shares ar restricted pursuant to Rule 144 of the 1933 Securities Act. These restriction ensure that these shares would not be immediately redistributed into the marke and therefore not be part of a “public offering.” Based on an analysis of th above factors, we have met the requirements to qualify for exemption unde Section 4(2) of the Securities Act of 1933 for the above transaction
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On July 26, 2002, we issued 1,686,530 shares of our restricted common stock t Eugene Gurevich in consideration for the license agreement entered into betwee us and YZ Business Consulting. The issuance was valued at $.001per share o $1,686.53. Our shares were issued in reliance on the exemption from registratio provided by Section 4(2) of the Securities Act of 1933. No commissions were pai for the issuance of such shares. The above issuance of shares of our commo stock qualified for exemption under Section 4(2) of the Securities Act o 1933since the issuance of such shares by us did not involve a public offering Mr.Gurevich was a sophisticated investor and had access to information normall provided in a prospectus regarding us. The offering was not a “public offering as defined in Section 4(2) due to the insubstantial number of persons involve in the deal, size of the offering, manner of the offering and number of share offered. We did not undertake an offering in which we sold a high number o shares to a high 54 number of investors. In addition, Mr. Gurevich had the necessary investment intent as required by Section 4(2) since he agreed to an received a share certificate bearing a legend stating that such shares ar restricted pursuant to Rule 144 of the 1933 Securities Act. These restriction ensure that these shares would not be immediately redistributed into the marke and therefore not be part of a “public offering.” Based on an analysis of th above factors, we have met the requirements to qualify for exemption unde Section 4(2) of the Securities Act of 1933 for the above transaction
On July 26, 2002, we issued 609,270 shares of our restricted common stock t Vera Shatokhina in consideration for the license agreement entered into betwee us and YZ Business Consulting. The issuance was valued at $.001 per share o $609.27. Our shares were issued in reliance on the exemption from registratio provided by Section 4(2) of the Securities Act of 1933. No commissions were pai for the issuance of such shares. The above issuance of shares of our commo stock qualified for exemption under Section 4(2) of the Securities Act o 1933since the issuance of such shares by us did not involve a public offering Ms.Shatokhina was a sophisticated investor and had access to informatio normally provided in a prospectus regarding us. The offering was not a “publi offering” as defined in Section 4(2) due to the insubstantial number of person involved in the deal, size of the offering, manner of the offering and number o shares offered. We did not undertake an offering in which we sold a high numbe of shares to a high number of investors. In addition, Ms. Shatokhina had th necessary investment intent as required by Section 4(2) since she agreed to an received a share certificate bearing a legend stating that such shares ar restricted pursuant to Rule 144 of the 1933 Securities Act. These restriction ensure that these shares would not be immediately redistributed into the marke and therefore not be part of a “public offering.” Based on an analysis of th above factors, we have met the requirements to qualify for exemption unde Section 4(2) of the Securities Act of 1933 for the above transaction.
On July 26, 2002, we issued 220,000 shares of our restricted common stoc toTeresa Bergstrom in consideration for the license agreement entered int between us and YZ Business Consulting. The issuance was valued at $.001per shar or $220.00. Our shares were issued in reliance on the exemption fro registration provided by Section 4(2) of the Securities Act of 1933. N commissions were paid for the issuance of such shares. The above issuance o shares of our common stock qualified for exemption under Section 4(2) of th Securities Act of 1933since the issuance of such shares by us did not involve public offering. Ms.Bergstrom was a sophisticated investor and had access t information normally provided in a prospectus regarding us. The offering was no a “public offering” as defined in Section 4(2) due to the insubstantial numbe of persons involved in the deal, size of the offering, manner of the offerin and number of shares offered. We did not undertake an offering in which we sol a high number of shares to a high number of investors. In addition, Ms Bergstrom had the necessary investment intent as required by Section 4(2) sinc she agreed to and received a share certificate bearing a legend stating tha such shares are restricted pursuant to Rule 144 of the 1933 Securities Act These restrictions ensure that these shares would not be immediatel redistributed into the market and therefore not be part of a “public offering. Based on an analysis of the above factors, we have met the requirements t qualify for exemption under Section 4(2) of the Securities Act of 1933 for th above transaction .
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On July 26, 2002, we issued 500,000 shares of our restricted common stock t Sonia Bromberg in consideration for the license agreement entered into betwee us and YZ Business Consulting. The issuance was valued at $.001per share o $500.00. Our shares were issued in reliance on the exemption from registratio provided by Section 4(2) of the Securities Act of 1933. No commissions were pai for the issuance of such shares. The above issuance of shares of our commo stock qualified for exemption under Section 4(2) of the Securities Act o 1933since the issuance of such shares by us did not involve a public offering Ms.Bromberg was a sophisticated investor and had access to information normall provided in a prospectus regarding us. The offering was not a “public offering as defined in Section 4(2) due to the insubstantial number of persons involve in the deal, size of the offering, manner of the offering and number of share offered. We did not undertake an offering in which we sold a high number o shares to a high number of investors. In addition, Ms. Bromberg had th necessary investment intent as required by Section 4(2) since she agreed to an received a share certificate bearing a legend stating that such shares ar restricted pursuant to Rule 144 of the 1933 Securities Act. These restriction ensure that these shares would not be immediately redistributed into the marke and therefore not be part of a “public offering.” Based on an analysis of th above factors, we have met the requirements to qualify for exemption unde Section 4(2) of the Securities Act of 1933 for the above transaction
On July 26, 2002, we issued 20,000 shares of our restricted common stock t Nikita Sukhin in consideration for the license agreement entered into between u and YZ Business Consulting. The issuance was valued at $.001 per share o $20.00. Our shares were issued in reliance on the exemption from registratio provided by Section 4(2) of the Securities Act of 1933. No commissions were pai for the issuance of such shares. The above issuance of shares of our commo stock qualified for exemption under Section 4(2) of the Securities Act of 193 since the issuance of such shares by us did not involve a public offering. Mr Sukhin was a sophisticated investor and had access to information normall provided in a prospectus regarding us. The offering was not a “public offering as defined in Section 4(2) due to the insubstantial number of persons involve in the deal, size of the offering, manner of the offering and number of share offered. We did not undertake an offering in which we sold a high number o shares to a high number of investors. In addition, Mr. Sukhin had the necessar investment intent as required by Section 4(2) since he agreed to and received share certificate bearing a legend stating that such shares are restricte pursuant to Rule 144 of the 1933 Securities Act. These restrictions ensure tha these shares would not be immediately redistributed into the market an therefore not be part of a “public offering.” Based on an analysis of the abov factors, we have met the requirements to qualify for exemption under Sectio 4(2) of the Securities Act of 1933 for the above transaction.
On July 26, 2002, we issued 10,000 shares of our restricted common stock t Margarita Ginzburg in consideration for the license agreement entered int between us and YZ Business Consulting. The issuance was valued at $.001pershar or $10.00. Our shares were issued in reliance on the exemption from registratio provided by Section 4(2) of the Securities Act of 1933. No commissions were pai for the issuance of such shares. The above issuance of shares of our commo stock qualified for exemption under Section 4(2) of the Securities Act of 193 since the issuance of such shares by us did not involve a public offering. Ms Ginzburg was a sophisticated investor and had access to information normall provided in a prospectus regarding us. The offering was not a “public offering as defined in Section 4(2) due to the insubstantial number of persons involve in the deal, size of the offering, manner of the offering and number of share offered. We did not undertake an offering in which we sold a high number o shares to a high number of investors. In addition, Ms. Ginzburg had th necessary investment intent as required by Section 4(2) since she agreed to an received a share certificate bearing a legend stating that such shares ar restricted pursuant to Rule 144 of the 1933 Securities Act. These restriction ensure that these shares would not be immediately redistributed into the marke and therefore not be part of a “public offering.” Based on an analysis of th above factors, we have met the requirements to qualify for exemption unde Section 4(2) of the Securities Act of 1933 for the above transaction.
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On July 26, 2002, we issued 20,000 shares of our restricted common stock to Ann Kanevsky in consideration for the license agreement entered into between us an YZ Business Consulting. The issuance was valued at $.001per share or $20.00. Ou shares were issued in reliance on the exemption from registration provided b Section 4(2) of the Securities Act of 1933. No commissions were paid for th issuance of such shares. The above issuance of shares of our common stoc qualified for exemption under Section 4(2) of the Securities Act of 1933 sinc the issuance of such shares by us did not involve a public offering. Ms.Kanevsk was a sophisticated investor and had access to information normally provided i a prospectus regarding us. The offering was not a “public offering” as define in Section 4(2) due to the insubstantial number of persons involved in the deal size of the offering, manner of the offering and number of shares offered. W did not undertake an offering in which we sold a high number of shares to a hig number of investors. In addition, Ms. Kanevsky had the necessary investmen intent as required by Section 4(2) since she agreed to and received a shar certificate bearing a legend stating that such shares are restricted pursuant t Rule 144 of the 1933 Securities Act. These restrictions ensure that these share would not be immediately redistributed into the market and therefore not be par of a “public offering.” Based on an analysis of the above factors, we have me the requirements to qualify for exemption under Section 4(2) of the Securitie Act of 1933 for the above transaction.
