U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 4 TO FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
MVD, INC.,
(Exact name of registrant as specified in its charter)
Delaware 7372 94-3357128
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer Identification No.)
of incorporation or organization) Classification Code Number)
660 Dover Street, Suite A16, Boca Raton, Florida 33487
(Address of registrant's principal executive offices) (Zip Code)
(561) 443-4654
(Registrant's Telephone Number, Including Area Code)
Thomas E. Stepp, Jr.
Stepp & Beauchamp LLP
1301 Dove Street, Suite 460
Newport Beach, California 92660
949.660.9700
Facsimile 949.660.9010
(Name, Address and Telephone Number of Agent for Service)
Approximate date of proposed sale to the public: From time to time after this
Registration Statement becomes effective.
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ] _______
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] _______
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] _______
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
============================================================================================================
Title of each class Amount Proposed maximum Proposed maximum
of securities to be offering price aggregate Amount of
to be registered registered per share offering price registration fee
- ------------------------------------------------------------------------------------------------------------
Common Stock, $.001 par value 2,500,000 $0.25 $625,000.00 $165.00
============================================================================================================
The offering price per share for the selling security holders was estimated
solely for the purpose of calculating the registration fee pursuant to Rule 457
of Regulation C.
The Registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933, as amended, or until this Registration Statement shall
become effective on such date as the Commission, acting pursuant to said Section
8(a), may determine.
1
Preliminary Prospectus
MVD, Inc.,
a Delaware corporation
2,500,000 Shares of Common Stock
This prospectus relates to 2,500,000 shares of common stock of MVD, Inc., a
Delaware corporation, which are issued and outstanding shares of our common
stock, acquired by the selling security holders in private placement
transactions which were exempt from the registration and prospectus delivery
requirements of the Securities Act of 1933. No national securities exchange or
the Nasdaq Stock Market lists the common stock being offered by the selling
security holders, and we have not applied for listing or quotation with any
national securities exchange or automated quotation system.
The shares of common stock offered by the selling security holders have not been
registered for sale under the securities laws of any state as of the date of
this prospectus. Brokers or dealers effecting transactions in the shares of our
common stock should confirm the registration thereof under the securities laws
of the states in which transactions occur or the existence of any exemption from
registration.
The selling security holders may from time to time sell the shares on the OTC
Bulletin Board, on any other national securities exchange or automated quotation
system on which the common stock may be listed or traded, in negotiated
transactions or otherwise, at prices then prevailing or related to the then
current market price or at negotiated prices. We will not receive any of the
proceeds from the sale of those shares being offered.
See "Risk Factors" on pages 5 to 9 for factors to be considered before investing
in the shares of our common stock.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of the prospectus. Any representation to the contrary is a
criminal offense.
The information in this prospectus is not complete and may be changed. The
selling security holders may not sell these securities until the registration
statement filed with the Securities and Exchange Commission is effective. This
prospectus is not an offer to sell these securities and it is not soliciting an
offer to buy these securities in any state where the offer or sale is not
permitted.
The date of this prospectus is October 31, 2000
Subject to completion.
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TABLE OF CONTENTS
Prospectus Summary ...........................................................4
Risk Factors..................................................................5
Use of Proceeds...............................................................9
Determination of Offering Price...............................................9
Dilution......................................................................9
Selling Security Holder.......................................................9
Plan of Distribution..........................................................10
Legal Proceedings ...........................................................11
Directors, Executive Officers, Promoters and Control Persons..................11
Security Ownership of Certain Beneficial Owners and Management................12
Description of Securities.....................................................13
Interest of Named Experts and Counsel.........................................13
Disclosure of Commission Position on Indemnification for Securities
Act Liabilities..............................................................13
Organization Within Last Five Years...........................................14
Description of Business.......................................................14
Management's Discussion and Analysis of Financial Condition and
Results of Operations........................................................18
Description of Property.......................................................19
Certain Relationships and Related Transactions................................19
Market for Common Equity and Related Stockholder Matters......................20
Executive Compensation........................................................21
Financial Statements..........................................................21
Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.....................................................21
Legal Matters.................................................................22
Experts.......................................................................22
Additional Information........................................................22
Indemnification of Directors and Officers.....................................22
Other Expenses of Issuance and Distribution...................................23
Recent Sales of Unregistered Securities.......................................23
Exhibits......................................................................24
Undertakings..................................................................24
Signatures....................................................................26
Power of Attorney.............................................................27
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Prospectus Summary
Our Business: Our principal business address is 660 Dover
Street, Suite A16, Boca Raton, Florida, 33487;
our telephone number (561) 443-4654.
We are a developmental stage company and we
intend to provide digital entertainment products
and services. Our principal business activities
are:
o the sale and distribution of digital
cameras and digital music players developed
and manufactured by third parties, and
o the development of digital-related
services.
The products that we sell and distribute include
a digital camera and a digital music player. We
have not yet generated any revenues from the
sale of those digital cameras or music players.
Our current website displays pictures of the
digital cameras and digital music players that
we sell and distribute and provides our address,
telephone number and e-mail address. We intend
to further develop our website, to market those
digital entertainment products. We intend to
develop our website to allow users to interact
with other digital users, obtain advice,
products and services from vendors, as well as
purchase digital entertainment products.
Our State of Organization: We were incorporated in Delaware on March 14,
2000.
Number of Shares Being
Offered: The selling security holders want to sell
2,500,000 shares of our common stock. The
offered shares were acquired by the selling
security holders in private placement
transactions which were exempt from the
registration and prospectus delivery
requirements of the Securities Act of 1933.
Number of Shares Outstanding
After the Offering: 2,500,000 shares of our common stock are issued
and outstanding. We have no other securities
issued.
Estimated use of We will not receive any of the proceeds from the
proceeds: sale of those shares being offered.
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RISK FACTORS
In addition to the other information in this prospectus, the following risk
factors should be considered carefully in evaluating our business before
purchasing any of our shares of common stock. A purchase of our common stock is
speculative and involves a lot of risks. No purchase of our common stock should
be made by any person who is not in a position to lose the entire amount of his
investment.
Information in this prospectus contains "forward looking statements" which can
be identified by the use of forward-looking words, such as "believes",
"estimates", "could", "possibly", "probably", "anticipates", "estimates",
"projects", "expects", "may", "will", or "should" or other variations thereon or
similar words. No assurances can be given that the future results anticipated by
the forward-looking statements will be achieved. The following matters
constitute cautionary statements identifying important factors with respect to
those forward-looking statements, including certain risks and uncertainties,
that could cause actual results to vary materially from the future results
anticipated by those forward-looking statements. Among the key factors that have
a direct bearing on our results of operations are the effects of various
governmental regulations, the fluctuation of our direct costs and the costs and
effectiveness of our operating strategy. Other factors could also cause actual
results to vary materially from the future results anticipated by those
forward-looking statements.
Because we are a new company with losses since our formation and we anticipate
that we will lose money in the foreseeable future, we may not be able to achieve
profitable operations.
We were incorporated in March 2000, and we began operations immediately
thereafter. As of June 30, 2000, our losses were approximately $13,615. We are
currently the non-exclusive distributor in the United States of digital cameras
and MP3 audio players developed and manufactured by Joinford (H.K.) Ltd. We have
not yet generated any revenues. We anticipate generating revenues in our current
fiscal year. Our prospects must be considered speculative, considering the
risks, expenses, and difficulties frequently encountered in the establishment of
a new business, specifically the risks inherent in the development of digital
products. We cannot guaranty that unanticipated technical or other problems will
not occur which would result in material delays in future product and service
commercialization or that our efforts will result in successful product and
service commercialization. We cannot guaranty that we will be able to achieve
profitable operations.
Our officers and directors are engaged in other activities that could have
conflicts of interest with us. Therefore, our officers and directors may not
devote sufficient time to our affairs.
The persons serving as our officers and directors have existing responsibilities
and, may have additional responsibilities to provide management and services to
other entities. As a result, conflicts of interest between us and the other
activities of those entities may occur from time to time, in that our officers
and directors shall have conflicts of interest in allocating time, services, and
functions between the other business ventures in which they may be or become
involved and our affairs.
Christopher A. Cota currently serves as managing member of Cota LLC, a Delaware
limited liability company. Cota LLC is the exclusive representative in North
America, Central America and South America for Varitronix (Malaysia) SDN BHD, a
Malaysia corporation and manufacturer of liquid crystal displays. A liquid
crystal display, which is installed in products such as cellular phones,
calculators and watches, consists of an array of tiny segments (called pixels)
that can be manipulated to present information. Mr. Cota currently devotes
approximately 1/2 of his time to Cota LLC. The digital cameras and music players
that we sell currently do not use liquid crystal displays. In the event that we
develop products which use liquid crystal displays and we purchase those
displays from Cota LLC, Mr. Cota will determine the price that we will pay for
those displays. Mr. Cota's determination of that price is a serious conflict of
interest.
Ryan A. Neely is the President, Secretary and a director of JPAL, Inc., a Nevada
corporation and an Internet based provider of vacation rentals. Mr. Neely
currently devotes approximately half of his time to JPAL, Inc. We do not believe
that we
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have any conflicts of interest with the business or industry of JPAL, Inc.,
other than Mr. Neely's duty to provide management and services.
We operate in a highly competitive industry and we may not have adequate
resources to market the products that we sell and distribute in order to compete
successfully.
Competition in the digital entertainment products industry is intense. We
compete directly with other companies and businesses that have developed and are
in the process of developing digital cameras and music players which are
functionally equivalent or similar to the digital cameras and music players
manufactured by Joinford (H.K.) Ltd. Other competitors' entry-level digital
cameras are similar to the digital cameras that we sell. Those cameras are
inexpensive, yet still provide the user the ability to digitally photograph
images and develop those pictures using a personal computer and a printer. Our
competitors' digital music players are similar to the digital music players that
we sell. Those music players are designed to be sold at low cost, yet still
provide quality sound. We expect that these competitors who have developed
similar digital cameras and music players will market those products to our
target customers, which will significantly affect our ability to compete.
Most of our competitors have substantially greater experience, financial and
technical resources and production, marketing and development capabilities than
we do. Many of those competitors with greater financial resources can afford to
spend more resources than we can to market their products. We cannot guaranty
that we will succeed in marketing, selling and distributing the digital products
manufactured by Joinford (H.K.) Ltd. We cannot guaranty that our competitors
will not succeed in marketing, selling and distributing their products.
