AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 2, 1997
REGISTRATION NO. 333-25673
________________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
------------------------
AMENDMENT NO. 1
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
NICHI CAPITAL, LTD.
(NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)
NEW YORK 6299 11-3334472
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
150 NASSAU STREET, 10TH FLOOR, NEW YORK, NEW YORK 10038
(800) 490-6074
(ADDRESS AND TELEPHONE NUMBER OF PRINCIPAL EXECUTIVE OFFICES)
150 NASSAU STREET, 10TH FLOOR, NEW YORK, NEW YORK 10038
(ADDRESS OF PRINCIPAL PLACE OF BUSINESS OR INTENDED PRINCIPAL PLACE OF BUSINESS)
------------------------
OLAWANDE A. AGUNLOYE, PRESIDENT
NICHI CAPITAL, LTD.
150 NASSAU STREET, 10TH FLOOR, NEW YORK, NEW YORK 10038
(800) 490-6074
(NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE)
------------------------
COPY OF ALL COMMUNICATIONS TO:
ARLEN G. LOSELLE, ESQ.
LOSELLE GREENAWALT KAPLAN & BLAIR LEON B. LIPKIN, ESQ.
140 EAST 45TH STREET 140 EAST 45TH STREET
NEW YORK, N.Y. 10017 NEW YORK, N.Y. 10017
(212) 986-6850 (212) 986-6850
------------------------
APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC: As soon as practicable
after this Registration Statement becomes effective.
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier registration statement for the same
offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
------------------------
CALCULATION OF REGISTRATION FEE
PROPOSED
MAXIMUM PROPOSED
OFFERING MAXIMUM AMOUNT OF
DOLLAR AMOUNT PRICE AGGREGATE REGISTRATION
TITLE OF EACH CLASS OF SECURITIES TO BE REGISTERED TO BE REGISTERED PER SHARE(1) OFFERING PRICE(1)(2) FEE(3)
Common Stock(1).............................................. 1,800,000 Shares $ 5.00 $ 9,000,000 $2,727
(1) Estimated solely for the purpose of calculating the registration fee.
(2) The total minimum aggregate offering price is $3,000,000. All proceeds of
this offering shall be placed in an escrow account to be managed by
Citibank, NA until the minimum aggregate offering price has been received by
the Registrant in accordance with the provision of Rule 15c 2-4 under the
Securities Exchange Act of 1934. The maximum offering price is $9,000,000.
This offering is on a best efforts basis and shall be withdrawn if the
minimum offering price of $3,000,000 is not received by the Company.
(3) Calculated pursuant to Rule 457(a) based on a bona fide estimate of the
maximum offering price. This fee has been paid by the Registrant.
------------------------
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.
________________________________________________________________________________
NICHI CAPITAL, LTD.
CROSS REFERENCE SHEET
PART 1.
FORM SB-2 ITEM NUMBER AND HEADING CAPTION AND LOCATION IN PROSPECTUS
- --------------------------------------------------------------------------- ------------------------------------
1. Front of Registration Statement and Outside Front Cover of
Prospectus......................................................... Front of Registration Statement and
Outside Front Cover of Prospectus
2. Inside Front and Outside Back Cover Pages of Prospectus.............. Inside Front and Outside Back Cover
Pages of Prospectus
3. Summary Information and Risk Factors................................. Prospectus Summary and Risk Factors
4. Use of Proceeds...................................................... Use of Proceeds
5. Determination of Offering Price...................................... Plan of Distribution
6. Dilution............................................................. Dilution
7. Plan of Distribution................................................. Plan of Distribution
8. Legal Proceedings.................................................... Business -- Legal Proceedings
9. Directors, Executive Officers, Promoters and Control Persons......... Management
10. Security Ownership of Certain Beneficial Owners and Management....... Principal Shareholders
11. Description of Securities............................................ Description of Securities
12. Interest of Named Experts and Counsel................................ Legal Matters; Experts
13. Disclosure of Commission Position on Indemnification for Securities
Act Liabilities.................................................... Management -- Limitations on
Personal Liability of Directors
14. Organization within Last Five Years.................................. Business; Certain Transactions
15. Description of Business.............................................. Business
16. Management's Discussion and Analysis or Plan of Operation............ Management's Discussion and Analysis
of Financial Condition and Results
of Operations
17. Description Of Property.............................................. Business -- Properties
18. Certain Relationships and Related Transactions....................... Certain Transactions
19. Market for Common Equity and Related Stockholder Matters............. Description of Securities; Shares
Eligible for Future Sale
20. Executive Compensation............................................... Executive Compensation
21. Financial Statements................................................. Financial Statements
22. Changes In and Disagreements with Accountants on Accounting and
Financial Disclosure............................................... Not applicable
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED OCTOBER 2, 1997
PROSPECTUS
NICHI CAPITAL, LTD.
1,800,000 SHARES OF COMMON STOCK
-----------------------------
All of the 1,800,000 shares of Common Stock, par value $.01 per share (the
'Common Stock'), offered hereby are being offered by Nichi Capital, Ltd. (the
'Company' or 'Nichi'). It is currently anticipated that the initial public
offering price per share will be $5.00. See 'Plan of Distribution' for
information relating to the factors considered in determining the initial public
offering price.
Prior to this offering, there has been no public market for the Common
Stock. The Company has applied to have the Common Stock quoted on the Niphix
System under the trading symbol 'Nichi.' See Plan of Distribution.
This offering is on a best efforts basis and with respect to the minimum
offering price on a best efforts all or none basis. All funds received by the
Company shall be placed in an escrow account with Citibank, NA for 180 days or
until at least $3,000,000, the minimum offering price, has been received by the
Company. If the minimum offering price is not received within 180 days from the
date hereof, this Offering will terminate and all funds will be returned
promptly to the subscribers by the escrow agent without deduction or interest.
The maximum offering price is $9,000,000 but the Company may receive less than
the maximum offering price. During the 180 day selling period potential
purchaser will not have the opportunity to have their funds returned. See 'Plan
of Distribution.'
------------------------
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK. SEE 'RISK
FACTORS' BEGINNING ON PAGE 5 OF THIS PROSPECTUS FOR CERTAIN INFORMATION THAT
SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
PROPOSED MAXIMUM UNDERWRITING
OFFERING PRICE DISCOUNTS AND PROCEEDS TO
TO PUBLIC COMMISSION(1) COMPANY(2)(3)
Per Share................................................... $ 5.00 $ -- $ 5.00
Totals(3)................................................... $9,000,000 $ -- $ 9,000,000
(1) There will be no Underwriting Discounts or Commissions.
(2) The total minimum aggregate offering price is $3,000,000. All proceeds of
this offering shall be placed in an escrow account to be managed by
Citibank, NA until the minimum aggregate offering price has been received by
the Registrant in accordance with the provisions of Rule 15c 2-4 under the
Securities Exchange Act of 1934. The maximum offering price is $9,000,000.
This offering is on a best efforts basis and shall be withdrawn if the
minimum offering price of $3,000,000 is not received by the Company.
------------------------
The shares of Common Stock are being offered by the Company on a best
efforts basis, subject to prior sale, when, as and if accepted by them and
subject to certain conditions. It is expected that delivery of certificates for
the shares of Common Stock will be made against payment therefor at the offices
of Citibank, NA at 111 Wall Street, Branch #003, New York, New York 10005.
The Company intends to furnish its stockholders with annual reports
containing audited financial statements of the Company, after the end of each
fiscal year, and make available such other periodic reports as the Company may
deem appropriate or as may be required by law.
------------------------
, 1997
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements and notes thereto appearing elsewhere in
this Prospectus. The term 'the Company' refers to Nichi Capital, Ltd. The
Company is a development stage company.
THE COMPANY
The Company was formed in New York in April 1996. Effective April 2, 1997,
the Company acquired all of the assets, goodwill and liabilities of the internet
financial and world wide web investment services business of Wise Choice
Discount Brokerage, Inc., ('Wise Choice'), in exchange for 3,795,302 shares of
common stock which were distributed to the shareholders of Wise Choice. Wise
Choice is owned and controlled by Mr. Olawande Agunloye, the Company's Chief
Executive Officer. As explained in Note 1 to the Financial Statements, the
financial statements of the Company reflect historical amounts at which the
assets and liabilities are shown and the historical operations of the
transferred business from it's inception on February 16, 1995. Except as the
context otherwise requires, the term 'Company' refers to both Nichi Capital, Ltd
and the acquired business. The Company's principal executive office is located
at 150 Nassau Street, Suite 1009-13, New York , New York 10038 and its telephone
number at such location is (212) 566-4143. Information contained in the
Company's Web site shall not be deemed a part of this Prospectus.
The Company is in the development stage and to a significant extent the
description of its business relate to activities in the planning stage. The
Company develops and provides branded, comprehensive Web-based financial
services that help users access and personalize the resources of the Internet.
The Company's primary service Nichi Money, is a free service targeted at
individual users which would among other things permit users to receive
information on companies going public thereby setting itself apart from other
free-to-use financial services.
The Internet is a computer network linked by data lines on a worldwide
basis. The Internet was established in 1969 by the U.S. Department of Defense.
The Worldwide Web (the 'Web') is a part of the Internet. The Web is a
multi-media, information storage and retrieval system; information is stored at
many computer sites but is made available by virtue of the linked data line
network. There are many access providers that offer access to the Internet
through local phone service. Some providers, such as America OnLine not only
provide access to the Internet but also provide its own informational content
programs, such as cartoon networks for children and access programs for finding
subject matter on the Internet.
The Internet has grown rapidly since its commercialization in the early
1990's. Currently, the primary uses of the Internet are E-mail, file transfers,
news, bulletin boards, advertising, shopping, and other online entertainment,
business and library services. It is generally believed that the Internet will
continue to attract significant numbers of new users in the years to come and
many new programs.