On October 10, 2002, we issued 30,000 shares of our restricted common stock t Ashley Goodman in consideration for services rendered with the analysis of ou English language software. The issuance was valued at $.001 per share o $30.00.Our shares were issued in reliance on the exemption from registratio provided by Section 4(2) of the Securities Act of 1933. No commissions were pai for the issuance of such shares. The above issuance of shares of our commo stock qualified for exemption under Section 4(2) of the Securities Act of 193 since the issuance of such shares by us did not involve a public offering. Ms Goodman was a sophisticated investor and had access to information normall provided in a prospectus regarding us. The offering was not a “public offering as defined in Section 4(2) due to the insubstantial number of persons involve in the deal, size of the offering, manner of the offering and number of share offered. We did not undertake an offering in which we sold a high number o shares to a high number of investors. In addition, Ms. Goodman had the necessar investment intent as required by Section 4(2) since she agreed to and received share certificate bearing a legend stating that such shares are restricte pursuant to Rule 144 of the 1933 Securities Act. These restrictions ensure tha these shares would not be immediately redistributed into the market an therefore not be part of a “public offering.” Based on an analysis of the abov factors, we have met the requirements to qualify for exemption under Sectio 4(2) of the Securities Act of 1933 for the above transaction.
On October 10, 2002, we issued 10,000 shares of our restricted common stock to Walter Eizenberg in consideration for services rendered with the analysis of our English language software. The issuance was valued at $.001 per share or $10.00. Our shares were issued in reliance on the exemption from registration provided by Section 4(2) of the Securities Act of 1933. No commissions were paid for the issuance of such shares. The above issuance of shares of our common stock qualified for exemption under Section 4(2) of the Securities Act of 1933 since the issuance of such shares by us did not involve a public offering. Mr. Eizenberg was a sophisticated investor and had access to information normally provided in a prospectus regarding us. The offering was not a “public offering” as defined in Section 4(2) due to the insubstantial number of persons involved in the deal, size of the offering, manner of the offering and number of shares offered. We did not undertake an offering in which we sold a high number of shares to a high number of investors. In addition, Mr. Eizenberg had the necessary investment intent as required by Section 4(2) since he agreed to and received a share certificate bearing a legend stating that such shares are restricted pursuant to Rule 144 of the 1933 Securities Act. These restrictions ensure that these shares would not be immediately redistributed into the market and therefore not be part of a “public offering.” Based on an analysis of the above factors, we have met the requirements to qualify for exemption under Section 4(2) of the Securities Act of 1933 for the above transaction.
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On October 10, 2002, we issued 10,000 shares of our restricted common stock to Zhana Kvetnaya in consideration for services rendered with the analysis of our English language software. The issuance was valued at $.001 per share or $10.00. Our shares were issued in reliance on the exemption from registration provided by Section 4(2) of the Securities Act of 1933. No commissions were paid for the issuance of such shares. The above issuance of shares of our common stock qualified for exemption under Section 4(2) of the Securities Act of 1933 since the issuance of such shares by us did not involve a public offering. Ms.Kvetnaya was a sophisticated investor and had access to information normally provided in a prospectus regarding us. The offering was not a “public offering” as defined in Section 4(2) due to the insubstantial number of persons involved in the deal, size of the offering, manner of the offering and number of shares offered. We did not undertake an offering in which we sold a high number of shares to a high number of investors. In addition, Ms. Kvetnaya had the necessary investment intent as required by Section 4(2) since she agreed to and received a share certificate bearing a legend stating that such shares are restricted pursuant to Rule 144 of the 1933 Securities Act. These restrictions ensure that these shares would not be immediately redistributed into the market and therefore not be part of a “public offering.” Based on an analysis of the above factors, we have met the requirements to qualify for exemption under Section 4(2) of the Securities Act of 1933 for the above transaction.
On October 10, 2002, we issued 10,000 shares of our restricted common stock to Galina Polina in consideration for services rendered with the analysis of our English language software. The issuance was valued at $.001 per share or $10.00. Our shares were issued in reliance on the exemption from registration provided by Section 4(2) of the Securities Act of 1933. No commissions were paid for the issuance of such shares. The above issuance of shares of our common stock qualified for exemption under Section 4(2) of the Securities Act of 1933 since the issuance of such shares by us did not involve a public offering. Ms. Polina was a sophisticated investor and had access to information normally provided in a prospectus regarding us. The offering was not a “public offering” as defined in Section 4(2) due to the insubstantial number of persons involved in the deal, size of the offering, manner of the offering and number of shares offered. We did not undertake an offering in which we sold a high number of shares to a high number of investors. In addition, Ms. Polina had the necessary investment intent as required by Section 4(2) since she agreed to and received a share certificate bearing a legend stating that such shares are restricted pursuant to Rule 144 of the 1933 Securities Act. These restrictions ensure that these shares would not be immediately redistributed into the market and therefore not be part of a “public offering.” Based on an analysis of the above factors, we have met the requirements to qualify for exemption under Section 4(2) of the Securities Act of 1933 for the above transaction.
On October 10, 2002, we issued 20,000 shares of our restricted common stock to Araz Khachatrian in consideration for services rendered with the analysis of our English language software. The issuance was valued at $.001 per share or $20.00. Our shares were issued in reliance on the exemption from registration provided by Section 4(2) of the Securities Act of 1933. No commissions were paid for the issuance of such shares. The above issuance of shares of our common stock qualified for exemption under Section 4(2) of the Securities Act of 1933 since the issuance of such shares by us did not involve a public offering. Mr.Khachatrian was a sophisticated investor and had access to information normally provided in a prospectus regarding us. The offering was not a “public offering” as defined in Section 4(2) due to the insubstantial number of persons involved in the deal, size of the offering, manner of the offering and number of shares offered. We did not undertake an offering in which we sold a high number of shares to a high number of investors. In addition, Mr. Khachatrian had the necessary investment intent as required by Section 4(2) since he agreed to and received a share certificate bearing a legend stating that such shares are restricted pursuant to Rule 144 of the 1933 Securities Act. These restrictions ensure that these shares would not be immediately redistributed into the market and therefore not be part of a “public offering.” Based on an analysis of the above factors, we have met the requirements to qualify for exemption under Section 4(2) of the Securities Act of 1933 for the above transaction.
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On October 10, 2002, we issued 20,000 shares of our restricted common stock to Mark Filstein in consideration for services rendered with the analysis of our English language software. The issuance was valued at $.001 per share or $20.00.Our shares were issued in reliance on the exemption from registration provided by Section 4(2) of the Securities Act of 1933. No commissions were paid for the issuance of such shares. The above issuance of shares of our common stock qualified for exemption under Section 4(2) of the Securities Act of 1933 since the issuance of such shares by us did not involve a public offering. Mr.Filstein was a sophisticated investor and had access to information normally provided in a prospectus regarding us. The offering was not a “public offering” as defined in Section 4(2) due to the insubstantial number of persons involved in the deal, size of the offering, manner of the offering and number of shares offered. We did not undertake an offering in which we sold a high number of shares to a high number of investors. In addition, Mr. Filstein had the necessary investment intent as required by Section 4(2) since he agreed to and received a share certificate bearing a legend stating that such shares are restricted pursuant to Rule 144 of the 1933 Securities Act. These restrictions ensure that these shares would not be immediately redistributed into the market and therefore not be part of a “public offering.” Based on an analysis of the above factors, we have met the requirements to qualify for exemption under Section 4(2) of the Securities Act of 1933 for the above transaction.
On October 10, 2002, we issued 10,000 shares of our restricted common stock to Marina Ivanova in consideration for services rendered with the analysis of our English language software. The issuance was valued at $.001per share or $10.00.Our shares were issued in reliance on the exemption from registration provided by Section 4(2) of the Securities Act of 1933. No commissions were paid for the issuance of such shares. The above issuance of shares of our common stock qualified for exemption under Section 4(2) of the Securities Act of 1933 since the issuance of such shares by us did not involve a public offering. Ms. Ivanova was a sophisticated investor and had access to information normally provided in a prospectus regarding us. The offering was not a “public offering” as defined in Section 4(2) due to the insubstantial number of persons involved in the deal, size of the offering, manner of the offering and number of shares offered. We did not undertake an offering in which we sold a high number of shares to a high number of investors. In addition, Ms. Ivanova had the necessary investment intent as required by Section 4(2) since she agreed to and received a share certificate bearing a legend stating that such shares are restricted pursuant to Rule 144 of the 1933 Securities Act. These restrictions ensure that these shares would not be immediately redistributed into the market and therefore not be part of a “public offering.” Based on an analysis of the above factors, we have met the requirements to qualify for exemption under Section 4(2) of the Securities Act of 1933 for the above transaction.
On October 10, 2002, we issued 10,000 shares of our restricted common stock to Vadim Nebuchin in consideration for services rendered with the analysis of our English language software. The issuance was valued at $.001 per share or $10.00.Our shares were issued in reliance on the exemption from registration provided by Section 4(2) of the Securities Act of 1933. No commissions were paid for the issuance of such shares. The above issuance of shares of our common stock qualified for exemption under Section 4(2) of the Securities Act of 1933 since the issuance of such shares by us did not involve a public offering. Ms.Nebuchin was a sophisticated investor and had access to information normally provided in a prospectus regarding us. The offering was not a “public offering” as defined in Section 4(2) due to the insubstantial number of persons involved in the deal, size of the offering, manner of the offering and number of shares offered. We did not undertake an offering in which we sold a high number of shares to a high number of investors. In addition, Ms. Nebuchin had the necessary investment intent as required by Section 4(2) since she agreed to and received a share certificate bearing a legend stating that such shares are restricted pursuant to Rule 144 of the 1933 Securities Act. These restrictions ensure that these shares would not be immediately redistributed into the market and therefore not be part of a “public offering.” Based on an analysis of the above factors, we have met the requirements to qualify for exemption under Section 4(2) of the Securities Act of 1933 for the above transaction.