Our ability to succeed is uncertain because we currently have limited sources of
revenue and minimal marketing activities due to the lack of revenues. Therefore,
investors may lose all or part of their investment, if we do not generate
revenues.
We are currently engaged primarily in marketing the digital cameras and digital
music players developed and manufactured by Joinford (H.K.) Ltd. Our only
sources of revenue are the sales of those digital cameras and digital music
players. We have not yet generated any revenues. Our marketing activities are
significantly limited and, to fund more sophisticated marketing activities, we
need to generate revenues. Our failure to generate revenues may cause an
investor to lose part or all of his investment. We cannot guaranty that we will
generate any revenues.
We are substantially dependent on Joinford (H.K.) Ltd. for our supply of digital
cameras and music players. We do not currently have any other source for these
products which are our only current potential source of revenue.
In the event that we cannot sell Joinford's digital cameras and music players,
we will need to develop a relationship with another supplier of digital cameras
and music players. We cannot guaranty that we would be able to develop another
relationship with a different supplier.
We do not have a written supply agreement with Joinford (H.K.) Ltd. Joinford has
no obligation to supply digital cameras and music players to us and, therefore,
Joinford may terminate our relationship at any time. In the event that Joinford
(H.K.) Ltd. terminates our relationship, we will not have any other products to
sell and distribute.
Joinford (H.K.) Ltd. allows us to market and distribute their digital cameras
and music players in the United States on a non-exclusive basis. Because we do
not have an exclusive right to sell and distribute these products, other
companies could acquire the exclusive right to sell and distribute these
products. In the event that another company acquires the exclusive right to sell
and distribute these products, we will have no sources of revenue and we will be
forced to develop a relationship with another supplier of digital cameras and
music players. If we are unable to find another supplier of digital cameras and
music players, we will need to develop other sources of revenue.
We may not be able to maintain our web domain name, which may cause confusion
among web users and decrease any potential value of our name.
6
We currently hold the web domain name www.mvdinc.com. Currently, the acquisition
and maintenance of domain names is regulated by governmental agencies and their
designees. The regulation of domain names in the U.S. and in foreign countries
is expected to change in the near future. As a result, we may not be able to
maintain our domain name. These changes could include the introduction of
additional top-level domains, which could cause confusion among web users trying
to locate our sites. Furthermore, the relationship between regulations governing
domain names and laws protecting trademarks and similar proprietary rights is
unclear. We may be unable to prevent third parties from acquiring domain names
that are similar to ours. The acquisition of similar domain names by third
parties could cause confusion among web users attempting to locate our site and
could decrease the value of our name and the use of our site.
We anticipate that we will need to raise additional capital to market and
distribute digital cameras and music players and continue to develop our
business. Our failure to raise additional capital will significantly limit our
marketing activities and business development.
To market and distribute digital cameras and music players and complete our
business development, we will be required to raise additional funds. We cannot
guaranty that we will be able to obtain additional financing at commercially
reasonable rates. We anticipate that we will spend a lot of funds on the
marketing and promotion of the digital cameras and music players that we sell.
The minimum amount necessary to complete our current business development plans
is approximately $25,000. Our failure to obtain additional funds would
significantly limit or eliminate our ability to fund our sales and marketing
activities. This would have a material adverse effect on our ability to continue
our operation and compete with other providers.
We anticipate that we may seek additional funding through public or private
sales of our securities. That could include equity securities, or through
commercial or private financing arrangements. Adequate funds may not be
available when needed or on terms acceptable to us. In the event that we are not
able to obtain additional funding on a timely basis, we may be required to limit
any proposed operations or eliminate certain or all of our marketing programs.
Our ability to raise additional capital through the sale of our stock may be
harmed by competing resales of our common stock by the selling security holders.
The price of our common stock could fall if the selling security holders sell
substantial amounts of our common stock. These sales would make it more
difficult for us to sell equity or equity-related securities in the future at a
time and price that we deem appropriate because the selling security holders may
offer to sell their shares of common stock to potential investors for less than
we do. Moreover, potential investors may not be interested in purchasing shares
of our common stock if the selling security holders are selling their shares of
common stock.
Our inability to generate revenues will affect our ability to market the digital
products manufactured by Joinford (H.K.) Ltd.
We may not be able to generate revenues to market and sell those digital cameras
and digital music players effectively. Our failure to sell those digital cameras
and digital music players could adversely affect our business and financial
performance. If we are unable to generate revenues, we anticipate that our
marketing activities will be very limited. Also, our expenses will be limited to
the day-to-day expenditures necessary to conduct business. Our President,
director and principal shareholder, Christopher A. Cota, has paid our expenses
since our inception. We cannot guaranty that Mr. Cota will continue to pay our
expenses in the event that we do not generate revenues.
Our officers, directors and principal security holders own approximately 66% of
our outstanding shares of common stock. Such concentrated control allows these
shareholders to exert significant influence in matters requiring approval of our
shareholders.
Our directors, officers and principal (greater than 5%) security holders, taken
as a group, together with their affiliates, beneficially own, in the aggregate,
approximately 66% of our outstanding shares of common stock. Christopher A.
Cota is one of our principal shareholders and also our President, Treasurer and
one of our directors. Such concentrated control of the company may adversely
affect the price of our common stock. Mr. Cota may be able to exert
significant influence, or even control, matters requiring approval by our
security holders, including the election of
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directors. Such concentrated control may also make it difficult for our
shareholders to receive a premium for their shares of our common stock in the
event we merge with a third party or enter into a different transaction which
requires shareholder approval.
In addition, certain provisions of Delaware law could have the effect of making
it more difficult or more expensive for a third party to acquire, or of
discouraging a third party from attempting to acquire, control of us.
Because we may be subject to the "penny stock" rules, the level of trading
activity in our stock may be reduced.
Broker-dealer practices in connection with transactions in "penny stocks" are
regulated by certain penny stock rules adopted by the Securities and Exchange
Commission. Penny stocks, like shares of our common stock, generally are equity
securities with a price of less than $5.00, other than securities registered on
certain national securities exchanges or quoted on Nasdaq. The penny stock rules
require a broker-dealer, prior to a transaction in a penny stock not otherwise
exempt from the rules, to deliver a standardized risk disclosure document that
provides information about penny stocks and the nature and level of risks in the
penny stock market. The broker-dealer also must provide the customer with
current bid and offer quotations for the penny stock, the compensation of the
broker-dealer and its salesperson in the transaction, and, if the broker-dealer
is the sole market maker, the broker-dealer must disclose this fact and the
broker-dealer's presumed control over the market, and monthly account statements
showing the market value of each penny stock held in the customer's account. In
addition, broker-dealers who sell these securities to persons other than
established customers and "accredited investors" must make a special written
determination that the penny stock is a suitable investment for the purchaser
and receive the purchaser's written agreement to the transaction. Consequently,
these requirements may have the effect of reducing the level of trading
activity, if any, in the secondary market for a security subject to the penny
stock rules, and investors in our common stock may find it difficult to sell
their shares.
We lack a public market for shares of our common stock, which may make it
difficult for investors to sell their shares.
There is no public market for shares of our common stock. We cannot guaranty
that an active public market will develop or be sustained. Therefore, investors
may not be able to find purchasers for their shares of our common stock. Should
there develop a significant market for our shares, the market price for those
shares may be significantly affected by such factors as our financial results
and introduction of new products and services. Factors such as announcements of
new or enhanced products by us or our competitors and quarter-to-quarter
variations in our results of operations, as well as market conditions in the
high technology sector may have a significant impact on the market price of our
shares. Further, the stock market has experienced extreme volatility that has
particularly affected the market prices of stock of many companies and that
often has been unrelated or disproportionate to the operating performance of
those companies.
Because we lack a public market for shares of our common stock, the offering
price of the shares will be arbitrarily determined by the selling security
holders. Therefore, investors may lose all or part of their investment if the
price of their shares is too high.
Our common stock is not publicly traded and we do not participate in the OTC
Bulletin Board, an electronic quotation medium for securities traded outside the
Nasdaq Stock Market. We cannot guaranty that an active public market for our
stock will develop or be sustained. Therefore, the offering price of shares of
our common stock may be arbitrarily determined by the selling security holders.
Accordingly, purchasers may lose all or part of their investments if the price
of their shares is too high. A purchase of our stock in this offering would be
"unsuitable" for a person who cannot afford to lose his entire investment.
We are registering all of the issued and outstanding shares of common stock,
including those shares owned by our officers and directors. The selling security
holders, including our officers and directors, may sell all of their shares as
soon as possible, which could significantly decrease the price of our common
stock and reduce our officers' and directors' desire to see us succeed.
All of the stock owned by the selling security holders, including our officers
and directors, will be registered by the registration statement of which this
prospectus is a part. The selling security holders, including our officers and
8
directors, may sell some or all of their shares immediately after they are
registered. In the event that the selling security holders sell some or all of
their shares, the price of our common stock could decrease significantly.
In the event that our officers and directors sell all or some of their common
stock, a conflict of interest will occur between our officers' and directors'
duties to us and their personal interests in selling their shares. Mr. Cota has
paid our expenses since our inception because he has a significant equity
interest in the company. In the event that that Mr. Cota sells some or all of
his shares, he may not have a continued incentive to fund our operations and pay
our expenses. We cannot assure you that the officers and directors will not sell
some or all of their shares as soon as they are registered.
Use of Proceeds
We will not receive any proceeds from the sale of shares of our common stock
being offered by the selling security holders.
Determination of Offering Price
Factors Used to Determine Share Price. The selling security holders may sell our
common stock at prices then prevailing or related to the then current market
price or at negotiated prices. The offering price has no relationship to any
established criteria of value, such as book value or earnings per share.
Additionally, because we have no significant operating history and have not
generated any revenues to date, the price of our common stock is not based on
past earnings, nor is the price of the shares of our common stock indicative of
current market value for the assets owned by us. No valuation or appraisal has
been prepared for our business and potential business expansion.
Dilution
The shares offered for sale by the selling security holders are already
outstanding and, therefore, do not contribute to dilution.
