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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT #1 TO
FORM SB-2
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
CEDAR MOUNTAIN DISTRIBUTORS, INC.
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(Name of Small Business Issuer in its Charter)
NEVADA 42249 91-2015441
----------------------------- ---------------------------- -------------------
(State or Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification No.)
1236 EAST FRONTIER LANE, OLATHE, KANSAS 66062 (913) 782-3068
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(Address and Telephone Number of Principal Executive Offices)
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(Address of Principal Place of Business or Intended Principal Place of Business)
JAMES R. SMITH
1236 EAST FRONTIER LANE, OLATHE, KANSAS 66062
(913) 782-3068
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(Name, Address and Telephone Number of Agent for Service)
Approximate date of commencement of proposed sale to the public: Effective date
of this registration statement.
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(c) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement of the earlier effective registration statement for the
same offering. / /
If delivery of the Prospectus is expected to be made pursuant to Rule 434, check
the following box. / /
CALCULATION OF REGISTRATION FEE
<Table>
<Caption>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF DOLLAR AMOUNT OFFERING PRICE AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED TO BE REGISTERED PER UNIT PRICE REGISTRATION FEE
---------------------------- ---------------- ---------------- ------------------ ----------------
Common Stock par value $.001 $200,000 $1.00 $200,000 $50.00
</Table>
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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.
PROSPECTUS
FOR THE INITIAL PUBLIC OFFERING FOR SALE OF
FROM 1 TO 200,000 SHARES OF COMMON STOCK
OF
CEDAR MOUNTAIN DISTRIBUTORS, INC.
<Table>
<Caption>
TOTAL TOTAL
IF NO IF ALL 200,000
PER SHARES SHARES
SHARE ARE SOLD ARE SOLD
------- -------- --------------- -------------------
Initial Offering
Price to the Public: $1.00 0 $200,000 The offering being presented in this Prospectus (the
"Offering") is being conducted on a direct participation
basis without the assistance of an underwriter. No
commissions are being paid. There is no minimum number of
shares we must sell and no minimum investment required of an
investor. A trust, escrow, or similar account will not be
established pending the sale of the shares and any proceeds
from this Offering will become immediately available for our
use. No funds will be returned regardless of how many or how
few shares are sold.
Offering Expenses: $0.25 $49,500 $49,500
Net Proceeds: $0.75 $(49,500) $150,500
</Table>
This Offering will terminate six months from the date of this Prospectus unless
all shares offered hereby are sold prior to that date.
INVESTING IN THE SHARES INVOLVES A HIGH DEGREE OF RISK. YOU SHOULD PURCHASE
SHARES ONLY IF YOU CAN AFFORD A COMPLETE LOSS. SEE "RISK FACTORS" BEGINNING ON
PAGE 4.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES OR DETERMINED THAT THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS OCTOBER 18, 2001
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TABLE OF CONTENTS
<Table>
<Caption>
PAGE
----
PART I....................................................................... 3
Summary of Offering.......................................................... 3
The Offering................................................................. 4
Risk Factors................................................................. 4
Forward Looking Statements................................................... 8
Use of Proceeds.............................................................. 8
Dividend Policy.............................................................. 9
Dilution..................................................................... 9
Business..................................................................... 10
Management................................................................... 15
Executive Compensation....................................................... 16
Principal Stockholders....................................................... 17
Certain Transactions Involving Officers, Directors, and Affiliates........... 18
Description of Common Stock.................................................. 18
Indemnification and Public Policy............................................ 21
Terms of the Offering........................................................ 22
No Public Market for Our Common Stock........................................ 23
Shares Eligible for Future Sale.............................................. 24
Litigation................................................................... 25
Legal Matters................................................................ 25
Experts...................................................................... 25
Additional Information....................................................... 25
Financial Information........................................................ 25
Financial Statements......................................................... F-1 - F-11
PART II...................................................................... II-1
Indemnification of Directors and Officers.................................... II-1
Other Expenses of Issuance and Distribution.................................. II-1
Recent Sales of unregistered Securities...................................... II-1
Exhibits..................................................................... II-2
Undertakings................................................................. II-2
Signature.................................................................... II-3
</Table>
No dealer, salesman, or other person has been authorized to give any information
or to make any representations other than contained in this Prospectus in
connection with the Offering described here. If given or made, such information
or representations must not be relied upon as having been authorized by us. This
Prospectus does not constitute an offer to sell, or the solicitation of an offer
to buy, the securities offered by this Prospectus to any person in any state or
other jurisdiction in which the offer or solicitation is unlawful. Neither the
delivery of this Prospectus nor any sale under this Prospectus shall, under any
circumstances, create any implication that there has been no change in our
affairs since such date.
Only our President, James R. Smith, and our Vice President, Lauri A. Orscheln,
are authorized to offer these securities on our behalf. See "Plan of
Distribution," page 22.
Until January 15, 2002 (90 days after the date of this Prospectus), all
dealers effecting transactions in the securities registered in this Offering may
be required to deliver a Prospectus. This is in addition to the dealer's
obligation to deliver a Prospectus when acting as underwriters and with respect
to their unsold allotments or subscriptions.
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SUMMARY OF OFFERING
Cedar Mountain Distributors, Inc. was incorporated in the State of Nevada on
December 23, 1999 using the name "KNETX Skates Corporation." On June 9, 2000,
the name was changed to Cedar Mountain Distributors, Inc. ("our Company," "us,"
"we," "our," etc.). On June 20, 2000, we acquired all common stock of Tarus
International, Inc. ("Tarus"), a company incorporated in the State of Kansas,
which is now our wholly-owned subsidiary. Before this acquisition, we were not
actively engaged in any business activity, had no revenues, and had only very
limited operating expenses. Prior to this merger, Tarus was engaged in the sale
and distribution of beverage products from the time of its formation on August
5, 1999. Our principal executive offices are located at 1236 East Frontier Lane,
Olathe, Kansas 66062. Our telephone number is (913) 782-3068. Our fiscal year
coincides with the annual year and ends on December 31.
BUSINESS
We are an early stage beverage brokerage company based in Olathe, Kansas. We
supply a limited line of beverages to schools, universities, wholesalers,
retailers, and distributors in the Midwestern United States through our
subsidiary, Tarus. Our products include beverages in four traditional beverage
categories: bottled water, fruit beverages, soft drinks, and sports drinks. We
do not develop, produce, bottle, or otherwise manufacture any of our own
products. Our principal business is soliciting contracts to purchase beverage
products from wholesalers and arranging distribution of those products to
institutional and retail customers.
OPERATING RESULTS
We have a very limited operating history since our inception in 1999. For 2000,
sales revenues were nominal and we experienced a net loss. Year 2000 represented
a transition year for us, as we operated as a part-time business for the
majority of 2000. In December 2000, Lauri A. Orscheln joined our Company as
full-time Vice President of Sales.
For the first quarter 2001, we had product sales of approximately $10,618 and a
gross profit of $3,896. During that same period, we had expenses of $12,084 and
a net loss of $(8,852). We have not been profitable during any quarter or fiscal
year since our inception.
During 2001, Ms. Orscheln expanded our customer base by adding over 50 new
accounts. In contrast, as of the close of 2000, we had only three accounts. We
anticipate that the addition of these and other new accounts through Ms.
Orscheln's efforts will generate increased revenues in 2001 compared to our
results for 2000 (see "Introduction," page 10) based upon the number of accounts
alone.
PROPOSED PLAN OF OPERATIONS
We currently have rights to distribute four beverage products in the Midwest.
Kansas City will become our base of operations and initial market. We plan to
seek the rights to broker additional products and will seek partnerships with
bottlers, distributors, and producers to develop markets in other areas of the
country. Once established domestically, we intend to formulate a plan to expand
into international markets (see "Marketing Strategy and Proposed Plan of
Operation," page 11).
The funding strategy for our plan of operations has been first to obtain loans
from our shareholders to cover approximately $60,000 in startup costs. To date
we have raised approximately $60,000 in this manner, on terms described in "Use
of Proceeds" on page 8. These proceeds are being used to fund expenses of this
public offering, purchase product, and pay general and administrative expenses
for the first 12 months. After that time, proceeds from the public offering will
be used to re-pay loans and continue to grow the business (see "Use of
Proceeds," page 8).
In the event that we do not raise sufficient funds through this Offering to
implement our business plan, we intend to seek additional funding through one of
two methods on terms not yet determined. The first method would involve securing
additional loans, most likely from our existing investors or possibly from
banks. The second method would involve a private offering of our stock in
reliance on Regulation D
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and/or Section 4-2 of the Securities Exchange Act. We may also revise our
business plan to enable us to continue operations with reduced funding. Under
any scenario, loans made by original investors to initially fund our business
and to pay for offering expenses will be honored and repayment arrangements
made. For more information regarding our plan of operations, see "Marketing
Strategy and Proposed Plan of Operations" on page 11.
THE OFFERING
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(A) Common Stock Offered................... A total of from 1 to 200,000 shares of par value $.001
common stock will be offered hereunder. We will attempt to
sell these shares to the public ourselves without the
assistance of an underwriter. There is no minimum amount
which must be sold in order for the Offering to proceed and
no minimum investment is required. Funds from this Offering
will not be held in escrow and this Offering will close in
six months, regardless of how many or how few shares are
sold. All funds we receive may be used immediately. No funds
will be returned regardless of how many or how few shares
are sold. Only our President, James R. Smith, and our Vice
President, Lauri A. Orscheln, are authorized to offer or
sell these securities on our behalf (see "Plan of
Distribution," page 22).
(B) Proposed Symbol and Trading Market..... There currently is no trading market for our stock.
(C) Use of Proceeds........................ We will use the proceeds of this Offering first to pay the
Offering expenses. Additional proceeds will be used to pay
for product inventory, marketing, general expenses related
to operating the business, will serve as working capital,
and will go to pay off business-related loans (see "Use of
Proceeds").
(D) Offering Costs......................... If we are unable to raise sufficient proceed to cover the
Offering costs, we intend to cover the expenses with loan
proceeds.
</Table>
RISK FACTORS
This Offering involves a high degree of risk. You should carefully consider the
risks and uncertainties described below, and other information contained in the
Prospectus, before deciding whether to invest in shares of our common stock. If
any of these risks occur, our business results and financial condition could be
adversely affected. This could cause the price of our common stock to decline,
and you might lose part or all of your investment.
RISKS ASSOCIATED WITH OUR FINANCIAL POSITION
WE CURRENTLY LACK WORKING CAPITAL SUFFICIENT TO FULLY IMPLEMENT OUR PLAN OF
OPERATIONS. We are a newly-formed venture without significant assets or cash. We
have not brought in significant revenues to offset operating expenses. Our lack
of cash makes it difficult for us to expand our business through marketing
efforts or purchase sufficient product inventory for distribution. For 2000,
sales revenues were $20,272, with a gross profit of $2,138. During 2000, our
operating expenses were $14,050 and we had net losses for the year of $(12,794).
During the first quarter of 2001, we experienced net losses of approximately
$(8,552). Continuing losses are possible, and there is no assurance that our
business will ever become profitable.
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WE NEED TO SELL ALL THE SHARES INCLUDED IN THIS OFFERING. There is no
minimum number of shares that must be sold in this Offering; however, in order
to fully implement our proposed plan of operations, we need to sell all 200,000
shares of our common stock that are included in this Offering. If we are not
successful in selling all of this stock, the resulting cash shortfall will, in
all likelihood, impair our ability to reach profitability. Furthermore, if we
raise less than the costs of this Offering, none of the Offering proceed will be
used to pursue our plan of operations.
PENNY STOCK. Stock in our Company is currently considered "PENNY STOCK" as
that term is defined by the Securities and Exchange Commission ("SEC") Rule
3a-51-1. You should be aware that, according to the SEC Release No. 34-29093,
the market for penny stocks has suffered in recent years from patterns of fraud
and abuse which could cause investors in penny stocks to lose their entire
investment. Such patterns include:
o control of the market for the security by one or a few broker-dealers
that are often related to the promoter or issuer;
o manipulation of prices through prearranged matching of purchases and
sales and false and misleading press releases;
o "boiler room" practices involving high pressure sales tactics and
unrealistic price projections by inexperienced sales persons;
o excessive and undisclosed bid-ask differentials and markups by selling
broker-dealers; and
o the wholesale dumping of the same securities by promoters and
broker-dealers after prices have been manipulated to a desired level, along with
the inevitable collapse of those prices with consequent investor losses.