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On October 10, 2002, we issued 20,000 shares of our restricted common stock to Ilya Bykov in consideration for services rendered with the analysis of our English language software. The issuance was valued at $.001per share or $20.00.Our shares were issued in reliance on the exemption from registration provided by Section 4(2) of the Securities Act of 1933. No commissions were paid for the issuance of such shares. The above issuance of shares of our common stock qualified for exemption under Section 4(2) of the Securities Act of 1933 since the issuance of such shares by us did not involve a public offering. Mr. Bykov was a sophisticated investor and had access to information normally provided in a prospectus regarding us. The offering was not a “public offering” as defined in Section 4(2) due to the insubstantial number of persons involved in the deal, size of the offering, manner of the offering and number of shares offered. We did not undertake an offering in which we sold a high number of shares to a high number of investors. In addition, Mr. Bykov had the necessary investment intent as required by Section 4(2) since she agreed to and received a share certificate bearing a legend stating that such shares are restricted pursuant to Rule 144 of the 1933 Securities Act. These restrictions ensure that these shares would not be immediately redistributed into the market and therefore not be part of a “public offering.” Based on an analysis of the above factors, we have met the requirements to qualify for exemption under Section 4(2) of the Securities Act of 1933 for the above transaction.
On October 10, 2002, we issued 20,000 shares of our restricted common stock to Tatiana Klatz in consideration for services rendered with the analysis of our English language software. The issuance was valued at $.001 per share or $20.00.Our shares were issued in reliance on the exemption from registration provided by Section 4(2) of the Securities Act of 1933. No commissions were paid for the issuance of such shares. The above issuance of shares of our common stock qualified for exemption under Section 4(2) of the Securities Act of 1933 since the issuance of such shares by us did not involve a public offering. Ms. Klatz was a sophisticated investor and had access to information normally provided in a prospectus regarding us. The offering was not a “public offering” as defined in Section 4(2) due to the insubstantial number of persons involved in the deal, size of the offering, manner of the offering and number of shares offered. We did not undertake an offering in which we sold a high number of shares to a high number of investors. In addition, Ms. Klatz had the necessary investment intent as required by Section 4(2) since she agreed to and received a share certificate bearing a legend stating that such shares are restricted pursuant to Rule 144 of the 1933 Securities Act. These restrictions ensure that these shares would not be immediately redistributed into the market and therefore not be part of a “public offering.” Based on an analysis of the above factors, we have met the requirements to qualify for exemption under Section 4(2) of the Securities Act of 1933 for the above transaction.
On October 10, 2002, we issued 10,000 shares of our restricted common stock to Tigran Makarian in consideration for services rendered with the analysis of our English language software. The issuance was valued at $.001 per share or $10.00. Our shares were issued in reliance on the exemption from registration provided by Section 4(2) of the Securities Act of 1933. No commissions were paid for the issuance of such shares. The above issuance of shares of our common stock qualified for exemption under Section 4(2) of the Securities Act of 1933 since the issuance of such shares by us did not involve a public offering. Mr.Makarian was a sophisticated investor and had access to information normally provided in a prospectus regarding us. The offering was not a “public offering” as defined in Section 4(2) due to the insubstantial number of persons involved in the deal, size of the offering, manner of the offering and number of shares offered. We did not undertake an offering in which we sold a high number of shares to a high number of investors. In addition, Mr. Makarian had the necessary investment intent as required by Section 4(2) since he agreed to and received a share certificate bearing a legend stating that such shares are restricted pursuant to Rule 144 of the 1933 Securities Act. These restrictions ensure that these shares would not be immediately redistributed into the market and therefore not be part of a “public offering.” Based on an analysis of the above factors, we have met the requirements to qualify for exemption under Section 4(2) of the Securities Act of 1933 for the above transaction.
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On November 14, 2002, we issued 10,000 shares of our restricted common stock to Natalia Sarafanova in consideration for services rendered with the analysis of our English language software. The issuance was valued at $.001 per share or $10.00. Our shares were issued in reliance on the exemption from registration provided by Section 4(2) of the Securities Act of 1933. No commissions were paid for the issuance of such shares. The above issuance of shares of our common stock qualified for exemption under Section 4(2) of the Securities Act of 1933since the issuance of such shares by us did not involve a public offering. Ms.Sarafanova was a sophisticated investor and had access to information normally provided in a prospectus regarding us. The offering was not a “public offering” as defined in Section 4(2) due to the insubstantial number of persons involved in the deal, size of the offering, manner of the offering and number of shares offered. We did not undertake an offering in which we sold a high number of shares to a high number of investors. In addition, Ms. Sarafanova had the necessary investment intent as required by Section 4(2) since she agreed to and received a share certificate bearing a legend stating that such shares are restricted pursuant to Rule 144 of the 1933 Securities Act. These restrictions ensure that these shares would not be immediately redistributed into the market and therefore not be part of a “public offering.” Based on an analysis of the above factors, we have met the requirements to qualify for exemption under Section 4(2) of the Securities Act of 1933 for the above transaction.
On November 14, 2002, we issued 10,000 shares of our restricted common stock to Dilbar Sultanova in consideration for services rendered with the analysis of our English language software. The issuance was valued at $.001 per share or $10.00.Our shares were issued in reliance on the exemption from registration provided by Section 4(2) of the Securities Act of 1933. No commissions were paid for the issuance of such shares. The above issuance of shares of our common stock qualified for exemption under Section 4(2) of the Securities Act of 1933 since the issuance of such shares by us did not involve a public offering. Ms.Sultanova was a sophisticated investor and had access to information normally provided in a prospectus regarding us. The offering was not a “public offering” as defined in Section 4(2) due to the insubstantial number of persons involved in the deal, size of the offering, manner of the offering and number of shares offered. We did not undertake an offering in which we sold a high number of shares to a high number of investors. In addition, Ms. Sultanova had the necessary investment intent as required by Section 4(2) since she agreed to and received a share certificate bearing a legend stating that such shares are restricted pursuant to Rule 144 of the 1933 Securities Act. These restrictions ensure that these shares would not be immediately redistributed into the market and therefore not be part of a “public offering.” Based on an analysis of the above factors, we have met the requirements to qualify for exemption under Section 4(2) of the Securities Act of 1933 for the above transaction.
On November 14, 2002, we issued 10,000 shares of our restricted common stock to Oksana Tkachenko in consideration for services rendered with the analysis of our English language software. The issuance was valued at $.001 per share or $10.00.Our shares were issued in reliance on the exemption from registration provided by Section 4(2) of the Securities Act of 1933. No commissions were paid for the issuance of such shares. The above issuance of shares of our common stock qualified for exemption under Section 4(2) of the Securities Act of 1933 since the issuance of such shares by us did not involve a public offering. Ms.Tkachenko was a sophisticated investor and had access to information normally provided in a prospectus regarding us. The offering was not a “public offering” as defined in Section 4(2) due to the insubstantial number of persons involved in the deal, size of the offering, manner of the offering and number of shares offered. We did not undertake an offering in which we sold a high number of shares to a high number of investors. In addition, Ms. Tkachenko had the necessary investment intent as required by Section 4(2) since she agreed to and received a share certificate bearing a legend stating that such shares are restricted pursuant to Rule 144 of the 1933 Securities Act. These restrictions ensure that these shares would not be immediately redistributed into the market and therefore not be part of a “public offering.” Based on an analysis of the above factors, we have met the requirements to qualify for exemption under Section 4(2) of the Securities Act of 1933 for the above transaction.
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On November 14, 2002, we issued 10,000 shares of our restricted common stock to Julia Parsons in consideration for services rendered with the analysis of our English language software. The issuance was valued at $.001 per share or $10.00.Our shares were issued in reliance on the exemption from registration provided by Section 4(2) of the Securities Act of 1933. No commissions were paid for the issuance of such shares. The above issuance of shares of our common stock qualified for exemption under Section 4(2) of the Securities Act of 1933 since the issuance of such shares by us did not involve a public offering. Ms. Parsons was a sophisticated investor and had access to information normally provided in a prospectus regarding us. The offering was not a “public offering” as defined in Section 4(2) due to the insubstantial number of persons involved in the deal, size of the offering, manner of the offering and number of shares offered. We did not undertake an offering in which we sold a high number of shares to a high number of investors. In addition, Ms. Parsons had the necessary investment intent as required by Section 4(2) since she agreed to and received a share certificate bearing a legend stating that such shares are restricted pursuant to Rule 144 of the 1933 Securities Act. These restrictions ensure that these shares would not be immediately redistributed into the market and therefore not be part of a “public offering.” Based on an analysis of the above factors, we have met the requirements to qualify for exemption under Section 4(2) of the Securities Act of 1933 for the above transaction.
On November 14, 2002, we issued 10,000 shares of our restricted common stock to Elena Marcucci in consideration for services rendered with the analysis of our English language software. The issuance was valued at $.001 per share or $10.00.Our shares were issued in reliance on the exemption from registration provided by Section 4(2) of the Securities Act of 1933. No commissions were paid for the issuance of such shares. The above issuance of shares of our common stock qualified for exemption under Section 4(2) of the Securities Act of 1933 since the issuance of such shares by us did not involve a public offering. Ms. Marcucci was a sophisticated investor and had access to information normally provided in a prospectus regarding us. The offering was not a “public offering” as defined in Section 4(2) due to the insubstantial number of persons involved in the deal, size of the offering, manner of the offering and number of shares offered. We did not undertake an offering in which we sold a high number of shares to a high number of investors. In addition, Ms. Marcucci had the necessary investment intent as required by Section 4(2) since she agreed to and received a share certificate bearing a legend stating that such shares are restricted pursuant to Rule 144 of the 1933 Securities Act. These restrictions ensure that these shares would not be immediately redistributed into the market and therefore not be part of a “public offering.” Based on an analysis of the above factors, we have met the requirements to qualify for exemption under Section 4(2) of the Securities Act of 1933 for the above transaction.