The Company believes that the Internet will significantly change the way
research, advertising and entertainment are made available to the public. Access
to the Internet can now be gained through television sets thus eliminating the
need for personal computers.
The Company's objective is to establish itself as a dominant, branded
financial services provider on the Internet in order to reach the greatest
audience. The Company seeks to build a high volume of traffic on its services to
provide a preferred platform for content providers and advertisers to reach
their target audiences. To achieve its objective, the Company intends to:
enhance the attractiveness of its service to users through the addition of new
features and functionality; develop and license innovative technologies which
can differentiate its service and scale with the growth of the Internet; offer
advertisers high impact, innovative advertising products; distribute its service
widely through software companies, access providers and others; and form
relationships with leading third party content providers.
The Company believes that it is well positioned to take advantage of the
growth of the Internet by serving the needs of advertisers. The Company believes
that the creation of internet communities which
2
match users needs with advertising specific to the needs, will result in a
cost-effective method of advertising on the web. The Company believes that
distributing and marketing its services widely is a key to successfully growing
its audience. The Company has advertised on Websites including Microsoft
Network, Webcrawler, Yahoo as well as through ad exchanges with Clubmaker
Online. The Company has purchased key words such as Stock Quotes, Funds,
Investing and Financial so that if a user of Yahoo's search engine types in the
word 'stock quotes', its banner will appear at the beginning of the results page
(the page where the results of a query is displayed). Once the user clicks on
the banner, the user is immediately taken to the Company's website. Once at the
Website the Company believes that users will register due to the free nature of
the service.
Apart from the search engines and websites listed above, Nichi Money will
continue to broaden its channels of distribution through other websites.
In addition the Company plans to execute brokerage transactions through
Wise Choice.
No assurance can be given that the Company will achieve the objectives
stated above. See 'Risk Factors' beginning on Page 5.
Insofar as the Company is a development stage enterprise it has sustained
losses from its inception. The Company's independent accountants have expressed
substantial doubt as to the Company's ability to continue as a going concern.
See Note 1b. Financial Statement p. F-7.
Effective August 11, 1997 the Company reverse stock split its common stock
1 share for each 2 shares held on this date. All references herein to share
ownership and shares outstanding reflects this stock split and other stock
splits declared in 1996. See Financial Statements footnote 6(a) p. F-9.
THE OFFERING
Common Stock offered by the Company on a best efforts basis: 600,000 shares
(minimum best efforts all or none), 1,800,000 shares (maximum). Common Stock to
be outstanding after the Offering: 4,395,302 (minimum), 5,595,302 (maximum).
SELLING
CONCESSIONS PROCEEDS TO
PRICE TO PUBLIC AND COMMISSIONS(1) COMPANY(2)
--------------- ------------------ -----------
Per Share........................................... $ 5.00 $ $ 5.00
Total Minimum....................................... $ 3,000,000 $ $ 3,000,000
Total Maximum....................................... $ 9,000,000 $ $ 9,000,000
- ------------
(1) There will be no Selling Concessions or Commissions.
(2) Before deducting expenses of this Offering estimated at $250,000.
USE OF PROCEEDS
The net proceeds to the Company from the sale of the maximum number of
Common Stock offered hereby, after deduction of Offering expenses will be
approximately $8,750,000 assuming an initial public offering price of $5.00 per
share. The Company intends to use the net proceeds for general corporate
purposes, including working capital, expansion of its marketings activities, its
staff and acquisition of additional computer equipment and funds necessary to
establish its Financial Reporting Services program referred to in the following
paragraph as 'EDGAR.' See 'Business.'
In early 1993, the Securities and Exchange Commission ('SEC') began to
mandate electronic filing through it's electronic data gathering, analysis, and
retrieval system ('EDGAR'). This system is intended to benefit electronic
filers, enhance the speed and efficiency of the SEC processing, and make
corporate and financial information available to investors, the financial
community and others in a matter of minutes. The Company is pursuing a contract
to be issued by the SEC for EDGAR which will allow the Company to accept and
redistribute EDGAR data for a fee which must be agreed upon by the SEC. The
Company anticipates spending $1 million in 1997 and the first quarter of 1998
for capital
3
expenditures in connection with this contract (if the offering is successful)
and for the Company's business expansion. See 'Business.'
Estimates of EDGAR related and certain other expenses payable out of the
net proceeds of this offering are approximately $3,500,000.
In the event the Company is only able to obtain net proceeds from the
minimum offering price of $3,000,000 it will only be able to obtain an EDGAR
data line and it will substantially curtail its other planned use of proceeds
for the EDGAR project. Other plans for marketing, staffing and additional
equipment will also be curtailed. The following columnar presentation shows the
principal expenditures of net proceeds assuming the minimum and maximum offering
price:
MINIMUM
- --------------------------------------------------
EDGAR data feed....................... 150,000
Various exchange fees................. 60,000
Equipment to run services............. 500,000
Technical staff & equipment........... 200,000
Working capital....................... 600,000
Marketing expenses.................... 750,000
Paying debt obligations............... 150,000
Director & officer liability
insurance........................... 60,000
Consultants building ticker plant and
setting up database for SEC EDGAR
feed and software................... 130,000
MAXIMUM
- --------------------------------------------------
Partner for EDGAR contract............ 3,000,000
EDGAR data feed....................... 150,000
Various exchange fees for real-time
data................................ 60,000
Equipment to run various services..... 500,000
Technical staff to maintain
equipment........................... 200,000
Working capital....................... 2,050,000
Marketing expenses.................... 800,000
Paying debt obligations............... 150,000
Director and officer liability
insurance........................... 60,000
Consultants building ticker plant and
setting up database for SEC EDGAR
feed and Software................... 30,000
Company's marketing staff............. 700,000
The foregoing use of proceeds are estimates only and there may be
significant variations in the uses of proceeds due to, among other things,
changes in the Company's business or financial condition or economic
circumstances. Accordingly, the Company reserves the right to reallocate among
the foregoing uses upon any such change.
The Company anticipates that the proceeds from the Offering, together with
projected cash flow from operations, will be sufficient to fund its operations,
including its proposed expansion, for approximately 12 months. However, there
can be no assurance that events affecting the Company's operations will not
result in the Company depleting its funds before that time. The Company may need
to raise substantial additional funding through public or private financings,
corporate collaborations or other sources. However, there can be no assurance
that additional financings will be available through any of these sources or, if
available, that such financing will be on acceptable terms. See 'Risk Factors --
Possible Need for Additional Financing' and 'Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources.'
Pending application of the net proceeds of the Offering, the Company will
make temporary investments in certificates of deposit, money market accounts
established by major commercial banks or financial institutions, United States
government obligations or high-grade commercial paper.
4
RISK FACTORS
In addition to the other information contained in this Prospectus,
investors should carefully consider the following risk factors:
LIMITED OPERATING HISTORY; HISTORY OF LOSSES
The Company has an extremely limited operating history, which makes it
difficult to predict future operating results. The Company was incorporated in
April 1996 and is the successor to a business organized in February 1995. It did
not generate any revenues until September 1996 and has generated limited
revenues since then to date. The Company has incurred significant net losses
since inception and expects to continue to incur significant losses on a
quarterly and annual basis for the foreseeable future. As of December 31, 1996,
the Company had an accumulated deficit of $328,934, a deficiency in
stockholders' equity of $93,050 and a working capital deficiency of $158,955.
These conditions among others raise substantial doubt about the Company's
ability to continue in business as a going concern. The report of the Company's
Independent Public Accountant's is qualified by reference to such conditions.
See 'Independent Accountant's Report.' The implementation of management's plan
to establish the Company as a dominant, branded financial services provider on
the Internet is dependent, among other things, on the success of this initial
public offering.
The Company and its prospects must be considered in light of the risks,
costs and difficulties frequently encountered by companies in their early stage
of development, particularly companies in the new and rapidly evolving Internet
market. In order to be successful, the Company must, among other things,
continue to attract, retain and motivate qualified personnel, successfully
implement its advertising program, continue to upgrade its technologies and
commercialize products and services incorporating such technologies, respond to
competitive developments and successfully expand its internal infrastructure.
Messrs Olawande Agunloye and Abraham Tu, President and Secretary of Company
have up until now had limited experience regarding the providing of internet
financial services. Messrs Agunloye and Tu also devote as much or more of their
time managing the business of Wise Choice. The Company currently does not have
any other directors who are not officers of the Company. The Company does not
have an audit committee nor does it have a compensation committee. See
'Management.'
From inception through August, 1997, the Company's operations were limited
and consisted primarily of start-up activities, including recruiting personnel,
raising capital, research and development, and the negotiation and execution of
agreements with various exchanges for stock quote information. All costs were
expensed as incurred during the development stage.
As a result of the Company's extremely limited operating history as well as
the very recent emergence of the market addressed by the Company, the Company
has neither internal nor industry-based historical financial data for any
significant period of time upon which to base planned operating expenses. The
Company has incurred significant net losses to date. Substantially all of the
Company's revenues have been generated from the subleasing of part of it's
office space and subscriptions to real time data. The Company has sold no
advertising space to date, therefore future sales and operating results are
difficult to forecast. In addition, significant portions of the Company's
revenues to date have been derived from it's subscriptions fees from it's
customers, and the Company currently anticipates that future quarters may
continue to reflect this trend. Therefore, the Company's inability to secure
subscribers and advertising contracts or license agreements could have a
material adverse effect on the Company's business, results of operations and
financial condition. The Company's expense levels are based in part on its
expectations as to future revenues and to a large extent are fixed. The Company
may not be able to adjust spending in a timely manner to compensate for any
unexpected revenue shortfall. Accordingly, any significant shortfall in relation
to the Company's expectations would have an immediate adverse impact on the
Company's business, results of operations and financial condition. Moreover, the
Company plans to significantly increase its operating expenses to fund greater
levels of research and development, establish its sales and marketing
operations, develop new distribution channels and broaden its customer support
capabilities. To the extent that any expenses in 1997 to 1998
5
precede or are not subsequently and timely followed by increased revenues, the
Company's business, results of operations and financial condition will be
materially adversely affected.
