Registration No. 333-45780
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
(Amendment No. 4)
CREST VIEW INC.
(Name of small business issuer in its charter)
Nevada 7000 88-0462761
(State or jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
1700 West Horizon Ridge Parkway - Suite 202, Henderson, Nevada 89012
Telephone: (702) 614-1750; Telecopier: (702) 614-1790
(Address and telephone number of principal executive offices)
Johnny R. Thomas, Chief Executive Officer
Crest View Inc.
1700 West Horizon Ridge Parkway - Suite 202
Henderson, Nevada 89012
Telephone: (702) 614-1750
Telecopier: (702) 614-1790
(Name, address and telephone number of agent for service)
Copies to:
Elliot H. Lutzker, Esq.
Snow Becker Krauss P.C.
605 Third Avenue
New York, New York 10158-0125
Telephone: (212) 687-3860
Telecopier: (212) 949-7052
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Approximate date of proposed sale to the public: As soon as practicable after
the effective date of this registration statement.
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If 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. [ ]
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF
1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS
THE COMMISSION, ACTING PURSUANT TO SECTION 8(A), MAY DETERMINE.
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2
The information in this prospectus is not complete and may be changed. These
securities may not be sold until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
SUBJECT TO COMPLETION - February 7, 2002
PROSPECTUS
CREST VIEW INC.
2,100,000 Units
consisting of
2,100,000 Shares of Common Stock and 700,000 Class A Redeemable Warrants
This is our initial public offering. We are offering 2.1 million units at a
price of $0.50 per unit. The units are being offered on a self underwritten,
best efforts, 1.2 million units minimum and 2.1 million units maximum basis.
Each unit consists of one share of our common stock and one-third (1/3) of one
class A redeemable warrant. The minimum purchase required by any one investor is
120 units and the number of units purchased must be in multiples of three. Each
class A warrant entitles its holder to purchase one share of our common stock
and one class B redeemable warrant. The class A warrants are exercisable for
four years from _____________, 2002, subject to earlier redemption, at an
exercise price of $6.00 per share. Each class B warrant entitles its holder to
purchase one share of our common stock. The class B warrants are exercisable for
five years from ____________, 2002, subject to earlier redemption, at an
exercise price of $9.00 per share.
If the minimum 1.2 million units are sold on or before __________, 2002 (90 days
from the date of this prospectus, unless we extend the offering for up to an
additional 90 days), the proceeds from the sale of such units will be
immediately released to us. If 1.2 million units are not sold by such date, all
subscription funds will be returned to the persons who subscribed to the
offering, with interest, if any. If we reach the minimum offering threshold of
1.2 million units, we will continue to offer units until the maximum 2.1 million
units are sold, the offering period ends, or the offering is terminated,
whichever first occurs. All of the cash proceeds from the offering of the units
will be promptly deposited in an escrow account at Southwest Escrow Company, 401
North Buffalo, Suite 205, Las Vegas, Nevada 89145.
Prior to this offering there has been no public market for the units, shares or
warrants. We only recently commenced operations and do not expect to generate
revenues for the immediate future.
These securities involve a high degree of risk and immediate substantial
dilution and should be purchased only by persons who can afford the loss of
their entire investment. See "Risk Factors" on page 4.
Throughout this prospectus, the terms "we," "our" and "our company" refer to
Crest View Inc. and, unless the context indicates otherwise, our subsidiaries on
a consolidated basis.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
accuracy or adequacy of this prospectus. Any representation to the contrary is a
criminal offense.
The date of this prospectus is February __, 2002
[INSIDE FRONT COVER]
[This page will contain of two pictures. The captions to be placed below the two
pictures describe the pictures as follows:
o View of our Naba Ah(TM) resort properties, taken from a boat just offshore.
The building in the center is located on the central parcel of these three
properties.
o View of our Naba Ah resort properties and beachfront, showing the
surrounding cays and water, taken from the highest point on the
properties.]
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TABLE OF CONTENTS
Page
PROSPECTUS SUMMARY............................................................1
The Company..........................................................1
Corporate Information................................................1
The Offering.........................................................1
Summary Financial Information........................................3
RISK FACTORS..................................................................4
Risks Relating to Our Business Prospects.............................5
Risks Involving Our Securities.......................................6
FORWARD-LOOKING STATEMENTS....................................................6
DILUTION AND OTHER COMPARATIVE PER SHARE DATA.................................8
DIVIDEND POLICY...............................................................9
CAPITALIZATION................................................................9
USE OF PROCEEDS..............................................................10
PLAN OF OPERATION............................................................12
Liquidity and Capital Resources.....................................12
PROPOSED BUSINESS............................................................16
Business Plans and Activities.......................................16
Business Model......................................................22
Competition.........................................................25
Seasonality.........................................................25
Employees...........................................................25
Governmental Regulation.............................................26
Properties..........................................................27
Legal Proceedings...................................................27
MANAGEMENT...................................................................28
Executive Officers and Directors....................................28
Executive Compensation..............................................28
Limitation on Liability and Indemnification Matters.................29
Certain Relationships and Related Transactions......................29
PRINCIPAL STOCKHOLDERS.......................................................30
DESCRIPTION OF SECURITIES....................................................33
General ...........................................................33
Units ...........................................................33
Common Stock........................................................33
Class A Redeemable Warrants.........................................33
Class B Redeemable Warrants.........................................34
Serial Preferred Stock..............................................35
State Blue Sky Information..........................................35
Transfer and Warrant Agent..........................................36
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PLAN OF DISTRIBUTION.........................................................36
CERTAIN MARKET INFORMATION...................................................37
SHARES ELIGIBLE FOR FUTURE SALE..............................................38
ADDITIONAL INFORMATION.......................................................39
LEGAL MATTERS................................................................39
EXPERTS ....................................................................40
INDEX TO FINANCIAL STATEMENTS................................................41
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You should rely only on the information contained in this prospectus. We have
not authorized anyone to provide you with information that is different. This
prospectus is intended to offer no securities other than the common stock and
the warrants constituting the units and the common stock underlying the
warrants. This prospectus may be used only where it is legal to offer and sell
these securities. The information in this prospectus may be accurate on the date
of this document only.
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New Mexico Exemption
We intend to avail ourself of an exemption from registration in the State of New
Mexico in connection with our offer of units to two holders of our promissory
notes who are residents of the State of New Mexico. The offer and any sale of
units to these noteholders will be limited to offering and selling units to
these note holders for consideration to be paid in the form of reduction or
cancellation of our debt obligations evidenced by such promissory notes. No
other offers or sales will be made in New Mexico pursuant to the offering made
under this prospectus, nor will we accept an offer to purchase units by these
note holders other than for consideration in the form of a reduction or
cancellation of such debt obligations. Further, the offering price to these two
note holders will be equal to the offering price for all other units under this
prospectus, $.50 per unit. In order to comply with this New Mexico exemption,
prior to any sale of units to either note holder, we will be required to obtain
from such note holder a signed statement that the note holder is acquiring the
units, and the shares of common stock and class A warrants comprising such
units, for the note holder's own account and that the note holder does not
intend to resell any of the securities within twelve months of the purchase
date. Such signed statement will be submitted to the New Mexico Securities
Division. We also will be required to notify each such note holder, prior to any
sale of units that the common stock and warrants comprising such units have not
been registered under the New Mexico Securities Act and cannot be resold unless
the securities are sold registered or can qualify for an exemption from
registration. This notification also will be filed with the New Mexico
Securities Division. A legend shall be placed on each stock and warrant
certificate evidencing the securities sold to such note holders pursuant to the
exemption stating that the securities have not been registered under the New
Mexico Securities Act and cannot be resold unless the securities are so
registered or can qualify for an exemption from such registration.
iv
PROSPECTUS SUMMARY
This is a summary of the information contained in this prospectus. You should
carefully read the entire prospectus, including the "Risk Factors" section, to
fully understand our company's proposed business operations, the offering of our
securities being made under this prospectus and the risks associated with an
investment in our securities.
The Company
We intend to develop a vacation and tourist destination, featuring an
"eco-resort" and cultural exhibits, on the Honduran island of Guanaja revolving
around a central theme. Our intended business operations are anticipated to
include a resort complex, called Naba Ah(TM). We also intend to market a line of
medicinal herbs and natural healing products, grown and developed on our
properties in Guanaja, as well as complementary third party products, and to
investigate and possibly develop an archeological site at the Plan Grande and
Marble Hill section of Guanaja.
We presently are a development stage company. We have acquired a number of
properties on Guanaja and have identified other properties for acquisition as
part of our intended business operations. The proceeds from this offering will
not be sufficient to commence business operations. Substantially all of the
proceeds from the offering are allocated for the purchase of real property
and/or the repayment of indebtedness; however, such allocated proceeds will not
be sufficient to repay all current and anticipated indebtedness. The remaining
proceeds of the offering will be used to fund more detailed planning of our Naba
Ah and Plan Grande developments.
Corporate Information
Our executive offices are located at 1700 West Horizon Ridge Parkway - Suite
202, Henderson, Nevada 89012. Our telephone number is (702) 614-1750.
The Offering
We are offering the units on a self underwritten, best efforts, 1.2 million unit
minimum, 2.1 million unit maximum basis. Lenders who financed our real property
acquisitions will be given the opportunity to purchase units offered under this
prospectus through the reduction or cancellation of our indebtedness to them,
rather than paying cash for their units. In such event, the cash proceeds which
we receive from the offering will be reduced by an amount equal to the debt so
reduced or canceled.
Unit offering price....................................... $0.50 per unit
Securities offered........................................ 2,100,000 units. Each unit consists of one share of
our common stock and one-third (1/3) of one class A
warrant. Each class A warrant entitles its holder to
purchase one share of common stock and one class B
warrant. Each class B warrant entitles the holder to
purchase one share of common stock.
Shares of common stock outstanding as of the date of
this prospectus........................................ 5,828,924
Shares of common stock outstanding after the:
maximum offering....................................... 7,928,924
minimum offering....................................... 7,028,924
Class A warrants outstanding as of the date of this
prospectus............................................. 1,800,000
Class A warrants outstanding after the:
maximum offering ...................................... 2,500,000
minimum offering ...................................... 2,200,000
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Warrant exercise prices:
Class A warrants....................................... $6.00 per warrant
Class B warrant........................................ $9.00 per warrant
Warrant expiration dates:
Class A warrants....................................... February __, 2006
Class B warrant........................................ February __, 2007
Redemption of warrants.................................... We may redeem the class A warrants and/or class B
warrants at a redemption price of $.001 per warrant,
upon not less than 30 days' prior written notice. We
may appoint standby purchasers to exercise any or all
of the warrants which are not exercised at the end of
the redemption notice period.
Use of Proceeds........................................... To finance the purchase of real property in Honduras
and the repayment of debt incurred in connection
with previously acquired real property, to fund more
detailed planning of our Naba Ah and Plan Grande
developments as vacation destinations and for
general and administrative expenses and working
capital purposes.
Unless the context indicates to the contrary, all reference in this prospectus
to shares of our common stock do not include shares issuable upon exercise of
any outstanding options or warrants.
2
Summary Financial Information
The summary financial information set forth below is derived from the more
detailed audited and unaudited financial statements appearing elsewhere in this
prospectus. This information should be read in conjunction with such financial
statements, including the notes to such financial statements, and the "Use of
Proceeds" and "Plan of Operation" sections of this prospectus.
Balance Sheet Data:
The pro forma information included below gives effect to the sale of 1.2 million
units in the minimum offering, resulting in net proceeds of $560,000, after the
payment of offering expenses. We assume for purposes of pro forma presentation
that none of the holders of our outstanding indebtedness elect to purchase units
through the reduction or cancellation of such indebtedness.
As of September 30, 2001
-------------------------------------- As of
Actual Pro Forma June 30, 2001
------------------ ------------------ ------------------
Cash and cash equivalents............................ $ 9,848 $ 569,848 $ 31,841
Total assets......................................... 901,013 1,461,013 31,841
Total liabilities.................................... 748,765 748,765 7,000
Stockholders' equity................................. 152,248 712,248 24,841
Statement of Operations Data:
Cumulative During
the Development Stage From Inception
(January 20, 2000 For the For the (January 20, 2000)
to Three Months Ended Year Ended to
September 30, 2001) September 30, 2001 June 30, 2001 June 30, 2000
-------------------- -------------------- ------------------- -------------------
(unaudited) (unaudited)
Revenues......................... $ -- $ -- $ -- $ --
Total costs and expenses......... 67,614 45,393 22,121 100
Net loss......................... (67,614) (45,393) (22,121) (100)
3
RISK FACTORS
An investment in our securities is highly speculative and subject to numerous
and substantial risks. These risks include those set forth below and elsewhere
in this prospectus. You should not purchase any of our securities unless you can
afford to lose your entire investment. Readers are encouraged to review these
risks carefully before making any investment decision.
Risks Relating to Our Financial Condition
We are a recently organized company and have no operating history upon
which you can base an investment decision.
We were organized on January 20, 2000 and, through September 30, 2001, our
efforts were limited primarily to organizational activities and the
acquisition of real property. We do not have any operating history or
experience upon which you can make an investment decision. You should
consider us a development stage company that is subject to all of the
business risks associated with a new business. The likelihood of our
success must be considered in light of the expenses, difficulties and
delays frequently encountered in connection with the formation and initial
operations of a new and unproven business.
If we cannot raise additional funds, commencement of our business
operations may be impossible.
The proceeds from the offering will not be sufficient to fully implement
our business plan. Accordingly, our ultimate success will depend on our
ability to raise additional capital. We have not investigated the
availability, source or terms that might govern our acquisition of
additional financing. When additional financing is needed, there is no
assurance that funds will be available from any source or, if available,
that the funds can be obtained on terms acceptable to us. If not available,
or not available on acceptable terms, our proposed operations would be
adversely affected and commencement of business operations may be
impossible.
If we continue to incur indebtedness, we may become too highly leveraged
and we would then be in risk of default.
There is no contractual limit to the amount of debt we can take on,
although we intend to follow a conservative debt policy. If our policy were
to change or be eliminated, we could become more highly leveraged, which
could adversely affect our ability to meet our obligations and we would
then be in risk of default.
If we were unable to secure refinancing of our indebtedness on acceptable
terms, we might be forced to dispose of properties on disadvantageous
terms.
We have approximately $1,086,000 of indebtedness due between June 2003 and
December 2004. We incurred this debt primarily in connection with our
acquisitions of real property on Guanaja. We anticipate incurring
additional indebtedness in connection with additional acquisitions of real
property which indebtedness may also be due prior to the end of 2004. The
proceeds of this offering made under this prospectus will not be sufficient
to repay this current and anticipated indebtedness. If we are unable to
refinance this indebtedness or otherwise satisfy the indebtedness through
future equity or debt financing, we may be forced to cease operations and
sell our real property on disadvantageous terms. If we incur variable rate
mortgage indebtedness, an increase in interest rates could have an adverse
effect on us. In addition, if a property is mortgaged to secure payment of
indebtedness and we are unable to make mortgage payments, the property
could be foreclosed upon by, or otherwise transferred to, the mortgagee
with a consequent loss of income and asset value to us.
4
We have incurred losses since inception and anticipate losses in the
future.
We have incurred net losses of approximately $22,000 for the year ended
June 30, 2001 and $45,000 for the three months ended September 30, 2001.
Our cumulative loss during our development stage is $68,000. We expect to
incur significant operating losses over each of the next several years and
expect cumulative losses to increase significantly as we implement our
business operations. We do not expect to receive revenues from operations
until, at the earliest, January 2003.
Risks Relating to Our Business Prospects
Changes in the economy and the effects of terrorist activities may
adversely affect our operations.
The United States and much of the world is currently experiencing a general
economic downturn, due, in part, to the September 11, 2001 terrorist
attacks in New York City and Washington, D.C. These economic conditions
have caused and may continue to cause a decrease in the demand for vacation
destinations. Any downturn in economic conditions or any price increases
related to the travel and tourism industry, such as higher airfares,
increased gasoline prices or decreased spending by consumers, could depress
discretionary consumer spending and have a material adverse effect on our
intended business operations. Additionally, the terrorist acts have caused
a large portion of our targeted customer market to refrain from traveling
via air transportation, which would be the overwhelming method of travel to
our vacation destination. These factors, if they persist, may hinder our
ability to attract customers which, in turn, may also adversely affect the
future availability of attractive financing rates for us.
There are potential conflicts of interest between us and our management
team.
We have borrowed money from certain friends and relatives of our management
to finance our real estate purchases on Guanaja. Our relationships with
these lenders have been amicable. However, there can be no assurance that
these relationships will remain friendly or, if any one or more
relationships become adversarial, how such adverse change will affect our
management personnel and their own relationships with our company.
We are dependent on officers and directors who have no experience in the
management and marketing of an eco-resort, which could result in delays or
a business failure.
None of our current officers or directors have any experience in the
management and marketing of an eco- resort or any other vacation
destination. Because of this lack of experience, we may overestimate the
marketability of our business operations and may underestimate the costs
and difficulties of managing our Naba Ah eco-resort. These difficulties
could prevent us from ever becoming profitable.
There have been kidnapings and killings of United States citizens in
Honduras.
At least six U.S. citizens were killed in Honduras in 2000. A spokesman for
the U.S. Embassy in Honduras was quoted in August 2001 as calling Honduras
"a high risk country in which to live or invest... [and] [we] are concerned
for the security of the 12,000 U.S. citizens who live in the country.... To
come to visit, invest or establish residence in this country represents a
lot of risk due to the crime and fragility of the judicial system." These
statements, as well as additional killings, kidnapings or other crime
perpetrated on U.S. citizens or other foreigners, may have a significant
adverse impact on our operations or ability to finance our proposed
activities.
5
Risks Involving Our Securities
If we redeem the warrants, the value of your investment may be reduced.
We may redeem our class A and class B warrants at a price of $.001 per
warrant at any time during the applicable warrant exercise period. If you
do not exercise your warrants prior to their expiration or redemption, you
will not be able to purchase the shares of common stock underlying your
warrants. If we call for redemption of any of the warrants, you will have
to (a) exercise the warrants (and pay the exercise price at a time when it
may be disadvantageous for you to do so), (b) sell the warrants at the
current market price when you might otherwise wish to hold the warrants for
possible additional appreciation, or (c) accept the redemption price, which
may be substantially less than the market value of the warrants at the time
of redemption.
If we do not keep this registration statement current, you will not be able
to exercise your warrants.
We must keep a registration statement effective with the SEC in order for
you to exercise your warrants. We may not be able to maintain a
registration statement in effect throughout the period during which the
warrants remain exercisable. Maintaining an effective registration
statement requires substantial continuing expenses for legal and accounting
fees and we cannot guarantee our ability to keep the registration statement
effective. We will instruct our warrant agent to suspend the exercise of
warrants if this or any future registration statement with respect to the
shares underlying the warrants is no longer effective.
If we do not qualify our securities in states other than Nevada, your
resale of any securities you acquire under this prospectus may be limited
and you may not be able to exercise your warrants.