On November 14, 2002, we issued 10,000 shares of our restricted common stock to Julie Litvinova in consideration for services rendered with the analysis of our English language software. The issuance was valued at $.001 per share or $10.00.Our shares were issued in reliance on the exemption from registration provided by Section 4(2) of the Securities Act of 1933. No commissions were paid for the issuance of such shares. The above issuance of shares of our common stock qualified for exemption under Section 4(2) of the Securities Act of 1933 since the issuance of such shares by us did not involve a public offering. Ms. Ltvinova was a sophisticated investor and had access to information normally provided in a prospectus regarding us. The offering was not a “public offering” as defined in Section 4(2) due to the insubstantial number of persons involved in the deal, size of the offering, manner of the offering and number of shares offered. We did not undertake an offering in which we sold a high number of shares to a high number of investors. In addition, Ms. Litvinova had the necessary investment intent as required by Section 4(2) since she agreed to and received a share certificate bearing a legend stating that such shares are restricted pursuant to Rule 144 of the 1933 Securities Act. These restrictions ensure that these shares would not be immediately redistributed into the market and therefore not be part of a “public offering.” Based on an analysis of the above factors, we have met the requirements to qualify for exemption under Section 4(2) of the Securities Act of 1933 for the above transaction.
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On November 14, 2002, we issued 10,000 shares of our restricted common stock to Ekaterina Gavin in consideration for services rendered with the analysis of our English language software. The issuance was valued at $.001 per share or $10.00.Our shares were issued in reliance on the exemption from registration provided by Section 4(2) of the Securities Act of 1933. No commissions were paid for the issuance of such shares. The above issuance of shares of our common stock qualified for exemption under Section 4(2) of the Securities Act of 1933 since the issuance of such shares by us did not involve a public offering. Ms. Gavin was a sophisticated investor and had access to information normally provided in a prospectus regarding us. The offering was not a “public offering” as defined in Section 4(2) due to the insubstantial number of persons involved in the deal, size of the offering, manner of the offering and number of shares offered. We did not undertake an offering in which we sold a high number of shares to a high number of investors. In addition, Ms. Gavin had the necessary investment intent as required by Section 4(2) since she agreed to and received a share certificate bearing a legend stating that such shares are restricted pursuant to Rule 144 of the 1933 Securities Act. These restrictions ensure that these shares would not be immediately redistributed into the market and therefore not be part of a “public offering.” Based on an analysis of the above factors, we have met the requirements to qualify for exemption under Section 4(2) of the Securities Act of 1933 for the above transaction.
On November 14, 2002, we issued 10,000 shares of our restricted common stock to Elena Smirnova in consideration for services rendered with the analysis of our English language software. The issuance was valued at $.001 per share or $10.00.Our shares were issued in reliance on the exemption from registration provided by Section 4(2) of the Securities Act of 1933. No commissions were paid for the issuance of such shares. The above issuance of shares of our common stock qualified for exemption under Section 4(2) of the Securities Act of 1933 since the issuance of such shares by us did not involve a public offering. Ms. Smirnova was a sophisticated investor and had access to information normally provided in a prospectus regarding us. The offering was not a “public offering” as defined in Section 4(2) due to the insubstantial number of persons involved in the deal, size of the offering, manner of the offering and number of shares offered. We did not undertake an offering in which we sold a high number of shares to a high number of investors. In addition, Ms. Smirnova had the necessary investment intent as required by Section 4(2) since she agreed to and received a share certificate bearing a legend stating that such shares are restricted pursuant to Rule 144 of the 1933 Securities Act. These restrictions ensure that these shares would not be immediately redistributed into the market and therefore not be part of a “public offering.” Based on an analysis of the above factors, we have met the requirements to qualify for exemption under Section 4(2) of the Securities Act of 1933 for the above transaction.
On November 14, 2002, we issued 10,000 shares of our restricted common stock to Larisa Garcia in consideration for services rendered with the analysis of our English language software. The issuance was valued at $.001per share or $10.00.Our shares were issued in reliance on the exemption from registration provided by Section 4(2) of the Securities Act of 1933. No commissions were paid for the issuance of such shares. The above issuance of shares of our common stock qualified for exemption under Section 4(2) of the Securities Act of 1933 since the issuance of such shares by us did not involve a public offering. Ms. Garcia was a sophisticated investor and had access to information normally provided in a prospectus regarding us. The offering was not a “public offering” as defined in Section 4(2) due to the insubstantial number of persons involved in the deal, size of the offering, manner of the offering and number of shares offered. We did not undertake an offering in which we sold a high number of shares to a high number of investors. In addition, Ms. Garcia had the necessary investment intent as required by Section 4(2) since she agreed to and received a share certificate bearing a legend stating that such shares are restricted pursuant to Rule 144 of the 1933 Securities Act. These restrictions ensure that these shares would not be immediately redistributed into the market and therefore not be part of a “public offering.” Based on an analysis of the above factors, we have met the requirements to qualify for exemption under Section 4(2) of the Securities Act of 1933 for the above transaction.
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On November 14, 2002, we issued 20,000 shares of our restricted common stock to Lana Koifman in consideration for services rendered with the analysis of our English language software. The issuance was valued at $.001 per share or $20.00.Our shares were issued in reliance on the exemption from registration provided by Section 4(2) of the Securities Act of 1933. No commissions were paid for the issuance of such shares. The above issuance of shares of our common stock qualified for exemption under Section 4(2) of the Securities Act of 1933 since the issuance of such shares by us did not involve a public offering. Ms. Koifmanwas a sophisticated investor and had access to information normally provided in a prospectus regarding us. The offering was not a “public offering” as defined in Section 4(2) due to the insubstantial number of persons involved in the deal, size of the offering, manner of the offering and number of shares offered. We did not undertake an offering in which we sold a high number of shares to a high number of investors. In addition, Ms. Koifman had the necessary investment intent as required by Section 4(2) since she agreed to and received a share certificate bearing a legend stating that such shares are restricted pursuant to Rule 144 of the 1933 Securities Act. These restrictions ensure that these shares would not be immediately redistributed into the market and therefore not be part of a “public offering.” Based on an analysis of the above factors, we have met the requirements to qualify for exemption under Section 4(2) of the Securities Act of 1933 for the above transaction.
On November 14, 2002, we issued 10,000 shares of our restricted common stock to Victoria Reznik in consideration for services rendered with the analysis of our English language software. The issuance was valued at $.001 per share or $10.00.Our shares were issued in reliance on the exemption from registration provided by Section 4(2) of the Securities Act of 1933. No commissions were paid for the issuance of such shares. The above issuance of shares of our common stock qualified for exemption under Section 4(2) of the Securities Act of 1933 since the issuance of such shares by us did not involve a public offering. Ms. Reznik was a sophisticated investor and had access to information normally provided in a prospectus regarding us. The offering was not a “public offering” as defined in Section 4(2) due to the insubstantial number of persons involved in the deal, size of the offering, manner of the offering and number of shares offered. We did not undertake an offering in which we sold a high number of shares to a high number of investors. In addition, Ms. Reznik had the necessary investment intent as required by Section 4(2) since she agreed to and received a share certificate bearing a legend stating that such shares are restricted pursuant to Rule 144 of the 1933 Securities Act. These restrictions ensure that these shares would not be immediately redistributed into the market and therefore not be part of a “public offering.” Based on an analysis of the above factors, we have met the requirements to qualify for exemption under Section 4(2) of the Securities Act of 1933 for the above transaction.
On November 14, 2002, we issued 10,000 shares of our restricted common stock to Berci Cherpician in consideration for services rendered with the analysis of our English language software. The issuance was valued at $.001 per share or $10.00.Our shares were issued in reliance on the exemption from registration provided by Section 4(2) of the Securities Act of 1933. No commissions were paid for the issuance of such shares. The above issuance of shares of our common stock qualified for exemption under Section 4(2) of the Securities Act of 1933 since the issuance of such shares by us did not involve a public offering. Mr. Cherpician was a sophisticated investor and had access to information normally provided in a prospectus regarding us. The offering was not a “public offering” as defined in Section 4(2) due to the insubstantial number of persons involved in the deal, size of the offering, manner of the offering and number of shares offered. We did not undertake an offering in which we sold a high number of shares to a high number of investors. In addition, Mr. Cherpician had the necessary investment intent as required by Section 4(2) since he agreed to and received a share certificate bearing a legend stating that such shares are restricted pursuant to Rule 144 of the 1933 Securities Act. These restrictions ensure that these shares would not be immediately redistributed into the market and therefore not be part of a “public offering.” Based on an analysis of the above factors, we have met the requirements to qualify for exemption under Section 4(2) of the Securities Act of 1933 for the above transaction.
