File No. 333-49508
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As filed with the Securities & Exchange Commission on November 8, 2000
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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AMENDMENT NO. 1 TO
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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CADDO ENTERPRISES, INC.
(Name of small business issuer in its charter)
Nevada 6770 98-0210152
(State or jurisdiction of (Primary Standard Industrial (IRS Employer
incorporation or organization) Identification No.) Classification Code No.)
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Suite 104, 1456 St. Paul St., Kelowna,
British Columbia, Canada V1Y 2E6
(Address of principal place of business or intended principal place of business)
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Garry Henry
Caddo Enterprises, Inc.
Suite 104, 1456 St. Paul St., Kelowna
British Columbia, Canada V1Y 2E6
(250) 868-8177 tel.
(Name, address and telephone number of agent for service)
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Copies to:
Antoine M. Devine, Esq.
Foley & Lardner
One Maritime Plaza, Sixth Floor
San Francisco, CA 94111
(415) 434-4484
Approximate date of proposed sale to the public: As soon as practicable after
this Registration Statement becomes effective.
CALCULATION OF REGISTRATION FEE
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Title of each Amount Proposed maximum Proposed maximum Amount of
class of to be offering price aggregate registration
securities to registered per unit(1) offering price fee
be registered
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Common Stock, 200,000 $1.00 $200,000 $56.00
par value $0.0001
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(1) Estimated solely for the purpose of calculating the registration fee and
pursuant to Rule 457.
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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 thereafter 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 said Section 8(a),
may determine.
PART I - INFORMATION REQUIRED IN PROSPECTUS
Cross Reference Sheet Showing the Location in Prospectus of Information Required
by Items of Form SB-2
Item No. Required Item Location of Caption in Prospectus
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1. Forepart of the Registration Cover Page; Outside Front Page of
Statement and Outside Front Prospectus
Cover of Prospectus
2. Inside Front and Outside Back Inside Front and Outside Back
Cover Pages of Prospectus Cover Pages of Prospectus
3. Summary Information and Risk Prospectus Summary; Risk Factors
Factors
4. Use of Proceeds Use of Proceeds
5. Determination of Offering Price Prospectus Summary-Determination
of Offering Price; Risk Factors;
Plan of Distribution
6. Dilution Dilution
7. Selling Security Holders Not Applicable
8. Plan of Distribution Plan of Distribution
9. Legal Proceedings Legal Proceedings
10. Director, Executive Officer, Management
management and Promoters and
Control Persons
11. Security Ownership of Certain Principal Shareholders
Beneficial owners and
Management
12. Description of Securities Description of Securities
13. Interest of Named Experts and Not Applicable
Counsel
14. Disclosure of Commission Indemnification of Officers and
Position on Indemnification for Directors
Securities Act Liabilities
15. Organization within Last Five Management, Certain Transactions
Years
16. Description of Business Business
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17. Management's Discussion and Plan of Operation
Analysis or Plan of Operation
18. Description of Property Description of Property
19. Certain Relationships and Certain Transactions
Related Transactions
20. Market for Common Equity and Prospectus Summary, Market for
Related Stockholder Matters Our Common Stock; Shares Eligible
for Future Sale
21. Executive Compensation Executive Compensation
22. Financial Statements Financial Statements
23. Changes in and Disagreements Changes in and Disagreements with
with Accountants on Accounting Accountants on Accounting and
and Financial Disclosure Financial Disclosures
PART II
24. Indemnification of Directors and Indemnification of Directors and
Officers Officers
25. Other Expenses of Issuance and Other Expenses of Issuance and
Distribution Distribution
26. Recent Sales of Unregistered Recent Sales of Unregistered
Securities Securities
27. Exhibits Exhibits
28. Undertakings Undertakings
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The information in this prospectus is not complete and may be changed. We may
not sell these securities until the Registration Statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
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Subject to Completion, Dated January 9, 2002
PUBLIC OFFERING
PROSPECTUS
CADDO ENTERPRISES, INC.
200,000 SHARES OF COMMON STOCK
$1.00 PER SHARE
Caddo Enterprises, Inc. is a startup company organized in the State of
Nevada to as a "blank check" company, whose sole purpose at this time is to
locate and consummate a merger or acquisition with a private entity.
We are offering these shares through our president, Mr. Garry Henry,
without the use of a professional underwriter. We will not pay commissions on
stock sales. The Board of Directors may, in its reasonable discretion, increase
the maximum aggregate amount of the offering. Because there is no minimum
offering amount, management may determine to close the offering before the
maximum offering amount is reached.
We will deposit the subscription funds in an interest-bearing escrow
account with our escrow agent until we have received subscriptions for 200,000
shares. If we do not complete the offering and a merger within 18 months of the
date of this prospectus, we will promptly return all subscription funds to
subscribers, with any interest earned on the funds. If we satisfy the
requirements of SEC Rule 419, our escrow agent will release the funds to us, and
the securities to you , as explained in this prospectus.
This is our initial public offering, and no public market currently
exists for our shares. The offering price may not reflect the market price of
our shares after the offering.
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This investment involves a high degree of Risk. You should purchase shares only
if you can afford a complete loss. See "Risk Factors" beginning on page 5.
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Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
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Offering Information
Per share Total
Initial public offering price $ 1.00 $ 200,000.00
Underwriting discounts/commissions $ .00 $ .00
Net offering proceeds to Caddo Enterprises, Inc. $ 1.00 $ 200,000.00
The date of this Prospectus is January 9, 2002
TABLE OF CONTENTS
Page
PROSPECTUS SUMMARY.............................................................3
SUMMARY FINANCIAL INFORMATION..................................................4
RISK FACTORS...................................................................5
YOUR RIGHTS AND SUBSTANTIVE PROTECTION UNDER RULE 419 DEPOSIT OF
OFFERING PROCEEDS AND SECURITIES...............................................7
DILUTION.......................................................................9
USE OF PROCEEDS...............................................................10
CAPITALIZATION................................................................11
DESCRIPTION OF BUSINESS.......................................................12
PLAN OF OPERATION.............................................................14
DESCRIPTION OF PROPERTY.......................................................18
PRINCIPAL SHAREHOLDERS........................................................19
MANAGEMENT....................................................................20
EXECUTIVE COMPENSATION........................................................21
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS................................22
LEGAL PROCEEDINGS.............................................................22
MARKET FOR OUR COMMON STOCK...................................................22
DESCRIPTION OF SECURITIES.....................................................24
SHARES ELIGIBLE FOR FUTURE RESALE.............................................24
WHERE CAN YOU FIND MORE INFORMATION?..........................................25
REPORTS TO STOCKHOLDERS.......................................................25
PLAN OF DISTRIBUTION..........................................................25
NOTICE TO CANADIAN RESIDENTS..................................................26
LEGAL MATTERS.................................................................28
EXPERTS.......................................................................28
INDEMNIFICATION OF OFFICERS AND DIRECTORS.....................................28
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE..........................................................28
FINANCIAL STATEMENTS.........................................................F-1
SIGNATURES..................................................................II-3
You should rely only on the information contained in this prospectus.
We have not authorized anyone to provide you with information different from
that contained in this prospectus. We are offering to sell, and seeking offers
to buy, shares of common stock only in jurisdictions where offers and sales are
permitted. The information contained in this prospectus is accurate only as of
the date of this prospectus, regardless of the time of delivery of this
prospectus or of any sale of our common stock.
Until 90 days after the date when the funds and securities are released
from the escrow account, all dealers effecting transactions in the shares,
whether or not participating in this distribution, may be required to deliver a
prospectus. This is in addition to the obligation of dealers to deliver a
prospectus when acting as underwriters to their unsold allotments or
subscriptions.
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PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in this
prospectus. Because this is a summary, it may not contain all of the information
that you should consider before receiving a distribution of our common stock.
You should read this entire prospectus carefully.
Caddo Enterprises, Inc.
We are a blank check company subject to Rule 419. We were organized as
a vehicle to acquire or merge with another business or company. We have no
present plans, proposals, agreements, arrangements or understandings to acquire
or merge with any specific business or company nor have we identified any
specific business or company for investigation and evaluation for a merger with
us. Since our organization, our activities have been limited to the sale of
initial shares for our organization and our preparation in producing a
registration statement and prospectus for our initial public offering. We will
not engage in any substantive commercial business following the offering. We
maintain our office at Suite 104, 1456 St. Paul St., Kelowna, British Columbia,
Canada V1Y 2E6. Our phone number is (250) 868- 8177.
The Offering
Securities offered 200,000 shares of common stock, $0.0001 par
value, being offered at $1.00 per share.
Common stock outstanding 500,000 shares
prior to the offering
Common stock to be 700,000 shares
outstanding after the offering
Use of Proceeds The net proceeds to us from this offering
will be $200,000.
Expiration date 18 months from the date of this prospectus
Plan of Distribution The offering will be sold by our officers,
who will receive no compensation, directly
or indirectly, for any sales.
Limited State Registration
Management has not determined what states, if any, it will register or
qualify the offering. Without an effective exemption or qualification, the
securities may only be resold in secondary market trading in states where the
securities are registered. Management of the target company, which shall replace
current management upon consummation of a merger, may rely upon exemptions
provided by the preemption of state regulations by the National Securities
Markets Improvement Act of 1996 for broker transactions under Section 4(1) and
dealer transactions under Section 4(3) of the Securities Act of 1933. The target
company may also qualify for NASDAQ NMS, which would qualify the securities for
secondary market trading.
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SUMMARY FINANCIAL INFORMATION
The table below contains certain summary historical financial data. The
historical financial data for the fiscal year ended September 30, 2001 has been
derived from our audited financial statements which are contained in this
prospectus. The information should be read in conjunction with those financial
statements and notes, and other financial information included in this
prospectus.
INCOME STATEMENT
Fiscal Year
Ended September 30
2001 2000
Revenue $ 0 0
Expenses $ 9,047 7,607
Net Income (loss) $ (9,047) (7,067)
Basic Earnings (loss) per share $ (0.02) (0.02)
Basic Number of Common Shares Outstanding $ 500,000 500,000
BALANCE SHEET (at end of period)
Total Assets $ 14,860 0
Total Liabilities $ 2,452 1,500
Total Shareholders Equity (Net Assets) $ (12,408) (1,500)
Net Income (loss) per share on a $ (0.02) (0.02)
fully diluted basis
*Less than .01 per share
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RISK FACTORS
Our business is subject to numerous risk factors, including the
following:
We Have Had No Recent Operating History Nor Any Revenues or Earnings
From Operations Since Our Inception. We have no significant assets or financial
resources. We will, in all likelihood, sustain operating expenses without
corresponding revenues, at least until the consummation of a business
combination. This may result in our incurring a net operating loss that will
increase continuously until we can consummate a business combination with a
profitable business opportunity. We cannot assure you that we can identify a
suitable business opportunity and consummate a business combination.
The Proceeds of This Offering May Be Insufficient to Provide Financing
to the Acquired Company. As of September 30, 2001, there were $14,860 in assets
and $2,452 in liabilities. There was $0 available in our treasury as of
September 30, 2001. Assuming the sale of all the shares in this offering, we
will receive gross proceeds of $200,000, all of which must be deposited in the
escrow account. It is unlikely that we will need additional funds, but we may if
an acquisition candidate insists we obtain additional capital. We may require
additional financing in the future in order to close a business combination.
This financing may consist of the issuance of debt or equity securities. These
funds might not be available, if needed, or might not be available on terms
acceptable to us.
We May Not Locate a Suitable Acquisition Candidate. We have no
arrangement, agreement or understanding with respect to engaging in a merger
with, joint venture with or acquisition of, a private or public entity. No
assurances can be given that we will successfully identify and evaluate suitable
business opportunities or that we will conclude a business combination within 18
months of the date of this prospectus. Management has not identified any
particular industry or specific business within an industry for evaluation. We
cannot guarantee that we will be able to negotiate a business combination on
favorable terms.