Selling Security Holders
The following table sets forth the number of shares which may be offered for
sale from time to time by the selling security holders. The shares offered for
sale constitute all of the shares known to us to be beneficially owned by the
selling security holders. None of the selling security holders has held any
position or office with us, except as specified in the following table. Other
than the relationships described below, none of the selling security holders had
or have any material relationship with us.
================================================================================
Shares of
Name of Selling Security Holder Common Stock
- --------------------------------------------------------------------------------
Christopher A. Cota, President, Treasurer and a director 925,000
- --------------------------------------------------------------------------------
Ryan A. Neely, Secretary and a director 50,000
- --------------------------------------------------------------------------------
Thomas E. Stepp, Jr.(1) 333,334
- --------------------------------------------------------------------------------
Richard Reincke(1) 166,666
- --------------------------------------------------------------------------------
Michael Muellerleile(1) 125,000
- --------------------------------------------------------------------------------
Antonio Cota, Jr. 50,000
- --------------------------------------------------------------------------------
Daniel Moore 50,000
- --------------------------------------------------------------------------------
Hal Pappano 50,000
- --------------------------------------------------------------------------------
Bill McElroy 50,000
- --------------------------------------------------------------------------------
Deanna Stith 50,000
- --------------------------------------------------------------------------------
Richard Barrera 50,000
- --------------------------------------------------------------------------------
Tina Cota 50,000
- --------------------------------------------------------------------------------
John Muellerleile 50,000
- --------------------------------------------------------------------------------
Sean Connelly 50,000
- --------------------------------------------------------------------------------
Kiriaki Rudolph 50,000
- --------------------------------------------------------------------------------
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- --------------------------------------------------------------------------------
Ruffo Espinosa 50,000
- --------------------------------------------------------------------------------
Warren Nass 50,000
- --------------------------------------------------------------------------------
Sharareh Frouzesh 50,000
- --------------------------------------------------------------------------------
Christopher Watson 50,000
- --------------------------------------------------------------------------------
Scott Ness 50,000
- --------------------------------------------------------------------------------
Antonio Torrellio 50,000
- --------------------------------------------------------------------------------
Richard Eagleston 50,000
- --------------------------------------------------------------------------------
Scott Sherman 50,000
================================================================================
(1) Thomas E. Stepp, Jr.; Richard Reincke and Michael J. Muellerleile are
employees of Stepp & Beauchamp LLP, which is legal counsel to the company.
Plan of Distribution
The selling security holders may sell our common stock in the over-the-counter
market, or on any securities exchange on which our common stock is or becomes
listed or traded, in negotiated transactions or otherwise. The selling security
holders may sell our common stock at prices then prevailing or related to the
then current market price or at negotiated prices. The shares will not be sold
in an underwritten public offering.
The shares may be sold directly or through brokers or dealers. The methods by
which the shares may be sold include:
o purchases by a broker or dealer as principal and resale by such broker
or dealer for its account;
o ordinary brokerage transactions and transactions in which the broker
solicits purchasers; and
o privately negotiated transactions.
Brokers and dealers engaged by selling security holders may arrange for other
brokers or dealers to participate. Brokers or dealers may receive commissions or
discounts from selling security holders (or, if any such broker-dealer acts as
agent for the purchaser of such shares, from such purchaser) in amounts to be
negotiated. Broker-dealers may agree with the selling security holders to sell a
specified number of such shares at a stipulated price per share, and, to the
extent such broker-dealer is unable to do so acting as agent for a selling
security holder, to purchase as principal any unsold shares at the price
required to fulfill the broker-dealer commitment to such selling security
holder. Broker-dealers who acquire shares as principal may resell those shares
from time to time in the over-the-counter market or otherwise at prices and on
terms then prevailing or then related to the then-current market price or in
negotiated transactions and, in connection with such resales, may receive or pay
commissions.
The selling security holders and any broker-dealers participating in the
distributions of the shares may be deemed to be "underwriters" within the
meaning of Section 2(11) of the Securities Act of 1933. Any profit on the sale
of shares by the selling security holders and any commissions or discounts given
to any such broker-dealer may be deemed to be underwriting commissions or
discounts. The shares may also be sold pursuant to Rule 144 under the Securities
Act of 1933 beginning one year after the shares were issued.
We have filed the Registration Statement, of which this prospectus forms a part,
with respect to the sale of the shares by the selling security holders. There
can be no assurance that the selling security holders will sell any or all of
the offered shares.
Under the Securities Exchange Act of 1934 and the regulations thereunder, any
person engaged in a distribution of the shares of our common stock offered by
this prospectus may not simultaneously engage in market making activities with
respect to our common stock during the applicable "cooling off" periods prior to
the commencement of such distribution. Also, the selling security holders are
subject to applicable provisions which limit the timing of purchases and sales
of our common stock by the selling security holders.
We have informed the selling security holders that, during such time as they may
be engaged in a distribution of any of the shares we are registering by this
Registration Statement, they are required to comply with Regulation M. In
general, Regulation M precludes any selling security holder, any affiliated
purchasers and any broker-dealer or other person who participates in a
distribution from bidding for or purchasing, or attempting to induce any person
to bid for or purchase, any security which is the subject of the distribution
until the entire distribution is complete. Regulation M defines a
10
"distribution" as an offering of securities that is distinguished from ordinary
trading activities by the magnitude of the offering and the presence of special
selling efforts and selling methods. Regulation M also defines a "distribution
participant" as an underwriter, prospective underwriter, broker, dealer, or
other person who has agreed to participate or who is participating in a
distribution.
Regulation M prohibits any bids or purchases made in order to stabilize the
price of a security in connection with the distribution of that security, except
as specifically permitted by Rule 104 of Regulation M. These stabilizing
transactions may cause the price of our common stock to be more than it would
otherwise be in the absence of these transactions. We have informed the selling
security holders that stabilizing transactions permitted by Regulation M allow
bids to purchase our common stock if the stabilizing bids do not exceed a
specified maximum. Regulation M specifically prohibits stabilizing that is the
result of fraudulent, manipulative, or deceptive practices. Selling security
holders and distribution participants are required to consult with their own
legal counsel to ensure compliance with Regulation M.
Legal Proceedings
There are no legal actions pending against us nor are any legal actions
contemplated by us at this time.
Directors, Executive Officers, Promoters and Control Persons
Executive Officers and Directors. We are dependent on the efforts and abilities
of certain of our senior management. The interruption of the services of key
management could have a material adverse effect on our operations, profits and
future development, if suitable replacements are not promptly obtained. We
anticipate that we will enter into employment agreements with each of our key
executives. We cannot guaranty that each executive will remain with us during or
after the term of his or her employment agreement. In addition, our success
depends, in part, upon our ability to attract and retain other talented
personnel. Although we believe that our relations with our personnel are good
and that we will continue to be successful in attracting and retaining qualified
personnel, we cannot guaranty that we will be able to continue to do so. Our
officers and directors will hold office until their resignations or removal. Our
directors and principal executive officers are as specified on the following
table:
=====================================================================
Name Age Position
---------------------------------------------------------------------
Christopher A. Cota 34 President, Treasurer and a Director
---------------------------------------------------------------------
Ryan A. Neely 29 Secretary and a Director
=====================================================================
Christopher A. Cota. Mr. Cota is our President, Treasurer and a director. Mr.
Cota manages all aspects of our operations, including negotiating agreements
with product manufacturers and suppliers as well as marketing and sales of the
digital cameras and music players. From 1998 to 2000, Mr. Cota has been the
managing member of Cota LLC, a Delaware limited liability company and the
exclusive sales representative in North America, Central America and South
America for Varitronix (Malaysia) SDN BHD, a Malaysia corporation and
manufacturer of liquid crystal displays. Cota LLC primarily sells liquid crystal
displays to manufacturers of cellular phones such as Motorola. From 1995 to
1998, Mr. Cota worked as an OEM Sales Manager for VL Electronics, Inc., a
California corporation and distributor of liquid crystal displays. From 1989
until 1994, Mr. Cota worked as a sales executive and consultant to product
development for various manufacturing companies in Asia. Mr. Cota has not been a
director of any other reporting company.
Ryan A. Neely. Mr. Neely is our Secretary and a director. From May 1999 to
September 1999, Mr. Neely worked as a sales account manager for Unified Research
Laboratories, Inc., which was recently acquired by Symantec Corporation. Unified
Research Laboratories, Inc. is a developer of Internet content-control software
and web filtering technologies. From August 1998 to May 1999, Mr. Neely was the
co-founder of Filtering Associates, a manufacturer representative for several
Internet content-control companies. From 1996 to August 1998, Mr. Neely worked
for Log-On Data Corp., Inc., a California corporation, as a Regional Sales
Manager where he was responsible for all enterprise sales. In March 2000, Mr.
Neely became and still is the President, Secretary and a director of JPAL, Inc.,
a Nevada corporation and an Internet based provider of vacation rentals. Mr.
Neely has not been a director of any other reporting company.
11
There is no family relationship between any of our officers or directors. There
are no orders, judgments, or decrees of any governmental agency or
administrator, or of any court of competent jurisdiction, revoking or suspending
for cause any license, permit or other authority to engage in the securities
business or in the sale of a particular security or temporarily or permanently
restraining any of our officers or directors from engaging in or continuing any
conduct, practice or employment in connection with the purchase or sale of
securities, or convicting such person of any felony or misdemeanor involving a
security, or any aspect of the securities business or of theft or of any felony.
Nor are any of the officers or directors of any corporation or entity affiliated
with us so enjoined.
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information regarding the beneficial
ownership of our common stock as of October 17, 2000 by each person or entity
known by us to be the beneficial owner of more than 5% of the outstanding shares
of common stock, each of our directors and named executive officers, and all of
our directors and executive officers as a group.
Title of Class Name and Address of Amount and Nature of
Beneficial Owner Beneficial Owner Percent of Class
- ------------------------------------------------------------------------------------------------------
Common Stock Thomas E. Stepp, Jr. (1) 333,334 shares 13.33%
1301 Dove Street, Suite 460
Newport Beach, CA 92660
Common Stock Richard Reincke (1) 166,666 shares 6.67%
1301 Dove Street, Suite 460
Newport Beach, CA 92660
Common Stock Michael Muellerleile (1) 125,000 shares 5.0%
1301 Dove Street, Suite 460
Newport Beach, CA 92660
Common Stock Christopher A. Cota 975,000 shares(2) President, 39.0%
660 Dover Street, Suite A16 Treasurer, Director
Boca Raton, Florida 33487
Common Stock Ryan A. Neely, 50,000 shares, Secretary, 2.0%
660 Dover Street, Suite A16 Director
Boca Raton, Florida 33487
Common Stock All directors and named 41.0%
executive officers as a group
(1) Law firm affiliation.