We are offering the units for sale only in the States of Nevada and, to a
limited extent, New Mexico. Any sale in New Mexico will be limited to those
persons currently holding our promissory notes. We believe that the common
stock and warrants comprising the units will be eligible for sale on a
secondary market basis in other states based upon applicable exemptions
from that state's registration requirements, subject, in each case, to the
exercise of the broad discretion and powers of the securities commission or
other administrative bodies having jurisdiction in each state and any
changes in statutes and regulations which may occur after the date of this
prospectus. However, the lack of registration in most states and the
requirement of a seller to comply with the requirements of state blue sky
laws in order for the seller to qualify for an applicable secondary market
sale exemption, may cause an adverse effect on the resale price of our
securities, as well as the delay or inability of a holder of our securities
to depose of such securities.
In addition, the warrants and underlying securities will be exercisable
only in Nevada. We may decide not to seek, or may not be able to obtain,
registration for the issuance of the underlying securities in the state
where you live during the period when the warrants are exercisable. We
cannot issue securities to you upon exercise of your warrants unless either
(a) the securities issuable upon exercise of the warrants are registered in
your state or (b) an exemption from registration is available. We may not
be able to qualify the warrants, in which case the warrants would become
unexercisable and deprived of value.
FORWARD-LOOKING STATEMENTS
Statements contained in this prospectus include "forward-looking statements"
within the meaning of such term under the Securities Act of 1933 and Securities
Exchange Act of 1934. Forward-looking statements involve known and unknown
risks, uncertainties and other factors which could cause actual financial or
operating results, performances or achievements expressed or implied by such
forward-looking statements not to occur or be realized. Such forward-looking
statements generally are based on our best estimates of future results,
performances or achievements, based upon current conditions and assumptions.
Forward-looking statements may be identified by the use of forward-looking
terminology such as "may," "can," "could," "project," "expect," "believe,"
"plan,"
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"predict," "estimate," "anticipate," "intend," "continue," "potential," "will,"
"would," "should," "aim," "opportunity" or similar terms, variations of those
terms or the negative of those terms or other variations of those terms or
comparable words or expressions.
You should carefully consider such risks, uncertainties and other information,
disclosures and discussions which contain cautionary statements identifying
important factors that could cause actual results to differ materially from
those provided in the forward-looking statements. We undertake no obligation to
publicly update or revise any forward-looking statements, whether as a result of
new information, future events or otherwise.
7
DILUTION AND OTHER COMPARATIVE PER SHARE DATA
The following table summarizes as of the date of this prospectus:
o the number of shares of our common stock purchased from us,
o the number of shares purchased as a percentage of our total outstanding
shares,
o the aggregate cash and non-cash consideration for such shares,
o the aggregate consideration as a percentage of total consideration, and
o the average consideration per share for such shares by the present and
public stockholders, assuming the sale of the maximum units offered hereby
and assuming the sale of the minimum units offered hereby, but, in both
cases, assuming no consideration is deemed to be paid for the warrants
included in the units being offered under this prospectus.
Shares of Percentage Percentage Average
Common Stock of Total Aggregate of Total Consideration
Purchased Shares Consideration Consideration Per Share
--------------- --------------- ---------------- --------------- ----------------
Maximum Offering:
Public investors........... 2,100,000 26.5% $ 1,050,000 82.7% $ .50
Present stockholders (1)... 5,828,924 73.5 219,862 17.3 $ .04
----------- --------- ----------- ----------
Totals..................... 7,928,924 100.0% $ 1,269,862 100.0%
=========== ========= =========== ==========
Minimum Offering:
Public investors........... 1,200,000 17.1% $ 600,000 73.2% $ .50
Present stockholders (1)... 5,828,924 82.9 219,862 26.8 $ .04
----------- --------- ----------- ----------
Totals..................... 7,028,924 100.0% $ 819,862 100.0%
=========== ========= =========== ==========
(1) Includes non-cash consideration of: (a) $28,800 of rent payments over a
two-year period ending June 30, 2003, for which we issued 57,600 shares of
our common stock to an affiliated entity of our executive officers, and (b)
$144,000 of salary over a two year period ending June 30, 2003, for which
we issued 144,000 shares of our common stock to each of our two executive
officers.
"Dilution" is the difference between the public offering price of the common
stock and the net tangible book value per share immediately after the offering.
"Net tangible book value" is the amount that results from subtracting our total
liabilities and intangible assets from our total assets. As of September 30,
2001, we had a net tangible book value for our common stock of $152,248, or less
than $.03 per share.
Purchasers of the units being offered pursuant to this prospectus will
experience immediate and substantial dilution from the initial public offering
price in the net tangible book value per share of the common stock included in
their units.
After the sale of the 2.1 million units (the maximum offering), and deducting
estimated expenses of $40,000, the pro forma net tangible book value of our
company at September 30, 2001 would be $1,162,248, or approximately $.15 per
share. This represents an immediate increase in the net tangible book value of
$.12 to existing stockholders and an immediate dilution of $.35 per share to the
public investors in the offering.
After the sale of the 1.2 million units (the minimum offering), and deducting
estimated expenses of $40,000, the pro forma net tangible book value of our
company at September 30, 2001 would be $712,248, or approximately $.10 per
share. This represents an immediate increase in the net tangible book value of
$.07 to existing stockholders and an immediate dilution of $.40 per share to the
public investors in the offering.
8
The following table illustrates the dilution described above:
Maximum Minimum
--------------- ----------------
Public offering price per share............................................ $ .50 $ .50
Net tangible book value per share before offering..................... $ .03 $ .03
Increase in pro forma net tangible book value per share
attributable to amount invested by the public..................... .12 .07
------ -------
Pro forma net tangible book value per share after offering................. .15 .10
------- -------
Dilution to public investors............................................... $ .35 $ .40
======= =======
DIVIDEND POLICY
We have never declared or paid any dividends to the holders of our common stock
and we do not expect to pay cash dividends in the foreseeable future. We
currently intend to retain all earnings for use in connection with the
development of our business and for general corporate purposes. Our board of
directors will have the sole discretion in determining whether to declare and
pay dividends in the future. The declaration of dividends will depend on our
profitability, financial condition, cash requirements, future prospects and
other factors deemed relevant by our board of directors. In addition, our
ability to pay cash dividends in the future could be limited or prohibited by
the terms of financing agreements that we may enter into or by the terms of any
preferred stock that we may authorize and issue. Accordingly, you will have to
look to appreciation in the value of your securities to obtain a return on your
investment.
CAPITALIZATION
The following table sets forth our capitalization as of September 30, 2001:
o on an actual basis,
o on a pro forma basis giving effect to:
o our borrowings of $94,000 in December 2001 and
o the other debt we incurred in December 2001 in connection with our
purchase of a fourth parcel of real estate on Guanaja, and
o on a pro forma, as adjusted basis giving effect to the December 2001
borrowings and assuming:
o the sale of 1.2 million units (the minimum offering), at an assumed
initial public offering price of $.50 per unit, after deducting
estimated offering expenses of $40,000, and the use of $490,000 of the
net proceeds of the offering to repay long-term debt,
o there are no exercise of any options or warrants to purchase shares of
our common stock, and
o a value of $.49 is assigned to the share included in each unit being
offered under this prospectus, with the remaining $.01 assigned to the
class A warrant included in such unit.
9
September 30, 2001
-------------------------------------------
Pro Forma,
Actual Pro Forma as Adjusted
------------ ------------- --------------
Long-term debt....................................................... $ 741,765 $ 1,035,765 $ 545,765
------------ ------------- --------------
Stockholders' equity:
Preferred stock, par value $.001 per share; 8,000,000 shares
authorized, no shares issued and outstanding.................... -- -- --
Common stock, par value $.001 per share; 40,000,000 shares
authorized, 5,828,924 (actual), 7,028,924 (pro forma) shares
issued and outstanding.......................................... 5,829 5,829 7,029
Additional paid-in capital........................................ 214,033 214,033 772,833
Accumulated deficit............................................... (67,614) (67,614) (67,6l4)
------------ ------------- --------------
Total stockholders' equity...................................... 152,248 152,248 712,248
------------ ------------- --------------
Total capitalization.......................................... $ 894,013 $ 1,188,013 1,258,013
============ ============= ==============
USE OF PROCEEDS
We will receive $1,050,000 in gross proceeds from the sale of the units being
offered under this prospectus, assuming all 2.1 million units are sold, or
$600,000 in gross proceeds, if the minimum 1.2 million units are sold. We expect
to incur offering expenses of approximately $40,000, consisting of legal,
accounting, printing, "blue sky" and state filing fees. These offering expenses
do not include any sales commissions, which we retain the right to pay to NASD
member firms who participate in the sale of the units, which would reduce the
net proceeds which we receive.
There is no guarantee we will receive any cash proceeds from the offering being
made under this prospectus. We are offering those parties who loaned us funds
the opportunity to purchase units offered under this prospectus through the
reduction or cancellation of our indebtedness to these lenders, instead of their
paying cash for such units. In the event any of such lenders purchase units in
the offering through the reduction or cancellation of our outstanding
indebtedness, the cash proceeds which we receive from the offering will be
reduced with a corresponding decrease in funds allocated to purchase additional
real property or repay indebtedness. We may sell the necessary number of units
to complete the minimum offering through sales to these lenders by means of the
reduction or cancellation of such indebtedness. This would result in no cash
proceeds to us in the offering. As of the date of this prospectus, we have not
solicited such purchases of units by our lenders and we currently do not have
any agreements, arrangements or understandings with any of our lenders regarding
their purchase of units through reductions or cancellations of our debt
obligations to these lenders, or otherwise. However, Falcon Financial Group LLC,
an entity owned jointly by our two executive officers and the holder of one of
our promissory notes in the principal amount of $72,300, will participate in the
offering by purchasing units through the reduction or cancellation of our
indebtedness to Falcon evidenced by such note, to the extent necessary to
complete the minimum offering or to purchase units that otherwise are unsold in
the maximum offering.
We expect to use the net proceeds approximately, as follows:
Use Minimum Maximum
- --- ------------------------ -------------------------
Amount Percentage Amount Percentage
----------- ----------- ----------- -----------
Purchase of real property in Honduras and/or payment
of indebtedness (1).................................... $ 490,000 87.5% $ 845,000 83.7%
Development of real property (2).......................... 20,000 3.6 90,000 8.9
General and administrative and working capital (3)........ 50,000 8.9 75,000 7.4
----------- --------- ----------- ---------
Total.................................................. $ 560,000 100.0% $ 1,010,000 100.0%
=========== ======== =========== =========
- ----------
(1) As of the date of this prospectus, we have identified three parcels for our
Naba Ah eco-resort and wellness center and two parcels of land for the Plan
Grande site. We have acquired four of these parcels as of the
10
date of this prospectus at an aggregate cost of approximately $1,062,000,
including debt incurred and closing costs. We anticipate the cost of
acquiring the remaining parcel to be at least $125,000. In July 2001, we
borrowed a total of approximately $473,000 from an affiliated entity of our
two executive officers, from family members of our chief executive officer
and from others. These loans are evidenced by promissory notes bearing
interest at 7% per annum and due and payable in lump sum payments on June
30, 2003. We used almost all of the proceeds of these loans to purchase two
of the four parcels. To acquire the third parcel, we delivered to the
seller of this property a promissory note in the principal amount of
$268,665, bearing interest at 6% per year and due in one lump sum on June
30, 2003. The seller of this third parcel also is a business partner of our
vice president and chief financial officer in another business venture,
Acalan, LLC. In December 2001, we borrowed an additional aggregate $94,000
from family members of our chief executive officer and from others. We
utilized $72,000 of such December 2001 borrowings to make the initial
payment for, and to cover closing costs in connection with, our purchase in
January 2002 of the fourth parcel. We also delivered to the seller of the
fourth parcel a promissory note in the principal amount of $250,000. This
$250,000 promissory note bears interest at 6% per year and is payable in
four equal semi-annual installments of principal, plus accrued interest,
commencing in June 2002. We intend to repay a portion of these loans and
future acquisition costs from a portion of the proceeds of the offering,
either in cash or by a reduction or cancellation of debt to the extent
these debtholders choose to participate in the offering through the
reduction or cancellation of their debt. We may then mortgage such real
property and use the proceeds of such re-financings for further development
of the properties to the extent that we repay these loans and such real
property is free of liens and encumbrances. This further development is
expected to include construction of the initial casitas and dock at our
Naba Ah properties and/or the initial development of our Plan Grande
tourist destination.
We anticipate that any proceeds from the exercise of warrants will be used for
further purchases of real property, repayment of indebtedness, development of
our real property, development of our alternative healing business and general
and administrative and working capital purposes. The actual allocation will be
determined based upon the amount and timing of receipt of such proceeds.
The above listed use of proceeds represents our best estimate of the allocation
of the net proceeds of this offering based upon the status of our current plans
and current economic condition, both in the United States and Honduras, as of
the date of this prospectus. Future events, including, the problems, delays,
expenses and complications frequently encountered by development stage
companies, as well as changes in both domestic and foreign regulation, political
and competitive activities affecting our business operations may make shifts in
allocation of funds necessary or desirable.
Following the offering being made under this prospectus, we will become subject
to the reporting requirements of the Exchange Act and, in accordance with these
requirements, we will file reports, proxy statements and other documentation
with the SEC. We also intend to furnish our stockholders with annual reports
containing audited financial statements and other periodic reports as we deem
appropriate or as may be required by law. These reports, proxy statements and
other documentation will contain information concerning the actual usage of the
proceeds of the offering and any changes in our anticipated allocations of the
proceeds from those set forth in the use of proceeds table set forth above.
Following the sale of the minimum units offered under this prospectus, the
proceeds will be released to us from escrow. The proceeds will then be invested,
until used, in FDIC-insured bank deposits, securities of any registered open-end
investment company that holds itself out as a money market fund meeting the
applicable conditions of the Investment Company Act, or short-term United States
government securities.
PLAN OF OPERATION
We are currently in the development stage and in the process of raising capital.
All our activities from inception to the date of this prospectus were related to
our formation, preparation of our business model, the acquisition of real
11
property and arranging and planning financing. Our ability to commence business
operations is contingent upon obtaining adequate financial resources through the
offering made under this prospectus and otherwise.
Liquidity and Capital Resources
We are deemed a development stage company. We have financed our operations to
date through the sale of our securities to and loans from our officers and
directors and their family members and affiliates.
From inception through September 30, 2001, cash used to fund operating
activities totaled $38,452. From inception through September 30, 2001, cash
utilized by investing activities totaled $471,3000 and cash provided by
financing activities totaled $519,600.
From inception through September 30, 2001, our sole source of cash and capital
has been from the following transactions:
o In January 2000, we sold and issued to an affiliate of our chief executive
officer 2,960,000 shares of our common stock and warrants to purchase
986,667 additional shares of our common stock for total cash proceeds of
$2,960,
o In January 2000, we sold and issued to our outside counsel 40,000 shares of
our common stock and warrants to purchase 13,333 additional shares of our
common stock for total cash proceeds of $40,
o Between August 2000 and February 2001, we borrowed an aggregate of $13,500
from our chief executive officer, all of which was converted into equity in
April and June 2001,
o In April 2001, we issued to an affiliate of our chief executive officer
2,400,000 shares of our common stock and warrants to purchase 800,000
additional shares of our common stock in satisfaction of certain of our
obligations to him totaling $2,400,
o In June 2001, we issued to our president 23,124 shares of our common stock
in satisfaction of certain of our obligations to him totaling $11,662,
o In June 2001, we sold and issued to our chief executive officer 60,000
shares of our common stock for total cash proceeds of $30,000,
o In July 2001, we borrowed $72,300 from Falcon Financial Group LLC, an
affiliate of our chief executive officer and vice president and which also
is our sublessor, and issued to Falcon a promissory note in the principal
amount of $72,300, bearing interest at the rate of 7% per annum and due in
June 2003,
o In July 2001, we issued to Falcon 57,600 shares of our common stock in
satisfaction of our sublease rent obligations to this affiliate totaling
$28,800,
o In July 2001, we borrowed a total of $400,800 from family members and
affiliates of our chief executive officer and issued to these family
members and affiliates promissory notes in the aggregate principal amount
of $400,800, bearing interest at the rate of 7% per annum and due in June
2003, and
o In September 2001, we acquired real property in Honduras by issuing a
promissory note, in the principal amount of $268,665 and due in June 2003,
to the seller of this property.
Almost all of the funds raised through the borrowings specified above have been
used by us in connection with our acquisition of properties on the Honduran Bay
Island of Guanaja. We anticipate purchasing at least one additional property on
Guanaja in the future.
In addition, in December 2001, we borrowed a total of $94,000 from family
members and affiliates of our chief executive officer and others and issued to
these lenders promissory notes in the aggregate principal amount of $94,000,
bearing interest at the rate of 7% per year and due in June 2003. We used such
loan proceeds primarily to make an initial $50,000 down payment in connection
with our January 2002 purchase of a parcel of real property in Honduras and to
pay $22,000 of closing costs incurred in connection with such purchase. We also
used approximately $17,000 of such loan proceeds for refurbishing work an a
building located on one of our acquired properties. The total purchase price for
this parcel was $300,000, of which $50,000 was paid at closing. We issued to the
sellers of the parcel a promissory note in the principal amount of $250,000,
representing the balance of the purchase price. This note is payable in four
semi-annual installments with a final maturity in December 2004.
Over the next twelve months, we expect to continue to incur expenses relating
to:
12
o purchase of real property on Guanaja, repayment of debt incurred in
connection with our prior acquisitions of real property on Guanaja and the
development of these properties for cash and notes totaling between
$190,000 and $715,000,
o payment of general and administrative expenses and our general working
capital needs totaling between $50,000 and $75,000.
We are negotiating the acquisition of another parcel of real property for use in
connection with the first stage of development of our Naba Ah eco-resort. We
anticipate the acquisition cost for this property to be approximately $120,000,
excluding closing and related expenses totaling $8,000. We, therefore, estimate
cash expenditures of at least $125,000 over the twelve months following the
closing of the offering being made under this prospectus with respect to the
proposed additional real property acquisition. We anticipate that the source of
funds to make these cash expenditures will be from the net proceeds of the
offering being made under this prospectus. If the net cash proceeds from the
offering are insufficient due to the fact that the proceeds of the offering are
in the form of reductions and cancellations of our outstanding indebtedness
rather than cash, we intend to mortgage some, if not all, of our currently owned
real property and use the proceeds of such re-financings to fund, in whole or
part depending upon the form of proceeds of the offering, the twelve-month costs
of the acquisition of these two properties.
We also are investigating the purchase of additional parcels of real property in
areas adjacent to the Naba Ah and Plan Grande parcels previously acquired. Such
additional acquisitions will be made only if we have sufficient available
capital, whether from the current unit offering, the exercise of warrants, the
refinancing of real property previously acquired, additional debt or equity
financings, or otherwise.
We currently have outstanding approximately $1,086,000 of indebtedness. We
expect to use $400,000 of the proceeds of the offering made under this
prospectus to repay a portion of this indebtedness. We may then mortgage our
real property and use the proceeds of such re-financings for further development
of the properties to the extent that we repay our indebtedness and such real
property is free of liens and encumbrances. This further development is expected
to include construction of the initial casitas and dock at our Naba Ah
properties and/or the initial development of our Plan Grande tourist
destination.