DEPENDENCE ON STOCK EXCHANGES
The Company's revenues in the near term will also be dependent to a
material degree on the Company's relationship with the various stock exchanges.
In 1996, the Company and the various stock exchanges entered into agreements,
which provide that, the exchanges will provide Nichi Money with stock quotes,
which Nichi Money will be able to redistribute subject to certain provisions.
The most important provision is that users who receive the data in real-time
will pay exchange fees which are to be collected by Nichi Money and passed on to
the exchanges as well as the necessary information collected on all those users.
In addition, the Exchanges have the right to cancel the agreement based upon the
Company's inability to make timely payments. See 'Management's Discussion and
Analysis of Financial Condition and Results of Operations,' 'Business -- Money
Brand' and 'Nichi Money.'
DEPENDENCY ON THE INTERNET
The market for the Company's products and services has only recently begun
to develop, is rapidly evolving and is characterized by an increasing number of
market entrants with products and services for use on the Internet. The
Company's future success is highly dependent upon the increased use of the
Internet for information publication, distribution and commerce. In particular,
because the Company expects to derive substantially all of its revenues in the
foreseeable future from sales of Internet advertising and subscriptions, the
future success of the Company is highly dependent on the development of the
Internet as an advertising medium and the use of the Internet to retrieve
real-time financial data. The Internet as an advertising medium has not been
available for a sufficient period of time to gauge its effectiveness as compared
with traditional advertising media.
In addition, the Company's success will depend in large part upon the
continued growth in the use of the Internet and in particular the use of the
Internet for investing purposes. There can be no assurance that Internet usage
will become widespread or that extensive content (such as Web pages) will
continue to be provided over the Internet. Issues concerning the commercial use
of the Internet such as security, reliability, cost, ease of access and use,
quality of service and acceptance of advertising, remain unresolved and may
negatively impact the growth of Internet usage or the acceptance of the Internet
as an advertising medium.
DEPENDENCE ON THIRD PARTY SUPPLIERS
The Company is dependent currently upon several suppliers for the integral
components of its current and future technologies. The Company currently uses
programs it has developed to perform various functions. Although the Company
continues to modify and develop its own proprietary core technology, there can
be no assurance that new features to Nichi Money will continue to be
successfully designed, developed, tested, marketed and introduced or accepted by
the marketplace in a timely manner. In the event that new features to Nichi
Money or an alternative technology, is not successfully introduced and accepted
in a timely manner, the Company will continue to be dependent upon the existing
technology it has developed. Given the technological changes occurring in the
industry, there is no assurance that the Nichi Money's technology will remain a
competitive technology in the future.
In addition, the Company has been developing services for distribution
through the use of technology developed by other companies. The Company intends
to utilize the software technology to organize it's business and distribute it's
products. Such products include 'Acrobat' a software package developed by Adobe
Software to distribute the Company's upcoming newsletter designed to keep users
up-to-date on what is happening on Nichi Money as well as to distribute exchange
agreements for subscriptions to real-time data.
A key element of the Company's strategy involves the use of unique content
developed by third parties for Nichi Money. A significant majority of the
Company's relationships with such third parties, however, have only recently
been developed. There can be no assurance that they will not seek to charge the
Company a significant fee for the supply of such content, that they will not
enter into similar
6
arrangements with or provide similar content to the Company's competitors, that
they will continue their relationship with the Company, or that they will not
establish their own services to compete against the Company for advertising
revenue. Nor can there be any assurance that the Company's current or future
third-party content providers will provide content that is attractive to Web
users or that their efforts will result in significant revenue to the Company.
Any failure of these parties to develop and maintain high-quality and attractive
content could result in dilution to the Nichi Money brand and could have a
material adverse effect on the Company's business, results of operations and
financial condition.
COMPETITION
The market for Internet products and services is highly competitive, with
no substantial barriers to entry, and the Company expects that competition will
continue to intensify. In addition, the market for the Company's products and
services has only recently begun to develop, is rapidly evolving and is
characterized by an increasing number of market entrants with competing products
and services. The Company does not believe this market will support the
increasing number of competitors and their products and services. Although the
Company believes that the diverse segments of the Internet market may provide
opportunities for more than one supplier of products and services similar to
those of the Company, it is possible that a single supplier may dominate one or
more market segments. Accordingly, any failure of the Company to provide product
and service offerings that achieve success in the short-term could result in an
insurmountable loss in market share and brand acceptance, and could, therefore,
have a material adverse and long-term effect upon the Company's business,
results of operations and financial condition.
A number of companies offer competitive products and services addressing
certain of the Company's target markets. These companies include America Online,
Inc., E-trade, Quote.Com., Microsoft Network, The Quicken Financial Network,
Charles Schwab, CompuServe Corporation, Prodigy Services Company and Yahoo!
Corporation. In addition, the Company competes with other companies that allows
users to search their databases over dedicated digital lines simultaneously. The
Company also competes indirectly with database vendors that offer information
search and retrieval capabilities with their core database products. In the
future, the Company may encounter competition from providers of Web browser
software, including Netscape and Microsoft Corporation ('Microsoft'), other
online services and other providers of other Internet products and services who
elect to incorporate their own financial search and retrieval features into
their offerings.
Many of the Company's existing and potential competitors have significantly
greater financial, technical and marketing resources than the Company. The
Company may also be adversely affected by competition from users of its products
and technology, current and future advertisers, as well as from its current,
future and former content providers. There can be no assurance that the
Company's competitors will not develop Internet products and services that are
superior to those of the Company or that achieve greater market acceptance than
the Company's offerings. Moreover, a number of the Company's future advertising
customers, licensees and licensors have also established relationships with
certain of the Company's competitors. In addition, the Company competes with
online services and other Web site operators as well as traditional off-line
media such as print and television for a share of advertisers' total advertising
budgets. There can be no assurance that the Company will be able to compete
successfully against its current or future competitors or that competition will
not have a material adverse effect on the Company's business, results of
operations and financial condition. See 'Business -- Competition.'
MANAGING EXPANSION; NEW TECHNOLOGIES
The rapid growth that the Company believes is necessary to successfully
offer its products and services has placed, and is expected to continue to place
a significant strain on the Company's managerial, operational and financial
resources. The Company continues to expand its operations and increase its
dependence and reliance on computer generated information. This evolution
necessitates continuous reassessment of the appropriateness of the Company's
computerized data and systems. The Company's current management information
system is cumbersome and inefficient and requires a
7
significant amount of manual effort using personal computer spreadsheets in
order to process and analyze information. This situation makes it difficult for
management to obtain timely and accurate information.
There can be no assurance that the Company will be able to effectively
manage the expansion of its operations, that the Company's new management team
will work together effectively, that the Company will be able to attract and
retain qualified personnel, that the Company's systems, procedures or controls
will be adequate to support the Company's operations or that Company management
will be able to achieve the rapid execution necessary to fully exploit any
potential market opportunity for the Company's products and services and media
properties. In addition, the Company intends to establish at least one mirror,
or duplicate, site in another geographic location, which will create additional
operational and management complexities, including the need for continual
updating and maintenance of the Company's databases among geographically
dispersed network servers. Any inability to effectively manage growth could have
a material adverse effect on the Company's business, results of operations and
financial condition. See 'Business -- Employees' and 'Management.'
PROTECTION OF PROPRIETARY RIGHTS
The Company's success depends significantly upon its proprietary
technology. The Company currently relies on a combination of copyright and
trademark laws, trade secrets, confidentiality procedures and contractual
provisions to protect its proprietary rights. The Company generally enters into
confidentiality agreements with its employees and consultants. The Company seeks
to protect its software, documentation and other written materials under trade
secret and copyright laws, which afford only limited protection.
Despite the Company's efforts to protect its proprietary rights,
unauthorized parties may attempt to copy aspects of the Company's products or
services or to obtain and use information that the Company regards as
proprietary. In addition, the laws of some foreign countries do not protect
proprietary rights to as great an extent as do the laws of the United States.
Litigation may be necessary to protect the Company's proprietary technology. Any
such litigation may be time-consuming and costly. There can be no assurance that
the Company's means of protecting its proprietary rights will be adequate or
that the Company's competitors will not independently develop similar technology
or duplicate the Company's products or services or design around patents or
other intellectual property rights of the Company.
There have been substantial amounts of litigation in the information
technology industry regarding intellectual property rights. There can be no
assurance that the Company will develop proprietary products or services or
technologies that are patentable or that the patents of others will not have a
material adverse effect on the Company's ability to do business. In addition,
there can be no assurance that third parties will not in the future claim
infringement by the Company with respect to current or future products or
services, trademarks or other proprietary rights, or that the Company will not
counterclaim against any such parties in such actions. Any such claims or
counterclaims could be time-consuming, result in costly litigation, cause
product release delays, require the Company to redesign its products or services
or require the Company to enter into royalty or licensing agreements, any of
which could have a material adverse effect upon the Company's business,
operating results and financial condition. Such royalty or licensing agreements,
if required, may not be available on terms acceptable to the Company or at all.
See ' -- Government Regulation and Legal Uncertainties,' ' -- Liability for
Information Retrieved from the Internet' and 'Business -- Intellectual Property
and Proprietary Rights.'
