As filed with the Securities and Exchange Commission on September 14, 2000
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
CREST VIEW, INC.
(Name of Small Business Issuer in its Charter)
Nevada 6799 88-0462761
(State or other (Primary Standard (I.R.S. Employer
jurisdiction of Industrial Identification No.)
incorporation Classification
or organization) Code Number)
1700 W. Horizon Ridge Parkway
Henderson, Nevada 89012
Telephone: (702) 614-1750
Telecopier: (702) 614-1790
(Address and telephone number of principal executive offices)
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JOHNNY R. THOMAS
Chief Executive Officer
CREST VIEW, INC.
1700 W. Horizon Ridge Parkway
Henderson, Nevada 89012
Telephone: (702) 614-1750
Telecopier: (702) 614-1790
(Name, address and telephone number of agent for service)
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Copies to:
ELLIOT H. LUTZKER, ESQ.
SNOW BECKER KRAUSS P.C.
605 Third Avenue, New York, NY 10158
New York, New York 10158-0125
Telephone: (212) 687-3860
Telecopier: (212) 949-7052
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Approximate Date of Proposed Sale to the Public:
As soon as practicable after the effective date of this registration statement.
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
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Proposed Maximum Proposed Maximum Amount of
Title of Each Class of Amount to be Aggregate Offering Price Aggregate Registration
Securities to be Registered Registered Per Security (1) Offering Price (1) Fee
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Units, consisting of one share of Common Stock 600,000 uts. (2) $.02 $12,000 $3
and one-third Class A Warrant
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Common Stock, $.001 par value 600,000 shs. (3) (3) (3)
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Class A Warrants 200,000 wts. (4) $6.00 (5) $1,200,000 (5) $317 (5)
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Common Stock, $.001 par value 200,000 shs. (6)(7) (8) (8) (8)
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Class B Warrants 200,000 wts. (9) $9.00 (10) $1,800,000 (10) $475 (10)
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Common Stock, $.001 par value 200,000 shs. (11)(12) (8) (8) (8)
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Common Stock, $.001 par value 3,000,000 shs. (13) $.02 (14) $60,000 (14) $16 (14)
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Class A Warrants 1,000,000 wts. (15) $6.00 (5) $6,000,000 (5) $1,584 (5)
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Common Stock, $.001 par value 1,000,000 shs. (7)(16) (8) (8) (8)
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Class B Common Stock Purchase Warrants 1,000,000 wts. (17) $9.00 (10) $9,000,000 (10) $2,376 (10)
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Common Stock, $.001 par value 1,000,000 shs. (12)(18) (8) (8) (8)
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Total $4,771
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(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457 under the Securities Act of 1933 (the "Act").
(2) Consists of Units, each consisting of one share of Common Stock and
one-third Class A Warrant being issued by the registrant and sold to the
public hereunder commencing on the effective date of this Registration
Statement for $.02 per Unit
(3) The purchase price of the Common Stock included in the Units is the entire
purchase price of the Units for purposes of this calculation of fee, and
such fee has already been computed with respect to the Units.
(4) Consists of Class A Warrants included in the Units being issued by the
registrant and sold to the public hereunder.
(5) Pursuant to Rule 457(g) under the Act, the registration fee has been
calculated on the basis of the price at which the Class A Warrants may be
exercised.
(6) Consists of shares of Common Stock issuable upon exercise of the Class A
Warrants being issued by the registrant and sold to the public hereunder.
(7) Pursuant to Rule 416(a) under the Act, this registration statement also
relates to such number of shares of Common Stock as may become issuable as
a result of anti-dilution adjustments in accordance with the terms of the
Class A Warrants.
(8) Pursuant to Rule 457(g) under the Act, no additional registration fee is
required for these securities.
(9) Consists of Class B Warrants issuable upon exercise of the Class A Warrants
being issued by the registrant and sold to the public hereunder.
(10) Pursuant to Rule 457(g) under the Act, the registration fee has been
calculated on the basis of the price at which the Class B warrants may be
exercised.
(11) Consists of shares of Common Stock issuable upon exercise of the Class B
Warrants issued upon exercise of the Class A Warrants sold to the public.
(12) Pursuant to Rule 416(a) under the Act, this Registration Statement also
relates to such number of shares of common stock as may become issuable as
a result of ant-dilution adjustments in accordance with the terms of the
Class B warrants.
(13) Consists of the shares of common stock or warrants, as the case may be,
being offered by selling securityholders who purchased 3,000,000 shares of
Common Stock and 1,000,000 Class A Warrants for an aggregate investment of
$3,000.
(14) Since there is presently no public market for the Common Stock, the
registration fee has been calculated based on the offering price of the
Units to the public, assuming that no portion of the purchase price payable
by the public is allocated to the Class A Warrants.
(15) Consists of Class A warrants being offered by selling securityholders
referred to in footnote 13 above.
(16) Consists of shares of Common Stock issuable upon exercise of Class A
warrants being offered by selling securityholders.
(17) Consists of Class B warrants issuable upon exercise of Class A warrants
being offered by selling securityholders.
(18) Consists of Common Stock issuable upon exercise of Class B warrants
described in footnote l7 above.
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The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this registration
statement shall become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to Section 8(a), may
determine.
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CREST VIEW, INC.
CROSS REFERENCE SHEET SHOWING LOCATION
IN PROSPECTUS OF INFORMATION
Required by Items 1 through 23, Part I of Form SB-2
Item and Heading Location in Prospectus
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1. Forepart of the Registration Statement and
Outside Front Cover Page of Prospectus........... Outside Front Cover Page
2. Inside Front and Outside Back Cover Page of
Prospectus....................................... Inside Front and Outside Back Cover
Pages of Prospectus; Where
You Can Find More Information
3. Summary Information, Risk Factors................ Prospectus Summary; Risk Factors
4. Use Of Proceeds.................................. Use of Proceeds
5. Determination of Offering Price.................. Outside Front Cover Page; Plan of
Distribution
6. Dilution......................................... Dilution and Other Comparative per
Share Data
7. Selling Security Holders......................... Principal and Selling Stockholders
8. Plan of Distribution............................. Plan of Distribution
9. Legal Proceedings................................ Proposed Business-Legal Proceedings
10. Directors, Executive Officers
Promoters and/Control Persons ................... Management
11. Security Ownership of Certain Beneficial Owners
and Management................................... Principal and Selling Stockholders
12. Description of the Securities.................... Description of Securities
13. Interest of Named Experts and Counsel............ Legal Matters; Experts
14. Disclosure of Commission Position on
Indemnification for Securities Act Liabilities... Plan of Distribution
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15. Organization Within Last Five Years.............. Prospectus Summary; Proposed Business
16. Description of Business.......................... Prospectus Summary; Proposed Business
17. Management's Discussion and Analysis or Plan of
Operation........................................ Plan of Operation
18. Description of Property.......................... Proposed Business - Property
19. Certain Relationships and Related Transactions... Risk Factors - Conflict with Another
"Blank Check" Company Controlled by
Management - Conflicts of Interest;
Principal and Selling Stockholders
20. Market for Common Equity and Related
Stockholder Matters.............................. Risk Factors - Absence of Public
Market; Potential Adverse
Affect of Sale of Selling
Securityholder Shares on the
Trading Price of the Common
Stock and Our Ability to
Consummate an Acquisition;
Potential Adverse Effect of
Exercise/Redemption of
Warrants; Possible Issuance
of Substantial Amount of
Additional Shares Without
Stockholder Approval;
Description of Securities
21. Executive Compensation........................... Management
22. Financial Statements............................. Not Applicable
23. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure .......... Not Applicable
-iv-
The information in this prospectus is not complete and may be changed. These
securities may not be sold until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
SUBJECT TO COMPLETION - SEPTEMBER 14, 2000
PROSPECTUS
600,000 Units
4,800,000 Shares of Common Stock
CREST VIEW, INC.
600,000 Shares of Common Stock and 200,000 Class A Redeemable
Warrants Each to Purchase One Share of Common Stock
and One Class B Redeemable Warrant; and 3,000,000 Additional
Shares of Common Stock and 1,000,000 Class A Warrants Offered by
Selling Securityholders
THESE SECURITIES ARE SPECULATIVE IN THAT THEY INVOLVE A HIGH DEGREE OF RISK AND
IMMEDIATE SUBSTANTIAL DILUTION. PROSPECTIVE PURCHASERS SHOULD NOT INVEST IN
THESE SECURITIES UNLESS THEY ARE PREPARED, AND CAN AFFORD, TO SUSTAIN A LOSS OF
THEIR ENTIRE INVESTMENT. SEE "RISK FACTORS" AND "DILUTION AND OTHER COMPARATIVE
PER SHARE DATA" FOR A DISCUSSION OF CERTAIN MATTERS WHICH SHOULD BE CONSIDERED
BY PROSPECTIVE PURCHASERS OF THESE SECURITIES.
We hereby offer 600,000 units at $0.02 per unit, each unit consisting of
one share of our common stock, $.001 par value, and one-third Class A Redeemable
Common Stock Purchase Warrant ( "Class A Warrants"). Each warrant is immediately
detachable and separately transferable from the common stock. The holder of
three (3) Units is entitled to exercise one Class A Warrant to purchase one
share of common stock and one Class B Redeemable Stock Purchase Warrant
(the"Class B Warrants") for four years from _____________, 2000 at a price of
$6.00 per share. The holder of one (1) Class B Warrant is entitled to purchase
one share of common stock for five years from ____________, 2000 at a price of
$9.00. The Class A Warrants and Class B Warrants are collectively referred to
herein as the "Warrants." The Warrants are redeemable by us during their term
upon 30 days written notice at a redemption price of $.001 each. The Warrants
remain exercisable during the 30-day notice period. Any holder who does not
exercise his Warrants prior to either their expiration or redemption, as the
case may be, will forfeit his right to purchase the underlying common stock. We
reserve the right to have standby purchasers exercise any or all of
The date of this prospectus is _________, 2000.
the Warrants which are not exercised at the end of the 30-day notice period for
a five day period thereafter. This prospectus also relates to an additional
3,000,000 shares of Common Stock and 1,000,000 Class A Warrants offered by
Selling Securityholders named in this prospectus.
THE UNITS HAVE BEEN REGISTERED ONLY IN THE STATE OF NEVADA AND MAY ONLY BE
TRADED IN SUCH STATE. PURCHASERS OF SUCH SECURITIES IN THIS OFFERING AND IN ANY
SECONDARY TRADING MARKET WHICH MAY DEVELOP MUST BE RESIDENTS OF NEVADA. HOWEVER,
POTENTIAL PURCHASERS IN THE OVER-THE-COUNTER TRADING MARKET WHO RESIDE IN STATES
OTHER THAN NEVADA SHOULD CONTACT THE COMPANY TO OBTAIN A NOTICE, IN THE FORM OF
A POST EFFECTIVE AMENDMENT TO THIS PROSPECTUS, OF ADDITIONAL STATES IN WHICH THE
SECURITIES HAVE BEEN REGISTERED OR ARE EXEMPT, IF ANY. SEE RISK FACTOR
"RESTRICTED RESALES OF THE OFFERED SECURITIES."
Prior to this offering there has been no public market for the units,
common stock or Warrants. No assurance can be given that such a market will
develop after the completion of this offering or that the units, common stock or
Warrants can be sold at or near the public offering price. The offering price of
the units and the exercise price and other terms of the Warrants have been
arbitrarily determined by us and are not necessarily related to any recognized
criteria of value.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED
BY THE SECURITIES AND EXCHANGE COMMISSION ("SEC") NOR HAS
THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
THE COMPANY IS A BLANK CHECK COMPANY WITHIN THE MEANING OF RULE 419 UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). As described herein, the Rule
requires that all securities issued and 90% of the funds received in the
offering be deposited in an escrow account; prohibits trading in the deposited
securities; requires a supplemental prospectus with audited financial statements
concerning the target business to be filed with the SEC and provided to
stockholders; and requires the Company to provide purchasers with the right to
rescind their investment and receive back their deposited funds prior to the
closing of the acquisition described in the supplemental prospectus; and
requires the Company to return the escrowed funds to the purchasers in this
offering if no acquisition is made within 18 months of the effective date of
this Prospectus.
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TABLE OF CONTENTS
Page
WHERE YOU CAN FIND MORE INFORMATION................................... 3
FORWARD LOOKING STATEMENTS............................................ 4
PROSPECTUS SUMMARY.................................................... 4
RISK FACTORS.......................................................... 11
DILUTION AND OTHER COMPARATIVE PER SHARE DATA......................... 25
USE OF PROCEEDS....................................................... 26
PLAN OF OPERATION..................................................... 27
PROPOSED BUSINESS..................................................... 28
MANAGEMENT............................................................ 38
PRINCIPAL AND SELLING STOCKHOLDERS.................................... 41
DESCRIPTION OF SECURITIES............................................. 42
PLAN OF DISTRIBUTION.................................................. 46
CERTAIN MARKET INFORMATION............................................ 48
ADDITIONAL INFORMATION................................................ 49
LEGAL MATTERS......................................................... 49
EXPERTS............................................................... 49
FINANCIAL STATEMENTS.................................................. F-1-6
You should rely only on the information contained in this prospectus. We
have not authorized anyone to provide you with information that is different.
This prospectus is intended to offer no securities other than the common stock
and the warrants. This prospectus may be used only where it is legal to offer
and sell these securities. The information in this prospectus may be accurate on
the date of this document only.
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WHERE YOU CAN FIND MORE INFORMATION
We file reports, proxy statements and other information with the SEC. You
may read and copy any document we file at the Public Reference Room of the SEC
at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and at the
Regional Offices of the SEC at Seven World Trade Center, Suite 1300, New York,
New York 10048 and at 500 West Madison Street, Suite 1400, Chicago, Illinois
60661-2511. Please call 1-800-SEC-0330 for further information concerning the
Public Reference Room. Our filings will be available to the public from the
SEC's website at www.sec.gov. We will distribute to our stockholders annual
reports containing audited financial statements.
We will not acquire a target business if audited financial statements
cannot be obtained for such target business. Additionally, management will
provide the public stockholders with, and file with the SEC, a supplemental
prospectus containing audited financial statements of the prospective target
business to assist them in assessing the target business for purposes of
confirming their investment. While the requirement of audited financial
statements may limit the pool of potential target businesses which we may
acquire, management believes that there are many businesses potentially
available for acquisition that either have or
3
can produce audited financial statements, although there can be no assurance
that the Company will be able to successfully conclude an acquisition of any of
such businesses.
FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements that involve risks and
uncertainties. These statements relate to future events or our future financial
performance. In some cases, you can identify forward-looking statements by
terminology including "could," "may," "will," "should," "expect," "intend,"
"plan," "anticipate," "believe," "estimate," "predict," "potential," "continue"
or "opportunity," the negative of these terms or other comparable terminology.
These statements are only predictions. Actual events or results may differ
materially. In evaluating these statements, you should specifically consider
various factors, including the risks described above and in other parts of this
prospectus. These factors may cause our actual results to differ materially from
any forward-looking statements.
Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, levels of
activity, performance, or achievements. We are under no duty to update any of
the forward-looking statements after the date of this prospectus to conform them
to actual results or to changes in our expectations.
PROSPECTUS SUMMARY
The following summary information is qualified in its entirety by reference
to the more detailed information and financial statements, including the notes
thereto, appearing elsewhere in this prospectus. Each prospective investor is
urged to read this prospectus in its entirety.
The Company
Crest View, Inc. was organized under the laws of the State of Nevada on
January 20, 2000. We are a brand new enterprise in our embryonic and promotional
stages of development and have not transacted any business other than
organizational matters. We have no full-time employees and no material assets.
We were formed to serve as a vehicle to raise capital to acquire a business
(the "target business") which may have potential for profit through a merger,
acquisition of stock or assets or other business combination or strategic
transaction ( such merger, acquisition or other transaction being herein
referred to as an "acquisition"). We are considered a "blank check" company in
that we have no revenues, own no operating business and have no understanding or
arrangement to acquire any target business and have designated no specific
geographical area, industry or type of operation in which we will seek to
participate. In addition, although our management believes that our ability to
acquire a target business is enhanced by our willingness to invest in high risk
ventures, our flexibility in structuring the transaction, including a
willingness to surrender control of our company, and our status as a publicly
held entity, there is and can be no assurance that we will be able to acquire
any such target business that we identify subsequent to this offering , or that
any of our
4
activities, even after an acquisition of a business, will be profitable.
Furthermore, while we could possibly participate in more than one acquisition,
in all likelihood, as a result of our extremely limited financial resources we
will be able acquire only a single target business and engage in only a single
acquisition before the existing stockholders of the Company and the purchasers
in this offering lose control of the Company. We are also unlikely to be able to
do more than one acquisition because of the legal requirement that before the
shares sold in this offering and the proceeds therefrom can be released from
escrow we acquire a target business with a fair market value equal to at least
80% of the maximum proceeds to the Company from this offering, including
proceeds received or to be received upon the exercise of the Warrants, but
excluding amounts payable to non-affiliates for underwriting commissions,
underwriting expenses and dealer allowances. The inability of management to do
more than one acquisition will limit the investors of any ability to have the
Company diversify its risk See "Risk Factors" and "Proposed Business."