Our costs of developing our Naba Ah and Plan Grande properties over the next
twelve months are anticipated to be between $20,000 and $1.2 million, of which
between $20,000 and $90,000 will be financed from the net proceeds of the
offering made under this prospectus. These development projects will include the
following matters:
o Retain advisors, such as architects, healers, shamans, archeologists,
advisors and historians, to insure harmony and consistency between theme
and historical fact and accepted theory and to assist in the planning and
planting of the herbal gardens at our Naba Ah and Plan Grande properties.
Through our vice president and chief financial officer, John C. Francis, we
have made contact with architects, healers, shamans, archeologists and
historians willing to assist us in this matter, at a cost we estimate will
not exceed $10,000 over the next twelve months, including travel and
miscellaneous expenses.
o Retain experts to plan and initiate the construction of up to ten casitas
and docking facilities at our planned Naba Ah eco-resort. On a test
project, we have retained a builder familiar with Guanaja hotel
developments to renovate the present facilities on the central property for
use as our eco-resort headquarters and to refurbish the present docking
facilities. The cost to us for this test project will be the cost of
materials and labor, which we estimate will total approximately $25,000.
This builder has indicated to us his willingness to construct the first ten
casitas at a cost equal to materials plus 10%, which we estimate would
result in total construction costs of $800,000.
o Construction of the Naba Ah spiritual and wellness center, development of
our Plan Grande tourist destination and the planting of herbal gardens at
both the Naba Ah and Plan Grande properties, at an estimated aggregate cost
of $375,000.
13
We provide in the subsection "Business Model" of this prospectus more detailed
information concerning our plans to develop our Naba Ah and Plan Grande
properties.
We anticipate compensating any employees, consultants and other service
providers in the form of a combination of cash, debt and/or securities of our
company. We intend to utilize this method in order to minimize cash expenditures
prior to raising additional funding, if any, and/or the receipt of anticipated
revenues from our business operations. This method of compensation partially in
the form of our securities also will provide incentives to these employees,
consultants and other service providers that are directly linked to increases in
stockholder values that will inure to the benefit of all of our stockholders.
We expect to incur significant operating losses over each of the next several
years and expect cumulative losses to increase significantly as we implement our
business operations. We do not expect to receive revenues from operations until,
at the earliest, January 2003.
We will offer the holders of certain of our outstanding indebtedness in the
principal amount of $835,765 and due between June 2003 and December 2004, the
opportunity to purchase units in the offering made under this prospectus and
make payment for such units by cancellation or reduction in the amount due under
their respective indebtedness. To the extent of such elections, our outstanding
long-term debt will be reduced with a corresponding increase in our
stockholders' equity. As of the date of this prospectus, we have not solicited
such purchases of units by our lenders and we currently do not have any
agreements, arrangements or understandings with any of our lenders regarding
their purchase units through reductions or cancellations of our debt obligations
to these lenders, or otherwise. However, Falcon Financial Group LLC, an entity
owned jointly by our two executive officers and the holder of one of our
promissory notes in the principal amount of $72,300, will participate in the
offering by purchasing units through the reduction or cancellation of our
indebtedness to Falcon evidenced by such note, to the extent necessary to
complete the minimum offering or to purchase units that otherwise are unsold in
the maximum offering.
We believe that existing cash and cash equivalents, together with the net
proceeds of the offering made under this prospectus, assuming that only the
minimum number of units are sold and that the net proceeds from such units will
total $560,000, will be sufficient to finance our proposed operations for at
least twelve months following the date of this prospectus. Our future liquidity
and capital requirements, however, will depend on numerous factors, including,
among others:
o our ability to raise additional funds, through equity and/or debt
offerings,
o the cost of acquisitions of additional properties on Guanaja,
o the timing and costs involved in obtaining regulatory approvals, if ever,
and complying with regulatory requirements,
o the timing of future revenues from our commercial activities, and
o our ability to successfully compete for customers for our commercial
operations.
If the proceeds of the offering made under this prospectus, together with
currently available funds, are not sufficient to satisfy our spending plans, we
will be required to revise our business model, seek a joint venture business
partner and/or seek additional funding through borrowings and/or additional
sales of our securities. We cannot assure you that additional funding will
become available when needed or that the terms of such funding will not be on
terms adverse to us and our securityholders.
Following the offering being made under this prospectus, we will become subject
to the reporting requirements of the Exchange Act and, in accordance with these
requirements, we will file reports, proxy statements and other documentation
with the SEC. We also intend to furnish our stockholders with annual reports
containing audited financial statements and other periodic reports as we deem
appropriate or as may be required by law. These reports, proxy statements and
other documentation will contain information concerning our liquidity and
capital resources. We do not anticipate seeking stockholder approval of any
change to our business plans or allocation of capital resources in conducting
our business operations, except as may be required by applicable law.
Among the risks associated with our plan of operations are the following:
14
o We have extremely limited resources and will have limited resources after
the offering made under this prospectus. We have relied on loans from our
management and friends and family members of our management to fund a
significant portion of our activities to date. We do not expect to receive
any additional loans from these lenders after completion of the offering
made under this prospectus. We can give you no assurance that additional
loans will be available from any source or that such loans, if available,
will be on terms amenable to us. Our failure to obtain loans or other
financing when needed or on terms amenable to us would have a material
adverse effect on our business operations.
o We will be dependent upon one hotel resort and wellness spa. We anticipate
that our business operations initially will be limited to our Naba Ah
eco-resort and wellness spa. Significant adverse differences between the
actual operating results of these initial operations and our anticipated
results could have a material adverse effect on us and impact our ability
to fully implement our business plans.
o We will incur significant development risks. While our policies with
respect to development of our resort hotel, wellness spa and cultural
center are intended to limit some of the risks associated with these
activities, any new project development is subject to a number of risks,
including that:
o temporary or construction financing may not be available on favorable
terms, if at all,
o construction costs may exceed original estimates,
o occupancy rates may not be at anticipated levels,
o permanent financing may not be available upon completion of
construction, and
o construction may not be completed on schedule.
o We are subject to risks associated with uninsured and underinsured losses.
We intend to maintain comprehensive insurance on each of our properties,
including liability, employee dishonesty and building casualty coverage. We
anticipate the types and amounts of coverage, including coverage limits and
deductibility provisions, to be customary for similar properties. However,
there are certain types of losses, generally of a catastrophic nature, such
as hurricanes, earthquakes and floods, that may be uninsurable or not
economically insurable. Should an uninsured loss or a loss in excess of
insured limits occur, we could lose our investment in the affected
operations, as well as the anticipated future revenues from those
operations, while remaining obligated for any mortgage indebtedness or
other financial obligations related to those operations.
o We will have risks associated with real estate financing. We expect to
finance some, if not all, of our real estate acquisitions and construction
costs through debt financing. In doing so, we will be subject to the risks
normally associated with debt financing, including the risks that:
o our cash flow will be insufficient to meet required payments of
principal and interest,
o we will not be able to refinance indebtedness at maturity,
o that the terms of any such refinancing will not be as favorable as the
terms of the existing indebtedness,
o that necessary capital expenditures for such purposes as renovations
and other improvements cannot be financed on favorable terms, if at
all, due to the terms of the debt financing,
o the potential for a forced sale of properties at potentially
distressed prices, and
o an increase in interest rates would increase the amount payable under
variable rate debt.
o If we do not raise sufficient capital and/or generate sufficient positive
cash flow to fund renovations and capital improvements, we may not be able
to remain competitive. Hotel properties require continuing renovation and
capital improvements, including periodic refurbishment and replacement of
furniture, fixtures and equipment, to remain competitive. The funding of
these expenditures will be dependent on our available capital, revenues and
cash flow. If available capital, revenues and cash flow are insufficient,
our competitive position may suffer which could result in our being forced
to limit or curtail business operations.
PROPOSED BUSINESS
We intend to develop a vacation and tourist destination, featuring our Naba Ah
eco-resort and Plan Grande archaeological development, on the Honduran island of
Guanaja. Naba Ah means "place of healing waters" in the
15
Mayan language. Guanaja is one of the Bay Islands located approximately 36 miles
off of the Gulf coast of Honduras. Our intended business operations are
anticipated ultimately to include the Naba Ah resort complex, featuring an
environmentally-friendly spiritual and wellness center, restaurant, traditional
fishing expeditions, deep sea diving and scuba diving. Our intent also is to
investigate and possibly develop an archeological park at a site, which scholars
have theorized, was an ancient ceremonial site where the indigenous people,
including the Mayans, conducted meditation and religious observances. We also
intend to market a line of medicinal herbs and natural healing products, grown
and developed on our properties in Guanaja, as well as complementary third party
products.
Our anticipated business operations will revolve around a central theme
involving the harmonious blending of:
o ancient indigenous history and culture, including that of the Mayans,
o local history and culture,
o natural products for healing and spiritual fulfillment, and
o the beauty and natural resources of the island of Guanaja.
Business Plans and Activities
Through our founders, we have located sites on Guanaja that we believe provide
an exemplary venue where we intend to create a mixture of historical,
archaeological, spiritual and enjoyable activities to attract tourists and
visitors seeking an alternative to the common vacation. We have organized an
initial plan to develop these properties as an attractive and inviting
destination revolving around our central theme.
We only recently began planning this development and no assurance can be given
that we will succeed in completing our business model or that, if completed, in
whole or part, that our plans will result in commercially successful operations.
We discuss in the "Business Model" subsection below, the current anticipated
stages in developing our project. These stages are subject to change by our
management, based upon funding and the various other factors discussed
throughout this prospectus.
We are in the process of acquiring several parcels of real estate on Guanaja, in
two distinct locations, approximately one mile apart. The first group of three
parcels are contiguous with each other and are located on the east end, or
leeward side of the island, and have beach access. It is at this location that
we intend to construct our Naba Ah eco- resort and spiritual and wellness
center. The second group of two parcels also are contiguous with each other, but
are located mid-island, and encompass the Marble Hill and the Plan Grande
sections of Guanaja. It is at this location that we intend to develop our
tourist destination. We will cultivate the herbs and plants for our line of
medicinal and alternative healing products at both parcels of land and such
other sites as we may determine.
The Island of Guanaja and Its Historical and Cultural Significance
The Gulf or north coast of Honduras offers over 400 miles of Caribbean coastline
with lush vegetation, white sandy beaches and warm, turquoise waters. The Bay
Islands lie between ten and 40 miles from the Honduran coastline, on the second
largest coral reef in the world. The Bay Islands are an archipelago of eight
islands and 65 cays covering approximately 92 square miles situated in an arc
over 77 miles in length. The three principal Bay Islands are Roatan, Utila and
Guanaja. Roatan is the largest and most developed of the Bay Islands. Utila is
low-lying, swampy and heavily forested. Guanaja has the highest elevation of the
Bay Islands, with a peak rising to approximately 1,400 feet, and has seen
limited development over the past few years.
Tourists from all over the world visit the Bay Islands. Coral reefs, often
within swimming distance of shore, virtually surround most of the Bay Islands
forming natural breakwaters and creating calm pools for diving, fishing,
swimming and sailing. The Bay Islands, with their white, "unspoiled" sand
beaches, their tropical thick forests, and their relaxed Caribbean atmosphere
have become a tourist and vacation destination. The Bay Islands are below the
"hurricane belt" that affects much of the Eastern Caribbean, Gulf of Mexico and
eastern United States, although the Bay Islands occasionally are subject to
tropical cyclones and other severe weather conditions. The average temperature
throughout the year is approximately 86(degree) Fahrenheit, with an average
water temperature of between 77(degree) and 82(degree) Fahrenheit. In 1990, the
entire island of Guanaja was declared a marine national park by the Honduran
16
government and an array of governmental programs were established to assure that
the ecology and environment, both on land and at sea, are preserved while
appropriate tourism development is encouraged.
The number of visitors to Honduras has increased dramatically over the last few
years, to approximately 475,000 tourists in 2000, generating $262 million in
revenues, a 35% increase in tourist-generated revenues from the amount generated
in 1999. Visitors from North America totaled 163,000 in 2000, a 30% increase
over the number of North American visitors over the prior five years.
Historically, Christopher Columbus first noted the island of Guanaja in European
literature in chronicling his final voyage to the New World. It was from Guanaja
that Columbus first saw the mainland of the Americas, despite it being his
fourth voyage to the New World. It also was at this time that Columbus first
encountered the local inhabitants who he called Maya.
Columbus called Guanaja the "Island of Pines," when he arrived in 1502. The
island, also referred to in the past as "Bonacca," measures about eleven miles
in length and under four miles in width, comprising a total of 29 square miles.
Much of the island is green and hilly and is mostly covered by Caribbean pine.
There is a paved airstrip on Guanaja, which is serviced by local Honduran and
Central American regional airlines. Air access to the Bay Islands is through the
city of San Pedro Sula, located on the Gulf coast of Honduras. Several major
airlines service the airport at San Pedro Sula, including Continental Airlines,
American Airlines and Taca Airlines. Direct flights originate in major United
States cities, such as Houston, Miami, Los Angeles and New Orleans.
There are no paved roads on Guanaja. Access to all points on the island is by
boat; in fact, the island has been divided in two by a man-made canal in order
to allow access by water throughout Guanaja. The estimated island population
numbers 10,000. The majority of local islanders speak English and Spanish. The
principal sources of employment on the island include commercial fishing and
tourism.
Recent planned development on Guanaja has included two resorts, a Kempinski
Resort and the Guanaja Reef Club. The Kempinski Resort, to consist of 36 private
dwellings, at an estimated construction cost of $20 million, is scheduled to
open in 2003.
The British scholar Thomas Young in 1847 and the British explorer and adventurer
F.A. Mitchell-Hedges in the early 1930s, investigated a cocoa nut garden on the
Marble Hill section of the island. They noted that this garden appeared to have
been attended to with great care. They described what existed from the mid
1850's until the 1930's as follows: A continuous low stone wall was discovered
in close proximity to this garden. The stone wall enclosed an almost oval space,
extending over a distance of approximately eight hundred yards, in which, in
near perfect formation, were situated mounds and monolithic stones erected with
almost astronomical precision on a north-south axis. To the south, there was a
mound covered with flat stones, and in front of the mound was a series of
approximately fifty monolithic stones erected in a semi-circle. We intend to
have archeologists investigate and, possibly, recreate this site to what we
believe to be its former status.
Mitchell-Hedges, working under the auspices of the Museum of the American
Indian, Heye Foundation, compared the site to the Stonehenge ruins in England.
However, he felt the site to be older, due to the disintegration of the rock
slabs at the Guanaja site.
Mitchell-Hedges admitted to removing more than 1,100 artifacts from this site.
These artifacts were transferred to the Museum of the American Indian in New
York City. The Museum of the American Indian became a part of the Smithsonian
Institute in 1989, and the Smithsonian has retained possession of these
artifacts to this day.
In April and May 1933, William Duncan Strong, an anthropologist at the
Smithsonian Institute, organized a research project at the site for the purposes
of gathering more information on the Bay Islands and to supplement information
concerning Mitchell-Hedges' artifacts and another archeological reconnaissance
of the Bay Islands by the American Museum of Natural History. Strong noted that
the Marble Hill and Plan Grande sites was the most
17
striking ruin visited by the Smithsonian research team during its exploration of
archaeological sites of the Bay Islands during 1933.
The Marble Hill site is honey-combed with caves. Part of the cave system
includes what scholars believe to be a sac-tun-na. A sac-tun-na, which literally
means "white stone cave" or "white stone house" in Maya, was believed by the
Mayans to be a cave of creation and considered to be one of the most spiritually
significant environments of the pre-Colombian Mayan inhabitants. Scholars base
their belief and we, in turn, base our belief, that these caves were considered
a sac-tun-na on the caves' natural elements, the impressive stelae formations
and the remains of a large number of offerings left at the site cave. We further
believe that there are few such natural formations in all of Central America
that so thoroughly match the Mayan notion of a sac-tun-na as the cave formations
at the Marble Hill site.
Land Purchases by Crest View
Since July 1, 2001, we have acquired real property parcels at two sites about a
mile apart from each other. We plan to use the acquired land at one site for
development of our Naba Ah eco-resort and spiritual and wellness center. The
second site will be used for our Plan Grande tourist destination.
The status of our land acquisitions are as follows:
A. Naba Ah properties. Three adjacent properties, located on the leeward side
of the east end of Guanaja, are being acquired for our Naba Ah development.
These properties, their approximate acreage, actual or anticipated
acquisition costs, status of acquisition and method of payment of their
actual or anticipated acquisition costs, are:
Number Purchase Acquisition
Parcel of Acres Price* Status Date Method of Purchase; Other Information
- ------ -------- ------ ------ ---- -------------------------------------
East 19.2 $300,000 Acquired January 2002 $50,000 paid at closing, balance payable in
four equal semi-annual payments of $62,500
plus accrued interest. Property owned by
Crest View, Investments S.A., our 99.96%
owned subsidiary.
Central 18.0 $400,000 Acquired July 2001 Cash paid at closing. Property owned by
Crest View, Investments S.A., our 99.96%
owned subsidiary.
West 12.0 $120,000 Under Not applicable Anticipated to be $30,000 payable at closing,
negotiations balance payable over 24 months.
- ---------
* Excludes closing costs.
Acquisition of these three properties, at an aggregate cost of
approximately $875,000, including closing costs, will provide us with just
under 50 acres which should form a strong base for our Naba Ah eco-resort
and wellness center project. We are investigating the purchase of
additional adjacent properties.
B. Plan Grande properties. Two adjacent properties have been acquired in the
central, inland Marble Hill section of Guanaja. These properties, their
approximate acreage, actual acquisition costs, status of acquisition and
method of payment of their actual acquisition costs, are:
18
Number Purchase Acquisition
Parcel of Acres Price* Status Date Method of Purchase; Other Information
- ------ -------- ------ ------ ---- -------------------------------------
A 3.5 $45,000 Acquired July 2001 Cash paid at closing. Property owned by
Crest View, Investments S.A., our 99.96%
owned subsidiary.
B 16.0 $268,665 Acquired September 2001 Issuance of promissory note due June 30,
2003 in the principal amount of $268,665.
This parcel is owned by Plan Grande Group,
S.A., our wholly owned subsidiary which we
acquired in September 2001 from Anthony
Conforti in order to acquire the property. Mr.
Conforti also is a business partner of our vice
president and chief financial officer in
another business venture, Acalan, LLC.
- ----------
* Excludes closing costs.
These two properties should provide us with adequate land for our current
Plan Grande tourist destination plans. There is an additional parcel of
land in close proximity with different, but complementary archeological
features. We will attempt to work with the unaffiliated third party owners
to include this parcel in archeological exploration to further enhance our
planned Plan Grande tourist destination.
With the exception of the Plan Grande parcel B property, we acquired the parcels
pursuant to oral agreements from bona fide unaffiliated third parties. The
parcel B property was acquired when we purchased the Honduran company which owns
this parcel. The relationship of the seller of the Plan Grande parcel B property
to one of our executive officers is set forth in the preceeding table.