The Company We Acquire May Never Establish Its Business or Become
Profitable. We have not established a specific length of operating history or a
specified level of earnings, assets, net worth or other criteria that we will
require a target business opportunity to have achieved. Accordingly, we may
enter into a business combination with a business opportunity having no
significant operating history, losses, limited or no potential for earnings,
limited assets, negative net worth or other characteristics that are indicative
of development stage companies.
Management May Not Devote a Sufficient Amount of Time to Seeking a
Target Company. While seeking a business combination, management anticipates
devoting no more than five hours per month. As a result, we may not identify an
acquisition candidate within 18 months of the date of this prospectus.
The Loss of Any of Our Officers Would Hurt Our Ability to Develop Our
Business. Notwithstanding the combined limited experience and time commitment of
management, loss of the services of any of these individuals would adversely
affect development of our business and our likelihood of continuing operations.
None of our officers have entered into a written employment agreements with us
and none is expected to do so in the foreseeable future. We have not obtained
key man life insurance on any of our officers or directors.
Our Officers and Directors Have Conflicts of Interest That May Prevent
Us From Forming a Business Combination. In the event that management identifies
a candidate for a business combination, and the candidate expresses no
preference for a particular company, management intends to
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enter into a business combination with a previously formed blank check company.
As a result, there may not be sufficient business opportunities to consummate a
business combination with us.
Target Companies That Fail to Comply With SEC Reporting Requirements
May Delay or Preclude an Acquisition. Sections 13 and 15(d) of the `34 Act
require reporting companies to provide certain information about significant
acquisitions, including certified financial statements for the company acquired,
covering one, two, or three years, depending on the relative size of the
acquisition. The time and additional costs that may be incurred by some target
entities to prepare these statements may significantly delay or essentially
preclude consummation of an acquisition. Acquisition prospects that do not have
or are unable to obtain the required audited statements may be inappropriate for
acquisition so long as the reporting requirements of the `34 Act are applicable.
We May Not Ever Locate an Acquisition Candidate. We have neither
conducted, nor have others made available to us, results of market research
indicating the level of market demand that exists for blank check companies.
Moreover, we do not have a marketing department, and we do not plan to engage a
marketing organization. Even if demand is identified for blank check company
mergers, we cannot assure you that we will be successful in completing a
business combination.
If We Acquire a Canadian or Other Foreign Entity, Investors Will Be
Subject to International Investment Risk. If we enter into a business
combination with foreign concern, we will be subject to risks inherent in
business operations outside of the United States. These risks include, for
example, currency fluctuations, regulatory problems, punitive tariffs, unstable
local tax policies, trade embargoes, risks related to shipment of raw materials
and finished goods across national borders and cultural and language
differences. Foreign economies may differ favorably or unfavorably from the
United States economy in growth of gross national product, rate of inflation,
market development, rate of savings and capital investment, resource
self-sufficiency and balance of payments positions, and in other respects.
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YOUR RIGHTS AND SUBSTANTIVE PROTECTION UNDER RULE 419
DEPOSIT OF OFFERING PROCEEDS AND SECURITIES
Rule 419 requires that offering proceeds, after deduction for
underwriting commissions, underwriting expenses and dealer allowances, if any,
and the securities purchased by you and other investors in this offering, be
deposited into an escrow or trust account governed by an agreement that contains
certain terms and provisions specified by Rule 419. Under Rule 419, the funds
will be released to us and the securities will be released to you only after we
have met the following three basic conditions:
First, we must execute an agreement for an acquisition of a business or
asset that will constitute our business and for which the fair value of the
business or net assets to be acquired represents at least 80% of the maximum
offering proceeds, but excluding underwriting commissions, underwriting expenses
and dealer allowances, if any.
Second, we must file a post-effective amendment to the registration
statement that includes the results of this offering including, but not limited
to, the gross offering proceeds raised to date, the amounts paid for
underwriting commissions, underwriting expenses and dealer allowances, if any,
amounts dispersed to us and amounts remaining in the escrow account. In
addition, we must disclose the specific amount, use and appropriation of funds
disbursed to us to date, including, payments to officers, directors, controlling
shareholders or affiliates, specifying the amounts and purposes of these
payments, and the terms of a reconfirmation offer that must contain conditions
prescribed by the rules. The post-effective amendment must also contain
information regarding the acquisition candidate and business, including audited
financial statements.
Third, we will mail to each investor within five business days of a
post-effective amendment, a copy of the prospectus contained therein. Each
investor will have a minimum of 20 business days and a maximum of 45 business
days from the effective date of the post-effective amendment to notify us in
writing that the investor elects to remain an investor. If we have not received
written notification by the 45th business day following the effective date of
the post-effective amendment, funds and interest or dividends, if any, held in
the escrow account will be promptly returned to the investor within five
business days. After we submit a signed representation to the escrow agent that
the requirements of Rule 419 have been met and after the acquisition is closed,
the escrow agent can release the funds and securities.
Accordingly, we have entered into an escrow agreement with City
National Bank, N.A. Los Angeles, California, which provides that:
The proceeds are to be deposited into the escrow account maintained by
the escrow agent promptly upon receipt. While Rule 419 permits 10% of
the funds to be released to us prior to the reconfirmation offering, we
do not intend to release these funds. The funds and any dividends or
interest thereon, if any, are to be held for the sole benefit of the
investor and can only be invested in bank deposit, in money market
mutual funds, federal government securities or securities for which the
principal or interest is guaranteed by the federal government.
All securities issued for the offering and any other securities issued,
including stock splits, stock dividends or similar rights are to be
deposited directly into the escrow account promptly upon issuance. Your
name must be included on the stock certificates or other documents
evidencing the securities. The securities held in the escrow account
are to remain as issued, and are to be held for your sole benefit. You
retain the voting rights, if any, to the securities held in your name.
The securities held in the escrow account may neither be transferred or
disposed of nor any interest created in them other than by will or the
laws of descent and distribution, or under a qualified
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domestic relations order as defined by the Internal Revenue Code of
1986 or Table 1 of the Employee Retirement Income Security Act.
Warrants, convertible securities or other derivative securities
relating to securities held in the escrow account may be exercised or
converted in accordance with their terms, provided that, however, the
securities received upon exercise or conversion, together with any cash
or other consideration paid for the exercise or conversion, are to be
promptly deposited into the escrow account.
The funds will be released to us, and the securities will be released
to you, only after:
The escrow agent has received a signed representation from us
and any other evidence acceptable by the escrow agent that:
We have executed an agreement for the acquisition of
an acquisition candidate whose fair market value
represents at least 80% of the maximum offering
proceeds and has filed the required post-effective
amendment.
The post-effective amendment has been declared
effective.
We have satisfied all of the prescribed conditions of
the reconfirmation offer.
The closing of the acquisition of the business with a
fair value of at least 80% of the maximum proceeds.
This offering will expire 18 months from the date of this prospectus.
There is no minimum number of securities that must be sold in the offering.
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DILUTION
The difference between the initial public offering price per share of
common stock and the net tangible book value per share after this offering
constitutes the dilution to investors in this offering. Net tangible book value
per share of common stock is determined by dividing our net tangible book value
(total tangible assets less total liabilities) by the number of shares of common
stock outstanding.
As of September 30, 2001, our net tangible book value was -$2,452 or
- -$.0049 per share of common stock. Net tangible book value represents the amount
of our total assets, less any intangible assets and total liabilities. After
giving effect to the sale of the 200,000 shares of common stock offered through
this prospectus at an initial public offering price of $1.00 per share, and
after deducting estimated expenses of the offering, our adjusted pro forma net
tangible book value as of September 30, 2001, would have been $197,548 or $0.28
per share. This represents an immediate increase in net tangible book value of
$0.28 per share to existing shareholders and an immediate dilution of $0.72 per
share to investors in this offering. The following table illustrates this per
share dilution:
Public offering price per share $1.00
Net tangible book value per share before offering $0.0001
Increase per share attributable to new investors $0.28
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Dilution per share to new investors $0.72
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Number of Shares Money Received For Shares Net Tangible Book Value
Before Offering Before Offering Per Share Before Offering
----------------- ------------------------- -------------------------
500,000 $50 $0.0001
Total Number of Shares Total Amount of Money Pro-Forma Net Tangible Book
After Offering Received For Shares Value Per Share After Offering
- ---------------------- --------------------- ------------------------------
700,000 $200,000 $0.28
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As of the date of this prospectus, the following table sets forth the
percentage of equity to be purchased by investors in this offering compared to
the percentage of equity to be owned by the present stockholders, and the
comparative amounts paid for the shares by the investors in this offering as
compared to the total consideration paid by our present stockholders.
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Shares Purchased Total Consideration Average Price
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Number Percent Amount Percent Paid Per Share
------ ------- ------ ------- --------------
New Investors 200,000 28.57% $200,000 99.5% $ 1.00
Existing shareholders 500,000 71.43% $ 50 .005% $ .0001
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USE OF PROCEEDS
The gross proceeds of this offering will be $200,000. Rule 419 permits
10% of the funds, or $20,000, to be released from escrow to us prior to the
reconfirmation of the offering. However, we do not intend to request release of
these funds. This offering is not contingent on a minimum number of shares to be
sold and will be sold on a first come, first served basis. If subscriptions
exceed the amount being offered, these excess subscriptions will be promptly
refunded without deductions for commissions or expenses. Accordingly, we will
receive these funds in the event a business combination is closed in accordance
with Rule 419.
There is no minimum amount we intend to raise in this offering. Due to
the nature our operations as a blank check company, we incur only nominal
expenses in maintaining our status, and management pays all the operating
expenses associated with our operations. These expenses consist of legal and
accounting fees associated with filing periodic reports with the SEC, expenses
associated with this offering and annual state incorporation fees. Any funds
raised in this offering, after deducting commissions, will remain in our
operating account for the benefit of the company we acquire for use in their
operations, which will be disclosed in a post-effective amendment. Raising an
amount significantly less than the maximum will have no effect on our continuing
operations, though it may make the company less attractive as a merger
candidate, which could result in our taking longer to consummate a merger.
We have not incurred and do not intend to incur in the future any debt
for our organizational activities, expenses associated with SEC reporting and
the expenses of this offering. Debt to management will not be repaid. Management
is not aware of any circumstances that would change this policy. Accordingly, no
portion of the proceeds is being used to repay debt. Management estimates that
the expenses of the offering will be $26,556.00. Management intends to pay all
expenses associated with the offering, and the expenses associated with
maintaining our reporting status. However, we cannot assure you that management
will pay these expenses indefinitely. These payments are categorized as
additional paid-in capital. Management believes that this is in our best
interest, because it reduces the amount of liabilities an acquisition candidate
must assume in the merger, and, may help facilitate an acquisition transaction.
Under Rule 419, after the reconfirmation offering and the closing of
the business combination, and assuming the sale of all the shares in this
offering, $200,000, plus any dividends received, but less commissions and any
amount returned to investors who did not reconfirm their investment under Rule
419, will be released to us. These funds shall remain in our operating account
for use by the target company in its operations.
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Assuming Maximum Offering
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Amount Percent
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Offering Expenses $ 26,556 0.0%
Reserve for Post-merger Operations $200,000 100.0%
Total $200,000 100.0%
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None of the offering proceeds shall be payable to any officer, director
or third party. None of the proceeds shall be loaned to any officer, director or
third party.
The proceeds received in this offering will be put into the escrow
account pending closing of a business combination and reconfirmation. These
funds will be in an insured financial institution in either a certificate of
deposit, interest bearing savings account or in short term federal government
securities as placed by City National Bank, N.A., Los Angeles, California.
CAPITALIZATION
The following table sets forth our capitalization as of September 30,
2001.