Our investors must be prepared to rely completely on the ability of our
management, which in the exercise of its sole and unlimited discretion, will
investigate, analyze and ultimately select the target business which we will
acquire. We believe that the skills and expertise of our officers, directors and
stockholders, their collective access to acquisition opportunities and ideas,
their industry and academic contacts and their proven management abilities will
enable us to successfully identify a target business and effect an acquisition.
An acquisition may be effected by merger, exchange of capital stock, acquisition
or exchange of stock or assets or other similar type of transaction, using cash,
the Company's equity or debt securities or a combination thereof as payment of
the purchase price. In order to minimize potential conflicts of interest
relating to non arms-length transactions, we will not merge with or acquire any
entity in which our officers, directors or non-public stockholders, or their
respective affiliates, serve as officers, directors or partners or own or hold
an ownership interest, nor pay to any of them finder's fees for introducing to
us a target business subsequently acquired by us. We may ultimately acquire more
than one business; however, our initial acquisition must be with a target
business whose fair market value is at least 80% of the maximum proceeds to the
Company from this offering, including proceeds received or to be received upon
the exercise of the Warrants, but excluding amounts payable to non-affiliates
for underwriting commissions, underwriting expenses and dealer allowances. We
have no plans, arrangements or understandings with any prospective acquisition
candidates and have not targeted any business for investigation and evaluation.
See "Business - Fair Market Value of Target Business."
To date, our efforts have been limited to organizational activities. We
will not engage in any substantive commercial business immediately following
this offering and, until the consummation of an acquisition, our only activities
will be to evaluate and select an appropriate target business and to structure,
negotiate and consummate the acquisition. The implementation of our business
plan is dependent upon the successful consummation of this offering. See
"Proposed Business."
Our management consists of persons with extensive experience in operating
public companies, seeking out and merging with public shell companies, financial
public relations, legal services and interfacing with the investment banking
community. They have each been engaged in these capacities for both public and
privately held companies for more than 20 years. The officers
5
and directors of the Company (see "Management" for more detailed biographical
information) are as follows:
Johnny R. Thomas, Chief Executive Officer, President, Treasurer and sole
director since our formation, has been a Managing Member of Falcon Financial
Group LLC since January 14, 2000 and since March 1999, has been engaged in the
business of venture capital. Falcon is engaged in the business of providing
assistance or advice to private companies on capital formation and on becoming a
publicly traded company and introductions to investment banking firms. Prior
thereto, from April 1, 1994 until February 22, 1999 he served as Chairman of the
Board and Chief Executive Officer of AgriBioTech ("ABT"), a director of ABT
since September 30, 1993, and was President of ABT from April 1, 1994 until
December 31, 1997. On January 25, 2000, approximately 11 months after Mr. Thomas
resigned from ABT, ABT and several of its subsidiaries filed a voluntary case
with the United States Bankruptcy Court in the District of Nevada under Chapter
11 of the United States Bankruptcy Code. ABT is operating its business as a
debtor in possession. Prior thereto, Mr. Thomas was President, Chairman of the
Board and Chief Executive Officer of FiberChem, Inc. ("FCI") from its inception
in December 1986 until March 31, 1994. Dr. Thomas received his Ph.D. degree in
genetics/plant breeding from Oregon State University in 1966.
Elliot H. Lutzker, Secretary since our formation, is a senior partner in
the law firm of Snow Becker Krauss P.C., counsel to the Company. He has been a
partner with Snow Becker Krauss P.C. since 1985 and was formerly an attorney
with the Division of Enforcement of the U.S. Securities and Exchange Commission.
Our offices initially will be located at 1700 W. Horizon Ridge Parkway,
Suite 202, Henderson, NV 89012. Our telephone number is (702) 614-1750.
Offering Proceeds Held in Escrow
The gross proceeds of this offering prior to payment of offering expenses
will be $12,000. Ninety percent (90%) of such amount, or $10,800, will be placed
in an escrow account maintained by an insured bank or savings and loan
association and invested in either FDIC insured bank deposits, securities of any
registered open-end investment company that holds itself out as a money market
fund ( a "money market fund") meeting the applicable conditions of the
Investment company Act of 1940, as amended (the "Investment Company Act") or
United States government securities that can be readily sold without any
dissipation of the offering proceeds. The portion of the escrow account
allocable to each purchaser of securities in this offering will not be available
for use by the Company until the purchaser, at the time of an acquisition of a
target business, elects, in the manner and within the time periods described
below, to remain an investor (see Election to Remain an Investor). Therefore,
the proceeds held in the escrow account will not be available for our use for
any expenses related to this offering or expenses which we may incur prior to
the closing of an acquisition related to the investigation and selection of a
target business and the negotiation of an agreement to acquire the target
business. In the event a purchaser does not elect to remain an investor and the
Company proceeds with the acquisition, such purchaser's pro rata share of the
6
principal amount of the escrow account plus any interest or dividends earned
thereon will be returned to such purchaser and his Units will be canceled. In
the event the Company does not acquire a target business within 18 months after
the closing of this offering, all of the remaining escrowed proceeds will be
returned to the holders of securities purchased in this offering in proportion
to their investments, the Company will be liquidated and any assets held by the
Company after satisfaction of the Company's obligations will be distributed to
the such security-holders.
Escrow of Securities
The units and underlying securities sold in this offering will be placed in
escrow and must be issued in the name of the purchaser, remain in that form and
be held for the sole profit of purchasers who will have the voting rights
provided by Nevada state law.
Fair Market Value of Target Business; Available Authorized Shares
The Company will not acquire a target business unless the fair market value
of such business, as determined by our Board of Directors based upon standards
generally accepted by the financial community, such as earnings and potential
therefor, cash flow and book value ("fair market value"), is at least 80% of the
maximum proceeds to the Company from this offering, including proceeds received
or to be received upon the exercise of the Warrants, but excluding amounts
payable to non-affiliates for underwriting commissions, underwriting expenses
and dealer allowances. If the Board of Directors determines that the financial
statements of a proposed target business do not clearly indicate that the target
business has a sufficient fair market value, we will obtain an opinion from an
unaffiliated, independent investment banking firm which is a member of the
National Association of Securities Dealers, Inc. ("NASD") with respect to the
satisfaction of such criteria. Since any opinion, if obtained, would merely
state that fair market value meets the 80% of the proceeds of this offering
threshold, it is not anticipated that copies of such opinion would be
distributed to our stockholders, although copies will be provided to
stockholders who request it. See "Proposed Business-Selection of Target Business
and Structuring an Acquisition." The Company had 40,000,000 authorized shares of
Common Stock, of which 3,600,000 shares will be issued and outstanding upon
completion of this offering, 2,400,000 are reserved for issuance upon exercise
of the Warrants, and up to 34,000,000 are available for issuance, at the sole
discretion of Management, in connection with the acquisition of a target
business.
Stockholder Reaffirmation of Investment
After we sign a definitive agreement for the acquisition of a target
business, but prior to the consummation of any acquisition, we will give the
purchasers of the units offered hereby, (hereinafter the "public stockholders")
an opportunity to reaffirm their investments, even if the nature of the
acquisition would not require common stockholder approval under applicable state
law. See Election to Remain an Investor, below. We will proceed with the
acquisition only if at least 80% in interest of our public stockholders elect to
remain an investor within no less than 20 business days and no more than 45
business days from the effective date of the post-effective amendment to this
7
registration statement; provided, however, that we will not consummate any
acquisition if 20% or more in interest of the public stockholders do not make
such election.
Commitment of Initial Stockholders in the Event a Stockholder Vote is Required
If a vote of stockholders is required, all of our stockholders prior to
this offering, including all of our officers and directors ("initial
stockholders"), have agreed to vote the shares of common stock owned by them on
the date hereof in accordance with the vote of the majority of all other shares
of common stock ("public shares") voted on any acquisition.
Election to Remain an Investor
Within five business days after we file a post-effective amendment with
respect to a proposed acquisition, we will send the prospectus contained in the
post effective amendment, including any amendment or supplement(the
"Supplemental Prospectus")thereto, to each purchaser of securities in this
offering (hereinafter a "purchaser") by first class mail or other equally prompt
means. In the Supplemental Prospectus we will give each purchaser the right to
elect to remain an investor by giving notice to the Company within the 20 to 45
business day period from the effective date of the post-effective amendment that
we will specify in the Supplemental Prospectus. If a purchaser does not notify
us of his election to remain an investor within such 20 to 45 business day
period and the proposed acquisition is consummated, then within five business
days after the end of such period, we will send him his or her pro rata share of
the Escrow account, including interest or dividends earned thereon as at the end
of such period. Without taking into account interest or dividends, if any,
earned on the escrow account, the per Unit share of the escrow account would be
approximately $.02, or approximately the same as than the per-Unit offering
price. We will not consummate any acquisition if 20% or more in interest of the
purchasers are entitled to receive back their pro rata share of the escrow
account. We may, however, complete an acquisition once 80% or more in interest
of the purchasers elect to remain investors even if before the end of the 45
business day period. If we do not proceed with the acquisition, the Company may
elect to retain all of the proceeds of this offering, pending further efforts to
on the part of the Company to find a suitable target business within 18 months
from the closing of this offering.
Liquidation if No Acquisition
In the event the Company does not acquire a target business within 18
months after the closing of this offering, all of the remaining escrowed
proceeds will be returned to the holders of securities purchased in this
offering in proportion to their investment within five business days after the
end of such 18 month period. Upon notice from us, the escrow agent of the escrow
account will commence liquidating the investments constituting the escrow
account and will turn over the proceeds to the transfer agent for the common
stock for distribution to the public stockholders. In addition after
distribution of such escrowed funds, the Company will be dissolved and we will
distribute our remaining assets, if any, after satisfaction of our obligations
to all public stockholders in proportion to their respective equity interests in
us. The initial stockholders have waived their
8
respective rights to participate in any liquidation distribution with respect to
the shares of common stock owned by them on the date hereof. If we were to
expend all of the proceeds of this offering, other than the proceeds deposited
in the escrow account, prior to liquidation, and without taking into account
interest, if any, earned on the escrow account, the aggregate amount per-share
that would be distributed to each of the public stockholders both from the
escrow account and upon liquidation would be approximately $.02, approximately
equal to the per-Unit offering price.
A public stockholder shall be entitled to receive funds from the escrow
account only in the event of an acquisition such public stockholder does not
elect to remain an investor and the Company proceeds with the acquisition or in
the event the Company does not acquire a target business within 18 months after
the closing of this offering. In addition, in the event the acquisition is
required to be submitted to a vote of our common stockholders such as in the
case of some merger transactions, the public stockholder will have the right to
seek the appraised value of their shares. We believe that the amounts received
in an appraisal would not be more, and possibly less, than the pro rata portion
of the escrow account to which the public stockholder is otherwise entitled. In
no other circumstances shall a public stockholder have any right or interest of
any kind to or in the escrow account.
Risk Factors
This offering involves a high degree of risk, and investment in the offered
securities is not recommended for persons who cannot afford the loss of their
entire investment. Risk factors include our management's unusual unlimited
discretion over our direction, since investors will have no voice in the
selection of the target business acquired by us and only in the affirmation of
their investment; our limited financial resources, which are likely to prohibit
any diversification of risk; and intense competition in the pursuit of business
opportunities. Furthermore, the book value of the common stock immediately after
the completion of the offering will be substantially less than the public
offering price. See "Risk Factors" and "Dilution and other Comparative Per Share
Data."
The Offering
- ------------
Unit Offering Price...................................... $ 0.02
Securities Offered ...................................... 600,000 units (1)
Common Stock........................................ 600,000 shares
Class A Warrants.................................... 200,000 Warrants
Class B Warrants.................................... 200,000 Warrants
Selling Securityholders
Common Stock........................................ 3,000,000 shares (2)
Class A Warrants.................................... 1,000,000 Warrants
Class B Warrants.................................... 1,000,000 Warrants
9
Shares of Common Stock Outstanding as of the
date of this Prospectus ............................ 3,000,000 (2)
Shares of Common Stock Outstanding after the Offering .. 3,600,000 (3)
- ----------
(1) Each Unit consists of one share of our common stock and one-third of a
Class A Warrant. Three (3) Class A Warrants entitle the holder to purchase
one share of common stock and one Class B Warrant. One(1) Class B Warrant
entitles the holder to purchase one share of common stock. See "Description
of Securities."
(2) All of the issued and outstanding common stock held by selling
securityholders named in this prospectus. See "Selling Securityholders."
(3) Does not give effect to up to 1,200,000 shares of common stock reserved for
issuance upon exercise of each of the Class A and Class B Warrants. See
"Description of Securities."
Use of Proceeds
We will receive up to $12,000 of gross proceeds from the sale of the units
offered hereby if all 600,000 units are sold. Ninety (90%) percent of the
proceeds will be held in the escrow account and invested either in FDIC insured
bank deposits, a money market fund or United States government securities that
can be readily sold without any dissipation of the offering proceeds. The
portion of the escrow account allocable to each purchaser of securities in this
offering will not be available for use by the Company until the purchaser, at
the time of an acquisition of a target business, elects to remain an investor.
(See Election to Remain an Investor.) We expect to incur offering expenses of up
to approximately $20,000 consisting of legal, accounting, printing, Blue Sky and
state filing fees, which amounts, to the extent they cannot be paid out of our
capital, will be loaned to us by our Chief Executive Officer and principal
stockholder.
Summary Financial Information
The summary financial information set forth below is derived from the more
detailed financial statements appearing elsewhere in this prospectus. Such
information should be read in conjunction with such financial statements,
including the notes thereto.
June 30, 2000
Balance Sheet Data:
Total assets......................... $2,900
Deficit accumulated during
the development stage.............. $100
Shareholders' equity........................ $2,900
10
RISK FACTORS
The securities offered hereby are highly speculative and subject to
numerous and substantial risks, and they should not be purchased unless a
prospective investor can afford the loss of his entire investment. Therefore,
prospective purchasers of the securities offered hereby should carefully
consider the risk factors relating to our business and the purchase of the
common stock or Warrants, including, but not limited to, those risk factors
discussed below.
Recently Organized, Development Stage Company.
We were organized on January 20, 2000, and we have extremely limited
resources, and no revenues. We are in the development stage. Neither us, nor any
of our officers, directors, promoters, affiliates or associates has conducted
any discussions, and there are no plans, arrangements or understandings, with
any prospective acquisition candidates or their representatives. To date, our
efforts have been limited primarily to organizational activities and this
offering. Accordingly, there is only a limited basis upon which to evaluate our
prospects for achieving our intended business objectives. Although certain of
our officers have had prior experience relating to the evaluation and
acquisition of businesses, we have no such experience. Accordingly, investors
must rely upon our management to a greater extent then would be the case in
other investments, and no person should purchase any securities if he is not
willing to entrust such responsibilities solely to our management. We will not
generate any revenues until, at the earliest, after the consummation of an
acquisition. Moreover, there can be no assurance that any acquired business will
derive any material revenues from its operations or operate on a profitable
basis. See "Management."
"Blank Check" Offering; Proceeds of Offering Not Specifically Allocated:
Risk of Delay in Investing in a Target Business.
We are a "blank check" company in that we were formed for the purpose of
acquiring a target business, to wit, complete or partial interests in
properties, products and/or businesses believed by Management to hold potential
for profit. Potential purchasers in this offering should be aware that, Rule 419
of the SEC rules relates to "blank check" offerings. According to the SEC the
purpose of the regulation is to strengthen regulation of securities filings by
blank check companies, which Congress has found to have been a common vehicle
for fraud and manipulation in the penny stock markets. We are a "blank check"
company within the meaning of such Rule 419. See "Use of Proceeds" and "Proposed
Business."
We do not propose to restrict our search for business opportunities to any
industry or to businesses which have achieved any particular stage of
development. Accordingly, we will consider firms which have recently commenced
operations, are developing companies in need of additional funds for expansion
into new products or markets, are seeking to develop a new product or service,
are established businesses either experiencing financial or operating
difficulties and in need of the limited additional capital or merely desirous of
establishing a public trading market for its common
11
stock, among others. Therefore, we may engage in essentially any type and stage
of business. As of the date hereof we have no business opportunities under
contemplation.
It is impossible to predict the manner in which we may participate in an
acquisition. Specific target businesses will be reviewed as well as our needs
and the promoters of the opportunity, and, upon the basis of that review and the
relative negotiating strength and that of such promoters, the legal structure or
method deemed by our management to be suitable will be selected. Such structure
may include, but is not limited to, leases, purchase and sales agreements,
licenses, joint ventures and other contractual arrangements, and we may act
directly or indirectly through an interest in a partnership, corporation or
other form of organization. Implementing such structure may require us to merge,
consolidate or reorganize with other corporations or forms of business
organization, and there is no assurance that we would be the surviving entity.