(2) Mr. Cota is the beneficial owner of 50,000 shares of common stock through
his wife Kiriaki Rudolph.
Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or investment
power with respect to securities. In accordance with Securities and Exchange
Commission rules, shares of our common stock which may be acquired upon exercise
of stock options or warrants which are currently exercisable or which become
exercisable within 60 days of the date of the table are deemed beneficially
owned by the optionees. Subject to community property laws, where applicable,
the persons or entities named in the table above have sole voting and investment
power with respect to all shares of our common stock indicated as beneficially
owned by them.
12
Changes in Control. Our management is not aware of any arrangements which may
result in "changes in control" as that term is defined by the provisions of Item
403(c) of Regulation S-B.
Description of Securities
We are authorized to issue 50,000,000 shares of $.001 par value common stock.
Each share of common stock has equal rights and preferences, including voting
privileges. We are authorized to issue 5,000,000 shares of $.001 par value
preferred stock. As of October 17, 2000, 2,500,000 shares of our common stock
were issued and outstanding.
Each shareholder of our common stock is entitled to a pro rata share of cash
distributions made to shareholders, including dividend payments. The holders of
our common stock are entitled to one vote for each share of record on all
matters to be voted on by shareholders. There is no cumulative voting with
respect to the election of our directors or any other matter. Therefore, the
holders of more than 50% of the shares voted for the election of those directors
can elect all of the directors. The holders of our common stock are entitled to
receive dividends when, as and if declared by our Board of Directors from funds
legally available therefor. Cash dividends are at the sole discretion of our
Board of Directors. In the event of our liquidation, dissolution or winding up,
the holders of common stock are entitled to share ratably in all assets
remaining available for distribution to them after payment of our liabilities
and after provision has been made for each class of stock, if any, having any
preference in relation to our common stock. Holders of shares of our common
stock have no conversion, preemptive or other subscription rights, and there are
no redemption provisions applicable to our common stock.
Dividend Policy. We have never declared or paid a cash dividend on our capital
stock. We do not expect to pay cash dividends on our common stock in the
foreseeable future. We currently intend to retain our earnings, if any, for use
in our business. Any dividends declared in the future will be at the discretion
of our Board of Directors and subject to any restrictions that may be imposed by
our lenders.
Interest of Named Experts and Counsel
No "expert", as that term is defined pursuant to Regulation Section 228.509(a)
of Regulation S-B, or our "counsel", as that term is defined pursuant to
Regulation Section 228.509(b) of Regulation S-B, was hired on a contingent
basis, or will receive a direct or indirect interest in us, except as specified
below, or was a promoter, underwriter, voting trustee, director, officer, or
employee of the company, at any time prior to the filing of this Registration
Statement.
Thomas E. Stepp, Jr.; Richard Reincke and Michael J. Muellerleile, are employees
of Stepp & Beauchamp LLP, which serves as our legal counsel. Thomas E. Stepp,
Jr. owns 333,334 shares of our common stock. Richard Reincke owns 166,666 shares
of our common stock. Michael J. Muellerleile owns 125,000 shares of our common
stock.
Disclosure of Commission Position on Indemnification for Securities Act
Liabilities
Article Six of our Certificate of Incorporation provides, among other things,
that our directors shall not be personally liable to us or our shareholders for
monetary damages for breach of fiduciary duty as a director, except for
liability:
o for any breach of such director's duty of loyalty to us or our
security holders;
o for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
o liability for unlawful payments of dividends or unlawful stock
purchase or redemption by us; or
o for any transaction from which such director derived any improper
personal benefit.
Accordingly, our directors may have no liability to our shareholders for any
mistakes or errors of judgment or for any act of omission, unless the act or
omission involves intentional misconduct, fraud, or a knowing violation of law
or results in unlawful distributions to our shareholders.
Article VI of our Bylaws also provides that our officers and directors shall be
indemnified and held harmless by us to the fullest extent permitted by the
provisions of Section 145 of the Delaware General Corporation Law.
13
Indemnification Agreements. We will enter into indemnification agreements with
each of our executive officers. We will agree to indemnify each such person for
all expenses and liabilities, including criminal monetary judgments, penalties
and fines, incurred by such person in connection with any criminal or civil
action brought or threatened against such person by reason of such person being
or having been our officer or director or employee. In order to be entitled to
indemnification by us, such person must have acted in good faith and in a manner
such person believed to be in our best interests. With respect to criminal
actions, such person must have had no reasonable cause to believe his or her
conduct was unlawful.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to our directors, officers and controlling persons
pursuant to the foregoing provisions, or otherwise, we have been advised that in
the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in that act and is, therefore, unenforceable.
Organization Within Last Five Years
Transactions with Promoters. Christopher A. Cota was issued 875,000 shares of
our common stock in exchange for his services as our promoter. The value of the
services performed by Mr. Cota were approximately $875.00
Description of Business
Our Background. MVD, Inc. was incorporated pursuant to the laws of the State of
Delaware on March 14, 2000.
Our Business. We are a developmental stage company. We intend to provide digital
entertainment products and services. Our principal business activities include
the distribution and sale of digital cameras and digital music players developed
and manufactured by third parties, and the development of digital-related
services. The products that we currently sell and distribute include a digital
camera and a digital music player, which are manufactured by Joinford (H.K.)
Ltd. We have not yet generated any revenues from the sale of those digital
cameras or music players. We have not yet received any orders for digital
cameras or music players.
To effectuate our business plan during the next three to six months, we must
market the digital camera and digital music player. We believe that we will
generate revenues to pay for our proposed marketing activities. If we are unable
to generate revenues necessary or obtain additional working capital to pay for
our development, we anticipate that our president, director and principal
shareholder, Christopher A. Cota, will contribute funds to pay our expenses. Our
belief that Mr. Cota will pay our expenses is based on the fact that Mr. Cota
has a significant equity interest in us. We believe that Mr. Cota will continue
to pay our expenses as long as he maintains a significant equity interest in us.
However, in the event that that Mr. Cota sells some or all of his shares, he may
not have a continued incentive to fund our operations and pay our expenses. We
cannot assure you that Mr. Cota will not sell some or all of his shares. We have
not contemplated any plan of liquidation in the event that we do not generate
revenues.
To further market the digital cameras and digital music players that we sell and
distribute, we believe that we need a minimum of $25,000. Any revenues generated
will be used to develop sales and promotional materials as well as marketing
expenses related to meeting with potential customers. Our management has
recently begun marketing and promoting the digital cameras and music players by
attempting to schedule in person meetings with potential customers to display
those products and demonstrate their capabilities. We have conducted an informal
meeting with one manufacturer of computer peripheral products to discuss using a
digital camera or a digital music player as a sales promotion for their flash
memory products. We currently do not have any other meetings scheduled, but plan
to schedule more meetings.
If we are unable to generate revenues to pay for our proposed marketing
activities, we hope that we will continue to market the cameras and music
players by in person meetings. Our failure to pay for our marketing activities
could result in our inability to meet the objectives of our business plan within
the next six months.
14
Products and Services.
Digital Cameras. The products that we sell and distribute include an "entry
level" digital camera, which is inexpensive and user friendly. Digital cameras
do not use film to develop photographs. The pictures are captured and saved as
digital data on disks. The digital data is then developed on a personal computer
and printed by a laser printer. We believe that the digital camera that we sell
possesses all of the features and functionality of the entry-level digital
cameras manufactured by such companies as Eastman Kodak and Canon.
Digital Music Players. The products that we sell and distribute also include a
portable digital music player, which plays music that has been digitally
compressed in a format known as Moving Pictures Experts Group Layer 3, commonly
referred to as MP3. Moving Pictures Experts Group is an International Standards
Organization standard for compressing and storing video, audio, and animation in
digital form. MP3 players contain no moveable parts and are very lightweight yet
extremely durable. Our MP3 players are designed to be compatible with a simple
personal computer and produce stereo quality sound.
Future Products. If we generate significant revenues from sales of digital
cameras and digital music players in the next twelve months, we may expand our
product line to include additional digital entertainment products, such as
digital toys and games and online digital data storage facilities.
Our Website. Our current website displays pictures of the digital cameras and
digital music players manufactured by Joinford (H.K) Ltd. and provides our
address, telephone number and e-mail address. If we generate revenues, we intend
to further develop the website to market the digital entertainment products that
we sell. If we generate significant revenues from the sale of digital cameras
and music players, we plan to expand and design our website to function as a
digital community for businesses and consumers. A community website allows
interaction and exchange of information between businesses and consumers. For
example, our proposed digital community website would allow business and
consumers to interact regarding new products, proper use and maintenance of
products and troubleshooting various problems. Our proposed digital community
website could be developed to allow users to interact with other digital users,
obtain advice, products and services from vendors and purchase digital
entertainment products.
Internet Advertising. If we generate significant revenues, we anticipate that we
will expand and develop our website as a digital community website for
businesses and consumers. If we develop our website as we anticipate, we believe
that we will be able to generate advertising revenues from companies which have
complementary products such as flash memory, and desire to advertise our on
website. According to the Internet Ad Bureau's article entitled "What
Advertising Works," which was compiled by Forrester Research, Inc., a
independent research firm that analyzes the future of technology change and its
impact on businesses, consumers, and society, the Internet is emerging as an
attractive method for advertisers, due to the growth in the number of Internet
users, the amount of time Internet users spend on the Internet, the increase in
electronic commerce, the interactive nature of the Internet, the Internet's
global reach, the ability to reach targeted audiences and a variety of other
factors.
According to the Internet Ad Bureau's Internet Ad Revenue Report dated April 18,
2000, which is conducted independently by PricewaterhouseCoopers, many of the
largest advertisers in traditional media, including consumer products companies,
automobile manufacturers and others, have increased their use of Internet
advertising. The Internet Ad Revenue Report also specifies that larger companies
will begin to allocate significant portions of their total advertising budgets
for Internet advertising. We believe that significant revenues can be generated
from online advertising, initially from small business service providers and
product vendors and, as use of our website increases, from advertisers, such as
consumer products companies.