We did not obtain any appraisals of the parcels we have acquired through the
date of this prospectus. The purchase prices and terms of purchases were each
determined based upon arms-length negotiations with the sellers of these
parcels. The transfers of the properties to us are each evidenced by formal
documentation meeting the requirements of applicable Honduran law. The transfer
documents are written in Spanish. No written English translations were ever
made. We relied upon our local Honduran counsel to orally translate for us each
transfer document.
Naba Ah: Our Eco-Resort and Spiritual and Wellness Center Complex
We are in the process of acquiring three parcels of land on the island of
Guanaja on which we intend to develop our Naba Ah eco-resort and spiritual and
wellness center complex. Two of the properties has been acquired and we
currently are negotiating the acquisition of the remaining parcels. These three
parcels all have ocean and beach frontage, with gentle slopes rising several
hundred feet to a ridge overlooking the Bay of Honduras and benefit from almost
continuous cooling trade winds. From this vantage point, one can see all of the
smaller cays of the Bay Islands on the leeward side of the island, local white
sand beaches and the coral reef. The parcels at the Naba Ah location generally
have electrical access, mature fruit trees and a variety of tropical plants. All
three of these parcels have access to potable water from fresh water springs
located onsite. One of the properties currently has a structure with electrical
and water access and a small boat docking facility. We are upgrading this
structure to serve as a base for future development projects. We are upgrading
the docking facility in order to service future construction activities and,
eventually, to serve our Naba Ah guests. We anticipate these construction
projects will cost approximately $25,000. We have engaged an architect and
building contractor to supervise these upgrade projects.
We intend to develop these parcels, encompassing our central theme with the
following facilities:
o a spiritual and wellness center,
o a world-class restaurant specializing in native and Caribbean cuisine, and
o a premier-level resort, consisting of free-standing studio, one- and
two-bedroom casitas, homesites.
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Each of the facilities is anticipated to be constructed utilizing
Honduran-sourced materials, primarily concrete, as well as mahogany wood,
ceramic and clay tiles and other native materials. We anticipate that the
resort, once fully developed, will have at least 40 casitas with a capacity for
approximately 350 guests. The casitas and spiritual and wellness center will be
arranged along winding paths, comporting to the natural layout of the land,
providing for an added layer of privacy to the center's and resort's guests.
We intend to construct our resort complex in stages. We anticipate constructing
up to ten casitas and limited staff housing in the first stage. In this stage of
development, we anticipate utilizing the present structure on one of the parcels
as a temporary administrative building and restaurant. A building to house the
spiritual and wellness center and the resort's permanent administrative
headquarters, as well as additional casitas and staff residences, will be
constructed in later stages of development.
During the first phase of business operations, we intend to operate a portion of
our Naba Ah resort as a traditional resort, whereby we rent the casitas on a per
diem basis. Within a second portion of the resort, to be constructed during
later stages of development, we may offer interests in the casitas to individual
parties and thereafter provide rental management services to these casitas'
interest holders. We also may enter into ventures with hotel and time- share
managers with respect to the casitas.
We anticipate that the motif of our Naba Ah resort will encompass our central
theme, utilizing replicas of Mayan and local art. We anticipate offering a line
of products, including jewelry and other novelties, at our resort.
The spiritual and wellness center is anticipated to be based on the teaching and
practice of alternative medicines and spirituality, which relies heavily on the
wisdom and traditions of the Native American people. We anticipate that the
facilities will be designed with input and counsel from traditional healers. In
contrast to other spas and wellness centers that focus on a "body beautiful"
approach, we intend for our spiritual and wellness center to reach beyond
physical therapies and offer our guests a place for spiritual rejuvenation. We
believe that our Naba Ah spiritual and wellness center will have teachers,
consultants, advisors and support staff, along with an overall atmosphere, that
will focus on health, enlightenment, relaxation and spiritual renewal of our
visitors. In this regard, we intend to retain experts on Native American
traditional healing and spiritual methodologies as employees, advisors,
consultants and seminar speakers for our wellness center operations.
Our vice president and chief financial officer, John C. Francis is a co-founder,
president and chief executive officer of Acalan, LLC. Acalan is a new media
company specializing in the development, production and distribution of
transformational media. Transformational media is material intended to transform
the spirit, as well as inform the mind. Through the past sixteen years of
extensive travel throughout Central America, the principals of Acalan, including
Mr. Francis, have been able to develop contacts with people involved in various
aspects of traditional healing, including those from various Native American
communities, as well as respected scholars and individuals involved in various
aspects of alternative spirituality. We intend to leverage these contacts and
Mr. Francis' experiences in structuring our plans and central theme for our Naba
Ah and Plan Grande development projects.
We also intend to establish relationships with travel consultants and others who
may be able to direct clients to our facilities as an attractive
tourist/vacation destination. Further, we anticipate establishing associations
with the cruise lines that currently have ports of call at the neighboring Bay
Island of Roatan and elsewhere in the southern Caribbean Sea that could result
in these cruise lines making stopovers on Guanaja in order for their passengers
to experience the island's facilities, including our wellness center and the
cultural center.
Our Plan Grande and Marble Hill Tourist Destination
We have acquired two parcels of land on the island of Guanaja at Marble Hill on
which we intend to develop our Plan Grande tourist destination. We believe that
Marble Hill, the entire Plan Grande site and surrounding area has an intrinsic
spiritual significance beyond its archaeological and historic value, due to the
site's natural elements. We believe there is an opportunity to exploit such
spiritual and natural element significance in an environmentally and culturally
friendly manner.
20
We believe, based on our studies and those of Thomas Young, F.A.
Mitchell-Hedges, William Duncan Strong and others, that Marble Hill was a sacred
place of healing, a pilgrimage destination for prayer and rejuvenation among the
ancient indigenous population. We intend to develop the site as an archeological
and ecological studies park targeted for those interested in ancient indigenous
cultures and those seeking a spiritual and healthful experience. We envision the
site, once fully developed, will have numerous gardens and resting places in
which visitors may conduct private or group meditations, prayers, discussions or
other spiritual awakenings.
We intend to retain professional archeologists and natives familiar with ancient
customs with the goal of returning the Plan Grande site to its former state,
based on our theory of the site's purpose.
Once the gardens, sac-tun-na and other ancient structures on Marble Hill have
been developed, we intend to construct one or more buildings at our Plan Grande
site as a cultural center. This cultural center will house exhibitions
concerning ancient, historical and current religious, ethnic and cultural art,
traditions and history. We would also display the artifacts taken by Young,
Mitchell-Hedges, Strong and others that are presently in the possession of the
Smithsonian Institute, if we are successful in our efforts to cause the
artifacts currently held by the Smithsonian to be returned to the island.
We will market the cultural center and sac-tun-na tours to those individuals,
including guests at our Naba Ah resort and spiritual and wellness center,
wishing for either active or passive involvement with these archaeological
sites. Short-term, part- and full-day, tours of the Marble Hill and Plan Grande
sites and cultural center, will be available. For those individuals desiring
more "hands-on" activities, amateur archaeologist participation supervised by
professionals in Mayan archaeology will also be available. Fees charged to our
guests will be based on the level of participation.
Anticipated revenues from our cultural center operations also will be generated
from ticket sales to non-natives for admission to the cultural center and sales
at a retail store located in the center. We intend for this store to sell the
normal array of souvenirs, including books, replicas of artifacts, t-shirts and
other mementos.
We also intend to fund professional archaeological investigation projects on
Marble Hill and the Plan Grande site. This funding will serve two purposes.
First, the funding may create good-will and positive name recognition in
connection with our further dealings with local governmental authorities, local
and international environmental, human rights and scientific groups. Second, any
discoveries at the archaeological sites may enhance the cultural experience of
our clients creating additional exposure for our commercial endeavors. We
believe that any positive publicity generated from these archeological
investigations could aid in the promotion of our company and our eco- resort.
Our management believes, based on their knowledge of the tourist industry, that
there is a substantial market for archaeological tours to Central America,
including those focusing on Mayan ruins on the Bay Islands of Honduras.
Our Alternative Healing Business
We intend to establish an area on our properties for the cultivation and
eventual harvesting of traditional herbs and other medicinal plants. A
commercial product line will be developed from these herbs and plants. This line
of products will be offered for sale to our hotel and spiritual and wellness
center guests and visitors to our tourist destination. We also intend to market
this line of products in the United States, Latin and South America, Europe and
Asia, subject to obtaining appropriate administrative approvals and
export/import permits, as well as compliance with other governmental laws and
regulations.
We anticipate initially obtaining product from third parties to accelerate cash
flow from this revenue source.
We also intend to offer alternative medicinal products that have been developed
by native and other traditional healers. It is our intention to fund the
training of students who will study under the guidance of the leading
practitioners of ancient Mayan and other native healing techniques. In this
context, guests of our spiritual and
21
wellness center and visitors to our tourist destination will be able to observe
these students as they learn such healing methods.
Business Model
We anticipate our business will be developed in different phases over an
extended period of time. We have chosen this course of action for two reasons.
First, we are a development stage company with limited resources embarking on a
large scale development project which we estimate could cost ultimately in
excess of $12 million if fully developed. Our management has experience in
raising capital for worthy projects, in different industries. We believe raising
adequate capital to fund our development plans will be difficult, especially
under current market conditions. However, we also believe raising such necessary
funds is feasible, although we can give you no assurance that such funds can be
obtained or that obtaining such funds, if possible, will be on terms
advantageous to our company or then current stockholders.
The second reason for progressing steadily, but without haste, in the early
stages is our need to plan the development carefully. We believe that our Naba
Ah and Plan Grande properties are rich in beauty and historical/cultural
significance. We further believe that we have a responsibility to our
stockholders, the native people of Guanaja and our future guests to develop the
properties carefully to maximize stockholder value while preserving and
enhancing the properties' natural beauty and cultural significance.
The anticipated development schedule which follows lists, in general terms, the
major tasks and current target periods for our development endeavors. These
phases are based upon our currently proposed plans, assumptions and anticipated
funding and revenues. In the event that our plans change, assumptions change or
prove inaccurate, or anticipated funding and revenues are less or more than
anticipated, we likely may be required to alter development projects and/or
revise phases of development. Phase I items primarily are development planning
items, including the establishment of a support team of professional advisors
experienced in resort construction within our planned guidelines, local culture,
alternative healing and related matters, to assist us in finalizing our Phase II
development plans. We expect to develop this team of professional advisors
utilizing the large network of people which our vice president, John C. Francis,
has developed through sixteen years of travel in the area.
Status or
Development Commencement Dates
- ----------- ------------------
PHASE I
A. Theme:
i. Develop an initial series of trademarks, name concepts and programs
revolving around our central theme.......................................... In progress
ii. Retain advisors, such as architects, healers, shamans, archeologists and
historians, to insure harmony and consistency between theme and historical
fact and accepted theory.................................................... Spring 2002
B. Naba Ah Eco-Resort:
i. Acquire up to three initial real estate parcels to serve as a base property. Two closed (approximately
37.2 acres) and one under
negotiation (approximately
12.0 acres)
ii. Acquire options to purchase additional parcels.............................. Preliminary discussions
C. Alternative Healing:
i. Retain advisors experienced in Mayan medicinal techniques and tropical
herbal plants............................................................... Spring 2002
ii. Develop plans for herbal gardens on eco-resort and Marble Hill properties... Spring 2002
D. Plan Grande Tourist Destination:
22
Status or
Development Commencement Dates
- ----------- ------------------
i. Acquire two real estate parcels encompassing all of the Marble Hill section
of Guanaja and adjacent land................................................ Completed
ii. Commence activities to negotiate return of artifacts for exhibition......... Spring 2002
E. Capital Formation:
i. Fund initial real estate acquisitions though debt financing................. Completed
ii. Commence initial, self-underwritten public offering......................... In progress
PHASE II
A. Theme:
i. Utilize information from advisor group to finalize development concepts,
programs and construction................................................... Summer 2002
B. Eco-Resort:
i. Initiate construction of docking facilities and up to ten casitas........... Summer 2002
ii. Finalize plans for development of the eastern two parcels................... Fall 2002 - Spring 2003
iii.Plant herbal garden paths................................................... Summer 2002
C. Alternative Healing:
i. Commence planting of herbal gardens on eco-resort and tourist destination
properties.................................................................. Fall 2002
ii. Retain several teachers and shamans and commence training students in the
use of alternative healing methods.......................................... Fall 2002
iii.Trademark product line consistent with theme and commence
licensing/permit procedures................................................. 2001 - 2002
iv. Arrange third party sourcing and private labeling of products............... Summer and Fall 2002
D. Tourist Destination:
i. Restore Marble Hill to its historical and garden state with meditation
access, herbal plantings and walkways....................................... Summer 2002
ii. Construct initial buildings for use as a training center for cultural center,
with an initial focus on history while anticipating increased future artifact
exhibition.................................................................. Fall 2002
iii.Initiate programs with locals to enhance the area as a tourist
destination. Summer 2002 iv. Enter into relationships with destination
service providers, such as travel agents, tour boats, etc................... Fall 2002
E. Capital Formation:
i. Raise capital as needed, likely sources to include traditional real estate debt
and sale of additional equity through exercise of warrants and/or private
placements and public offerings............................................. Ongoing
ii. Seek grants and sponsorships for Plan Grande tourist destination............ 2002 and ongoing
Our capital requirements during Phase I should be adequate from a combination of
existing debt as well as equity anticipated from completion of this public
offering. Almost all of the proceeds of this offering are allocated for the
purchase of real property and/or repayment of indebtedness. We anticipate that
$50,000 of the minimum proceeds, or $75,000 of the maximum proceeds, from the
offering will be used for general and administrative and working capital
purposes. These funds are to be primarily used for salaries, accounting and
legal expenses, travel and other fees and expenses.
The building and our business activities proposed in Phase II are likely to
require approximately $1.2 million. We believe that funding for planned Phase II
development will be derived from the issuance of additional debt in
23
combination with mortgaging properties previously acquired and with capital
provided by the exercise of warrants and the issuance of common or preferred
stock. We have not formulated specific plans regarding any equity or debt
offerings or mortgaging our properties and do not know if such sources of
funding would be available to us when needed nor on what terms. We also intend
to approach other entities, both corporate and individual, to assist us in some
of our Plan Grande development activities, on a grant or sponsorship basis. The
failure to raise additional funds, through debt or equity financing or by grant
funding, will result in our inability to continue development activities. The
inability to continue development activities could result in a substantial, if
not total, loss in the value of any investment in our company.
As Phase I planning is finalized in preparation for Phase II construction, we
will evaluate the advisability of using new capital resources for the
commencement of construction or for the acquisition of additional properties
adjacent to or in close proximity to our currently planned Naba Ah and Plan
Grande properties. In any event, we do not anticipate generating any revenues
prior to January 2003.
Development of our operations could be subject to delays. There are numerous
uncertainties surrounding our ability to develop our Naba Ah tourist/vacation
destination in Honduras where the eco-resort concept has not been proven a
successful business model. A failure by us to successfully complete our
development and construction activities as discussed above may have a material
adverse effect on our intended business operations.
Our resort property will be subject to all operating risks common to the resort
industry. These risks include, among other things:
o competition from other hotels and resorts,
o reduction in demand for eco-resorts,
o changes in governmental regulation,
o overbuilding in the hotel and vacation destination industries, which may
adversely affect occupancy and room rates,
o increases in operating costs attributable to inflation and other factors,
which increases have not consistently been, and may not necessarily in the
future be, offset by increased room rates,
o significant dependence on vacation travelers and tourism,
o the seasonality of hotel revenues, especially for resorts,
o the impact of severe weather on hotel occupancies in locations such as
Honduras,
o increases in construction costs,
o increases in energy costs and other expenses of travel, and
o adverse effects of general and local economic conditions.
In order to implement our business model, we will be required to:
o obtain, develop and adopt appropriate and adequate operating systems,
o attract and retain skilled executive, management and other personnel,
and
o successfully manage growth, including monitoring operations,
controlling costs and maintaining effective quality and service
controls.
We cannot assure you that we will be able to implement successfully our business
model.
Competition
We believe that the principal methods of competition with our Naba Ah resort
complex will be on the basis of:
o our ability to incorporate our central theme into the complex's
infrastructure and available services,
o brand development, affiliation and marketing,
o customer service,
o location, and
o the condition and upkeep of the resort in general and in relation to other
resorts and hotels in the local, regional, national and international
markets.
We believe that we will be well positioned in each of these categories. We
intend to emphasize our Naba Ah central theme, customer service and the newness
of our facilities. We also believe that a strong commitment to regular
24
capital improvements, including the refurbishment of furniture, fixtures and
equipment, will help in our competitive position.
We will have to compete for customers. Our resort will compete for customers
with a wide range of lodging facilities offering full-service, limited-service
and all-suite lodging options to the public and with other competitors offering
other types of vacation destinations. We will compete with other local
tourist/vacation destinations, as well as with tourist/vacation destinations
located throughout the world. We face significant competition from many of the
world's established and recognized lodging, hospitality, entertainment, vacation
ownership companies. Many of our competitors have much greater financial,
marketing, personnel and other resources than we do, which could adversely
affect our ability to successfully compete with these competitors.
Companies in the lodging and vacation industries compete based on factors such
as room rates, quality of accommodations, name recognition, service levels,
marketing programs, convenience of location and entertainment value. We cannot
assure you that our competitors will not significantly expand or improve
facilities, adjust prices or implement new or improved marketing programs so
that our proposed operations are adversely affected. We will also compete with
other alternative entertainment destinations in attracting cruise ships and tour
groups. We cannot assure you that we will be successful in obtaining commitments
from cruise ship lines and travel and tour agencies to add our resort, wellness
spa and cultural center to their ports-of call or recommendation lists.
Seasonality
The operations at our resort are anticipated to be seasonal. This seasonality
pattern can be expected to cause fluctuations in our quarterly revenues and cash
flow. The market price for our securities, if one exists, may be subject to
volatility as a result of such seasonality.
Employees
We are a development stage company and currently have no employees, other than
our two executive officers, Johnny R. Thomas and John C. Francis. We expect to
use outside consultants, advisors, attorneys and accountants as necessary, none
of which will be hired on a salaried basis. We anticipate that, following the
offering made under this prospectus, we may retain one employee in the United
States for administrative work and three persons in Honduras for site
preparation and caretaking.
We consider Johnny R. Thomas, our Chief Executive Officer, and John C. Francis,
our Vice President, to be key to our future success, if any. The loss of the
services of either of these executive officers could have a material adverse
effect on our performance. We presently do not maintain a "key-man" life
insurance policy with respect to any of our executive officers.
Governmental Regulation
We will be subject to various local governmental regulations in connection with
the development of our Naba Ah eco-resort complex. These regulations include
those relating to construction and zoning permits and variances, and compliance
with environmental and sewage matters. We have retained local counsel to advise
us on these matters and to assist us in compliance with all applicable
regulations.