Typically, however, a blank check company like ours would participate in a
target business by issuing to the owners thereof a block of shares of common
stock which would transfer to the beneficial owners of such shares control of
the blank check company. As part of such a transaction, all of our directors
likely will resign, and new directors likely will be appointed without any vote
by stockholders. See Risk Factor "Likely Change of Control."
We do not yet have any understanding or arrangement to obtain any target
business, and we may be unable to find one upon favorable terms. Therefore,
investors will be entrusting their funds to our management, which will have
complete and unlimited discretion in determining specific expenditures of the
funds. This is the principal reason we may be described as a "blank check" or
"blind pool" offering.
"Blank check" offerings are inherently characterized by an absence of
substantive disclosure (other than general descriptions relating to the intended
application of the net proceeds of the offering), including, without limitation,
disclosure of the bases on which to evaluate the merits of an investment.
Accordingly, investors in this offering will have virtually no substantive
information available at this time for advance consideration of any specific
target business, which increases the uncertainty and risk of this investment.
The absence of such disclosure can be contrasted with the disclosure which would
be necessary if we already had identified a target business to acquire or if the
entity possessing such opportunity were to effect an offering of its securities
directly to the public. Furthermore, there can be no assurance that an
investment in the securities offered hereby will not ultimately prove to be less
favorable to investors in this offering than such a direct investment, if it
were available. Finally, there can be no assurance as to when we will locate a
suitable target business to acquire, and our on-going inability to find one
would cause the proceeds of the offering to remain uncommitted indefinitely
after the closing, of this offering, which could cause a substantial decline in
the market value of the securities offering hereby.
Dependence on Part-Time Management.
Our success will largely be dependent upon our officers, directors and
advisors for implementing our business plan, although none of them is subject to
any employment agreement
12
with us, or key man life insurance policy of which we are the beneficiary, or is
required to make any specific amount or percentage of his business time
available to us. Accordingly, our management should be expected to manage our
affairs only on a part-time or as-needed basis, which may be inadequate to
properly conduct our business. The loss of the services of such individuals
could have a material adverse effect on our ability to successfully achieve our
objectives. Although our management may retain independent professionals to
evaluate potential business opportunities in their respective areas of
expertise, there can be no assurance that they will. See Risk Factor,
"Limitations of Due Diligence Investigations" and "Management."
Selection of Business Opportunities.
As of the date of this prospectus, we have not identified any potential
target business to acquire. Our management intends to structure our acquisition
of a target business in a way which does not provide stockholders with the legal
right to review, vote on or otherwise participate in our decision to acquire a
target business, and our management does not intend to provide stockholders with
any opportunity to do so unless applicable law so requires. However, under the
SEC's rules you will have the right to rescind your investment and receive 90%
of your money back with any interest and dividends earned thereon. Accordingly,
the stockholders will not participate in the determination of our choice of a
target business in which to invest, however, will receive information on the
target business prior to closing of such transaction.
Conflict with Another "Blank Check" Company Controlled by Management.
Johnny R. Thomas serves as the sole director, Chief Executive Officer,
President and Treasurer and is a principal stockholder of another "blank check"
company, Twin Lakes, Inc., ("Twin Lakes") that contemplates the same business
activities as the Company and thus competes directly with the Company. Twin
Lakes is in the process of registering an initial public offering of its
securities with the SEC on virtually identical terms as the offering of the
securities of the Company pursuant to its prospectus. Mr. Thomas may register
securities for other "blank check" companies in the future. As a result, Mr.
Thomas will have a conflict of interest with respect to prospective target
businesses and presenting corporate opportunities to acquire target businesses
to the Company. In general, officers and directors of a corporation incorporated
under the laws of the State of Nevada are required to present certain business
opportunities to such corporation. As a result of Mr. Thomas's business
associations with several companies he will have conflicting interests.
Therefore, the Company has agreed that with respect to conflicts of interest
among these companies related to the allocation of opportunities to acquire a
target business, the Company will waive any conflict or claim related to Mr.
Thomas' fiduciary duty. However, the conflict may be mitigated by the fact that
Mr. Thomas has the same ownership interest in Twin Lakes as he does in the
Company, and Twin Lakes and the Company have identical stockholders, at least
initially. The conflict will be more significant should, at a later date, these
facts change.
13
Other Conflicts of Interest.
Each of our officers and directors has other business interests to which he
devotes his primary attention and virtually all of his business time. There is
no requirement for any of the officers or directors to devote even a substantial
amount of time to our business. As a result, conflicts of interest may arise in
the allocation of our management time among various business and with respect to
any joint ventures or other contractual relationships that may be entered into
between us and any of our affiliates, which can only be resolved through
exercise by the officers and directors of such judgment as is consistent with
their fiduciary duties to us which arise under statutory laws and general
corporate law. Also, Mr. Thomas is involved in one other "blank check" company
similar to ours, and may in the future become affiliated with other "blank
check" companies.
Conflicts may arise between the interests of the members of our management
and/or our principal stockholders on the one hand, and their involvement in
other business ventures on the other hand. Accordingly, as a result of their
multiple business affiliations these individuals may have conflicts of interest
with respect to determining to which entity a business opportunity should be
presented.
In order to minimize potential conflicts of interest relating to non
arms-length transactions, (1) we will not merge with or acquire any target
business in which its officers, directors or non-public stockholders, or their
respective affiliates, serve as officers, directors or partners or own or hold
an ownership interest, or (2) neither ourselves nor the acquired target business
or its principals will pay to any of them finder's fees or similar compensation
whether in cash, securities or otherwise, for introducing to us a target
business subsequently acquired by us.
In addition to these conflicts, commencing on the date of this prospectus,
an affiliate of our President and principal stockholder has agreed that, until
the acquisition of a target business, it will make available to us, for an
administrative fee of $100 per month, a small amount of office space, as well as
certain office and secretarial services, as may be required by the Company from
time to time.
Dependence on Outside Advisors.
In order to supplement the business experience of management, we may be
required to employ accountants, technical experts, appraisers, attorneys or
other consultants or advisors. The selection of any such advisors will be made
by our management and without any control by stockholders. Furthermore, it is
anticipated such persons may be engaged on an ad hoc basis without a continuing
fiduciary or other obligation to us. We do not intend to hire outside
consultants or advisors on a retainer basis.
14
Our Possible Liquidation.
If we do not consummate an acquisition within 18 months from the completion
of this offering, we will distribute to all public stockholders in proportion to
their respective equity interests us, an aggregate sum equal to the amount in
the escrow account, inclusive of any interest thereon, plus any remaining net
assets. We will then liquidate the Company and the remaining assets, if any,
held by the Company after satisfaction of the Company's obligations will be
distributed to the public stockholders. It is likely that, in the event of such
distribution of the amounts held in the escrow account and of any remaining
assets upon liquidation, the aggregate distribution will be less than the
initial per-share public offering price (assuming no value is attributed to the
warrants included in the Units offered hereby) as a consequence of the expenses
of this offering. If we were to expend all of the proceeds of this offering,
other than the proceeds deposited in the escrow account, prior to liquidation,
and without taking into account interest, if any, earned on the escrow account,
the per-share liquidation price would be approximately $.02 approximately equal
to the per Unit offering price. The initial stockholders have waived their
respective rights to participate in any liquidation distribution with respect to
the shares of common stock owned by them on the date hereof.
A public stockholder shall be entitled to receive funds from the escrow
account only in the event the Company does not consummate an acquisition
satisfying the requirements of Rule 419 within 18 months or if he does not elect
to remain an investor in connection with an acquisition which we actually
consummate. In no other circumstances shall a public stockholder have any right
or interest of any kind to and in the escrow account.
Limitations of "Due Diligence" Investigations.
Our limited funds and the lack of full-time management may make it
impracticable to conduct a complete or substantial "due diligence" investigation
and analysis of a target business before we commit our capital or other
resources thereto. Therefore, management decisions may be made without detailed
feasibility studies, independent analysis, market surveys and the like which, if
we had more funds available to us, would be desirable. We will be particularly
dependent in making decisions upon information provided by the promoter, owner,
sponsor or others associated with the target business seeking our participation,
and there can be no assurance that our management will have the relevant
background knowledge to accurately assess such target business or, even it does,
that its assessment will prove to be correct. In fact, as potentially available
business opportunities are expected to be in different industries and at various
stages of development, the task of comparative investigation and analysis of
such business opportunities will be extremely difficult and complex. Potential
investors must recognize that due to our limited capital available for
investigation and management's limited experience in business analysis we may
not discover or adequately evaluate adverse facts about the opportunity to be
acquired.
Unascertainable Nature and Risk of Potential Business Opportunities.
We have not identified the target business in which we will attempt to
obtain an interest. We therefore cannot describe the specific risks presented by
such businesses. In general, it may be expected that any such business will
present such a high level of risk that conventional financing is
15
unavailable to it on favorable terms, if at all, and this would be especially
applicable to a business interested in a transaction with us in order to obtain
access to our extremely limited cash on hand. Such business may involve an
unproven product, technology or marketing strategy, the viability and success of
which is uncertain, or possess management which may lack the necessary skills,
qualifications or abilities to manage a public company. To the extent we
complete an acquisition with a financially unstable company, or a company in its
early stage of growth, or without earnings, the Company will become subject to
all of the risks inherent in the operation of such a business. Although our
management will try to evaluate the risks inherent in any particular target
business, there can be no assurance that we will properly ascertain all such
risks.
Alternatively, a business opportunity may be presented by a company which
does not need any additional capital but which desires to establish a public
market for its common stock while avoiding what it may deem to be the adverse
consequences of itself undertaking a public offering, such as time delays,
significant expense, possible loss of voting control and the disclosures
required by federal and applicable state securities laws.
An acquired target business may be in competition with larger, established
firms with greater personnel, financial and other resources with whom it is
likely to be at a distinct competitive disadvantage. The specific risks of a
target business will not be disclosed to our stockholders prior to its
acquisition. Our investment in a target business may be expected to be highly
illiquid and could result in a total loss to us if the opportunity is
unsuccessful. Furthermore, the structure of an acquisition with a target
business, which may take the form of a merger, exchange of capital stock or
stock or asset acquisition, presently cannot be determined since we have not had
any preliminary contacts, discussions or understandings with representatives of
any prospective target business regarding the possibility of an acquisition. See
"Proposed Business-Selection and Evaluation of Target Businesses."
Discretionary Use of Proceeds.
Our management has broad discretion with respect to the specific
application of the net proceeds of this offering, although substantially all of
the net proceeds of this offering are intended to be applied toward completing
an acquisition. As of the date of this prospectus, we have not identified a
prospective target business and, accordingly, investors in this offering do not
have any substantive information available for advance consideration of any
acquisition. Notwithstanding the foregoing, in connection with completing an
acquisition, we intend to furnish our stockholders with a supplemental
prospectus which will include a description of the operations of the target
business and audited historical financial statements thereof. Such supplemental
prospectus will be filed with, and be subject to the review of, the SEC.
Limited Ability to Evaluate Management of Target Business.
While our ability to successfully effect an acquisition will be dependent
upon certain of our key personnel, there can be no assurance that the key
personnel will have sufficient experience or
16
knowledge relating to the operations of the particular target business.
Furthermore, although we intend to closely scrutinize the management of a
prospective target business in connection with evaluating the desirability of
effecting an acquisition, there can be no assurance that our assessment of
management will prove to be correct. In addition, there can be no assurance that
management of the target business will have the necessary skills to manage a
company intending to embark on a program of business development. See "Proposed
Business-Selection and Evaluation of Target Businesses."
Offering To Be Conducted in Accordance with Rule 419.
This offering is being conducted in accordance with Rule 419 under the
Securities Act ("Rule 419"), which regulates securities offerings by "blank
check" companies. Rule 419 requires that the securities to be issued and the
funds received in a blank check offering be deposited and held in an escrow
account until an acquisition meeting specified criteria is completed. Before the
acquisition can be completed and before the funds and securities can be
released, the blank check company is required to update its registration
statement with a post-effective amendment and, after the effective date thereof,
the blank check company is required to furnish investors with a supplemental
prospectus (which forms a part of the post-effective amendment to its
registration statement) containing specified information, including a discussion
of the business and the audited financial statements of the proposed acquisition
candidate. According to Rule 419, the investors must have no less than 20 and no
more than 45 days from the effective date of the post-effective amendment to
decide whether to remain an investor or require the return of their investment
funds. Any investor not making any decision within such 45-day period is
automatically entitled to receive a return of his investment funds. Unless at
least 80% in interest of investors elect to remain investors, all of the
deposited funds in the escrow account must be returned to all investors and none
of the securities will be issued. Rule 419 further provides that if the blank
check company does not complete an acquisition meeting the specified criteria
within 18 months, all of the deposited funds must be returned to investors.
Lack of Diversification.
Regardless of the amount of proceeds raised from this offering, we do not,
as a matter of policy, intend to participate in more than one acquisition. Such
lack of diversification means that we will not benefit from the possible
spreading of risks or offsetting of losses, and we will be subject to the
economic and regulatory risks applicable to the particular industry in which the
target business operates. In addition, the impact of this non-diversification
would be heightened in the event we participate in a target business dependent
on the development or market acceptance of a single or limited member of
products, processes or services. This lack of diversification also means that
the failure of our acquisition would have a disastrous effect on us and the
value of an investment in the securities offered hereby, and probably would
result in a total loss to investors.
17
Requirement for Audited Financial Statements.
We will require audited financial statements from prospective acquisition
candidates. However, no assurance can be given that audited financials always
will be available to us, and in such cases we will not be able to make such
acquisition. We will be subject to Section 15(d) of the Securities Exchange Act
of 1934 (the "Exchange Act") and required to furnish certain information about
significant acquisitions, including certified financial statements for any
business that we acquire. Consequently, acquisition prospects that have not or
are unable to obtain the required certified statements at the time of closing
may not be appropriate for acquisition so long as we are subject to the
reporting requirements of the Exchange Act.
Need for Additional Financing.
The net proceeds of this offering available to us may not be adequate for
us to acquire an interest in any property, business or opportunity which we
ordinarily would choose, and we may have to settle for a less attractive one. We
do not, however, believe that we will be foreclosed from all business
opportunities. In addition, even assuming that we do have sufficient funds to
make such acquisition, it can be anticipated that we will not have sufficient
capital to fully exploit any property, business or opportunity acquired.
Accordingly, our ultimate success may depend upon our ability to raise
additional equity or obtain debt financings or to have other parties bear a
portion of the required costs to further develop or exploit any business
opportunity in which we become involved. There is no assurance that funds will
be available from any source, and if not available, it will be necessary for us
to limit our operations to those that can be financed from the immediate
proceeds of this offering.
Investment Company Act.
The regulatory scope of the Investment Company Act of 1940, as amended (the
"Investment Company Act"), which was enacted principally for the purpose of
regulating vehicles for pooled investments in securities, extends generally to
companies engaged primarily in the business of investing, reinvesting, owning,
holding or trading in securities. However, the Investment Company Act may also
be deemed to be applicable to a company which does not intend to be
characterized as an investment company but which, nevertheless, engages in
activities which may be deemed to be within the definitional scope of certain
provisions of the Investment Company Act. We believe that our anticipated
principal activity, which will involve acquiring a target business, will not
subject us to regulation under the Investment Company Act. Nevertheless, there
can be no assurance that we will not be deemed to be an investment company,
especially during the period prior to acquiring a target business. In the event
we are deemed to be an investment company, we may become subject to certain
restrictions relating to our activities, including restrictions on the nature of
our investments and the issuance of securities. In addition, the Investment
Company Act imposes certain requirements on companies deemed to be within its
regulatory scope, including registration as an investment company, adoption of a
specific form of corporate structure and compliance with certain burdensome
reporting, recordkeeping, voting, proxy, disclosure and other rules and
regulations. In the event of characterization of us as an investment company,
the failure by us to satisfy regulatory
18
requirements, whether on a timely basis or at all, would, under certain
circumstances, have a material adverse effect on us. See "Proposed Business -
Investment Company Act Considerations."
Likely Change of Control.
Purchasers of the units will give our management broad discretionary powers
to invest the proceeds from the offering. As part of the acquisition of a target
business the current Board of Directors is likely to authorize the issuance of a
majority of our common stock to the stockholders of the opportunity and to
resign after appointing their successors; and purchasers of the units would be
unable to elect or remove such new directors.
Competition for Acquisition Opportunities.
The search for potentially profitable acquisition opportunities is
intensely competitive, especially since many "blank check" companies have gone
public, many with net proceeds and other financial resources, and technical and
personnel resources, substantially greater than those that will be available to
us. Many of these entities, including venture capital funds, leveraged buyout
funds and operating business, are well established and have extensive experience
in connection with identifying and effecting acquisitions directly or through
affiliates. There is no assurance that we will be able to compete successfully
in acquiring an attractive target business. While we believe that there are
numerous potential target businesses that we could acquire with the net proceeds
of this offering, our ability to compete in acquiring certain target businesses
may be limited by our available our financial resources (including our ability
to obtain additional financing). This inherent competitive limitation gives
others an advantage in pursuing the acquisition of certain target businesses.