Stockholders' equity: $50
Common stock, $.001 par value;
Authorized 50,000,000 shares,
issued and outstanding
500,000 shares
Additional paid-in capital 30,960
Deficit accumulated during the 18,602
Development period
Total stockholders equity 12,408
Total Capitalization 12,408
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DESCRIPTION OF BUSINESS
Caddo Enterprises, Inc., was incorporated on September 23, 1997 under
the laws of the State of Nevada to engage in any lawful corporate purpose. Other
than issuing shares to its shareholders, we never commenced any other
operational activities. We can be defined as a "blank check" company, whose sole
purpose at this time is to locate and consummate a merger or acquisition with a
private entity. The Board of Directors has elected to commence implementation of
our principal business purpose.
The proposed business activities classifies us as a "blank check"
company. The Securities and Exchange Commission defines these companies as "any
development stage company that is issuing a penny stock and that has no specific
business plan or purpose, or has indicated that its business plan is to merge
with an unidentified company or companies." Many states have enacted statutes,
rules and regulations limiting the sale of securities of "blank check" companies
in their respective jurisdictions. Management does not intend to undertake any
efforts to cause a market to develop in our securities, either debt or equity,
until we have successfully implemented our business plan. We intend to comply
with the periodic reporting requirements of the Securities Exchange Act of 1934
for so long as it is subject to those requirements.
Lock-up Agreement
Each of our shareholders has executed and delivered a "lock-up" letter
agreement, affirming that they shall not sell their respective shares of common
stock until we have successfully consummated a merger or acquisition and we are
no longer classified as a "blank check" company. In order to provide further
assurances that no trading will occur in our securities until a merger or
acquisition has been consummated, each shareholder has agreed to place their
respective stock certificate with our legal counsel, Foley & Lardner, who will
not release these respective certificates until they have confirmed that a
merger or acquisition was successfully consummated. However, while management
believes that the procedures established to preclude any sale of our securities
prior to closing of a merger or acquisition will be sufficient, we cannot assure
you that the procedures established will unequivocally limit any shareholder's
ability to sell their respective securities before a closing.
Investment Company Act of 1940
Although we will be subject to SEC regulation, management believes we
will not be subject to regulation as an investment company, since we will not be
engaged in the business of investing or trading in securities. In the event we
engage in business combinations that result in our holding passive investment
interests in a number of entities, we could be subject to regulation as an
investment company. If that occurs, we would be required to register as an
investment company and could be expected to incur significant registration and
compliance costs. We have obtained no formal determination from the Securities
and Exchange Commission as to our status as an investment company and,
consequently, a violation of the Act could subject us to material adverse
consequences.
Investment Advisors Act of 1940
An investment adviser is a person who, for compensation, engages in the
business of advising others, either directly or through publications or
writings, as to the value of securities or as to the advisability of investing
in, purchasing, or selling securities, or who, for compensation and as part of a
regular business, issues or promulgates analyses or reports concerning
securities. We seek to locate a suitable merger of acquisition candidate, and we
do not intend to engage in the business of advising others in investment matters
for a fee or other type of consideration.
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Forward Looking Statements
We caution readers regarding forward looking statements found in the
following discussion and elsewhere in this registration statement and in any
other statement made by, or on our behalf, whether or not in future filings with
the Securities and Exchange Commission. Forward looking statements are
statements not based on historical information and that relate to future
operations, strategies, financial results or other developments. Forward looking
statements are necessarily based upon estimates and assumptions that are
inherently subject to significant business, economic and competitive
uncertainties and contingencies, many of which are beyond our control and many
of which, with respect to future business decisions, are subject to change.
These uncertainties and contingencies can affect actual results and could cause
actual results to differ materially from those expressed in any forward looking
statements made by or on our behalf. We disclaim any obligation to update
forward looking statements. Readers should also understand that under Section
27A(b)(2)(D) of the `33 Act, and Section 21E(b)(2)(D) of the `34 Act, the "safe
harbor" provisions of the PSLRA do not apply to statements made in connection
with our offering.
-13-
PLAN OF OPERATION
We intend to seek to acquire assets or shares of an entity actively
engaged in a business that generates revenues, in exchange for its securities.
We have not identified a particular acquisition target and have not entered into
any negotiations regarding an acquisition. As soon as this registration
statement becomes effective, we intend to contact investment bankers, corporate
financial analysts, attorneys and other investment industry professionals
through various media. None of our officers, directors, promoters or affiliates
have engaged in any preliminary contact or discussions with any representative
of any other company regarding the possibility of an acquisition or merger with
us as of the date of this registration statement.
Depending upon the nature of the relevant business opportunity and the
applicable state statutes governing how the transaction is structured, our Board
of Directors expects that it will provide our shareholders with complete
disclosure documentation concerning a potential business opportunity and the
structure of the proposed business combination prior to consummation. Disclosure
is expected to be in the form of a proxy or information statement, in addition
to the post-effective amendment.
While any disclosure must include audited financial statements of the
target entity, we cannot assure you that such audited financial statements will
be available. If audited financial statements are not available at closing, the
proposed transaction will be voidable at management's discretion. As part of the
negotiation process, the Board of Directors does intend to obtain certain
assurances of value, including statements of assets and liabilities, material
contracts, accounts receivable statements, or other indicia of the target
entity's condition prior to consummating a transaction, with further assurances
that an audited statement would be provided prior to execution of a merger or
acquisition agreement. Closing documents will include representations that the
value of the assets transferred will not materially differ from the
representations included in the closing documents, or the transaction will be
voidable.
Due to our intent to remain a shell corporation until a merger or
acquisition candidate is identified, it is anticipated that its cash
requirements shall be minimal. We also do not expect to acquire any plant or
significant equipment. Management is paying the expenses required to maintain
our company until a merger is consummated. However, we cannot assure you that
management will pay these expenses indefinitely.
We have not, and do not intend to enter into, any arrangement,
agreement or understanding with non-management shareholders allowing
non-management shareholders to directly or indirectly participate in or
influence our management. Management currently holds 60.8% of our stock. As a
result, management is in a position to elect a majority of the directors and to
control our affairs.
We have no full time employees. Our President and Secretary have agreed
to allocate a portion of their time to our activities, without compensation.
These officers anticipate that our business plan can be implemented by their
devoting approximately five hours each per month to our business affairs and,
consequently, conflicts of interest may arise with respect to their limited time
commitment. We do not expect any significant changes in the number of employees.
Our officers and directors may become involved with other companies who
have a business purpose similar to ours. As a result, potential conflicts of
interest may arise in the future. If a conflict does arise and an officer or
director is presented with business opportunities under circumstances where
there may be a doubt as to whether the opportunity should belong to us or
another "blank check" company they are affiliated with, they will disclose the
opportunity to all the companies. If a situation arises where more than one
company desires to merge with or acquire that target company and the principals
of the proposed target company have no preference as to which company will merge
with or
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acquire the target company, the company that first filed a registration
statement with the Securities and Exchange Commission will be entitled to
proceed with the proposed transaction.
General Business Plan
Our purpose is to seek, investigate and, if investigation warrants,
acquire an interest in business opportunities presented to it by persons or
firms that desire to seek the perceived advantages of an Exchange Act registered
corporation. We will not restrict our search to any specific business, industry,
or geographical location and we may participate in a business venture of
virtually any kind or nature. This discussion of the proposed business is
purposefully general and is not meant to restrict our discretion to search for
and enter into potential business opportunities. Management anticipates that it
may be able to participate in only one potential business venture because we
have nominal assets and limited financial resources. This lack of
diversification should be considered a substantial risk to our shareholders
because it will not permit us to offset potential losses from one venture
against gains from another.
We may seek a business opportunity with entities that have recently
commenced operations, or that wish to utilize the public marketplace in order to
raise additional capital in order to expand into new products or markets, to
develop a new product or service, or for other corporate purposes. We may
acquire assets and establish wholly owned subsidiaries in various businesses or
acquire existing businesses as subsidiaries.
We anticipate that the selection of a business opportunity will be
complex and extremely risky. Due to general economic conditions, rapid
technological advances being made in some industries and shortages of available
capital, management believes that there are numerous firms seeking the perceived
benefits of a publicly registered corporation. The perceived benefits may
include facilitating or improving the terms for additional equity financing that
may be sought, providing liquidity for incentive stock options or similar
benefits to key employees, providing liquidity for shareholders with
unrestricted stock and other factors. Potentially, available business
opportunities may occur in many different industries and at various stages of
development, all of which will make the task of comparative investigation and
analysis of these business opportunities extremely difficult and complex.
The owners of the business opportunities will incur significant legal
and accounting costs in connection with acquisition of a business opportunity,
including the costs of preparing Form 8-K's, 10-KSBs or 10-QSBs, agreements and
related reports and documents. The `34 Act specifically requires that any merger
or acquisition candidate comply with all applicable reporting requirements,
which include providing audited financial statements to be included within the
numerous filings relevant to complying with the `34 Act. Nevertheless, our
officers and directors have not conducted market research and are not aware of
statistical data that would support the perceived benefits of a merger or
acquisition transaction for the owners of a business opportunity.
The analysis of new business opportunities will be undertaken by our
officers and directors, none of whom is a professional business analyst.
Management intends to concentrate on identifying preliminary prospective
business opportunities that may be brought to our attention through present
associations of our officers and directors, or by our shareholders. In analyzing
prospective business opportunities, management will consider:
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o the available technical, financial and managerial resources;
o working capital and other financial requirements;
o history of operations, if any;
o prospects for the future;
o nature of present and expected competition;
o the quality and experience of management services that may be
available and the depth of that management;
o the potential for further research, development, or
exploration;
o specific risk factors not now foreseeable but could be
anticipated to impact our proposed activities;
o the potential for growth or expansion;
o the potential for profit;
o the perceived public recognition of acceptance of products,
services, or trades;
o name identification; and
o other relevant factors.
Our officers and directors expect to meet personally with management
and key personnel of the business opportunity as part of their " due diligence"
investigation. To the extent possible, we intend to utilize written reports and
personal investigations to evaluate the above factors. We will not acquire or
merge with any company that cannot provide audited financial statements within a
reasonable period of time after closing of the proposed transaction.
Our management, while probably not especially experienced in matters
relating to our prospective new business, shall rely upon their own efforts and,
to a much lesser extent, the efforts of our shareholders, in accomplishing our
business purposes. We do not anticipate that any outside consultants or
advisors, except for our legal counsel and accountants, will be utilized by us
to accomplish our business purposes. However, if we do retain an outside
consultant or advisor, any cash fee will be paid by the prospective
merger/acquisition candidate. We have no contracts or agreements with any
outside consultants and none are contemplated.
We will not restrict our search for any specific kind of firms, and may
acquire a venture that is in its preliminary or development stage or is already
operating. We cannot predict at this time the status of any business in which we
may become engaged, because the business may need to seek additional capital,
may desire to have its shares publicly traded, or may seek other perceived
advantages that we may offer. Furthermore, we do not intend to seek additional
capital to finance the operation of any acquired business opportunity until we
have successfully consummated a merger or acquisition.
A business combination involving the issuance of our common stock will,
in all likelihood, result in shareholders of a private company obtaining a
controlling interest in us. If that occurs, management may be required to sell
or transfer all or a portion of the common stock held by them, or resign as
members of our Board of Directors. The resulting change in control could result
in removal of one or more present officers and directors and a corresponding
reduction in or elimination of their participation in our future affairs.
Acquisition of Opportunities
In implementing a structure for a particular business acquisition, we
may become a party to a merger, consolidation, reorganization, joint venture, or
licensing agreement with another corporation or entity. It may also acquire
stock or assets of an existing business. On the consummation of a transaction,
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it is probable that our present management and shareholders will no longer be in
control. In addition, our directors may, as part of the terms of the acquisition
transaction, resign and be replaced by new directors without a vote of our
shareholders. Furthermore, management may negotiate or consent to the purchase
of all or a portion of our stock. Any terms of sale of the shares presently held
by officers and/or directors will be also afforded to all other shareholders on
similar terms and conditions. Any such sale would require an amendment to this
registration statement.