PERFORMANCE OF COMPANY PRODUCTS AND SERVICES
A key element of the Company's strategy is to generate a high volume of
traffic to its products and services. Accordingly, the performance of the
Company's products and services is critical to the Company's reputation, its
ability to attract advertisers to the Company's Web sites and market acceptance
of these products and services. Any system failure that causes interruptions or
that increases response time of the Company's products and services would result
in less traffic to the Company's Web sites and, if sustained or repeated, would
reduce the attractiveness of the Company's products and
8
services to advertisers and customers. In addition, an increase in the volume of
queries conducted through the Company's products and services could strain the
capacity of the software, hardware or telecommunications lines deployed by the
Company, which could lead to slower response time or system failures. As the
number of Web pages and users increase, there can be no assurance that the
Company's products, services and systems will be able to scale appropriately.
The Company is also dependent upon Web browser companies and Internet and online
service providers for access to its products and services, and users have
experienced and may in the future experience difficulties due to system or
software failures or incompatibilities not within the Company's control. The
Company is also dependent on hardware suppliers for prompt delivery,
installation and service of servers and other equipment and services used to
provide its products and services. Any disruption in the Internet access and
service provided by the Company or its service providers could have a material
adverse effect upon the Company's business, results of operations and financial
condition.
The process of managing advertising within large, high traffic Web sites
such as the Company's is an increasingly important and complex task. The Company
relies on internal advertising inventory management and analysis systems to
provide enhanced internal reporting and customer feedback on advertising. An
extended failure of the Company's advertising management system could result in
incorrect advertising insertions. In the event of such failure the Company may
be exposed to 'make good' obligations with its advertising customers, which, by
displacing advertising inventory, could have a material adverse effect on the
Company's business, results of operations and financial condition.
SAFE GUARDING OF COMPUTER SYSTEMS
The Company's operation depends upon its ability to maintain and protect
its computer systems located in New York City, New York. This system is
vulnerable to damage from fire, floods, earthquakes, power loss,
telecommunications failures, break-ins and similar events. The Company does not
currently have a disaster recovery plan in effect. Despite the implementation of
network security measures by the Company, its servers are also vulnerable to
computer viruses, break-ins and similar disruptive problems. Computer viruses,
break-ins or other problems caused by third parties could lead to interruptions,
delays in or cessation of service to users of the Company's products and
services. The occurrence of any of these risks could have a material adverse
effect on the Company's business, results of operations and financial condition.
See 'Business -- Facilities/Property.'
GOVERNMENT REGULATION
The SEC has adopted regulations that generally define a 'penny stock' to be
any equity security that has a market price of less than $5.00 per share or an
exercise price of less than $5.00 per share, subject to certain exceptions. Such
exceptions include an equity security listed on NASDAQ, and an equity security
issued by an issuer that has [i] net tangible assets of at least $2,000,000, if
such issuer has been in continuous operation for three years, [ii] net tangible
assets of at least $5,000,000 if such issuer has been in continuous operation
for less than three years, [iii] average revenue of at least $6,000,000 for the
preceding three years. Unless an exception is available, the regulations require
the delivery, prior to any transaction involving a penny stock, or a risk
disclosure schedule explaining the penny stock market and the risks associated
therewith.
If the Company's securities were to become subject to regulations
applicable to penny stock, the market liquidity for the securities would be
seriously affected, limiting the ability of broker-dealers to sell the
securities and the ability of purchasers in this Offering to sell their
securities in the secondary market. There is no assurance that trading in the
Company's securities will not be subject to these or other regulations that
would adversely affect the market for such securities.
The Company is not currently subject to direct regulation by any government
agency, other than by regulations applicable to businesses generally, and there
are currently few laws or regulations directly applicable to access to or
commerce on the Internet. It is possible that a number of laws and regulations
may be adopted with respect to the Internet, covering issues such issues as user
privacy, pricing and characteristics and quality of products and services. For
example, the recently enacted Telecommunications Reform Act of 1996 imposes
criminal penalties on anyone who distributes obscene, lascivious or
9
indecent communications on the Internet. The adoption of any such laws or
regulations may decrease the growth of the Internet, which could in turn
decrease the demand for the Company's products, increase the Company's cost of
doing business, or otherwise have an adverse effect on the Company's business,
results of operations or financial condition. Moreover, the applicability to the
Internet of existing laws governing issues such as property ownership,
copyright, trade secret, libel and personal privacy is uncertain. Any such new
legislation or regulation could have a material adverse effect on the Company's
business, results of operations or financial condition.
HIGH POTENTIAL FOR LITIGATION
Because Internet services provided by the Company require the Company to
link users to information which is downloaded, indexed and distributed from Web
pages published by a large number of Internet Web sites and content providers,
there is potential that claims will be made against the Company on theories such
as defamation, negligence, copyright or trademark infringement, distribution of
obscene, lascivious or indecent communications or other theories of liability
based on the nature and content of such materials. Such claims have been
brought, and sometimes successfully pressed, against online services in the
past. Additionally, claims could be made against the Company for copyright
infringement based on the improper dissemination of information. Although the
Company intends to carry general liability insurance, the Company's insurance
may not cover potential claims of this type, or may not be adequate to indemnify
the Company for all liability that may be imposed. Any imposition of liability
that is not covered by insurance or is in excess of insurance coverage could
have a material adverse effect on the Company.
DETERMINATION OF OFFERING PRICE AND ABSENCE OF PUBLIC MARKET
Prior to this Offering there has been no public market for the Company's
Common Stock, and there can be no assurance that an active public market for the
Common Stock will develop or be sustained after the Offering. The initial
offering price was determined by the Company and may not be indicative of future
market prices. The trading price of the Company's Common Stock could be subject
to wide fluctuations in response to a number of factors, including quarterly
variations in operating results, announcements of technological innovations or
new products and services, applications or product enhancements by the Company
or its competitors, changes in financial estimates by securities analysts and
other events. In addition, the stock markets in general, and the market prices
for Internet-related companies in particular, have historically experienced
extreme volatility that at times has been unrelated to the operating performance
of such companies.
Sales of a substantial number of shares of Common Stock in the public
market following this Offering could adversely affect the market price for the
Common Stock. The number of shares of Common Stock available for sale in the
public market is limited by restrictions under the Securities Act of 1933, as
amended (the 'Securities Act'). As a result of Rule 144 under the Securities Act
the sale of unregistered stock is restricted for a period of one year from the
date of purchase.
Mr. Olawande Agunloye has agreed with the Company not to sell any of his
shares of common stock for a period of three years from the date hereof.
Upon completion of this Offering, the present directors, executive officers
and principal shareholders of the Company and their affiliates will beneficially
own approximately 80% and 63% assumed sale of the minimum and maximum offering
price of the outstanding Common Stock, and will be able to control all matters
requiring shareholder approval, including approval of significant corporate
transactions. Accordingly, the principal shareholders of the Company, who
collectively hold over 66 2/3% of the Company's outstanding stock, will be able
to control election of all directors of the Company. These provisions could
delay or make more difficult a proxy contest involving the Company, which could
adversely affect the market price of the Company's Common Stock.
DILUTION
Purchasers in this Offering will suffer an immediate and substantial
dilution in the net tangible book value of the Common Stock from the initial
public offering price. See 'Dilution.'
10
POSSIBLE NEED FOR ADDITIONAL FINANCING
The Company currently anticipates that the net proceeds of this Offering,
together with available funds and cash flows generated from advertising
revenues, will be sufficient to meet its anticipated needs for working capital,
capital expenditures and business expansion for at least the next 12 months.
Thereafter, the Company may need to raise additional funds. The Company may need
to raise additional funds sooner in order to fund more rapid expansion, to
develop new or enhanced services or products, to respond to competitive
pressures or to acquire complementary products, businesses or technologies. If
additional funds are raised through the issuance of equity or convertible debt
securities, the percentage ownership of the shareholders of the Company will be
reduced, shareholders may experience additional dilution and such securities may
have rights, preferences or privileges senior to those of the holders of the
Company's Common Stock. There can be no assurance that additional financing will
be available on terms favorable to the Company, or at all. If adequate funds are
not available or are not available on acceptable terms, the Company may not be
able to fund its expansion, take advantage of unanticipated acquisition
opportunities, develop or enhance services or products or respond to competitive
pressures.
DIVIDEND POLICY
The Company has never declared or paid any cash dividends on its capital
stock, and does not expect to pay cash dividends on its Common Stock in the
foreseeable future. The Company currently intends to retain its earnings, if
any, for use in its business.
11
CAPITALIZATION
The following table sets forth as of June 30, 1997 (a) the historical
capitalization of the Company and (b) the pro forma capitalization of the
Company giving effect to the issuance of a maximum of 1,800,000 shares offered
hereby, and (c) the pro forma capitalization of the Company giving effect to the
issuance of a minimum of 600,000 shares of Common Stock being offered hereby.
This table should be read in conjunction with the Financial Statements and notes
thereto appearing elsewhere in this prospectus.
AT JUNE 30, 1997
------------------------------------------------------
AS ADJUSTED AS ADJUSTED
ACTUAL MAXIMUM MINIMUM
--------- ---------------- ----------------
Debt:
Total liabilities........................................ $ 260,467 $ 260,467 $ 260,467
--------- ---------------- ----------------
--------- ---------------- ----------------
Stockholders' Equity:
Common Stock, $.01 par value; 15,000,000 shares
authorized; 3,795,302 shares issued and outstanding
actual; 5,599,672 shares issued and outstanding, As
adjusted -- Maximum; and 4,399,672 shares issued and
outstanding, As adjusted -- Minimum.................... 37,953 55,997(1)(4) 43,997(2)(4)
Additional paid-in Capital............................... 244,903 9,020,609(1)(4) 3,032,609(2)(4)
Deficit accumulated in the development stage............. (386,749) (386,749) (386,749)
--------- ---------------- ----------------
Total stockholders' equity (deficiency)............. (103,893) 8,689,857 2,689,857
--------- ---------------- ----------------
Total capitalization................................ $ 156,574 $8,950,324 $2,950,324
--------- ---------------- ----------------
--------- ---------------- ----------------
- ------------
(1) Reflects the receipt of $8,750,000 in net proceeds from the issuance of
1,800,000 shares of Common Stock at $5.00 per share, after deducting
offering expenses aggregating $250,000.