Further, our obligation to seek public stockholder affirmation of their
investment may delay the consummation of a transaction; and may place us at a
competitive disadvantage in successfully negotiating an acquisition. See
"Proposed Business-Competition."
Absence of Public Market.
Prior to this offering there has been no public trading market for the
Company's securities. Since no one acting on behalf of us is likely to make any
effort to encourage any broker-dealer to make a market for our securities until
after such time as we acquire a target business or enter into a letter of intent
to do so, no assurance can be given that a regular trading market will develop
at the conclusion of this offering for the units, common stock and/or Warrants
or, if developed, that any such market will be sustained. If such a market does
develop the price of such securities may be volatile. Our securities are
expected to be quoted on NASD's OTC Bulletin Board.
Arbitrary Public Offering and Warrant Exercise Prices.
The public offering price of the units, and the exercise price and other
terms of the Warrants, are arbitrary not to be considered an indication of our
actual value. Such prices do not necessarily
19
bear any relationship to our book value, assets or current or prospective
earnings, or to any other recognized criteria of value.
Possible Issuance of Substantial Amounts of Additional Shares Without
Stockholder Approval
Upon completion of this offering and assuming no exercise of the Warrants,
we would have 3,600,000 shares of common stock issued and outstanding, 2,400,000
shares reserved for issuance upon exercise of the Warrants and 34,000,000 shares
unissued and not reserved for specific issuances. All of such shares may be
issued without any action or approval by our stockholders. Although there are no
present plans, agreements, commitments or undertakings with respect to our
issuance of any such shares, or securities convertible into any such shares, it
is likely that a substantial number of such shares will be used in connection
with our acquisition of a target business, and any such issuances would
substantially dilute our percentage ownership held by purchasers of the offered
common stock and could adversely affect prevailing market prices.
Control by Insiders.
After completion of this offering the non-public stockholders will continue
to exercise effective control of us by virtue of owning approximately 83% of our
outstanding common stock. Accordingly, they will be able effectively to elect
all of our directors of and to cause us to declare or refrain from declaring
dividends, to increase the authorized capital, to issue additional shares of
stock and generally to direct our affairs and the use of all funds available to
us. Conversely, the public investors will have no effective voice in our
management. See "Principal Stockholders".
Tax Considerations.
As a general rule, Federal and state tax laws and regulations have a
significant impact upon the structuring of acquisitions. We will evaluate the
possible tax consequences of any prospective acquisition of a target business
and will endeavor to structure the same so as to achieve the most favorable tax
treatment to us, the acquired business and their respective stockholders. There
can be no assurance, however, that the Internal Revenue Service (the "IRS") or
appropriate state tax authorities will ultimately assent to our tax treatment.
To the extent the IRS or state tax authorities ultimately prevail in
recharacterizing such treatment there may be adverse tax consequences to us, the
acquired business and/or our respective stockholders.
Possible Payment of Finder's Fees.
A person or entity who introduces us to a prospective target business
ultimately acquired by us may be entitled to receive a finder's fee in
consideration therefor. We are not presently obligated to pay any finder's fees.
We will not pay to our officers, directors and non-public stockholders, and
their respective affiliates, any such fee. By virtue of having signed the
registration statement of which
20
this prospectus is a part, our directors and officers confirm that they know of
no circumstances under which, through their own initiative, this understanding
will change.
No Dividends.
We have not paid any dividends on our common stock to date and do not
intend to pay dividends prior to the acquisition of a target business. The
payment of dividends after any such acquisition, if any, will be within the
discretion of our Board of Directors, which may be expected to take into account
our revenues and earnings, if any, capital requirements and general financial
condition.
Potential Adverse Effect of Sale of Selling Securityholders' Shares on the
Trading Price of the Common Stock and on Our Ability to Consummate an
Acquisition.
This prospectus is available for use by selling securityholders for the
sale in the public trading markets, if such markets develop, of up to 3,000,000
shares of common stock and 1,000,000 Class A Warrants presently owned by them.
The public sale or resale, or the possibility of the public sale or resale, of
all or a portion of such shares or Warrants could have an adverse effect on the
trading price of the shares. A decline in the price of our shares, may also
impair our ability to consummate an acquisition of a target business, or if we
are able to consummate an acquisition to do so on favorable terms.
Potential Adverse Effect of Exercise/Redemption of Warrants.
The Warrants may be redeemed by us at a price of $.001 per Warrant upon 30
days' written notice at any time during the Warrant exercise period. There can
be no assurance that we, although we currently intend to do so, will redeem the
Warrants at a time when they can be exercised pursuant to a current prospectus,
and any redemption in the absence of such a prospectus could subject us to
litigation. Redemption of the Warrants would force the Warrant holder to
exercise the Warrants, and pay the exercise price, at a time when it may be
disadvantageous for the holder to do so, to sell the Warrants at the current
market price for the Warrants when he might otherwise wish to hold the Warrants
for possible additional appreciation, or to accept the redemption price, which
is likely to be substantially less than the market value of the Warrants at the
time of redemption. Any holder who does not exercise his Warrants prior to their
expiration or redemption, as the case may be, will forfeit his right to purchase
the shares of common stock underlying his Warrants. We reserve the right to have
standby purchasers exercise any or all of the Warrants which are not exercised
at the end of the 30-day notice period for a five day period thereafter. See
"Description of Securities - Redeemable Warrants."
21
Current Registration Statement and Blue Sky Qualification Required for
Exercise of Public Warrants.
In order for holders of the Warrants included in the units offered hereby
to exercise such Warrants there must be a current registration statement on file
with the SEC to continue registration of the shares of common stock underlying
the Warrants. Absent the occurrence of any material changes in our affairs, this
prospectus will become stale under Section 10(a)(3) of the Act on __________,
2001(1), and we will instruct our Warrant Agent to suspend the exercise of
Warrants when this or any future prospectus is no longer current. We intend to
keep the registration statement effective with respect to the Warrants for so
long as they remain exercisable by filing appropriate post-effective amendments.
However, maintenance of an effective registration statement will subject us to
substantial continuing expenses for legal and accounting fees, and there can be
no assurance that we will be able to maintain a current registration statement
throughout the period during which the Warrants remain exercisable, in which
event the Warrants would no longer be exercisable and would be deprived of
value. Accordingly, it is possible that at the time the Warrants expire they
might not be exercisable and would expire worthless, even if the common stock
was trading above the Warrant exercise price.
The Warrants and underlying common stock will be saleable only in those
states in which such securities have been registered for sale or are exempt from
such requirements to wit, Nevada, which do not contain any provisions
specifically related to offerings of "blank check" companies such as us.
Although the units will not knowingly be sold to purchasers in jurisdictions in
which the units are not registered or otherwise qualified for sale, purchasers
may buy units in the after-market or may move to jurisdictions in which the
Warrants and the common stock underlying the Warrants are not so registered or
qualified. While certain exemptions in the securities or "blue sky" laws of
certain states might permit the Warrants to be transferred therein even though
the units were not initially registered for sale therein, we will be prevented
from issuing common stock to residents of any state upon exercise of the
Warrants unless either the common stock issuable upon the exercise thereof is
registered in that state or an exemption from registration is available. We may
decide not to seek, or may not be able to obtain, registration for the issuance
of common stock in all of the states in which the ultimate holders of the
Warrants reside during the period when the Warrants are exercisable. In this
event, we would be unable to issue common stock to those persons desiring to
exercise their Warrants unless and until the Warrants and the common stock were
qualified for sale in such jurisdictions or an exemption from such qualification
exists. There can be no assurance that we will effect any required
qualification, in default of which the Warrants would become unexercisable and
deprived of value. See "Description of Securities" and "Underwriting."
Qualification Requirements for NASDAQ Securities.
Based upon current qualification requirements none of the units, common
stock or Warrants will qualify for inclusion in the NASDAQ system. We will
attempt to acquire a target business
- ----------
(1) 9 months from the effective date of this prospectus.
22
which, either by virtue of such opportunity's own financial position or with the
benefit of additional financing from a private placement, would allow us to
satisfy the then applicable listing requirements, although there can be no
assurance that such acquisition would enable us to do so. The National
Association of Securities Dealers, Inc. (the "NASD"), which administers the
NASDAQ system, has strict criteria for both initial and continued NASDAQ
eligibility. In the event, after effecting the acquisition of a target business,
we were to meet the criteria for initial inclusion in NASDAQ, the shares could
nonetheless be delisted thereafter in the event we were unable to obtain any
additional financing we required to meet the maintenance standards, and such
delisting could cause a precipitous deadline in the price of the shares and
adversely affect their liquidity in the secondary market.
Limitations on Broker-Dealer Transactions in the Offered Securities.
Our securities are covered by an SEC rule that imposes additional sales
practice requirements on broker-dealers who sell such securities to persons
other than established customers and accredited investors (generally
institutions with assets in excess of $5,000,000 or individuals with net worth
in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly
with their spouses). For transactions covered by this rule, the broker-dealer
must make a special suitability determination for the purchaser and receive the
purchaser's written agreement to the transaction prior to the sale.
Consequently, the rule may adversely affect the ability of broker-dealers to
sell the units and also may affect the ability of purchasers in this offering to
sell their securities in the secondary market.
Directors' Liability Limited.
Under our Certificate of Incorporation, our directors cannot be held liable
to us or our stockholders for monetary damages for breach of fiduciary duties
unless the breach involves (i) the director's duty of loyalty to us or our
stockholders, (ii) acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) unlawful dividends
or stock purchases or redemptions by us, or (iv) a transaction from which the
director derived an improper personal benefit. This provision does not affect
the liability of any director under federal or applicable state securities laws.
A Foreign Acquisition May Result in Special Risks.
In the event we acquire a target business or make an investment outside of
the United States, which is possible even though it will not be a strong or
central focus of our acquisition efforts, the enforcement of civil liabilities
against new management by investors may be affected. Investors may have
difficulty effecting service of process within the United States, and any
judgments against foreign persons in United States courts may be difficult or
impossible to enforce. In addition, there can be no assurance that foreign
courts would enforce judgments predicated upon the civil liability provisions of
the Federal securities laws or otherwise. In addition, any such transaction may
impose additional political or economic risks not necessarily associated with a
domestic acquisition.
23
Restricted Resales of the Securities.
The units have only been registered in the State of Nevada (the "Initial
Registration State"). In order to prevent resale transactions in violation of
state securities laws, we intend to limit resale transactions in the securities
included in this offering to the Initial Registration State by placing on the
certificates for the common stock and Warrants sold in this offering a legend to
the effect that resale transactions in such securities may only be made in
Nevada and in such other states, if any, in which a blue sky application has
been filed, accepted and disclosed in an amendment to this prospectus. Such
restriction on resales may limit the ability of purchasers to resell the
securities purchased in this offering. We will amend this prospectus for the
purpose of disclosing additional states, if any, in which our securities become
registered.
24
DILUTION AND OTHER COMPARATIVE
PER SHARE DATA
General
The following tables summarize as of the date of this prospectus the number
of shares of common stock purchased from us, and the number of shares purchased
as a percentage of our total outstanding shares, the aggregate consideration for
such shares, the aggregate consideration as a percentage of total consideration,
and the average consideration per share for such shares by the present and
public stockholders, assuming no exercise of the Warrants, and in the second
table assuming exercise of the Class A Warrants, but not the Class B Warrants.
Shares of Average
Common % of Consi-
Stock Total Aggregate % of Total deration
Purchased Shares Consideration Consideration Per Share
--------- ------ ------------- ------------- ---------
Common Stock without Exercise of Warrants
Public Investors 600,000 16.7% $ 12,000 80% $ .02
========
Present Stockholders 3,000,000 83.3 3,000 20 $ .001
--------- -------- ---------- ---------- ========
Total 3,600,000 100% $ 15,000 100%
========= ======== ========== ==========
Common Stock with Exercise of Class A Warrants
Public Investors 800,000 16.67% $1,212,000 16.8% $ 1.52
========
Present Stockholders 4,000,000 83.33 6,003,000 83.2 $ 1.50
--------- -------- ---------- ---------- ========
Total 4,800,000 100% $7,215,000 100%
--------- ======== ========== ==========
Dilution
Dilution" is the difference between the public offering price of the common
stock and the net tangible book value per share immediately after the offering.
"Net tangible book value" is the amount that results from subtracting our total
liabilities and intangible assets from our total assets. As of June 30, 2000, we
had a net tangible book value for our common stock of $2,900, or approximately
$.001 per share. See "Financial Statements."
After giving effect to the sale of the units offered hereby, and after
deduction of all commissions and estimated expenses in connection therewith, the
pro forma net tangible book value of our outstanding common stock at June 30,
2000 would be $13,700, or approximately $.004 per
25
share. After giving effect to the exercise of the Class A Warrants by our
present stockholders and the public investors (but not the Class B Warrants) the
pro forma net tangible book value of our 4,800,000 shares of outstanding common
stock at June 30, 2000 would be $7,213,700, or approximately $1.50 per share.
The following table illustrates the dilution described above:
Shares Warrants
------ --------
Public offering price per share/Warrant................ $ .02 $6.00
Net tangible book value
per share before offering....................... .001 .004
Increase per share attributable
to amount invested by the public................ .003 1.496
Net tangible book value per share
after offering.................................. .004 1.50
Dilution to public investors........................... $.016 $4.50
USE OF PROCEEDS
We will receive $12,000 of gross proceeds from the sale of the units
offered hereby if all 600,000 units are sold. We expect to incur offering
expenses of up to approximately $20,000 consisting of legal, accounting,
printing, Blue Sky and state filing fees which will be loaned to us by our
President and principal stockholder. Ninety (90%) percent of the proceeds will
be held in the escrow account and invested in either FDIC insured bank deposits,
securities of any registered open-end investment company that holds itself out
as a money market fund meeting the applicable conditions of the Investment
company Act or United States government securities that can be readily sold
without any dissipation of the offering proceeds; provided, however, that the
escrow agent will attempt not to invest such proceeds in a manner which may
result in our being deemed to be an investment company under the Investment
Company Act. The portion of the escrow account allocable to each purchaser of
securities in this offering will not be available for use by the Company until
the purchaser, at the time of an acquisition of a target business, elects to
remain an investor. (See Election to Remain an Investor.) Furthermore, we will
not acquire a target business unless the fair market value of such business is
at least 80% of the maximum proceeds to the Company from this offering,
including proceeds received or to be received upon the exercise of the Warrants,
but excluding amounts payable to non-affiliates for underwriting commissions,
underwriting expenses and dealer allowances.
26
Therefore, the proceeds held in the escrow account will not be available
for our use for any expenses related to this offering or expenses which may be
incurred by us related to the investigation and selection of a target business
and the negotiation of an agreement to acquire the target business. If an
acquisition is consummated, any amount in the escrow account not paid as
consideration to the sellers of the target business may be used to pay expenses
relating to the consummation of the acquisition and to finance the operations of
the target business or to effect other acquisitions, as determined by our
then-Board of Directors. Management believes however, that, unless and until the
Warrants are exercised or additional financing is obtained, it is unlikely that
we would have sufficient proceeds remaining after its initial acquisition and
the payment of expenses relating to such acquisition to undertake additional
acquisitions. If an acquisition is not consummated within 18 months, since all
of the initial stockholders have waived their respective rights to participate
in the liquidation distribution, all of our assets which may be distributed from
the escrow account and upon such liquidation would be distributed only to the
public stockholders. The escrow agent is authorized only to invest the funds in
FDIC insured bank accounts, money market funds and certain government securities
and to disburse all or a portion of the funds from the account upon receipt of
instructions from the Company; it has no other duties or obligations.
PLAN OF OPERATION
As described in detail elsewhere in this Prospectus, the Company's plan is
to seek, investigate, and if warranted, complete an acquisition with a target
business desiring the perceived advantages of a publicly held corporation. At
this time, we have no plan, proposal, agreement, understanding, or arrangement
to merge with any specific business or company, and we have not identified any
specific business or company for investigation and evaluation. We will not
restrict our search to any specific business, industry, or geographical
location, and may participate in business ventures of virtually any kind or
nature. We do not propose to restrict our search for business opportunities to
any industry or to businesses which have achieved any particular stage of
development. Accordingly, we will consider firms which have recently commenced
operations, are developing companies in need of additional funds for expansion
into new products or markets, are seeking to develop a new product or service,
are established businesses either experiencing financial or operating
difficulties and in need of the limited additional capital or merely desirous of
establishing a public trading market for its common stock, among others. We will
not acquire a target business unless the fair market value of such business is
at least 80% of the maximum proceeds to the Company from this offering,
including proceeds received or to be received upon the exercise of the Warrants,
but excluding amounts payable to non-affiliates for underwriting commissions,
underwriting expenses and dealer allowances.