While the actual terms of a transaction that management may not be a
party to cannot be predicted, it may be expected that the parties to the
business transaction will find it desirable to avoid the creation of a taxable
event and thereby structure the acquisition in a so-called "tax-free"
reorganization under Sections 368(a)(1) or 351 of the Internal Revenue Code. In
order to obtain tax-free treatment under the Code, it may be necessary for the
owners of the acquired business to own 80% or more of the voting stock of the
surviving entity. In that event, our shareholders would retain 20% or less of
the issued and outstanding shares of the surviving entity, which would result in
significant dilution in the equity of the shareholders.
As part of the "due diligence" investigation, our officers and
directors will meet personally with management and key personnel, may visit and
inspect material facilities, obtain independent analysis of verification of
certain information provided, check references of management and key personnel,
and take other reasonable investigative measures to the extent of our limited
financial resources and management expertise. How we will participate in an
opportunity will depend on the nature of the opportunity, the respective needs
and desires of the parties, the management of the target company and our
relative negotiation strength.
With respect to any merger or acquisition, negotiations with target
company management are expected to focus on the percentage of our shares that
the target company shareholders would acquire in exchange for all of their
shareholdings in the target company. Depending upon, among other things, the
target company's assets and liabilities, our shareholders will probably hold a
substantially lesser percentage ownership interest following any merger or
acquisition. The percentage ownership may be subject to significant reduction in
the event we acquire a company with substantial assets. Any merger or
acquisition effected by us can be expected to have a significant dilutive effect
on the percentage of shares held by our then shareholders, in addition to the
dilution that may be experienced as a result of this offering.
We will participate in a business opportunity only after the
negotiation and execution of appropriate written agreements. Although we cannot
predict the terms of the agreements, generally the agreements will require some
specific representations and warranties by all of the parties, will specify
certain events of default, will detail the terms of closing and the conditions
that must be satisfied by each of the parties prior to and after the closing,
will outline the manner of bearing costs, including costs associated with our
attorneys and accountants, will set forth remedies on default and will include
miscellaneous other terms.
As stated previously, we will not acquire or merge with any entity that
cannot provide independent audited financial statements concurrent with the
closing of the proposed transaction. We are subject to the reporting
requirements of the `34 Act. Included in these requirements is our affirmative
duty to file independent audited financial statements as part of its Form 8-K to
be filed with the Securities and Exchange Commission upon consummation of a
merger or acquisition, as well as our audited financial statements included in
our annual report on Form 10-KSB and quarterly reports on Form 10-QSB. If the
audited financial statements are not available at closing, or if the audited
financial statements provided do not conform to the representations made by the
candidate to be acquired in the closing documents, the closing documents will
provide that the proposed transaction will be voidable at the discretion of our
present management. If the transaction is voided, the agreement will also
contain a
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provision providing for the acquisition entity to reimburse us for all costs
associated with the proposed transaction.
Competition
We will remain an insignificant participant among the firms that engage
in the acquisition of business opportunities. There are many established venture
capital and financial concerns that have significantly greater financial and
personnel resources and technical expertise than we do. In view of our combined
extremely limited financial resources and limited management availability, we
will continue to be at a significant competitive disadvantage compared to our
competitors.
DESCRIPTION OF PROPERTY
We have no properties and at this time have no agreements to acquire
any properties.
We operate from our offices at Suite 104, 1456 St. Paul St., Kelowna,
British Columbia, Canada. Space is provided to us on a rent free basis by Mr.
Hemmerling, a former officer and director, and it is anticipated that this
arrangement will remain until we successfully consummate a merger or
acquisition. Management believes that this space will meet our needs for the
foreseeable future.
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PRINCIPAL SHAREHOLDERS
The table below lists the beneficial ownership of our voting securities
by each person known by us to be the beneficial owner of more than 5% of our
securities, as well as the securities beneficially owned by all our directors
and officers as of the date of this Prospectus. Unless specifically indicated,
the shareholders listed possess sole voting and investment power with respect to
the shares shown.
Directors, Officers Shares Beneficially Owned Shares to be Beneficially Owned
and 5% Stockholders Prior to Offering After Offering
- ------------------- ----------------- --------------
Number Percent Number Percent
------ ------- ------ -------
Garry Henry 152,000 30.4% 152,000 21.71%
Suite 104, 1456 St. Paul Street
Kelowna, British Columbia
Canada V1Y 2E6
Laurie deBoer 152,000 30.4% 152,000 21.71%
Suite 104, 1456 St. Paul Street
Kelowna, British Columbia
Canada V1Y 2E6
All directors and officers as 304,000 60.8% 304,000 43.43%
a group, which consists of
2 persons
All the stock shown above are Common Stock. The balance of the
outstanding Common Stock are held by 8 persons, none of whom hold 5% or more of
our outstanding Common Stock.
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MANAGEMENT
Our directors and officers are as follows:
Name Age Position
- ---- --- --------
Garry Henry 55 President, Chairman
Laurie deBoer 45 Secretary, Treasurer, Director
The above listed officers and directors will serve until the next
annual meeting of the shareholders or until their death, resignation,
retirement, removal, or disqualification, or until their successors have been
duly elected and qualified. Vacancies in the existing Board of Directors are
filled by majority vote of the remaining Directors. Our officers serve at the
will of the Board of Directors. There are no other family relationships between
any of our executive officers and directors.
Resumes
Garry Henry was appointed President and Chairman in December 2000. From
1991 to 2000, Mr. Henry was a financial advisor for Canaccord Capital Ltd. in
Vancouver BC. From 1986 to 1991, he worked for Haywood Securities as a financial
advisor. From 1972 to 1986, he worked for West Coast Securities Ltd. in
Vancouver, BC as a financial advisor. Mr. Henry has been a licensed financial
advisor for the past 29 years. During that time, his primary functions included
account management, security trading, market making, due diligence and corporate
finance.
Mr. Henry has completed the following courses: Investment Dealers
Association Registration, Effective Management in the Canadian Securities
Industry, "The Securities Program" - Corporate Governance/Continuous
Disclosure." He also holds the Series 62 and 63 securities licenses for the sale
of corporate securities and for state registration, respectively.
Laurie deBoer, has served as our Director, Secretary and Treasurer
since December, 2001. Since the autumn of 1999, Laurie deBoer has been employed
as the Executive Assistant by the corporate finance firm RD Capital. As well as
providing accounting services for public companies, Ms. deBoer assists those
companies with their reporting obligations. Ms. deBoer has also held the office
of Secretary with the Strathmore Minerals Corp. since May of 2000. Strathmore
Minerals Corp. is engaged in the business of acquiring and developing uranium
properties and trades on the CDNX under the trading symbol STM. After a 4 year
career in banking, and a 9 year career in the hospitality industry, Ms. deBoer
returned to school in 1988. Graduating with honours in 1991, Ms. deBoer received
both a certificate and a diploma in Business Administration from Red Deer
Community College, Red Deer, Canada in 1990 and 1991, respectively. After
graduation in 1991, Ms. deBoer worked as a cost and staff accountant for a
manufacturing firm.
Prior "Blank Check" Experience
Neither Mr. Henry nor Ms deBoer have any prior blank check company
experience.
Conflicts of Interest
Members of our management are associated with other firms involved in a
range of business activities. Consequently, there are potential inherent
conflicts of interest in their acting as officers and directors. Because the
officers and directors are engaged in other business activities, management
anticipates it will devote only a minor amount of time to our affairs.
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Our officers and directors are now and may in the future become
shareholders, officers or directors of other companies that may be formed for
the purpose of engaging in business activities similar to those conducted by us.
Accordingly, additional direct conflicts of interest may arise in the future
with respect to individuals acting on our behalf or other entities. Moreover,
additional conflicts of interest may arise with respect to opportunities that
come to the attention of these individuals in the performance of their duties.
We do not currently have a right of first refusal pertaining to opportunities
that come to management's attention where the opportunity may relate to our
proposed business operations.
The officers and directors are, so long as they remain officers or
directors, subject to the restriction that all opportunities contemplated by our
plan of operation that come to their attention, either in the performance of
their duties or in any other manner, will be considered opportunities of, and be
made available to us and the other companies that they are affiliated with on an
equal basis. A breach of this requirement will be a breach of the fiduciary
duties of the officer or director. If we or the companies that the officers and
directors are affiliated with both desire to take advantage of an opportunity,
then those officers and directors would abstain from negotiating and voting upon
the opportunity. However, all directors may still individually take advantage of
opportunities if we should decline to do so. Except as set forth above, we have
not adopted any other conflict of interest policy with respect to those
transactions.
EXECUTIVE COMPENSATION
None of our officers and/or directors have received any compensation
for their respective services rendered unto us. They all have agreed to act
without compensation until authorized by the Board of Directors, which is not
expected to occur until we have generated revenues from operations after
consummation of a merger or acquisition. As of the date of this registration
statement, we have no funds available to pay directors. Further, none of the
directors are accruing any compensation pursuant to any agreement with us.
It is possible that, after we successfully consummate a merger or
acquisition with an unaffiliated entity, that entity may desire to employ or
retain one or a number of members of our management for the purposes of
providing services to the surviving entity. However, we have adopted a policy
whereby the offer of any post-transaction employment to members of management
will not be a consideration in our decision to undertake any proposed
transaction. Each member of management has agreed to disclose to the Board of
Directors any discussions concerning possible employment by any entity that
proposes to undertake a transaction with us and further, to abstain from voting
on the transaction. Therefore, as a practical matter, if each member of the
Board of Directors is offered employment in any form from any prospective merger
or acquisition candidate, the proposed transaction will not be approved by the
Board of Directors as a result of the inability of the Board to affirmatively
approve the transaction. The transaction would then be presented to our
shareholders for approval.
It is possible that persons associated with management may refer a
prospective merger or acquisition candidate to us. In the event we consummate a
transaction with any entity referred by associates of management, it is possible
that the associate will be compensated for their referral in the form of a
finder's fee. It is anticipated that this fee will be either in the form of
restricted common stock issued by us as part of the terms of the proposed
transaction, or will be in the form of cash consideration. However, if
compensation is in the form of cash, payment will be tendered by the acquisition
or merger candidate, because we have insufficient cash available. The amount of
any finder's fee cannot be determined as of the date of this registration
statement, but is expected to be comparable to consideration normally paid in
like transactions, which range up to ten percent of the transaction price. No
member of management will receive any finders fee, either directly or
indirectly, as a result of their respective efforts to implement our business
plan.
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No retirement, pension, profit sharing, stock option or insurance
programs or other similar programs have been adopted for the benefit of our
employees.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
There have been no related party transactions, or any other
transactions or relationships required to be disclosed pursuant to Item 404 of
Regulation S-B.
LEGAL PROCEEDINGS
There is no litigation pending or threatened by or against us.
MARKET FOR OUR COMMON STOCK
There is no trading market for our common stock at present and there
has been no trading market to date. Management has not undertaken any
discussions with any prospective market maker concerning the participation in
the aftermarket for our securities and management does not intend to initiate
any discussions until we have consummated a merger or acquisition. We cannot
guarantee that a trading market will ever develop or if a market does develop,
that it will continue.