(2) Reflects the receipt of $2,750,000 in net proceeds from the issuance of
600,000 shares of Common Stock at $5.00 per share, after deducting offering
expenses aggregating $250,000.
(3) Retroactively reflects a reverse stock split of 1 share for every 2 held
which was declared on August 11, 1997.
(4) Reflects the issuance of 4,370 shares of common stock in July 1997 to
Abraham Tu, an officer and Director, and his brother for $43,700 in cash.
12
DILUTION(1)
The difference between the Offering Price per share of Common Stock and the
pro forma net tangible book value per share after the Offering constitutes the
dilution per share of Common Stock to investors in the offering. The net
tangible deficiency in book value of Common Stock at June 30, 1997 was
($125,482) or ($.03) per share of Common Stock. Net tangible book value per
share of Common Stock on any given date is determined by dividing the net
tangible book value of the Company (total tangible assets less total
liabilities) on such date by the number of shares of Common Stock outstanding on
such date.
After (i) giving effect to the sale of 1,800,000 shares of Common Stock
offered hereby by the Company at the Offering Price of $5.00 per share (ii) the
deduction of estimated offering expenses payable by the Company and, (iii) the
issuance of 4,370 shares of Common Stock in July 1997 to an Officer/Director and
his brother, the pro forma tangible book value of the Company as of June 30,
1997 would have been $8,728,255 or $1.56 per share. This represents an immediate
dilution of $3.44 per share to new public investors purchasing Common Stock in
the Offering, as illustrated in the following table:
Offering Price per share.................................................... $5.00
Net tangible book value before offering................................ ($0.03)
Increase attributed to new investors................................... 1.59
------
Pro forma net tangible book value after the Offering........................ 1.56
-----
Dilution to new investors................................................... $3.44
-----
-----
If the minimum number of shares of Common stock are sold, the pro forma net
tangible book value per share at June 30, 1997, as adjusted for the Offering,
would be approximately $2,728,255 or $.62 per share and the dilution per share
to the purchasers of Common Stock in the Offering would be approximately $4.38.
The following table summarizes on a pro forma basis as of June 30, 1997 the
difference between existing shareholders and new investors with respect to the
number and percentage of shares of Common Stock purchased from the Company and
the average consideration and percentage of total consideration paid to the
Company and the average consideration per share paid (at an assumed public
offering price of $5.00 per share):
Assuming the maximum number of shares of Common Stock are sold:
AVERAGE
SHARES PURCHASED TOTAL CONSIDERATION PRICE
-------------------- -------------------- PER
NUMBER PERCENT AMOUNT PERCENT SHARE
--------- ------- --------- ------- -------
Existing Shareholders............ 3,799,672 67.86% 326,566 3.50% $0.09
Public investors................. 1,800,000 32.14% 9,000,000 96.50% $5.00
--------- ------- --------- -------
5,599,672 100.00% 9,326,566 100.00%
--------- ------- --------- -------
--------- ------- --------- -------
Assuming the minimum number of shares of Common Stock are sold:
AVERAGE
SHARES PURCHASED TOTAL CONSIDERATION PRICE
-------------------- -------------------- PER
NUMBER PERCENT AMOUNT PERCENT SHARE
--------- ------- --------- ------- -------
Existing Shareholders............ 3,799,672 86.36% 326,566 9.82% $0.09
Public investors................. 600,000 13.64% 3,000,000 90.18% $5.00
--------- ------- --------- -------
4,399,672 100.00% 3,326,566 100.00%
--------- ------- --------- -------
--------- ------- --------- -------
- ------------
(1) Retroactively reflects a reverse stock split of 1 share for every 2 held
which was declared on August 11, 1997.
13
SELECTED FINANCIAL DATA
The following table represents selected historical financial data for the
years ended December 31, 1996 and 1995 and the six (6) months ended June 30,
1997 and 1996. The historical financial data for the years ended December 31,
1996 and 1995 is derived from the financial statement of the Company which have
been audited by Weinick, Sanders & Co. LLP, independent accountants and are
included in this prospectus. The financial data for the six month period ended
June 30, 1997 and 1996 is derived from the financial statements of the Company
which have not have been subject to audit, but which have been prepared on a
basis consistent with the audited financial statements. In the opinion of
management, the unaudited financial statements include all adjustments
(consisting only of normal recurring adjustments) necessary for a fair statement
of the financial position and results of operations for those periods. The
results of operations for the six month ended June 30, 1997 and 1996 are not
necessarily indicative of the results of operations for the full fiscal year.
The information set forth below should be read in conjunction with
'Management's Discussion and Analysis of Financial Condition and Results of
Operations' and all of the financial statements of the Company and the notes
thereto and other financial information included elsewhere in this Prospectus.
SIX MONTHS YEAR ENDED DECEMBER
ENDED JUNE 30, 31,
------------------------ ----------------------
1996 1996 1995
1997 -------- --------- --------
-----------
(UNAUDITED)
Statements of Operations Data
Revenue............................................ $ 0 $ 0 $ 9,101 $ 4,542
----------- -------- --------- --------
Cost and expenses:
Consulting -- Officer/Stockholder............. 26,894 2,500 36,693 0
Advertising................................... 4,000 30,897 60,479 1,448
Depreciation and amortization................. 7,467 7,781 13,936 4,623
Other general and administrative expenses..... 19,454 40,502 132,967 92,431
----------- -------- --------- --------
Total cost and expenses....................... 57,815 81,680 244,075 98,502
----------- -------- --------- --------
Net loss........................................... $ (57,815) $(81,680) $(234,974) $(93,960)
----------- -------- --------- --------
----------- -------- --------- --------
Per Share Data(3)
Net loss per common share.......................... $(0.02) $(0.02) $(0.03) $(0.01)
----------- -------- --------- --------
----------- -------- --------- --------
Weighted average number of shares outstanding........... 3,795,152 3,770,379 8,463,955 8,396,644
JUNE 30, 1997
-------------------------------------------------
AS ADJUSTED AS ADJUSTED
ACTUAL MAXIMUM(1) MINIMUM(2)
--------- ---------------- ----------------
Balance Sheet Data
Working capital (deficiency)................................... $(180,110) $8,613,640 $2,613,640
Total assets................................................... $ 156,574 $8,950,324 $2,950,324
Total shareholders equity (deficiency)......................... $(103,893) $8,689,857 $2,689,857
- ------------
(1) Gives effect to the sale of 1,800,000 shares of Common Stock (the maximum
offering) being offered hereby, at $5.00 per share.
(2) Gives effect to the sale of 600,000 shares of Common Stock (the minimum
offering) being offered hereby, at $5.00 per share.
(3) Retroactively reflects a reverse stock split of 1 share for every 2 shares
held which was declared on August 11, 1997.
14
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND PLAN OF OPERATIONS
OVERVIEW
The Company was incorporated as Nichi Capital Ltd. on February 16, 1995.
For net capital reasons the Company changed it's name and sold off the assets to
Wise Choice in exchange for shares equal to the amount the shareholders owned in
Wisechoice. Wisechoice was made a member of the NASD in July 1996 and is a
discount broker dealer which allows it's customers to purchase stock, corporate
bonds and options using the internet or telephone.
From inception (February 16, 1995) to December 31, 1996, the Company's
operations were limited and consisted primarily of start-up activities,
including recruiting personnel, raising capital, research and development, and
the negotiation and execution of an agreement with various exchanges for stock
quote information.
The Company introduced its first products and services on July 1, 1996.
During 1995 and for the first quarter of 1996, the Company derived its revenues
substantially from sublease income and, to a lesser extent, from advisory fees
for the Company's services. During these periods, there were no advertising
revenues and the sublease and the advisory fees accounted for 75% and 25%,
respectively, of total revenues. However, the Company expects to derive
substantially all of its revenues for the foreseeable future from selling
advertising space on its Web sites and from subscribers. The Company's current
business model, which generates revenues through the sale of advertising on the
Internet, is unproven. There can be no assurance that advertisers will purchase
advertising space and services from the Company or that the Company will be able
to successfully attract additional advertisers. See 'Risk Factors -- Reliance on
Advertising Revenues.'
The Company has a limited operating history, which makes it difficult to
predict future operating results. The Company did not commence generating
revenues until September, 1996, and has generated limited revenues to date. The
Company has incurred significant net losses since inception and expects to
continue to incur significant losses on a quarterly and annual basis for the
foreseeable future. As of December 31, 1996, the Company had an accumulated
deficit of $328,934, a deficiency in stockholders' equity of $93,050 and a
working capital deficiency of $158,925. These conditions raise substantial doubt
about the Company's ability to continue in business as a going concern. The
report of the Company's Independent Public Accountant's is qualified by
reference to such conditions. See 'Independent Accountant's Report.' The
implementation of management's plan to establish the Company as the dominant,
branded financial services provider on the Internet is dependent, among other
things, on the success of the Company's initial public offering being made
hereby.
RESULTS OF OPERATIONS
From inception through the third quarter of 1996, the Company's operations
were limited and consisted primarily of start-up activities. Accordingly, the
Company believes period-to-period comparisons of the first, second and third
quarters of 1996 against the comparable period in 1995 or the entire year of
1995, are not meaningful. Accordingly the Company has not included such
comparisons in the following discussion. Likewise, because of the Company's
limited operations in 1995, the Company believes that future period-to-period
comparisons against 1995 may also not be meaningful. See 'Risk
Factors -- 'Limited Operating History.'