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On November 14, 2002, we issued 10,000 shares of our restricted common stock to Yury Ribinovich in consideration for services rendered with the analysis of our English language software. The issuance was valued at $.001 per share or $10.00. Our shares were issued in reliance on the exemption from registration provided by Section 4(2) of the Securities Act of 1933. No commissions were paid for the issuance of such shares. The above issuance of shares of our common stock qualified for exemption under Section 4(2) of the Securities Act of 1933 since the issuance of such shares by us did not involve a public offering. Mr. Ribinovich was a sophisticated investor and had access to information normally provided in a prospectus regarding us. The offering was not a “public offering” as defined in Section 4(2) due to the insubstantial number of persons involved in the deal, size of the offering, manner of the offering and number of shares offered. We did not undertake an offering in which we sold a high number of shares to a high number of investors. In addition, Mr. Ribinovich had the necessary investment intent asrequired by Section 4(2) since he agreed to and received a share certificate bearing a legend stating that such shares are restricted pursuant to Rule 144 of the 1933 Securities Act. These restrictions ensure that these shares would not be immediately redistributed into the market and therefore not be part of a “public offering.” Based on an analysis of the above factors, we have met the requirements to qualify for exemption under Section 4(2) of the Securities Act of 1933 for the above transaction.
On November 14, 2002, we issued 10,000 shares of our restricted common stock to Mikhail Kupsis in consideration for services rendered with the analysis of our English language software. The issuance was valued at $.001 per share or $10.00. Our shares were issued in reliance on the exemption from registration provided by Section 4(2) of the Securities Act of 1933. No commissions were paid for the issuance of such shares. The above issuance of shares of our common stock qualified for exemption under Section 4(2) of the Securities Act of 1933 since the issuance of such shares by us did not involve a public offering. Mr. Kupsis was a sophisticated investor and had access to information normally provided in a prospectus regarding us. The offering was not a “public offering” as defined in Section 4(2) due to the insubstantial number of persons involved in the deal, size of the offering, manner of the offering and number of shares offered. We did not undertake an offering in which we sold a high number of shares to a high number of investors. In addition, Mr. Kupsis had the necessary investment intent as required by Section 4(2) since he agreed to and received a share certificate bearing a legend stating that such shares are restricted pursuant to Rule 144 of the 1933 Securities Act. These restrictions ensure that these shares would not be immediately redistributed into the market and therefore not be part of a “public offering.” Based on an analysis of the above factors, we have met the requirements to qualify for exemption under Section 4(2) of the Securities Act of 1933 for the above transaction.
On November 14, 2002, we issued 10,000 shares of our restricted common stock to Mikhail Shor in consideration for services rendered with the analysis of our English language software. The issuance was valued at $.001 per share or $10.00. Our shares were issued in reliance on the exemption from registration provided by Section 4(2) of the Securities Act of 1933. No commissions were paid for the issuance of such shares. The above issuance of shares of our common stock qualified for exemption under Section 4(2) of the Securities Act of 1933 since the issuance of such shares by us did not involve a public offering. Mr. Shor was a sophisticated investor and had access to information normally provided in a prospectus regarding us. The offering was not a “public offering” as defined in Section 4(2) due to the insubstantial number of persons involved in the deal, size of the offering, manner of the offering and number of shares offered. We did not undertake an offering in which we sold a high number of shares to a high number of investors. In addition, Mr. Shor had the necessary investment intent as required by Section 4(2) since he agreed to and received a share certificate bearing a legend stating that such shares are restricted pursuant to Rule 144 of the 1933 Securities Act. These restrictions ensure that these shares would not be immediately redistributed into the market and therefore not be part of a “public offering.” Based on an analysis of the above factors, we have met the requirements to qualify for exemption under Section 4(2) of the Securities Act of 1933 for the above transaction.
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On November 14, 2002, we issued 20,000 shares of our restricted common stock to Alexander Terletsky in consideration for services rendered with the analysis of our English language software. The issuance was valued at $.001 per share or $20.00. Our shares were issued in reliance on the exemption from registration provided by Section 4(2) of the Securities Act of 1933. No commissions were paid for the issuance of such shares. The above issuance of shares of our common stock qualified for exemption under Section 4(2) of the Securities Act of 1933since the issuance of such shares by us did not involve a public offering. Mr.Terletsky was a sophisticated investor and had access to information normally provided in a prospectus regarding us. The offering was not a “public offering” as defined in Section 4(2) due to the insubstantial number of persons involved in the deal, size of the offering, manner of the offering and number of shares offered. We did not undertake an offering in which we sold a high number of shares to a high number of investors. In addition, Mr. Terletsky had the necessary investment intent as required by Section 4(2) since he agreed to and received a share certificate bearing a legend stating that such shares are restricted pursuant to Rule 144 of the 1933 Securities Act. These restrictions ensure that these shares would not be immediately redistributed into the market and therefore not be part of a “public offering.” Based on an analysis of the above factors, we have met the requirements to qualify for exemption under Section 4(2) of the Securities Act of 1933 for the above transaction.
On November 14, 2002, we issued 20,000 shares of our restricted common stock to Igor Sluzhevsky in consideration for services rendered with the analysis of our English language software. The issuance was valued at $.001 per share or $20.00.Our shares were issued in reliance on the exemption from registration provided by Section 4(2) of the Securities Act of 1933. No commissions were paid for the issuance of such shares. The above issuance of shares of our common stock qualified for exemption under Section 4(2) of the Securities Act of 1933 since the issuance of such shares by us did not involve a public offering. Mr. Sluzhevsky was a sophisticated investor and had access to information normally provided in a prospectus regarding us. The offering was not a “public offering” as defined in Section 4(2) due to the insubstantial number of persons involved in the deal, size of the offering, manner of the offering and number of shares offered. We did not undertake an offering in which we sold a high number of shares to a high number of investors. In addition, Mr. Sluzhevsky had the necessary investment intent as required by Section 4(2) since he agreed to and received a share certificate bearing a legend stating that such shares are restricted pursuant to Rule 144 of the 1933 Securities Act. These restrictions ensure that these shares would not be immediately redistributed into the market and therefore not be part of a “public offering.” Based on an analysis of the above factors, we have met the requirements to qualify for exemption under Section 4(2) of the Securities Act of 1933 for the above transaction.
On December 17, 2003, we issued 100,000 shares of our restricted common stock to Mikhail Safanov in consideration for services rendered to us for assistance with the City Mix transaction. The issuance was valued at $.1287 per share or $12,870. Our shares were issued in reliance on the exemption from registration provided by Section 4(2) of the Securities Act of 1933. No commissions were paid for the issuance of such shares. The above issuance of shares of our common stock qualified for exemption under Section 4(2) of the Securities Act of 1933 since the issuance of such shares by us did not involve a public offering. Mr. Safanov was a sophisticated investor and had access to information normally provided in a prospectus regarding us. The offering was not a “public offering” as defined in Section 4(2) due to the insubstantial number of persons involved in the deal, size of the offering, manner of the offering and number of shares offered. We did not undertake an offering in which we sold a high number of shares to a high number of investors. In addition, Mr. Safanov had the necessary investment intent as required by Section 4(2) since he agreed to and received a share certificate bearing a legend stating that such shares are restricted pursuant to Rule 144 of the 1933 Securities Act. These restrictions ensure that these shares would not be immediately redistributed into the market and therefore not be part of a “public offering.” Based on an analysis of the above factors, we have met the requirements to qualify for exemption under Section 4(2) of the Securities Act of 1933 for the above transaction. On December 17, 2003, we issued 20,000shares of our restricted common stock to Souren Sombatov in consideration for services rendered to us for assistance with the City Mix transaction. The issuance was valued at $.1287 per share or $2,574. Our shares were issued in reliance on the exemption from registration provided by Section 4(2) of the Securities Act of 1933. No commissions were paid for the issuance of such shares. The above issuance of shares of our common stock qualified for exemption under Section 4(2) of the Securities Act of 1933 since the issuance of such shares by us did not involve a public offering. Mr.Sombatov was a sophisticated investor and had access to information normally provided in a prospectus regarding us. The offering was not a “public offering” as defined in Section 4(2) due to the insubstantial number of persons involved in the deal, size of the offering, manner of the offering and number of shares offered. We did not undertake an offering in which we sold a high number of shares to a high number of investors. In addition, Mr. Sombatov had the necessary investment intent as required by Section 4(2) since he agreed to and received a
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share certificate bearing a legend stating that such shares are restricted pursuant to Rule 144 of the 1933 Securities Act. These restrictions ensure that these shares would not be immediately redistributed into the market and therefore not be part of a “public offering.” Based on an analysis of the above factors, we have met the requirements to qualify for exemption under Section 4(2) of the Securities Act of 1933 for the above transaction.
On December 17, 2003, we issued 20,000 shares of our restricted common stock to Jacob Fortun in consideration for services rendered to us for assistance with the City Mix transaction. The issuance was valued at $.1287 per share or $2,574. Our shares were issued in reliance on the exemption from registration provided by Section 4(2) of the Securities Act of 1933. No commissions were paid for the issuance of such shares. The above issuance of shares of our common stock qualified for exemption under Section 4(2) of the Securities Act of 1933 since the issuance of such shares by us did not involve a public offering. Mr. Fortun was a sophisticated investor and had access to information normally provided in a prospectus regarding us. The offering was not a “public offering” as defined in Section 4(2) due to the insubstantial number of persons involved in the deal, size of the offering, manner of the offering and number of shares offered. We did not undertake an offering in which we sold a high number of shares to a high number of investors. In addition, Mr. Fortun had the necessary investment intent as required by Section 4(2) since he agreed to and received a share certificate bearing a legend stating that such shares are restricted pursuant to Rule 144 of the 1933 Securities Act. These restrictions ensure that these shares would not be immediately redistributed into the market and therefore not be part of a “public offering.” Based on an analysis of the above factors, we have met the requirements to qualify for exemption under Section 4(2) of the Securities Act of 1933 for the above transaction.
