UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM SB-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Kinship Systems, Inc.
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(Name of small business issuer in its charter)
Utah 7371
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(State of jurisdiction of (Primary Standard Industrial
incorporation or organization) Classification Code Number)
87-0648148
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(I.R.S. Employer
Identification No.)
22 East 100 South, Suite 400, Salt Lake City, Utah 84111 (801) 521-8636
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(Address and telephone number of principal executive offices)
22 East 100 South, Suite 400, Salt Lake City, Utah 84111
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(Address of principal place of business or intended principal place of business)
Mr. Andrew Limpert 22 East 100 South, Suite 400, Salt Lake City, Utah 84111
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(801) 521-8636 (Name, address and telephone number of agent for service)
Approximate date of proposed sale to the public August 1, 2000.
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If this Form is filed to register additional securities for an offering pursuant
to rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering.[ ] Not currently applicable.
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If this Form is a post-effective amendment filed pursuant to Rule 4629(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. [ ] Not currently applicable.
-------------------------
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] Not currently applicable.
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If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box.[ X]
Title of each class Dollar amount Proposed Proposed Amount of
of securities to be to be registered maximum maximum registration fee
registered offering price aggregate offering
per unit price
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Common voting Max: $200,000 $1.00/share $200,000 $53.00
stock
PROSPECTUS
KINSHIP SYSTEMS, INC.
A UTAH CORPORATION
22 East 100 South, Suite 400
Salt Lake City, Utah 84111
(801) 521-8636
Offering of the common voting stock of Kinship Systems, Inc.
(hereinafter the "Company," "Issuer," or "Kinship"). Minimum Offering of 100,000
shares, Maximum Offering of 200,000 shares at $1.00/share. The Company reserves
the right to close the offering at any amount between the Minimum Offering or
Maximum Offering during the offering term of One-hundred and Twenty days (120)
from the date appearing on this prospectus cover page.
The Company has only one class of stock, 50,000,000 common voting
stock, no par, of which 1,270,000 are presently issued and outstanding with up
to an additional 200,000 to be issued by this Offering.
The Company is a start-up enterprise which was incorporated on February
1, 2000 with minimum capital to engage in its initial intended business
activities to become a distributor of various business computer software. See
description of Business in this Prospectus. The Company has no historical
operating history or revenues to date.
THIS IS A HIGH RISK OFFERING. SEE RISK FACTORS AT PAGE 6.
This Offering is intended as a self underwriting (stock sold by the Company
itself) without the employment of any underwriters or other commissioned sales
agents. Should the Company be unsuccessful at completing its self underwriting,
it may amend the prospectus to indicate commissions intended to be paid.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE UNITED STATES
SECURITIES AND EXCHANGE COMMISSION ("SEC" OR "COMMISSION") ;NOR BY ANY STATE OR
FOREIGN SECURITIES REGULATORY AGENCY; NOR HAS THE COMMISSION OR ANY OTHER
SECURITIES REGULATORY AGENCY PASSED UPON THE ACCURACY OR ADEQUACY OF ANY
INFORMATION MATERIALS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Description of Estimated Cost of Estimated Net Net Proceeds as a
Securities Offering Proceeds of Percentage of
Offered Offering Offering Price
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Minimum 100,000 shares $20,000 $80,000 80%
Offering
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Maximum 200,000 shares $20,000 $180,000 90%
Offering
Offering Notes on following page
Date of this Prospectus: July 5, 2000
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TABLE OF CONTENTS
ITEM
NUMBER DESCRIPTION PAGE
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1 Summary Information.............................................................. 4
2 Risk Factors and Dilution........................................................ 6
3 Plan of Distribution............................................................. 8
4 Use of Proceeds to Issuer........................................................ 9
5 Description of Business..........................................................11
6 Description of Property..........................................................14
6 Management's Discussion and Analysis of Financial
Condition....................................................................14
7 Directors, Executive Officer & Significant Employees.............................15
8 Remuneration of Directors & Officers.............................................18
9 Security Ownership of Management & Certain
Security Holders...........................................................19
10 Interest of Management & Others in Certain Transactions..........................19
11 Securities Being Offered.........................................................20
12 Experts..........................................................................21
13 Legal Proceedings................................................................21
14 Changes in a Disagreement with Accountants.......................................21
15 Indemnity of Officers and Directors..............................................21
EXHIBITS
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Audited Financial Statements to the period ending April 30, 2000
3
SUMMARY OF THE OFFERING
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Terms of Offering: This is a Minimum/Maximum Offering. We, as your
management, will not deem that the Offering has
been subscribed and closed unless a minimum of
$100,000 of gross proceeds has been received
within the offering term of One-Hundred and Twenty
Days (120/days) from the date appearing on the
face of this Prospectus. All funds received up to
the minimum offering will be held in a segregated
subscription account by the Company, until or
unless the minimum offering is reached within the
subscription term. If the minimum offering is not
reached within this subscription term, all
proceeds will be returned to the investors in this
Offering without interest or deduction for costs.
We may close the Offering at any time after the
minimum offering is sold within the Offering term.
However, if the maximum offering of $200,000 is
reached, the Offering will be closed when and if
such amount is obtained within the Offering term.
All proceeds received after the minimum offering
will be paid directly to the Company and may be
used for the anticipated company purposes as
received. The Company is selling 100,000 (Min.) to
200,000 (Max.) of its common voting stock in this
Offering at $1.00/share. There is no minimum
subscription amount.
Cost of the Offering: We have estimated the cost of this Offering to be
approximately $20,000 which amount should include
registration fees, printing, legal, accounting and
distribution costs.
No Commissions: No allowances are made for the payment of
commissions as we intend to sell the Offering
through our own management (self-underwriting)
without the payment of any third party commission
or fees. Should we not be successful in selling
the Offering, we may elect to amend this
Registration Statement and Prospectus to provide
for the payment of commissions to any licensed
third party underwriter or broker, at which time
the amount of commissions would be described in
the forepart of the Prospectus. See section on
Terms of Offering.
4
Business: We, to date, have not engaged in any active
business purpose. We have recently entered into a
Product Distributing Agreement with ProSource
Software for the distribution and marketing rights
to a unique proprietary computer software used in
accident vehicle prevention and accident
reconstruction and analysis. The contract
essentially provides for a discount purchase right
to the technology by the Company on a geographic
exclusive basis for an initial two year term. The
Company, if the supplier is not able to satisfy
demand, may also arrange for third party
manufacturing of the technology. This contract is
more fully explained under the Business Section.