In 1990, the entire island of Guanaja was declared a marine national park by the
Honduran government and an array of governmental programs were established to
assure that the ecology and environment, both on land and at sea, are preserved
while appropriate tourism development is encouraged. We have been advised that
this marine park designation will affect our construction plans only to the
extent of compliance with sewage disposal/septic requirements. We do not believe
compliance with these requirements will have a material adverse effect on our
construction and development plans nor on our future business operations.
The lodging industry is subject to various government regulations, such as food
service and health and liquor license laws. We also will be subject to laws
governing our relationships with employees, including minimum wage
25
requirements, overtime, working conditions and work permit requirements. We
believe that our operations will be in substantial compliance with these
requirements. However, a determination that our operations are not in compliance
with any applicable law could result in the imposition of fines, an award of
damages to private litigants or significant expense to us in bringing our
operations into compliance.
Our line of medicinal herbs and natural healing products and related marketing
and advertising will be subject to governmental regulation by the various
domestic agencies and authorities of the jurisdictions in which we will market
and sell the product line. This will include, in the United States, the Food and
Drug Administration, which regulates food, medical products and cosmetics. The
advertising and marketing of our products are regulated in the U.S. by the
Federal Trade Commission, which enforces consumer protection laws in regards to
truth in advertising. In addition, the Consumer Product Safety Commission
protects the U.S. public from unreasonable risk of injuries and death associated
with consumer products, and the United States Department of Agriculture
regulates food safety and quality for products sold in the U.S. Similar types of
agencies exist in our foreign markets.
Our intended medicinal herbs and natural healing products markets are subject to
regulations concerning product formulation, labeling and packaging. These laws
and regulations will, in all likelihood, require us, among other things, to
conform product labeling to the regulations, and register or qualify products
with the applicable government authority or obtain necessary approvals or file
necessary notifications for the marketing of such products. Many of our intended
markets also regulate product claims and advertising. These laws regulate the
types of claims and representations that can be made regarding the capabilities
of products. For example, in the United States, we will be unable to make any
claim that our products will diagnose, cure, mitigate, treat, or prevent
disease.
Our operations will be conducted in a foreign country and there are risks
inherent in international business activities. These risks include:
o unexpected changes in regulatory requirements,
o anti-American political climate which curtails tourism because of perceived
danger,
o tariffs and other trade barriers,
o difficulties in managing international operations,
o potential adverse tax consequences, including limitations on repatriation
of earnings,
o reduced protection for intellectual property,
o the burdens of complying with foreign laws,
o being subject to a foreign system that may differ from the system in the
United States,
o the ability of key management to obtain permits to work in the foreign
country, and
o the effects of local wage scales, employment customs and other expenses.
Properties
We have acquired four parcels of land on Guanaja at two sites and are
negotiating the acquisition of an additional parcel at one of these sites. The
first set of three parcels, consisting of approximately 49.2 acres, is where we
intend to construct our Naba Ah eco-resort and wellness center. To date, we have
acquired approximately 37.2 acres and are in negotiations to acquire an
additional 12.0 acres. The second set of two parcels, consisting of
approximately 19.5 acres, is at the Plan Grande location and includes Marble
Hill.
We may be subject to various environmental, health, safety and land use laws,
ordinances, regulations and similar requirements. Pursuant to these laws, a
current or previous owner or operator of real property may be required to
investigate and clean up hazardous or toxic substances or wastes or releases of
petroleum products or wastes at such property, and may be held liable to a
governmental entity or to third parties for associated damages and for
investigation and substantial clean-up costs incurred by such parties in
connection with the contamination. Such laws may impose clean-up responsibility
and liability without regard to whether the owner knew of or caused the presence
of the contaminants.
We may experience adverse effects or incur liability as a result of our
interests in real estate. We currently own property on the island of Guanaja in
Honduras and intend to acquire and/or lease additional property on the island.
26
We will therefore be subject to varying degrees of risk generally related to
owning and leasing real estate. These risks include:
o changes in national, regional and local economic conditions,
o changes in local real estate market conditions,
o costs of periodic renovation of our resort and the periodic replacement of
furniture and equipment in order to stay competitive,
o costs of uninsured and underinsured casualty and other losses, such as
those arising from hurricanes or earthquakes,
o changes in interest rates and in the availability, costs and terms of
financing,
o the ongoing need for capital improvements,
o changes in real estate tax rates and other operating expenses,
o the impact of present or future environment legislation and compliance with
environmental laws, and
o adverse changes in zoning and other governmental laws and regulations.
Most of these matters are beyond our control. Additionally, real estate
investments are relatively illiquid, which means that our ability to vary our
business in response to changes in economic and other conditions may be limited.
Our principal executive office is located at 1700 West Horizon Ridge Parkway,
Suite 202, Henderson, Nevada 89012. We intend to maintain our principal
executive office in the United States following commencement of business
operations in Honduras.
Legal Proceedings
We currently are not a party to any legal proceedings.
27
MANAGEMENT
Executive Officers and Directors
Our current executive officers and directors, and their ages and principal
positions with our company are as follows:
Age Title
--- -----
Johnny R. Thomas 60 Chief Executive Officer, President,
Treasurer and Director
John C. Francis 52 Vice President, Chief Financial Officer and
Director
Set forth below is a brief description of the business experience and background
of our executive officers and directors, based upon information they have
provided us.
Johnny R. Thomas has served as chief executive officer, president, treasurer and
a director of our company since our formation in January 2000, originally as a
"blank check" development stage company. Dr. Thomas received his Ph.D. degree in
genetics/plant breeding from Oregon State University in 1966. Dr. Thomas has
been a managing member of Falcon Financial Group LLC, a privately-held company
engaged in providing assistance and advice to private companies on capital
formation and introductions to investment banking firms, since January 2000. Dr.
Thomas served as chairman of the board and chief executive officer (from April
1994 to February 1999), president (April 1994 through December 1997) and a
director (from September 1993 to February 1999) of AgriBioTech, Inc., a
publicly-held, vertically integrated developer, producer, marketer and
distributor of forage and cool-season turfgrass seed. AgriBioTech and several of
its subsidiaries filed a voluntary petition for bankruptcy in January 2000,
approximately eleven months following Dr. Thomas' departure from the company.
John C. Francis, has served as vice president, chief financial officer and a
director of our company since July 1, 2001. Mr. Francis has served as president
and chief executive officer of Acalan, LLC since its formation in 1998. Acalan
is a new media company specializing in the development, production and
distribution of transformational media. Transformational media is material
intended to transform the spirit, as well as inform the mind. Mr. Francis also
has been a managing member of Falcon Financial Group LLC since January 2000. He
served as chief financial officer (from April 1994 to April 1996), vice
president, secretary and a director (April 1994 through January 1999) of
AgriBioTech, Inc. AgriBioTech and several of its subsidiaries filed a voluntary
petition for bankruptcy in January 2000, approximately eleven months following
Mr. Francis' departure from the company. Mr. Francis also serves as chief
executive officer, president and sole director of Hunapu, Inc., a "blank check"
development stage company.
Each of our directors has been elected to serve until the next annual meeting of
our stockholders, unless he shall resign, become disqualified, disabled or shall
otherwise be removed from office.
There are potential conflicts of interest between us and our management team. We
borrowed money from certain friends and relatives of our management to finance
our real estate purchases on Guanaja. While our relationships with these lenders
have been amicable, there can be no assurance that these relationships will
remain friendly or, if any one or more relationships become adversarial, how
such adverse change will affect our management personnel and their own
relationships with our company.
Certain conflicts of interest may exist between us and our officers and
directors. Our officers and directors have other business interests to which
they devote their attention and may be expected to continue to do so. As a
result, conflicts of interest may arise that can be resolved only through their
exercise of such judgement as is consistent with their fiduciary duties to our
company.
Executive Compensation
From our inception through June 30, 2001, we did not pay compensation to our
officers and directors. We entered into substantially identical employment
agreements, each dated as of July 1, 2001, with Johnny R. Thomas, our chief
executive officer, and John C. Francis, our vice president and chief financial
officer. These employment agreements provide that Messrs. Thomas and Francis
shall devote such time and effort as may be reasonably required to perform
28
their duties without a requirement to devote a specific number of hours. These
employment agreements are for a two-year term, which we may terminate for cause
without notice. In connection with their entering into their employment
agreement, we issued to each of Messrs. Thomas and Francis 144,000 shares of our
common stock valued at $.50 per share. Bonuses may be paid at the sole
discretion of our board of directors. The agreements provide for each employee
to receive three weeks of vacation per year and to receive all benefits
available to our employees.
The employment agreements provide that in the event there is a material change
in ownership or management, where the employee is terminated, or, at the
employee's sole discretion, there is a significant change in his duties,
responsibilities, principal place of employment or compensation, the employee
may terminate without justification for one year following such change of
control. The employees agreed not to compete with us during the period of their
employment and for a two-year period thereafter.
Limitation on Liability and Indemnification Matters
As authorized by the Nevada General Corporation Law, our certificate of
incorporation provides that none of our directors shall be personally liable to
us or our stockholders for monetary damages for breach of fiduciary duty as a
director, except for liability for:
o any breach of the director's duty of loyalty to us or our stockholders,
o acts or omissions not in good faith or which involve intentional misconduct
or a knowing violation of law,
o unlawful payments of dividends or unlawful stock redemptions or
repurchases, or
o any transaction from which the director derived an improper personal
benefit.
This provision limits our rights and the rights of our stockholders to recover
monetary damages against a director for breach of the fiduciary duty of care
except in the situations described above. This provision does not limit our
rights or the rights of any stockholder to seek injunctive relief or rescission
if a director breaches his or her duty of care. In addition, our certificate of
incorporation provides that if the Nevada General Corporation Law is amended to
further limit the liability of a director, then the liability of the directors
shall be eliminated or limited to the fullest extent permitted by such
amendment. These provisions will not alter the liability of directors under
federal securities laws.
Our certificate of incorporation further provides for the indemnification of any
and all persons who serve as our director, officer, employee or agent to the
fullest extent permitted under the Nevada General Corporation Law.
When sufficient cash is available, we anticipate obtaining a policy of insurance
under which our directors and officers will be insured, subject to the limits of
the policy, against certain losses arising from claims made against our
directors and officers by reason of any acts or omissions covered under this
policy in their capacities as directors or officers, including liabilities under
the Securities Act.
Insofar as indemnification for liabilities arising under the Securities Act may
be permitted to our directors, officers and controlling persons under the above
provisions, or otherwise, we have been advised that in the opinion of the SEC,
indemnification is against public policy as expressed in the Securities Act, and
is unenforceable.
Certain Relationships and Related Transactions
On January 20, 2000, upon the formation of the company, Johnny R. Thomas,
founder, a director and chief executive officer of our company, purchased
through Estancia LLC, an entity established by Dr. Thomas for estate planning
purposes, 2,960,000 shares of our common stock from the company for an aggregate
purchase price of $2,960, or $.001 per share. Dr. Thomas tendered a recourse
promissory note to the company for these shares which was paid in June 2000 when
the company opened a bank account. On March 31, 2001, Estancia LLC sold, at a
price of $.001 per share, 1,444,000 shares of our common stock to Excalibur
Trust, of which John C. Francis is a trustee and beneficiary, and 72,000 shares
of our common stock to Snow Becker Krauss P.C., our legal counsel. On July 1,
2001, John C. Francis became vice president, chief financial officer and a
director of our company.
29
Between August 23, 2000 and February 17, 2001, we borrowed a total of $13,500
from Johnny R. Thomas. These loans were repayable one year from date of the
loans and bore interest at 6% per annum. As of December 31, 2000, and June 30,
2001, we had accrued a total of $784 in interest charges.
On April 1, 2001, we issued 2,400,000 shares of common stock to Manzano Limited
Partners, a family limited partnership of Johnny R. Thomas' family members, of
which Dr. Thomas is a member and manager. These shares were issued in
satisfaction of $2,400 principal amount of indebtedness we owed to Dr. Thomas.
Manzano subsequently transferred these shares to certain of its members and
others. Dr. Thomas did not receive any of these shares.
On June 29, 2001, we issued an additional 22,200 shares of common stock to Dr.
Thomas in satisfaction of the remaining $11,100 of indebtedness we owed him, as
well as 1,124 shares in satisfaction of $562 of accrued interest.
Between June 22, and 29, 2001, Dr. Thomas purchased 60,000 shares of common
stock for $30,000 cash, or $.50 per share, in order to fund our working capital.
We are renting office space, telephone and secretarial services from Falcon
Financial Group LCC. This is the location at which we currently have our
principal offices. Falcon is an entity controlled by our chief executive officer
and vice president; the landlord is a non-affiliated third party. On July 1,
2001, we entered into a sublease with Falcon pursuant to which we issued to
Falcon an aggregate of 57,600 shares of our common stock in full satisfaction of
our two-year sublease rent obligation to Falcon, which we valued at $28,800, or
$1,200 per month. Falcon pays $1,750 per month under its overlease with the
landlord for the premises. We did not obtain any outside valuation of the
sublease and we do not consider this arrangement with Falcon to be an
arms-length transaction.
We intend to undertake to seek at least two persons to act as independent
directors on our board of directors following the successful completion of the
offering made under this prospectus. Once appointed to our board, we anticipate
that our independent directors will approve all future related party
transactions.
PRINCIPAL STOCKHOLDERS
The following table sets forth information known to us with respect to the
beneficial ownership of shares of our common stock, as of the date of this
prospectus and as adjusted to reflect the sale by us of the minimum and maximum
number of units offered under this prospectus, by:
o each person known by us to beneficially own 5% or more of our common stock,
o each of our executive officers and directors, and
o all of our executive officers and directors as a group.
Beneficial ownership is determined in accordance with the rules of the SEC and
includes voting and investment power. Under SEC rules, a person is deemed to be
the beneficial owner of securities which may be acquired by such person upon the
exercise of options and warrants or the conversion of convertible securities
within 60 days from the date on which beneficial ownership is to be determined.
Each beneficial owner's percentage ownership is determined by dividing the
number of shares beneficially owned by that person by the base number of
outstanding shares, increased to reflect the beneficially-owned shares
underlying options, warrants or other convertible securities included in that
person's holdings, but not those underlying shares held by any other person.
For the purposes of the table, the base number of outstanding shares are:
o prior to the offering: 5,828,924,
o completion of the offering, if the minimum number of units are sold:
7,028,924, and
o completion of the offering, if the maximum number of units are sold:
7,928,924.
Except as otherwise indicated in the notes to the following table,
o we believe that all shares are beneficially owned, and investment and
voting power is held by, the persons named as owners, and
30
o the address for each beneficial owner listed in the table, except where
otherwise noted, is c/o Crest View Inc., 1700 West Horizon Ridge Parkway -
Suite 202, Henderson, Nevada 89012.
Percentage of Shares
Beneficially Owned
Amount and --------------------------------------------
Nature of Completion Completion
Beneficial Prior to of Minimum of Maximum
Name of Stockholder Ownership Offering Offering Offering
- ------------------- --------- -------- -------- --------
Johnny R. Thomas (1)................ 2,210,457(2) 35.0(2) 29.4(2) 26.3(2)
John C. Francis (3)................. 2,774,135(4) 42.5(4) 35.9(4) 32.1(4)
All executive officers and directors
as a group (two persons)....... 4,926,792(5) 70.3(5) 60.0(5) 54.1(5)
- ----------
(1) Dr. Thomas is our chief executive officer, president, treasurer and a
director of our company.
(2) Represents (a) 1,444,000 shares of our common stock owned by Estancia LLC,
an entity established by Dr. Thomas for estate planning purposes and of
which Dr. Thomas is the manager, (b) 481,333 shares of our common stock
issuable upon exercise of class A warrants owned by Estancia LLC, (c)
57,600 shares of our common stock owned by Falcon Financial Group LLC, an
entity in which Dr. Thomas and John C. Francis each own a 50% equity
interest, and (d) 227,324 shares of our common stock owned of record by Dr.
Thomas. The number of shares beneficially owned by Dr. Thomas and his
percentage of shares beneficially owned, as reflected in the table above,
do not include (a) 250,002 shares of our common stock owned by an entity
created by Dr. Thomas' spouse for estate tax purposes, and which are her
sole and separate property, and (b) 481,333 shares of our common stock
issuable upon exercise of class B warrants, which class B warrants are only
issuable upon exercise of the class A warrants owned by Estancia LLC. If
such issuable shares were included in Dr. Thomas' beneficial ownership, Dr.
Thomas' amount of shares beneficially owned would be 2,941,792 and his
percentage beneficial ownership would be 43.3% prior to the offering, 36.8%
after the offering in which only the minimum number of units are sold, and
33.1% after the offering in which the maximum number of units are sold.
(3) Mr. Francis is vice president, chief financial officer and a director of
our company.
(4) Represents (a) 501,000 shares of our common stock owned by Excalibur Trust,
an entity established by Mr. Francis for estate planning purposes and of
which Mr. Francis is a trustee and beneficiary, which shares were
originally issued in January 2000, (b) 167,000 shares of our common stock
issuable upon exercise of class A warrants owned by Excalibur Trust, (c)
699,999 shares of our common stock owned by Camelot FLP, a family limited
partnership in which Mr. Francis has voting and disposition power over and
a beneficial interest, (d) 233,333 shares of our common stock issuable upon
exercise of warrants owned by Camelot FLP, (e) 57,800 shares of our common
stock owned by Falcon Financial Group LLC, an entity in which Mr. Francis
and Johnny R. Thomas each own a 50% equity interest, (f) 144,000 shares of
common stock owned of record by Mr. Francis, (g) 201,000 shares of our
common stock owned by Tea Cups FLP, a family limited partnership in which
the wife of Mr. Francis has voting and disposition power over and a
beneficial interest, (h) 67,000 shares of our common stock issuable upon
exercise of class A warrants owned by Tea Cups FLP, (i) 470,503 shares of
our common stock owned by Unicorn Trust, a trust in which the wife of Mr.
Francis is the trustee, and (j) 232,500 shares of our common stock issuable
upon exercise of class A warrants owned by Unicorn Trust. Mr. Francis
disclaims any beneficial ownership with respect to all shares and all
shares underlying the warrants owned by Tea Cups FLP and Unicorn Trust, in
which Mr. Francis has no pecuniary interest. The number of shares
beneficially owned by Mr. Francis and his percentage of shares beneficially
owned, as reflected in the table above, do not include the aggregate
699,833 shares of common stock issuable upon exercise of class B warrants,
which class B warrants are only issuable upon exercise of the class A
warrants owned by Excalibur Trust, Camelot FLP, Tea Cups FLP and Unicorn
Trust. If such issuable shares were included in Mr. Francis' beneficial
ownership, Mr. Francis' amount of shares beneficially owned, prior to
disclaiming beneficial ownership of all securities owned by Tea Cups FLP
and Unicorn Trust, would be 3,475,968 and his percentage beneficial
ownership would be 48.1% prior to the offering, 41.2% after the offering in
which only the minimum number of units are sold, and 37.3% after the
offering in which the maximum number of units are sold.