RISKS ASSOCIATED WITH HOW THIS OFFERING IS BEING CONDUCTED
NO UNDERWRITER. We have not hired an underwriter to assist us in selling
our common stock. Only our President, James R. Smith, and our Vice President,
Lauri A. Orscheln, are authorized to offer and sell these securities. Neither of
these individuals has any prior experience in selling stock to the public and
there can be no assurance that they will be able to sell all or any part of the
Offering.
NO ESCROW. There is no escrow account into which the proceeds of this
Offering will be deposited pending the sale of all shares. If we fail to sell
all the shares included in this Offering, no funds will be returned. All
proceeds of this Offering will be deposited directly into our operating account,
regardless of the number of shares sold for our immediate use.
ARBITRARY DETERMINATION OF PRICE PER SHARE. In most public offerings that
use the services of an underwriter, the underwriter has the opportunity to
review the terms of the public offering and decide whether the offering price of
a stock is fair and reasonable. Because we are attempting to sell our common
stock ourselves without using an underwriter, no independent review will be
conducted regarding the stock pricing. We arbitrarily determined the offering
price of our common stock. Prospective investors should not assume that the
offering price of our common stock necessarily reflects the actual value of our
common stock. The price does not bear any relationship to assets, earnings, book
value, or any other objective criteria of value. There is a risk that our
arbitrary offering price does not fairly value our common stock. See
"Determination of Offering Price," page 22.
OTHER FACTORS THAT MAY DIMINISH THE VALUE OF OUR COMMON STOCK
LACK OF A PUBLIC MARKET. Before this Offering, there has not been any
public market for our common stock. Furthermore, it is possible that an active
public market for our common stock may never develop or be sustained. We do not
intend to list our common stock on any national securities exchange or to apply
for listing on The Nasdaq National Stock Market or The Nasdaq SmallCap Stock
Market. Any public trading in our common stock would most likely take place in
the over-the-counter market in the
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so-called "PINK SHEETS" reported on the OTC Bulletin Board ("OTC:BB") service,
but may do so at sometime in the future. We have not applied to have our
stock trades reported on the OTC:BB. If a public market does not develop or is
not sustained, there is a risk that an investor might find it difficult to sell
our common stock at a time when the investor needs or desires to do so.
DIFFICULTY OF ASSESSING THE MARKET VALUE OF OUR COMMON STOCK. If our stock
is ultimately traded through the pink sheets or on the OTC:BB, a relative lack
of liquidity or volume and the participation of only a few market makers would
make it more likely that wide fluctuations in the quoted price of our common
stock would occur. As a result, there is a risk that an investor will not be
able to obtain accurate price quotes or be able to correctly assess the market
price of his stock. Increases in volatility could also make it more difficult to
pledge our common stock as collateral if an investor sought to do so because a
lender might also be unable to accurately value our common stock. Even if our
stock were to be traded on the Nasdaq National or SmallCap Stock Markets, which
we do not anticipate at the present time, the possibility of volatility would
still exist. These markets and the stocks traded thereon are also subject to
sharp fluctuations in value and in the number of shares traded.
IMMEDIATE, SUBSTANTIAL DILUTION. The public offering price of our common
stock is much higher than the net book value of our common stock that we have
already issued. As a result, purchasers of our common stock who pay $1.00 per
share will experience immediate and substantial dilution. Dilution to the
purchasers of shares included in this Offering will range from 95.5% to 99%,
depending on the number of shares sold.
NUMBER OF SHARES AVAILABLE FOR SALE. A significant portion of our shares
have already been issued. Any shares sold in this Offering are unrestricted and
thus may be resold in the public market immediately after they are purchased.
The remaining 3,000,000 of our outstanding shares are restricted shares that
were sold prior to this Offering. These restricted shares are available for
resale in the public market, or will become available soon, as described under
"Shares Eligible for Future Sale" below. As more restricted shares become
available for resale, the market price could drop significantly if the holders
of these restricted shares sell them or are perceived by the market as intending
to sell them.
WE DON'T EXPECT TO PAY DIVIDENDS ON COMMON STOCK ANYTIME SOON. We expect to
use all earnings and the proceeds from this Offering to develop our business.
Anyone in need of or expecting dividend income should not invest in our stock.
A FEW INDIVIDUALS WILL BE ABLE TO CONTROL THE COMPANY. A few individuals
will be able to control the company after the registration. After this Offering,
approximately 31.3% of our common stock will be controlled by James R. Smith,
and an additional combined total of approximately 49.3% will be controlled by
David C. Owen and Malcolm K. Green, individually or jointly. Accordingly, under
our Articles of Incorporation and the Nevada corporate laws, these shareholders
as a group will control the votes necessary to approve or disapprove of any
potential acquisitions, mergers, or other actions requiring a simple majority
vote of the stockholders. Messrs. Owen and Green are early investors in and
consultants to the Company and are each more than 10% beneficial owners of the
Company, neither had any prior business relationship with the Company or Tarus.
BUSINESS FACTORS THAT MAY HAVE A NEGATIVE EFFECT ON OUR OPERATIONS
INTENSE COMPETITION. The industry within which we compete is highly
fragmented and comprised of numerous companies, many of whom are larger and have
significantly more resources. In 1999, there were an estimated 30 licensed
beverage distributors located within a 50-mile radius of Kansas City.
Collectively, these distributors sold a total of approximately 70 million
gallons to the local market. A majority of these companies have been in business
for lengthy periods which make it difficult for us to break into the market and
become competitive. If a new consumer trend develops with significant market
potential, such as the high-energy beverage drink market, the potential exists
that major national distributors may enter and take-over that market very
quickly. Because we are significantly smaller than the majority of our national
or even local competitors, we may lack the financial resources needed to capture
market share in an amount sufficient for us to be profitable. Since we compete
for the same geographic markets, starting with the Kansas City metropolitan
area, as our competitors, their financial strength could prevent us from
capturing even a small portion of those markets.
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GOVERNMENTAL REGULATIONS AND ENVIRONMENTAL FACTORS. Our business could be
significantly affected if certain legislative proposals are adopted, including
soft drink taxes and mandatory container deposit laws. In that connection, a
proposal for a national container deposit law has been introduced in the past
and defeated in Congress. In addition, costs of compliance with existing and
future environmental laws and regulations cannot be predicted with any degree of
certainty and may significantly affect the Company's operations.
MANAGEMENT OF GROWTH. At present our operations are relatively simple. We
have only two employees and operate from the residence of our President, James.
R. Smith; however, if we are successful in increasing sales and growing our
business, the size and complexity of our operations will inevitably increase. We
may need larger facilities, more employees, and possibly our own warehouse. We
may also need augmented capabilities for order placement, billing, customer
service, and inventory control. We cannot guarantee that our management will
adequately manage our growth.
DEPENDENCY ON OUR SUPPLIERS. As a distributor, we face a number of risks
over which we will have little control. Since we do not bottle the products we
distribute, we are and will be dependent on our suppliers in many respects. Our
suppliers at anytime will determine prices, availability, delivery time, and the
quality of our products. Any failure by the supplier to meet product demand or
to maintain product quality could adversely affect us. At present, our only
supplier is Vancol Industries ("Vancol") of Denver, Colorado. If Vancol or
future suppliers were to experience production delays, work stoppages, an act of
God, or were to discontinue production of one or more of these beverages or go
out of business, we would suffer financial losses. Under such a scenario, there
is no guarantee that we would be able to secure distribution rights for any
substitute products from other producers.
LICENSING RIGHTS AND TERRITORY NOT GUARANTEED. Our primary beverage
supplier, Vancol, does not grant exclusive marketing territories, nor are
licensing rights guaranteed for any defined period of time. As a result, the
target marketing area might be given to a competitor if we fail to support the
existing customer base, aggressively market to new customers, or fail to grow
sales.
CHANGING CONSUMER HABITS. We have built our product line around certain
assumptions regarding consumer trends and profitability in the beverage market.
One such assumption is that it is feasible to build a profitable product line
around bottled still water, fruit flavored juices, and packaged sports drinks.
Together, these account for approximately 40% of the retail consumer market in
the U.S. for traditional beverage categories. If consumer preferences were to
shift in favor of other categories or in favor of competing products, our
business could be adversely affected. A partial shift to other products could
occur, for example, if the US economy were to enter a recession and more
consumers were to purchase generic or lower-priced beverages. If consumer
preferences were to shift for any reason, our business could be materially
affected.
INITIAL DEPENDENCE ON THE SCHOOL LUNCH MARKET. Much of our initial success
has centered on supplying beverages to schools in Johnson, Miami, and Franklin
counties in Kansas. The taste preferences of children may be hard to predict and
may be subject to fads. We will need to broaden our market beyond school lunch
programs. Much work remains to be done in broadening and deepening our markets.
DEPENDENCE ON KEY EMPLOYEES. We depend almost entirely on two employees to
manage our Company, James R. Smith and Lauri A. Orscheln. If we were to lose the
services of either employee, it would be extremely difficult for us to continue
in business. The loss specifically of Mr. Smith could result in the loss of our
office space currently being provided to us at no charge in his residence. We
have no employment contracts or key person insurance covering either Mr. Smith
or Mr. Orscheln.
PRODUCT LIABILITY AND OTHER SUITS. As a consumer-oriented business, we face
a possible risk of lawsuits for product liability and other causes. Even though
we are insured, one or more claims could conceivably arise that would exceed, or
would not be covered by, our insurance. If this were to occur, we would likely
be forced to liquidate our business and cease operations.
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FORWARD-LOOKING STATEMENTS
This Prospectus contains certain forward-looking statements that are based on
beliefs and assumptions of our management. Often, you can recognize these
statements because we use words such as "BELIEVE," "ANTICIPATE," "INTEND,"
"ESTIMATE," and "EXPECT" in the statements. Our actual performance in 2001 and
beyond could differ materially from the forward-looking statements contained in
this Prospectus. However, we are not obligated to release publicly, and do not
presently intend to release, any revisions to the forward-looking statements
contained in this Prospectus, except to the extent that we are obligated to do
so under Item 28 of our registration statement filed with the SEC on Form SB-2.
This Item requires us to file post-effective amendment(s) to this registration
statement to include in the Prospectus any facts or events which, individually
or together, represent a fundamental change in the registration statement and
also to include any additional or changed material information on the plan of
distribution.
USE OF PROCEEDS
The following table describes the intended use of proceeds of this Offering.
Because it is difficult to predict how many shares of this Offering may be sold
given the fact that we are attempting to sell the shares ourselves rather than
using the services of an underwriter, the table presents information that
assumes that one-fourth, one-half, three-fourths and all of the shares are sold.
It is also possible that we will sell less than one-fourth of the shares covered
by this Offering. IF WE SELL LESS THAN APPROXIMATELY ONE-FOURTH OF THE SHARES
REGISTERED IN THIS OFFERING NONE OF THE FUNDS RAISED WOULD BE AVAILABLE TO OUR
COMPANY; all would be used to pay the expenses of this Offering.
The categories of expenditures are also listed in the order of priority, with
purchase of merchandise being the most important category and working capital
the least important category. Accordingly, anywhere between approximately
$50,000 and $200,000 in gross proceeds would be allocated among the intended
uses as follows:
PERCENTAGE OF SHARES SOLD IN THIS OFFERING
<Table>
<Caption>
AMOUNT($)
25% 50% 75% 100%
-------- -------- -------- --------
DESCRIPTION:
Purchase of Inventory ............. 0 10,000 25,000 40,000
Marketing and Promotions .......... 0 10,000 15,000 25,000
General and Administrative(1) ..... 0 20,000 40,000 50,000
Loan Repayment(2) ................. 50,000 50,000 60,000 70,000
-------- -------- -------- --------
Working Capital ................... 0 10,000 10,000 15,000
-------- -------- -------- --------
TOTAL ............................. $ 50,000 $100,000 $150,000 $200,000
</Table>
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(1) Includes officers' salaries, rent, other fixed overhead expenses, and other
costs associated with office space we anticipate leasing. All of these
expenses are associated with the development and implementation of our
proposed plan of operations.
(2) The expenses of the Offering are estimated to be $49,500 and include filing
fees, transfer agent fees and expenses, legal fees and expenses, and
accounting fees and expenses. Because these expenses are being paid with
loan proceeds, the Loan Repayment represents the payment of "Offering
Expenses."
Certain of our investors have loaned us funds that are being used as operating
expenses and for the costs of this Offering. A portion of the proceeds of this
Offering will be used to pay off these loans. Thus far, these loans amount to
approximately $60,000. We intend to borrow up to a total of $80,000 in this
manner. Those loans are in the form of promissory notes (bridge loans) at an
interest rate of 10% per annum. The loans mature in one year and most will be
due beginning in March 2002 (see "Marketing Strategy and Proposed Plan of
Operation," page 11).