Risks & Dilution: This Offering involves substantial risks of loss
to the investor. Further, you will realize an
immediate and substantial reduction in the net
worth per share of your investment after the
Offering due to various dilution factors. See
Section on Risk Factors and Dilution.
Use of Proceeds: The intended use of proceeds is set out under that
Section. However, each of you should understand
that we have broad discretion, in the exercise of
sound business judgment, to alter or amend the
specific use of proceeds applicable. See Use of
Proceeds Section.
Control & Ownership: You should understand that even in the event of
the sale of the maximum offering, you and other
shareholders purchasing pursuant to this
Registration will hold only a minority interest in
the Company and that the original founders and
shareholders will continue to maintain a majority
sharehold interest. See Risk Factors and Terms of
the Offering.
Offering Price: The offering price for shares in this Registration
have been arbitrarily set by us and do not
purport, in any way, to reflect the actual value
of the Company or its assets. See Section on Terms
of the Offering.
5
RISK FACTORS
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The following constitutes what we (the Company's management) believe to
be the most significant risk factors in this Offering. This list is not intended
to be exclusive and each investor should read the entire Prospectus materials as
to risk factors as may be discussed or illuminated by other sections. Further,
no particular significance should be attached to the order in which the risk
factors are listed:
1- Limited Marketing Rights. The current products of the Company are
not only unproven, but are distributed by the Company pursuant to a two year
distribution contract. There is no assurance the Company can continue to market
its products beyond this initial two year term, or that it will be able to have
any business purpose beyond this term.
2- Lack of Capitalization. We have intentionally limited the amount of
money to be raised in this Offering to help in efforts to close this Offering as
a self-underwriting by potential contacts of management and without the need to
employ third party underwriters or broker dealers. As a result, the amount of
capital being raised is marginal and may not be adequate to fully or
sufficiently fund the business plan or complete one or more of the stated
objectives of the Company. Further, the Company has no alternative financing
plan.
3- Start-up Enterprise. This is a start-up enterprise without any
operating history or record. No assurance can be made or given that the business
concepts or products will be viable, can be profitably marketed or that you, as
investors in this Offering, will receive any return on your investment.
4- Majority Control. Even in the event that the maximum amount is sold
in this Offering, the shareholders in the Company prior to this Offering will
continue to hold the majority of the shares and thereby control the future of
the Company in such important matters as type of business, compensation to
management and control of the corporation's Board of Directors.
5-Lack of Trading Markets. As of the time of the anticipated effective
date of this Registration Statement, there will not exist any publicly traded
market for the Company's shares. Even after the completion of this Offering, as
a minimum or maximum offering, there can be no assurance that a publicly traded
market will develop for the shares being sold to you in this Offering. If we are
not able to develop a public trading market for the shares, there may be limited
liquidity of the shares and you may be forced to hold such shares for an
indefinite period of time and to then rely upon the uncertain prospects of
"private"sales of your securities in order to have any type of a marketability
or "exit strategy."
6-Arbitrary Offering Price. The Offering price of the shares being sold
in this Offering were arbitrarily set by us and do not reflect any intrinsic
value of the Company or its shares.
7-Dilution. Because various of the initial shares in this corporation
were issued to founders or other affiliated parties for minimal capitalization
and intangibles such as concepts, entrepreneurship and other factors not
6
involving hard assets or cash, you, as a post organization investor in this
Offering, will suffer a dilution in value of the shares you purchase in this
Offering - that is the reduction in value of your shares after the Offering
compared to the price of the shares being purchased in the Offering. See
Dilution Section.
8-Unproved Markets and Products. The concepts and products described in
this Offering have traditionally been associated with a limited market. There is
no assurance that we will be successful in profitably marketing the intended
services and products to this limited market. See Description of Business and
Markets.
9-Limited Exclusive Rights. We are obtaining exclusive geographic
rights to the technology. However, the Company directly, or through one or more
third parties, may compete with us in other geographic areas.
10-Cost of the Offering Relative to Other Use of Proceeds. The cost of
the Offering constitutes a substantial portion of the proceeds of this Offering,
up to 20% in the event only the minimum offering is sold. As a result, you
should understand that much of the proceeds being raised will be used to pay the
cost of this Offering, rather than being employed for actual business purposes.
We anticipated this consequence as a result of our efforts to maintain a limited
offering size. However, there remains a risk that a relatively high portion of
the proceeds of the offering will be used to pay costs rather than direct
business development. See Use of Proceeds, Description of Business and Terms of
the Offering sections.
11-Managements Experience with a Public Entity. We have limited
experience in business activities and no experience in the management of a
public company. You will be relying upon Company management to be able to manage
a public company, complete the reporting requirements and to learn and discharge
the other responsibilities incident to the operation of a publicly held
reporting company if this Offering is successfully closed.
12-Start-up Company. As a start-up company, there may be some cost
overruns and other problems that are not disclosed or anticipated by this
Offering and which may impede the return of investment or the continued
commercial operations of the Company.
DILUTION
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Dilution is a term which normally defines the reduction in value per
share which occurs to the investor in certain offerings compared to the purchase
price of those shares. By way of specific illustration, an investor in this
Offering is paying $1.00 per share. It is estimated that the net worth per share
after the completion of the Maximum Offering will only be $.14. Therefore, each
investor in this Offering will suffer an immediate dilution to his investment of
$.86 per share or 86 % in the Maximum Offering; and $.92 per share or 92 % in
the Minimum Offering. These dilution factors are illustrated in the following
graphical representations:
7
[Graph Ommitted]
Minimum offering Maximum Offering
Value Subscription Value share after Value Subscription Value share
$1.00/share offering $1.00/share after offering
100% $ .08/share 100% $.14 /share
(Rounded) (Rounded)
Dilution Dilution
Dilution 92% Dilution 86%
In this Offering, dilution primarily arises because the original
founders and affiliated parties who organized the corporation took shares for
the entrepreneurial effort, concepts and with the transfer of minimal cash,
which did not result in any significant accountable net worth for the Company.