Our Target Markets and Marketing Strategy. We believe that our primary target
market will consist of manufacturers of computer hardware that desire to promote
the sale of their existing products, such as printers, computers, computer flash
memory by combining complementary products, such as the digital camera or music
player that we sell, with their products. For example, computer flash memory is
used by digital cameras and music players to store digital data. Therefore,
manufacturers of computer flash memory may offer digital cameras or music
players to demonstrate and promote that memory. A manufacturer of specialized
computer printers designed to print photographs
15
may combine our entry-level digital entertainment products to promote and induce
the purchase of their printers. As an added incentive, Joinford (H.K.) Ltd. has
assured us that it will add the logos of the manufacturers to digital cameras or
music players to identify and promote those manufacturers. However, Joinford has
no obligation to add any logo of any manufacturer to the digital cameras or
music players.
We intend to target large manufacturers of non-electronic consumer products who
desire to purchase digital cameras and music players for use as specialty
promotional products or gifts. We believe that the newness and uniqueness of
digital entertainment products will entice companies that desire to promote
their company name and brand to purchase those products that we sell and
distribute.
We also intend to target retail consumer electronic distributors, such as Best
Buy, Circuit City, and Radio Shack. We believe that discount retail consumer
electronic distributors, such as Wal-Mart, Target and K-Mart, are potential
customers, as these retail distributors offer a variety of entry-level digital
entertainment products.
We will market and promote our website on the Internet. Our marketing strategy
is to promote our services and products and attract businesses to our website.
Our marketing initiatives include:
o utilizing direct response print advertisements placed primarily in
small business, entrepreneurial, and financially-oriented magazines
and special interest magazines;
o links to industry focused websites;
o advertising by television, radio, banners, affiliated marketing and
direct mail;
o presence at industry tradeshows; and
o entering into affiliate marketing relationships with website providers
to increase our access to Internet business consumers. Affiliate
marketing means that we would place a link to our website or a banner
advertisement on the websites of other companies in exchange for
placing their link or banner advertisement on our website. Such
marketing increases access to users because the users of other
websites may visit our website as a result of those links or banner
advertisements.
Pricing Strategy. According to the Active Buyer's Guide, a free service of
Active Research, Inc., an Internet based provider of market research and
e-commerce services, our competitors provide digital cameras that are priced
from as low as $150 to as much as $2,500 and approximately eighty percent (80%)
of digital cameras are priced between $200 and $600, with a median price of
$400. We intend to offer digital cameras with a price of less than $150, yet
with many of the features that are available in our competitors' higher priced
products.
The Active Buyer's Guide also specifies that the prices for portable MP3 players
generally vary from $125 to $800, with a median price of $462. The majority of
portable MP3 players are priced around $150. Our strategy is to offer MP3
players at prices below these of our competitors' equivalent products.
Growth Strategy. Our objective is to become a dominant provider of low cost
digital entertainment products and services. Our strategy is to continue
providing clients with exceptional personal service and low cost digital
entertainment products. Key elements of our strategy include:
o negotiate distribution agreements with third party manufacturers for
digital entertainment products and services;
o continue and expand our website;
o increase the number of Internet users to our website;
o increase our relationships with businesses;
o increase our relationships with third party providers of digital
products and services;
o provide additional services for businesses and consumers; and
o pursue relationships with joint venture candidates. We will attempt to
establish joint ventures with companies that will support our business
development. For example, a potential joint venture candidate could
include a manufacturer of computer memory because digital cameras and
music players use computer flash memory.
16
Our Supplier. We are marketing the digital cameras and music players developed
and manufactured by Joinford (H.K.) Ltd. We have not yet generated any revenues
from the sale of digital cameras and music players. We do not have a written
agreement with Joinford (H.K.) Ltd. We do not anticipate that we will have a
written agreement until we are able to generate revenues to market the digital
cameras and music players. Joinford has no obligation to supply digital cameras
and music players to us or to develop products to our customer's specifications
and, therefore, Joinford may terminate our relationship at any time. We do not
currently have any other relationships with additional suppliers of digital
cameras and music players.
Our arrangement with Joinford (H.K.) Ltd. provides that we will sell their
products subject to our customers' specifications and, therefore, our profit
will be determined on a case-by-case basis. For example, if we sell digital
cameras to manufacturers of computer hardware to be bundled with their current
products, then we will negotiate a price for the digital cameras with Joinford
(H.K.) Ltd. and increase the price to our customer. We do not have any other
relationships with additional suppliers of digital cameras and music players.
If we generate significant revenues, we anticipate that we will be able to
develop relationships with additional suppliers so that we will have alternative
suppliers in the event that Joinford (H.K.) Ltd. does not desire or is unable to
supply a sufficient amount of products to meet our anticipated customer's
requirements. We also plan to enter arrangements with other suppliers to
diversify our product offerings.
Our Competition. The digital entertainment products industry is new, rapidly
evolving and has become significantly competitive. Current and new competitors
may be able to establish products at a relatively low cost and relatively
quickly. We compete directly with other companies and businesses that have
developed, and are in the process of developing, digital cameras and music
players which are functionally equivalent or similar to the digital cameras and
music players manufactured by Joinford (H.K.) Ltd. Other competitors'
entry-level digital cameras are similar to the digital cameras that we sell
because they are inexpensive, yet still provide the user the ability to
digitally photograph images and develop pictures using a personal computer and a
printer. Our competitors' digital music players are similar to digital music
players that we sell because they are designed to be sold at low cost, yet still
provide quality sound. We currently have no market share in our primary target
markets of manufacturers of computer hardware who may desire to combine digital
cameras or music players with their products and large manufacturers of
non-electronic consumer products who may desire to offer digital cameras or
music players as promotional or specialty products. We believe we can gain
shares in these markets as a low cost competitor.
Proprietary Rights. Our success depends in part upon our ability to preserve our
trade secrets and operate without infringing the proprietary rights of other
parties. We own the Internet domain name "www.mvdinc.com." Under current domain
name registration practices, no one else can obtain an identical domain name,
but someone might obtain a similar name, or the identical name with a different
suffix, such as ".org", or with a country designation. The regulation of domain
names in the United States and in foreign countries is subject to change, and we
could be unable to prevent third parties from acquiring domain names that
infringe or otherwise decrease the value of our domain names.
Our Research and Development. We are not currently conducting any research and
development activities. We do not anticipate conducting such activities in the
near future. If we generate significant revenues, we may expand our product line
by entering into distribution relationships with third party manufacturers.
Government Regulation. We do not believe that we need any governmental approval
for the digital cameras and digital music players manufactured by Joinford
(H.K.) Ltd. Our business is subject to Federal Trade Commission regulation and
other federal and state laws relating to the promotion, advertising, labeling
and packaging of digital cameras and music players. We believe that we are in
compliance with all laws, rules and regulations material to our operations and
have obtained.
We may be subject to the Audio Home Recording Act of 1992, which regulates
manufacturers and importers of digital audio recording devices. The Audio Home
Recording Act of 1992 provides digital audio recording devices must contain one
of the following:
17
o The Serial Copy Management System, which permits first-generation
digital-to-digital copies of prerecorded music and other audio works,
but prohibits multi-generation or "serial" copies of those copies;
o A system with the same functional characteristics as Serial Copy
Management System, and which acts compatibly on the same copyright and
generation status information as used by Serial Copy Management
System; or
o Any other system certified by the U.S. Secretary of Commerce as
prohibiting unauthorized serial copying.
The Audio Home Recording Act also provides that devices or services designed to
circumvent the Serial Copy Management System or any other serial copy control
system may not be distributed. We do not believe that the digital music players
that we sell are subject to this regulation, because the music players cannot
record music. However, there can be no assurance that we will not be required to
comply with appropriate regulation and that, in the event we are required to
comply, our business will not be adversely affected.
Employees. As of October 17, 2000, we have two (2) employees. We anticipate that
we will not hire any employees in the next six months, unless we generate
significant revenues. We believe our future success depends in large part upon
the continued service of our key senior management personnel and our ability to
attract and retain managerial personnel.
Facilities. Our executive, administrative and operating offices are located at
660 Dover Street, Suite A16, Boca Raton, Florida 33487 and are provided to us,
at no charge, by Christopher A. Cota.
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Liquidity and Capital Resources. We have cash of $920.00 as of June 30, 2000. We
were incorporated on March 14, 2000 and our only material expense has been legal
fees of approximately $10,494. Our President, director and principal
shareholder, Christopher A. Cota, has paid our expenses since our inception.
Although, we do not have a written agreement or formal arrangement with Mr.
Cota, in which he has agreed to pay our expenses, we anticipate that Mr. Cota
will continue to pay our expenses in the event that we do not generate revenues
or obtain additional working capital. Our belief that Mr. Cota will pay our
expenses is based on the fact that Mr. Cota has a significant equity interest in
us. We believe that Mr. Cota will continue to pay our expenses as long as he
maintains a significant equity interest in us. However, in the event that that
Mr. Cota sells some or all of his shares, he may not have a continued incentive
to fund our operations and pay our expenses. We cannot assure you that Mr. Cota
will not sell some or all of their shares.
Results of Operations. We have not yet realized any revenue from operations. Our
expenses of approximately $13,615 consist of start-up costs from formation
through June 30, 2000.
Our Plan of Operation for the Next Twelve Months. Our plan of operation is
materially dependent on our ability to generate revenues. If we are able to
generate significant revenues, we anticipate that those revenues will be used to
market digital cameras and music players, provide us with working capital and
pay our legal and accounting fees for the next twelve months. If we generate
those revenues, then we expect that our expenses for the next twelve months will
be approximately $100,000. If we are unable to generate revenues, then we
anticipate that our expenses for the next twelve months will be limited to the
day-to-day expenditures necessary to conduct business such as administrative
expenses which includes costs to maintain our telephone and website. Although it
is difficult to quantify the day-to-day expenses, we believe that such expenses
will no more that $200 per month. Our President, director and principal
shareholder, Christopher A. Cota, has paid our expenses since our inception. Our
belief that Mr. Cota will pay our expenses is based on the fact that Mr. Cota
has a significant equity interest in us. We believe that Mr. Cota will continue
to pay our expenses as long as he maintains a significant equity interest in us.