As at June 30, 2000, we had cash on hand, including cash equivalents, of
$2,900. We will receive $12,000 of gross proceeds from the sale of the units
offered hereby if all 200,000 units are sold. We expect to incur offering
expenses of up to approximately $20,000 which will be loaned to us by our
President and principal stockholder. Ninety (90%) percent of the proceeds of
this Offering will be held in an escrow account and invested in either FDIC
insured bank
27
deposits, securities of any registered open-end investment company that holds
itself out as a money market fund meeting the applicable conditions of the
Investment company Act or United States government securities that can be
readily sold without any dissipation of the offering proceeds. The portion of
the escrow account allocable to each purchaser of securities in this offering
will not be available for use by the Company until the purchaser, at the time of
an acquisition of a target business, elects to remain an investor.
The time and costs required to select and evaluate a target business
(including conducting a due diligence review) and to structure and consummate an
acquisition (including negotiating relevant agreements and preparing requisite
documents for filing pursuant to applicable securities laws and corporation
laws) cannot presently be ascertained with any degree of certainty. The
Company's President and principal stockholder of the Board intends to devote
only a small portion of his time to the affairs of the Company and, accordingly,
selection of a target business and consummation of an acquisition may require a
greater period of time than if the Company's management devoted its full time to
the Company's affairs. While no current steps have been taken nor agreements
reached, the Company may engage consultants and other third parties providing
goods and services, including assistance in the identification and evaluation of
target businesses. These consultants or third parties may be paid in cash,
stock, options or other securities of the Company.
The proceeds held in the escrow account will not be available for our use
for any expenses related to this offering or expenses which may be incurred by
us related to the investigation and selection of a target business and the
negotiation of an agreement to acquire the target business. The Company plans to
finance all or a portion of these expenses, to the extent they cannot be paid
out of the Company's capital, with loans from its President and principal
stockholder, although there can be no assurance that such loans will be
available.
PROPOSED BUSINESS
Characteristics of a Blind Pool
Crest View, Inc. is a newly organized blind pool incorporating the selected
investor safeguards set forth below. Immediately after the consummation of an
acquisition, these safeguards (other than as described under "Escrow of Initial
Stockholders' Shares") will no longer be applicable.
Fair Market Value of Target Business; Available Authorized Shares
We will not acquire a target business unless the fair market value of such
business is at least 80% of the maximum proceeds to the Company from this
offering, including proceeds received or to be received upon the exercise of the
Warrants, but excluding amounts payable to non-affiliates for underwriting
commissions, underwriting expenses and dealer allowances. If the Board of
Directors determines that the financial statements of a proposed target business
do not clearly indicate that the target business has a sufficient fair market
value, we will obtain an opinion from
28
an unaffiliated, independent investment banking firm (which is a member of the
NASD) with respect to the satisfaction of such criteria. Since any opinion, if
obtained, would merely state that fair market value meets the 80% of the maximum
proceeds of this offering threshold, it is not anticipated that copies of such
opinion would be distributed to our stockholders, although copies will be
provided to stockholders who request it. We will not be required to obtain an
opinion from an investment banking firm as to fair market value if the Board of
Directors determines that the target business does have sufficient fair market
value. See "Proposed Business-Selection and Evaluation of Target Business." The
Company had 40,000,000 authorized shares of Common Stock, of which 3,600,000
shares will be issued and outstanding upon completion of this offering,
2,400,000 are reserved for issuance upon exercise of the Warrants, and up to
34,000,000 are available for issuance, at the sole discretion of Management, in
connection with the acquisition of a target business.
Commitment of Initial Stockholders in the Event a Stockholder Vote is Required
If a vote of stockholders is required to approve an acquisition under
applicable state law, all of our stockholders prior to this offering, including
all of our officers and directors ("initial stockholders"), have agreed to vote
the shares of common stock owned by them on the date hereof in accordance with
the vote of the majority of all other shares of common stock ("public shares")
voted on any acquisition.
Election to Remain an Investor
After we sign a definitive agreement for the acquisition of a target
business, but prior to the consummation of any acquisition, we will file a
post-effective amendment to this registration statement with the SEC concerning
the target business. Within five business days after we file the post-effective
amendment with respect to a proposed acquisition, we will send the prospectus
contained in the post effective amendment, including any amendment or supplement
(the "supplemental prospectus")thereto, to each purchaser of securities in this
offering (hereinafter a "purchaser") by first class mail or other equally prompt
means. In the Supplemental Prospectus we will give each purchaser the right to
elect to remain an investor by giving notice to the Company within the 20 to 45
business day period from the effective date of the post-effective amendment that
we will specify in the Supplemental Prospectus. If a purchaser does not notify
us of his election to remain an investor within such 20 to 45 business day
period and the proposed acquisition is consummated, then within five business
days after the end of such period, we will send him his or her pro rata share of
the Escrow account, including interest or dividends earned thereon as at the end
of such period. Without taking into account interest or dividends, if any,
earned on the escrow account, the per Unit share of the Escrow account would be
approximately $.02, or approximately the same as the per-Unit offering price. We
will not consummate any acquisition if 20% or more in interest of the purchasers
are entitled to receive back their pro rata share of the Escrow account. If we
do not proceed with the acquisition, the Company may elect to retain all of the
proceeds of this offering, pending further efforts to on the part of the Company
to find a suitable target business within l8 months from the closing of this
offering.
29
Liquidation If No Acquisition
In the event the Company does not acquire a target business within 18
months after the closing of this offering, all of the remaining escrowed
proceeds will be returned to the holders of securities purchased in this
offering in proportion to their investment within five business days after the
end of such 18 month period. Upon notice from us, the escrow agent of the escrow
account will commence liquidating the investments constituting the escrow
account and will turn over the proceeds to the transfer agent for the common
stock for distribution to the public stockholders. In addition after
distribution of such escrowed funds, the Company will be dissolved and we will
distribute our remaining assets, if any, after satisfaction of our obligations
to all public stockholders in proportion to their respective equity interests in
us. The initial stockholders have waived their respective rights to participate
in any liquidation distribution with respect to the shares of common stock owned
by them on the date hereof. If we were to expend all of the proceeds of this
offering, other than the proceeds deposited in the escrow account, prior to
liquidation, and without taking into account interest, if any, earned on the
escrow account, the aggregate amount per-share that would be distributed to each
of the public stockholders both from the escrow account and upon liquidation
would be $.02, equal to the per-Unit offering price.
A public stockholder shall be entitled to receive funds from the escrow
account only in the event of an acquisition in which such public stockholder
does not elect to remain an investor and the Company proceeds with the
acquisition or in the event the Company does not acquire a target business
within 18 months after the closing of this offering. In addition, in the event
the acquisition is required to be submitted to a vote of our common stockholders
such as in the case of some merger transaction, the public stockholder will have
the right to seek the appraised value of their shares. We believe that the
amounts received in an appraisal would not be more, and possibly less, than the
pro rata portion of the escrow account to which the public stockholder is
otherwise entitled. In no other circumstances shall a public stockholder have
any right or interest of any kind to or in the escrow account.
General
Our plan is to seek, investigate, and if warranted, complete an acquisition
with a target business desiring the perceived advantages of a publicly held
corporation. At this time, we have no plan, proposal, agreement, understanding,
or arrangement to merge with any specific business or company, and we have not
identified any specific business or company for investigation and evaluation. No
member of management or any promoter, or an affiliate of either, has had any
material discussions with any other company with respect to any acquisition. We
will not restrict our search to any specific business, industry, or geographical
location, and may participate in business ventures of virtually any kind or
nature. We do not propose to restrict our search for business opportunities to
any industry or to businesses which have achieved any particular stage of
development. Accordingly, we will consider firms which have recently commenced
operations, are developing companies in need of additional funds for expansion
into new products or markets, are seeking to develop a new product or service,
are established businesses either experiencing financial
30
or operating difficulties and in need of the limited additional capital or
merely desirous of establishing a public trading market for its common stock,
among others. Discussion of our proposed business under this caption and
throughout this prospectus is purposefully general and is not meant to restrict
our virtually unlimited discretion to search for and enter into a potential
acquisition.
We propose to seek, investigate and, if warranted, acquire one or more
business opportunities. However, our capital will be extremely limited, and it
is not anticipated that we will be able to participate in more than one such
acquisition. We intend to seek long-term growth potential as opposed to
short-term earnings.
We expect that the selection of a target business in which to participate
will be complex and extremely risky. Because of, among other things, rapid
technological advances being made in some industries and shortages of available
capital, and depressed conditions in other industries, management believes that
there are numerous firms seeking even the limited additional capital which we
will have and/or the benefits of a publicly traded corporation. Such perceived
benefits of a publicly traded corporation may include facilitating or improving
the terms upon which additional equity financing may be sought, providing
liquidity for estate planning needs of principal stockholders, providing
incentive stock options or similar benefits to key employees, providing
liquidity for all stockholders and other factors.
Potential target businesses may exist in many different industries and at
various stages of development, all of which will make the task of comparative
investigation and analysis of such target businesses extremely difficult and
complex.
We will have insufficient capital with which to provide the owners of a
target business significant cash or other assets. We believe we will offer
owners of target businesses the opportunity to acquire a controlling ownership
interest in a public company at substantially less cost than is required to
conduct an initial public offering. Nevertheless, we have not conducted market
research and are not aware of statistical data which would support the perceived
benefits of a merger or acquisition transaction for the owners of a target
business.
We will not restrict our search for any specific kind of target business,
and may merge with an entity which is in its preliminary or development stage,
which is already in operation, or in essentially any stage of its corporate
life. It is impossible to predict at this time the status of any business in
which we may become engaged, in that such business may need to seek additional
capital, may desire to have its shares publicly traded, or may seek other
perceived advantages which we may offer. However, we do not intend to obtain
funds in one or more private placements to finance the operation of any acquired
target business until such time as we have successfully completed such an
acquisition.
It is anticipated that business opportunities will be available to us from
various sources, including our officers and directors, professional advisors,
such as attorneys and accountants,
31
investment bankers, securities broker-dealers, venture capitalists, bankers,
other members of the financial community and others who may present unsolicited
proposals. While we do not presently anticipate engaging the services of
professional firms that specialize in finding business acquisitions on any
formal basis, we may engage such firms in the future, in which event we may pay
a finder's fee or other compensation. In no event, however, will we pay a
finder's fee or commission to any officer and director of the Company or any
entity with which he is affiliated for such service. Moreover, in no event shall
we issue any of our securities to any officer, director or promoter of the
Company, or any of their respective affiliates or associates, in connection with
activities designed to locate a target business.
We have no plans, understandings, agreements or commitments with any
individual for such persons to act as a finder of opportunities for us. In order
to minimize potential conflicts of interest relating to non arms-length
transactions, we will not merge with or acquire any entity in which our
officers, directors or non-public stockholders, or their respective affiliates,
serve as officers, directors or partners or own or hold an ownership interest,
nor pay to any of them finder's fees for introducing a target business
subsequently acquired by us. By virtue of having signed the registration
statement of which this prospectus is a part, our directors and officers confirm
that they know of no circumstances under which, through their own initiative,
this understanding will change.
Selection and Evaluation of Target Businesses
We will have complete discretion and flexibility in identifying and
selecting a prospective target business. In connection with our evaluation of a
prospective target business, management anticipates that we will conduct a due
diligence review which will encompass, among other things, meeting with
incumbent management and inspection of facilities, as well as a review of
financial, legal and other information which will be made available to us.
Under the Federal securities laws, public companies must furnish
stockholders certain information about significant acquisitions, which
information requires audited financial statements for an acquired company with
respect to two or more fiscal years, depending upon the relative size of the
acquisition. Consequently, we will only be able to effect an acquisition with a
prospective target business that has available audited financial statements or
has financial statements which can be audited.
The time and costs required to select and evaluate a target business
(including conducting a due diligence review) and to structure and consummate
the acquisition (including negotiating relevant agreements and preparing
requisite documents for filing pursuant to applicable securities laws and
corporation laws) cannot presently be ascertained with any degree of certainty.
Our current officers and directors intend to devote only a small portion of
their time to our affairs and, accordingly, completion of an acquisition may
require a greater period of time than if our management devoted their full time
to our affairs. While no current steps have been taken nor agreements reached,
we may engage consultants and other third parties providing goods and services,
including assistance in the identification and evaluation of potential target
businesses. These
32
consultants or third parties may be paid in cash, stock, options or other of our
securities, and the consultants or third parties may be placement agents or
their affiliates.
Prior to considering participation in an acquisition, we intend to request
that we receive written materials regarding the target business containing such
items as a description of product, service and company history; management
resumes; financial information; available projections with related assumptions
upon which they are based; an explanation of proprietary products and services;
evidence of existing patents, trademarks or service marks or rights thereto;
present and proposed forms of compensation to management; a description of
transactions between us and our affiliates during relevant prior periods; a
description of present and required facilities; an analysis of risks and
competitive conditions; a financial plan of operation and estimated capital
requirements; audited financial statements; and other information deemed
relevant. As part of our "due diligence" investigation, officers and directors
intend to meet personally with management and key personnel, visit and inspect
material facilities, obtain independent analysis or verification of certain
information provided, check references of management and key personnel, and take
other reasonable investigative measures, to the extent of our limited financial
resources and management expertise.
The analysis of target businesses will be undertaken by or under the
supervision of the officers and directors, who intend to consider, among other
relevant matters, the following factors:
1) the available technical, financial and managerial resources;
2) history of operations, if any;
3) prospects for the future;
4) Competitive position as compared to other firms of similar size and
experience within the industry segment as well as within the industry
as a whole;
5) Capital requirements and anticipated availability of required funds,
to be provided by us or from operations, through the sale of
additional securities, through joint ventures or similar arrangements
or from other sources;
6) The accessibility of required management expertise, personnel, raw
materials, services, professional assistance and other required items;
7) the quality and experience of management services which may be
available and the depth of that management;
8) the potential for further research, development or exploration;
9) specific risk factors not now foreseeable but which then may be
anticipated to impact the proposed activities of the target business;
10) the potential for growth or expansion;
11) the potential for profit;
12) the perceived public recognition or acceptance of products, services
or trades; and
13) name identification.
Merger opportunities in which we may participate will present certain
risks, many of which cannot be adequately identified prior to selecting a
specific opportunity. Our stockholders must, therefore, depend on Management to
identify and evaluate such risks. The investigation of specific
33
acquisition opportunities and the negotiation, drafting and execution of
relevant agreements, disclosure documents and other instruments will require
substantial management time and attention and substantial costs for accountants,
attorneys and others. If a decision is made not to participate in a specific
acquisition opportunity the cost therefore incurred in the related investigation
would not be recoverable. Furthermore, even if an agreement is reached for the
participation in a specific acquisition opportunity, the failure to consummate
that transaction may result in the loss of the company of the related costs
incurred.
To a large extent, a decision to participate in a specific acquisition may
be made upon management's analysis of the quality of the other firm's management
and personnel, the anticipated acceptability of new products or marketing
concepts, the merit of technological changes, and numerous other factors which
are difficult, if not impossible, to analyze through the application of any
objective criteria. In many instances, it is anticipated that the historical
operations of a specific firm may not necessarily be indicative of the potential
for the future because of the requirement to substantially shift marketing
approaches, obtain additional capital, change product emphasis, change or
substantially augment management, or make other changes. Because of the lack of
training or experience of management, we will be dependent upon the owners
and/or promoters of a target business to identify such problems and to
implement, or be primarily responsible for the implementation of, required
changes. Because we may participate in an acquisition with a newly organized
firm or with a firm which is entering a new phase of growth, it should be
emphasized that we will incur further risks since management in many instances
will not have proven its abilities or effectiveness, the eventual market for
such firm's product or services will likely not be established, and the
profitability of the firm will be unproven, uncertain and unpredictable.
In seeking target businesses, management's decision will not be controlled
by an attempt to time anticipated enthusiasm in the securities market for a
specific industry, management group or product or service industry, although
such factors may influence management significantly. However, Management will
attempt to base its decisions upon the objective of seeking long-term capital
appreciation in our real value and consider current income only a minor factor
in such decisions, although no assurance can be given.
It is anticipated we will not be able to diversify, but will essentially be
limited to one venture because of our limited financing. This lack of
diversification is unlikely to permit us to offset potential losses from one
target business against profits from another, and should be considered an
adverse factor affecting any decision to purchase our securities.
It is emphasized that our management may effect transactions having a
potentially adverse impact on the public investors pursuant to the authority of
our Board of Directors, without submitting the proposal to the stockholders for
their consideration absent a requirement of state law to do so.
We are unable to predict when we may participate in an acquisition. We
expect, however, that the analysis of specific proposals and the selection of a
target business may take several months
34
or more, and persons should not purchase the securities offered hereby if they
expect a short-term appreciation in our value.