If we are successful in raising only a minimal amount of money, the resulting
lack of proceeds will make it unlikely that we will be able to fully implement
our proposed plan of operations. The projected expenditures above are estimates
and approximations only and may change due to changes in our
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business; however, as of the date hereof, they represent our best projection for
how the funds raised by this Offering will be used. For example, we may
determine that funds earmarked for one particular type of allocation may be more
productively spent in another allocated use, based upon the experience of our
management in evaluating our needs over the next 12 months. Proceeds not
immediately used will be invested in bank certificates of deposit, insured bank
deposit accounts, or similar investments.
DIVIDEND POLICY
We currently plan to retain any earnings and use them to finance the growth and
development of our business. We also intend to use earnings for working capital
and general corporate purposes. We do not anticipate paying cash dividends on
our common stock; however, any payment of dividends will be at the discretion of
the Board of Directors and will depend upon the following factors:
o earnings,
o financial condition,
o capital requirements,
o level of indebtedness,
o contractual provisions that might restrict the payment of dividends,
and
o factors that we cannot currently predict.
Persons who desire or need dividend income should not invest in our common
stock.
DILUTION
The net tangible book value deficiency of our outstanding shares of common stock
as of December 31, 2000, was approximately $(9,384) or $(.003) per share. "NET
TANGIBLE BOOK VALUE" per share represents the total amount of our tangible
assets, less the total amount of our liabilities, divided by the number of
shares of common stock outstanding. After giving effect to the sale of 200,000
shares offered at an initial public offering price of $1.00 per share less
estimated costs of the Offering, our net tangible book value at December 31,
2000 would have been $141,116 or approximately $0.044 per share. This represents
an immediate increase in net tangible book value of $0.047 per share to existing
shareholders and an immediate dilution of over $0.956 per share of common stock
to new investors.
The following tables illustrate what dilution would have been, respectively, as
of December 31, 2000, assuming we had sold 100% and 25% of the shares offered
hereby:
<Table>
If Offering is 100% sold:
Initial public offering price per share ............... $ 1.00
Net tangible book value per share
before the Offering .............................. $ (.003)
Increase per share attributable to new investors
purchasing this Offering ......................... $ .047
Net tangible book value per share
after this Offering .............................. $ .044
Dilution per share to new investors ................... $ .956
If Offering is 25% sold:
Initial public offering price per share ............... $ 1.00
Net tangible book value per share
before Offering .................................. $ (.003)
Increase per share attributable to new investors
purchasing this Offering ......................... $ (.003)
Net tangible book value per share
after this Offering .............................. $ (.006)
Dilution per share to new investors ................... $ (1.006)
</Table>
9
<Page>
The following table sets forth the number of shares of common stock purchased,
the total consideration paid and the average price per share paid, by our
existing stockholders as of March 15, 2001 and any new investors purchasing the
shares of common stock offered:
<Table>
<Caption>
SHARES PURCHASE TOTAL CONSIDERATION AVERAGE
------------------------- ----------------------- PRICE PER
NUMBER PERCENT(1) NUMBER PERCENT SHARE(2)
--------- ---------- --------- ------- ---------
Existing shareholders ... 3,000,000 93.75% $ 4,000 2.0% $ 0.0013
New investors ........... 200,000 6.25% $ 200,000 98.0% $ 1.00
Total ................... 3,200,000 100.00% $ 204,000 100.0%
</Table>
-------------------
(1) If less than all of the offered shares are sold, the new investors will
receive a smaller aggregate percentage of ownership while the existing
shareholders will retain a greater percentage ownership. The above
discussion assumes that all 200,000 shares that we are offering to the
public at $1.00 will be sold.
(2) If less than $200,000 in gross proceeds is received from the Offering,
dilution to new investors who invest in the common sock will be greater
than described above. By way of example, if only 100,000 shares of common
stock are sold in this Offering (one-half of the Offering), the tangible
book value per share would have been approximately $0.013 as of December
31, 2000 and the new investors would have suffered a dilution of nearly
$0.987 per share.
BUSINESS
INTRODUCTION
Our Company was incorporated in the State of Nevada on December 23, 1999 using
the name "KNETX Skates Corporation." On June 9, 2000, the name was changed to
Cedar Mountain Distributors, Inc. On June 20, 2000, we acquired all common stock
of Tarus, a company incorporated in the State of Kansas on August 5, 1994, which
became our wholly-owned subsidiary. Before this acquisition, we were not engaged
in any business activities, and Tarus was engaged in the sale and distribution
of beverage products.
We are an early stage beverage brokerage company. The initial mission of the
Company is to build a Midwest-based beverage brokerage that supplies a limited
line of flavored beverages to schools, universities, wholesalers, retailers, and
distributors in the Midwestern United States. The Company has an initial
customer base with the local school districts as a result Mr. Smith's position
as an administrator and educator in the area for 25 years. In order to focus on
this initial customer base, we will focus on four traditional beverage
categories: bottled water, fruit beverages, soft drinks, and sports drinks.
We currently have rights to distribute four products in the Kansas City area,
our base of operations and initial market. As our business expands, we intend to
seek the rights to broker additional products and will seek partnerships with
bottlers, distributors, and manufacturers that have an existing customer base in
other parts of the country through which we can distribute our current product
line. Once established domestically, we also intend to formulate a plan to
expand into international markets. We are also in the process of pursuing a
government contract that would allow us to export to any military base in the
world.
A key asset in our drive to build a beverage distributorship is the experience
of our President, James R. Smith, who has extensive prior experience in the
beverage industry (see "Management," page 15). With experience in helping found
two other beverage distributors and as an administrator, Mr. Smith has the
abilities needed to lead our Company.
Mr. Smith and our Vice President, Ms. Lauri A. Orscheln, have already
established accounts with retail, wholesale, and educational customers,
including Kmart, Walgreen, Hy-Vee Grocery, and assorted liquor and convenience
stores. The number of these accounts has increased markedly since 2000. As of
the close of last year, all of our sales were to three customers--all school
districts. In contrast, we now have made sales to over fifty customers, as of
September 21, 2001, drawn from a variety of types of industries and
institutions. Many of these accounts have only purchased small volumes of
product from us;
10
<Page>
however, sixteen customers have purchased more than $500 in merchandise this
year. We are in the process of finalizing sales to Kmart that could reach up to
$17,000 initially if we are able to reach an agreement. In broadening our
account base, we are laying the groundwork for what we hope will be a
substantial increase in our sales.
We do not develop, produce, bottle, or otherwise manufacture any of our own
products. Our principal business is soliciting contracts to purchase beverage
products from a wholesaler and arranging distribution for those products to
institutional and retail customers.
Provided that we successfully sell all or most of the shares included in this
Offering, our management anticipates that implementation of this business plan
will succeed for the following reasons:
o We have an established and growing customer base that includes retail
establishments, wholesalers, convenience stores, grocery stores, and
school districts;
o Industry statistics indicate that our primary products (including
fruit beverages, high-energy sports drinks, and bottled water
represent the fastest growing segments in the consumer market today);
o We have rights to distribute beverage products that are specifically
geared towards the growing segments (see "The Industry," page 12, for
description of the source of these statistics);
o Our President, James R. Smith, has past experience in marketing
beverage products and in starting beverage distributorships (see
"Management," page 15).
MARKETING STRATEGY AND PROPOSED PLAN OF OPERATION
We currently have the right to distribute four products from Vancol. These
products are Tommy Knocker Root Beer, Kwencher Thirst Aid Products, Ora
Nutritional Supplements, and Blue Ox Energy Drinks. The rights to distribute
these products are not exclusive to us and thus do not preclude others from
marketing the products in the region where we operate (see "Dependency on our
Suppliers" and "Licensing rights and territory not guaranteed" under "Risk
Factors," page 7). In addition, the arrangement with Vancol is "at-will" and
does not include any obligations to either party, so it is incumbent on us to
establish the market and the customers.
We have recently secured an account to distribute the Kwencher line to school
lunch programs in Johnson, Miami, and Franklin counties in Kansas. We are
currently searching and will continue to search for beverage products to
introduce to the Greater Kansas City metropolitan market.
Our initial expanded market is the Greater Kansas City metropolitan area where
there are 30 school districts with over 100,000 students and where we will
promote the Kwencher product line. The customers for these products are
secondary students in the school districts of the counties mentioned above where
the products are offered in the school lunch programs. The first account and
product order was with USD #233 Olathe, Kansas. The Kwencher line offers the
student customers alternative choices from Gatorade, Frutopia, and natural still
water.
With the inclusion of Blue Ox energy drink in the product line, we believe we
will be able to penetrate the fast growing New Age beverage market. As defined
by Beverage Marketing Corporation, the New Age beverage market includes
"single-serve fresh fruit juices, ready-to-drink coffees, herbal ice teas,
premium sodas, smoothies, shelf-stable dairy drinks, nutritionally enhanced
beverages and energy drinks." Energy drinks are the fastest growing beverages in
the "New Age" category, with annual growth of over 100% in 1999 and 2000. Blue
Ox is unique in the energy drink market in that it is the only product made in
four different flavors. Competing energy drinks are currently only made in one
flavor. (Industry statistics and all others in this Prospectus relating to
beverage markets are drawn from "BEVERAGE WORLD'S 2000 STATE OF THE INDUSTRY
REPORT," available on their website at WWW.BEVERAGEWORLD.COM under "Liquid
Stats," or from us upon request.)
11
<Page>
Of the total U.S. soft drink consumption, the West Central area consumes 57.3%.
We desire to include the soft drink market in our second year of operations. We
hope to introduce additional products and a wider distribution area, including
an international market, during years three and four.
In addition to selling directly to the school lunch room market, we will target
markets where there are established distributors who currently have
transportation and distribution facilities and are capable of moving our product
lines into a new geographical area without requiring a physical presence or
infrastructure to allow both direct shipping of products and to gain accounts
with other established vendors and customers. We intend to hire a sales person
who will be given a base salary plus commission, that will be tasked with
marketing to wholesale and retail customers. We intend to have this person focus
his or her efforts on those companies that have corporate or regional
headquarters in the Kansas City area with the objective of gaining shelf space
in their retail facilities located in the Midwest.
The funding strategy for our plan of operations has been first to obtain loans
from our shareholders to cover approximately $60,000 in startup costs. To date
we have raised approximately $60,000 in this manner on terms described in "Use
of Proceeds" on page 8. These proceeds are being used to fund expenses of this
public offering covered by loans, purchase product, and pay general and
administrative expenses for the first 12 months. After that time, proceeds from
the public offering will be used to pay any offering expense not yet paid, and
continue to grow the business (see "Use of Proceeds," page 8).
Our current business plan assumes that no further public or private offerings
will be required to fund our business if we sell all or most of the shares
included in this Offering. In the event that this Offering does not raise
sufficient funds for us to implement our business plan, we will likely seek
additional funding through one of two methods on terms not yet determined. The
first would involve securing additional loans, most likely from our existing
investors or possibly from banks. A second scenario would involve a private
offering of our stock in reliance on Regulation D and/or Section 4-2 of the
Securities Exchange Act. We may also revise our business plan to enable us to
continue operations with reduced funding. Under any scenario, loans made by
original investors to initially fund our business and to pay for offering
expenses will be honored and repayment arrangements made.
THE INDUSTRY
In the United States in 1998, the market for the eight traditional beverage
categories, beer, bottled water, fruit beverages, tea, soft drinks, spirits,
sports drinks, and wine, was as follows: $187 billion in retail sales from $117
billion in wholesale sales, 30.9 billion gallons of product sold, and an average
per capita consumption of over 114 gallons.
For the same period, the sales data for the four product categories that we will
broker (bottled water, fruit beverages, soft drinks and sports drinks) were as
follows: $79.2 billion in retail sales from $61.7 billion in wholesale sales,
13.1 billion gallons of product sold, and an average per person consumption
estimated at over 20 gallons per year. (See Beverage World's "Liquid Stats.")
Based on industry statistics, we believe it is feasible to initially focus our
expanded operations on three specific product types; bottled still water,
fruit-flavored juices, and packaged sports drinks. According to the Beverage
Marketing Corporation, 92% of bottled water sold is still water, 60% of fruit
beverages sold are juices, and nearly 70% of sports drinks that are sold are the
packaged variety. Each of these markets is included in the our product line. In
addition to these three categories, we will also carry selected soft drinks for
distribution.