In the opinion of management, available funds will satisfy our working capital
requirements through November 2000. We have begun marketing the digital cameras
and music players to potential customers. Based on our meeting with a potential
customer who is a manufacturer of computer flash memory, Joinford (H.K.) Ltd.
has assured us that they can add the logo of that manufacturer to digital
cameras and music players to comply with the potential customers' request.
However, we have not entered into any formal discussions with this potential
customer because Joinford (H.K.) Ltd. has not assured us that it can add a
liquid crystal display to the music player. Therefore, based on discussions with
potential
18
customers, we believe the earliest that we will begin to generate revenues is
approximately January 2001. Our belief is based on the fact that Joinford (H.K.)
Ltd. has forecast January 2001 as the earliest time that it can add a liquid
crystal display to the music player.
Our arrangement with Joinford (H.K.) Ltd. provides that we will sell their
products subject to our customers' specifications. Therefore, our profits will
be determined on a case-by-case basis. For example, if we are selling digital
cameras to manufacturers of computer hardware to be sold with their current
products as a promotional item, then we will negotiate prices for the digital
cameras with Joinford (H.K.) Ltd. and increase the prices to our customers.
Our forecast for the period for which our financial resources will be adequate
to support our operations involves risks and uncertainties and actual results
could fail as a result of a number of factors. We anticipate that we may need to
raise additional capital to develop, promote and conduct our operations. Such
additional capital may be raised through public or private financing as well as
borrowings and other sources. There can be no assurance that additional funding
will be available on favorable terms, if at all. If adequate funds are not
available, we believe that our officers and directors will contribute funds to
pay for our expenses. Therefore, we have not contemplated any plan of
liquidation in the event that we do not generate revenues.
Description of Property
Property held by Us. As of the date specified in the following table, we held
the following property:
====================================================
Property June 30, 2000
- ----------------------------------------------------
Cash $920.00
- ----------------------------------------------------
Property and Equipment $0.00
====================================================
Our Facilities. We recently moved to facilities located at 660 Dover Street,
Suite A16, Boca Raton, Florida 33487. The facilities are provided, at no charge,
by Christopher A. Cota, our President and a director. We do not have a written
lease or sublease agreement and Mr. Cota does not expect to be paid or
reimbursed for providing office facilities. Mr. Cota leases the facilities at
$1,100 per month and the lease expires in October 2000.
Certain Relationships and Related Transactions
Conflicts Related to Other Business Activities. The persons serving as our
officers and directors have existing responsibilities and, in the future, may
have additional responsibilities, to provide management and services to other
entities in addition to us. As a result, conflicts of interest between us and
the other entities may occur from time to time.
Christopher A. Cota currently serves as managing member of Cota LLC, a Delaware
limited liability company. Cota LLC is the exclusive representative in North
America, Central America and South America for Varitronix (Malaysia) SDN BHD, a
Malaysia corporation and manufacturer of liquid crystal displays. A liquid
crystal display, which is installed in products such as cellular phones,
calculators and watches, consists of an array of tiny segments (called pixels)
that can be manipulated to display information. Mr. Cota currently devotes
approximately 1/2 of his time to Cota LLC. The digital cameras and music players
that we sell currently do not use liquid crystal displays. In the event that we
develop products which use liquid crystal displays and we purchase those
displays from Cota LLC, Mr. Cota's management of Cota LLC will conflict with our
interests. Also, in the event we purchase those displays from Cota LLC, Mr. Cota
will determine the purchase price we will pay to Cota LLC for those displays.
Ryan A. Neely is the President, Secretary and a director of JPAL, Inc., a Nevada
corporation and an Internet based provider of vacation rentals. Mr. Neely
currently devotes approximately half of his time to JPAL, Inc. We do not believe
that we have any conflicts of interest with the business or industry of JPAL,
Inc., other than Mr. Neely's duty to provide management and services.
We will attempt to resolve any such conflicts of interest in our favor. Our
officers and directors are accountable to us and our shareholders as
fiduciaries, which requires that such officers and directors exercise good faith
and integrity in
19
handling our affairs. A shareholder may be able to institute legal action on our
behalf or on behalf of that shareholder and all other similarly situated
shareholders to recover damages or for other relief in cases of the resolution
of conflicts in any manner prejudicial to us.
Related Party Transactions. Christopher A. Cota, our President, Treasurer and
director, has provided $10,000 to us and currently provides office space to us
at no charge. The terms of Mr. Cota's advance to us are no interest and the
principal amount shall be due on demand
Market for Common Equity and Related Stockholder Matters
Reports to Security Holders. Our securities are not listed for trading on any
exchange or quotation service. We are not required to comply with the timely
disclosure policies of any exchange or quotation service. The requirements to
which we would be subject if our securities were so listed typically include the
timely disclosure of a material change or fact with respect to our affairs and
the making of required filings. Although we are not required to deliver an
annual report to security holders, we intend to provide an annual report to our
security holders, which will include audited financial statements.
When we become a reporting company with the Securities and Exchange Commission,
the public may read and copy any materials filed with the Securities and
Exchange Commission at the Security and Exchange Commission's Public Reference
Room at 450 Fifth Street N.W., Washington, D.C. 20549. The public may also
obtain information on the operation of the Public Reference Room by calling the
Securities and Exchange Commission at 1-800-SEC-0330. The Securities and
Exchange Commission maintains an Internet site that contains reports, proxy and
information statements, and other information regarding issuers that file
electronically with the Securities and Exchange Commission. The address of that
site is http://www.sec.gov.
There are no outstanding options or warrants to purchase, or securities
convertible into, shares of our common stock. There are no outstanding shares of
our common stock that could be sold pursuant to Rule 144 pursuant to the
Securities Act of 1933 or that we have agreed to register under the Securities
Act of 1933 for sale by security holders. The approximate number of holders of
record of shares of our common stock is twenty-three (23).
There have been no cash dividends declared on our common stock. Dividends are
declared at the sole discretion of our Board of Directors.
Penny Stock Regulation. Shares of our common stock are subject to rules adopted
by the Securities and Exchange Commission that regulate broker-dealer practices
in connection with transactions in "penny stocks". Penny stocks are generally
equity securities with a price of less than $5.00 (other than securities
registered on certain national securities exchanges or quoted on the Nasdaq
system, provided that current price and volume information with respect to
transactions in those securities is provided by the exchange or system). The
penny stock rules require a broker-dealer, prior to a transaction in a penny
stock not otherwise exempt from those rules, deliver a standardized risk
disclosure document prepared by the Securities and Exchange Commission, which
contains the following:
o a description of the nature and level of risk in the market for penny
stocks in both public offerings and secondary trading;
o a description of the broker's or dealer's duties to the customer and
of the rights and remedies available to the customer with respect to
violation to such duties or other requirements of securities' laws;
o a brief, clear, narrative description of a dealer market, including
"bid" and "ask" prices for penny stocks and the significance of the
spread between the "bid" and "ask" price;
o a toll-free telephone number for inquiries on disciplinary actions;
o definitions of significant terms in the disclosure document or in the
conduct of trading in penny stocks; and
o such other information and is in such form (including language, type,
size and format), as the Securities and Exchange Commission shall
require by rule or regulation.
Prior to effecting any transaction in penny stock, the broker-dealer also must
provide the customer the following:
20
o the bid and offer quotations for the penny stock;
o the compensation of the broker-dealer and its salesperson in the
transaction;
o the number of shares to which such bid and ask prices apply, or other
comparable information relating to the depth and liquidity of the
market for such stock; and
o monthly account statements showing the market value of each penny
stock held in the customer's account.
In addition, the penny stock rules require that prior to a transaction in a
penny stock not otherwise exempt from those rules, the broker-dealer must make a
special written determination that the penny stock is a suitable investment for
the purchaser and receive the purchaser's written acknowledgment of the receipt
of a risk disclosure statement, a written agreement to transactions involving
penny stocks, and a signed and dated copy of a written suitably statement. These
disclosure requirements may have the effect of reducing the trading activity in
the secondary market for a stock that becomes subject to the penny stock rules.
Holders of shares of our common stock may have difficulty selling those shares
because our common stock will probably be subject to the penny stock rules.
Executive Compensation
Any compensation received by our officers, directors, and management personnel
will be determined from time to time by our Board of Directors. Our officers,
directors, and management personnel will be reimbursed for any out-of-pocket
expenses incurred on our behalf.
Summary Compensation Table. The table set forth below summarizes the annual and
long-term compensation for services in all capacities to us payable to our Chief
Executive Officer and our other executive officers whose total annual salary and
bonus are anticipated to exceed $50,000 during the year ending December 31,
2000. Our Board of Directors may adopt an incentive stock option plan for our
executive officers which would result in additional compensation.
===================================================================================================================
Name and Principal Position Year Annual Bonus ($) Other Annual Compensation All Other Compensation
Salary ($) ($)
- -------------------------------------------------------------------------------------------------------------------
Christopher A. Cota,
President, Treasurer, Director 2000 None None None None
- -------------------------------------------------------------------------------------------------------------------
Ryan A. Neely,
Secretary, Director 2000 None None None None
===================================================================================================================
Compensation of Directors. Our directors who are also our employees receive no
extra compensation for their service on our Board of Directors.
Compensation of Officers. As of October 17, 2000, our officers have received no
compensation for their services provided to us.
Employment Contracts. We anticipate that we will enter into employment contracts
with Christopher A. Cota and Ryan A. Neely.
Financial Statements
21
MVD, INC.
(A Development Stage Company)
REPORT AND FINANCIAL STATEMENTS
JUNE 30, 2000
AND THE PERIOD MARCH 14, 2000 (INCEPTION)
THROUGH JUNE 30, 2000
MVD, INC.
JUNE 30, 2000
TABLE OF CONTENTS
Pages
Independent Auditors' Report 1
Audited Financial Statements:
Balance Sheet 2
Statement of Operations 3
Statement of Changes in Stockholders' Deficit 4
Statement of Cash Flows 5
Notes to Financial Statements 6 - 9
[LETTERHEAD OF LESLEY, THOMAS, SCHWARZ & POSTMA, INC.]