31
(5) Includes shares of our common stock beneficially owned by our executive
officers and directors, including those shares described in notes (2) and
(4) above. The number of shares beneficially owned by our executive
officers and directors as a group and the group's percentage of shares
beneficially owned, as reflected in the table above, do not include (a) the
1,181,166 shares of common stock issuable upon exercise of class B
warrants, which class B warrants are only issuable upon exercise of the
class A warrants owned by Estancia LLC, Excalibur Trust, Camelot FLP, Tea
Cups FLP and Unicorn Trust, prior to any disclaimer of beneficial
ownership, nor (b) the 250,000 shares owned by the entity created by Dr.
Thomas' spouse for estate tax purposes. If such issuable shares were
included in the group's beneficial ownership, the group's amount of shares
beneficially owned would be 6,357,958 and the group's percentage beneficial
ownership would be 77.0% prior to the offering, 67.7% after the offering in
which only the minimum number of units are sold, and 61.8% after the
offering in which the maximum number of units are sold.
Control of our company will be held by our management. Upon completion of the
offering, our current management, together with their affiliates, spouses and
spouses' affiliates, will control approximately 56.8% of the total voting power
of our company, if the minimum amount of units are sold in the offering, or
50.4% of the total voting power, if the maximum amount of units are sold in the
offering. Given their large voting control and ability to acquire additional
shares of our common stock, our management, together with their affiliates,
spouses and spouses' affiliates, if they choose to act in concert, is in the
position to elect all of the members of our board of directors and thereby
control the policies of our company. As such, our management will have
substantial influence over our company, which influence may not necessarily be
consistent with the interests of our other stockholders.
32
DESCRIPTION OF SECURITIES
General
We have authorized 40 million shares of common stock, par value $.001 per share,
and 8 million shares of preferred stock, par value $.001 per share, whose rights
and designation(s) have not yet been established. We had 5,828,924 shares of our
common stock outstanding as of the date of this prospectus, which are held by 61
holders of record. We currently have outstanding no shares of preferred stock.
All shares of common stock currently outstanding are validly issued, fully paid
and non-assessable.
Units
Each unit consists of one share of our common stock and one-third of one class A
redeemable warrant. Upon the completion of the minimum offering, the common
stock and the warrants which comprise the units will be immediately detachable
and separately transferable. Each class A warrant is exercisable to purchase of
one share of our common stock and one class B warrant.
Common Stock
Each share of our common stock entitles its holder to one vote upon all matters
on which holders of our common stock are entitled to vote under applicable law
or otherwise. Stockholders are not permitted to vote their shares cumulatively.
Accordingly, the holders of more than 50% of the issued and outstanding shares
of common stock can elect all of our directors. Holders of common stock have no
preemptive or other subscription rights, conversion rights, redemption or
sinking fund provisions. In the event of our liquidation, dissolution or winding
up, whether voluntary or involuntary, each share of common stock will be
entitled to share ratably in any assets available for distribution to holders of
our equity securities after satisfaction of all liabilities and after providing
for each class of stock, if any, having preference over the common stock.
The rights of the holders of common stock are subject to any rights that may be
fixed for holders of preferred stock, when and if any preferred stock is issued.
All outstanding shares of common stock are, and the shares underlying all
options and warrants will be, duly authorized, validly issued, fully paid and
non-assessable.
Class A Redeemable Warrants
Each class A warrant entitles its holder to purchase from us, for cash or other
consideration approved by our board of directors, one share of common stock at a
price of $6.00 per share and one class B redeemable warrant, subject to
adjustment as described below. The class A warrants are exercisable for four
years from the date of this prospectus. At our option, we may reduce the
exercise price of the class A warrants upon 30 days written notice from time to
time for such period(s) as we, in our sole discretion, may chose; provided that
no such period shall be for less than fifteen days nor more than 90 days. We
also may extend the exercise period, at our sole option.
We have the right to redeem the class A warrants at a price of $.001 per warrant
on at least 30 days prior notice at any time during the exercise period. If you
do not exercise your warrants prior to their expiration or redemption, you will
forfeit your right to purchase the underlying shares of common stock and class B
warrants. We may appoint standby purchasers to exercise any or all of the
warrants which are not exercised at the end of the 30-day notice period for a
fourteen-day period immediately thereafter.
The class A warrants are immediately detachable from the common stock and
exercisable. The holder of a class A warrant may exercise the warrant during the
exercise period by surrendering the warrant certificate, with the form of
election to purchase on the reverse side of the class A warrant certificate
properly completed, dated and executed, together with the payment of the
applicable exercise price, to the warrant agent. The class A warrants may be
exercised in whole at any time or in part from time to time. No fractional
shares or class B warrants will be issued upon the exercise of class A warrants.
33
The exercise price and the number of shares of common stock and class B warrants
purchasable upon exercise of the class A warrants will be adjusted in proportion
to any stock dividends, stock splits, combinations, reclassifications and other
similar events. No such adjustments will be made upon the issuance of shares of
common stock for any other reason. No adjustment of the exercise price will be
made until cumulative adjustments amount to $.05 or more. No adjustments as to
dividends will be made upon any exercise of class A warrants.
The Class A warrants do not confer upon their holders voting or pre-emptive
rights or any other rights (including the right to participate in the
distribution of the company's assets in the event of its liquidation,
dissolution or winding up) as a stockholder of the company.
We currently have outstanding warrants owned of record by 59 persons and
entities. These warrants automatically will convert into 1.8 million class A
warrants upon the closing of the minimum offering made under cover of this
prospectus.
We must have a current registration statement on file with the SEC in order to
continue the registration of the common stock and class B warrants underlying
the class A warrants, and, accordingly, we will need to file post- effective
amendments to the registration statement of which this prospectus is a part when
subsequent events require. There can be no assurance that such registration
statement can or will be kept current, and if it is not kept current, the class
A warrants will not be exercisable and may be deprived of value. In addition,
the common stock issuable upon the exercise of the class A warrants cannot be
sold in various jurisdictions without the registration in such jurisdictions of
the common stock in accordance with local law, or the availability of an
exemption from such registration. We may find it impractical or impossible to
qualify the common stock in those jurisdictions where we do not initially
qualify this offering. Class A warrant holders who are residents of
jurisdictions in which we do not qualify the common stock underlying the class A
warrants for sale will have no choice but to sell their class A warrants, to let
them expire or, if we elect to redeem the class A warrants, accept the
redemption price for their class A warrants.
Class B Redeemable Warrants
Each class B warrant entitles its holder to purchase from us, for cash or other
consideration approved by our board of directors, one share of common stock at a
price of $9.00 per share, subject to adjustment as described below. The class B
warrants are exercisable for five years from the date of this prospectus. At our
option, we may reduce the exercise price of the class B warrants upon 30 days
written notice from time to time for such period(s) as we, in our sole
discretion, may chose; provided that no such period shall be for less than
fifteen days nor more than 90 days. We also may extend the exercise period, at
our sole option.
We have the right to redeem the class B warrants at a price of $.001 per warrant
on at least 30 days prior notice at any time during the exercise period. If you
do not exercise your warrants prior to their expiration or redemption, you will
forfeit your right to purchase the underlying shares of common stock. We may
appoint standby purchasers to exercise any or all of the warrants which are not
exercised at the end of the 30-day notice period for a fourteen-day period
immediately thereafter.
The class B warrants will immediately be exercisable. The holder of a class B
warrant may exercise the warrant during the exercise period by surrendering the
warrant certificate, with the form of election to purchase on the reverse side
of the class B warrant certificate properly completed, dated and executed,
together with the payment of the applicable exercise price, to the warrant
agent. The class B warrants may be exercised in whole at any time or in part
from time to time. No fractional shares will be issued upon the exercise of
class B warrants.
The exercise price and the number of shares of common stock purchasable upon
exercise of the class B warrants will be adjusted in proportion to any stock
dividends, stock splits, combinations, reclassifications and other similar
events. No such adjustments will be made upon the issuance of shares of common
stock for any other reason. No adjustment of the exercise price will be made
until cumulative adjustments amount to $.05 or more. No adjustments as to
dividends will be made upon any exercise of class B warrants.
34
The Class B warrants will not confer upon their holders voting or pre-emptive
rights or any other rights (including the right to participate in the
distribution of the company's assets in the event of its liquidation,
dissolution or winding up) as a stockholder of the company.
We must have a current registration statement on file with the SEC in order to
continue the registration of the common stock underlying the class B warrants,
and accordingly, we will need to file post-effective amendments to the
registration statement of which this prospectus is a part when subsequent events
require. There can be no assurance that such registration statement can or will
be kept current, and if it is not kept current, the class B warrants will not be
exercisable and may be deprived of value. In addition, the common stock issuable
upon the exercise of the class B warrants cannot be sold in various
jurisdictions without the registration in such jurisdictions of the common stock
in accordance with local law, or the availability of an exemption from such
registration. We may find it impractical or impossible to qualify the common
stock in those jurisdictions where we do not initially qualify this offering.
Class B warrant holders who are residents of jurisdictions in which we do not
qualify the common stock underlying the class B warrants for sale will have no
choice but to sell their class B warrants, to let them expire or, if we elect to
redeem the class A warrants, accept the redemption price for their class B
warrants.
Serial Preferred Stock
Our board of directors is authorized by our certificate of incorporation to
issue up to 8 million shares of one or more series of serial preferred stock. No
shares of serial preferred stock have been authorized or designated for future
issuance by our board. In addition, we have no present plans to issue any such
shares.
In the event that our board of directors does authorize, designate and issue
shares of serial preferred stock, it may exercise its discretion in establishing
the terms of such serial preferred stock. In the exercise of such discretion,
our board may determine the voting rights, if any, of the series of serial
preferred stock being issued, which could include the right to vote separately
or as a single class with our common stock and/or other series of serial
preferred stock; to have more or less voting power per share than that possessed
by our common stock or other series of serial preferred stock; and to vote on
certain specified matters presented to the shareholders or on all of such
matters or upon the occurrence of any specified event or condition. On our
liquidation, dissolution or winding up, the holders of serial preferred stock
may be entitled to receive preferential cash distributions fixed by our board
when creating the particular series of preferred stock before the holders of our
common stock are entitled to receive anything. Serial preferred stock authorized
by our board could be redeemable or convertible into shares of any other class
or series of our capital stock.
The issuance of serial preferred stock by our board of directors could adversely
affect the rights of holders of our common stock by, among other things,
establishing preferential dividends, liquidation rights or voting powers. The
issuance of serial preferred stock could be used to discourage or prevent
efforts to acquire control of our company through the acquisition of shares of
our common stock, even if a change in control were in our stockholders'
interest.
We will not offer, sell or issue shares of any class of our serial preferred
stock to any of our directors or executive officers, including Johnny R. Thomas
and John C. Francis, nor any affiliate of such persons, except:
o if the offer, sale or issuance is on the same terms as we offer such
securities to all other existing stockholders or to new stockholders, or
o if the offer, sale or issuance is approved by a majority of our independent
directors who do not have an interest in the transaction and who have
access, at our expense, to our or other independent counsel.
State Blue Sky Information
We are offering the units for sale in the States of Nevada and, to a limited
extent, New Mexico. Additionally, we believe that the units, upon completion of
this offering, and the common stock and warrants comprising the units, once they
become separately transferable, will be eligible for sale on a secondary market
basis in other states based upon the registration of the securities in such
states, a listing in Standard and Poor's or Moody's manuals, or the availability
of an applicable exemption from the state's registration requirements, subject,
in each case, to the exercise of the broad discretion and powers of the
securities commission or other administrative bodies having
35
jurisdiction in each state and any changes in statutes and regulations which may
occur after the date of this prospectus. We will amend this prospectus to
disclose additional states, if any, in which our securities will be eligible for
resale in the secondary trading market.
Transfer and Warrant Agent
Pacific Stock Transfer Company will act as our transfer agent and warrant agent
upon the completion of the offering made under this prospectus.
PLAN OF DISTRIBUTION
We are offering the 2.1 million units on a self underwritten, best efforts 1.2
million units minimum and 2.1 million units maximum basis. The minimum number of
units which can be purchased by any one investor is 120, and the total number of
units purchased by any one investor must be in multiples of three.
If the minimum 1.2 million units are sold on or before __________, 2002 (90 days
from the date of this prospectus, unless we extend it for up to an additional 90
days) the proceeds from the sale of such units will immediately be released to
us. If 1.2 million units are not sold by such date, all subscription funds will
be returned to the persons who subscribed to the offering, with interest, if
any. If we reach the minimum offering threshold of 1.2 million units, we will
continue to offer units until the maximum 2.1 million units are sold, the
offering period ends, or the offering is terminated, whichever first occurs. All
of the proceeds received, are required to be promptly deposited in an escrow
account at Southwest Escrow Company, 401 North Buffalo, Suite 205, Las Vegas
89145.
Lenders who financed our acquisition of real property in Honduras will be given
the opportunity to purchase units offered under this prospectus through the
reduction or cancellation of our debt to them, rather than by paying cash for
their units. In such event, the cash proceeds which we receive from this
offering will be reduced by an amount equal to the debt so reduced or canceled.
The amount of any reduction or cancellation of our debt will be included in the
amount of gross proceeds received in determining whether the minimum offering
amount has been reached. As of the date of this prospectus, we have not
solicited such purchases of units by our lenders and we currently do not have
any agreements, arrangements or understandings with any of our lenders regarding
the purchase of units through such reductions or cancellations of our
obligations to them, or otherwise. However, Falcon Financial Group LLC, an
entity owned jointly by our two executive officers and the holder of one of our
promissory notes in the principal amount of $72,300, will participate in the
offering by purchasing units through the reduction or cancellation of our
indebtedness to Falcon evidenced by such note, to the extent necessary to
complete the minimum offering or to purchase units that otherwise are unsold in
the maximum offering.
The holders of the warrants who exercise such warrants may sell the common stock
purchased upon their exercise from time to time in public transactions, on or
off the NASD's OTC Bulletin Board, or in private transactions, at prevailing
market prices or at privately negotiated prices. They may sell their shares in
the following types of transactions:
o ordinary brokerage transactions and transactions in which the broker
solicits purchasers;
o a block trade in which the broker-dealer so engaged will attempt to sell
the shares as agent, but may position and resell a portion of the block as
principal to facilitate the transaction;
o purchases by a broker or dealer as principal and resale by such broker or
dealer for its account pursuant to this prospectus;
o face-to-face transactions between sellers and purchasers without a
broker-dealer; and
o or otherwise.
The 700,000 class A warrants being offered by this prospectus are being offered
and 700,000 class B warrants issuable upon exercise of the class A warrants will
be offered by the holders of these securities and may be sold by these holders
in the over-the-counter market, or privately, or through broker-dealers selected
by these holders, or as principals.
36
The units will be sold by one of our executive officers, Johnny R. Thomas. Dr.
Thomas will rely on the safe harbor exception of Rule 3a4-1 of the Securities
Exchange Act to not be deemed brokers with respect to the offering. Dr. Thomas
will not receive commissions, but will be registered as a sales representative
where required under state securities laws. We may also retain NASD member firms
to sell units and pay them customary sales commissions subject to our first
filing this prospectus with the NASD. A market may never develop for the shares.
We have arbitrarily set the offering price of the units, warrants and shares of
common stock.
We intend to avail ourself of an exemption from registration in the State of New
Mexico in connection with our offer of units to two holders of our promissory
notes who are residents of the State of New Mexico. The offer and any sale of
units to these noteholders will be limited to offering and selling units to
these note holders for consideration to be paid in the form of reduction or
cancellation of our debt obligations evidenced by such promissory notes. No
other offers or sales will be made in New Mexico pursuant to the offering made
under this prospectus, nor will we accept an offer to purchase units by these
note holders other than for consideration in the form of a reduction or
cancellation of such debt obligations. Further, the offering price to these two
note holders will be equal to the offering price for all other units under this
prospectus, $.50 per unit. In order to comply with this New Mexico exemption,
prior to any sale of units to either note holder, we will be required to obtain
from such note holder a signed statement that the note holder is acquiring the
units, and the shares of common stock and class A warrants comprising such
units, for the note holder's own account and that the note holder does not
intend to resell any of the securities within twelve months of the purchase
date. Such signed statement will be submitted to the New Mexico Securities
Division. We also will be required to notify each such note holder, prior to any
sale of units that the common stock and warrants comprising such units have not
been registered under the New Mexico Securities Act and cannot be resold unless
the securities are sold registered or can qualify for an exemption from
registration. This notification also will be filed with the New Mexico
Securities Division. A legend shall be placed on each stock and warrant
certificate evidencing the securities sold to such note holders pursuant to the
exemption stating that the securities have not been registered under the New
Mexico Securities Act and cannot be resold unless the securities are so
registered or can qualify for an exemption from such registration.
We will pay all expenses incident to the registration of the securities covered
by this prospectus. We will not pay, among other things, the expenses,
commissions and discounts of brokers, dealers or agents of the purchasers of the
units.
The sale of the common stock and warrants are subject to the prospectus delivery
and other requirements of the Securities Act. To the extent required, we will
use our best efforts to file and distribute, during any period in which offers
or sales are being made, one or more amendments or supplements to this
prospectus or a new registration statement to describe any material information
with respect to the plan of distribution not previously disclosed in this
prospectus, including, but not limited to, the number of securities being
offered and the terms of the offering, including the name or names of any
underwriters, dealers or agents, if any, any discounts, commissions or
concessions allowed or reallowed or paid to dealers and the proposed selling
price to the public.
Under the Exchange Act and the regulations thereunder, any person engaged in a
distribution of our securities offered by this prospectus may not simultaneously
engage in market-making activities with respect to our common stock during the
applicable "cooling off" period five business days prior to the commencement of
this distribution.
CERTAIN MARKET INFORMATION
This offering is the initial public offering of the our securities and,
accordingly, there has been, and there currently is, no public trading market
for our units, common stock or warrants. A public trading market may never
develop or, if one develops, may not be sustained. Accordingly, a resale of your
securities may be difficult. No assurance can be given that a market will
develop or that any securityholder will be able to liquidate their investment
without considerable delay, if at all. While we intend to apply for quotation of
our securities on the Over-the-Counter Bulletin Board, we cannot guarantee that
our application will be approved and that our securities are listed and quoted
for sale. The trading market price of our securities may decline below the price
at which the securities were sold. If a market for our securities should
develop, their market prices may be highly volatile. In addition, an active
37
public market for our securities may not develop or be sustained. If selling
securityholders sell all or substantial amounts of their securities in the
public market, the market price of our securities could be adversely affected.
The public offering and warrant exercise prices were arbitrarily determined and
may not reflect our value. The price of the units be sold in the offering being
made under this prospectus does not bear any relationship to our book value,
assets, current or prospective earnings or any other recognized criterion of
value.
Federal regulations governing "penny stocks" could have a detrimental effect on
holders of our securities. Our securities, when available for trading, will be
subject to the Securities and Exchange Commission rules that impose special
sales practice requirements upon broker-dealers that sell such securities to
parties other than established customers or accredited investors. For
transactions covered by these rules, the broker-dealer must make a special
suitability determination for the purchaser and receive the purchaser's written
agreement to the transaction prior to the sale. Consequently, the rule may
affect the ability of purchasers of our securities to buy or sell in any market
that may develop. In addition, the SEC has adopted a number of rules to regulate
"penny Stocks." Because our securities may constitute "penny stock" within the
meaning of these rules, the rules would apply to us and our securities. The
rules may further affect the ability of owners of our securities to sell their
securities in any market that may develop for them.