PRODUCTS
As mentioned above, we intend to distribute four products from Vancol: Kwencher
Thirst Aid Products, Tommy Knocker Root Beer, Ora Nutritional Supplements, and
Blue Ox Energy Drinks. The products are described in more detail below.
BLUE OX ENERGY DRINKS. Blue Ox Energy drinks are bottled in Denver,
Colorado, by Vancol. This is our flagship product on which we are building our
initial business. Blue Ox comes in 8.4 fluid ounce cans
12
<Page>
in a 24-pack shrink-wrap in the original Blue Cola Flavor, Orange, Citrus, and
Black Cherry. They have experienced over 100% growth in the last two years.
Beverage industry experts are predicting energy drink sales to soar from sales
over $300 million to $2 billion within a few years. These stimulant drinks are
also being sold as "functional beverages" because they offer something beyond
taste and hydration. Many consumers under 35 are using the drinks as mixers with
premium liquors.
WATER PRODUCTS. Kwencher water products, bottled in Denver, Colorado, by
Vancol, are a pure, non-carbonated water with a major splash of natural fruit
flavors in 16.9 ounce plastic sports bottles. The flavors include Strawberry
Banana, Honey Bee, Lemonade, Kiwi, Strawberry, Strawberry Vanilla, Orange, Creme
Soda, and Peaches & Creme. Kwencher believes packaging drives sales for flavored
waters and led to the products' appearance at Wal-Mart stores starting in 1999.
Besides being eye-catching, the faceted bottle design is also functional. The
product is bottled under license from Mount Olympus Waters, Inc., Salt Lake
City, Utah. The new blue-tinted 1/2-L PET bottle, molded by Schmalbach-Lubeca
Plastic Containers, entered markets in 1999 to replace a stock blue-tinted PET
bottle. Vancol credits the custom bottle with drawing the interest and
subsequent business of Wal-Mart. A limited test that started around July 4,
1999, proved so successful that Kwencher stayed in the stores.
The bottle's ribs, full-around narrow rings above and below the smooth label
area, and pipes bolster its strength. The pipes are the symmetrical convex
portions that extend out from the lines molded into the bottle. Together, these
strengthening aspects combine to provide very good top load capabilities and do
not compromise the bottle's squeezability, which is exceptional for a PET
bottle. The bottle also incorporates elements of a sports bottle, including the
push-pull cap, with tamper-evident inner seal, from Creative Packaging.
Kwencher's seven flavors were increased to nine with the addition of
Strawberry-Banana and Orange Mango Tango in September 1999.
ROOT BEER. Tommy Knocker root beer is bottled in Denver, Colorado, by
Vancol and packed in 12 ounce bottles in four-pack for each of the following
flavors: Original Root Beer, Strawberry Creme, and Almond Creme. The product
comes in a long-necked brown bottle and the label with the Tommy Knocker
character is intended to make this product stand out on the shelf.
SUPPLEMENT DRINK. Ora Nutritional drinks are bottled in Denver, Colorado,
by Vancol and packed in 20 ounce bottles in a variety of flavors that include
nutritional supplements. Ora Nutritional suggests that the supplements, which
include ginseng, angelica, choline, ginkgo biloba, aloe vera, beta-carotene,
dandelion and guarana can enhance a consumer's energy, vitality, and focus. The
drinks come in four different flavors, all with an assortment or combination of
the above supplements.
ADVERTISING AND SALES PROMOTION PROGRAMS
Vancol provides excellent promotional materials for use by its distributors. The
materials include high quality multi-color booklets and brochures that can be
used in presentations to potential customers as well as for direct mailing or as
handouts at promotional events. We have a ready supply of these materials and,
to date, they have been an effective way of introducing our products to
customers. We intend to equip our sales staff with the printed material and a
supply of each product for use in approaching potential customers. We intend to
use funds raised in the Offering to place advertisements in printed industry
periodicals and also retail fliers and brochures.
If we successfully raise more than the costs of this Offering, we intend to use
a portion of the proceeds raised to place advertisements in printed industry
periodicals and to place banner ads in various beverage industry websites. The
amount we will spend on such advertising will depend on how much we raise in
this Offering (see page 8, "Use of Proceeds").
In addition, both Vancol and other large to mid-size bottling companies have
marketing campaigns to introduce, brand, and sell their products in certain
targeted areas of the country. These campaigns consist of television and radio
advertising, billboards, tradeshow kiosks, booths, banners, and other display
items. Our objective is to achieve a volume sales level from venders to allow
for their marketing campaign to enter our initial target market area. We desire
to assist in this effort by approaching retail customers to allow
point-of-purchase displays in their stores and conduct certain, targeted
promotions at community events where we will provide the product for both
giveaways and direct sales.
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OPPORTUNITIES TO ADD PRODUCTS
Because we will rely on trending products and trending markets, we must monitor
the market to be able to deliver a continuous line of additional products to
existing customers and to the marketplace. We plan to carefully watch beverage
market periodicals and beverage industry websites in search of products, test
the products and, if deemed satisfactory, approach the manufacturer and customer
for sales agreements.
COMPETITION
The sports drink, fruit drink, and bottled water beverage markets are dominated
by major players such as Coca Cola, Pepsi, Cadbury, Quaker Oats, and others
whose total sales exceeded $20 billion in 1997. While many of our competitors
have greater financial resources, we believe we can successfully compete in
niche markets for two reasons. First, consumers like variety and choice. The
beverage industry is highly diversified. As a result, smaller beverage companies
have been successful in catering to market niches. Second, Mr. Smith's
experience and customer contacts have given us a foothold in the local
distribution market. An important factor in our early sales growth is Mr.
Smith's personal contacts with local school districts. As we expand our markets
beyond school programs, a key component of the Company's success will be the
caliber and commitment of Mr. Smith and Ms. Orscheln.
PRICING AND MARKETING
Our pricing strategy is to broker products on a volume basis with a competitive
net margin. The pricing structure will provide a mark-up on the base price of
product that will range from $3.50 to $9.50 per case, yielding margins of
50-75%.
DISTRIBUTION
Our initial objective is to locate existing distributors that have the necessary
equipment, sales staff, and facilities to accept, store, and distribute our
products. This includes local distributors, grocery stores, and other various
wholesalers. Although no formal contracts exist with any distributors at this
time, informal agreements exist with our primary supplier, Vancol, and with
local distributors who will handle product pickup and delivery. In addition, we
intend to make arrangements with Vancol to direct ship product to customers on
an as-needed basis.
CUSTOMER SERVICE PROGRAMS
As with all businesses, customer satisfaction is directly related to company
sales. We will accommodate the needs of our customers, both directly, and by
telephone support offered by our supplier, Vancol. In addition, Mr. Smith has
existing relationships with the school districts in the area, and his main focus
will be to support and enhance these relationships with frequent personal
visits, follow-up telephone calls, and occasional solicitation of customer
satisfaction surveys. In addition, we will provide point-of-sale items available
from manufacturers, prompt and timely filling of orders, and reasonable payment
terms.
CREDIT AND COLLECTION POLICIES
Sales to the local school districts will be on terms of net 30 days. As we
expand and pick up customers and distributors, a letter of credit policy will be
adopted whereby customers will have to provide evidence of payment prior to
product shipping.
OPERATING SYSTEMS AND PROCEDURES
Orders are placed via telephone to our office. Once an order is received, a
target delivery date is established and an order form is completed and faxed to
the customer to confirm with signature. Within 24 hours, an order is forwarded
simultaneously to the bottler and to the distributor and is confirmed in a
return fax to us. We have online access to the bottler's shipping department to
confirm the agreed delivery date and maintain contact with this system to ensure
timely delivery. We then coordinate the delivery with the distributor and get
confirmation from the distributor when the delivery is made to the
14
<Page>
customer. We also make a follow-up telephone call to the customer to confirm
receipt and condition of the product and an invoice is produced and mailed to
the customer.
We are set up with a local bank to process different types of payments,
including checks, credit cards, cash, and money orders. We also review each
account on a bi-weekly basis to ensure that net 30-day terms are being met. If
an account becomes delinquent, we send a reminder letter.
INSURANCE
We will make efforts to ensure that manufacturers for which we distribute
products do provide evidence of product liability insurance. In addition, we
have obtained a $1 million dollar general liability policy for general company
business protection including employee travel, facility and equipment, and for
product liability. Annual premiums are currently $1,951 per year.
DESCRIPTION OF PROPERTY
We currently operate from a home office where all current orders, deliveries,
billing, and communications are handled. This office is the personal residence
of our James R. Smith, our President, who provides the space at no charge under
no formal lease. We have no other properties or facilities currently. Warehouse
storage and distribution services are being handled by local distributors for
the interim period until sales and cash flow permit expansion. As sales
increase, we intend to lease office space, warehouse space, dock, and forklift
capabilities. We will either seek additional loans or pursue another offering of
our stock in order to fund this expansion. The decision as to which type of
funding we will seek will be determined largely by the results of this Offering;
if we successfully sell all or nearly all of this Offering, we will most
probably pursue an additional public offering.
EQUIPMENT, MACHINERY, AND VEHICLES
As a broker, we have no current need to invest capital in equipment, such as
delivery trucks, forklifts, refrigeration equipment, or dollies. The equipment
we rely on includes computers, printers, fax machine, scanner, telephones, and
other general office equipment. As mentioned above, growth and expansion may
provide the necessity to acquire these assets in the future.
MANAGEMENT
OFFICERS AND DIRECTORS
Information concerning each of our executive officers and directors is set forth
below:
<Table>
<Caption>
NAME AGE POSITION
---- --- --------
James R. Smith 62 President, Secretary, Treasurer, Acting Chief
Financial Officer, and Director
Lauri A. Orscheln 37 Vice President, Director
</Table>
Our directors are elected to hold office until the next annual meeting of
shareholders and until their respective successors have been elected and
qualified. Our officers are elected by the Board of Directors and hold office
until their successors are elected and qualified.
JAMES R. SMITH is President, Secretary, Treasurer, and key manager of the
company. He has over 39 years business and administrative experience, including
fifteen years of part or full time work in the beverage industry (Europa
Distributers, 1982-84; Frontier, Inc., 1992-2001; Tarus International, our
subsidiary, 1999-2001). Mr. Smith has demonstrated abilities in the areas of
administration, management (budget, personnel, and facilities), sales, service,
business consulting, personnel interrelationships, advertising, and leadership.
He has experience and the ability to develop a business from start-up through
implementation. His business creation experience include the creation and
development of real estate ownership/partnerships, a computer consulting
company, a physical fitness center, and two beverage distribution companies.
15
<Page>
Mr. Smith's beverage distribution career began in 1982 when he created
Europa Distributors, Inc., a beverage distribution company very similar to Cedar
Mountain Distributors. Europa, based in Olathe, Kansas, obtained the exclusive
distributing rights for Chapelle(R)Sparkling Mineral Waters that were imported
from Germany. In a one-year period, Europa conducted $700,000 in sales in 23
states. Mr. Smith set up distribution nationwide with beer wholesalers and
served as President of the company. In 1984 Mr. Smith sold his shares in the
company to take the position of Vice President of University Relations at Ottawa
University. In 1992, Mr. Smith returned to the beverage industry and created
Frontier, Inc., a local beverage distribution service operating in the Kansas
City area. In 1999, Mr. Smith established Tarus International, Inc.
Mr. Smith is a graduate of Ottawa University in Ottawa, Kansas, with a
Bachelor of Science in Physical Education and Science. Later he obtained a
Master of Science degree in Biology and Chemistry from Emporia State College in
Kansas, and also obtained an Educational Administrative Certification from the
University of Kansas. For the last six years, Mr. Smith has been employed full
time as the Director of Community Development with the Olathe Kansas School
District.
Mr. Smith devotes approximately 15 hours a week to the work of our company
in addition to his full time employment with the school district. Upon sale of
all or most of the shares included in this Offering, Mr. Smith is prepared to
devote more time to the Company.
LAURI A. ORSCHELN is Vice President and oversees sales and marketing
activities for the Company. With over a decade of experience in marketing and
finance, Ms. Orscheln possesses a proven track record in sales. She is a 1985
graduate of Emporia State University where she obtained a Bachelor of Science
Degree in Business Administration and Marketing. She attended Emporia State
University in Kansas on an athletic scholarship. She competed on the varsity
gymnastics team at the national level. Upon graduating from college, she went to
work in the banking industry. Ms. Orscheln has been a successful loan officer
for several lending institutions. Ms. Orscheln has served on the Board of
Directors for Habitat for Humanity and been an active member of the Board of
Realtors. She currently is a member of Noon Optimist Club of Olathe and the
Olathe Chamber of Commerce. Since joining us in December 2000, Ms. Orscheln has
expanded the customer base substantially from a year ago (see "Introduction,"
page 10) and has begun to successfully penetrate several major market niches
including schools, grocery stores, convenient stores, bars and clubs, and
military installations. For the five years prior to joining us, Ms. Orscheln was
a full-time homemaker.