You, as an investor, will contribute essentially all of the working capital, but
which contribution is divided not only by shares sold in this Offering, but also
among those issued to the original shareholders thus resulting in the dilution
described above.
PLAN OF DISTRIBUTION AND TERMS OF THE OFFERING
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As noted previously, the Company does not intend to employ the services
of any underwriter or other broker/dealer to place or sell its securities. The
Company believes it can place the limited amount of securities being offered by
this registration through the efforts of its own management group who will not
be paid any consideration, commission or other compensation for the selling and
placement efforts. Consequently, no provisions for commissions have been
provided for in this Prospectus. Should management determine, at any time, that
it is necessary to sell this Offering pursuant through the use of commissions to
an underwriter, management will reserve the right to amend the Registration and
Prospectus to reflect any such commission arrangements and to continue with the
Offering in accordance with all other terms and provisions.
The costs of this Offering are estimated at $20,000 and include legal,
accounting, filing or permit fees, printing and related distribution costs.
These amounts are estimates but are believed reasonably accurate for the
intended size of the Offering. As noted under the Risk Factors and Use of
Proceeds Sections, payment of these estimated offering costs will involve a
substantial portion of both the minimum or maximum offering, thereby limiting
the amount of net proceeds available for actual business purposes.
Proceeds of the Offering, up to the minimum offering, will be placed in
a segregated subscription account under control of the Company and will not be
employed for any business purposes of the Company until or unless the minimum
offering is sold within the offering term of 120 days from the date appearing on
the face of this Prospectus. If the minimum offering is not fully sold and
collected within such minimum period, then the Offering with be terminated and
all proceeds with be returned without deduction for cost or addition of any
interest. Any interest earned on the subscription account will be employed by
the Company to pay for anticipated Offering costs and return of subscription
proceeds to investors.
8
After the close of the minimum offering , the Company will employ
proceeds of this Offering upon receipt and the subscription account will no
longer be employed.
The Company reserves the right to close the Offering at any time within
the Offering term of 120 days when the minimum offering has been sold, even if
less than the maximum offering has been sold. Factors which may influence the
Company's decision to close the Offering would be the effort required to
continue sales and the rate at which subscriptions were obtained up to the
minimum offering. In all events, the Company will not sell more than the maximum
offering and will close the Offering at any time that the maximum amount has
been sold. The Use of Proceeds section reflects the Company's best present
estimate of the use of proceeds in the event of either the minimum or maximum
offering. The Offering may be closed at some point between the minimum and
maximum and the use of proceeds will be adjusted accordingly, though no
assurance is given or represented that such adjustment will be exactly pro rata
to the percentage difference between the minimum and maximum offering.
It is intended the Offering will be sold primarily to citizens of the
State of Utah and that the Offering will qualify in Utah as a registration by
coordination. That is the Company will be deemed to be qualified as a registered
offering in Utah upon clearance of this Registration with the SEC. If the
Offering is offered or sold in other jurisdictions, the Offering must be
registered or qualified under the applicable state law of that jurisdiction. The
Company does not intend to register this Offering in any other jurisdiction for
sale unless such registration can primarily be achieved by coordination without
the necessity of any merit or substantial additional disclosure requirements.
However, should the Company elect to sell in any jurisdiction that imposes any
additional disclosure requirements, they will be included in this Offering as a
supplemental disclosure.
Also, as previously noted, the Company has not secured a commitment to
list or trade the securities being registered through any broker/dealer and
there is no present assurance that a public market will exist for the securities
even in the event of a successful completion of this Offering. Each prospective
investor should consider the potential lack of a public market as a significant
risk factor. Management will work to obtain the listing of the securities after
this offering by one or more broker/dealers, but can give no warranty or
assurance that they will be successful in such efforts.
No shares of current management or original shareholders are being
registered pursuant to this Offering and no intent or obligation exists by the
Company to register currently issued shares in any manner.
USE OF PROCEEDS
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Management has set-out in the following tabular format the intended use
of proceeds based upon the sale of either the minimum or maximum offering. As
previously advised, each prospective investor should be aware that the Offering
may be closed at some point between the minimum and maximum offering and there
would be some proration of the use of proceeds between the two tables, though
management is under no requirement to exactly complete a mathematical pro ration
on the use of proceeds.
9
YOU ARE ADVISED THAT MANAGEMENT MAY ALTER OR CHANGE THE USE OF PROCEEDS
IN THE EXERCISE OF SOUND BUSINESS DISCRETION AND MANAGEMENT JUDGMENTS AFTER THE
COMPLETION OF THE OFFERING AND THE FOLLOWING SHOULD CONSTITUTE ONLY AN OUTLINE
OF THE PRESENT INTENDED USE OF PROCEEDS.
Minimum Offering:
General Description of Intended Expenditure Dollar Amount Percentage of
Offering
(Rounded)
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1. Estimated cost of Offering $20,000 20%
2. Overhead Expenses (Six months) $25,000 25%
3. Funds committed to acquiring and marketing $30,000 30%
the "software technology"
4. Funds reserved for securities compliance work $7,000 7%
5. Working capital reserves $18,000 18%
Totals $100,000 100%
Maximum Offering:
General Description of Intended Expenditure Dollar Amount Percentage of
Offering
(Rounded)
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1. Estimated cost of Offering $20,000 10%
2. Overhead Expenses (Six months) $25,000 13%
3. Funds committed to acquiring and marketing $100,000 50%
the "software technology"
4. Funds reserved for securities compliance work $8,000 4%
5. Working capital reserves $47,000 23%
Totals $200,000 100%
The Company has reserved and allocated approximately $25,000 of the net
proceeds of the Offering for operational costs. The operational allocations are
allocated to cover minimum cost of operation of the Company for an estimated
period of six months. Included within the operational allocation would be
payment of rent, utilities, and other overhead; as well as a base salary stipend
10
of $1,000/monthly for the present Chief Executive Officer of the Company for his
services on an as needed basis. It is not anticipated that there will be any
other full time salaried officers or employees during this initial start-up
phase, unless revenues are generated sufficient to justify payment of salaries
to other employees through revenues. The total amount of salary allocated for
the initial six month period to the Chief Executive Officer will not exceed
$6,000. It should be understood this is a reduced stipend from the base salary
proposed for the CEO and he has agreed to accept this as a minimal allocation
from proceeds during the start-up phase.