Market Price
Our common stock is not quoted at the present time. The Securities and
Exchange Commission has adopted a Rule that established the definition of a
"penny stock," for purposes relevant to us, as any equity security that has a
market price of less than $5.00 per share or with an exercise price of less than
$5.00 per share, subject to certain exceptions. For any transaction involving a
penny stock, unless exempt, the rules require:
o that a broker or dealer approve a person's account for
transactions in penny stocks; and
o the broker or dealer receive from the investor a written
agreement to the transaction, setting forth the identity and
quantity of the penny stock to be purchased. In order to
approve a person's account for transactions in penny stocks,
the broker or dealer must
o obtain financial information and investment experience and
objectives of the person; and
o make a reasonable determination that the transactions in
penny stocks are suitable for that person and that person
has sufficient knowledge and experience in financial matters
to be capable of evaluating the risks of transactions in
penny stocks. The broker or dealer must also deliver, prior
to any transaction in a penny stock, a disclosure schedule
prepared by the Commission relating to the penny stock
market, which, in highlight form,
o sets forth the basis on which the broker or dealer made the
suitability determination; and
o that the broker or dealer received a signed, written
agreement from the investor prior to the transaction.
Disclosure also has to be made
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about the risks of investing in penny stock in both public
offering and in secondary trading, and about commissions
payable to both the broker-dealer and the registered
representative, current quotations for the securities and
the rights and remedies available to an investor in cases of
fraud in penny stock transactions. Finally, monthly
statements have to be sent disclosing recent price
information for the penny stock held in the account and
information on the limited market in penny stocks.
Management intends to strongly consider undertaking a transaction with
any merger or acquisition candidate that will allow our securities to be traded
without the aforesaid limitations. However, we cannot predict whether, upon a
successful merger or acquisition, we will qualify our securities for listing on
Nasdaq or some other national exchange, or be able to maintain the maintenance
criteria necessary to insure continued listing. Failure to qualify our
securities or to meet the relevant maintenance criteria after qualification in
the future may result in the discontinuance of the inclusion of our securities
on a national exchange. However, trading, if any, in our securities may then
continue in the non-Nasdaq over-the-counter market. As a result, a shareholder
may find it more difficult to dispose of, or to obtain accurate quotations as to
the market value of, our securities.
Penny Stock Regulation
For transactions covered by Rule 15g-9 under the `34 Act, a
broker-dealer must furnish to all investors in penny stocks, a risk disclosure
document required by the rule, make a special suitability determination of the
purchaser and have received the purchaser's written agreement to the transaction
prior to the sale. In order to approve a person's account for transactions in
penny stock, the broker or dealer must (i) obtain information concerning the
person's financial situation, investment experience and investment objectives;
(ii) reasonably determine, based on the information required by paragraph (i)
that transactions in penny stock are suitable for the person and that the person
has sufficient knowledge and experience in financial matters that the person
reasonably may be expected to be capable of evaluating the rights of
transactions in penny stock; and (iii) deliver to the person a written statement
setting forth the basis on which the broker or dealer made the determination
required by paragraph (ii) in this section, stating in a highlighted format that
it is unlawful for the broker or dealer to effect a transaction in a designated
security subject to the provisions of paragraph (ii) of this section unless the
broker or dealer has received, prior to the transaction, a written agreement to
the transaction from the person; and stating in a highlighted format immediately
preceding the customer signature line that the broker or dealer is required to
provide the person with the written statement and the person should not sign and
return the written statement to the broker or dealer if it does not accurately
reflect the person's financial situation, investment experience and investment
objectives and obtain from the person a manually signed and dated copy of the
written statement.
A penny stock means any equity security other than a security (i)
registered, or approved for registration upon notice of issuance on a national
securities exchange that makes transaction reports available pursuant to 17 CFR
11Aa3-1 (ii) authorized or approved for authorization upon notice of issuance,
for quotation on the Nasdaq NMS; (iii) that has a price of five dollars or more
or (iv) whose issuer has net tangible assets in excess of $2,000,000
demonstrated by financial statements dated less than fifteen months previously
that the broker or dealer has reviewed and has a reasonable basis to believe are
true and complete in relation to the date of the transaction with the person.
Consequently, the rule may affect the ability of broker-dealers to sell our
securities.
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Holders
There are ten holders of our common stock. In September 1997, we issued
500,000 of common stock for services in formation and organization valued at
$.0001 per share or $50.00 under the 4(2) exemption from registration under the
Securities Act of 1933. Our founder gifted 348,000 shares to 9 other
shareholders on our behalf in accordance with the exemption from registration
afforded by Regulation S of the Securities Act of 1933.
Dividends
We have not paid any dividends to date, and have no plans to do so in
the immediate future.
Transfer Agent
We do not have a transfer agent at this time.
DESCRIPTION OF SECURITIES
Our authorized capital stock consists of 100,000,000 shares, of common
stock, par value $.0001 per share. As of the date of this filing, there are
500,000 shares of common stock issued and outstanding.
Common Stock
All shares of common stock have equal voting rights and, when validly
issued and outstanding, are entitled to one vote per share in all matters to be
voted upon by shareholders. The shares of common stock have no preemptive,
subscription, conversion or redemption rights and may be issued only as fully
paid and nonassessable shares. Cumulative voting in the election of directors is
not permitted, which means that the holders of a majority of the issued and
outstanding shares of common stock represented at any meeting where a quorum is
present will be able to elect the entire Board of Directors if they so choose.
In that event, the holders of the remaining shares of common stock will not be
able to elect any directors. In the event of liquidation, each shareholder is
entitled to receive a proportionate share of our assets available for
distribution to shareholders after the payment of liabilities and after
distribution in full of preferential amounts, if any. All shares of our common
stock issued and outstanding are fully paid and nonassessable. Holders of stock
are entitled to share pro rata in dividends and distributions with respect to
the common stock, as may be declared by the Board of Directors out of funds
legally available therefor. We have no intention to issue additional shares of
stock.
There are no outstanding options or warrants to purchase, or securities
convertible into, our common equity. The 500,000 shares of our common stock
currently outstanding are restricted securities as that term is defined in the
Securities Act. We are offering 200,000 shares of our common stock at $1.00 per
share. Dilution to the investors in this offering shall be approximately $.72
per share.
SHARES ELIGIBLE FOR FUTURE RESALE
There has been no public market for our common stock and we cannot
assure you that a significant public market for our common stock will be
developed or be sustained after this offering. Sales of substantial amounts of
common stock in the public market after this offering, or the possibility of
substantial sales occurring, could adversely affect prevailing market prices for
the common stock or our future ability to raise capital through an offering of
equity securities.
Upon completion of this offering, we will have 700,000 shares
outstanding. The 200,000 shares proposed to be sold in this offering will be
freely tradeable without restriction or further registration under the
Securities Act unless purchased by "affiliates," as that term is defined in Rule
144 under the Securities
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Act. Upon execution of a merger agreement, the 500,000 shares currently
outstanding may be returned to us for cancellation. These shares may be
purchased outright by a target company or in connection with the exercise of
appraisal rights under Nevada law. These shares may also be included in a later
registration statement, but we are not going to negotiate registration rights in
connection with a merger agreement. If these shares are not sold as part of a
merger, they may only be sold under a registration statement in accordance with
SEC and NASD policy governing the sale of blank check company stock. Under this
policy, Rule 144 is not available for the resale of these shares.
WHERE CAN YOU FIND MORE INFORMATION?
We are a reporting company, and are subject to the reporting
requirements of the Exchange Act. We voluntarily filed a Form 10-SB on October
4, 1999. We have filed a registration statement with the SEC on form SB-2 to
register the offer and sale of the shares. This prospectus is part of that
registration statement, and, as permitted by the SEC's rules, does not contain
all of the information in the registration statement. For further information
about us and the shares offered under this prospectus, you may refer to the
registration statement and to the exhibits and schedules filed as a part of the
registration statement. You can review the registration statement and its
exhibits and schedules at the public reference facility maintained by the SEC at
Judiciary Plaza, Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549.
Please call the SEC at 1-800-SEC-0330 for further information on the public
reference room. The registration statement is also available electronically on
the World Wide Web at http://www.sec.gov.
You can also call or write us at any time with any questions you may
have. We'd be pleased to speak with you about any aspect of our business and
this offering.
REPORTS TO STOCKHOLDERS
We intend to furnish our stockholders with annual reports containing
audited financial statements as soon as practicable at the end of each fiscal
year. Our fiscal year ends on June 30th.
PLAN OF DISTRIBUTION
We offer the right to purchase 200,000 shares at $1.00 per share. We
propose to offer the shares directly on a best efforts, no minimum basis, and no
compensation is to be paid to any person for the offer and sale of the shares.
We are selling the shares through our president without the use of a
professional securities underwriting firm. Consequently, there may be less due
diligence performed in conjunction with this offering than would be performed in
an underwritten offering. Although he is an associated person of us as that term
is defined in Rule 3a4-1 under the Exchange Act, he is deemed not to be a broker
for the following reasons:
He is not subject to a statutory disqualification under the Exchange
Act at the time of his participation in the sale of our securities.
He will not be compensated for his participation in the sale of our
securities by the payment of commission or other remuneration based
either directly or indirectly on transactions in securities.
He is not an associated person of a broker or a dealer at the time of
his participation in the sale of our securities.
He will restrict his participation to the following activities:
-25-
A. Preparing any written communication or delivering any
communication through the mails or other means that does not
involve oral solicitation by him of a potential purchaser;
B. Responding to inquiries of potential purchasers in a
communication initiated by the potential purchasers, provided
however, that the content of responses are limited to information
contained in a registration statement filed under the Securities
Act or other offering document;
C. Performing ministerial and clerical work involved in effecting
any transaction.
As of the date of this Prospectus, no broker has been retained by us
for the sale of securities being offered. In the event a broker who may be
deemed an underwriter is retained by us, an amendment to our registration
statement will be filed.
Arbitrary Determination of Offering Price
The initial offering price of $1.00 per share has been arbitrarily
determined by us, and bears no relationship whatsoever to our assets, earnings,
book value or any other objective standard of value. Among the factors
considered by us were:
A. The lack of operating history;
B. The proceeds to be raised by the offering;
C. The amount of capital to be contributed by the public in
proportion to the amount of stock to be retained by present
stockholders;
D. The current market conditions in the over-the-counter market
NOTICE TO CANADIAN RESIDENTS
Resale Restrictions
The distribution of the common stock in Canada is being made only on a
private placement basis exempt from the requirement that we and the selling
stockholders prepare and file a prospectus with the securities regulatory
authorities in each province where trades of common stock are made. Any resale
of the common stock in Canada must be made under applicable securities laws
which will vary depending on the relevant jurisdiction, and which may require
resales to be made under available statutory exemptions or under a discretionary
exemption granted by the applicable Canadian securities regulatory authority.
Purchasers are advised to seek legal advice prior to any resale of the common
stock.
Representations of Purchasers
By purchasing common stock in Canada and accepting a purchase
confirmation, a purchaser is representing to us, the selling stockholders and
the dealer from whom the purchase confirmation is received that: - the purchaser
is entitled under applicable provincial securities law to purchase the common
stock without the benefit of a prospectus qualified under those securities laws,
- - where required by law, that the purchaser is purchasing as principal and not
as agent, and - the purchaser has reviewed the text above under Resale
Restrictions.
-26-
Rights of Action (Ontario Purchasers)
The securities being offered are those of a foreign issuer and Ontario
purchaser will not receive the contractual right of action prescribed by Ontario
securities law. As a result, Ontario purchasers must rely on other remedies that
may be available, including common law rights of action for damages or
rescission or rights of action under the civil liability provisions of the U.S.
federal securities laws.
Enforcement of Legal Rights
All of the issuer's directors and officers as well as the experts named
herein and the selling stockholders may be located outside of Canada and, as a
result, it may not be possible for Canadian purchasers to effect service of
process within Canada upon the issuer or such persons. All or a substantial
portion of the assets of the issuer and such persons may be located outside of
Canada and, as a result, it may not be possible to satisfy a judgment against
the issuer or such persons in Canada or to enforce a judgment obtained in
Canadian courts against such issuer or persons outside of Canada.