Form of Acquisition
It is impossible to predict the manner in which we may participate in an
acquisition. Specific target businesses will be reviewed as well as our
respective needs and desires and the promoters of the opportunity, and, upon the
basis of that review and our relative negotiating strength and such promoters,
the legal structure or method deemed by management to be suitable will be
selected. Such structure may include, but is not limited to, leases, purchase
and sales agreements, licenses, joint ventures and other contractual
arrangements. We may act directly or indirectly through an interest in a
partnership, corporation or other form of organization. Implementing such
structure may require our merger, consolidation or reorganization with other
corporations or forms of business organization, and there is no assurance that
we would be the surviving entity. In addition, the present management likely
will not have control of a majority of our voting shares following a
reorganization transaction. As part of such a transaction, all of our directors
likely will resign, and new directors likely will be appointed without any vote
by stockholders.
It is anticipated that there may be target businesses presented to us
primarily because our common stock is publicly traded and a private company
stockholders desire to obtain the benefits of a combination with an existing
publicly held corporation, which may include avoiding what may be deemed to be
adverse consequences of undertaking for itself a public offering, as
distinguished from reorganizing with an existing public corporation. Such
adverse factors may include the substantial cost and time delays encountered in,
and the disclosure requirements related to, obtaining governmental clearances
believed required prior to the registered offer and sale of securities, the
requirement that public stockholders have a substantial share of voting control
of the combined firm which may be smaller following a reorganization or asset
acquisition than would be permitted under applicable laws or be acceptable to an
underwriter in a public offering, the requirement that the public stockholders
obtain sufficient shares so that the tangible net book value of the shares will
not be diluted by more than a specified percentage, as well as other conditions
or requirements imposed by various state laws. These requirements generally have
the stated purpose of protecting public stockholders so that the participation
in an acquisition by an investment in us may have the effect of depriving
persons purchasing securities in this offering from such purported protections.
In making an investment in us, it should be recognized that persons purchasing
securities in our company may do so under terms which may ultimately be less
favorable under the foregoing criteria than if such persons were investing in a
firm with a specific business which was undertaking its own public offering.
As a general rule, Federal and state tax laws and regulations have a
significant impact upon the structuring of acquisitions. We will evaluate the
possible tax consequences of any prospective acquisition and will endeavor to
structure an acquisition so as to achieve the most favorable tax treatment to
us, the target business and their respective stockholders. There can be no
assurance that the Internal Revenue Service ("IRS") or relevant state tax
authorities will ultimately assent to our
35
tax treatment of a particular consummated acquisition. To the extent the IRS or
any relevant state tax authorities ultimately prevail in recharacterizing the
tax treatment of an acquisition, there may be adverse tax consequences to us,
the target business and their respective stockholders. Tax considerations as
well as other relevant factors will be evaluated in determining the precise
structure of a particular acquisition.
It is likely that we will acquire our participation in a target business
through the issuance of our common stock. Although the terms of any such
transaction cannot be predicted, it should be noted that in certain
circumstances the criteria for determining whether or not an acquisition is a
so-called "tax free" reorganization under Section 368(a)(1) of the Internal
Revenue Code of 1986, as amended, depends upon the issuance to the stockholders
of the acquired company of at least 80% of the common stock of the combined
entities immediately following the reorganization. If a transaction were
structured to take advantage of these provisions rather than other "tax free"
provisions provided under the Internal Revenue Code, the persons who became
stockholders through the purchase of the common stock offered hereby would in
such circumstances retain 20% or less of the total issued and outstanding
shares. This could result in substantial additional dilution to the equity of
those who were our stockholders prior to such reorganization.
We may utilize available cash and equity securities in effecting an
acquisition. Although we have no commitments as of this date to issue any shares
of common stock or options or warrants, other than those to be issued under this
prospectus, we will likely issue a substantial number of additional shares in
connection with the consummation of an acquisition, probably in most cases equal
to nine or more times the amount held by our stockholders prior to the
acquisition. We currently have no intention to issue Preferred Stock. We may
have to effect reverse stock splits prior to any acquisition. To the extent that
such additional shares are issued, dilution to the interests of our stockholders
will occur. Additionally, a change in control of us may occur which may affect,
among other things, our ability to utilize net operating loss carryforwards, if
any.
We intend to participate in an acquisition only after the negotiation and
execution of a written agreement. Although the terms of such agreement cannot be
predicted, generally such an agreement would require specific representations
and warranties by all of the parties thereto, specify certain events of default,
detail the terms of closing and the conditions which must be satisfied by each
of the parties thereto prior to such closing, outline the manner of bearing
costs if the transaction is not closed, set forth remedies upon default and
include miscellaneous other terms.
It is anticipated that the investigation of specific target businesses and
the negotiation, drafting and execution of relevant agreements, disclosure
documents and other instruments will require substantial management time and
attention and substantial costs for accountants, attorneys and others. If a
decision is made not to participate in a specific target business, the costs
theretofore incurred in the related investigation would not be recoverable.
Furthermore, even if an agreement is reached for the participation in a specific
acquisition, the failure to consummate that transaction may result in the loss
to us of the related costs incurred.
36
Investment Company Act Considerations
We may participate in a business or opportunity by purchasing, trading or
selling the securities of such business. However, we do not intend to engage
primarily in such activities. Specifically, we intend to conduct our activities
so as to avoid being classified as an "investment company" under the Investment
Company Act of 1940 (the "'40 Act"), and therefore avoid application of the
costly and restrictive registration and other provisions of the Investment Act
and the regulations promulgated thereunder.
Section 3(a) of the '40 Act excepts from the definition of an "investment
company" an entity which does not engage primarily in the business of investing,
reinvesting or trading in securities, or which does not engage in the business
of investing, owning, holding or trading "investment securities" (defined as
"all securities other than government securities or securities of majority-owned
subsidiaries") the value of which exceeds 40% of the value of its total assets
(excluding government securities, cash or cash items). We intend to implement
our business plan in a manner which will result in the availability of this
exception from the definition of "investment company." Consequently, our
participation in a business or opportunity through the purchase and sale of
investment securities will be limited. Although we intend to act to avoid
classification as an investment company, the provisions of the '40 Act are
extremely complex and it is possible that it may be classified as an inadvertent
investment company. We intend to vigorously resist classification as an
investment company, and to take advantage of any exemptions or exceptions from
applications of the '40 Act, which allows an entity a one-time option during any
three-year period to claim an exemption as a "transient" investment company. The
necessity of asserting any such resistance, or making any claim of exemption,
could be time consuming and costly, or even prohibitive, given our limited
resources.
Our plan of business may involve changes in its capital structure,
management, control and business, especially if it consummates a reorganization
as discussed above. Each of these areas is regulated by the '40 Act, which
regulation has the purported purpose of protecting purchasers of investment
company securities. Since we do not intend to register as an investment company,
purchasers in this offering will not be afforded these purported protections.
Competition
Due to the general impact on existing businesses of continued shortages of
capital relative to the need to finance or expand existing operations and the
generally improving conditions of the securities markets as a manifestation of
investor confidence, we expect to encounter substantial competition in our
efforts to locate attractive opportunities for the employment of our capital.
The primary competition for desirable investments is expected to come from
business development companies, "blank checks," venture capital partnerships and
corporations, venture capital affiliates of large industrial and financial
companies, small business investment companies and wealthy individuals.
Virtually all of these entities will have significantly greater financial
resources than us, and many will have greater experience, personnel resources
and managerial capabilities than us, and
37
will therefore be in a better position than us to obtain access to attractive
target businesses. See also "Management - Conflicts of Interest."
Employees
We are a development stage company and currently have no employees.
Following the closing of this offering our officers are expected to continue to
devote only a minor portion of their time (less than 10%) to our affairs on as
"as needed" basis. See "Management." Our management expects to use outside
consultants, advisors, attorneys and accountants as necessary, none of which
will be hired on a retainer basis, and does not anticipate a need to engage any
full-time employees so long as it is seeking and evaluating business
opportunities. The need for employees and their availability will be addressed
in connection with the decision whether or not to acquire or participate in a
specific acquisition.
Property
Our offices are located at 1700 W. Horizon Ridge Parkway, Suite 202,
Henderson, Nevada 89012.
Legal Proceedings
The Company is not a party to any material legal proceedings.
MANAGEMENT
Executive Officers and Directors
The following table provides information concerning each officer and
director of the Company. All directors hold office until the next annual meeting
of stockholders or until their successors have been elected and qualified.
Age Title
--- -----
Johnny R. Thomas 59 Chief Executive Officer,
President, Treasurer and Director
Elliot H. Lutzker 47 Secretary
Johnny R. Thomas, Chief Executive Officer, President, Treasurer and sole
director since our formation, has been a Managing Member of Falcon Financial
Group LLC since January 14, 2000 and since March 1999, has been engaged in the
business of venture capital. Falcon is engaged in the business of providing
assistance or advice to private companies on capital formation, on becoming a
publicly traded company, and introductions to investment banking firms. Mr.
Thomas is Chief Executive Officer, President, Treasurer and sole director of
Twin Lakes, Inc., a "blank check" company whose securities are, or will be,
offered pursuant to a public offering registered with the
38
SEC. From April 1, 1994 until February 22, 1999 he served as Chairman of the
Board and Chief Executive Officer of AgriBioTech ("ABT"), a director of ABT
since September 30, 1993, and was President of ABT from April 1, 1994 until
December 31, 1997. On January 25, 2000, approximately 11 months after Mr. Thomas
resigned from ABT, ABT and several of the subsidiaries filed a voluntary case
with the United States Bankruptcy Court in the District of Nevada under Chapter
11 of the United States Bankruptcy Code. ABT is operating its business as a
debtor in possession. Prior thereto, Mr. Thomas was President, Chairman of the
Board and Chief Executive Officer of FiberChem, Inc. ("FCI") from its inception
in December 1986 until March 31, 1994. Dr. Thomas received his Ph.D. degree in
genetics/plant breeding from Oregon State University in 1966.
Elliot H. Lutzker, Secretary since our formation, is a senior partner in
the law firm of Snow Becker Krauss P.C., counsel to the Company. He has been a
partner with Snow Becker Krauss P.C. since 1985 and was formerly an attorney
with the Division of Enforcement of the U.S. Securities and Exchange Commission.
Each member of management intends to devote less than 10% of his time to
our affairs.
Executive Compensation
Since its inception, we have paid no cash compensation to our officers or
directors. Following the closing of the offering made hereby, our officers and
directors will not receive executive compensation. No officer or director is
required to make any specific amount or percentage of his business time
available to us.
Certain Relationships and Related Transactions
On January 20, 2000, upon the formation of the Company, Johnny R. Thomas,
founder and Chief Executive Officer, purchased through Estancia LLC, an entity
established by Mr. Thomas for estate planning purposes, 2,960,000 shares of
Common Stock from the Company for an aggregate of $2,960 or $.001 per share. Mr.
Thomas tendered a recourse promissory note to the Company for his shares which
was paid in June 2000 when the Company opened a bank account.
The Company is renting office space and secretarial services from Falcon
Financial Group LCC, at l700 W. Horizon Ridge Parkway, Suite 202, Henderson, NV
89012. Falcon is an entity controlled by the Company's Chief Executive Officer.
See "Management." The Company intends to pay Falcon $100 per month until it
acquires a target business.
Conflicts of Interest
In order to minimize potential conflicts of interest relating to non
arms-length transactions, (1) we will not merge with or acquire any target
business in which our officers, directors or non-public stockholders, or their
respective affiliates, serve as officers, directors or partners or own or hold
an ownership interest, (2) none of such persons shall receive from us or the
acquired target
39
business or its principals any finder's fees, consulting fees or similar
compensation, whether in cash, securities or otherwise, for introducing to us a
target business subsequently acquired by us, and (3) members of Management will
not negotiate or otherwise consent to the purchase of their respective common
stock as a condition of or in connection with the proposed acquisition by us of
a target business. By virtue of having signed the registration statement of
which this prospectus is a part, our directors and officers confirm that they
know of no circumstances under which, through their own initiative, this
understanding will change.
In addition to the Company, Mr. Thomas serves as the sole director, Chief
Executive Officer, President and Treasurer, and is a principal stockholder, of
another "blank check" company, Twin Lakes, that contemplates the same business
activities as the Company and thus competes directly with the Company.
As a result of his role as the sole director of these companies, and
possibly others in the future, Mr. Thomas will have a conflict of interest with
respect to prospective target acquisitions and presenting the corporate
opportunity to the Company. In general, officers and directors of a corporation
incorporated under the laws of the State of Nevada are required to present
certain business opportunities to such corporation, and the laws of the State of
Nevada further provide rights and remedies to the shareholders in the event such
duty is breached. As a result of Mr. Thomas's business associations with several
companies he will have conflicting interests. Therefore, the Company has agreed
that with respect to conflicts of interest among these companies related to the
allocation of opportunities to negotiate and merge with targets, the Company
will waive any conflict or claim related to Mr. Thomas's fiduciary duty.
However, the conflict may be mitigated by the fact that Mr. Thomas has the same
ownership interest in Twin Lakes as he does in the Company, and each of Twin
Lakes and its Company has identical stockholders, at least initially. The
conflict will be more significant should, at a later date, these facts change.
Similarly, in general, officers and directors of a corporation incorporated
under the laws of the State of Nevada owe certain fiduciary obligations to the
shareholders of such corporation. Among these are the duties of fiduciary care
and loyalty, prudent business judgment, and the above-mentioned duty regarding
the presentation of corporate business opportunities. Essentially, officers and
directors have a duty to act in manner so as to advance the financial interests
of the corporation and the shareholders. When these obligations and duties are
breached, aggrieved shareholders can seek redress through a derivative action
brought on behalf of the corporation and occasionally, depending on the facts
and circumstances, through suits brought individually. However, with respect to
the Company and Twin Lakes, Inc., each potential shareholder is hereby made
aware of the fact that Mr. Thomas is the Chief Executive Officer, President and
Treasurer of the Company and another "blank check" company, Twin Lakes, Inc.
Because each shareholder of the Company is also an equal shareholder in the
other company that competes directly with the Company, the shareholders of the
Company should not be harmed due to conflicts of interest amongst these
companies related to Mr. Thomas' fiduciary obligations as sole executive officer
and director of each of the Company and/or the allocation of opportunities to
acquire target businesses, since his interest is the same in each company.
40
Mr. Thomas and the Company have no formal plan relating to the allocation
of business opportunities between the Company and Twin Lakes, and thus there can
be no assurance that any opportunity shall be presented the Company, as opposed
to Twin Lakes.
Our officers and directors currently have and/or may in the future have
real or potential conflicts of interest with us in connection with their
allocation of business time and with respect to corporate opportunities. See
Risk Factor "Other Conflicts of Interest," for a discussion of this subject.
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth certain information regarding the number and
percentage of common stock (being the Company's only voting securities)
beneficially owned by each officer and director, each person (including any
"group" as that term is used in Section 13(d)(3) of the Securities Exchange Act
of 1934) known by the Company to own 5% or more of the common stock of the
Company, and all officers and directors as a group, as of the date of this
prospectus and as adjusted to give pro forma effect, first to the sale of the
units offered hereby and then to the sale of the units and the exercise of the
Class A Warrants. This table does not reflect the fact that all 3,000,000 shares
beneficially owned by the two selling securityholders in the table have been
registered for resale and if sold the selling securityholders will own zero
shares of common stock of the Company.
Percentage of
Amount and Outstanding
Nature of Shares Owned
Beneficial -------------------------------------------
Name Ownership (1) Before Offering(2) After Offering (3)
- ---- ------------- ------------------ ------------------
Johnny R. Thomas (4) 3,946,667(5) 98.67% 82.2%
1700 W. Horizon Ridge Parkway
Henderson, NV 89012
Snow Becker Krauss P.C. (6) 53,333(7) 1.33% 1.1%
605 Third Avenue
New York, NY 10158
All Officers and 4,000,000 100% 83.33%
Directors as a Group
(two persons)
- ----------
(1) Unless otherwise indicated, the Company has been advised that all
individuals listed have the sole power to vote and dispose of the number of
shares set forth opposite their names. For purposes of computing the number
and percentage of shares beneficially owned by a selling securityholder,
any shares which such person has the right to acquire within 60 days
41
are deemed to be outstanding, but those shares are not deemed to be
outstanding for the purpose of computing the percentage ownership of any
other selling securityholder.
(2) Based on 3,000,000 shares issued and outstanding as of the date of this
prospectus.
(3) Based on 3,600,000 shares issued and outstanding without giving effect to
the potential issuance of additional common stock upon the exercise of the
Class A and Class B Warrants.
(4) Mr. Thomas is President, Treasurer and a Director of the Company.
(5) Consists of 2,960,000 shares of Common Stock and 986,667 Class A Warrants
registered in the name of Estancia LLC, an entity established by Mr. Thomas
for estate planning purposes.
(6) This partnership consist of members of Snow Becker Krauss P.C., counsel to
the Company. Elliot H. Lutzker, a member of Snow Becker Krauss P.C., is
Secretary of the Company.