It is anticipated that revenues will be sufficient to cover operating
expenses after the first six months of operation, though no assurance or
warranty of this projection can be made. Management may elect to use additional
offering proceeds for continuing operation beyond the six months term in the
exercise of sound business discretion. In all events, the use of proceeds of the
Offering to pay operational costs will necessarily reduce the amount of proceeds
of the Offering available for actual product marketing and distribution. Each
prospective investor should understand that there is a risk factor in investing
in a start-up entity that must use offering proceeds for operational costs and
does not yet have sufficient revenues to pay for such costs.
There is no assurance that any of the estimated use of proceeds for the
specific business purposes outlined above will be sufficient to adequately fund
the costs of operation and start up of the various business operations.
We reserve the right to explore supplemental financing, through either
private placements or loans, should the proceeds of this Offering not prove
adequate to complete its business purposes. No warranties or assurances have
been made or represented in any manner that the Company would be successful in
securing alternative financing and no prospective investors should invest with
the expectation that such alternative funding is available.
As noted above, the Company has allocated $30,000 in the event of the
minimum offering and approximately $100,000 in the maximum offering towards the
direct distribution and marketing efforts for the "software technology"
consisting of the unique proprietary software. It is intended that the Company
will primarily use these proceeds to obtain the software and to attempt to
acquire and retain various distributors on a commission basis for the product,
as well as direct marketing efforts through direct conventional and e-mail
mailings and other selective Internet marketing efforts. At the present, the
Company is completing a business plan as to an allocation of these anticipated
proceeds between a website, catalog advertising and direct mailing to various
companies or individuals who may be prospective distributors of the intended
product line.
DESCRIPTION OF BUSINESS
-----------------------
Kinship Systems, Inc. was incorporated in the State of Utah on February
1, 2000 under the initial name of Kinship Communications, Inc. The name was
subsequently changed, due to availability, as of March 2, 2000 to Kinship
Systems, Inc. Because no business, other than organizational matters, were
conducted under the Kinship Communications name, the Company does not deem the
name to have any significance and has referred to itself for the purposes of
this Prospectus as Kinship Systems, Inc.
11
On May 4, 2000, the Company entered into a product distribution
agreement with ProSource Software, Inc., ("the Supplier") for specific computer
software developed and marketed by ProSource primarily for software programs
designed for vehicle accident analysis and reconstruction Exhibit "F". This is a
limited industry in which various accident reconstruction experts, as well as
various traffic and law enforcement agencies, attempt to analyze data related to
accident reconstruction. The primary purpose of this type of analysis is to
provide for liability and damage consultation and services related to litigation
which may arise out of vehicle accidents.
The technology is also used by various police departments in accessing
liability or fault in a traffic accident situation. Because of the limited scope
of the software it is considered a "specialty item" which would have interest
primarily to insurance companies, potential litigants and their legal counsel,
as well as various police and transportation departments.
The principal software for which the Company is obtaining a
distribution right is known as the "Larm 2"(TM). Larm is an acronym for linear
and rotational momentum. This software is used for various vehicle accident
diagram programs and analysis as to speed, direction, vector analysis and
potential physical damages caused by various hypothetical accident
configurations. The other software is known as the "Accident Avoidance
Analysis"(TM) (AAA) which is primarily used to analyze various speed and
distances factors related to accident reconstruction work. This software is
employed to determine under what conditions of speed and distance an accident
scenario may have been avoided.
The specific terms of the marketing agreement between the Company and
ProSource Software provides that the Company would have the exclusive marketing
rights to this software in the states of Utah, Idaho, Arizona and California.
ProSource would sell the software, manuals and advertising material for this
software configured for either single, network or lan users at a 20 percent
discount to the prevailing market price employed by ProSource. It would be
anticipated that Kinship would then resell the product at a 20 percent markup
within the exclusively designated geographic areas. The initial term of the
agreement is for 2 years.
Kinship intends to use direct mailing, e-mailing, trade print
advertising and Web Site sales as the primary marketing tools for this product,
though no assurance or warranty of successful marketing efforts can be made.
After the termination of the initial 2 year term of the agreement, the
parties may renegotiate a continuation of the contract as mutually agreed upon.
There is no obligation or warranty that either Kinship or ProSource will
continue with the marketing of the software or other software products from
ProSource after the termination of the initial 2 year term.
The contract also provides that if ProSource is, at any time, unable to
adequately supply software, manuals or other components of the software product
to be marketed, then Kinship may, at its own cost and expense, obtain third
party production of these materials and resell the materials at its current
prevailing market price.
12
A copy of the distribution agreement between the Supplier and the
Company is attached hereto and incorporated as Exhibit "F" to this Registration
Statement, but is not included in the Prospectus delivered to you. Any potential
investor desiring to review this contract prior to investing may obtain a copy
by requesting the document from the Company.
The present business of the Company is too new for the Company to make
any reasonable projections as to gross revenues, net profits, if any, or even
the number of units which must be sold by the Company to obtain profitability.
Further, the Company is not able to make any present estimates or projections as
to geographic areas, markets or specific customers to which most of the products
may be sold.
It is anticipated that market analysis will subsequently be available
and can be disclosed to shareholders in the Company as the Company generates
such data from anticipated sales and revenues.
NO ASSURANCE OR WARRANTY CAN BE GIVEN THAT THE COMPANY WILL BE
SUCCESSFUL IN ANY MANNER IN THE MARKETING OR DISTRIBUTION OF THE PRODUCT.
NUMBER OF PERSONS EMPLOYED
--------------------------
At present, only Mr. Tery Deru will act as a part-time officer of the
Company during the initial start-up phase. Mr. David Collier as the Vice
President, and Mr. Andrew Limpert as the Secretary will serve the Company
part-time on an as needed basis during the initial organizational period. These
individuals have agreed to receive subsequently determined stock options and
rights as deferred compensation for their part-time service during this initial
phase, as the Company will not have sufficient proceeds to pay a salary to these
individuals. It is believed that the individuals will devote such time as may be
necessary to discharge various obligations in those capacities as well as their
service on the Board of Directors where applicable.
Mr. Deru acting as the part-time President will be responsible for all
of the day to day administrative duties of the Corporation including necessary
clerical and administrative functions until such time as anticipated revenues
would allow for the hiring of any support personnel. Mr. Deru will receive a
cost of living stipend from offering proceeds up to $6,000 during the initial
six months of operations.