Notice to British Columbia Residents
A purchaser or common stock to whom the Securities Act (British
Columbia) applies is advised that the purchaser is required to file with the
British Columbia Securities Commission a report within ten days of the sale of
any common stock acquired by such purchaser in this offering. The report must be
in the form attached to British Columbia Securities Commission Blanket Order BOR
#95/17, a copy of which may be obtained from us. Only one report must be filed
for common stock acquired on the same date and under the same prospectus
exemption.
Taxation and Eligibility for Investment
Canadian purchasers of common stock should consult their own legal and
tax advisors with respect to the tax consequences of an investment in the common
stock in their particular circumstances and about the eligibility of the common
stock for investment by the purchaser under relevant Canadian legislation.
-27-
LEGAL MATTERS
The validity of the shares offered under this prospectus is being
passed upon for us by Foley & Lardner of San Francisco, California.
EXPERTS
Our financial statements as of the year ended September 30, 2001,
included in this prospectus and in the registration statement, have been so
included in reliance upon the reports of Cordovano & Harvey, P.C., independent
certified public accountants, included in this prospectus, and upon the
authority of said firm as experts in accounting and auditing.
INDEMNIFICATION OF OFFICERS AND DIRECTORS
Article XII of the Articles of Incorporation and Article VI of our
Bylaws, as amended, set forth certain indemnification rights. Our Bylaws provide
that we will possess and may exercise all powers of indemnification of officers,
directors, employees, agents and other persons and all incidental powers and
authority. Our Board of Directors is authorized and empowered to exercise all of
our powers of indemnification, without shareholder action. Our assets could be
used or attached to satisfy any liabilities subject to indemnification. See
Exhibit 3.1 hereto.
Disclosure of Commission Position on Indemnification for Securities Act
Liabilities
The Nevada Revised Statutes, as amended, authorize us to indemnify any
director or officer under certain prescribed circumstances and subject to
certain limitations against certain costs and expenses, including attorneys'
fees actually and reasonably incurred in connection with any action, suit or
proceedings, whether civil, criminal, administrative or investigative, to which
the person is a party by reason of being a director or officer if it is
determined that the person acted in accordance with the applicable standard of
conduct set forth in the statutory provisions. Our Articles of Incorporation
provides for the indemnification of directors and officers to the full extent
permitted by Nevada law.
We may also purchase and maintain insurance for the benefit of any
director or officer that may cover claims for situations where we could not
provide indemnification.
Although indemnification for liabilities arising under the `33 Act may
be permitted to officers, directors or persons controlling us under Nevada law,
we have been informed that in the opinion of the U.S. Securities and Exchange
Commission, this form of indemnification is against public policy as expressed
in the `33 Act, and is therefore unenforceable.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
We have not changed accountants since our formation, and there are no
disagreements with the findings of our accountants.
-28-
FINANCIAL STATEMENTS
The following financial statements are attached to this report and filed as a
part of this Registration Statement.
Page
Independent auditor's report.................................................F-2
Balance sheet as of September 30, 2001 ......................................F-3
Statement of operations for the period September 30, 2001 and 2000 and
for the period from September 23, 1997 (inception) through
September 30, 2001 (unaudited).............................................F-4
Statement of shareholder's equity for the years ended September 30,
2001 and 2000 and for the period September 23, 1997 (inception)
through September 30, 2001 (unaudited).....................................F-5
Statement of cash flows for the years ended September 30, 2001 and 2000
and for the period September 23, 1997 (inception) through
September 30, 2001 (unaudited).............................................F-6
Notes to financial statements as of September 30, 2001.......................F-7
Independent auditor's report................................................F-10
Balance sheet as of September 30, 2000 .....................................F-11
Statement of operations for the period September 30, 2000 and 1999
and for the period from September 23, 1997 (inception) through
September 30, 2000 (unaudited)............................................F-12
Statement of shareholder's equity for the years ended September 30, 2000
and 1999 and for the period September 23, 1997 (inception) through
September 30, 2000 (unaudited)............................................F-13
Statement of cash flows for the years ended September 30, 2000 and 1999
and for the period September 23, 1997 (inception) through
September 30, 2000 (unaudited)............................................F-14
Notes to financial statements as of September 30, 2000......................F-15
F-1
Independent Auditors' Report
To the Board of Directors and Shareholders
Caddo Enterprises, Inc.
We have audited the balance sheet of Caddo Enterprises, Inc. as of September 30,
2001 and the related statements of operations, shareholders' equity and cash
flows for the years ended September 30, 2001 and 2000. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the
audits 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 Caddo Enterprises, Inc. as of
September 30, 2001, and the related statements of operations and cash flows for
the years ended September 30, 2001 and 2000 in conformity with accounting
principles generally accepted in the United States.
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. As discussed in Note A to the financial
statements, the Company has a working capital deficiency at September 30, 2001
and recurring losses since inception . These factors raise substantial doubt
about the Company's ability to continue as a going concern. Management's plans
regarding those matters are also described in Note A. The financial statements
do not include any adjustments that might result from the outcome of this
uncertainty.
Cordovano and Harvey, P.C
Denver, Colorado
December 7, 2001
F-2
CADDO ENTERPRISES, INC.
Balance Sheet
September 30, 2001
ASSETS
Deferred offering costs.............................................$ 14,860
============
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Accounts payable..............................................$ 952
Accrued liabilities........................................... 1,500
------------
Total liabilities 2,452
------------
Shareholders' equity:
Common stock, $.0001 par value, 100,000,000 shares authorized,
500,000 shares issued and outstanding...................... 50
Additional paid-in capital (Note B)........................... 30,960
Retained deficit.............................................. (18,602)
Total shareholders' equity 12,408
$ 14,860
============
See accompanying notes to financial statements
F-3
CADDO ENTERPRISES, INC.
Statements of Operations
Years Ended September 30,
2001 2000
-------------- --------------
Costs and expenses:
Legal fees................................... $ 6,435 $ 2,792
Accounting fees.............................. 2,250 2,000
Printing..................................... - 2,615
Licenses and fees............................ 362 200
-------------- --------------
Total costs and expenses 9,047 7,607
-------------- --------------
Operating loss (9,047) (7,607)
-------------- --------------
Income taxes (Note C)............................. - -
-------------- --------------
Net loss $ (9,047) $ (7,607)
============== ==============
Basic and diluted loss per common share........... $ (0.02) $ (0.02)
Basic and diluted weighted average common
shares outstanding........................... 500,000 500,000
============== ==============
See accompanying notes to financial statements
F-4
CADDO ENTERPRISES, INC.
Statement of Shareholders' Equity
October 1, 1999 through September 30, 2001
Additional
Common Stock Paid-In Retained
Shares Par Value Capital Deficit Total
---------- --------- -------------- ----------- ----------
BALANCE, OCTOBER 1, 1999 500,000 $ 50 $ 398 $ (1,948) $ (1,500)
Third party expenses paid by an affiliate on
behalf of the Company (Note B)................... - - 7,607 - 7,607
Net loss for year ended September 30, 2000.......... - - - (7,607) (7,607)
---------- --------- -------------- ----------- ----------
BALANCE, SEPTEMBER 30, 2000 500,000 50 8,005 (9,555) (1,500)
Third party expenses paid by an affiliate on
behalf of the Company (Note B)................... - - 22,955 - 22,955
Net loss for year ended September 30, 2001.......... - - - (9,047) (9,047)
---------- --------- -------------- ----------- ----------
BALANCE, SEPTEMBER 30, 2001 500,000 $ 50 $ 30,960 $ (18,602) $ 12,408
========== ========= ============== =========== ==========
See accompanying notes to financial statements
F-5
CADDO ENTERPRISES, INC.
Statements of Cash Flows
Years Ended September 30,
2001 2000
-------------- --------------
Cash flows from operating activities:
Net loss.................................................. $ (9,047) $ (7,607)
Transactions not requiring cash:
Changes in operating liabilities:
Accounts payable and accrued liabilities............ 952 -
-------------- --------------
Net cash used in operating activities (8,095) (7,607)
-------------- --------------
Cash flows from financing activities:
Payments for deferred offering costs...................... (14,860) -
Third party expenses paid by affiliate on
behalf of the company, recorded as
additional-paid-in capital............................. 22,955 7,607
-------------- --------------
Net cash provided by financing activities 8,095 7,607
-------------- --------------
Net change in cash.............................................. - -
Cash, beginning of period....................................... - -
-------------- --------------
Cash, end of period $ - $ -
============== ==============
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest................................................$ - $ -
============== ==============
Income taxes............................................$ - $ -
============== ==============
See accompanying notes to financial statements
F-6
CADDO ENTERPRISES, INC.
Notes To Financial Statements
Note A: Organization and summary of significant accounting policies
Organization
Caddo Enterprises, Inc. (the "Company") was incorporated, under the laws of
Nevada on September 23, 1997 to engage in any lawful corporate undertaking,
including, but not limited to, selected mergers and acquisitions. The Company's
business plan is to evaluate, structure and complete a merger with, or
acquisition of, a privately owned corporation.
Management changed the manner in which it presents the Company's operating
results and cash flows during the year ended September 30, 2001. Management no
longer considers the Company in the development stage as defined by the FASB
Statement of Standards No. 7, "Accounting and Reporting by Development Stage
Enterprises." As a result, cumulative operating results and cash flow
information is no longer presented in the financial statements. This change does
not affect the Company's operating results or financial position. Accordingly,
no pro forma financial information is necessary. Historical information has been
revised in conformity with current practice.
The accompanying financial statements have been prepared on a going concern
basis, which contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business. As shown in the accompanying
financial statements, the Company has a working capital deficiency as of
September 30, 2001 and recurring losses since inception. These factors, among
others, may indicate that the Company will be unable to continue as a going
concern for reasonable period of time.
The financial statements do not include any adjustments relating to the
recoverability and classification of liabilities that might be necessary should
the Company be unable to continue as a going concern. The Company's continuation
as a going concern is dependent upon continuing capital contributions from an
affiliate to meet its obligations on a timely basis, consummating a business
combination with an operating company, and ultimately attaining profitability.
The Company is also plans to raise $200,000 through a common stock offering
included on a Registration Statement filed with the Securities and Exchange
Commission ("SEC") on Form SB-2 (see Note D). There is no assurance that the
affiliate will continue to provide capital to the Company, that the Company can
identify a target company and consummate a business combination, or that the
Company will be successful in raising capital through its common stock offering.
The financial statements do not include any adjustments that might result from
the outcome of this uncertainty.
Summary of significant accounting policies
Cash and equivalents
For the purposes of the statement of cash flows, the Company considers all
highly liquid debt instruments purchased with an original maturity of three
months or less to be cash equivalents. The Company had no cash or cash
equivalents at September 30, 2001.
Fair value of financial instruments
The Company's financial instruments consist of accounts payable and accrued
liabilities. The carrying amounts of the current liabilities approximate fair
value due to the short-term maturity of the instruments.
F-7
CADDO ENTERPRISES, INC.
Notes To Financial Statements
Use of estimates
The preparation of the financial statements in conformity with generally
accepted accounting principals requires management to make estimates and
assumptions that affect certain reported amounts of assets and liabilities;
disclosure of contingent assets and liabilities at the date of the financial
statements; and the reported amounts of revenues and expenses during the
reporting period. Accordingly, actual results could differ from those estimates.
Income Taxes
The Company reports income taxes in accordance with SFAS No. 109, "Accounting
for Income Taxes", which requires the liability method in accounting for income
taxes. Deferred tax assets and liabilities arise from the difference between the
tax basis of an asset or liability and its reported amount on the financial
statements. Deferred tax amounts are determined by using the tax rates expected
to be in effect when the taxes will actually be paid or refunds received, as
provided under currently enacted law. Valuation allowances are established when
necessary to reduce the deferred tax assets to the amounts expected to be
realized. Income tax expense or benefit is the tax payable or refundable,
respectively, for the period plus or minus the change during the period in the
deferred tax assets and liabilities.