FAMILY RELATIONSHIPS
Ms. Orscheln is the daughter of James R. Smith.
EXECUTIVE COMPENSATION
The following table provides certain summary information concerning compensation
paid to executive officers since inception. There were no stock appreciation
rights outstanding during the fiscal year ending December 31, 2000, nor are
there any rights outstanding as of the date of this Prospectus.
<Table>
<Caption>
LONG-TERM
COMPENSATION
---------------
FISCAL OTHER ANNUAL
NAME AND POSITION YEAR SALARY($) BONUS($) COMPENSATION($)
-------------------------- ------ --------- -------- ---------------
James R. Smith,
President................. 2000 0 0 0
</Table>
There are no employment agreements with any of our officers or directors.
16
<Page>
PRINCIPAL STOCKHOLDERS
The following table and notes set forth information concerning the beneficial
ownership of the Company's shares as of June 1, 2001 for (i) each current
Director and each nominee for Director (ii) each named executive officer of the
Company as defined in 402(a)(2) of Regulation S-B of the Securities Act of 1933,
(iii) all persons known by the Company to beneficially own more than 5% of the
Company's voting shares, and (iv) all officers and Directors of the Company as a
group.
<Table>
<Caption>
AMOUNT AND PERCENTAGE
NATURE OF OF
NAME TITLE OWNERSHIP(1)(2) CLASS(3)
------------------------------------ -------------------------------- --------------- ----------
James R. Smith(4)................... President, Secretary/Treasurer, 1,000,000 33.3%
Acting Chief Financial Officer,
and Director
Lauri A. Orscheln(4)................ Vice President and Director -0- -0-
David C. Owen(5).................... Beneficial Owner 990,000 33.0%
Malcolm K. Green(6)................. Beneficial Owner 640,000 21.3%
Laura Owen(7)....................... Beneficial Owner 990,000 33.0%
All Directors and Executive
Officers as a Group................. 1,000,000 33.3%
</Table>
-------------------
(1) Unless otherwise noted, the Company believes that all shares are
beneficially owned and that all persons named in the table or family
members have sole voting and investment power with respect to all shares
owned by them. Unless otherwise indicated, the address of each individual
is 11011 King Street, Suite 260, Overland Park, Kansas 66062. This address
is the business address for David C. Owen, Malcolm K. Green, and for the
David & Laura Owen Trust, and entities that they control.
(2) A person is deemed to be the beneficial owner of securities that can be
acquired by such person within 60 days from the date hereof upon the
exercise of warrants or options.
(3) Assumes 3,000,000 shares outstanding plus, for each individual, any
securities that such individual has the right to acquire upon exercise of
presently exercisable stock options. Each beneficial owner's percentage
ownership is determined by assuming that options or warrants that are held
by such person (but not those held by any other person) and which are
exercisable within 60 days from the date hereof have been exercised.
(4) Mr. Smith and Ms. Orscheln's address is 1236 East Frontier Lane, Olathe,
Kansas 66062. Ms. Orscheln resides with Mr. Smith, who is her father.
(5) Includes the following shares: (i) 300,000 shares held by Owen Enterprises,
LLC, (ii) 100,000 shares held by DBM, LP, (iii) 100,000 shares held by
Emerson B. Wells, LP, (iv) 300,000 shares held by the David & Laura Owen
Trust, and (v) 140,000 of 280,000 shares held by Midwest Equity Group, LLC,
which is controlled jointly by David C. Owen and Malcolm K. Green. An
additional 50,000 shares held are held by Laura Owen, the wife of David C.
Owen; these are included here solely because David C. Owen is deemed the
beneficial owner of shares that his wife controls.
(6) Includes 140,000 of 280,000 shares held by Midwest Equity Group, LLC.
(7) Includes all of the shares reported for David C. Owen above in (5), of
which 50,000 are held directly by Laura Owen and 300,000 shares are held by
the David & Laura Owen Trust. All other shares are included here solely
because Laura Owen is deemed the beneficial owner of shares her husband,
David C. Owen, controls.
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CERTAIN TRANSACTIONS INVOLVING OUR OFFICERS, DIRECTORS AND AFFILIATES
Our corporate offices are located at the personal residence of James R. Smith.
Under an oral agreement with Mr. Smith, we pay no rent for the use of this
office space.
On June 15, 2000, our shareholders approved the acquisition of Tarus
International, Inc, a Kansas corporation, Tarus was owned by Mr. Smith who was
the sole officer and stockholder prior to our acquisition of Tarus. As part of
the acquisition agreement, shareholders approved the exchange of 1,000,000
shares of restricted common stock for Cedar Mountain Distributors, Inc. in
exchange for 200,000 shares of common stock of Tarus. As a result, Tarus became
a wholly-owned subsidiary of Cedar Mountain Distributors, Inc.
David C. Owen and Malcolm K. Green have provided consulting services to the
Company in exchange for the right to purchase the ownership interests they
acquired in the Company as outlined in Item 26 below and as set forth under
Principal Stockholders above.
DESCRIPTION OF OUR STOCK
GENERAL
We are authorized to issue 50,000,000 shares of $0.001 par value common stock
and 5,000,000 shares of $0.001 par value preferred stock.
COMMON STOCK
As of the date of this Prospectus, there were 3,000,000 shares of common stock
outstanding held by 14 shareholders.
Holders of common stock are entitled to one vote per share in all matters to be
voted on by the shareholders. Except for any priority in the payment of
dividends, which may be granted to the holders of preferred stock, holders of
common stock are entitled to receive on a per share basis any dividends that may
be legally declared from time to time by our Board of Directors. If we were to
liquidate, dissolve, or wind up our affairs, holders of common stock would be
entitled to share ratably in all assets remaining after payment of our
liabilities and the liquidation preference, if any, of any outstanding preferred
stock. The rights, preferences, and privileges of common stock holders are
subject to the rights of the holders of preferred stock even if the preferred
stock is issued after your common stock.
PREFERRED STOCK
The Board of Directors has the authority, without any further vote or action by
the shareholders, to issue up to 5,000,000 shares of preferred stock from time
to time on those terms that the Board of Directors may determine. Although it is
not possible to state what effect, if any, issuance of preferred stock might
have on the rights of common stockholders, the issuance of preferred stock may
have one or more of the following effects:
o to restrict common stock dividends if preferred stock dividends have
not been paid;
o to dilute the voting power and equity interest of holders of common
stock to the extent that any preferred stock has voting rights or is
convertible into common stock; and
o to prevent current holders of common stock from participating in our
assets if we were to liquidate until the preferred stockholders have
been paid.
The issuance of any shares of preferred stock having rights superior to those of
common stock may result in a decrease of the value or market price of our common
stock. The issuance of preferred stock could also be used by the Board of
Directors as a device to prevent a change in our control. There are no shares of
preferred stock presently outstanding and the Board of Directors does not
presently intend to issue any shares of preferred stock.
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NO PREEMPTIVE RIGHTS
Holders of common stock do not have any preemptive right to subscribe for or
purchase any class of our securities nor do they have any redemption or
conversion rights.
NO CUMULATIVE VOTING
Common stock shareholders do not have the right to cumulate his or her votes in
an election of directors or for any other matter or matters to be voted upon by
our shareholders.
CERTAIN PROVISIONS OF THE NEVADA GENERAL CORPORATION LAW
As a Nevada corporation, we are subject to the Nevada Revised Statutes ("NRS" or
"Nevada law"). Certain provisions of Nevada law create rights that might be
deemed material to our shareholders. Other provisions might delay or make more
difficult acquisitions of our stock or changes in our control or might also have
the effect of preventing changes in our management or might make it more
difficult to accomplish transactions that some of our shareholders may believe
to be in their best interests.
DISSENTERS' RIGHTS. Among the rights granted under Nevada law which might
be considered material is the right for shareholders to dissent from certain
corporate actions and obtain payment for their shares (see Nevada Revised
Statutes ("NRS") 92A.380-390). This right is subject to exceptions, summarized
below, and arises in the event of mergers or plans of exchange. This right
normally applies if shareholder approval of the corporate action is required
either by Nevada law or by the terms of the articles of incorporation.
A shareholder does not have the right to dissent with respect to any plan
of merger or exchange, if the shares held by the shareholder are part of a class
of shares which are (1) listed on a national securities exchange, (2) included
in the national market system by the National Association of Securities Dealers,
or (3) held of record by not less than 2,000 holders. This exception
notwithstanding, a shareholder will still have a right of dissent if it is
provided for in the articles of incorporation or if the shareholders are
required under the plan of merger or exchange to accept anything but cash or
owner's interests, or a combination of the two, in the surviving or acquiring
entity, or in any other entity falling in any of the three categories described
above in this paragraph.
INSPECTION RIGHTS. Nevada law also specifies that shareholders are to have
the right to inspect company records (see NRS 78.105). This right extends to any
person who has been a shareholder of record for at least six months immediately
preceding his demand. It also extends to any person holding, or authorized in
writing by the holders of, at least 5% of outstanding shares. Shareholders
having this right are to be granted inspection rights upon five days' written
notice. The records covered by this right include official copies of (1) the
articles of incorporation, and all amendments thereto, (2) bylaws and all
amendments thereto; and (3) a stock ledger or a duplicate stock ledger, revised
annually, containing the names, alphabetically arranged, of all persons who are
stockholders of the corporation, showing their places of residence, if known,
and the number of shares held by them respectively. In lieu of the stock ledger
or duplicate stock ledger, Nevada law provides that the corporation may keep a
statement setting out the name of the custodian of the stock ledger or duplicate
stock ledger, and the present and complete post office address, including street
and number, if any, where the stock ledger or duplicate stock ledger specified
in this section is kept.
CONTROL SHARE ACQUISITIONS. Sections 78.378 to 78.3793 of Nevada law
contain provisions that may prevent any person acquiring a controlling interest
in a Nevada-registered company from exercising voting rights. To the extent that
these rights support the voting power of minority shareholders, these rights may
also be deemed material. These provisions will be applicable to us as soon as we
have 200 shareholders of record with at least 100 of these having addresses in
Nevada as reflected on our stock ledger. While we do not yet have the required
number of shareholders in Nevada or elsewhere, it is possible that at some
future point we will reach these numbers and, accordingly, these provisions will
become applicable. We do not intend to notify shareholders when we have reached
the number of shareholders specified under these provisions of Nevada law.
Shareholders can learn this information
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pursuant to the inspection rights described above and can see the approximate
number of our shareholders by checking under Item 5 of our annual reports on
Form 10-KSB. This form is filed with the Securities and Exchange Commission
within 90 days of the close of each fiscal year hereafter. You can view these
and our other filings at www.sec.gov in the "EDGAR" database.
Under NRS Sections 78.378 to 78.3793, an acquiring person who acquires a
controlling interest in company shares may not exercise voting rights on any of
these shares unless these voting rights are granted by a majority vote of our
disinterested shareholders at a special shareholders' meeting held upon the
request and at the expense of the acquiring person. If the acquiring person's
shares are accorded full voting rights and the acquiring person acquires control
shares with a majority or more of all the voting power, any shareholder, other
than the acquiring person, who does not vote for authorizing voting rights for
the control shares, is entitled to demand payment for the fair value of their
shares, and we must comply with the demand. An "ACQUIRING PERSON" means any
person who, individually or acting with others, acquires or offers to acquire,
directly or indirectly, a controlling interest in our shares. "CONTROLLING
INTEREST" means the ownership of our outstanding voting shares sufficient to
enable the acquiring person, individually or acting with others, directly or
indirectly, to exercise one-fifth or more but less than one-third, one-third or
more but less than a majority, or a majority or more of the voting power of our
shares in the election of our directors. Voting rights must be given by a
majority of our disinterested shareholders as each threshold is reached or
exceeded. "CONTROL SHARES" means the company's outstanding voting shares that an
acquiring person acquires or offers to acquire in an acquisition or within 90
days immediately preceding the date when the acquiring person becomes an
acquiring person.