As soon as revenues would justify the hiring of various personnel, the
Company would intend to hire clerical and marketing personnel to assist in the
operation of the Company, including the distribution of the product. As noted
earlier, it is anticipated, though not warranted, that such personnel may be
hired after the initial six months depending upon the revenues generated from
the Company's operations.
13
ENVIRONMENTAL COMPLIANCE
------------------------
It is not anticipated that the general products or services to be
supplied by the Company will have significant or particular environmental
compliance requirements or regulations.
DESCRIPTION OF PROPERTY
-----------------------
The Company currently operates a combined limited assembly and
administrative office/plant from leased space located at 22 East 100 South,
Suite 400, Salt Lake City, Utah 84111. This property consists of approximately
800 square feet which is currently retained on a one year sublease with gross
rental payments of $200.00 per month with the present lease term expiring in
March 31st of 2001 and with the right of renewal for three more years on a to be
negotiated basis.
The present facilities are believed adequate for the initial operation
of the Company through the expenditure of the anticipated proceeds of this
Offering. Thereafter, if the products are being successfully marketed and demand
increases beyond an estimated one hundred units per month of sales, the present
facilities would have to be expanded or other facilities acquired to meet
demand. The administrative offices consists of approximately one fourth of the
lease area and are considered adequate for the start-up period.
Total monthly costs of operation of the physical facilities including
rents, all utilities and other office expenses, except salaries, are estimated
to be approximately $250.00 per month at the present time.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
-----------------------------------------------------------
As noted previously, the Company is a start-up entity without prior
operating history, revenues or income. No assurance or warranty can be made that
the Company will be successful in its anticipated business operations and the
nature of a start-up entity is that it poses significant risk factors as to
whether any investor will receive back a return of investment or whether they
will lose their entire investment.
The initial capital of the Company was $25,000 of which approximately
$59 was expended through April, 2000. It is anticipated that all initial capital
will be expended in paying costs related to this registration.
The accountants have noted in their notes to the financial statements,
Note 5, that because the Company has no operating history and limited
capitalization, the auditors must reserve opinion as to whether the Company may
continue as a "going concern."
Management has also expressed in the Risk Factors, and other sections
of this registration, some concern that the capitalization may be too limited to
adequately fund the intended business activities. Management has deemed that it
must take this risk based upon its inability to obtain an underwritten Offering
14
for greater capital and has had to limit the amount of capital being raised to
that which reasonably can be raised through management's efforts. Management
believes, but cannot warrant, that such capital should be adequate to move the
Company to a point where revenues are generated from the Company's product, if
the product is commercially viable.
Investors in this Offering are assuming a risk as to both liability of
the product as a commercially marketable technology, as well as the normal risk
inherent in a start-up entity with limited capitalization.
Because no revenues have been generated to date, there does not exist
any standard methodology to break down risk factors as to what sectors or
clients, if any, may generate revenues, actual profit margins, costs of
operation and other standard accounting and financial measurements. The lack of
such financial standards and measurements must be considered as an additional
risk factor to investors in this type of Offering.
There is also a concern that actual costs of operation may
substantially exceed the projections used by the Company in preparing the Use of
Proceeds Section in which event the Company may have to spend more of the net
proceeds of this Offering to sustain minimal operations and devote less to
product development and marketing.
DIRECTORS, EXECUTIVE OFFICERS AND SIGNIFICANT EMPLOYEES
-------------------------------------------------------
Following this table is a brief biographical description for each of
the management principals with a brief description of their business experience
and present relationship to the Company, together with all required relevant
disclosures for the past five years. Following the biographical information for
the directors and officers is a remuneration table showing current compensation
and following this table a security ownership table showing security ownership
of the principal officers and directors and those holding ten percent (10%) or
more of the issued and outstanding stock.
15
NAME POSITION CURRENT TERM OF
OFFICE
- -----------------------------------------------------------------------------------------------------------------
Mr. Terry Deru Director, CEO Appointed in Organizational
President/Treasurer Minutes - February, 2000.
Chairman of the Board Will serve as director until
(Part-time) first annual meeting, not yet
set. Will serve as an officer
without term/contract
pursuant to leave of the
Board of Directors.
- -----------------------------------------------------------------------------------------------------------------
Mr. Andrew Limpert Director/Secretary/Treasurer Appointed in Organizational
CFO/Accounting Officer Minutes - February, 2000.
(As needed) Will serve as Director until
first annual meeting, not yet
set. Will serve as an officer
without term/contract
pursuant to leave of the
Board of Directors
- -----------------------------------------------------------------------------------------------------------------
Mr. Robert Hunter Director Appointed in Organizational
(As needed) Minutes - February, 2000.
Will serve as Director until
first annual meeting, not yet set.
Will serve as an officer without
term/contract pursuant to leave
of the Board of Directors.
- -----------------------------------------------------------------------------------------------------------------
Mr. David Collier Vice President Appointed in Organizational
(As needed) Minutes -February, 2000 as
an officer. Will serve as an
officer without term/contract
pursuant to leave of the
Board of Directors
16
BIOGRAPHICALS
MR. TERRY DERU - DIRECTOR , CEO/PRESIDENT, CHAIRMAN OF THE BOARD
Age: 46
Mr. Deru is currently an owner and consultant with Belsen Getty LLC, a
Salt Lake City, Utah based financial planning firm. Mr. Deru has been with
Belsen Getty since 1985. Mr. Deru will continue on a part-time affiliation with
Belsen Getty while acting as the part-time officer of the Company. Mr. Deru
obtained a B.A. degree from the University of Utah in finance in 1977 and an
M.B.A. degree from that institution in 1979.
MR. ANDREW LIMPERT - DIRECTOR/SECRETARY/TREASURER/CFO
ACCOUNTING OFFICER
Age: 30
Mr. Limpert has been an investment advisor with the Salt Lake based
firm of Belsen Getty LLC since 1998. Mr. Limpert plans to continue his full-time
employment with Belsen Getty Prior to that position he worked with Pro Source
Software of Park City, Utah as a software sales agent from 1993 to 1998. Mr.