SHARES ELIGIBLE FOR FUTURE SALE
We will have 7,928,924 shares of our common stock and 2.5 million class A
warrants issued and outstanding following the completion of the offering made
under this prospectus, assuming all of the units offered for sale in the
offering are sold, or 7,028,924 shares of our common stock and 2.2 million class
A warrants issued and outstanding, assuming the minimum number of the units
offered for sale in the offering are sold. Of such securities, 2.1 million
shares and 700,000 shares issuable upon exercise of class A warrants, assuming
the maximum number of units offered by this prospectus are sold in the offering,
or 1.2 million shares and 400,000 shares issuable upon exercise of class A
warrants, assuming the minimum number of units offered by this prospectus are
sold in the offering, will be freely tradable without restriction or further
registration under the Securities Act, except for any shares purchased by any
affiliate of us and assuming we are able to keep effective our registration
statement with respect to the shares of our common stock issuable upon exercise
of the class A warrants included in the units sold in the offering.
An affiliate of ours is generally a person who has a controlling position with
regard to us. Any shares of common stock purchased by our affiliates in the
offering will be subject to the resale limitations of Rule 144 promulgated under
the Securities Act.
All of the remaining 5,828,924 remaining shares of our common stock that will be
outstanding following the offering, as well as the 1.8 million shares of our
common stock issuable upon exercise of our currently outstanding class A
warrants, are restricted securities as that term is defined under Rule 144.
Approximately 3 million of these outstanding shares of our common stock, as well
as 1 million class A warrants and the shares issuable upon exercise of such
warrants, will be eligible for sale ninety days after the date of this
prospectus and the remaining 2,828,924 shares, 800,000 class A warrants and the
shares issuable upon exercise of such warrants will become eligible, at various
times following the date of this prospectus, subject to the resale provisions of
Rule 144.
In general, under Rule 144, as currently in effect, beginning 90 days after the
date of this prospectus, a person or group of persons whose shares are
aggregated, who has beneficially owned restricted shares for at least one year,
including the holding period of any prior owner except an affiliate of ours,
would be entitled to sell, within any three month period, a number of shares
that does not exceed the greater of:
o 1% of the number of then outstanding shares of our common stock, or
o the average weekly trading volume of our common stock during the four
calendar weeks preceding the sale;
provided, that, public information about us as required by Rule 144 is available
and the seller complies with manner of sale provisions and notice requirements.
The volume limitations described above, but not the one-year holding period,
also apply to sales of our non-restricted securities by our affiliates. A person
who is not an affiliate, has not been an affiliate within three months before
the sale and has beneficially owned the restricted securities for at least
38
two years, is entitled to sell the restricted shares under Rule 144 without
regard to any of the limitations described above.
Before this offering, there was no public market for our securities. We cannot
predict the effect, if any, that sales of, or the availability for sale of, our
securities stock will have on the market price of our securities prevailing from
time to time. Nevertheless, the possibility that substantial amounts of our
common stock and class A warrants might enter the public market through Rule 144
sales, or otherwise, could adversely affect the prevailing market price of our
securities and could impair our ability to raise capital in the future through
the sale of securities.
There may be an adverse effect on the market price of our securities because
shares of our common stock are available for future sale. No prediction can be
made as to the effect, if any, that future sales, or the availability of shares
of our common stock for future sale, by us or by our directors and executive
officers will have on the market price of our securities prevailing from time to
time. Sales of substantial amounts of our securities, including shares issued
upon the exercise of options or warrants, or the perception that such sales
could occur, could adversely affect prevailing market prices for the our
securities.
ADDITIONAL INFORMATION
We have filed with the Securities and Exchange Commission, a registration
statement on Form SB-2, including exhibits and schedules thereto, under the
Securities Act with respect to the securities to be sold in the offering made
under this prospectus. This prospectus which constitutes a part of the
registration statement and does not contain all the information set forth in the
registration statement and the exhibits filed with it. For further information
with respect to us and the securities to be sold in the offering, reference is
made to the registration statement and to the exhibits filed with it. Statements
contained in this prospectus as to the contents of any contract, agreement or
other document referred to, are not necessarily complete. In each instance, we
refer you to the copy of the contracts, agreements and or other documents filed
as exhibits to the registration statement, and these statements are deemed
qualified in their entirety by reference to the contract or document.
You may inspect, without charge, all or any portion of the registration
statement or any reports, statements or other information we file with the SEC
at the SEC's public reference room at Room 1024, Judiciary Plaza, 450 Fifth
Street, NW, Washington, D.C. 20549 and at the regional offices of the SEC
located at 233 Broadway, New York, New York 10007 and Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of these documents
may also be obtained from the SEC's Public Reference Room at 450 Fifth Street,
NW, Room 1024, Washington, D.C. 20549 upon payment of the prescribed fees. You
may obtain information on the operation of the Public Reference Room by calling
the SEC at 1-800-SEC-0330.
In addition, registration statements and other filings we make with the SEC
through its Electronic Data Gathering, Analysis and Retrieval, or EDGAR, system
are publicly available through the SEC's site located at www.sec.gov. The
registration statement, including all exhibits and schedules and amendments, has
been filed with the commission through the EDGAR system.
On the date of this prospectus, we will become subject to the reporting
requirements of the Exchange Act and, in accordance with these requirements,
will file reports, proxy statements and other information with the SEC. We
intend to furnish our stockholders with annual reports containing audited
financial statements and other periodic reports as we deem appropriate or as may
be required by law.
LEGAL MATTERS
The validity of the issuance and sale of the units being offered by this
prospectus is being passed on for us by Snow Becker Krauss P.C., 605 Third
Avenue, New York, New York. Snow Becker Krauss P.C. owns 112,000 shares of our
common stock and 33,333 class A warrants. Elliot H. Lutzker, a member of Snow
Becker Krauss P.C., is our corporate secretary.
39
EXPERTS
The financial statements included in the registration statement of which this
prospectus is a part, have been included herein in reliance on the report of
Lazar Levine & Felix LLP, independent accountants, given on the authority of
that firm as an expert in accounting and auditing.
40
INDEX TO FINANCIAL STATEMENTS
Page
----
Independent Auditors' Report.............................................................................. F - 1
Consolidated Financial Statements:
Balance Sheets as of September 30, 2001 (Unaudited) and June 30, 2001................................ F - 2
Statements of Operations Cumulative During the Development Stage (January 20,
2000 to September 30, 2001) (Unaudited), for the Three Months Ended
September 30, 2001 (Unaudited), for the Year Ended June 30, 2001 and From
Inception
(January 20, 2000) to June 30, 2000................................................................ F - 3
Statements of Stockholders' Equity for the Period from Inception, January 20, 2000, to
September 30, 2001 (Unaudited)..................................................................... F - 4
Statements of Cash Flows Cumulative During the Development Stage (January 20, 2000 to
September 30, 2001) (Unaudited), for the Three Months Ended September 30, 2001 (Unaudited),
for the Year Ended June 30, 2001 and From Inception (January 20, 2000) to June 30, 2000............ F - 5
Notes to Consolidated Financial Statements................................................................ F - 6
41
INDEPENDENT AUDITORS' REPORT
To the Stockholders
Crest View Inc.
Henderson, Nevada
We have audited the accompanying balance sheets of Crest View Inc. (a
development stage company), as of June 30, 2001 and 2000, and the related
statements of operations, shareholders' equity and cash flows for the period
from inception January 20, 2000 to June 30, 2000, the year ended June 30, 2001
and the cumulative period from inception, January 20, 2000 through June 30,
2001. 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 audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. 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 audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above, present fairly, in
all material respects, the financial position of Crest View, Inc. (a development
stage company) and the results of its operations and its cash flows for the
periods mentioned in conformity with accounting principles generally accepted in
the United States of America.
LAZAR LEVINE & FELIX LLP
New York, New York
August 20, 2001
F - 1
CREST VIEW, INC.
(A Development Stage Company)
CONSOLIDATED BALANCE SHEETS
September 30, June 30,
2001 2001
--------- --------
(unaudited)
- ASSETS -
CURRENT ASSETS:
Cash ............................................................... $ 9,848 $ 31,841
--------- --------
Total current assets ............................................. 9,848 31,841
--------- --------
OTHER ASSETS:
Investment in real estate (Note 4) ................................. 739,965 --
Deferred expenses (Note 7) ......................................... 151,200 --
--------- --------
891,165 --
--------- --------
$ 901,013 $ 31,841
========= ========
- LIABILITIES AND STOCKHOLDERS' EQUITY -
CURRENT LIABILITIES:
Accrued expenses ................................................... $ 7,000 $ 7,000
--------- --------
Total current liabilities ........................................ 7,000 7,000
--------- --------
LONG-TERM DEBT (Note 5) ............................................... 741,765 --
--------- --------
COMMITMENTS AND CONTINGENCIES (Notes 4 and 7)
STOCKHOLDERS' EQUITY (Note 6):
Preferred stock, $.001 par value; 8,000,000 shares authorized,
none issued ...................................................... -- --
Common stock, $.001 par value; 40,000,000 shares authorized,
5,828,924 and 5,483,324 shares issued and outstanding at September
30, 2001 and June 30, 2001, respectively ......................... 5,829 5,483
Additional paid-in capital ......................................... 214,033 41,579
Deficit accumulated during the development stage ................... (67,614) (22,221)
--------- --------
152,248 24,841
--------- --------
$ 901,013 $ 31,841
========= ========
The accompanying notes are an integral part of these financial statements
F - 2
CREST VIEW, INC.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS
Cumulative During
the Development Stage From Inception
(January 20, 2000 For the For the (January 20, 2000)
to Three Months Ended Year Ended to
September 30, 2001) September 30, 2001 June 30, 2001 June 30, 2000
------------------- ------------------ ------------- -------------
(unaudited) (unaudited)
REVENUES......................... $ -- $ -- $ -- $ --
-------- -------- -------- -----
COSTS AND EXPENSES:
Compensation.................. 21,600 21,600 -- --
Filing fees................... 6,606 1,300 5,206 100
Professional fees............. 28,050 17,050 11,000 --
Other expenses................ 6,351 998 5,353 --
Rent expense.................. 1,200 1,200 -- --
Interest expense.............. 3,807 3,245 562 --
-------- -------- -------- -----
67,614 45,393 22,121 100
-------- -------- -------- -----
NET LOSS......................... $(67,614) $(45,393) $(22,121) $(100)
========= ========= ========= ======
The accompanying notes are an integral part of these financial statements
F - 3
CREST VIEW, INC.
(A Development Stage Company)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
Deficit
Accumulated
Common Stock Additional During the
----------------------- Paid-In Development Stockholders'
Number Amount Capital Stage Equity
--------- ------ -------- -------- ---------
At inception, January 20, 2000 ................... -- $ -- $ -- $ -- $ --
Issuance of units ................................ 3,000,000 3,000 -- -- 3,000
Net loss for period ended June 30, 2000 .......... -- -- -- (100) (100)
--------- ------ -------- -------- ---------
BALANCE AT JUNE 30, 2000 ......................... 3,000,000 3,000 -- (100) 2,900
Repayment of officer's loans ..................... 2,422,200 2,422 11,078 -- 13,500
Payment of interest accrued ...................... 1,124 1 561 -- 562
Issuance of shares for cash ...................... 60,000 60 29,940 -- 30,000
Net loss for year ended June 30, 2001 ............ -- -- -- (22,121) (22,121)
--------- ------ -------- -------- ---------
BALANCE AT JUNE 30, 2001 ......................... 5,483,324 5,483 41,579 (22,221) 24,841
Shares issued for compensation and rent
(Note 7) ...................................... 345,600 346 172,454 -- 172,800
Net loss for period ended September 30,
2001 (unaudited) .............................. -- -- -- (45,393) (45,393)
--------- ------ -------- -------- ---------
BALANCE AT SEPTEMBER 30,
2001 (UNAUDITED) .............................. 5,828,924 $5,829 $214,033 $(67,614) $ 152,248
========= ====== ======== ======== =========
The accompanying notes are an integral part of these financial statements
F - 4
CREST VIEW, INC.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
Cumulative During
the Development Stage From Inception
(January 20, 2000 For the For the (January 20, 2000)
to Three Months Ended Year Ended to
September 30, 2001) September 30, 2001 June 30, 2001 June 30, 2000
------------------- ------------------ ------------- -------------
(unaudited) (unaudited)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS:
CASH FLOWS FROM
OPERATING ACTIVITIES:
Net loss .......................................... $ (67,614) $ (45,393) $(22,121) $ (100)
Adjustments to reconcile net loss
to net cash used by operating
activities:
Compensatory stock .............................. 22,162 21,600 562 --
Changes in assets and liabilities:
Increase in accrued expenses .................. 7,000 -- 7,000 --
--------- --------- -------- -------
Net cash utilized by operating
activities ...................................... (38,452) (23,793) (14,559) (100)
--------- --------- -------- -------
CASH FLOWS FROM
INVESTING ACTIVITIES:
Acquisition of real estate ........................ (471,300) (471,300) -- --
--------- --------- -------- -------
Net cash utilized by investing
activities ...................................... (471,300) (471,300) -- --
--------- --------- -------- -------
CASH FLOWS FROM
FINANCING ACTIVITIES:
Loans from affiliates ............................. 473,100 473,100 -- --
Proceeds from officer's loans ..................... 13,500 -- 13,500 --
Sale of units ..................................... 33,000 -- 30,000 3,000
--------- --------- -------- -------
Net cash provided by financing
activities ...................................... 519,600 473,100 43,500 3,000
--------- --------- -------- -------
NET INCREASE (DECREASE)
IN CASH AND CASH
EQUIVALENTS ....................................... 9,848 (21,993) 28,941 2,900
Cash and cash equivalents at
beginning of period ............................. -- 31,841 2,900 --
--------- --------- -------- -------
CASH AND CASH
EQUIVALENTS AT END OF
PERIOD ............................................ $ 9,848 $ 9,848 $ 31,841 $ 2,900
========= ========= ======== =======
Supplemental Disclosures of
Non-Cash Financing Activities:
During the year ended June 30, 2001, the Company issued 2,400,000 shares of its
common stock in full payment of $2,400 of officer's loans; 22,200 shares in full
payment of $11,100 of officer's loans as well as 1,124 shares of common stock in
satisfaction of interest accrued on such loans of $562.
The accompanying notes are an integral part of these financial statements
F - 5
CREST VIEW, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2001 and 2000
(Information as of and for the three months ended September 30, 2001
is unaudited)
NOTE 1: DESCRIPTION OF COMPANY
Crest View, Inc. (the "Company") was organized in the state of Nevada on January
20, 2000. The Company was formed to serve as a vehicle to raise capital to
acquire a business and, as of June 30, 2001 was considered a "blank check"
company inasmuch as the Company was not generating revenues and did not own an
operating business. The Company currently has no employees except for its two
executive officers and had no material assets prior to the acquisition of real
estate in September 2001. Administrative services are currently being provided
by an entity controlled by an officer of the Company. The Company's efforts,
through June 30, 2001, were limited to organizational activities. In July 2001,
the Company entered into an agreement to develop a vacation and tourist
destination featuring an "eco-resort," wellness center and cultural exhibits, on
the Honduran island of Guanaja (see Note 4).
The Company is considered as being in the development stage, since its
inception, in accordance with Statement of Financial Accounting Standards No. 7,
and its fiscal year end is June 30.
During the quarter ended September 30, 2001, the Company formed a wholly owned
subsidiary, Crest View Investments, S. A., through which it purchased two
parcels of real estate (see Note 4). The Company also acquired all of the
outstanding shares of Plan Grande Groupe, S. A., thereby making this entity a
wholly owned subsidiary (see Note 4). All inter-company transactions and
balances have been eliminated upon consolidation.
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Company's accounting policies are in accordance with accounting principles
generally accepted in the United States of America. Outlined below are those
policies considered particularly significant.
(a) Use of Estimates:
In preparing financial statements in accordance with accounting principles
generally accepted in the United States of America, management makes
certain estimates and assumptions, where applicable, that affect the
reported amounts of assets and liabilities and disclosures of contingent
assets and liabilities at the date of the financial statements, as well as
the reported amounts of revenues and expenses during the reporting period.
While actual results could differ from those estimates, management does not
expect such variances, if any, to have a material effect on the financial
statements.
(b) Statements of Cash Flows:
For purposes of the statements of cash flows the Company considers all
highly liquid investments purchased with a remaining maturity of three
months or less to be cash equivalents.
F - 6
CREST VIEW, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2001 and 2000
(Information as of and for the three months ended September 30, 2001 is
unaudited) (continued)
NOTE 3: LOANS PAYABLE - OFFICER
On August 23, 2000 and September 7, 2000, the Company received $6,000 and
$5,000, respectively from an officer of the Company. These loans are repayable
one year from the date of receipt with interest at 6% per annum. On February 17,
2000, the Company received additional loans from this officer aggregating
$2,500. As of June 30, 2001, the Company had repaid the principal amount and all
interest accrued on such loans, through the issuance of 2,423,324 shares of its
common stock to this officer.
NOTE 4: INVESTMENT IN REAL ESTATE
In connection with the plans to develop a vacation and tourist resort (see Note
1), since July 1, 2001 and through September 30, 2001, the Company has acquired
three parcels of real estate through Honduran subsidiaries and has entered into
negotiations to purchase two other parcels of land on the island of Guanaja.
One parcel of land of approximately 18 acres to be used for the resort was
acquired at a total cost (including closing costs) of approximately $425,000.
The Company also acquired a parcel of land (approximately 3.5 acres) at another
site at a cost of approximately $45,000. The funds for these acquisitions were
borrowed from affiliates.
In September 2001, the Company acquired 1,250 shares (100%) of the outstanding
stock of Plan Grande Groupe, S.A. ("PGG"), a Honduran corporation. The sole
asset of PGG is real property, approximately 16 acres of undeveloped land,
located on the island of Guanaja. As consideration for the acquisition of these
shares, the Company issued a promissory note payable to the seller in the
principal amount of $268,665. See Note 5.
NOTE 5: LONG-TERM DEBT
As of September 30, 2000, long-term debt consisted of the following:
6% note payable regarding acquisition of 1,250 shares of PGG,
due June 30, 2003 (see Note 4) ............................... $ 268,665
7% unsecured note payable to related party, due June 23, 2003...... 22,300
7% unsecured note payable to related party, due June 30, 2003...... 50,000
7% unsecured notes payable, due June 30, 2003...................... 400,800
---------
$ 741,765
=========
F - 7
CREST VIEW, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2001 and 2000
(Information as of and for the three months ended September 30, 2001
is unaudited) (continued)
NOTE 6: STOCKHOLDERS' EQUITY
As of June 30, 2000, the Company had issued an aggregate of 3,000,000 units at a
price of $.001 per unit, with each unit consisting of one share of common stock
and one-third (1/3) Class A Redeemable Common Stock Purchase Warrant, for cash
proceeds of $3,000. The holder of 3 units is entitled to exercise one Class A
Warrant to purchase one share of common stock and one Class B Redeemable Common
Stock Purchase Warrant at a price of $6.00 per share. One class B Warrant
entitles the holder to purchase one share of common stock at a price of $9.00
per share.