July 17, 2000
Independent Auditors' Report
To the Board of Directors and stockholders of
MVD, Inc.
We have audited the accompanying balance sheet of MVD, Inc. (a development
stage company) as of June 30, 2000, and the related statements of operations,
changes in stockholders' deficit, and cash flows for the period March 14, 2000
(inception) through 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 MVD, Inc. at June 30, 2000,
and the results of its operations and its cash flows for the period March 14,
2000 (inception) through June 30, 2000 in conformity with generally accepted
accounting principles.
/s/ Lesley, Thomas, Schwarz & Postma, Inc.
---------------------------------------
Lesley, Thomas, Schwarz & Postma, Inc.
A Professional Accountancy Corporation
1
MVD, INC.
(a development stage company)
BALANCE SHEET
JUNE 30, 2000
ASSETS
Cash and cash equivalents (Note 1) $ 920
--------
Total assets $ 920
========
LIABILITIES AND STOCKHOLDERS' DEFICIT
LIABILITIES
Accrued expenses $ 1,265
Advance from stockholder (Note 2) 10,000
--------
11,265
COMMITMENTS AND CONTINGENCIES (Note 3)
STOCKHOLDERS' DEFICIT(Note 4)
Preferred stock
$0.001 par value
5,000,000 shares authorized
No shares issued and outstanding --
Common stock
$0.001 par value
50,000,000 shares authorized
2,500,000 shares issued and outstanding 2,500
Additional paid-in capital 770
Deficit accumulated during development stage (13,615)
--------
Total stockholders' deficit (10,345)
--------
Total liabilities and stockholders' deficit $ 920
========
See the accompanying notes to these financial statements
2
MVD, INC.
(a development stage company)
STATEMENT OF OPERATIONS
PERIOD MARCH 14, 2000 (INCEPTION) THROUGH JUNE 30, 2000
REVENUES $ 0
--------
EXPENSES
Legal and organization costs (Note 1) 10,494
Consulting fees (Note 5) 1,500
Rent (Notes 3 and 5) 770
Licenses and registrations 689
Office expense 162
--------
Total expenses 13,615
--------
LOSS BEFORE INCOME TAXES (13,615)
PROVISION FOR INCOME TAXES (Note 6) 0
--------
NET LOSS $(13,615)
========
BASIC LOSS PER SHARE $ (.00)
========
DILUTIVE LOSS PER SHARE $ (.00)
========
See the accompanying notes to these financial statements
3
MVD, INC.
(a development stage company)
STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIT
PERIOD MARCH 14, 2000 (INCEPTION) THROUGH JUNE 30, 2000
Deficit
Accumulated
Common Stock Preferred Stock Additional During Total
--------------------------- ------------------ Paid-in Development Stockholders'
Shares Amount Shares Amount Capital Stage Deficit
---------- -------- ------ ------ ------ -------- --------
BALANCE, March 14, 2000 0 $ 0 0 $ 0 $ 0 $ 0 $ 0
ISSUANCE OF COMMON
STOCK FOR CASH 1,000,000 1,000 1,000
ISSUANCE OF COMMON
STOCK FOR SERVICES 1,500,000 1,500 1,500
ADDITIONAL PAID-IN
CAPITAL (rent provided
by a stockholder) 770 770
NET LOSS (13,615) (13,615)
---------- -------- --- ---- ------ -------- --------
BALANCE, June 30, 2000 2,500,000 $ 2,500 0 $ 0 $ 770 $(13,615) $(10,345)
========== ======== === ==== ====== ======== ========
See the accompanying notes to these financial statements
4
MVD, INC.
(a development stage company)
STATEMENT OF CASH FLOWS
PERIOD MARCH 14, 2000 (INCEPTION) THROUGH JUNE 30, 2000
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(13,615)
--------
Adjustments to reconcile net loss to net cash used in operating activities
Services provided in exchange for issuance of common stock 1,500
Rent provided by a stockholder as additional paid-in capital 770
Changes in operating assets and liabilities
Increase in accrued expenses 1,265
--------
Total adjustments 3,535
--------
Net cash used in operating activities (10,080)
--------
CASH FLOW FROM FINANCING ACTIVITIES
Proceeds from the issuance of common stock 1,000
Advance from stockholder 10,000
--------
Net cash provided by financing activities 11,000
--------
NET INCREASE IN CASH AND CASH EQUIVALENTS 920
CASH AND CASH EQUIVALENTS, beginning of period (inception) 0
--------
CASH AND CASH EQUIVALENTS, end of period $ 920
========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for interest $ --
Cash paid during the period for income taxes $ --
SUPPLEMENTAL DISCLOSURE OF NON-CASH TRANSACTIONS
During the period ended June 30, 2000, the Company issued stock in
exchange for services provided valued at $1,500
During the period ended June 30, 2000 the Company recorded rent expense
of $770 and additional paid-in capital of $770 for rent provided by a
stockholder
See the accompanying notes to these financial statements
5
MVD, INC.
(a development stage company)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2000
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Nature of Business - MVD, Inc. (the "Company") doing
business in Florida as MVDIGITAL, Inc. provides digital entertainment products
and services. The Company's primary focus is the distribution and sale of
digital entertainment products developed and manufactured by third parties and
the development of digital related services.
Accounting Estimates - The preparation of financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results may differ from those estimates.
Cash and Cash Equivalents - For purposes of the balance sheet and statement
of cash flows, the Company considers all highly liquid debt instruments
purchased with a maturity of three months or less to be cash equivalents.
Income Taxes - The Company accounts for income taxes in accordance with the
provisions of Statement of Financial Accounting Standards No. 109, "Accounting
for Income Taxes", which requires the recognition of deferred tax assets and
liabilities for the expected future tax consequences of events that have been
included in the financial statements or tax returns. Under this method, deferred
tax assets and liabilities are determined based on the difference between the
financial statement and the tax basis of assets and liabilities using enacted
rates in effect for the periods in which the differences are expected to
reverse. Valuation allowances are established when necessary to reduce deferred
tax assets to the amount expected to be realized.
Start-up Activities - The Company has adopted the provisions of Statement
of Position 98-5, "reporting Costs of Start-up Activities" ("SOP 98-5"). SOP
98-5 requires that the costs of start-up activities including organization costs
be expensed as incurred.
6
NOTE 2 - ADVANCE FROM STOCKHOLDER
On March 14, 2000, the principal stockholder and officer of the Company
advanced the Company $10,000 which was used for initial legal and start-up
expenses of the Company. This advance is non-interest bearing, due on demand,
and is to be repaid as cash becomes available.
NOTE 3 - COMMITMENTS AND CONTINGENCIES
The Company is currently utilizing office space provided by the Company's
President (a stockholder). The Company has recorded rent expense of $770 which
represents the Company's pro rata share of the office space being provided by
the Company's President. The President has waived reimbursement of the allocated
rent and has considered it as additional paid-in capital.
NOTE 4 - COMPANY SECURITIES
Description of Capital Stock - The authorized capital stock of the Company
consists of 50,000,000 shares of $.001 par value common stock of which 2,500,000
are issued and outstanding as of June 30, 2000 and 5,000,000 shares of $.001 par
value preferred stock of which no such shares are issued and outstanding as of
June 30, 2000. Holders of shares of the Company's common stock are entitled to
receive dividends when and as declared by the Board of Directors of the Company.
All the shares of common stock have equal voting rights and are nonassessable.
Each share of common stock is entitled to share ratably in any assets available
for distribution to holders of the Company's equity securities upon liquidation
of the Company.
Dividend Policy - Any payment of dividends will be at the sole and absolute
discretion of the Company's Board of Directors and will depend upon earnings,
financial condition, capital requirements, amount of indebtedness, contractual
restrictions with respect to payment of dividends, and other factors. Any such
dividends may be paid in cash, property or shares of the Company's capital
stock. The Company has not paid any dividends since its formation, and it is not
probable that any dividends on the Company's common stock will be declared at
any time in the foreseeable future. There can be no assurance that any dividends
on the Company's common stock will be paid in the future.
Dilution - The following table sets forth the number of shares of $.001 par
value common stock purchased from the Company, the total consideration paid and
the price per share.
Shares Issued Total Consideration
------------------- ------------------- Price Per
Number Percent Amount Percent Share
--------- ------- ------ ------- ---------
Founding stockholders 1,500,000 60% $1,500 60% $.001
Purchasers of offered shares 1,000,000 40% 1,000 40% .001
--------- --- ------ ---
Total 2,500,000 100% $2,500 100%
========= === ====== ===
7
NOTE 5 - RELATED PARTY TRANSACTIONS
During the period from inception through June 30, 2000, the Company entered
into consulting agreements for advisory services relating to the initial
start-up of the Company. Total fees were $1,500 for the period ended June 30,
2000 with each consultant receiving a percentage of ownership in the form of
common stock. A portion of these services were provided by the President. The
services were valued using hourly rates at estimated fair market value of
similar services. As mentioned in Note 3 the Company has recorded rent expense
for office space being provided by the President.
NOTE 6 - INCOME TAXES
The Company accounts for income taxes under Statement of Financial
Accounting Standards No. 109 ("SFAS 109"). This statement mandates the liability
method of accounting for deferred income taxes and permits the recognition of
deferred tax assets subject to an ongoing assessment of realizability.
The components of the Company's income tax provision consist of:
Period
March 14, 2000
(inception)
Through
June 30, 2000
-------------
Federal taxes (deferred) net operating loss benefit $(2,000)
Change in valuation account 2,000
-------
$ --
=======
Deferred income taxes are provided for timing differences in the
recognition of certain income and expense items for tax and financial statement
purposes. The tax effect of the temporary differences giving rise to the
Company's deferred tax assets and liabilities as of June 30, 2000 are as
follows:
June 30, 2000
-------------
Deferred income taxes
Net operating loss benefit $ 2,000
Valuation allowance (2,000)
-------
$ --
=======
The Company's tax reporting year end is December 31, 2000. If the Company
has a net operating loss carryforward from operations at that time, it will
expire in 2020.