Limpert holds a B.S. degree in finance from the University of Utah in 1995 and
an M.B.A from Westminster College of Salt Lake City, Utah in 1998.
MR. ROBERT HUNTER - DIRECTOR
Age :47
Mr. Hunter is a practicing CPA with Hunter & Hashimoto in Sandy, Utah.
He has been affiliated with that firm over the past twelve years. Mr. Hunter
specializes in Tax and Bankruptcy accounting. He will serve on an as needed
basis. He is a 1981 graduate of BYU with a Master of Accountancy in Federal
Taxation.
MR. DAVID COLLIER - VICE PRESIDENT
Age: 31
Mr. Collier most recently served as a sales representative with Bank of
the West where he was responsible for obtaining loan commitments. He has been
affiliated with the Bank from August 1996 to current. Previously Mr. Collier has
worked for Lightspeed Dealer Systems as a sales representative for its software
products from March 1992 to July 1996. In this capacity he gained experience in
a public company as it completed an IPO and in a later merger transaction where
the company was bought out by Bell & Howell Corporation. Mr. Collier is a
graduate of Weber State University with a B.S. Degree in technical sales.
The following table sets forth the anticipated three most highly
compensated officers or directors in the Corporation. As each investor has been
advised, this is a start up entity in which no salaries have been paid to date.
The following table attempts to set forth the anticipated salaries to be paid
from revenues, if the Company is successful in this Offering. At present, there
17
is no plan to pay this salary from Offering proceeds beyond the initial six
months, or to pay other salaries from proceeds.
Further, it is anticipated that if the Company is successful in
generating revenues, it will attempt to hire one or more other officers and
employees to supply administrative and marketing services. The following chart
then attempts to set forth the current stipend amount to be paid to the
president, with reservation of salaries to other officers pending revenues.
POSITION NAME OF CAPACITY IN WHICH AGGREGATE
INDIVIDUAL OR REMUNERATION WILL REMUNERATION
IDENTITY OF GROUP BE RECEIVED
- -------------------------------------------------------------------------------------------------------------
All executive officers as a President $1,000/month-stipend from
group and offering proceeds for the
Other Officers president until and unless
sufficient revenues are
received for a period up to six
months. Beginning
anticipated salaries for all
full-time officers are not yet
determined and are contingent
upon revenues.
18
SHARES OWNED BY MANAGEMENT AND CERTAIN SECURITY HOLDERS
-------------------------------------------------------
The following table attempts to set forth all shares issued to a
director, officer or 5% or greater shareholder. There are no created or issued
stock options or other stock rights in the Company at the present time:
Title or Class Name and Amount Amount Percent of Percent of
Address of Owner owned owned Class Class
before the after the Before After
Offering Offering Offering Max.
(Rounded) Offering
(Rounded)
- ----------------------------------------------------------------------------------------------------------------------
Common Terry Deru 625,000 same 49% 43%
Stock
Common Andrew Limpert 625,000 same 49% 43%
Stock
Common Robert Hunter 10,000 same .7% .6%
Stock
Common David Collier 10,000 same .7% .6%
Stock
THERE ARE NO OTHER SHAREHOLDERS WHICH OWN ANY OF THE OUTSTANDING STOCK
PRIOR TO THE OFFERING. FURTHER ,THE COMPANY HAS NOT ADOPTED ANY FORM OF WARRANTS
OR OPTION RIGHTS TO ANY PERSON WHO ACQUIRES STOCK. IT IS ANTICIPATED THAT IN THE
EVENT OF THE SUCCESSFUL COMPLETION OF THIS OFFERING, THE BOARD OF DIRECTORS MAY
AUTHORIZE AND APPROVE A STANDARD INCENTIVE STOCK OPTION PLAN.
INTEREST OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS
---------------------------------------------------------
There are certain transactions related to the Company and this Offering
which are not deemed to be "arms-length" transactions. That is, the parties on
both sides of the contract or agreement have substantial relationships or common
interests. While all such transactions are not set out in this section, the
Company believes the following transactions involving management should be
considered by each prospective investor.
1. The Distribution Contract, described earlier in the Offering, was
not negotiated or derived between totally separate or disinterested parties. Mr.
Limpert, on behalf of the Company, had substantial involvement and participation
with the Supplier, ProSource Software, in the development and implementation of
19
the technology products subject to the distribution contract as a prior sales
agent. As a result, each investor in this Offering should consider that the
terms and provision of such distribution contract may not be the result of an
arms-length bargaining agreement between two totally disinterested parties.
2. Management of the Company, particularly Mr. Limpert and Mr. Deru,
have had a substantial prior business relationship and dealings as financial
advisors and part owners of the Belsen Getty financial planning firm. As a
result, they may bring with them historical relationships and interests which
would not be the same as two totally disinterested parties being retained as
officers and directors of a public company.
3. Each investor in the Offering should consider that even if the total
Offering is sold, the prior management group, as described above, will continue
in control and will be essentially in a position to dictate salaries,
distributions, and other interests as to all shareholders. While there is a
general common law or statutory obligation placed upon management of the Company
to act in the best interest of all shareholders, each investor in this Offering
should consider that minority shareholders status imposes a certain risk of not
being in a position to influence or affect the direction of the Company.
4. Finally, the Company is most likely going to engage in some
subsequent financing transactions in order to achieve its anticipated results.
Each investor should understand that subsequent financing transactions will
almost certainly result in a dilution of control by shareholders in value per
share.
SECURITIES BEING OFFERED
------------------------
Only the Company's voting common stock is being offered by this
Prospectus. Of the Fifty- Million (50,000,000) shares of common stock
authorized, $0.001 par, the Company presently has issued and outstanding
1,270,000 shares of common stock and will sell between 100,000 shares of common
stock in the minimum offering and 200,000 shares in the maximum offering. If the
minimum offering is sold, the shareholders purchasing in this Offering would
hold 7.3 % of the issued and outstanding common stock and in the event of the
maximum offering 13.61% of the issued and outstanding common stock.
In summary of the nature of the securities being offered, each investor
should note as follows:
o The Company does not have any dividend policy nor has it declared
dividends. It is not anticipated that dividends will be paid for the foreseeable
future by the Company.
o Each common share has an equal voting right.
o There are no pre-emptive rights or cumulative voting in the Company.
o The shares are not subject to any conversion rights or obligations,
nor any redemptive provisions, sinking fund provisions, or liability to call or
assessment.