These Nevada statutes do not apply if a company's articles of incorporation
or bylaws in effect on the tenth day following the acquisition of a controlling
interest by an acquiring person provide that these provisions do not apply.
According to NRS 78.378, the provisions referred to above will not restrict
our directors from taking action to protect the interests of our Company and its
shareholders, including without limitation, adopting or executing plans,
arrangements or instruments that deny rights, privileges, power or authority to
a holder of a specified number of shares or percentage of share ownership or
voting power. Likewise, these provisions do not prevent directors or
shareholders from including stricter requirements in our Articles of
Incorporation or Bylaws relating to the acquisition of a controlling interest in
the Company.
Our Articles of Incorporation and Bylaws do not exclude us from the
restrictions imposed by NRS 78.378 to 78.3793, nor do they impose any more
stringent requirements.
CERTAIN BUSINESS COMBINATIONS. Sections 78.411 to 78.444 of the Nevada law
may restrict our ability to engage in a wide variety of transactions with an
"INTERESTED SHAREHOLDER." As was discussed above in connection with NRS 78.378
to 78.3793, these provisions could be considered material to our shareholders,
particularly to minority shareholders. They might also have the effect of
delaying or making more difficult acquisitions of our stock or changes in our
control. These sections of NRS are applicable to any Nevada company with 200 or
more stockholders of record and that has a class of securities registered under
Section 12 of the 1934 Securities Exchange Act, unless the company's articles of
incorporation provide otherwise. While our securities are not registered yet
under Section 12, we may register them under this provision at some point in the
future. Similarly, as was discussed above, although we do not yet have 200 or
more shareholders, we may reach this number at some future date. If these events
occur, we will be subject to these statutes as our Articles of Incorporation do
not exempt us from them.
These provisions of Nevada law prohibit us from engaging in any
"combination" with an interested stockholder for three years after the
interested stockholder acquired the shares that cause him to become an
interested shareholder, unless he had prior approval of our Board of Directors.
The term "COMBINATION" is described in NRS 78.416 and includes, among other
things, mergers, sales or purchases of assets, and issuances or
reclassifications of securities. If the combination did not have prior approval,
the interested shareholder may proceed after the three-year period only if the
shareholder receives approval from a majority of our disinterested shares or the
offer meets the requirements for fairness that are specified in NRS 78.441-42.
For the above provisions, "RESIDENT DOMESTIC CORPORATION" means a Nevada
20
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corporation that has 200 or more shareholders. An "INTERESTED STOCKHOLDER" is
defined in NSR 78.423 as someone who is either:
o the beneficial owner, directly or indirectly, of 10% or more of the
voting power of our outstanding voting shares; or
o our affiliate or associate and who within three years immediately
before the date in question, was the beneficial owner, directly or
indirectly, of 10% or more of the voting power of our outstanding
shares at that time.
DIRECTORS' DUTIES. Section 78.138 of the Nevada law allows our directors
and officers, in exercising their powers to further our interests, to consider
the interests of our employees, suppliers, creditors and customers. They can
also consider the economy of the state and the nation, the interests of the
community and of society and our long-term and short-term interests and
shareholders, including the possibility that these interests may be best served
by our continued independence. Our directors may resist a change or potential
change in control if they, by a majority vote of a quorum, determine that the
change or potential change is opposed to or not in our best interest. Our Board
of Directors may consider these interests or have reasonable grounds to believe
that, within a reasonable time, any debt which might be created as a result of
the change in control would cause our assets to be less than our liabilities,
render us insolvent, or cause us to file for bankruptcy protection
AMENDMENTS TO BYLAWS
Our Articles of Incorporation provide that the power to adopt, alter, amend, or
repeal our Bylaws is vested exclusively with the Board of Directors. In
exercising this discretion, our Board of Directors could conceivably alter our
Bylaws in ways that would affect the rights of our shareholders and the ability
of any shareholder or group to effect a change in our control; however, the
Board would not have the right to do so in a way that would violate law or the
applicable terms of our Articles of Incorporation.
TRANSFER AGENT AND REGISTRAR
Before the effective date of this Offering, we intend to engage Interwest
Transfer Company, Inc. of Salt Lake City, Utah, as the transfer agent and
registrar of our common stock.
INDEMNIFICATION AND PUBLIC POLICY
Our Articles of Incorporation contain a provision permitted under the Nevada law
concerning the liability of directors. This provision permits our Board of
Directors to enter into indemnity agreements between our Company and each
director or officer. These agreements shall provide for the fullest possible
indemnification of our directors and officers that is permitted under Nevada
law. They are to extend to all expenses, judgments, fines, penalties, excise
taxes, and amounts paid in settlement for claims relating to the particular
director or officer's service with or for our Company. This provision eliminates
a director or officer's personal liability for monetary damages; however, it
does not extend to breaches of the duty of loyalty or to acts or omissions that
involve intentional misconduct or a knowing violation of law. This provision
does not limit or eliminate our rights or the rights of any shareholder to seek
non-monetary relief, like an injunction or rescission, if there is a breach of a
director's fiduciary duty. This provision will not change a director's liability
under federal securities laws.
Insofar as indemnification for liabilities arising under the Securities Act is
permitted to our directors, officers, or persons controlling us pursuant to the
foregoing provisions, we have been informed that in the opinion of the SEC, this
type of indemnification is against public policy as expressed in the Securities
Act and is therefore unenforceable.
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TERMS OF THE OFFERING
PLAN OF DISTRIBUTION
We are offering to sell from 1 to 200,000 shares of our common stock at a
purchase price of $1.00 per share. Our common stock is being offered by our
officers and directors on a "DIRECT PARTICIPATION" basis. This means that no
underwriter will be involved to assist in our sales efforts. The employees,
officers, and directors who will sell the Offering on our behalf are James R.
Smith and Lauri A. Orscheln. The principal shareholders will supply names of
prospective investors to Smith and Orscheln. None of these prospective investors
shall have been offered shares of common stock prior to the date of this
Prospectus. We do not intend to offer the shares of common stock by means of
general advertising or solicitation. We reserve the right to withdraw, cancel,
or reject any offer to purchase our stock. The common stock registered in this
Offering will not be sold to our insiders, control persons, or affiliates. There
are no plans, proposals, arrangements, or understandings with any potential
sales agent with respect to participating in the distribution of our securities.
If at some point in the future, participation with sales agents develops, the
registration statement will be amended to identify those persons.
The individuals who will be selling the common stock offered in this Offering
will rely on the safe harbor in Rule 3a4-1 under the Securities Exchange Act of
1934 to sell our securities. Neither Smith nor Orscheln are subject to any
statutory disqualifications under Section 3(a)(39) of the Securities Exchange
Act of 1934. Neither will receive any sales commission, finder's fee, or other
compensation (other than the normal salaries paid to our management) for our
common stock that they sell, and neither is an associated person of a broker or
dealer as those terms are defined in Rule 3a4-1 nor has been in the last twelve
months. Both Smith and Orscheln meet the criteria set forth in Rule
3a4-1(a)(4)(ii). Both perform substantial duties on our behalf other than in
connection with transactions in securities and neither has or will participate
in an offering of securities by any issuer more than once in any twelve-month
period.
DETERMINATION OF OFFERING PRICE
We arbitrarily determined the offering price and other terms of our common stock
after generally considering the following:
o the amount of proceeds required to initiate our business plan and
marketing strategy;
o our lack of revenues;
o our management capability;
o our plans for future growth;
o the general condition of the securities markets; and
o the amount of retained equity to the present shareholders.
Prospective investors should not assume that the offering price of our common
stock reflects the actual value of our common stock.
NO MINIMUM INVESTMENT
There is no minimum investment that any investor must make in this Offering.
Further, there is no minimum amount of stock that must be sold in order for this
Offering to go forward. All funds received by us from the sale of our common
stock offered by this Prospectus will be deposited immediately into our
operating account and used as described above under "Use of Proceeds."
TERMINATION OF OFFERING
This Offering will terminate six months from the date of this Prospectus unless
all shares offered by this Prospectus are sold prior to that date.
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NO PUBLIC MARKET FOR OUR COMMON STOCK
Before the Offering, there has been no established trading market for our common
stock, and even if a public market were to be created or maintained, brokers or
dealers who make a market in or otherwise trade in our common stock would be
subject to requirements when trading our stock that are not imposed upon the
trading of stock with a higher market value. This is because our stock would be
considered to be a "PENNY STOCK." For example, Rule 15g-9 under the Securities
Exchange Act of 1934 imposes additional sales practice requirements upon
broker-dealers who sell "PENNY STOCKS" to persons other than established
customers and institutional accredited investors. For transactions under this
rule, a broker-dealer must make a special suitability determination for the
purchaser and have received the purchaser's written consent to the transaction
prior to the sale.
The term "PENNY STOCK" is defined in Rule 3a51-1 of the Securities and Exchange
Commission. "PENNY STOCKS" are securities:
o with a price of less than five dollars per share;
o that are not traded on a "recognized" national exchange;
o whose prices are not quoted on the NASDAQ automated quotation system
(NASDAQ-listed stocks must still meet the first requirement above); or
o of an issuer with net tangible assets less than $2,000,000 (if the
issuer has been in continuous operation for at least three years) or $5,000,000
(if in continuous operation for less than three years), or with average annual
revenues of less than $6,000,000 for the last three years.
Section 15(g) of the 1934 Act, and Rule 15g-2 of the Commission require
broker-dealers dealing in penny stocks to provide potential investors with a
document disclosing the risks of penny stocks and to obtain a manually signed
and dated written receipt of the document before effecting any transaction in a
penny stock for the investor's account.
Rule 15g-9 of the Commission requires broker-dealers in penny stocks to approve
the account of any investor for transactions in such stocks before selling any
penny stock to that investor. This procedure requires the broker-dealer to:
o obtain from the investor information concerning his or her financial
situation, investment experience and investment objectives;
o reasonably determine, based on that information, that transactions in
penny stocks are suitable for the investor and that the investor has sufficient
knowledge and experience as to be reasonably capable of evaluating the risks of
penny stock transactions;
o provide the investor with a written statement setting forth the basis
on which the broker-dealer made his or her determination; and
o receive a signed and dated copy of such statement from the investor,
confirming that it accurately reflects the investor's financial situation,
investment experience and investment objectives.
Compliance with these requirements may make it more difficult for purchasers of
our common stock to resell their shares to third parties or to otherwise dispose
of them.
In addition, the National Association of Securities Dealers, Inc. ("NASD") has
adopted a series of changes pertaining to the OTC Bulletin Board and the OTC
market. Generally stated, these changes:
o allow only those companies that report their current financial
information to the SEC, banking, or insurance regulators to be quoted on the OTC
Bulletin Board;
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o require brokers, before they recommend a transaction involving an OTC
security, to review current financial statements on the company they are
recommending; and
o prior to the initial purchase of an OTC security, require that every
investor receive a standard disclosure statement (prepared by the NASD)
emphasizing the differences between OTC securities and other market-listed
securities.
The NASD has also adopted a rule which grants authority for the NASD to halt
trading of securities on the OTC Bulletin Board under circumstances where the
NASD believed the investment public could be harmed. We cannot predict the
likelihood of these proposed changes being approved by the SEC in their current
form or the adoption of any additional changes by the NASD.
In addition, in order to create a market in our common stock that would trade on
the OTC Bulletin Board, we would need to recruit a NASD member broker-dealer to
act as a market maker. Although we have identified some potential market makers,
we have not entered into any negotiations or arrangements with any broker-dealer
to act as a market maker. Even if such a public market were to develop, the
vagaries of the stock market might subject our stock to significant price and
volume fluctuations that may or may not be related to our operating performance.
Such a market maker cannot accept any consideration from us for initiating
quotations in our stock.
We have not applied for a trading symbol under which our stock would trade. It
is anticipated that we would apply for a trading symbol once we have identified
a market maker that would agree to make a market in our stock.
SHARES ELIGIBLE FOR FUTURE SALE
IN GENERAL
Once the Offering is complete, we will have a total of at least 3,000,000 shares
of common stock outstanding, and may have as many as 3,200,000, depending on how
many shares we sell under this Offering. Of these shares of common stock, all
shares from the Offering will be freely tradable without restriction or further
registration under the Securities Act.
SALES OF RESTRICTED SHARES
IN GENERAL. The remaining 3,000,000 shares of common stock are "RESTRICTED
SECURITIES" as defined in Rule 144. Restricted securities may be sold in the
public market only if they are registered or if they qualify for an exemption
from registration under the Securities Act. Subject to the volume limitations
described below, approximately 2,200,000 of these shares are already eligible
for sale under Rule 144. During January 2002, an additional 500,000 will be
eligible, with the remaining 300,000 becoming eligible by March 6, 2002.