On December 17, 2003, we issued 30,000 shares of our restricted common stock to Tatyana Rusanov in consideration for services rendered to us for assistance with the City Mix transaction. The issuance was valued at $.1287 per share or $3,861. Our shares were issued in reliance on the exemption from registration provided by Section 4(2) of the Securities Act of 1933. No commissions were paid for the issuance of such shares. The above issuance of shares of our common stock qualified for exemption under Section 4(2) of the Securities Act of 1933 since the issuance of such shares by us did not involve a public offering. Ms. Rusanov was a sophisticated investor and had access to information normally provided in a prospectus regarding us. The offering was not a “public offering” as defined in Section 4(2) due to the insubstantial number of persons involved in the deal, size of the offering, manner of the offering and number of shares offered. We did not undertake an offering in which we sold a high number of shares to a high number of investors. In addition, Ms. Rusanov had the necessary investment intent as required by Section 4(2) since she agreed to and received a share certificate bearing a legend stating that such shares are restricted pursuant to Rule 144 of the 1933 Securities Act. These restrictions ensure that these shares would not be immediately redistributed into the market and therefore not be part of a “public offering.” Based on an analysis of the above factors, we have met the requirements to qualify for exemption under Section 4(2) of the Securities Act of 1933 for the above transaction.
On December 17, 2003, we issued 150,000 shares of our restricted common stock to Eduard Klebanov in consideration for services rendered to us for assistance with the City Mix transaction. The issuance was valued at $.1287 per share or $19,305. Our shares were issued in reliance on the exemption from registration provided by Section 4(2) of the Securities Act of 1933. No commissions were paid for the issuance of such shares. The above issuance of shares of our common stock qualified for exemption under Section 4(2) of the Securities Act of 1933 since the issuance of such shares by us did not involve a public offering. Mr.Klebanov was a sophisticated investor and had access to information normally provided in a prospectus regarding us. The offering was not a “public offering” as defined in Section 4(2) due to the insubstantial number of persons involved in the deal, size of the offering, manner of the offering and number of shares offered. We did not undertake an offering in which we sold a high number of shares to a high number of investors. In addition, Mr. Klebanov had the necessary investment intent as required by Section 4(2) since he agreed to and received a share certificate bearing a legend stating that such shares are restricted pursuant to Rule 144 of the 1933 Securities Act. These restrictions ensure that these shares would not be immediately redistributed into the market and therefore not be part of a “public offering.” Based on an analysis of the above factors, we have met the requirements to qualify for exemption under Section 4(2) of the Securities Act of 1933 for the above transaction.
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On December 17, 2003, we issued 300,000 shares of our restricted common stock to Y. Jacob Rusanov in consideration for services rendered to us assistance with the City Mix transaction. The issuance was valued at $.1287 per share or $38,610. Our shares were issued in reliance on the exemption from registration provided by Section 4(2) of the Securities Act of 1933. No commissions were paid for the issuance of such shares. The above issuance of shares of our common stock qualified for exemption under Section 4(2) of the Securities Act of 1933 since the issuance of such shares by us did not involve a public offering. Mr. Rusanov was a sophisticated investor and had access to information normally provided in a prospectus regarding us. The offering was not a “public offering” as defined in Section 4(2) due to the insubstantial number of persons involved in the deal, size of the offering, manner of the offering and number of shares offered. We did not undertake an offering in which we sold a high number of shares to a high number of investors. In addition, Mr. Rusanov had the necessary investment intent as required by Section 4(2) since he agreed to and received a share certificate bearing a legend stating that such shares are restricted pursuant to Rule 144 of the 1933 Securities Act. These restrictions ensure that these shares would not be immediately redistributed into the market and therefore not be part of a “public offering.” Based on an analysis of the above factors, we have met the requirements to qualify for exemption under Section 4(2) of the Securities Act of 1933 for the above transaction.
On December 17, 2003, we issued 20,000 shares of our restricted common stock to Boris Magidenko in consideration for services rendered to us for assistance with the City Mix transaction. The issuance was valued at $.1287 per share or $2,574. Our shares were issued in reliance on the exemption from registration provided by Section 4(2) of the Securities Act of 1933. No commissions were paid for the issuance of such shares. The above issuance of shares of our common stock qualified for exemption under Section 4(2) of the Securities Act of 1933 since the issuance of such shares by us did not involve a public offering. Mr.Magidenko was a sophisticated investor and had access to information normally provided in a prospectus regarding us. The offering was not a “public offering” as defined in Section 4(2) due to the insubstantial number of persons involved in the deal, size of the offering, manner of the offering and number of shares offered. We did not undertake an offering in which we sold a high number of shares to a high number of investors. In addition, Mr. Magidenko had the necessary investment intent as required by Section 4(2) since he agreed to and received a share certificate bearing a legend stating that such shares are restricted pursuant to Rule 144 of the 1933 Securities Act. These restrictions ensure that these shares would not be immediately redistributed into the market and therefore not be part of a “public offering.” Based on an analysis of the above factors, we have met the requirements to qualify for exemption under Section 4(2) of the Securities Act of 1933 for the above transaction.
On December 17, 2003, we issued 4,278400 shares of our restricted common stock to Eugene Gurevich in consideration for the share exchange with City Mix, LLC, our subsidiary. The issuance was valued at $.1287 per share or $550,630.Our shares were issued in reliance on the exemption from registration provided by Section 4(2) of the Securities Act of 1933. No commissions were paid for the issuance of such shares. The above issuance of shares of our common stock qualified for exemption under Section 4(2) of the Securities Act of 1933 since the issuance of such shares by us did not involve a public offering. Mr. Gurevich was a sophisticated investor and had access to information normally provided in a prospectus regarding us. The offering was not a “public offering” as defined in Section 4(2) due to the insubstantial number of persons involved in the deal, size of the offering, manner of the offering and number of shares offered. We did not undertake an offering in which we sold a high number of shares to a high number of investors. In addition, Mr. Gurevich had the necessary investment intent as required by Section 4(2) since he agreed to and received a share certificate bearing a legend stating that such shares are restricted pursuant to Rule 144 of the 1933 Securities Act. These restrictions ensure that these shares would not be immediately redistributed into the market and therefore not be part of a “public offering.” Based on an analysis of the above factors, we have met the requirements to qualify for exemption under Section 4(2) of the Securities Act of 1933 for the above transaction.
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On December 17, 2003, we issued 1,545,600 shares of our restricted common stock to Shatokhina Vera in consideration for the share exchange with City Mix, LLC, our subsidiary. The issuance was valued at $.1287 per share or $198,919.Our shares were issued in reliance on the exemption from registration provided by Section 4(2) of the Securities Act of 1933. No commissions were paid for the issuance of such shares. The above issuance of shares of our common stock qualified for exemption under Section 4(2) of the Securities Act of 1933 since the issuance of such shares by us did not involve a public offering. Ms. Vera was a sophisticated investor and had access to information normally provided in a prospectus regarding us. The offering was not a “public offering” as defined in Section 4(2) due to the insubstantial number of persons involved in the deal, size of the offering, manner of the offering and number of shares offered. We did not undertake an offering in which we sold a high number of shares to a high number of investors. In addition, Ms. Vera had the necessary investment intent as required by Section 4(2) since she agreed to and received a share certificate bearing a legend stating that such shares are restricted pursuant to Rule 144 of the 1933 Securities Act. These restrictions ensure that these shares would not be immediately redistributed into the market and therefore not be part of a “public offering.” Based on an analysis of the above factors, we have met the requirements to qualify for exemption under Section 4(2) of the Securities Act of 1933 for the above transaction.
On December 17, 2003, we issued 4,480,000 shares of our restricted common stock to Yevsey Zilman in consideration for the share exchange with City Mix, LLC, our subsidiary. The issuance was valued at $.1287 per share or $576,576. Our shares were issued in reliance on the exemption from registration provided by Section 4(2) of the Securities Act of 1933. No commissions were paid for the issuance of such shares. The above issuance of shares of our common stock qualified for exemption under Section 4(2) of the Securities Act of 1933 since the issuance of such shares by us did not involve a public offering. Mr. Zilman was a sophisticated investor and had access to information normally provided in a prospectus regarding us. The offering was not a “public offering” as defined in Section 4(2) due to the insubstantial number of persons involved in the deal, size of the offering, manner of the offering and number of shares offered. We did not undertake an offering in which we sold a high number of shares to a high number of investors. In addition, Mr. Zilman had the necessary investment intent as required by Section 4(2) since he agreed to and received a share certificate bearing a legend stating that such shares are restricted pursuant to Rule 144 of the 1933 Securities Act. These restrictions ensure that these shares would not be immediately redistributed into the market and therefore not be part of a “public offering.” Based on an analysis of the above factors, we have met the requirements to qualify for exemption under Section 4(2) of the Securities Act of 1933 for the above transaction.
On December 17, 2003, we issued 4,524,800 shares of our restricted common stock to Yuli Ginzburg in consideration for the share exchange with City Mix, LLC, our subsidiary. The issuance was valued at $.1287 per share or $582,342. Our shares were issued in reliance on the exemption from registration provided by Section 4(2) of the Securities Act of 1933. No commissions were paid for the issuance of such shares. The above issuance of shares of our common stock qualified for exemption under Section 4(2) of the Securities Act of 1933 since the issuance of such shares by us did not involve a public offering. Mr. Ginzburg was a sophisticated investor and had access to information normally provided in a prospectus regarding us. The offering was not a “public offering” as defined in Section 4(2) due to the insubstantial number of persons involved in the deal, size of the offering, manner of the offering and number of shares offered. We did not undertake an offering in which we sold a high number of shares to a high number of investors. In addition, Mr. Ginzburg had the necessary investment intent as required by Section 4(2) since he agreed to and received a share certificate bearing a legend stating that such shares are restricted pursuant to Rule 144 of the 1933 Securities Act. These restrictions ensure that these shares would not be immediately redistributed into the market and therefore not be part of a “public offering.” Based on an analysis of the above factors, we have met the requirements to qualify for exemption under Section 4(2) of the Securities Act of 1933 for the above transaction.