20
o It is not believed that any shareholder under Utah law would be
subject to any debts, liabilities or claims made against the Corporation.
o The Company does not have any warrants, rights or other stock
interest or rights to acquire stock; however, management will most likely
institute some standard management stock option plan if this Offering is
completed.
EXPERTS
-------
The Company has retained the firm of Jensen, Duffin, Carman, Dibb &
Jackson to act as independent securities counsel. Such company has passed upon
the eligibility of the Company to file this registration. The named expert has
no relationship with any member of management or the Company.
ACCOUNTANTS
-----------
The firm of Hansen, Barnett and Maxwell have been retained as the
independent auditors for the Company.
LEGAL PROCEEDINGS
-----------------
The Company is not presently engaged in any legal proceedings as either
a plaintiff or defendant, nor does it know of any material claims.
CHANGES IN OR DISAGREEMENTS WITH ACCOUNTANTS
--------------------------------------------
The Company has retained the firm of Hansen, Burnett & Maxwell of Salt
Lake City, Utah to serve as independent auditors. Neither the Company nor
management has had any material disagreement with, nor have there been any
changes in the accounting materials supplied by such independent auditors as
attached hereto.
INDEMNITY OF OFFICERS AND DIRECTORS
-----------------------------------
The By-laws and Articles for the Company provide Indemnity Statements
for general indemnities and relief from liability for management. These
indemnities, as well as Utah law, provide for general indemnity for officers,
directors and agents acting within the normal scope of their duty and service to
the Company.
EACH INVESTOR SHOULD UNDERSTAND, NOTWITHSTANDING THESE GENERAL
INDEMNITY PROVISIONS, THAT IT IS THE POSITION OF THE SEC, AND MOST STATES
SECURITY REGULATORY AGENCIES, THAT INDEMNITIES AS TO VIOLATION OF FEDERAL OR
STATE SECURITIES LAWS OR REGULATIONS ARE VOID AS AGAINST PUBLIC POLICY.
21
PART II
-------
Item 1. Indemnification of Officers & Directors. The Company indicates
that it has normal and customary indemnification provisions under its By-laws
and Articles of Incorporation as well as those generally provided by Utah law.
The Articles and By-Laws are being filed as Exhibit items.
Item 2. Other Expenses of Issuance & Distribution. The Company does not
know of any other accrued or to be accrued expenses of issuance and distribution
other than as outlined in the foregoing Prospectus and Use of Proceeds.
Item 3. Undertakings. The undersigned registrant hereby undertakes:
To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by section
10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the registration
statement (or the most recent post- effective
amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the
information set forth in the registration statement.
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in
the registration statement or any material change to
such information in the registration statement.
Item 4. Unregistered Securities Issued or Sold Within One Year. The
Company believes that in the body of this Prospectus it has described all shares
issued within the past year from the date of inception of the Company. In
summary of that disclosure, the Company represents the only shares issued were
to its founders and principals, Mr. Andrew Limpert, Mr. Terry Deru, Mr. Robert
Hunter and Mr. David Collier. All shares issued to them are the same shares set
forth in the chart showing securities held by management and are deemed exempted
transactions under section 4(2) of the Securities Act of 1933.
Item 5. Index of Exhibits.
A. Audited Financial Statements for the period ending April 30, 2000
B. Articles of Incorporation with Amendments and By-Laws
C. Auditor's Consent Letter
D. Attorney Letter in re legality
22
E. Specimen Stock Certificate
F. Distribution Contract
The following signatures constitute the signature of the Registrant's
chief executive officer, principal financial officer/accounting officer and all
directors:
Date: 7/3/2000 /s/Terry Deru
----------------------------
Mr. Terry Deru
CEO, Director
Date: 7/3/2000 /s/Andrew Limpert
----------------------------
Mr. Andrew Limpert
Principal Financial Officer,
Accounting Officer/Director
Date: 7/3/2000 /s/Robert Hunter
----------------------------
Mr. Robert Hunter
Director
23
KINSHIP SYSTEMS, INC.
(A Development Stage Enterprise)
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
AND
FINANCIAL STATEMENTS
April 30, 2000
HANSEN, BARNETT & MAXWELL
A Professional Corporation
CERTIFIED PUBLIC ACCOUNTANTS
24
KINSHIP SYSTEMS, INC.
(A Development Stage Enterprise)
TABLE OF CONTENTS
Page
----
Report of Independent Certified Public Accountants F-1
Financial Statements:
Balance Sheet - April 30, 2000 F-2
Statement of Operations for the Period from February 1, 2000
(Date of Inception) through April 30, 2000 F-3
Statement of Stockholders' Equity for the Cumulative Period from
February 1, 2000 (Date of Inception) through April 30, 2000 F-4
Statement of Cash Flows for the Period from February 1, 2000
(Date of Inception) through April 30, 2000 F-5
Notes to Financial Statements F-6
--------------------
HANSEN, BARNETT & MAXWELL
A Professional Corporation
CERTIFIED PUBLIC ACCOUNTANTS
(801) 532-2200
Member of AICPA Division of Firms Fax (801) 532-7944
Member of SECPS 345 East Broadway, Suite 200
Member of Summit International Associates Salt Lake City, Utah 84111-2693
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders
Kinship Systems, Inc
We have audited the accompanying balance sheet of Kinship Systems, Inc. (a
development stage enterprise) as of April 30, 2000 and the related statement of
operations, stockholders' equity and cash flows for the period from February 1,
2000 (date of inception) through April 30, 2000. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Kinship Systems, Inc. as of
April 30, 2000 and the results of its operations and its cash flows for the
period from February 1, 2000 (date of inception) through April 30, 2000 in
conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 5 to the
financial statements, the Company's lack of operating history raises substantial
doubt about its ability to continue as a going concern. Management's plans
regarding those matters are also described in Note 5. The financial statements
do not include any adjustments that might result from the outcome of this
uncertainty.
/s/ HANSEN, BARNETT& MAXWELL
----------------------------
HANSEN, BARNETT & MAXWELL
Salt Lake City, Utah
June 7, 2000
F-1
KINSHIP SYSTEMS, INC.