WHO CAN SELL
IN GENERAL. Under Rule 144, in general, a person (or persons whose shares
are aggregated), including an affiliate, who has beneficially owned shares for
at least one year can sell, within any three-month period a number of shares of
common stock that does not exceed the greater of:
(a) 1% of the then outstanding shares of common stock (between 30,000 and
32,000 shares immediately after the Offering); or
(b) the average weekly trading volume in our common stock during the four
calendar weeks before notice of the Rule 144 sale is filed, subject to
a few restrictions described in Rule 144.
NO VOLUME LIMITS. In addition, any person who has not been our affiliate at
anytime during the 90 days before a sale and who has beneficially owned the
shares he or she desires to sell for at least two years may sell those shares
under Rule 144(k) and not be concerned with the volume limits described above.
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EFFECT OF SALES OF SHARES. Before the Offering, there has been no public
market for our common stock. No precise prediction can be made as to whether a
market will be created or sustained after the Offering; therefore, we cannot
predict what precise effect sales of restricted stock may have on the market
price of our common stock. Nevertheless, sale of substantial amounts of common
stock in the public market could adversely affect market prices. Sales of
restricted stock could also impair our future ability to raise capital through
the sale of our equity securities.
LITIGATION
We are not a party to any pending or threatened legal proceedings.
LEGAL MATTERS
We are being advised on the legality of issuing our common stock offered by this
Prospectus by Gibson, Haglund & Paulsen, Sandy, Utah.
EXPERTS
The balance sheet of the Company as of December 31, 2000 and the statements of
operations, stockholders' deficit and cash flows for the years ended December
31, 2000 and 1999 have been included herein in reliance upon the report of
Sartain Fischbein & Co., Independent Certified Public Accountants, given as the
authority of that firm as experts in accounting and auditing. With respect to
the unaudited interim financial information for the three month periods ended
March 31, 2001, and 2000, the independent certified public accountants have not
audited or reviewed such financial statements and have not expressed an opinion
or any other form of assurance with respect to such financial statements.
ADDITIONAL INFORMATION
We have filed our Form SB-2 Registration Statement with the SEC. This Prospectus
does not contain all of the information set forth in the registration statement.
You will find additional information about us and our common stock in the
registration statement and in the exhibits attached thereto. The registration
statement, including its exhibits, may be inspected without charge at the SEC's
principal office at 450 Fifth Street, N.W., Washington, D.C. 20549, and copies
may be obtained from that office, if you pay the applicable fees. The
registration statement is available on the SEC's website at www.sec.gov.
We have to comply with the information requirements of the Securities Exchange
Act of 1934, and will file reports, proxy statements, and other information with
the SEC. These materials can be inspected and copied at the public reference
facilities maintained by the SEC at 450 Fifth Street, N.W., Washington, D.C.
20549, or at its regional offices at 500 West Madison Street, Suite 1400,
Chicago, Illinois, 60661. Copies of these materials can be obtained from the
SEC's Public Reference Section at 450 Fifth Street, N.W., Washington, D.C. 20549
at prescribed rates. Some information about us is also available on the SEC's
website at www.sec.gov.
We intend to furnish our shareholders, after the close of each calendar year,
with an annual report that describes our business and contains audited financial
statements that have been examined and reported upon by an independent certified
public accountant. In addition, we may from time to time furnish our
shareholders with other reports that we believe will help keep them informed
about our business.
FINANCIAL INFORMATION
The Company financial statements for the year ended as of December 31, 2000, and
the related statements of operations, stockholders' deficit, and cash flows for
the year ended December 31, 2000 and the period from August 5, 1999 (inception)
to December 31, 1999; and the unaudited financial statements for the first
quarter of 2001 included below.
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CEDAR MOUNTAIN DISTRIBUTORS, INC.
CONTENTS
<Table>
<Caption>
PAGE
----
INDEPENDENT AUDITORS' REPORT F-2
FINANCIAL STATEMENTS:
Balance Sheets F-3
Statements of Operations F-4
Statement of Stockholders' Deficit F-5
Statements of Cash Flows F-6
Notes to Financial Statements F-7 to F-11
</Table>
F-1
<Page>
INDEPENDENT AUDITORS' REPORT
To the Stockholders
Cedar Mountain Distributors, Inc.
Olathe, Kansas
We have audited the accompanying balance sheet of Cedar Mountain Distributors,
Inc. as of December 31, 2000, and the related statements of operations,
stockholders' deficit, and cash flows for the year ended December 31, 2000 and
the period from August 5, 1999 (inception) to December 31, 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 audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we
plan and perform the 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 Cedar Mountain Distributors,
Inc. as of December 31, 2000 and the results of its operations and its cash
flows for the year ended December 31, 2000 and the period from August 5, 1999
(inception) to December 31, 1999, in conformity with accounting principles
generally accepted in the United States of America.
March 26, 2001 Sartain Fischbein & Co.
Tulsa, Oklahoma
F-2
<Page>
CEDAR MOUNTAIN DISTRIBUTORS, INC.
BALANCE SHEETS
<Table>
<Caption>
December 31, March 31,
2000 2001
(Unaudited)
------------ -----------
ASSETS
CURRENT ASSETS:
Cash $ 2,573 $ 21,200
Accounts receivable 715 1,975
Inventories 5,792 10,135
-------- --------
TOTAL CURRENT ASSETS $ 9,080 $ 33,310
-------- --------
OTHER ASSETS:
Deposits -- 600
Prepaid offering costs -- 7,500
-------- --------
-- 8,100
-------- --------
TOTAL ASSETS $ 9,080 $ 41,410
======== ========
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Accounts payable $ 8,582 $ 1,600
Accrued interest payable 882 1,546
Notes payable - stockholders 9,000 56,500
-------- --------
TOTAL CURRENT LIABILITIES 18,464 59,646
-------- --------
STOCKHOLDERS' DEFICIT
Preferred stock, $.001 par value, 5,000,000 shares
authorized, no shares issued and outstanding -- --
Common stock, $.001 par value, 50,000,000 shares
authorized, 3,000,000 shares issued and outstanding 3,000 3,000
Additional paid-in capital 410 410
Accumulated deficit (12,794) (21,646)
-------- --------
TOTAL STOCKHOLDERS' DEFICIT (9,384) (18,236)
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 9,080 $ 41,410
======== ========
</Table>
F-3
The accompanying notes are an integral part of the financial statements.
<Page>
CEDAR MOUNTAIN DISTRIBUTORS, INC.
STATEMENTS OF OPERATIONS
<Table>
<Caption>
Period from
August 5, 1999
(Inception)
to Year Ended Three Months Ended March 31,
December 31, December 31, ---------------------------
1999 2000 2000 2001
(Unaudited) (Unaudited)
--------- ----------- ---------- -----------
SALES $ -- $ 20,272 $ 19,230 $ 10,618
COST OF SALES -- 18,134 13,815 6,722
--------- ----------- ---------- -----------
GROSS PROFIT -- 2,138 5,415 3,896
OPERATING EXPENSES -- 14,050 1,547 12,084
--------- ----------- ---------- -----------
OPERATING INCOME (LOSS) -- (11,912) 3,868 (8,188)
INTEREST EXPENSE -- 882 168 664
--------- ----------- ---------- -----------
NET INCOME (LOSS) $ -- $ (12,794) $ 3,700 $ (8,852)
========= =========== ========== ===========
BASIC INCOME (LOSS)
PER SHARE $ * $ * $ * $ *
========= =========== ========== ===========
BASIC WEIGHTED AVERAGE
SHARES OUTSTANDING 1,000,000 2,060,109 1,000,000 3,000,000
========= =========== ========== ===========
</Table>
* Less than $.01 per share
F-4
The accompanying notes are an integral part of the financial statements.
<Page>
CEDAR MOUNTAIN DISTRIBUTORS, INC.
STATEMENT OF STOCKHOLDERS' DEFICIT
PERIODS FROM AUGUST 5, 1999 (INCEPTION) TO MARCH 31, 2001
<Table>
<Caption>
Common Stock Additional
------------------------ Paid-in Accumulated
Shares Amount Capital Deficit Total
--------- ------ ---------- ----------- --------
Balance at Inception,
August 5, 1999 -- $ -- $ -- $ -- $ --
Issue shares for cash at
$.002 per share 1,000,000 1,000 1,000 -- 2,000
--------- ------ ------- -------- --------
Balance, December 31, 1999 1,000,000 1,000 1,000 -- 2,000
Common stock issued in
merger, $.001 par value 2,000,000 2,000 (590) -- 1,410
Net loss for year -- -- -- (12,794) (12,794)
--------- ------ ------- -------- --------
Balance, December 31, 2000 3,000,000 3,000 410 (12,794) (9,384)
Net loss for period
(unaudited) -- -- -- (8,852) (8,852)
--------- ------ ------- -------- --------
Balance, March 31, 2001
(unaudited) 3,000,000 $3,000 $ 410 $(21,646) $(18,236)
========= ====== ======= ======== ========
</Table>
F-5
The accompanying notes are an integral part of the financial statements.
<Page>
CEDAR MOUNTAIN DISTRIBUTORS, INC.
STATEMENTS OF CASH FLOWS
<Table>
<Caption>
Period from
August 5, 1999
(inception)
to Year Ended Three Months Ended March 31,
December 31, December 31, ----------------------------
1999 2000 2000 2001
(Unaudited) (Unaudited)
-------------- ------------ ----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ -- $(12,794) $ 3,700 $ (8,852)
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Increase in accounts receivable -- (715) -- (1,260)
Increase in inventories -- (5,792) -- (4,343)
Increase in deposits -- -- -- (600)
Increase (decrease) in accounts payable -- 8,582 653 (6,982)
Increase in accrued interest payable -- 882 168 664
------- -------- ------- --------
NET CASH PROVIDED BY (USED IN) OPERATING
ACTIVITIES -- (9,837) 4,521 (21,373)
------- -------- ------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash received upon merger (Note 2) -- 1,410 -- --
------- -------- ------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Prepaid offering costs -- -- -- (7,500)
Proceeds from the sale of common stock 2,000 -- -- --
Proceeds from notes payable - stockholders -- 14,000 14,000 47,500
Repayments of note payable -- (5,000) -- --
------- -------- ------- --------
NET CASH PROVIDED BY FINANCING ACTIVITIES 2,000 9,000 14,000 40,000
------- -------- ------- --------
NET INCREASE IN CASH 2,000 573 18,521 18,627
CASH, beginning of period -- 2,000 2,000 2,573
------- -------- ------- --------
CASH, end of period $ 2,000 $ 2,573 $20,521 $ 21,200
======= ======== ======= ========
CASH PAID DURING THE PERIOD FOR:
Interest $ -- $ -- $ -- $ --
======= ======== ======= ========
Income Taxes $ -- $ -- $ -- $ --
======= ======== ======= ========
</Table>
F-6
The accompanying notes are an integral part of the financial statements.
<Page>
CEDAR MOUNTAIN DISTRIBUTORS, INC.
NOTES TO FINANCIAL STATEMENTS
PERIODS FROM AUGUST 5, 1999 (INCEPTION) TO MARCH 31, 2001
(INFORMATION FOR THE PERIODS ENDED MARCH 31, 2001 AND 2000 IS UNAUDITED)
1. INTERIM FINANCIALS In the opinion of Cedar Mountain Distributors,
STATEMENTS Inc. (the "Company"), the accompanying unaudited
(UNAUDITED) financial statements contain all adjustments
(consisting of only normal recurring adjustments)
necessary to present fairly the financial position
of the Company at March 31, 2001 and the results
of its operations and cash flows for the three
months ended March 31, 2001 and 2000. The results
of operations for the three months ended March 31,
2001 and 2000 are not necessarily indictive of the
results to be expected for the full year.
2. BUSINESS On June 20, 2000, a merger was consummated whereby
COMBINATION Cedar Mountain Distributors, Inc. (the "Company")
issued 1,000,000 common shares (par value $.001)
in exchange for 100% of Tarus International, Inc.
("Tarus") common stock. Immediately after the
merger, the Tarus stockholder owned 33.3% of
Company common stock.
The business combination was accounted for using
the principles of purchase accounting with Tarus
being the acquiring enterprise for the following
reasons:
1. The Company was a new entity formed to
issue stock to effect a business
combination and had no substantial
activity prior to the merger.
2. The management of Tarus became the
management of the Company immediately
after the merger.