(7) Consists of 40,000 shares of Common Stock and 13,333 Class A Warrants.
In order to minimize potential conflicts of interest relating to non
arms-length transactions, the Company will not merge with or acquire any target
business in which its officers, directors, parents, promoters or non-public
stockholders, or their respective affiliates, serve as officers, directors or
partners or own or hold an ownership interest, nor pay to any of them finder's
fees for introducing to the Company a target business subsequently acquired by
the Company. By virtue of having signed the registration statement of which this
prospectus is a part, the directors and officers of the Company confirm that
they know of no circumstances under which, through their own initiative, this
understanding will change. See also Risk Factor, "Conflicts of Interest," and
"Management -- Conflicts of Interest".
DESCRIPTION OF SECURITIES
General
The Company has authorized 40 million shares of common stock, par value
$.001 per share and 8 million shares of preferred stock, par value $.001 per
share. There are issued and outstanding as of the date of this prospectus
3,000,000 shares of common stock ( held by two holders of record) and no shares
of Preferred Stock. All shares of common stock currently outstanding are validly
issued, fully paid and non-assessable. There are no plans, proposals,
arrangements or understandings with respect to the sale of additional securities
of the Company after the completion of the offering and prior to the location of
a target business.
42
Units
Each Unit consists of one share of common stock, $.001 par value, and
one-third Redeemable Warrants. The common stock and the Warrants which comprise
the units are immediately detachable and separately transferable. The holder of
three Units is entitled to exercise one Class A Warrant and purchase one share
of common stock and one Class B Warrant. Common Stock
Voting Rights
Each share of common stock entitles the holder thereof to one vote, either
in person or by proxy, at meetings of stockholders. The holders are not
permitted to vote their shares cumulatively. Accordingly, the holders of more
than 50% of the issued and outstanding shares of common stock can elect all of
the directors of the Company. See "Principal and Selling Stockholders."
Dividends
All shares of common stock are entitled to participate ratably in dividends
when and as declared by the Company's Board of Directors out of the funds
legally available therefor. Any such dividends may be paid in cash, property or
additional shares of common stock. The Company has not paid any dividends since
its inception and presently anticipates that no dividends will be declared in
the foreseeable future. Any future dividends will be subject to the discretion
of the Company's Board of Directors and will depend upon, among other things,
future earnings, the operating and financial condition of the Company, its
capital requirements, general business conditions and other pertinent facts.
Therefore, there can be no assurance that any dividends on the common stock will
be paid in the future.
Miscellaneous Rights and Provisions
Holders of common stock have no preemptive or other subscription rights,
conversion rights, redemption or sinking fund provisions. In the event of the
dissolution, whether voluntary or involuntary, of the Company, each share of
common stock is entitled to share ratably in any assets available for
distribution to holders of the equity securities of the Company after
satisfaction of all liabilities.
Class A Redeemable Warrants
Subject to adjustment as described below, the holders of three (3) Units
will entitle the holder to exercise one Class A Warrant, purchase from the
Company, for cash, one share of common stock at a price of $6.00 per share for a
period of four years from the date of this prospectus and one Class B Redeemable
Warrant. The exercise price of the Class A Warrants may, at the Company's
option, upon 30 days prior written notice, be reduced from time to time for a
period or periods, none of which shall be for less than 15 nor more than 90
days. The exercise period may also be extended at the Company's sole option.
43
As of the date of this prospectus, the Company has authorized 1,200,000
Class A Warrants, of which 1,000,000 were issued and held by two persons. The
Company has the right to redeem the Class A Warrants at a price of $.001 per
Warrant on at least 30 days prior notice, at any time during the exercise
period. Any holder who does not exercise his Warrants prior to their expiration
or redemption, as the case may be, will forfeit his right to purchase the
underlying shares of common stock. We reserve the right to have standby
purchasers exercise any or all of the Warrants which are not exercised at the
end of the 30-day notice period for a five day period thereafter.
Set forth below is a brief summary of other significant information
concerning the Class A Warrants. This summary is subject to the provisions of
the actual Class A Warrant certificates, specimens of which have been filed as
exhibits to the registration statement of which this prospectus is a part, and
reference is made to such exhibits for a detailed description of the provisions
thereof summarized below.
The Class A Warrants are immediately detachable and exercisable. The holder
of a Class A Warrant may exercise it during the exercise period by surrendering
it, with the form of election to purchase on the reverse side of the Class A
Warrant properly executed, together with the payment of the exercise price to
the Warrant Agent. The Class A Warrants may be exercised in whole at any time or
in part from time to time. A new Class A Warrant will be issued for the
remaining number of shares purchasable under the unexercised portion of the
Class A Warrant. No fractional shares will be issued upon the exercise of Class
A Warrants.
The exercise price and the number of shares of common stock purchasable
upon exercise of the Warrants are subject to anti-dilutive adjustment upon the
occurrence of stock dividends, stock splits, combinations, reclassifications and
other similar events. No such adjustments will be made upon the issuance of
shares of common stock in connection with the Company's acquisition of a target
business. No adjustment of the exercise price will be made until cumulative
adjustments therein amount to $.05. No adjustments as to dividends will be made
upon any exercise of Class A Warrants.
The Warrants do not confer upon the holders thereof voting or pre-emptive
rights or any other rights (including the right to participate in the
distribution of the Company's assets in the event of its liquidation or
dissolution) as a stockholder of the Company.
The Company must have a current registration statement on file with the SEC
in order to continue the registration of the common stock underlying the Class A
Warrants, and accordingly it will be necessary for the Company to file
post-effective amendments to the registration statement of which this prospectus
is a part when subsequent events require. There can be no assurance that such
registration statement can or will be kept current, and if it is not kept
current the Class A Warrants will not be exercisable and may be deprived of
value. In addition, the common stock issuable upon the exercise of the Class A
Warrants cannot be sold in various jurisdictions without the registration
therein of the common stock in accordance with local law, or the availability of
an exemption from such registration. The Company may find it impractical or
impossible so to qualify
44
the common stock in those jurisdictions where it does not initially qualify this
offering. Class A Warrant holders who are residents of jurisdictions in which
the Company does not qualify the common stock underlying the Class A Warrants
for sale will have no choice but to sell their Class A Warrants or to let them
expire.
Class B Redeemable Warrants
Subject to adjustment as described below, each Class B Warrant will entitle
the holder to purchase from the Company, for cash, one share of common stock at
a price of $9.00 per share for a period of five years from the date of this
prospectus. The exercise price of the Class B Warrants may, at the Company's
option, upon 30 days prior written notice, be reduced from time to time for a
period or periods, none of which shall be for less than 15 nor more than 90
days. The exercise period may also be extended at the Company's sole option.
As of the date of this prospectus, the Company has authorized 1,200,000
Class B Warrants, none of which were issued and outstanding. The Company has the
right to redeem the Class B Warrants at a price of $.001 per Warrant on at least
30 days prior notice, at any time during the exercise period. Any holder who
does not exercise his Warrants prior to their expiration or redemption, as the
case may be, will forfeit his right to purchase the underlying shares of common
stock. We reserve the right to have standby purchasers exercise any or all of
the Warrants which are not exercised at the end of the 30-day notice period for
a five day period thereafter.
Set forth below is a brief summary of other significant information
concerning the Class B Warrants. This summary is subject to the provisions of
the actual Class B Warrant certificates, specimens of which have been filed as
exhibits to the registration statement of which this prospectus is a part, and
reference is made to such exhibits for a detailed description of the provisions
thereof summarized below.
The Class B Warrants are immediately detachable and exercisable. The holder
of a Class B Warrant may exercise it during the exercise period by surrendering
it, with the form of election to purchase on the reverse side of the Class B
Warrant properly executed, together with the payment of the exercise price to
the Warrant Agent. The Class B Warrants may be exercised in whole at any time or
in part from time to time. A new Class B Warrant will be issued for the
remaining number of shares purchasable under the unexercised portion of the
Class B Warrant. No fractional shares will be issued upon the exercise of Class
B Warrants.
The exercise price and the number of shares of common stock purchasable
upon exercise of the Warrants are subject to anti-dilutive adjustment upon the
occurrence of stock dividends, stock splits, combinations, reclassifications and
other similar events. No such adjustments will be made upon the issuance of
shares of common stock in connection with the Company's acquisition of a target
business. No adjustment of the exercise price will be made until cumulative
adjustments therein amount to $.05. No adjustments as to dividends will be made
upon any exercise of Class B Warrants.
45
The Warrants do not confer upon the holders thereof voting or pre-emptive
rights or any other rights (including the right to participate in the
distribution of the Company's assets in the event of its liquidation or
dissolution or as a stockholder of the Company) and they do not confer upon the
holders the right to receive a distribution of any portion of the escrow
account.
The Company must have a current registration statement on file with the SEC
in order to continue the registration of the common stock underlying the Class B
Warrants, and accordingly it will be necessary for the Company to file
post-effective amendments to the registration statement of which this prospectus
is a part when subsequent events require. There can be no assurance that such
registration statement can or will be kept current, and if it is not kept
current the Class B Warrants will not be exercisable and may be deprived of
value. In addition, the common stock issuable upon the exercise of the Class B
Warrants cannot be sold in various jurisdictions without the registration
therein of the common stock in accordance with local law, or the availability of
an exemption from such registration. The Company may find it impractical or
impossible so to qualify the common stock in those jurisdictions where it does
not initially qualify this offering. Class B Warrant holders who are residents
of jurisdictions in which the Company does not qualify the common stock
underlying the Class B Warrants for sale will have no choice but to sell their
Class B Warrants or to let them expire.
State Blue Sky Information
The Units offered hereby will be sold in the state of Nevada. Additionally,
the Company believes that the Units, upon completion of this offering, and the
Common Stock and Warrants comprising the Units, once they become separately
transferable, will be eligible for sale on a secondary market basis in various
other states based upon the registration of such securities in such states or
the availability of an applicable exemption from the state's registration
requirements, subject in each case to the exercise of the broad discretion and
powers of the securities commission or other administrative bodies having
jurisdiction in each state and any changes in statutes and regulations which may
occur after the date hereof. The Company will amend this Prospectus for the
purpose of disclosing additional states, if any, in which the Company's
securities will be eligible for resale in the secondary trading market.
Transfer and Warrant Agent
The Company will act as its own Transfer Agent and Warrant Agent until the
completion of an acquisition.
PLAN OF DISTRIBUTION
The shares of common stock issuable upon exercise of our warrants are being
offered by us directly to the securityholders, without an underwriter.
The holders of the warrants who exercise such warrants may sell the common
stock
46
purchased upon their exercise from time to time in public transactions, on or
off the NASD's OTC Bulletin Board, or private transactions, at prevailing market
prices or at privately negotiated prices. They may sell their shares in the
following types of transactions:
-- ordinary brokerage transactions and transactions in which the broker
solicits purchasers;
-- a block trade in which the broker-dealer so engaged will attempt to
sell the shares as agent, but may position and resell a portion of the
block as principal to facilitate the transaction;
-- purchases by a broker or dealer as principal and resale by such broker
or dealer for its account pursuant to this prospectus; and
-- face-to-face transactions between sellers and purchasers without a
broker-dealer, or otherwise.
To our knowledge, the selling securityholders have not entered into any
underwriting arrangements for the sale of the shares. As used in this
prospectus, selling securityholders include donees, pledgees, distributees,
transferees and other successors-in-interest of the selling securityholders
named in this prospectus.
Each selling securityholder must pay brokerage commissions and discounts
for the sale of its shares. We have agreed to indemnify the selling
securityholders against certain liabilities, including liabilities under the
Securities Act. The selling securityholders may agree to indemnify any agent,
dealer or broker-dealer participating in sales of the shares against certain
liabilities, including liabilities under the Securities Act. The selling
securityholders have agreed to indemnify us and our directors, officers and
controlling persons against certain liabilities related to the sale of the
shares, including liabilities under the Securities Act. Insofar as
indemnification for liabilities under the Securities Act may be permitted to our
directors, officers or controlling persons, in the opinion of the SEC such
indemnification is against public policy as expressed in the Securities Act and
is therefore unenforceable.
The 1,200,000 Class A Warrants being offered by this prospectus are being
offered and 1,200,000 Class B Warrants issuable upon exercise of the Class A
Warrants will be offered by the holders of these securities and may be sold by
these holders in the over-the-counter market, or privately, or through
broker-dealers selected by these holders, or as principals.
There are 3,000,000 shares of outstanding common stock covered by this
prospectus offered by the holders thereof for their own account and not that of
the Company. Such shares may be sold in the over-the-counter market through
brokers, or otherwise.
47
Usual and customary or negotiated brokerage fees or commissions may be paid
by the holders in connection with such sales.
The selling securityholders, their respective transferees, intermediaries,
donees, pledgees or other successors in interest through whom the selling
securityholders' common stock and warrants are sold may be deemed "underwriters"
within the meaning of Section 2(11) of the Securities Act, with respect to the
securities offered and any profits realized or commissions received may be
deemed to be underwriting compensation. Any broker-dealers that participate in
the distribution of the selling securityholders' securities may be deemed to be
"underwriters," as defined in the Securities Act, and any commissions,
discounts, concessions or other payments made to them, or any profits realized
by them upon the resale of any selling securityholders' securities purchased by
them as principals, may be deemed to be underwriting commissions or discounts
under the Securities Act.
We will pay all expenses incident to the registration of the securities
covered by this prospectus. We will not pay, among other expenses, commissions
and discounts of brokers, dealers or agents.
The sale of the common stock and warrants are subject to the prospectus
delivery and other requirements of the Securities Act. To the extent required,
we will use our best efforts to file and distribute, during any period in which
offers or sales are being made, one or more amendments or supplements to this
prospectus or a new registration statement to describe any material information
with respect to the plan of distribution not previously disclosed in this
prospectus, including, but not limited to, the number of securities being
offered and the terms of the offering, including the name or names of any
underwriters, dealers or agents, if any, the purchase price paid by the
underwriter for securities purchased from a selling securityholder, any
discounts, commissions or concessions allowed or reallowed or paid to dealers
and the proposed selling price to the public.
Under the Exchange Act and the regulations thereunder, any person engaged
in a distribution of our securities offered by this prospectus may not
simultaneously engage in market-making activities with respect to our common
stock during the applicable "cooling off" period five business days prior to the
commencement of this distribution. The selling securityholders will also be
subject to applicable provisions of the Exchange Act and the rules and
regulations thereunder, including, Regulation M, in connection with transactions
in the securities, which provisions may limit the timing of purchases and sales
of securities by the selling securityholders.
CERTAIN MARKET INFORMATION
The offering made by this prospectus is the initial public offering of the
Company's securities and, accordingly, there has been, and there currently is,
no public trading market for its units, common stock or Warrants. There can be
no assurance that any public trading market therefor will ever develop or, if
one develops, that it will be sustained.
48
ADDITIONAL INFORMATION
A registration statement relating to the securities offered hereby has been
filed by the Company with the SEC. This prospectus does not contain all of the
information set forth in such registration statement. For further information
with respect to the Company and to the securities offered hereby, reference is
made to such registration statement, including the exhibits thereto. Statements
contained in this prospectus as to the content of any contract or other document
referred to are not necessarily complete, and in each instance reference is made
to the copy of such contract or other document filed as an exhibit to the
registration statement, each such statement being qualified in all respects by
such reference.
LEGAL MATTERS
The validity of the issuance and sale of the units being offered by this
prospectus is being passed on for the Company by Snow Becker Krauss P.C., 605
Third Avenue, New York, New York. Snow Becker Krauss P.C., counsel to the
Company, owns 40,000 shares of our common stock and 13,333 Class A Warrants.
Elliot H. Lutzker, a member of Snow Becker Krauss P.C., is Secretary of the
Company.
EXPERTS
General
The financial statements as of June 30, 2000, included in the registration
statement of which this prospectus is a part, have been included herein in
reliance on the report of Lazar, Levine & Felix LLP, independent accountants,
given on the authority of that firm as an expert in accounting and auditing.
49
CREST VIEW, INC.
(A Development Stage Company)
FOR THE PERIOD FROM INCEPTION (JANUARY 20, 2000)
TO JUNE 30, 2000
INDEX
Page(s)
Independent Auditors' Report F-1.
Financial Statements:
Balance Sheet F-2.
Statement of Operations F-3.
Statement of Shareholders' Equity F-4.
Statement of Cash Flows F-5.
Notes to Financial Statements F-6.
INDEPENDENT AUDITORS' REPORT
To the Shareholders
Crest View, Inc.
Henderson, Nevada
We have audited the accompanying balance sheet of Crest View, Inc. (a
development stage company), as of June 30, 2000, and the related statements of
operations, shareholders' equity and cash flows for the period from inception
(January 20, 2000) to June 30, 2000. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above, present fairly, in
all material respects, the financial position of Crest View, Inc. (a development
stage company) as of June 30, 2000, and the results of its operations and its
cash flows for the period then ended, in conformity with generally accepted
accounting principles.