TOTAL REVENUE
From inception (February 16, 1995) to December 31, 1995 and fiscal 1996,
total revenues were $4,542 and $9,101, respectively, consisting principally of
rental income and from the third quarter of 1996, nominal revenues from selling
subscriptions on its Web sites. See 'Risk Factors -- Potential Fluctuations in
Future Results,' ' -- Reliance on Advertising Revenues' and ' -- Developing
Market; Unproven Acceptance of Internet Advertising and of the Company's
Products and Services,'
' -- Change in Exchange Relationship and Dependence on Other Third Party
Distribution Relationships' and 'Business -- Marketing and Distribution of the
Nichi Money Brand.'
15
OPERATING EXPENSES
SALES AND MARKETING
From inception to December 31, 1995 and fiscal 1996, sales and marketing
expenses were $1,448 and $60,479, respectively. Sales and marketing expenses
consisted primarily of advertising expenses. Sales and marketing expenses
included marketing efforts made through Softbank pursuant to advertising Nichi
Money on Yahoo! and ads placed on CNN All-Politics website as well as on
Webcrawler. Historically a large portion of the Company's traffic was derived
through Yahoo's Web page.
During the 30 day period from August 22 through September 22, 1996, the
Company's average daily traffic was approximately 48% higher than its average
daily traffic for the 30 day period immediately prior to the advertisement on
Yahoo's website. There can be no assurance that the Company will be able to
maintain or increase its current level of traffic. This agreement with Yahoo
provides for payments of up to an aggregate of $8,500 a month which is the term
of the agreement. The Company has the right to terminate the agreement at the
end of each month, in which case payments to Yahoo would not be reduced. The
Company expects to start hiring sales and marketing personnel and to increase
promotional and advertising expenses, and anticipates that these costs will
substantially increased in absolute dollars in future periods.
GENERAL AND ADMINISTRATIVE
From inception to December 31, 1995 and fiscal 1996, general and
administrative expenses were $97,054 and $183,596 respectively. General and
administrative expenses consist primarily of compensation of administrative and
executive personnel, occupancy costs and fees for professional services. The
Company anticipates that its general and administrative expenses will continue
to increase significantly in absolute dollar amounts as the Company expands its
administrative and executive staff, relocates to new facilities, adds
infrastructure and incurs additional costs related to being a public Company,
such as expenses related to directors' and officers' insurance, investor
relations programs and increased professional fees.
INCOME TAXES
The Company believes it is less likely than not to realize a net deferred
tax asset and, accordingly, a valuation allowance has not been provided.
LIQUIDITY AND CAPITAL RESOURCES
From inception through December 31, 1996, the Company financed its
operations and met its capital expenditure requirements primarily through cash
proceeds from private sales of it's Common Stock aggregating approximately
$236,000. The Company had $2,887 and $0 in cash at December 31, 1995 and
December 31, 1996, respectively.
From inception to December 31, 1995 and fiscal 1996, operating activities
used cash of $75,340 and $83,764 respectively. From inception to December 31,
1995 and fiscal 1996, investing activities used net cash of $48,747 and $42,244,
respectively, primarily associated with the purchase of property and equipment.
Financing activities generated cash of $126,974 and $123,121 from inception to
December 31, 1995 and fiscal 1996, respectively, primarily from Common Stock
sales.
The Company expects to use the net proceeds of this Offering for the
purchase of computer hardware and software as well as general corporate
purposes, including the expansion of the Company's product development and sales
and marketing organizations and working capital. Furthermore, from time to time
the Company expects to evaluate the acquisition of products, businesses and
technologies that complement the Company's business, for which a portion of
the net proceeds may be used. The Company does not, however, currently have
any understandings, commitments or agreements with respect to any such
acquisitions. Management expects that cash in excess of current requirements
will be invested in investment grade, short-term interest-bearing securities.
See 'Risk Factors -- No Specific Use of Proceeds.'
16
The Company currently anticipates that the minimum net proceeds of this
Offering, advertising revenues and subscribers to the real-time version of it's
services will be sufficient to meet it's anticipated needs for working capital,
capital expenditures and business expansion for at least the next 12 months.
Thereafter, the Company may need to raise additional funds. The Company may need
to raise additional funds sooner, however, in order to fund more rapid
expansion, to develop new or enhanced services or products, to respond to
competitive pressures or to acquire complementary products, businesses or
technologies. If additional funds are raised through the issuance of equity or
convertible debt securities, the percentage ownership of the shareholders of the
Company will be reduced, shareholders may experience additional dilution and
such securities may have rights, preferences or privileges senior to those of
the holders of the Company's Common Stock. There can be no assurance that
additional financing will be available on terms favorable to the Company, or at
all. If adequate funds are not available or are not available on acceptable
terms, it would limit the Company's ability to fund expansion, take advantage of
acquisition opportunities, develop or enhance services or products or respond to
competitive pressures. Such limitation could have a material adverse effect on
the Company's business, results of operations and financial condition.
BUSINESS
The Company is in the development stage and to a significant extent the
description of its business relate to activities in the planning stage. The
Company develops and provides branded, comprehensive Web-based financial
services that help users access and personalize the resources of the Internet.
The Company's primary service Nichi Money, is a free service targeted at
individual users. The Company believes that by permitting users to receive
information on companies going public, it will set itself apart from other
free-to-use financial services.
Nichi Money distributes, develops and provides branded, comprehensive
Web-based financial services that gives users access to delayed stock quotes,
graphs, stock recommendations, information on upcoming initial public offerings
and much more with a more advanced version to paying subscribers while providing
access by agreement to discount brokerage services. The Company's primary
service offering, Nichi Money, is a free service targeted at individual
investors who use the Internet to monitor their stock positions.
The Company has no advertising revenue to date. Advertising revenue, when
and if received, would be recognized over the period the service is provided.
The Company is also selling to users on the Internet real-time service for
$40.00 a month, which does not include exchange fees. The Company introduced the
service on the September 10, 1996, and has generated limited revenues to date.
Insofar as this service has just been recently introduced, there is no basis to
determine market acceptance or future revenue growth.
INDUSTRY BACKGROUND
The Internet was originally created by the U.S. government to facilitate
the exchange of information and electronic mail ('e-mail') between a limited
number of academic institutions, defense contractors and government agencies.
The Internet was commercialized in the late 1980s and 1990s and technological
enhancements have since extended the Internet's reach to consumers and
businesses. The most important technological enhancement to the Internet was the
creation of the World Wide Web (the 'Web') in the early 1990s. The Web is an
interactive environment which facilitates the exchange of multimedia-rich
information and entertainment resources among users worldwide. In addition,
recent technological developments have enabled consumers and businesses to use
the Web for buying and selling products and services.
The open nature of the Web enables any individual or organization to
publish a Web site. New software-based authoring tools have lowered the cost of
publishing content on the Web relative to conventional publishing methods and
enabled new, exciting forms of multimedia content. The cost of delivering
content to a large audience is lower than that of conventional media, consisting
only of the cost of maintaining and operating computer equipment. In addition,
the interactive nature of the Internet provides an environment in which content
providers can track the appeal of their content by
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measuring the number of visits to a Web site and can respond quickly to
consumers' changing tastes and needs.
The dramatic increase in Web-based information and entertainment has
increased the appeal of the Web to consumers and has driven the high growth in
traffic on the Web. Continued enhancement to the Internet multimedia offering
technology and new compression technologies, should continue to attract new
content providers to this medium.
FINANCIAL SERVICES
The rapid growth in content on the Web combined with the web's unindexed
nature presents significant challenges for consumers seeking Financial-based
information and resources. With the emergence of navigational tools, users still
had to know lengthy Web addresses for each specific site, or use hypertext links
which enable users to go directly to the listed site by clicking on the address.
Content providers and advertisers also faced difficulties in making the
existence and location of their Web sites widely known and available to their
target audiences.
A number of financial websites have emerged to assist users in providing
financial information from their databases, including discount brokerage firms,
financial newspapers and magazines and search engines. The financial web sites
are typically for the use of their customers but do list other financial Web
sites by specific topics of interest. Directories generally list Web sites by
their hypertext address. Entries in a directory also may contain Web site
descriptions or reviews. Search engines offer users the ability to get delayed
quotes and Company news based upon specific word or phrase queries. The
information is then served from their database.
Although financial related companies help users obtain financial
information over the Web, the Company believes that such websites have certain
limitations which could enable the Company to provide added value to the
consumer. Most financial website and search engines only provide information of
financial products they are trying to sell or provide insufficient and untimely
information which makes informed financial decision making extremely difficult.
The Company believes that information should be disseminated in a simple format
so that users can get the information they need to determine which of the myraid
investment vehicles offered in today's marketplace would be suitable in
fulfilling their financial goals.
The Company believes that there is an opportunity to provide a more
comprehensive financial website that not only provides specific and relevant
information which would be provided in response to an investors queries, but
also aggregates and packages the information in a format which will serve a
consumer's unique and personal financial interest. The Company believes that
consumers will respond to services that aggregate specific and relevant
responses to queries with related financial information such as targeted
advertising, discussion groups and other resources.
ADVERTISING ON THE WEB
With the growth in the number of Internet users and content providers, the
Internet has begun to develop the attributes of a conventional mass medium,
where advertising subsidizes content delivered to users. Forrester Research,
Inc. estimates that spending on Web-based advertising will increase from $37
million in 1995 to approximately $700 million by 1998. Moreover, the 1995
Commerce Net/Nielsen Internet Demographics Survey indicates that on average, Web
users are upscale, professional and educated, providing an attractive
demographic profile for advertisers. However due to the low cost it takes to get
on the Internet, it is the Company's belief that this audience will attract
advertisers.