Accordingly, the historical financial statements
prior to June 20, 2000 are those of Tarus restated
to reflect the equivalent number of Company shares
and the par value of such shares.
Tarus acquired the sole asset of the Company,
which consisted of $1,410 of cash.
No pro forma information giving effect of the
acquisition as if it had taken place on August 5,
1999 as the effect would be immaterial to the
results of operations.
F-7
<Page>
CEDAR MOUNTAIN DISTRIBUTORS, INC.
NOTES TO FINANCIAL STATEMENTS
PERIODS FROM AUGUST 5, 1999 (INCEPTION) TO MARCH 31, 2001
(INFORMATION FOR THE PERIODS ENDED MARCH 31, 2001 AND 2000 IS UNAUDITED)
3. SUMMARY OF NATURE OF OPERATIONS: Tarus International, Inc.
SIGNIFICANT ("Tarus") was incorporated in August 1999. Tarus'
ACCOUNTING principal operations during its development stage
POLICIES consisted of developing a business plan, raising
capital, establishing key relationships with
suppliers and customers and creating the operation
infrastructure. During the year ended December 31,
2000, Tarus began to sell imported soft drinks in
load quantities to schools and institutions. Tarus
intends to take advantage of the market for
healthy alternatives to traditional soft drinks.
The Company was incorporated on December 23, 1999
to effect a business combination with Tarus (See
Note 2).
INVENTORIES: Inventories, which consist of
purchased bottled and canned soft drinks, are
stated at the lower of cost (first-in, first-out
method) or market.
PREPAID OFFERING COSTS: Prepaid offering costs
represent costs incurred in connection with the
Company's proposed public offering. Prepaid
offering costs will be offset against net proceeds
if successful, or expensed in operations if the
offering is unsuccessful.
PER SHARE INFORMATION: The computation of income
(loss) per share is based on the income (loss)
applicable to common stockholders, divided by the
weighted average number of common shares
outstanding during the period. No diluted per
share information is provided as there are no
potential common shares.
INCOME TAXES: The Company uses the asset and
liability method of accounting for income taxes.
Under the asset and liability method, deferred tax
assets and liabilities are recognized for the
future tax consequences attributable to difference
between the financial statement carrying amounts
of existing assets and liabilities and their
respective tax basis. Deferred tax assets and
liabilities are measured using enacted tax rates
expected to apply to taxable income in the years
in which those temporary differences are expected
to be recovered or settled.
ADVERTISING COSTS: Advertising costs are expensed
as incurred.
F-8
<Page>
CEDAR MOUNTAIN DISTRIBUTORS, INC.
NOTES TO FINANCIAL STATEMENTS
PERIODS FROM AUGUST 5, 1999 (INCEPTION) TO MARCH 31, 2001
(INFORMATION FOR THE PERIODS ENDED MARCH 31, 2001 AND 2000 IS UNAUDITED)
3. SUMMARY OF USE OF ESTIMATES: The preparation of financial
SIGNIFICANT statements in conformity with generally accepted
ACCOUNTING accounting principles requires management to make
POLICIES estimates and assumptions that affect the reported
(CONTINUED) amount of assets and liabilities and disclosure of
contingent assets and liabilities at the date of
the financial statements and the reported amounts
of revenues and expenses during the reporting
period. Actual results could differ from those
estimates.
REVENUE RECOGNITION: Upon receipt of a customer
order, the Company places an order with their
vendor for the soft drink products. Vendors
supplying product to the Company generally require
payment before the product is picked up by a
common carrier for delivery to the customer.
Funds paid to the vendor are recorded as deposits
on inventory until the product is picked up by the
common carrier, at which time the product becomes
Company inventory. Inventory is recorded at cost.
The Company recognizes revenue upon delivery of
the products to the customer.
CONCENTRATION: The Company currently purchases all
its inventory from one supplier.
4. NOTES PAYABLE Notes payable stockholder consist of the
STOCKHOLDERS following:
<Table>
<Caption>
December 31, March 31,
2000 2001
------------ ---------
Notes payable to stockholders with
interest at 10%, due on demand. The
notes are without collateral. $9,000 $56,500
====== =======
</Table>
5. MAJOR CUSTOMERS One unaffiliated customer accounted for 96% of the
Company's total revenue during the year ended
December 31, 2000. At December 31, 2000, there
were no outstanding receivables from the customer.
F-9
<Page>
CEDAR MOUNTAIN DISTRIBUTORS, INC.
NOTES TO FINANCIAL STATEMENTS
PERIODS FROM AUGUST 5, 1999 (INCEPTION) TO MARCH 31, 2001
(INFORMATION FOR THE PERIODS ENDED MARCH 31, 2001 AND 2000 IS UNAUDITED)
5. MAJOR CUSTOMERS Three unaffiliated customers accounted for 75% of
(CONTINUED) the Company's total revenue during the three
months ended March 31, 2001 and one affiliated
customer accounted for 100% of the Company's total
revenue during the three months ended March 31,
2000.
6. RELATED PARTY From inception to December 2000, the Company had
TRANSACTIONS no employees and currently continues to utilize
the services, furniture, equipment, and facilities
of one of the stockholders for no charge.
7. INCOME TAX Components of the net deferred tax asset at are as
follows:
<Table>
<Caption>
December 31, March 31,
2000 2001
------------ --------
Net operating losses $ 1,919 3,247
Valuation allowance (1,919) (3,247)
------- -------
Net deferred tax asset $ -- $ --
======= =======
</Table>
At December 31, 2000 the Company has net operating
loss carryforwards of approximately $12,000 which
expire through 2021. Due to the uncertainty as to
the ultimate utilization, a deferred tax asset
valuation allowance has been provided and no net
provision for income taxes is included in the
statement of operations.
8. STOCK OPTION PLAN Effective January 6, 2000, the Company adopted a
Stock Option Plan ("the Plan") that provides for
qualified and non-qualified plans. The Plan covers
an aggregate 2,000,000 shares of common stock,
except that no more than 1,000,000 shares shall be
issued in connection with the exercise of
incentive options. The incentive plan is
administered by a committee appointed by the Board
of Directors' "committee", and requires that
options be granted at an exercise price of 100% of
the fair value of the common stock of the Company
on the date of the grant. Options granted to
stockholders who possess more than 10% of the
outstanding common stock have a required exercise
price of 100% of the fair value of the common
stock on the date of grant.
F-10
<Page>
CEDAR MOUNTAIN DISTRIBUTORS, INC.
NOTES TO FINANCIAL STATEMENTS
PERIODS FROM AUGUST 5, 1999 (INCEPTION) TO MARCH 31, 2001
(INFORMATION FOR THE PERIODS ENDED MARCH 31, 2001 AND 2000 IS UNAUDITED)
8. STOCK OPTION PLAN The options expire up to ten years from date of
(CONTINUED) grant or up to five years from the date of grant
for options to stockholders who possess more than
10% of the outstanding common stock.
The non-qualified plan is also administered by the
Committee and is covered by the same 2,000,000
shares as the incentive plan. The non-qualified
plan provides that options may be granted at
exercise prices and terms as determined by the
Committee.
No options have been granted under the Plan.
9. STOCKHOLDERS' PREFERRED STOCK: The Board of Directors authorized
EQUITY 5,000,000 of $.001 par value preferred stock with
attributes to be determined by the Board of
Directors.
10. SUBSEQUENT Subsequent to March 31, 2001, the Board of
EVENT (UNAUDITED) Directors approved the sale of 200,000 shares of
common stock at $1.00 per share in a public
offering.
Subsequent to March 31, 2001, the Company borrowed
an additional $20,000 from a stockholder. The note
is due on demand, bears interest at 10% and is
without collateral.
F-11
<Page>
PART II - INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 78.037 of the Nevada Revised Statutes provides that a corporation, in
its Articles of Incorporation, may provide for the limitation of personal
liability of directors or officers to the corporation or its stockholders for
breach of fiduciary duty except for acts or omissions involving intentional
misconduct, fraud or knowing violation of law or unlawful payment of
distributions. The Company's Articles of Incorporation contains such a
provision.
The Company's Articles of Incorporation, pursuant to the authority granted by
NRS Section 78.037, state that no director or officer shall be personally liable
to company for monetary damages for any breach of fiduciary duty by such person
as a director or officer. Notwithstanding the foregoing sentence, a director or
officer shall be liable to the extent provided by applicable law, (i) for acts
or omissions which involve intentional misconduct, fraud or a knowing violation
of law, or (ii) for the payment of dividends in violation of NRS 78.300.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the estimated expenses in connection with the
issuance and distribution of the securities offered hereby.
<Table>
<Caption>
AMOUNT
--------
SEC Registration Fee ................... $ 50
Printing ............................... $ 100
Blue Sky Fees and Expenses ............. $ 5,000
Transfer Agent Fees .................... $ 2,500
Accounting Fees and Expenses ........... $12,500
Legal Fees and Expenses ................ $25,000
Miscellaneous Fees and Expenses ........ $ 2,000
-------
Total ..................... $47,150
=======
</Table>
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.
Since our inception, sales of unregistered common stock (the only issued and
outstanding securities of the Company) were made by the small business issuer as
follows:
<Table>
<Caption>
NAME AND CONSIDERATION DATE SOLD NUMBER OF SHARES CASH
---------------------------------- --------- ---------------- ------------
James R. Smith 06/15/00 1,000,000 $ 2,000.00
Peterson & Sons Holding Co. 01/06/00 900,000 $ 900.00
Owen Enterprises, LLC 01/06/00 300,000 $ 300.00
The David & Laura Owen Trust 01/06/00 300,000 $ 300.00
Bryan S. Ferguson 01/06/00 100,000 $ 100.00
MDN, LLP 01/06/00 100,000 $ 100.00
DBM, LLP 01/06/00 100,000 $ 100.00
Emerson B. Wells, LP 01/06/00 100,000 $ 100.00
Laura E. Owen 01/06/00 50,000 $ 50.00
Karen E. Taylor 01/06/00 25,000 $ 25.00
John C. Garrison 01/06/00 25,000 $ 25.00
</Table>
With respect to the sale of all unregistered securities as described above, this
small business issuer relied upon the exemption afforded by Section 4(2) of the
Securities Act of 1933 which relates to transactions in securities not involving
a public offering. All recipients had a preexisting relationship with a founder,
officer, or director of the Company. No advertisement or general solicitation
was used to promote sales of the Company's stock. The Company believed that each
purchaser was purchasing with the intent to
II-1
<Page>
invest, and not with a view to distribution. No transfer of restricted
securities will be permitted without opinion of counsel that such transfer is in
compliance with the rules and regulations of the SEC.
ITEM 27. EXHIBITS.
<Table>
<Caption>
NUMBER DESCRIPTION
------ -----------
2.1 Agreement and Plan of Exchange between Cedar Mountain Distributors,
Inc. and Tarus International, Inc.
3.1 Articles of Incorporation of KNETX Skates Corporation
3.2 Restated Articles of Incorporation of Cedar Mountain Distributors, Inc.
3.3 Restated Bylaws of Cedar Mountain Distributors, Inc.
5.1 Opinion of Gibson, Haglund & Paulsen
21.1 Information Regarding our Subsidiary, Tarus International, Inc.
23.1 Consent of Gibson, Haglund & Paulsen, see Exhibit 5.1
23.2 Consent of Sartain Fischbein & Co.
</Table>
ITEM 28. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes that it will:
(1) File, during any period in which it offers or sells securities
under Rule 415 of the Securities Act, a post-effective amendment to this
registration statement to:
(i) include any Prospectus required by section 10(a)(3) of the
Securities Act; and
(ii) reflect in the Prospectus any facts or events which,
individually or together, represent a fundamental change 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 initial 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.
II-2
<Page>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form SB-2 and authorized this registration
statement to be signed on its behalf by the undersigned, in the City of Olathe,
State of Kansas, on October 12, 2001.
CEDAR MOUNTAIN DISTRIBUTORS, INC.,
a Nevada corporation
By: /s/ James R. Smith
-----------------------------------
James R. Smith, President, Secretary,
Treasurer, and Acting Chief
Financial Officer
In accordance with the requirements of the Securities Act of 1933, this
registration statement was signed by the following persons in the capacities and
on the dates stated.
NAME TITLE DATE
---- ----- ----
/s/ James R. Smith President, Secretary, October 18, 2001
------------------------ Treasurer, Acting Chief
James R. Smith Financial Officer, and Director
/s/ Lauri A. Orscheln Vice President and Director October 18, 2001
------------------------
Lauri A. Orscheln
II-3