----------------------------
LAZAR LEVINE & FELIX LLP
New York, New York
August 15, 2000
F-1
CREST VIEW, INC.
(A Development Stage Company)
BALANCE SHEET
JUNE 30, 2000
- ASSETS -
CURRENT ASSETS:
Cash $ 2,900
-------
TOTAL ASSETS $ 2,900
=======
- LIABILITIES AND SHAREHOLDERS' EQUITY -
COMMITMENTS AND CONTINGENCIES (Note 3)
SHAREHOLDERS' EQUITY (Note 3):
Preferred stock, $.001 par value; 8,000,000 shares authorized,
none issued $ --
Common stock, $.001 par value; 40,000,000 shares authorized,
3,000,000 shares issued and outstanding 3,000
Deficit accumulated during the development stage (100)
-------
$ 2,900
=======
The accompanying notes are an integral part of these financial statements.
F-2
CREST VIEW, INC.
(A Development Stage Company)
STATEMENT OF OPERATIONS
FOR THE PERIOD FROM INCEPTION (JANUARY 20, 2000)
TO JUNE 30, 2000
REVENUES $ --
COSTS AND EXPENSES:
Filing fees (100)
--------
NET LOSS $ (100)
========
The accompanying notes are an integral part of these financial statements.
F-3
CREST VIEW, INC.
(A Development Stage Company)
STATEMENT OF SHAREHOLDERS' EQUITY
FOR THE PERIOD FROM INCEPTION (JANUARY 20, 2000)
TO JUNE 30, 2000
Deficit
Accumulated
Common Shares During the
--------------------- Development Shareholders'
Number Amount Stage Equity
--------- --------- --------- ---------
At inception, January 20, 2000 -- $ -- $ -- $ --
Issuance of common units 3,000,000 3,000 -- 3,000
Net loss for period ended June 30, 2000 -- -- (100) (100)
--------- --------- --------- ---------
BALANCE AT JUNE 30, 2000 3,000,000 $ 3,000 $ (100) $ 2,900
========= ========= ========= =========
The accompanying notes are an integral part of these financial statements.
F-4
CREST VIEW, INC.
(A Development Stage Company)
STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM INCEPTION (JANUARY 20, 2000)
TO JUNE 30, 2000
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS:
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (100)
--------
Adjustment to reconcile net loss to net cash utilized
by operating activities
Net cash utilized by operating activities (100)
CASH FLOWS FROM FINANCING ACTIVITIES:
Sale of common units 3,000
--------
NET INCREASE IN CASH AND CASH EQUIVALENTS $ 2,900
========
The accompanying notes are an integral part of these financial statements.
F-5
CREST VIEW INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2000
NOTE 1 - DESCRIPTION OF COMPANY:
Crest View, Inc., ("the Company"), was organized in the state of
Nevada on January 20, 2000. The Company was formed to serve as a
vehicle to raise capital to acquire a business and is currently
considered a "blank check" company inasmuch as the Company is not
generating revenues and does not own an operating business. The
Company has no employees and no material assets. Administrative
services are currently being provided by an entity controlled by an
officer of the Company. The Company's efforts to date have been
limited to organizational activities.
The Company is considered as being in the development stage, since its
inception, in accordance with Statement of Financial Accounting
Standards No. 7, and its fiscal year end is December 31.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
The Company's accounting policies are in accordance with generally
accepted accounting principles. Outlined below are those policies
considered particularly significant.
(a) Use of Estimates:
In preparing financial statements in accordance with generally
accepted accounting principles, management makes certain estimates and
assumptions, where applicable, that affect the reported amounts of
assets and liabilities and disclosures of contingent assets and
liabilities at the date of the financial statements, as well as the
reported amounts of revenues and expenses during the reporting period.
While actual results could differ from those estimates, management
does not expect such variances, if any, to have a material effect on
the financial statements.
(b) Statements of Cash Flows:
For purposes of the statement of cash flows the Company considers all
highly liquid investments purchased with a remaining maturity of three
months or less to be cash equivalents.
NOTE 3 - SHAREHOLDERS' EQUITY:
As of June 30, 2000, the Company had issued an aggregate of 3,000,000
units at a price of $.001 per unit, with each unit consisting of one
(1) share of common stock and one-third (1/3) Class A Redeemable
Common Stock Purchase Warrant, for cash proceeds of $3,000. The holder
of 3 units is entitled to exercise one Class A Warrant to purchase one
share of common stock and one Class B Redeemable Common Stock Purchase
Warrant at a price of $6.00 per share. One class B Warrant entitles
the holder to purchase one share of Common stock at a price of $9.00
per share.
The Company is preparing to file a registration statement on Form
SB-2, with the Securities and Exchange Commission, to register
4,800,000 shares of its common stock. The Company intends to offer for
sale, 600,000 units (each unit consisting of one (1) share of common
stock and one-third (1/3) Class A Redeemable Common Stock Purchase
Warrant) at a per unit price of $.02.
The proposed offering also covers the resale of an aggregate of
1,000,000 shares of common stock underlying the warrants previously
issued and an aggregate of 3,000,000 shares currently held by certain
shareholders. The Company will not receive any of the proceeds from
the resale of these shares.
F-6
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of Directors and Officers
The following statutes and by-law provisions are the only statutes, charter
provisions, by-laws, contracts or other arrangements known to the registrant
that insure or indemnify a controlling person, director or officer of the
registrant in any manner against liability which he or she may incur in his or
her capacity as such.
Article EIGHTH of the registrant's Articles of Incorporation provides that:
The registrant may, to the fullest extent permitted by the General
Corporation Law of the State of Nevada, as the same may be amended and
supplemented, indemnify any and all persons whom it shall have power to
indemnify under said Law from and against any and all of the expenses,
liabilities, or other matters referred to in or covered by said Law, and the
indemnification provided for herein shall not be deemed exclusive of nay other
rights to which those indemnified may be entitled under any Bylaw, agreement,
vote of stockholders or disinterested directors or otherwise, both as to action
in his official capacity and as to action in another capacity while holding such
office, and shall continue as to a person who has ceased to be a director,
officer, employee, or agent and shall inure to the benefit of the heirs,
executors, and administrators of such a person.
Article X of the registrant's By-laws provides that:
On the terms, to the extent, and subject to the condition prescribed by
statute and by such rules and regulations, not inconsistent with statute, as the
Board of Directors may in its discretion impose in general or particular cases
or classes of cases, (a) the Corporation shall indemnify any person made, or
threatened to be made, a party to an action or proceeding, civil or criminal,
including an action by or in the right of any other corporation of any type or
kind, domestic or foreign, or any partnership, joint venture, trust, employee
benefit plan or other enterprise which any director or officer of the registrant
served in any capacity at the request of the registrant, by reason of the fact
that he, his testator or intestate, was a director or officer of the registrant,
or served such other corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise in any capacity, against judgments, fines,
amounts paid in settlement and reasonable expenses, including attorneys, fees,
actually and necessarily incurred as a result of such action or proceeding, or
any appeal therein, and (b) the registrant may pay, in advance of final
disposition of any such action or proceeding, expenses incurred by such person
in defending such action or proceeding.
On the terms, to the extent, and subject to the conditions prescribed by
statute and by such rules and regulations, not inconsistent with statute, as the
Board of Directors may in its discretion impose in general or particular cases
or classes of cases, (a) the registrant shall indemnify any person made a party
to an action by or in the right of the registrant to procure a judgment in its
favor, by reason of the fact that he, his testator or intestate, is or was a
director or officer of the registrant, against the reasonable expenses,
including attorneys, fees, actually and necessarily incurred by him in
connection with the defense of such action, or in connection with an appeal
therein, and (b) the registrant may pay, in advance of final disposition of any
such action, expenses incurred by such person in defending such action or
proceeding.
II-1
Section 78.751 of the Nevada General Corporation Law ("GCL"), provides that:
1. A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative,
except an action by or in the right of the corporation, by reason of the fact
that he is or was a director, officer, employee or agent of the corporation, or
is or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, against expenses, including attorneys' fees, judgments, fines
and amounts paid in settlement actually and reasonably incurred by him in
connection with the action, suit or proceeding if he acted in good faith and in
a manner which he reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, does not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the corporation, and that, with respect to any criminal action or
proceeding, he had reasonable cause to believe that his conduct was unlawful.
2. A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the corporation to procure a judgment in its favor by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses, including amounts paid in
settlement and attorneys' fees actually and reasonably incurred by him in
connection with the defense or settlement of the action or suit if he acted in
good faith and in a manner which he reasonably believed to be in or not opposed
to the best interests of the corporation. Indemnification may not be made for
any claim, issue or matter as to which such a person has been adjudged by a
court of competent jurisdiction, after exhaustion of all appeals therefrom, to
be liable to the corporation or for amounts paid in settlement to the
corporation, unless and only to the extent that the court in which the action or
suit was brought or other court of competent jurisdiction determines upon
application that in view of all the circumstances of the case, the person is
fairly and reasonably entitled to indemnity for such expenses as the court deems
proper.
3. To the extent that a director, officer, employee or agent of a
corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in subsections 1 and 2, or in defense of
any claim, issue or matter therein, he must be indemnified by the corporation
against expenses, including attorneys' fees, actually and reasonably incurred by
him in connection with the defense.
4. Any indemnification under subsections 1 and 2, unless ordered by a court
or advanced pursuant to subsection 5, must be made by the corporation only as
authorized in the specific case upon a determination that indemnification of the
director, officer, employee or agent is proper in the circumstances. The
determination must be made:
(a) By the stockholders;
(b) By the board of directors by majority vote of a quorum consisting
of directors who were not parties to the act, suit or proceeding;
II-2
(c) If a majority vote of a quorum consisting of directors who were
not parties to the act, suit or proceeding so orders, by independent legal
counsel in a written opinion; or
(d) If a quorum consisting of directors who were not parties to the
act, suit or proceeding cannot be obtained, by independent legal counsel in
a written opinion.
5. The articles of incorporation, the bylaws or an agreement made by the
corporation may provide that the expenses of officers and directors incurred in
defending a civil or criminal action, suit or proceeding must be paid by the
corporation as they are incurred and in advance of the final disposition of the
action, suit or proceeding, upon receipt of an undertaking by or on behalf of
the director or officer to repay the amount if it is ultimately determined by a
court of competent jurisdiction that he is not entitled to be indemnified by the
corporation. The provisions of this subsection do not affect any rights to
advancement of expenses to which corporate personnel other than directors or
officers may be entitled under any contract or otherwise by law.
6. The indemnification and advancement of expenses authorized in or ordered
by a court pursuant to this section:
(a) Does not exclude any other rights to which a person seeking
indemnification or advancement of expenses may be entitled under the
articles of incorporation or any bylaw, agreement, vote of stockholders or
disinterested directors or otherwise, for either an action in his official
capacity or an action in another capacity while holding his office, except
that indemnification, unless ordered by a court pursuant to subsection 2 or
for the advancement of expenses made pursuant to subsection 5, may not be
made to or on behalf of any director or officer if a final adjudication
establishes that his acts or omissions involved intentional misconduct,
fraud or a knowing violation of the law and was material to the cause of
action.
(b) Continues for a person who has ceased to be a director, officer,
employee or agent and inures to the benefit of the heirs, executors and
administrators of such a person.
Section 78.752 of the GCL provides that:
1. A corporation may purchase and maintain insurance or make other
financial arrangements on behalf of any person who is or was a director,
officer, employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise for any
liability asserted against him and liability and expenses incurred by him in his
capacity as a director, officer, employee or agent, or arising out of his status
as such, whether or not the corporation has the authority to indemnify him
against such liability and expenses.
2. The other financial arrangements made by the corporation pursuant to
subsection 1 may include the following:
(a) The creation of a trust fund.
(b) The establishment of a program of self-insurance.
(c) The securing of its obligation of indemnification by granting a
security interest or other lien on any assets of the corporation.
II-3
(d) The establishment of a letter of credit, guaranty or surety.
No financial arrangement made pursuant to this subsection nay provide protection
for a person adjudged by a court of competent jurisdiction, after exhaustion of
all appeals therefrom, to be liable for intentional misconduct, fraud or a
knowing violation of law, except with respect to the advancement of expenses or
indemnification ordered by a court.
3. Any insurance or other financial arrangement made on behalf of a person
pursuant to this section may be provided by the corporation or any other person
approved by the board of directors, even if all or part of the other person's
stock or other securities is owned by the corporation.
4. In the absence of fraud:
(a) The decision of the board of directors as to the propriety of the terms
and conditions of any insurance or other financial arrangement made pursuant to
this section and the choice of the person to provide the insurance or other
financial arrangement is conclusive; and
(b) The insurance or other financial arrangement:
(1) Is not void or voidable; and
(2) Does not subject any director approving it to personal liability
for his action, even if a director approving the insurance or other
financial arrangement is a beneficiary of the insurance or other financial
arrangement.
5. A corporation or its subsidiary which provides self-insurance for itself
or for another affiliated corporation pursuant to this section is not subject to
the provisions of Title 57 of the The Nevada Revised Statutes.
Item 25. Other Expenses of Issuance and Distribution
SEC Registration Fee .................................... $ 4,771
Printing Expenses ....................................... 1,000
Legal Fees and Expenses ................................. 6,000
State Securities Qualification Fees and Expenses ........ 1,000
Accounting and Auditing Fees and Expenses ............... 1,500
Miscellaneous ........................................... 5,729
-------
Total ................................................... $20,000
=======
Item 26. Recent Sales of Unregistered Securities
(a) As of January 20, 2000, the registrant had issued an aggregate of
2,960,000 shares of its common stock and 986,667 Class A redeemable common stock
purchase warrants to its founder for $2,960 in cash. The registrant is using the
proceeds for working capital and the general corporate purposes. There were no
underwriters in connection with the above transaction. The registrant believes
that these securities were issued in a transaction not involving a public
offering in reliance upon an exemption from registration provided by Section
4(2) of the Act.
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(b) As of July 20, 2000, the registrant issued an aggregate of 40,000
shares of its common stock and 13,333 Class A redeemable common stock purchase
warrants to Snow Becker Krauss P.C. in connection with legal services being
rendered to registrant. See "Legal Matters" in the prospectus which is included
in this registration statement. There were no underwriters in connection with
the above transaction. The registrant believes that these securities were issued
in a transaction not involving a public offering in reliance upon an exemption
from registration provided by Section 4(2) of the Act.
The Board of Directors and executive officers were elected as of January
20, 2000 and are not aware of any other sales of unregistered securities of the
registrant.
Item 27. Exhibits and Financial Statement Schedules
(a) Exhibits
3.1 Articles of Incorporation of the registrant,
3.2 By-Laws of the registrant,
4.1 Specimen Common Share Certificate.
4.2 Specimen Class A Warrant Certificate.
4.3 Specimen Class B Warrant Certificate.
5.1 Opinion of Snow Becker Krauss P.C.
23.1 Consent of Snow Becker Krauss P.C.
23.2 Consent of Lazar Levine & Felix LLP
Item 28. Undertakings
The registrant hereby undertakes:
(1) To file, during any period in which it offers or sells securities, a
post-effective amendment to this registration statement to:
(i) Include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933, as amended (the "Act");
(ii) Reflect in the prospectus any facts or events which, individually
or together, represent a fundamental change in the information in the
registration statement;
(iii) Include any additional or changed material information on the
plan of distribution.
(2) For determining liability under the Act, to treat each post-effective
amendment as a new registration statement of the securities offered, and the
offering of the securities at that time to be the initial bona fide offering.
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(3) To file a post-effective amendment to remove from registration any of
the securities that remain unsold at the end of the offering.
(4) Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the small business
issuer pursuant to the foregoing provisions, or otherwise, the small business
issuer has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the small business issuer of
expenses incurred or paid by a Director, officer or controlling person of the
small business issuer in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the small business issuer will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
(5) For determining any liability under the Securities Act, to 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 Act as part of this registration statement as of the time the
Commission declared it effective.
(6) For determining any liability under the Securities Act, to 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.
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SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form SB-2 and authorized this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Las Vegas, State of Nevada on the 13th day of
September, 2000.
CREST VIEW, INC.
By: /s/ Johnny R. Thomas
------------------------------
Johnny R. Thomas, President
and Treasurer
In accordance with 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 stated:
Signature Title Date
- --------- ----- ----
/s/ Johnny R. Thomas
- ---------------------- President, Treasurer September 13, 2000
Johnny R. Thomas (Principal Executive Officer and
Chief Financial Officer)
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EXHIBIT INDEX
Exhibit
Number Description Page
- ------ ----------- ----
3.1 Article of Incorporation of the registrant.
3.2 By-Laws of the registrant.
4.1 Specimen Common Share Certificate.
4.2 Specimen Class A Warrant Certificate.
4.3 Specimen Class B Warrant Certificate.
5.1 Opinion of Snow Becker Krauss P.C.
23.1 Consent of Snow Becker Krauss P.C.
23.2 Consent of Lazar Levine & Felix LLP