In June 2001, the Company issued 60,000 shares of its common stock for cash
proceeds of $30,000. See Note 3 for additional detail on issuances of common
stock.
The Company has filed a registration statement on Form SB-2, with the Securities
and Exchange Commission, to register 3,500,000 shares of its common stock. The
Company intends to offer for sale 2,100,000 units (each unit consisting of one
share of common stock and one-third (1/3) Class A Redeemable Common Stock
Purchase Warrant) at a per unit price of $.50 on a self-underwritten, best
efforts, 1,200,000 units minimum and 2,100,000 units maximum, basis.
NOTE 7: COMMITMENTS
(a) Employment Agreements:
The Company entered into substantially identical employment agreements,
each dated as of July 1, 2001, with its Chief Executive Officer, and its
Vice President/Chief Financial Officer. These two-year employment
agreements provide that these two officers shall devote such time and
effort as may be reasonably required to perform their duties without a
requirement to devote a specific number of hours and may be terminated for
cause without notice. The officers shall each receive a salary of $36,000
per year payable through the issuance of an aggregate of 144,000 shares of
Company common stock valued at $.50 per share, all of which vest upon
commencement of the agreements. Bonuses may be paid at the sole discretion
of the board of directors. The agreements provide for each employee to
receive two weeks of vacation per year and to receive all benefits
available to all employees. The employees have agreed not to compete with
the Company during the period of their employment and for a two-year period
thereafter.
(b) Lease:
On July 1, 2001, the Company entered into a sublease for office space with
an entity controlled by its two executive officers, whereby the Company
agreed to pay this entity $1,200 per month rent over a two-year period or
an aggregate of $28,800. The Company has issued an aggregate of 57,600
shares of common stock to this entity in full satisfaction of its rent
obligation.
F - 8
We have not authorized any dealer, salesperson or other person to give any
information or to represent anything not contained in this prospectus. You must
not rely on any unauthorized information or representations. This prospectus
does not constitute an offer to sell or buy any securities in any jurisdiction
where it is unlawful to do so. The information contained in this prospectus is
current only as of its date
Until ____________, 2002 (90 days from the date of this prospectus), all dealers
effecting transactions in these securities, whether or not participating in this
offering, may be required to deliver a prospectus. This is in addition to a
dealer's obligation to deliver a prospectus when acting as an underwriter and
with respect to an unsold allotment or subscription.
2,100,000 Units
Crest View Inc.
February __, 2002
F - 9
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of Directors and Officers.
The following statutes and by-law provisions are the only statutes, charter
provisions, by-laws, contracts or other arrangements known to the registrant
that insure or indemnify a controlling person, director or officer of the
registrant in any manner against liability which he or she may incur in his or
her capacity as such.
Article EIGHTH of the registrant's Articles of Incorporation provides that:
The registrant may, to the fullest extent permitted by the General
Corporation Law of the State of Nevada, as the same may be amended and
supplemented, indemnify any and all persons whom it shall have power to
indemnify under said Law from and against any and all of the expenses,
liabilities, or other matters referred to in or covered by said Law, and the
indemnification provided for herein shall not be deemed exclusive of any other
rights to which those indemnified may be entitled under any Bylaw, agreement,
vote of stockholders or disinterested directors or otherwise, both as to action
in his official capacity and as to action in another capacity while holding such
office, and shall continue as to a person who has ceased to be a director,
officer, employee, or agent and shall inure to the benefit of the heirs,
executors, and administrators of such a person.
Article VI of the registrant's By-laws provides that:
On the terms, to the extent, and subject to the condition prescribed by
statute and by such rules and regulations, not inconsistent with statute, as the
Board of Directors may in its discretion impose in general or particular cases
or classes of cases, (a) the Corporation shall indemnify any person made, or
threatened to be made, a party to an action or proceeding, civil or criminal,
including an action by or in the right of any other corporation of any type or
kind, domestic or foreign, or any partnership, joint venture, trust, employee
benefit plan or other enterprise which any director or officer of the registrant
served in any capacity at the request of the registrant, by reason of the fact
that he, his testator or intestate, was a director or officer of the registrant,
or served such other corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise in any capacity, against judgments, fines,
amounts paid in settlement and reasonable expenses, including attorneys, fees,
actually and necessarily incurred as a result of such action or proceeding, or
any appeal therein, and (b) the registrant may pay, in advance of final
disposition of any such action or proceeding, expenses incurred by such person
in defending such action or proceeding.
On the terms, to the extent, and subject to the conditions prescribed by
statute and by such rules and regulations, not inconsistent with statute, as the
Board of Directors may in its discretion impose in general or particular cases
or classes of cases, (a) the registrant shall indemnify any person made a party
to an action by or in the right of the registrant to procure a judgment in its
favor, by reason of the fact that he, his testator or intestate, is or was a
director or officer of the registrant, against the reasonable expenses,
including attorneys, fees, actually and necessarily incurred by him in
connection with the defense of such action, or in connection with an appeal
therein, and (b) the registrant may pay, in advance of final disposition of any
such action, expenses incurred by such person in defending such action or
proceeding.
Section 78.751 of the Nevada General Corporation Law ("GCL"), provides
that:
1. A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative,
except an action by or in the right of the corporation, by reason of the fact
that he is or was a director, officer, employee or agent of the corporation, or
is or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, against expenses, including attorneys' fees, judgments, fines
and amounts paid in settlement actually and reasonably
II - 1
incurred by him in connection with the action, suit or proceeding if he acted in
good faith and in a manner which he reasonably believed to be in or not opposed
to the best interests of the corporation, and, with respect to any criminal
action or proceeding, had no reasonable cause to believe his conduct was
unlawful. The termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its equivalent,
does not, of itself, create a presumption that the person did not act in good
faith and in a manner which he reasonably believed to be in or not opposed to
the best interests of the corporation, and that, with respect to any criminal
action or proceeding, he had reasonable cause to believe that his conduct was
unlawful.
2. A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the corporation to procure a judgment in its favor by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses, including amounts paid in
settlement and attorneys' fees actually and reasonably incurred by him in
connection with the defense or settlement of the action or suit if he acted in
good faith and in a manner which he reasonably believed to be in or not opposed
to the best interests of the corporation. Indemnification may not be made for
any claim, issue or matter as to which such a person has been adjudged by a
court of competent jurisdiction, after exhaustion of all appeals therefrom, to
be liable to the corporation or for amounts paid in settlement to the
corporation, unless and only to the extent that the court in which the action or
suit was brought or other court of competent jurisdiction determines upon
application that in view of all the circumstances of the case, the person is
fairly and reasonably entitled to indemnity for such expenses as the court deems
proper.
3. To the extent that a director, officer, employee or agent of a
corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in subsections 1 and 2, or in defense of
any claim, issue or matter therein, he must be indemnified by the corporation
against expenses, including attorneys' fees, actually and reasonably incurred by
him in connection with the defense.
4. Any indemnification under subsections 1 and 2, unless ordered by a court
or advanced pursuant to subsection 5, must be made by the corporation only as
authorized in the specific case upon a determination that indemnification of the
director, officer, employee or agent is proper in the circumstances. The
determination must be made:
(a) By the stockholders;
(b) By the board of directors by majority vote of a quorum consisting
of directors who were not parties to the act, suit or proceeding;
(c) If a majority vote of a quorum consisting of directors who were
not parties to the act, suit or proceeding so orders, by independent legal
counsel in a written opinion; or
(d) If a quorum consisting of directors who were not parties to the
act, suit or proceeding cannot be obtained, by independent legal counsel in
a written opinion.
5. The articles of incorporation, the bylaws or an agreement made by the
corporation may provide that the expenses of officers and directors incurred in
defending a civil or criminal action, suit or proceeding must be paid by the
corporation as they are incurred and in advance of the final disposition of the
action, suit or proceeding, upon receipt of an undertaking by or on behalf of
the director or officer to repay the amount if it is ultimately determined by a
court of competent jurisdiction that he is not entitled to be indemnified by the
corporation. The provisions of this subsection do not affect any rights to
advancement of expenses to which corporate personnel other than directors or
officers may be entitled under any contract or otherwise by law.
6. The indemnification and advancement of expenses authorized in or ordered
by a court pursuant to this section:
II - 2
(a) Does not exclude any other rights to which a person seeking
indemnification or advancement of expenses may be entitled under the
articles of incorporation or any bylaw, agreement, vote of stockholders or
disinterested directors or otherwise, for either an action in his official
capacity or an action in another capacity while holding his office, except
that indemnification, unless ordered by a court pursuant to subsection 2 or
for the advancement of expenses made pursuant to subsection 5, may not be
made to or on behalf of any director or officer if a final adjudication
establishes that his acts or omissions involved intentional misconduct,
fraud or a knowing violation of the law and was material to the cause of
action.
(b) Continues for a person who has ceased to be a director, officer,
employee or agent and inures to the benefit of the heirs, executors and
administrators of such a person.
Section 78.752 of the GCL provides that:
1. A corporation may purchase and maintain insurance or make other
financial arrangements on behalf of any person who is or was a director,
officer, employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise for any
liability asserted against him and liability and expenses incurred by him in his
capacity as a director, officer, employee or agent, or arising out of his status
as such, whether or not the corporation has the authority to indemnify him
against such liability and expenses.
2. The other financial arrangements made by the corporation pursuant to
subsection 1 may include the following:
(a) The creation of a trust fund.
(b) The establishment of a program of self-insurance.
(c) The securing of its obligation of indemnification by granting a
security interest or other lien on any assets of the corporation.
(d) The establishment of a letter of credit, guaranty or surety.
No financial arrangement made pursuant to this subsection may provide protection
for a person adjudged by a court of competent jurisdiction, after exhaustion of
all appeals therefrom, to be liable for intentional misconduct, fraud or a
knowing violation of law, except with respect to the advancement of expenses or
indemnification ordered by a court.
3. Any insurance or other financial arrangement made on behalf of a person
pursuant to this section may be provided by the corporation or any other person
approved by the board of directors, even if all or part of the other person's
stock or other securities is owned by the corporation.
4. In the absence of fraud:
(a) The decision of the board of directors as to the propriety of the
terms and conditions of any insurance or other financial arrangement made
pursuant to this section and the choice of the person to provide the
insurance or other financial arrangement is conclusive; and
(b) The insurance or other financial arrangement:
(1) Is not void or voidable; and
(2) Does not subject any director approving it to personal
liability for his action, even if a director approving the insurance
or other financial arrangement is a beneficiary of the insurance or
other financial arrangement.
II - 3
5. A corporation or its subsidiary which provides self-insurance for itself
or for another affiliated corporation pursuant to this section is not subject to
the provisions of Title 57 of the Nevada Revised Statutes.
Item 25. Other Expenses of Issuance and Distribution.
SEC Registration Fee.......................................... $ 4,771.00
Printing Expenses............................................. 2,000.00
Legal Fees and Expenses....................................... 25,000.00
State Securities Qualification Fees and Expenses.............. 3,000.00
Accounting and Auditing Fees and Expenses..................... 5,000.00
Miscellaneous................................................. 229.00
------
Total......................................................... $40,000.00
==========
Item 26. Recent Sales of Unregistered Securities.
(a) As of January 20, 2000, the registrant issued, in a private
transaction, an aggregate of 2,960,000 shares of its common stock and warrants
to purchase an additional 986,667 shares of the registrant's common stock to
Estancia LLC, an entity established for estate planning purposes by Johnny R.
Thomas, a director, chief executive officer and founder of the registrant, for
the aggregate consideration of $3,256. Dr. Thomas is the manager of Estancia.
The registrant believes that these securities were issued in a transaction not
involving any public offering in reliance upon exemptions from registration
provided by Section 4(2) of the Act.
(b) As of January 20, 2000, the registrant issued, in a private
transaction, an aggregate of 40,000 shares of its common stock and warrants to
purchase an additional 13,333 shares of the registrant's common stock to Snow
Becker Krauss P.C., the registrant's outside counsel, for the aggregate
consideration of $40. The registrant believes that these securities were issued
in a transaction not involving a public offering in reliance upon an exemption
from registration provided by Section 4(2) of the Act.
(c) On April 1, 2001, the registrant issued, in a private transaction, an
aggregate of 2,400,000 shares of its common stock and warrants to purchase an
additional 800,000 shares of the registrant's common stock to Manzano Limited
Partners, a family limited partnership consisting of family members of Johnny R.
Thomas, a director, chief executive officer and founder of the registrant, in
exchange for the cancellation of $2,680 of indebtedness due the registrant's
founder. Dr. Thomas is the manager of Manzano. The registrant believes that
these securities were issued in a transaction not involving a public offering in
reliance upon an exemption from registration provided by Section 4(2) of the
Act.
(d) Effective June 29, 2001, the registrant issued, in a private
transaction, an aggregate of 23,324 shares of its common stock to Johnny R.
Thomas, a director, chief executive officer and founder of the registrant, in
exchange for $11,662 of indebtedness due Dr. Thomas. The registrant believes
that these securities were issued in a transaction not involving a public
offering in reliance upon an exemption from registration provided by Section
4(2) of the Act.
(e) Effective June 29, 2001, the registrant issued, in a private
transaction, an aggregate of 60,000 shares of its common stock to Johnny R.
Thomas, a director, chief executive officer and founder of the registrant for
$30,000 paid in cash. The registrant believes that these securities were issued
in a transaction not involving a public offering in reliance upon an exemption
from registration provided by Section 4(2) of the Act.
(f) Effective June 29, 2001, the registrant issued, in a private
transaction, an aggregate of 57,600 shares of its common stock to Falcon
Financial Group, LLC, an entity owned by Johnny R. Thomas, a director, chief
executive officer and founder of the registrant, and John C. Francis, a
director, vice president and chief executive officer of the registrant, in
connection with a sublease for the Registrant's current principal executive
II - 4
offices and valued at $28,800. The registrant believes that these securities
were issued in a transaction not involving a public offering in reliance upon an
exemption from registration provided by Section 4(2) of the Act.
(g) Effective July 1, 2001, the registrant issued, in a private
transaction, an aggregate of 144,000 shares of its common stock to each of
Johnny R. Thomas, a director, chief executive officer and founder of the
registrant, and John C. Francis, a director, vice president and chief executive
officer of the registrant, in connection with their two-year employment
agreements with the registrant. The registrant believes that these securities
were issued in a transaction not involving a public offering in reliance upon an
exemption from registration provided by Section 4(2) of the Act.
Item 27. Exhibits and Financial Statement Schedules.
(a) Exhibits
Exhibit
Number Description
3.1 Composite of Articles of Incorporation, as amended to date.*
3.2 By-Laws, as amended to date.*
4.1 Specimen common stock certificate.*
4.2 Specimen class A warrant certificate.*
4.3 Specimen class B warrant certificate.*
4.4 Form of Warrant Agent Agreement, to be entered into between Crest
View Inc. and Pacific Stock Transfer Company.*
4.5 Form of warrant certificates evidencing currently outstanding
warrants.*
5.1 Opinion of Snow Becker Krauss P.C.
10.1 Form of Escrow Agreement, to be entered into between Crest View Inc.
and Southwest Escrow Company.*
10.2 Form of promissory notes made August 23, 2000, September 7, 2000 and
February 17, 2001.*
10.3 Employment Agreement, dated as of July 1, 2001, between Crest View
Inc. and Johnny R. Thomas.*
10.4 Employment Agreement, dated as of July 1, 2001, between Crest View
Inc. and John C. Francis. *
10.5 Exchange Agreement, dated April 1, 2001, between Crest View Inc. and
Johnny R. Thomas.*
10.6 Exchange Agreement, dated June 29, 2001, between Crest View Inc. and
Johnny R. Thomas.*
10.7 Sublease Agreement, dated June 29, 2001, between Crest View Inc. and
Falcon Financial Group LLC.*
10.8 Form of promissory note issued to real property lenders.*
10.9 Stock Purchase Agreement, dated as of September 18, 2001, between
Crest View Inc. and Anthony Conforti.*
10.10 Promissory note issued to Anthony Conforti.
10.11 Form of investment representation letter utilized by each purchaser
of common stock and/or warrants from Estancia LLC, Excalibur Trust
and Manzano Limited Partners.*
23.1 Consent of Snow Becker Krauss P.C. (included in legal opinion filed
as Exhibit 5.1).
23.2 Consent of Lazar Levine & Felix LLP.
- ----------
* Previously filed.
Item 28. Undertakings.
The registrant hereby undertakes:
(1) To file, during any period in which it offers or sells securities, a
post-effective amendment to this registration statement to:
II - 5
(i) Include any prospectus required by Section 10(a)(3) of the Securities
Act of 1933, as amended (the "Act");
(ii) Reflect in the prospectus any facts or events which, individually or
together, represent a fundamental change in the information in the
registration statement;
(iii) Include any additional or changed material information on the plan of
distribution.
(2) For determining liability under the Act, to treat each post-effective
amendment as a new registration statement of the securities offered, and the
offering of the securities at that time to be the initial bona fide offering.
(3) To file a post-effective amendment to remove from registration any of
the securities that remain unsold at the end of the offering.
(4) Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the small business
issuer pursuant to the foregoing provisions, or otherwise, the small business
issuer has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the small business issuer of
expenses incurred or paid by a Director, officer or controlling person of the
small business issuer in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the small business issuer will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
(5) For determining any liability under the Securities Act, to treat the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the small business issuer under Rule 424(b)(1), or (4) or
497(h) under the Act as part of this registration statement as of the time the
Commission declared it effective.
(6) For determining any liability under the Securities Act, to treat each
post-effective amendment that contains a form of prospectus as a new
registration statement for the securities offered in the registration statement,
and that offering of the securities at that time as the initial bona fide
offering of those securities.
II - 6
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form SB-2 and authorized this registration
statement to be signed on its behalf by the undersigned, in the City of
Henderson, State of Nevada on February 7, 2002.
CREST VIEW, INC.
By: /s/ Johnny R. Thomas
--------------------
Johnny R. Thomas, President
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:
Signature Title Date
--------- ----- ----
/s/ Johnny R. Thomas Chairman of the Board, President, Treasurer
- -------------------- (Principal Executive Officer) February 7, 2002
Johnny R. Thomas
/s/ John C. Francis Vice President, Chief Financial Officer and Director
------------------- (Principal Accounting and Financial Officer) February 7, 2002
John C. Francis
II - 7
EXHIBIT INDEX
Exhibit
Number Description
------ -----------
5.1 Opinion of Snow Becker Krauss P.C.
10.10 Promissory note issued to Anthony Conforti.
23.1 Consent of Snow Becker Krauss P.C. (included in legal
opinion filed as Exhibit 5.1).
23.2 Consent of Lazar Levine & Felix LLP.
II - 8