Loss per common share
Basic loss per share is computed by dividing income available to common
shareholders (the numerator) by the weighted-average number of common shares
(the denominator) for the period. The computation of diluted loss per share is
similar to basic loss per share, except that the denominator is increased to
include the number of additional common shares that would have been outstanding
if potentially dilutive common shares had been issued.
At September 30, 2001, there was no variance between basic and diluted loss per
share as there were no potentially dilutive common shares outstanding.
Stock-based compensation
SFAS No. 123, "Accounting for Stock-Based Compensation" permits the use of
either a "fair value based method" or the "intrinsic value method" defined in
Accounting Principles Board Opinion 25, "Accounting for Stock Issued to
Employees" (APB 25) to account for stock-based compensation arrangements.
Companies that elect to use the method provided in APB 25 are required to
disclose pro forma net income and pro forma earnings per share information that
would have resulted from the use of the fair value based method. The Company has
elected to continue to determine the value of stock-based compensation
arrangements with employees under the provisions of APB 25. No pro forma
disclosures have been included with the accompanying financial statements as
there was no pro forma effect to the Company's net loss or net loss per share.
Note B: Related party transactions
The Company maintains a mailing address at an affiliate's address. At this time,
the Company has no need for an office.
F-8
CADDO ENTERPRISES, INC.
Notes To Financial Statements
The Company does not maintain a checking account and expenses incurred by the
Company have historically been paid by an affiliate. During the years ended
September 30, 2001 and 2000, the Company incurred $16,654 in expenses of which
$14,202 was paid by the affiliate. The remaining balance of $2,452 is included
in accounts payable and accrued liabilities in the accompanying financial
statements. The affiliate also paid $14,860 in deferred offering costs on behalf
of the Company during the years ended September 30, 2001 and 2000.
Since the Company's inception, the affiliate has paid offering costs and
expenses on behalf of the Company totaling $30,960. The affiliate does not
expect to be repaid for the expenses it pays on behalf of the Company.
Accordingly, payments made by the affiliate are classified as additional paid-in
capital.
Note C: Income taxes
A reconciliation of U.S. statutory federal income tax rate to the effective rate
is as follows:
For the Years Ended
September 30,
---------------------
2001 2000
---------- ----------
U.S. statutory federal rate...................... 15.00% 15.00%
State income tax rate, net of federal benefit.... 3.94% 4.04%
Net operating loss (NOL) for which no tax
benefit is currently available................ -18.94% -19.04%
---------- ----------
0.00% 0.00%
========== ==========
At September 30, 2001, deferred taxes consisted of a net tax asset of $3,065,
due to operating loss carryforwards of $17,650, which was fully allowed for, in
the valuation allowance of $3,065. The valuation allowance offsets the net
deferred tax asset for which there is no assurance of recovery. The changes in
the valuation allowance for the years ended September 30, 2001 and 2000 were
$1,533 and $1,162, respectively. Net operating loss carryforwards will expire
through 2021.
The valuation allowance will be evaluated at the end of each year, considering
positive and negative evidence about whether the asset will be realized. At that
time, the allowance will either be increased or reduced; reduction could result
in the complete elimination of the allowance if positive evidence indicates that
the value of the deferred tax asset is no longer impaired and the allowance is
no longer required.
Should the Company undergo an ownership change, as defined in Section 382 of the
Internal Revenue Code, the Company's tax net operating loss carryforwards
generated prior to the ownership change will be subject to an annual limitation
which could reduce or defer the utilization of those losses.
Note D: Form SB-2 Filing
The Company filed a Registration Statement on Form SB-2 with the Securities and
Exchange Commission ("SEC") in January of 2001 to offer for sale 200,000 common
shares at $1.00 per share. To date, the SEC has not declared the Form SB-2
effective.
F-9
To the Board of Directors and Shareholders
Caddo Enterprises, Inc.
Independent Auditors' Report
We have audited the balance sheet of Caddo Enterprises, Inc. (a development
stage company) as of September 30, 2000 and the related statements of
operations, shareholders' equity and cash flows for the years ended September
30, 2000 and 1999. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Caddo Enterprises, Inc. as of
September 30, 2000 and the related statements of operations and cash flows for
the years ended September 30, 2000 and 1999, in conformity with generally
accepted accounting principles.
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. As discussed in Note A to the financial
statements, the Company has a substantial dependence on the success of its
development stage activities, significant losses since inception, lack of
liquidity, and a working capital deficiency at September 30, 2000. These factors
raise substantial doubt about the Company's ability to continue as a going
concern. Management's plans regarding those matters are also described in Note
A. The financial statements do not include any adjustments that might result
from the outcome of this uncertainty.
Cordovano and Harvey, P.C
Denver, Colorado
January 10, 2001
F-10
CADDO ENTERPRISES, INC.
(A Development Stage Company)
Balance Sheet
September 30, 2000
ASSETS
CURRENT ASSETS
Cash......................................................$ -
-----------------
TOTAL CURRENT ASSETS -
-----------------
TOTAL ASSETS -
-----------------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Acccrued liabilities......................................$ 1,500
-----------------
TOTAL CURRENT LIABILITIES 1,500
SHAREHOLDERS' EQUITY
Common stock, $.0001 par value, 100,000,000 shares
authorized, 500,000 shares issued and
outstanding (See Note B)............................... 50
Additional paid in capital................................ 8,005
Deficit accumulated during the development stage.......... (9,555)
-----------------
TOTAL SHAREHOLDERS' EQUITY (1,500)
-----------------
$ -
=================
See accompanying notes to financial statements
F-11
CADDO ENTERPRISES, INC.
(A Development Stage Company)
Statements of Operations
September 23, 1997
(Inception)
Year Ended Through
September 30, 2000 September 30, 1999 September 30, 2000
-------------------- -------------------- --------------------
(unaudited)
INCOME
Revenue.....................................$ - $ - $ -
COSTS AND EXPENSES
Legal fees..................................$ 2,792 $ 198 $ 2,990
Accounting fees............................. 2,000 1,500 3,500
Licenses and fees........................... 200 200 400
Organizational Costs........................ - - 50
Printing.................................... 2,615 - 2,615
-------------------- -------------------- --------------------
LOSS FROM OPERATIONS (7,607) (1,898) (9,555)
-------------------- -------------------- --------------------
INCOME TAX BENEFIT (EXPENSE) (NOTE C)
Current tax benefit......................... 1,448 286 1,819
Deferred tax expense........................ (1,448) (286) (1,819)
-------------------- -------------------- --------------------
NET LOSS $ (7,607) $ (1,898) $ (9,555)
==================== ==================== ====================
BASIC LOSS PER COMMON SHARE................. * * *
==================== ==================== ====================
BASIC WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING..................... 500,000 500,000 500,000
==================== ==================== ====================
* Less than .01 per share
See accompanying notes to financial statements
F-12
CADDO ENTERPRISES, INC.
(A Development Stage Company)
Statement of Shareholders' Equity
September 23, 1997 (inception) through September 30, 2000
Deficit
Accumulated
Capital Paid During
Preferred Stock Common Stock In Excess Development
Shares Amount Shares Amount of Par Value Stage Total
-------- -------- -------- -------- ------------ ----------- ---------
Beginning balance, September 23, 1997................... - $ - - $ - $ - $ - $ -
Common stock issued in exchange
for services........................................ - - 500,000 50 - - 50
Net loss for the period ended September 30, 1997........ - - - - (50) (50)
-------- -------- -------- -------- ------------ ----------- ---------
BALANCE, SEPTEMBER 30, 1997 - - 500,000 50 - (50) -
Net loss for year ended September 30, 1998.............. - - - - - - -
-------- -------- -------- -------- ------------ ----------- ---------
BALANCE, SEPTEMBER 30, 1998 - - 500,000 50 - (50) -
Expenses paid by third party on behalf of the Company... - - - - 398 - 398
Net loss for year ended September 30, 1999.............. - - - - - (1,898) (1,898)
-------- -------- -------- -------- ------------ ----------- ---------
BALANCE, SEPTEMBER 30, 1999 - - 500,000 50 398 (1,948) (1,500)
Expenses paid by third party on behalf of the Company... - - - - 7,607 - 7,607
Net loss for year ended September 30, 2000.............. - - - - - (7,607) (7,607)
-------- -------- -------- -------- ------------ ----------- ---------
BALANCE, SEPTEMBER 30, 2000 - - 500,000 50 8,005 (9,555) (1,500)
======== ======== ======== ======== ============ =========== =========
See accompanying notes to financial statements
F-13
CADDO ENTERPRISES, INC.
(A Development Stage Company)
Statements of Cash Flows
September 23, 1997
(Inception)
Year Ended Through
September 30, 2000 September 30, 1999 September 30, 2000
-------------------- -------------------- --------------------
(unaudited)
CASH (USED IN)
OPERATING ACTIVITIES
Net loss....................................$ (7,607) $ (1,898) $ (9,555)
Non-cash transactions:
Common stock issued for services.......... - - 50
Changes in operating assets and liabilities:
Accounts payable and accrued liabilities.. - 1,500 1,500
Third party expenses paid by affiliate on
behalf of the company, recorded as
additional-paid-in capital................ 7,607 398 8,005
-------------------- -------------------- --------------------
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES - - -
-------------------- -------------------- --------------------
NET CASH PROVIDED BY
FINANCING ACTIVITIES - - -
-------------------- -------------------- --------------------
NET INCREASE IN CASH - - -
Cash, beginning of period................... - - -
-------------------- -------------------- --------------------
CASH, END OF PERIOD $ - $ - $ -
==================== ==================== ====================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest...............................$ - $ - $ -
==================== ==================== ====================
Income taxes...........................$ - $ - $ -
==================== ==================== ====================
Non-cash financing activities:
500,000 shares common stock
issued for services....................$ - $ - $ 50
==================== ==================== ====================
See accompanying notes to financial statements
F-14
CADDO ENTERPRISES, INC.
(A Development Stage Company)
Notes to Financial Statements
Note A: Organization and summary of significant accounting policies
Organization
- ------------
Caddo Enterprises, Inc. (the "Company") was incorporated under the laws of
Nevada on September 23, 1997 to engage in any lawful corporate undertaking,
including, but not limited to, selected mergers and acquisitions. The Company is
a development stage enterprise in accordance with Statement of Financial
Accounting Standard (SFAS) No. 7.
The Company has been in the development stage since inception and has no
operations to date.
The accompanying consolidated financial statements have been prepared on a going
concern basis, which contemplates the realization of assets and the satisfaction
of liabilities in the normal course of business. As shown in the accompanying
consolidated financial statements, the Company is a development stage company
with no revenue as of September 30, 2000 and has incurred losses of $(7607),
$(1,898) and $(9,556) for the years ended September 30, 2000 and 1999 and for
the period September 23, 1997 (inception) through September 30, 2000,
respectively. The Company has no operating history or revenue, no assets, and
continuing losses which the Company expects will continue for the foreseeable
future. These factors among others may indicate that the Company will be unable
to continue as a going concern for a reasonable period of time. An affiliate of
the Company plans to continue advancing funds on an as needed basis and in the
longer term, revenues from the operations of a merger candidate, if found. The
Company's continuation as a going concern is dependent upon continuing capital
advances from an affiliate and commencing operations or locating and
consummating a business combination with an operating company. There is no
assurance that the affiliate will continue to provide capital to the Company or
that the Company can commence operations or identify such a target company and
consummate such a business combination. These factors, among others, raise
substantial doubt about its ability to continue as a going concern. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
Summary of significant accounting policies
- ------------------------------------------
Cash equivalents
- ----------------
The Company's financial instruments consist of accounts payable and accrued
liabilities. For financial accounting purposes and the statement of cash flows,
cash equivalents include all highly liquid debt instruments purchased with an
original maturity of three months or less.
F-15
CADDO ENTERPRISES, INC.