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On December 17, 2003, we issued 5,040,000 shares of our restricted common stock to Vladimir Davidov in consideration for the share exchange with City Mix, LLC, our subsidiary. The issuance was valued at $.1287 per share or $648,648.Our shares were issued in reliance on the exemption from registration provided by Section 4(2) of the Securities Act of 1933. No commissions were paid for the issuance of such shares. The above issuance of shares of our common stock qualified for exemption under Section 4(2) of the Securities Act of 1933 since the issuance of such shares by us did not involve a public offering. Mr. Davidov was a sophisticated investor and had access to information normally provided in a prospectus regarding us. The offering was not a “public offering” as defined in Section 4(2) due to the insubstantial number of persons involved in the deal, size of the offering, manner of the offering and number of shares offered. We did not undertake an offering in which we sold a high number of shares to a high number of investors. In addition, Mr. Davidov had the necessary investment intent as required by Section 4(2) since he agreed to and received a share certificate bearing a legend stating that such shares are restricted pursuant to Rule 144 of the 1933 Securities Act. These restrictions ensure that these shares would not be immediately redistributed into the market and therefore not be part of a “public offering.” Based on an analysis of the above factors, we have met the requirements to qualify for exemption under Section 4(2) of the Securities Act of 1933 for the above transaction.
On December 17, 2003, we issued 2,531,200 shares of our restricted common stock to Anrew Kharlanov in consideration for the share exchange with City Mix, LLC, our subsidiary. The issuance was valued at $.1287 per share or $325,765.Our shares were issued in reliance on the exemption from registration provided by Section 4(2) of the Securities Act of 1933. No commissions were paid for the issuance of such shares. The above issuance of shares of our common stock qualified for exemption under Section 4(2) of the Securities Act of 1933 since the issuance of such shares by us did not involve a public offering. Mr. Karlanov was a sophisticated investor and had access to information normally provided in a prospectus regarding us. The offering was not a “public offering” as defined in Section 4(2) due to the insubstantial number of persons involved in the deal, size of the offering, manner of the offering and number of shares offered. We did not undertake an offering in which we sold a high number of shares to a high number of investors. In addition, Mr. Karlanov had the necessary investment intent as required by Section 4(2) since he agreed to and received a share certificate bearing a legend stating that such shares are restricted pursuant to Rule 144 of the 1933 Securities Act. These restrictions ensure that these shares would not be immediately redistributed into the market and therefore not be part of a “public offering.” Based on an analysis of the above factors, we have met the requirements to qualify for exemption under Section 4(2) of the Securities Act of 1933 for the above transaction.
On December 17, 2003, we issued 6,400,000 shares of our restricted common stock to Alexander Shishkin in consideration for the share exchange with City Mix, LLC, our subsidiary. The issuance was valued at $.1287 per share or $823,680. Our shares were issued in reliance on the exemption from registration provided by Section 4(2) of the Securities Act of 1933. No commissions were paid for the issuance of such shares. The above issuance of shares of our common stock qualified for exemption under Section 4(2) of the Securities Act of 1933since the issuance of such shares by us did not involve a public offering. Mr. Shishkin was a sophisticated investor and had access to information normally provided in a prospectus regarding us. The offering was not a “public offering” as defined in Section 4(2) due to the insubstantial number of persons involved in the deal, size of the offering, manner of the offering and number of shares offered. We did not undertake an offering in which we sold a high number of shares to a high number of investors. In addition, Mr. Shishkin had the necessary investment intent as required by Section 4(2) since he agreed to and received a share certificate bearing a legend stating that such shares are restricted pursuant to Rule 144 of the 1933 Securities Act. These restrictions ensure that these shares would not be immediately redistributed into the market and therefore not be part of a “public offering.” Based on an analysis of theabove factors, we have met the requirements to qualify for exemption under Section 4(2) of the Securities Act of 1933 for the above transaction.
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On December 17, 2003, we issued 3,200,000 shares of our restricted common stock to Eugene Koupsin in consideration for the share exchange with City Mix, LLC, our subsidiary. The issuance was valued at $.1287 per share or $411,840.Our shares were issued in reliance on the exemption from registration provided by Section 4(2) of the Securities Act of 1933. No commissions were paid for the issuance of such shares. The above issuance of shares of our common stock qualified for exemption under Section 4(2) of the Securities Act of 1933 since the issuance of such shares by us did not involve a public offering. Mr. Kuopsin was a sophisticated investor and had access to information normally provided in a prospectus regarding us. The offering was not a “public offering” as defined in Section 4(2) due to the insubstantial number of persons involved in the deal, size of the offering, manner of the offering and number of shares offered. We did not undertake an offering in which we sold a high number of shares to a high number of investors. In addition, Mr. Kuopsin had the necessary investment intent as required by Section 4(2) since he agreed to and received a share certificate bearing a legend stating that such shares are restricted pursuant to Rule 144 of the 1933 Securities Act. These restrictions ensure that these shares would not be immediately redistributed into the market and therefore not be part of a “public offering.” Based on an analysis of the above factors, we have met the requirements to qualify for exemption under Section 4(2) of the Securities Act of 1933 for the above transaction.
On October 10, 2004, we undertook a 1 for 10 forward stock split of our shares of common stock.
On March 11, 2005, we issued 50,000 shares of our restricted common stock to Andrei Petrov in consideration for his agreement to become our President and Principal Executive Officer. The issuance was valued at $.25 per share or $12,500. Our shares were issued in reliance on the exemption from registration provided by Section 4(2) of the Securities Act of 1933. No commissions were paid for the issuance of such shares. The above issuance of shares of our common stock qualified for exemption under Section 4(2) of the Securities Act of 1933 since the issuance of such shares by us did not involve a public offering. Mr. Petrov was a sophisticated investor and had access to information normally provided in a prospectus regarding us. The offering was not a “public offering” as defined in Section 4(2) due to the insubstantial number of persons involved in the deal, size of the offering, manner of the offering and number of shares offered. We did not undertake an offering in which we sold a high number of shares to a high number of investors. In addition, Mr. Petrov had the necessary investment intent as required by Section 4(2) since he agreed to and received a share certificate bearing a legend stating that such shares are restricted pursuant to Rule 144 of the 1933 Securities Act. These restrictions ensure that these shares would not be immediately redistributed into the market and therefore not be part of a “public offering.” Based on an analysis of the above factors, we have met the requirements to qualify for exemption under Section 4(2) of the Securities Act of 1933 for the above transaction.
On September 15, 2005, we issued 25,000 shares of our restricted common stock to Eduard Klebanov, our officer and director for services rendered to us in his capacity as an officer and director. The issuance was valued at $.25 per share or $6,250. Our shares were issued in reliance on the exemption from registration provided by Section 4(2) of the Securities Act of 1933. No commissions were paid for the issuance of such shares. The above issuance of shares of our common stock qualified for exemption under Section 4(2) of the Securities Act of 1933 since the issuance of such shares by us did not involve a public offering. Mr. Klebanov was a sophisticated investor and had access to information normally provided in a prospectus regarding us. The offering was not a “public offering” as defined in Section 4(2) due to the insubstantial number of persons involved in the deal, size of the offering, manner of the offering and number of shares offered. We did not undertake an offering in which we sold a high number of shares to a high number of investors. In addition, Mr. Klebanov had the necessary investment intent as required by Section 4(2) since he agreed to and received a share certificate bearing a legend stating that such shares are restricted pursuant to Rule 144 of the 1933 Securities Act. These restrictions ensure that these shares would not be immediately redistributed into the market and therefore not be part of a “public offering.” Based on an analysis of the above factors, we have met the requirements to qualify for exemption under Section 4(2) of the Securities Act of 1933 for the above transaction.
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All of the above issuances of shares of our common stock qualified for exemption under Section 4(2) of the Securities Act of 1933 since the issuance of such shares by us did not involve a public offering. Each of these shareholders was a sophisticated investor and had access to information regarding us. The offering was not a “public offering” as defined in Section 4(2) due to the in substantial number of persons involved in the deal, size of the offering, manner of the offering and number of shares offered. We did not undertake an offering in which we sold a high number of shares to a high number of investors. In addition, these shareholders had the necessary investment intent as required by Section 4(2) since they agreed to and received a share certificate bearing a legend stating that such shares are restricted pursuant to Rule 144 of the 1933 Securities Act. These restrictions ensure that these shares would not be immediately redistributed into the market and therefore not be part of a “public offering.” Based on an analysis of the above factors, we have met the requirements to qualify for exemption under Section 4(2) of the Securities Act of 1933 for the above transactions.