8
NOTE 7 - LIQUIDITY
Due to the Company being in the development stage, various risks must be
considered carefully. These risks include, but are not necessarily limited to,
(i) there can be no assurance that the Company's current products and services
will achieve a significant degree of market acceptance, and that acceptance, if
achieved, will be sustained for any period sufficient to permit the Company to
recover associated costs; (ii) there can be no assurance that the Company will
be able to adequately protect its trade secrets and proprietary information;
(iii) the Company's officers and directors may be subject to various conflicts
of interest; (iv) the Company's results of operations may vary from period to
period as a result of a variety of factors; (v) the market for the Company's
products and services is characterized by continuous development, production and
introduction of new products and services; and, (vi) the Company's business is
significantly competitive.
9
Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure
In July 2000, our Board of Directors appointed Lesley, Thomas, Schwarz and
Postma, Inc., independent accountants, to audit our financials statements from
March 14, 2000 (our date of formation) through June 30, 2000.
There have been no disagreements with our accountants since our formation
required to be disclosed pursuant to Item 304 of Regulation S-B.
LEGAL MATTERS
The validity of the issuance of the shares of common stock offered by the
selling security holders has been passed upon by the law firm of Stepp &
Beauchamp LLP, located in Newport Beach, California.
EXPERTS
Our financial statements for the period ended June 30, 2000 appearing in this
prospectus which is part of a Registration Statement have been audited by
Lesley, Thomas, Schwarz and Postma, Inc. and are included in reliance upon such
reports given upon the authority of Lesley, Thomas, Schwarz and Postma, Inc., as
experts in accounting and auditing.
ADDITIONAL INFORMATION
We have filed a Registration Statement on Form SB-2 with the Securities and
Exchange Commission pursuant to the Securities Act of 1933 with respect to the
common stock offered by the selling security holders. This prospectus does not
contain all of the information set forth in the Registration Statement and the
exhibits and schedules to the Registration Statement. For further information
regarding us and our common stock offered hereby, reference is made to the
Registration Statement and the exhibits and schedules filed as a part of the
Registration Statement.
PART II - INFORMATION NOT REQUIRED IN PROSPECTUS
Indemnification of Directors and Officers
Article Six of our Certificate of Incorporation provides, among other things,
that our directors shall not be personally liable to us or our shareholders for
monetary damages for breach of fiduciary duty as a director, except for:
o any breach of such director's duty of loyalty to us or our security
holders;
o acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
o liability for unlawful payments of dividends or unlawful stock
purchase or redemption by us; or
o any transaction from which such director derived any improper personal
benefit.
Accordingly, our directors may have no liability to our shareholders for any
mistakes or errors of judgment or for any act of omission, unless such act or
omission involves intentional misconduct, fraud, or a knowing violation of law
or results in unlawful distributions to our shareholders.
Our Certificate of Incorporation provides that we will indemnify our directors
to the extent permitted by Delaware General Corporation Law, including
circumstances in which indemnification is otherwise discretionary under the
Delaware General Corporation Law. Our Certificate of Incorporation also provides
that to the extent that Delaware General Corporation Law is amended to permit
further indemnification, we will so indemnify our directors.
Section 145 of the Delaware General Corporation Law provides that a corporation
shall have the power to indemnify any person who was or is a party or is
threatened to be made a party to or is involved in any pending, threatened, or
completed civil, criminal, administrative, or arbitration action, suit, or
proceeding, or any appeal therein or any inquiry or investigation which could
result in such action, suit, or proceeding, because of his or her being or
having been our director, officer, employee, or agent or of any constituent
corporation absorbed by us in a consolidation or merger or by reason of his or
her being or having been a director, officer, trustee, employee, or agent of any
other corporation or of any partnership, joint venture, sole proprietorship,
trust, employee benefit plan, or such enterprise, serving as such at our request
or of any such constituent corporation, or the legal representative of any such
director, officer, trustee, employee, or agent, from and against any and all
reasonable costs, disbursements, and attorney's fees, and any and all amounts
paid or incurred in satisfaction of settlements, judgments, fines, and
penalties, incurred or suffered in connection with any such proceeding.
22
Article VI of our Bylaws also provides that our officers and directors shall be
indemnified and held harmless by us to the fullest extent permitted by the
provisions of Section 145 of the Delaware General Corporation Law.
Indemnification Agreements. We anticipate that we will enter into
indemnification agreements with each of our executive officers pursuant to which
we will agree to indemnify each such officer for all expenses and liabilities,
including criminal monetary judgments, penalties and fines, incurred by such
person in connection with any criminal or civil action brought or threatened
against such person by reason of such person being or having been our officer or
director or employee. To be entitled to indemnification by us, such officer must
have acted in good faith and in a manner such officer believed to be in our best
interests and, with respect to criminal actions, such person must have had no
reasonable cause to believe his or her conduct was unlawful.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to our directors, officers and controlling persons
pursuant to the foregoing provisions, or otherwise, we have been advised that in
the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore, unenforceable.
Other Expenses of Issuance and Distribution
We will pay all expenses in connection with the registration and sale of the
common stock by the selling security holders. The estimated expenses of issuance
and distribution are set forth below.
====================================================================
Registration Fees Approximately $264.00
- --------------------------------------------------------------------
Transfer Agent Fees Approximately $500.00
- --------------------------------------------------------------------
Costs of Printing and Engraving Approximately $500.00
- --------------------------------------------------------------------
Legal Fees Approximately $10,000.00
- --------------------------------------------------------------------
Accounting Fees Approximately $2,500.00
====================================================================
Recent Sales of Unregistered Securities
There have been no sales of unregistered securities within the last three (3)
years which would be required to be disclosed pursuant to Item 701 of Regulation
S-B, except for the following:
On or about May 8, 2000, we issued 1,000,000 shares of our common stock for
$.001 per share. The shares were issued in a transaction which we believe
satisfies the requirements of that exemption from the registration and
prospectus delivery requirements of the Securities Act of 1933, which exemption
is specified by the provisions of Section 4(2) of that act and Rule 506 of
Regulation D promulgated pursuant to that act by the Securities and Exchange
Commission. Specifically, the offer was made to "accredited investors", as that
term is defined under applicable federal and state securities laws, and no more
than 35 non-accredited investors. The value of the shares was arbitrarily set by
us and had no relationship to our assets, book value, revenues or other
established criteria of value. There were no commissions paid on the sale of
these shares. The net proceeds to us were $1,000. All nineteen purchasers of
shares of our common stock were business associates, personal friends or family
members of Christopher A Cota, our President and one of our directors.
On or about March 17, 2000, we issued 1,500,000 shares of our common stock to
Christopher A. Cota; Thomas E. Stepp, Jr.; Richard Reincke and Michael
Muellerleile, in a transaction which we believe satisfies the requirements of
that certain exemption from the registration and prospectus delivery
requirements of the Securities Act of 1933, which exemption is specified by the
provisions of Section 4(2) of the Securities Act of 1933, as amended. The shares
were issued in exchange for services provided to us, which were valued at
$1,500. Thomas E. Stepp, Jr.; Richard Reincke and Michael Muellerleile provided
legal services to us and Christopher A. Cota provided services related to our
incorporation.
23
Exhibits
Copies of the following documents are filed with this Registration
Statement as exhibits:
Exhibit No.
1. Underwriting Agreement (not applicable)
3.1 Certificate of Incorporation*
(Charter Document)
3.2 Bylaws*
5. Opinion Re: Legality*
8. Opinion Re: Tax Matters (not applicable)
11. Statement Re: Computation of Per Share Earnings**
15. Letter on unaudited interim financial information (not applicable)
23.1 Consent of Auditors
23.2 Consent of Counsel***
24. Power of Attorney is included on the Signature Page of the Registration
Statement
27. Financial Data Schedule*
* Included in Amendment No.1 to Registration Statement on Form SB-2 filed on
August 17, 2000.
** Included in Financial Statements
*** Included in Exhibit 5
Undertakings
A. Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to our directors, officers and controlling persons
pursuant to the foregoing provisions, or otherwise, we have been advised that in
the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act of 1933 and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by us of expenses incurred or paid by
our director, officer or controlling person 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, we will, unless in
the opinion of our counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act of 1933 and will be governed by the final adjudication of such issue.
B. We hereby undertake:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
24
(ii) To specify in the prospectus any facts or events arising after
the effective date of the Registration Statement (or most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set
forth in the Registration Statement. Notwithstanding the
foregoing, any increase or decrease in volume of securities
offered (if the total dollar value of securities offered would
not exceed that which was registered) and any deviation from the
low or high end of the estimated maximum offering range may be
reflected in the form of prospectus filed with the Securities and
Exchange Commission pursuant to Rule 424(b) (Section 230.424(b)
of Regulation S-B) if, in the aggregate, the changes in volume
and price represent no more than a 20% change in the maximum
aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective Registration Statement;
and
(iii) To include any additional or changed material information with
respect to the plan of distribution not previously disclosed in
the Registration Statement or any material change to such
information in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new Registration Statement relating to the securities
offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the
termination of the offering.
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SIGNATURES
In accordance with the requirements of the Securities Act of 1933, as amended,
we certify that we have reasonable grounds to believe that we meet all of the
requirements of filing on Form SB-2 and authorized this Registration Statement
to be signed on our behalf by the undersigned, in the city of Boca Raton,
Florida, on October 31, 2000.
MVD, Inc.,
a Delaware corporation
By: /s/ Christopher A. Cota
---------------------------------
Christopher A. Cota
Its: President, Treasurer and Director
In accordance with the requirements of the Securities Act of 1933, this
Registration Statement was signed on this 31st day of October, 2000, the
following persons in the capacities and on the dates stated:
/s/ Christopher A. Cota October 31, 2000
- ------------------------------
Christopher A. Cota
President, Treasurer, Director
/s/ Ryan A. Neely October 31, 2000
- ------------------------------
Ryan A. Neely
Secretary, Director
26
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints and hereby
authorizes Christopher A. Cota with the full power of substitution, as
attorney-in-fact, to sign in such person's behalf, individually and in each
capacity stated below, and to file any amendments, including post-effective
amendments to this Registration Statement.
In accordance with the requirements of the Securities Act of 1933, this
Registration Statement was signed by the following persons in the capacities and
on the dates stated.
MVD, INC.
/s/ Christopher A. Cota October 31, 2000
- ------------------------------
Christopher A. Cota
President, Treasurer, Director
/s/ Ryan A. Neely October 31, 2000
- ------------------------------
Ryan A. Neely
Secretary, Director
27