Unlike the more conventional print and broadcast media, the interactive and
global nature of the Internet has the potential to enable advertisers to
cost-effectively target specific audiences, measure the popularity of
advertising content, reach worldwide audiences and create innovative and
interactive advertisements. The Company believes that the web will become an
even more attractive advertising platform with the introduction of increased
transmission bandwidths through higher speed Internet connections coupled with
wider multimedia enabling technologies for the Web such as Java, VRM and others.
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Advertisers currently face difficulties, however, in placing their
advertisements strategically on the Web. It is difficult for advertisers to
understand the volume and demographics of traffic patterns on Web sites. As a
result, advertisers can find it difficult to make the existence and location of
their advertisements widely known and target their audiences effectively. The
Company believes that, in the near term, advertisers will migrate to sites which
can offer a high number of impressions per day. The Company also believes that,
over time, advertisers will be attracted to those services that experience a
high volume of traffic, track consumers carefully and deliver advertisers
audiences that fit specific buying profiles. In order to match advertisers with
consumers, sites must be develop to conduct complex demographic and
psychographic profiling of their consumers resulting in targeted, high impact
advertising ('narrowcasting' or 'microcasting'). The Company believes that those
sites which both garner a high volume of traffic and offer advertisers the
ability to target specific audiences effectively will be in the best position to
take advantage of the advertising potential of the Web.
REAL-TIME DATA ON THE WEB
It is the Company's belief that the Internet will become the principal
means of transmitting and receiving data. Real time data subscribers are looking
to the Internet because it is more accessible and it is between 10% and 30% of
the cost of other more conventional methods of transmitting real time market
data. The Company believes that distributors of market data can further reduce
costs through the elimination of costly dedicated terminals to serve out or
provide software to view such data.
NICHI MONEY
Nichi Money develops and provides branded, comprehensive Web-based
financial services that help users access and personalize the vast resources of
the Internet. Nichi's primary service offering, Nichi Money, not only provides
financial information, but also aggregates and packages the resources of the
Internet in order to serve a consumer's unique and personal financial interests.
By integrating the capabilities of a search engine and a database technology,
Nichi Money packages specific responses to queries for real-time and delayed
information. Nichi Money satisfies the needs of consumers to access relevant and
specific information; the needs of content providers to chat on topics of
interest; and the needs of advertisers to reach a targeted group of potential
customers.
With Nichi Money, the consumer can choose from the following offerings: (i)
specific and relevant initial public offering listings, (ii) information on
mutual funds, stock and mutual fund quotes, (iii) portfolio management tools,
(iv) stock and mutual fund graphs, (v) recommendations from leading investment
advisors, (vi) a chat forum to discuss financial strategies and (vii) trading
capabilities through Wise Choice. The Company's users also will receive unique
editorials on related financial subjects; articles on how to use Nichi Money
through our newsletter and access to authoritative financial literature by well
known authors from well established publishers. For example, a stock broker who
uses the Company's portfolio management tools to track the stock and mutual fund
position of his clients will have the ability to view the unrealized gain or
loss in his clients' portfolio at any point in time. This investor will also
have the ability to view the distribution of holdings among various classes of
assets i.e; cash, stock, bonds and mutual funds, etc., as well as allowing him
to view graphs on the individual stocks in his clients' portfolios. This
investor may also view advertising appropriate to his interests. The Company
believes that the creation of real-time content enhances a user's financial
knowledge and experience by immediately linking the user to relevant and
specific information.
The Company believes that its Nichi money service has the following
advantages:
(i) It has developed it's own system to retrieve information with high
accuracy and the ability to quickly perform complex searches. It has also
developed it's own data reader to accurately and quickly parse data
received at high speed from various third parties.
(ii) It integrates search and link functions, providing not only
specific responses to user queries, but also direct links in real-time to
areas of content of interest that contain relevant content related to the
specific request. Through this approach, consumers will find specific
answers to a search query and through links can access a broader
environment of other relevant and related financial information through the
web page.
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The Company plans to continue to enhance the attractiveness of its service
to users through additional features and functionality. Nichi Capital is
currently developing several enhancements to Nichi Money. Such enhancements will
allow for personalization of content, offer information from various other
financial centers and advertising according to user interests and allow users to
abstract specific financial information from newswires, stock and mutual fund
services, bulletin board topics and other financial resources. These
enhancements are expected to be released by spring 1998.
Nichi Money's services provide advertisers with an increased ability to
undertake measurable, targeted, cost-effective and interactive advertising on
the Internet. The Company's services provide advertisers with the flexibility to
target a specific audience by advertising on one of the Company's different
sections and to target special interest groups by placing advertisements in chat
forums about certain investment products. The Company believes that both types
of advertising can provide significant value to advertisers. While larger, mass
market campaigns increase brand awareness, narrower campaigns through directory
ads or quote ads provide opportunities to engage in high response, product
specific advertising.
EDGAR FINANCIAL REPORTING SERVICE
The Company is currently planning to provide extensive web service for the
SEC's Electronic Data Gathering Analysis and Retrieval financial reporting
system ('EDGAR'). Virtually all reports are required to be filed electronically
with the SEC and may be electronically transmitted to a user who possesses the
appropriate computer equipment.
It is the Company's intent to pursue the EDGAR contract (the 'Contract') in
partnership with an entity which possesses the expertise necessary to fulfill
the Contracts requirements. The Company will provide the funding. The Contract
will help to reduce the direct cost of processing the data feed. It will also
allow the Company to achieve a required rate of return on capital even though it
will still have to absorb the cost of the real-time data feed. The Company will
also be able to market the website and employ its own marketing staff to sell ad
space on the site.
In addition to funding the contract, the Company will provide both current
and historical data as well as enabling its users to plot charts and graphs
using such data. It is also the Company's intention to increase sales by hiring
its own marketing and sales staff.
WISE CHOICE
Wise Choice, which is affiliated with the Company by its common ownership
and management, offers discount brokerage services to its customers. The Company
will use the services of Wise Choice in connection with securities transactions
for its customers.
WEB SITE
From July 1996 the Company's service was listed on Clubmaker Online by way
of an ad exchange brokered by the Company. Due to the success of the ad
exchange, the Company is in the process of establishing similar links with
various other companies who have websites on the Internet. However since 70% of
the website's traffic has come from search engines which advertises on the
website, the Company plans to also enter into distribution agreements and
informal relationships with other software vendors and operators of online
networks and Web sites. Although none of these relationships currently
represents a significant portion of the Company's traffic, the Company expects
that they will become more important in the future.
BUSINESS STRATEGY
The Company's objective is to establish itself as a dominant branded quote
and content aggregation financial information provider on the Internet. The
Company seeks to build a high volume of traffic on its services to provide a
preferred platform for content providers and advertisers to reach their target
audiences. At the core of the Company's strategy, the Company seeks to provide
real-time financial information to subscribers, content rich Web communities
that create value for the user and establish
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the Company's platform as an attractive medium for advertisers. The Company's
strategy contains the following key elements:
(1) The Company believes that, as with many conventional media,
branding and consumer loyalty on the Internet are highly dependent on the
aggregation and packaging of content into innovative and appealing products
and the effective marketing of such products to consumers. To this end, the
Company developed Nichi Money, a financial information and content
aggregation service that differentiates the Company's service and enhances
a user's Internet experience through the real-time creation of Web
communities, stock and bond research and by interviewing market
professionals from various financial fields. The Company intends to build
upon its technical and media expertise to develop innovative new services,
as well as enhance and expand existing service offerings. The Company also
promotes its brand through online and print advertising and other
promotional activities. The Company believes that these promotional
campaigns are an important component in building brand awareness in the
emerging Internet market.
(2) The Company seeks to provide advertisers with innovative solutions
to effectively reach their target audiences through the Internet. The
Company currently offers a broad range of customized alternatives for
advertisers, providing advertisers with the flexibility to target mass
audiences or specific communities, or link advertisements to various
quotes.
(3) In addition, the Company is actively exploring new technologies
which will enable advertisers to utilize user demographic, profile, and
psychographic information. The Company believes that these innovative
advertising approaches, which will allow advertisers to direct
advertisements to specific user types based on sophisticated analysis of
searching behavior, will significantly differentiate the Company's
services.
CREATE AND EXPAND BRANDED CONTENT PARTNERSHIPS
The Company seeks to co-brand its service offerings with recognized
third-party content in order to enhance the value of the Nichi Money brand. The
Company believes that the use of third party branded content may lead to higher
perceived editorial value and provide incremental distribution outlets and
cross-promotion opportunities. In addition, the Company intends to develop
content in-house.
The Company intends to aggressively build and extend the branded content
available through Nichi Money by developing alliances with leading media
companies and content providers.
The Company seeks to form relationships that maximize audience reach and
create alternate distribution channels to the Company's services. The Company
established as one of its earliest and primary distribution channels an initial
relationship with Wise Choice to be the sole provider of financial information
to users of it's discount brokerage service at www.wisediscount.com. This
relationship enabled the Company to gain access to an audience of potential
subscribers and build brand awareness.
In order to maximize exposure, the Company has broadened and will continue
to broaden its distribution channels through other relationship and other
companies as well. The Company intends to continue to aggressively expand its
distribution relationships.
LEVERAGE MEDIA AND TECHNICAL EXPERTISE
The Company believes that the Internet represents a technology-driven mass
medium in which it intends to use advertising to subsidize content. As a result,
in-depth knowledge and understanding of publishing, advertising, technology and
media will be critical elements to the success of any Internet company. To this
end, the Company intends to assemble a management team with a depth of
experience in this area. The Company also believes that directly establishing
and maintaining relationships with advertisers is becoming important in
maintaining and capturing advertising market share. Accordingly, the Company
will assemble a highly experienced, direct sales force to promote and generate
advertising sales.