ITEM 27. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits:
The following exhibits are filed as part of this registration statement:
EXHIBIT | DESCRIPTION |
| |
3.1 | Articles of Incorporation of Royal Capital Management, Inc. and Amendments (1) |
3.2 | By-Laws (1) |
5.1 | Opinion and Consent of Anslow & Jaclin, LLP |
10.1 | License Agreement dated July 26, 2002 between us and YZ Business Consulting (1) |
10.2 | Share Transfer and Memorandum of Association Agreement between City Mix Management Company and Dhafir S. Jaber Al Ahbabi and Mubarak S. Jaber Al Ahbabi (2)(4)(5) |
10.3 | Wizzard OEM Software Agreement (2) |
10.4 | Edward D. Pergament, Registered Patent Attorney Consent Letter (3) |
10.5 | First Gulf Bank Loan Documentation (2) |
10.6 | Lease Contract for Land Plot to Build a Factory (2) |
10.7 | Intentionally Omitted |
10.8 | Intentionally Omitted |
10.9 | Intentionally Omitted |
10.10 | Intentionally Omitted |
10.11 | Intentionally Omitted |
10.12 | Rental Agreement between RMC Super Mix and City Mix, LLC (2) |
10.13 | Assets Management Agreement between City Mix L.L.C. and Royal Capital Management, Inc. (2) |
10.14 | Share Transfer and Amendment of Articles of Association dated January 5, 2005 with Power of Attorney (3) |
10.15 | Andrei Kharlanov Employment Agreement (3) |
10.16 | First Gulf Bank Letter Extension (3) |
10.17 | Amended Rental Agreement dated June 26, 2005 between RMC Super Mix and City Mix, LLC (3) |
10.18 | Legal Opinion from Al Tamimi & Company regarding legal rights of ownership in the United Arab Emirates (3) |
10.19 | Letter of Al Tamimi and Company(4)(5) |
10.20 | Consultancy Agreement dated January 6, 2004 |
10.20 | Arabian Engineer Trading Est Consent Letter(4)(5) |
10.21 | Consultancy Agreement dated January 6, 2004 between us and YZ Business Consulting, Inc.(4)(5) |
10.22 | Amendment dated August 9, 2005 to License Agreement dated July 26, 2002 between us and YZ Business Consulting (see Exhibit 10.1) (4)(5) |
10.23 | Agreement with Mubarak Al Ahbabi regarding truck rental revenue |
10.24 | Amendment dated August 9, 2005 to License Agreement dated July 26, 2002 between us and YZ Business Consulting (see Exhibit 10.1) |
10.25 | Al Tamimi and Company Memorandum |
10.26 | Al Tamimi and Company Letter on Ownership Rights in the UAE |
10.27 | Land Lease |
21.1 | List of Subsidiaries (2) |
23.1 | Consent of Demetrius & Company, LLC, independent auditors |
23.2 | Consent of Gately & Associates, LLC, independent auditors |
24.1 | Power of Attorney (included on signature page of Registration Statement) |
| |
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(1) Filed with original Form SB-2 on October 26, 2004 (SEC File No. 33-119959).
(2) Filed with Amendment No. 1 to Form SB-2 on July 1, 2005 (SEC File No. 333-119959).
(3) Filed with Amendment No. 2 to Form SB-2 on October 28, 2005 (SEC File No. 333-119959).
(4) Filed with Amendment No. 3 to Form SB-2 on February 14, 2006 (SEC File No. 333-119959). However, since this amendment was not timely filed, we are re- Filing these exhibits with Amendment No. 4.
(5) Filed with Amendment No. 4 to Form SB-2 on May 11, 2006 (SEC File No. 333-119959).
ITEM 28. UNDERTAKINGS.
(a) | The undersigned Registrant hereby undertakes: |
(1) | To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement to: |
(i) | Include any prospectus required by Section 10(a)(3) of the Securities Act of 1933; |
(ii) Reflect in the prospectus any facts or events which, individually or together, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement; and
(iii) Include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement.
(2) That, for the purpose of determining any liability under the 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 therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.
(4) For determining liability of the undersigned small business issuer under the Securities Act to any purchaser in the initial distribution of the securities, the undersigned small business issuer undertakes that in a primary offering of securities of the undersigned small business issuer pursuant to this registration statement, regardless of the underwriting method used to sell the securities to he purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned small business issuer will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:
(a) Any preliminary prospectus or prospectus of the undersigned small business issuer relating to the offering required to be filed pursuant to Rule 424 (Sec. 230. 424);
(b) Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned small business issuer or used or referred to by the undersigned small business issuer;
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(c) The portion of any other free writing prospectus relating to the offering containing material information about the undersigned small business issuer or its securities provided by or on behalf of the undersigned small business issuer; and
(d) Any other communication that is an offer in the offering made by the undersigned small business issuer to the purchaser.
(b) | Request for Acceleration of Effective Date: Undertaking pursuant to Item 512(e) of Regulation S-B |
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to our directors, officers and controlling persons pursuant to the provisions above, or otherwise, we have been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act, and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities, other than the payment by us of expenses incurred or paid by one of our directors, officers, or controlling persons in the successful defense of any action, suit or proceeding, is asserted by one of our directors, officers, or controlling persons in connection with the securities being registered, we will, unless in the opinion of our counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification is against public policy as expressed in the Securities Act, and we will be governed by the final adjudication of such issue.
(c) | Reliance on Rule 430A under the Securities Act: Undertaking pursuant to Item 512(f) of Regulation S-B |
The undersigned registrant hereby undertakes:
1. For determining any liability under the Securities Act, treat the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the small business issuer under Rule 424(b)(1), or (4) or 497(h) under the Securities Act (Sec. 230. 424(b)(1), (4) or 230. 497(h)) as part of this registration statement as of the time the Commission declared it effective.
2. For determining any liability under the Securities Act, treat each post-effective amendment that contains a form of prospectus as a new registration statement for the securities offered in the registration statement, and that offering of the securities at that time as the initial bona fide offering of those securities.
(d) For Purposes of Determining Liability under the Securities Act: Undertaking pursuant to Item 512(g) of Regulation S-B
The undersigned registrant hereby undertakes that, for the purpose of determining liability under the Securities Act to any purchaser:
1. | If the small business issuer is relying on Rule 430B (ss. 230. 430B of this chapter): |
(i) Each prospectus filed by the undersigned small business issuer pursuant to Rule 424(b)(3) (ss. 230. 424(b)(3) of this chapter) shall be deemed to be part of the registration statement as of the date the filed prospectus was deemed part of and included in the registration statement; and
(ii) Each prospectus required to be filed pursuant to Rule 424(b)(2), (b)(5), or (b)(7) (ss. 230. 424(b)(2), (b)(5), or (b)(7) of this chapter) as part of a registration statement in reliance on Rule 430B relating to an offering made pursuant to Rule 415(a)(1)(i), (vii), or (x) (ss. 230. 415(a)(1)(i), (vii), or (x) of this chapter) for the purpose of providing the information required by section 10(a) of the Securities Act shall be deemed to be part of and included in the registration statement as of the earlier of the date such form of prospectus is first used after effectiveness or the date of the first contract of sale of securities in the offering described in the prospectus. As provided in Rule 430B, for liability purposes of the issuer and any person that is at that date an underwriter, such date shall be deemed to be a new effective date of the registration statement relating to the securities in the registration statement to which that prospectus relates, and the offering of such securities at that time shall be deemed to be the initial bona fide
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offering thereof. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such effective date, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such effective date; or
2. If the small business issuer is subject to Rule 430C (ss. 230. 430C of this chapter), include the following: Each prospectus filed pursuant to Rule 424(b)(ss. 230. 424(b) of this chapter) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A (ss. 230. 430A of this chapter), shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use.
(B) Undertaking Required by Regulation S-B, Item 512(e).
Insofar as indemnification for liabilities arising under the Securities Act of1933 may be permitted to directors, officers or controlling persons pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933 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 that the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act of 1933 and will be governed by the final adjudication of such issue.
(C) Undertaking Required by Regulation S-B, Item 512(f)
The undersigned Registrant hereby undertakes that, for purposes of determining any liability under the Securities Act of 1933, each filing of the Registrant’s annual report pursuant to Section 13(a) or 15(d) of the Exchange Act of 1934that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at the time shall be deemed to be the initial bona fide offering thereof.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the Township of Marlboro, State of New Jersey, on the 10th day of August, 2006.
ROYAL CAPITAL MANAGEMENT, INC. |
| |
By: | /S/ YEVSEY D. ZILMAN |
| YEVSEY D. ZILMAN |
| President, Principal Executive Officer and
Deputy Chairman of the Board of Directors |
POWER OF ATTORNEY
The undersigned directors and officers of Royal Capital Management, Inc. hereby constitute and appoint Yevsey D. Zilman, with full power to act without the other and with full power of substitution and resubstitution, our true and lawful attorneys-in-fact with full power to execute in our name and behalf in the capacities indicated below any and all amendments (including post-effective amendments and amendments thereto) to this registration statement under the Securities Act of 1933 and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission and hereby ratify and confirm each and every act and thing that such attorneys-in-fact, or any them, or their substitutes, shall lawfully do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.
SIGNATURE | TITLE | DATE |
| | |
/S/ YULI GINZBURG
YULI GINZBURG | Vice President, Director | August 10, 2006 |
| | |
/S/ YEVSEY D. ZILMAN
YEVSEY D. ZILMAN | President, Principal Executive Officer and Deputy Chairman of the Board of Directors | August 10, 2006 |
| | |
/S/ EDUARD KLEBANOV
EDUARD KLEBANOV | Vice President, Principal Accounting Officer, Principal Financial Officer and Chairman of the Board of Directors | August 10, 2006 |
| | |
/S/ LEONARD KHODOROVSKY
LEONARD KHODOROVSKY | Director | August 10, 2006 |
| | |
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