(A Development Stage Enterprises)
BALANCE SHEET
APRIL 30, 2000
ASSETS
Current Assets
Cash $ 24,941
--------
Total Current Assets 24,941
--------
Total Assets $ 24,941
========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities $ --
--------
Stockholders' Equity
Common stock - no par value; 50,000,000 shares
authorized; 1,270,000 shares issued and outstanding 25,813
Deficit accumulated during the development stage (872)
--------
Total Stockholders' Equity 24,941
--------
Total Liabilities and Stockholders' Equity $ 24,941
========
The accompanying notes are an integral part of these financial statements.
F-2
KINSHIP SYSTEMS, INC.
(A Development Stage Enterprise)
STATEMENT OF OPERATIONS
From
February 1, 2000
(Date of Inception)
through
April 30, 2000
--------------
Revenue $ --
General and administrative expenses 872
-----------
Net Loss $ (872)
===========
Basic and Diluted Loss Per Share $ (0.00)
===========
Weighted Average Number of Shares
Outstanding 1,270,000
===========
The accompanying notes are an integral part of these financial statements.
F-3
KINSHIP SYSTEMS, INC.
(A Development Stage Enterprise)
STATEMENT OF STOCKHOLDERS' EQUITY
Deficit
Accumulated
During the Total
Common Stock Development Stockholders'
Shares Amount Stage Equity
------ ------ ----- ------
Balance - February 1, 2000 -- $ -- $ -- $ --
Shares issued for cash, February 12, 2000,
$.0203 per share 1,230,000 25,000 -- 25,000
Shares issued for services, February
12, 2000, $.0203 per shares 40,000 813 -- 813
Net loss -- -- (872) (872)
--------- --------- --------- ---------
Balance - April 30, 2000 1,270,000 $ 25,813 $ (872) $ 24,941
========= ========= ========= =========
The accompanying notes are an integral part of these financial statements.
F-4
KINSHIP SYSTEMS, INC.
(A Development Stage Enterprise)
STATEMENT OF CASH FLOWS
From
February 1, 2000
(Date of Inception)
through
April 30, 2000
Cash Flows from Operating Activities
Net loss $ (872)
Stock issued for services 813
--------
Net Cash Used by Operating Activities (59)
--------
Net Cash Provided by Investing Activities --
--------
Cash Flows From Financing Activities
Proceeds from issuance of common stock 25,000
--------
Net Cash Provided by Financing Activities 25,000
--------
Net Increase in Cash and Cash Equivalents 24,941
Cash and Cash Equivalents at Beginning of Period --
--------
Cash and Cash Equivalents at End of Period $ 24,941
========
The accompanying notes are an integral part of these financial statements.
F-5
KINSHIP SYSTEMS, INC.
(A Development Stage Enterprises)
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 2000
NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization -- On February 1, 2000, Kinship Systems, Inc ("the Company") was
organized under the laws of the State of Utah. The Company is considered a
development stage enterprise and is in the process of raising capital to fund
operations. The planned operations of the Company consists of marketing and
selling proprietary computer software to be used used in accident vehicle
prevention and accident reconstruction and analysis.
Use of Estimates -- The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect certain reported amounts and disclosures
NOTE 2 -- INCOME TAXES
The components of the net deferred tax asset as of April 30, 2000 are as
follows:
Tax Net Operating Loss Carryforward $ 326
Valuation Allowance (326)
-------------
Net Deferred Tax Asset $ --
=============
During the period ended April 30, 2000 the valuation allowance increased $326.
As of April 30, 2000 the Company had net operating loss carry forwards for
federal income tax reporting purposes of $872 which will expire, beginning in
2020.
The following is a reconciliation of the income tax at the federal statutory tax
rate with the provision of income taxes for the years ended April 30, 2000:
Income tax benefit at statutory rate (34%) $ (296)
Change in valuation allowance 326
State benefit net of federal tax (30)
-------------
Provision for Income Taxes $ --
=============
NOTE 3 -- STOCKHOLDERS' EQUITY
On February 12, 2000, the Company issued 1,230,000 shares of common stock to two
officers and directors of the Company for cash. The proceeds from the issuance
of the stock was $25,000 or $0.0203 per share. On that same date, all directors
and officers of the Company each received 10,000 shares of common stock for
entrepreneurial and organizational services rendered to the Company.
F-6
KINSHIP SYSTEMS, INC.
(A Development Stage Enterprises)
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 2000
These directors and officers received a total of 40,000 shares of common stock
of the Company. The shares have been valued at $813 or $0.0203 per share.
NOTE 4-COMMITMENTS AND CONTINGENCIES
On March 31, 2000, the Company entered into a lease agreement for use of office
space with a company under common ownership. The owners of the related company
are the majority shareholders of the Company and are also officers and directors
of the Company. The lease term is for one year beginning on March 31, 2000. The
base monthly rent for the term of the lease shall be $200. The Company has the
right to extend the lease term for up to three additional years. The execution
of the lease was delayed until June 1, 2000.
The Company has entered into an agreement with the president to provide a $1,000
stipend per month that will not accrue until the Company has revenues or until
after six months. After that time, the anticipated salaries for the three full
time officers will be determined by the Board of Directors.
The Company has plans to complete an SB-1 Registration Statement. As a result of
this offering, the Company will owe $20,000 to various parties who participated
in the filing of the Registration Statement.
NOTE 5-GOING CONCERN
The Company has limited operating history. This situation raises substantial
doubt about its ability to continue as a going concern. Management plans to
complete an SB-1 Registration Statement in which the Company will offer a
minimum of 100,000 shares of common stock and a maximum of 200,000 shares of
common stock at $1.00 per share. From the proceeds, the Company plans to use
$15,000 to pay legal counsel that assisted in the offering and $5,000 for other
various offering costs. Management also plans to begin marketing and selling the
Company's products with the proceeds from the offering. The financial statements
do not include any adjustments relating to the recoverability and classification
of asset carrying amounts or the amount and classification of liabilities that
might result should the Company be unable to continue as a going concern.
NOTE 6-SUBSEQUENT EVENTS
On May 5, 2000, the Company entered into an agreement with a software producer
wherein the Company has the exclusive rights to market and distribute two
accident reconstruction software packages in five westerns states. The Company
is entitled to purchase the product at a 20 percent discount from the prevailing
market price charged by the software producer for identical product.
F-7