(A Development Stage Company)
Notes to Financial Statements
Note A: Organization and summary of significant accounting policies, continued
Use of estimates
- ----------------
The preparation of the financial statements in conformity with generally
accepted accounting principals requires management to make estimates and
assumptions that affect certain reported amounts of assets and liabilities;
disclosure of contingent assets and liabilities at the date of the financial
statements; and the reported amounts of revenues and expenses during the
reporting period. Accordingly, actual results could differ from those estimates.
Income Taxes
- ------------
The Company reports income taxes in accordance with SFAS No. 109, "Accounting
for Income Taxes", which requires the liability method in accounting for income
taxes. Deferred tax assets and liabilities arise from the difference between the
tax basis of an asset or liability and its reported amount on the financial
statements. Deferred tax amounts are determined by using the tax rates expected
to be in effect when the taxes will actually be paid or refunds received, as
provided under currently enacted law. Valuation allowances are established when
necessary to reduce the deferred tax assets to the amounts expected to be
realized. Income tax expense or benefit is the tax payable or refundable,
respectively, for the period plus or minus the change during the period in the
deferred tax assets and liabilities.
Loss per common share
- ---------------------
The Company has adopted Statement of Financial Accounting Standards No. 128
("SFAS 128") which requires the disclosure of basic and diluted earnings per
share. Basic earnings per share is calculated using income available to common
shareowners divided by the weighted average of common shares outstanding during
the year. Diluted earnings per share is similar to basic earnings per share
except that the weighted average of common shares outstanding is increased to
include the number of additional common shares that would have been outstanding
if the dilutive potential common shares, such as options, had been issued. The
Company has a simple capital structure and no outstanding options at September
30, 2000. Therefore, dilutive earnings per share are not applicable and
accordingly have not been presented
Fiscal year
- -----------
The Company operates on a fiscal year ending on September 30.
F-16
CADDO ENTERPRISES, INC.
(A Development Stage Company)
Notes to Financial Statements
Note A: Organization and summary of significant accounting policies, continued
Stock based compensation
- ------------------------
SFAS No. 123, "Accounting for Stock-Based Compensation" was issued in October
1995. This accounting standard permits the use of either a fair value based
method or the method defined in Accounting Principles Board Opinion 25,
"Accounting for Stock Issued to Employees" ("APB 25") to account for stock-based
compensation arrangements. Companies that elect to use the method provided in
APB 25 are required to disclose pro forma net income and earnings per share that
would have resulted from the use of the fair value based method. The Company has
elected to continue to determine the value of stock-based compensation
arrangements under the provisions of APB 25. For stock issued to officers the
fair value approximates the intrinsic value. Therefore, no pro forma disclosures
are presented.
Fair value of financial instruments
- -----------------------------------
SFAS 107, "Disclosure About Fair Value of Financial Instruments," requires
certain disclosures regarding the fair value of financial instruments. The
Company has determined, based in available market information and appropriate
valuation methodologies, the fair value of its financial instruments
approximates carrying value. The carrying amounts of cash, accounts payable, and
other accrued liabilities approximate fair value due to the short-term maturity
of the instruments.
Recently issued accounting pronouncements
- -----------------------------------------
The Company has adopted the following new accounting pronouncements for the year
ended September 30, 1999. There was no effect on the financial statements
presented from the adoption of the new pronouncements.
Statement of Financial Accounting Standard ("SFAS") No. 130, "Reporting
Comprehensive Income," requires the reporting and display of total comprehensive
income and its components in a full set of general-purpose financial statements.
SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information," is based on the "management" approach for reporting segments. The
management approach designates the internal organization that is used by
management for making operating decisions and assessing performance as the
source of the Company's reportable segments. SFAS No. 131 also requires
disclosure about the Company's products, the geographic areas in which it earns
revenue and holds long-lived assets, and its major customers.
SFAS No. 132, "Employers' Disclosures about Pensions and Other Post-retirement
Benefits," which requires additional disclosures about pension and other
post-retirement benefit plans, but does not change the measurement or
recognition of those plans.
F-17
CADDO ENTERPRISES, INC.
(A Development Stage Company)
Notes to Financial Statements
Note A: Organization and summary of significant accounting policies, concluded
SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities,"
requires an entity to recognize all derivatives on a balance sheet, measured at
fair value.
Statement of Position ("SOP") 98-1 "Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use." This SOP requires that
entities capitalize certain internal-use software costs once certain criteria
are met.
SOP 98-5, "Reporting on the Costs of Start-Up Activities." Sop 98-5 provides,
among other things, guidance on the reporting of start-up costs and organization
costs. It requires costs of start-up activities and organization costs to be
expensed as incurred.
The Company will continue to review these new accounting pronouncements over
time to determine if any additional disclosures are necessary based on evolving
circumstances.
Note B: Related party transactions
The Company maintains a mailing address at an affiliate's address. This address
is Suite 104, 1456 St. Paul Street, Kelowna, B.C., Canada, V1Y 2E6. At this time
the Company has no need for an office.
The Company has issued an officer 500,000 shares of common stock in exchange for
services related to management and organization costs of $50.00. The officer
will provide administrative and marketing services as needed. The officer may,
from time to time, advance to the Company any additional funds that the Company
needs for costs in connection with searching for or completing an acquisition or
merger.
The Company does not maintain a checking account and all expenses incurred by
the Company are paid by an affiliate. For the fiscal year ended September 2000
the Company incurred $2,792 in legal expense, $2,000 in accounting expense,
$2,615 in printing expense, $85 in filing fees, and $115 in resident agent fees.
The affiliate does not expect to be repaid for the expenses it pays on behalf of
the Company. Accordingly, as the expenses are paid, they are classified as
additional-paid-in capital.
F-18
CADDO ENTERPRISES, INC.
(A Development Stage Company)
Notes to Financial Statements
Note C: Income taxes
A reconciliation of U.S. statutory federal income tax rate to the effective rate
for the years ended September 30, 2000 and September 30, 1999 is as follows:
September 19,
1997
(inception)
Year Ended Through
September 30, September 30,
2000 2000
------------- ------------
U.S. statutory federal rate...................... 15.00% 15.00%
State income tax rate, net of federal benefit.... 4.04% 4.04%
Offering costs, permanent difference............. 0.00% 0.00%
Net operating loss (NOL) for which no tax
benefit is currently available................ -19.04% -19.04%
------------- ------------
0.00% 0.00%
============= ============
The valuation allowance offsets the net deferred tax asset for which there is no
assurance of recovery. The change in the valuation allowance for the years ended
September 30, 2000 and September 30, 1999 was $1,162. NOL carryforwards at
September 30, 2000 will begin to expire in 2013. The valuation allowance will be
evaluated at the end of each year, considering positive and negative evidence
about whether the asset will be realized. At that time, the allowance will
either be increased or reduced; reduction could result in the complete
elimination of the allowance if positive evidence indicates that the value of
the deferred tax asset is no longer impaired and the allowance is no longer
required.
Should the Company undergo an ownership change, as defined in Section 382 of the
Internal Revenue Code, the Company's tax net operating loss carryforwards
generated prior to the ownership change will be subject to an annual limitation
which could reduce or defer the utilization of those losses.
Note D: Shareholders' equity
Common Stock
- ------------
The Company initially authorized 25,000 shares of $1.00 par value common stock.
On September 23, 1997 the Board of Directors approved an increase in authorized
shares to 100,000,000 and changed the par value to $.0001. On September 23, 1997
the Company issued 500,000 shares of common stock for services valued at $.0001
per share, or $50.
F-19
CADDO ENTERPRISES, INC.
(A Development Stage Company)
Notes to Financial Statements
Note D: Shareholders' equity, concluded
On September 1, 1999 the Company filed amended articles with the state of Nevada
to change the authorized shares of common stock originally approved by the Board
of Directors on September 23, 1997 from 25,000, no par value to 100,000,000,
$.0001 par. Nevada Revised Statutes Section 78.385 (c) treats this amendment as
if it was filed on September 23, 1997, therefore, giving the Company enough
shares for the original issuance of 500,000 shares of common stock.
F-20
[BACK COVER]
Part II. Information Not Required In Prospectus
Item 24. Indemnification of officers and directors
The information required by this Item is incorporated by reference to
"Indemnification of Officers and Directors" in the Prospectus.
Item 25 -- Other Expenses of Issuance and Distribution
Securities and Exchange Commission filing fee $ 56.00
Blue Sky filing fees 500.00
Legal fees and expenses 23,000.00
Printing 1,500.00
Marketing expenses 1,000.00
Miscellaneous 500.00
---------
Total $ 26,556.00
=========
Item 26 -- Recent Sales of Unregistered Securities
On September 23, 1997, the Company issued 500,000 shares of common
stock to Devinder Randhawa, for $50. The Company relied on exemption provided by
Section 4(2) of the Securities Act of 1933, as amended, for the issuance of
500,000 shares of common stock to Mr. Randhawa. All of the shares of common
stock of the Company previously issued have been issued for investment purposes
in a "private transaction" and are "restricted" shares as defined in Rule 144
under the `33 Act.
On September 23, 1997, Mr. Randhawa gifted 152,000 shares of common
stock to Bob Hemmerling, Secretary of the Company, and gifted 196,000 shares of
common stock to eight other shareholders for a total of 500,000 shares of common
stock. The shares were gifted to increase the number of shareholders. This was a
transaction deemed to be "by or on behalf of the issuer" by the SEC Staff, and
therefore the issuer relied upon Regulation S. All of these shares are
"restricted" shares as defined in Rule 144 under the Securities Act of 1933.
As of the date of this registration statement, all of the issued and
outstanding shares of the Company's common stock would normally be eligible for
sale under Rule 144 promulgated under the '33 Act, subject to certain
limitations included in said Rule. However, the SEC staff, through a letter to
the NASD in November of 1999, has eliminated the availability of Rule 144 for
the public sale of all shares issued by blank check companies in private
placements, unless those shares are sold under a registration statement. As a
result, the 500,000 shares issued by the Company prior to the filing of this
registration statement may not be resold on the secondary market unless a
registration statement is filed for their resale.
II-1
Item 27-Exhibits
3.1* Articles of Incorporation
3.2* Amendment to Articles of Incorporation
3.3* Bylaws
4.1* Specimen Informational Statement
4.1.2*** Share Purchase Agreement
5.1*** Opinion of Foley & Lardner with respect to the legality of the
shares being registered
23.1.1 Consent of Cordovano & Harvey, P.C.
23.2 Consent of Foley & Lardner (included in Exhibit 5.1)
24.1*** Power of Attorney
99.1** Escrow Agreement
* Incorporated by reference to Form 10-SB, File No. 000-29021,
filed January 19, 2000.
** To be filed in an amendment.
*** Previously filed.
Item 28 -- Undertakings
We undertake that we will:
1) File, during any period in which it offers or sells securities, a
post-effective amendment to this registration statement to:
(i) Include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) Reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in
the information in the registration statement; and
(iii) Include any additional or changed material information on
the plan of distribution.
2) For determining liability under the Securities Act, 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 bona fide offering.
3) File a post-effective amendment to remove from registration any
of the securities that remain unsold at the end of the offering.
We undertake to provide to the underwriters at the closing specified in
the underwriting agreement certificates in such denominations and registered in
such names as the underwriter requires to permit prompt delivery to each
purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, we have been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable.
II-2
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form SB-2 and authorized this registration
statement on Form SB-2 to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Kelowna, Province of British Columbia, Canada,
on January 9, 2002.
Caddo Enterprises, Inc.
/s/ Garry Henry
--------------------------------------
Garry Henry, President
Signature Title Date
- --------- ----- ----
/s/Garry Henry President, Director January 9, 2002
- --------------------------
Garry Henry
/s/Laurie deBoer Director January 9, 2002
- --------------------------
Laurie deBoer