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NICHI MONEY'S SERVICES
Nichi's primary service offering, Nichi Money, is a financial information
and content aggregation service targeted towards individual investors and
offered free to users. In addition to Nichi Money, the Company offers Nichi
Real-Time, a subscription-based service featuring real-time financial
information and targeted to business and professional users. The Company plans
to continue to introduce new services for individual and professional users over
time. The Company's current and future service offerings are described below:
Nichi Money, the Company's primary financial and content aggregation
service, assists users in obtaining relevant information on the Internet.
Nichi Money provides to the user fast and relevant quote and search results
in response to each user's query. Nichi Money's users have access to
initial public offering information, mutual fund and stock data, graphs,
portfolio management tools, a chat forum, stock research and trading
facilities through Wise Choice Discount Brokerage. Nichi Money is offered
free of charge to Internet users. The service was introduced in July 1996.
Nichi Money integrates multiple methods of obtaining information from
its databases. Users are presented with two principal options, the free
service or the real-time version which is only available to subscribers.
The home screen gives the user the opportunity to access eight
different sections from which they can launch specific queries, browse or
access proprietary content.
THE IPO FUNCTION
The IPO Function allows the user to effect query-based searches of initial
public offerings that have been filed with the SEC. To perform a search, a user
types a query in the search box. The user is then presented with a highly
specific response from a search of the entire database. A search can be effected
using simple keywords. For example, a user can search for 'technology.' The
search results will display the ten most recent Initial Public Offerings
('IPO's') in the technology field.
The Company is currently working on its next generation financial
information website, Nichi 97, which the Company plans to release in the second
half of 1998. Nichi 97 will enable the searching of a much greater database of
information at even faster speeds without sacrificing accuracy.
THE FUNDS FUNCTION
The Funds Function allows a user to effect query-based searches for
information on thousands of public mutual funds. In order to receive an answer
to a query, the user has to simply type in the name of the mutual fund or the
symbol of the fund. A Fund Symbol Guide has been provided to help the user in
the search. Also available are mutual fund quotes. A user simply types in the
symbol and he or she is presented with the offer price, Net Asset Value, the
prior day's Net Asset Value, and offer information on the fund. Also included in
the Funds Section is the option to plot a graph on the fund's performance.
THE DATA FUNCTION
The Data Function allows users to access stock quotes, as well as the most
active stocks as it relates to unit volume, dollar volume and percentage
changes. Users are presented with the data screen which allows the user to type
in changes of up to ten stock symbols at a time.
THE GRAPHS FUNCTION
In the Graphs Function, users can look at customized graphs and graphs
which track stock prices for the past 30, 60 or 90 days. The Real-Time users can
speed up the search time by storing graphs of specific stocks in separate files.
THE PORTFOLIO FUNCTION
The Portfolio Function leads the user to the Company's Portfolio Management
Program which allows users to view the unrealized gains and losses of each stock
and mutual fund in their portfolio
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adjusted for any commissions paid to execute the trade. The Portfolio function
allows the user to view and edit prior entries made during the prior 45 days as
well as allowing the user to view pie charts which will show the distribution of
assets according to sector or position held.
Another Nichi Portfolio feature will allow the user to view the
recommendations of various Investment Advisors, Mutual Fund managers and other
investment professionals. The site allows the user to access the thought
patterns underlying the recommendations, the current price of the security and
the target price that the security is expected to reach. The portfolio screens
contains options which allow the user to view the actual text and a graph of
earnings estimates for the recommended stock.
THE PROFILES FUNCTION
The Profiles Function gives the user a description of a selected company's
business. This section also allows the user to link with that company's website
(if available) as well as access its most recent annual and quarterly reports.
THE BULLETIN BOARD
The Bulletin Board allows investors to gain from one another's experience
in the market place by providing a chat room where investment strategies and
other areas of the investment industry can be discussed. Users can search for
topics of interest by typing in the keyword(s). Topics which contain that
keyword will be displayed on the screen. A user has the option to reply
immediately to any comments or questions posted on the board.
THE TRADING FUNCTION
The Trading Function offers a link to the Wise Choice web page, and allows
users to trade stocks online for a fee which is payable to Wise Choice. The cost
of trading through Wise Choice is currently $14.50 for up to the first 5,000
shares traded online or placed over the phone.
THE PUBLIC ACCESS CENTER
The Public Access Center allows users to view the opinions of analysts,
advisors and brokers. Our newsletter, which among other things, will describe
new features on the website and articles on investing, will be featured in the
Public Access Center. The Newsletter is currently free of charge but the
intention is to develop it into an online magazine for which subscribers will be
charged. Other items available in the Public Access Center are press releases,
announcing our new products, terms and conditions of use, and Nichi Mart, where
users can buy financial related literature.
Nichi Money operates with the most popular Web browsers. Although browser
features vary by manufacturer and version, Nichi Money automatically configures
itself to conform to the specific features of each user's browser. Where
available, Nichi Money employs advanced features such as frames, which organize
the screen format into clickable areas to enhance the usability of the service
and the appeal to advertisers.
The Company plans to continue to enhance the attractiveness of its service
to users through additional features and functionality. Nichi Capital is
currently developing several enhancements to Nichi Money, which will allow for
personalization of content and advertising according to user interests. These
enhancements are expected to be released by the second quarter of 1998, and
will allow users to create permanent filters for Internet-based information
such as newswires, stock quotes, Chat room listings and other Internet
resources.
Nichi Real-Time is a subscription-based service targeted primarily to
professional investors featuring financial online data and content. Nichi
Real-Time provides access to multiple, premium content databases in addition to
the standard collections of Web pages, Chat Room discussions, and trading
services more widely available on the Internet. Nichi Real-Time currently costs
$40 a month plus the cost of the applicable Exchange Fees for the data they
would like to have access to. Nichi Real-Time has not been a source of
significant revenues to date for the Company.
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TECHNOLOGY
The Company believes it can differentiate itself by developing innovative
proprietary technology and integrating technology licensed from third parties
where appropriate. The Company's strategy is to develop and license only
technologies that have the flexibility to enable the Company to cost-effectively
adapt and grow with the Internet.
QUOTE ENGINE TECHNOLOGY.
The Company's quote engine seeks to deliver high accuracy, which is
characterized by a high level of precision and recall. Precision and recall are
two criteria by which the effectiveness of a quote engine technology is often
measured. Precision is a measure of how effectively a quote engine calculates
the relevance of data that match the query. Recall is a measure of the
percentage of relevant data in the database which is found during the search.
Together, these two measures of performance tend to be the most important
factors to users in evaluating the accuracy and usefulness of a quote engine.
For example, in a database of 100 symbols with 2 symbols which exactly match the
desired query, the ideal quote engine would retrieve only the two matching
quotes, with the correct bid and ask prices, correct volume, and correct last
sale price, thereby achieving both 100% precision and 100% recall.
In addition, due to the dynamic nature of the Internet, the retrieval of
up-to-date information and stock prices has become another key factor for the
evaluation of financial websites. To bring current information to the user, the
Company's employees will use technology to refresh its entire database,
excluding data from third parties, no less frequently than every four weeks,
while regularly updating with new information and research reports. This enables
Nichi Money to deliver accurate, relevant and up-to-date search results.
Nichi Money's quote/search engine is able to recognize proper nouns and
analyze keyword proximity. A request using the Fund Symbol Guide for 'Fidelity
Magellan' will return that specific fund name and symbol.
ADVERTISING MANAGEMENT
Nichi Money has developed certain proprietary systems for the instantaneous
placement of advertisements with targeted audiences on appropriate Nichi Money
Web pages. Nichi Money's advertising management systems are capable of
presenting real-time advertising that corresponds to a user's inquiry. If
certain key words have been purchased by more than one advertiser, the system
automatically determines which advertisement is displayed based upon the number
of impressions under contract and delivered to date. As part of the Company's
proprietary advertising management system, Nichi Money also maintains a database
that tracks the number of searches of each word queried by Nichi users, and the
number of impressions of each advertisement. This system assists the Company in
estimating the number of expected impressions of specific advertisement options
marketed by the Company or otherwise sought by advertisers.
ADVERTISING SALES
Advertisements appear on Nichi Money's Web page when a user enters the
service, performs a search, browses through the directory or obtains a quote. In
order to increase advertising revenues, the Company seeks to hire an ad
executive who will organize a direct sales force.
SALES FORCE
As of December 31, 1996, the Company had no sales representatives. The
Company believes that an experienced internal sales force will enable it to
better understand and meet advertisers' needs, increase its access to potential
advertisers and establish strong relationships with its advertising clients. The
Company plans to hire its staff by the end of 1997. In Europe, Asia and Latin
America, the Company intends to establish working relationships with
international advertising representation firms. No definitive arrangement with
any international firms have been reached to date.
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ADVERTISING PRODUCTS AND PRICING
The Company will offer advertisers four main advertising options that may
be purchased individually or in packages: general rotation, section pages,
keyword and special placement. These options all contain hypertext links to the
advertiser's home page. To date, no advertising contracts have been signed.
(1) General Rotation:
General rotation advertisements rotate on a random basis through Nichi
Money's search result pages. General rotation advertisements are typically
sold in blocks of one thousand impressions for a four week period.
Currently the base CPM (cost per thousand impressions) is $20 however, the
cost varies depending upon the number of impressions purchased.
(2) Section Pages:
These advertisements allow advertisers to target an audience with a
specific area of interest. Like general rotation advertisements, Section
Page advertisements are sold in blocks of impressions for a four week
period. Because of the greater selectivity of the audience, current CPMs
range from $25 with a rate card CPM of $20 for one million impressions.
(3) Keyword
Keyword advertisements are displayed when a user's search contains a
particular keyword selected by the advertiser. This option offers the
advertiser a highly targeted, self-selected audience. Through its
proprietary advertising management system, the Company tracks every word
and quote that is queried by Nichi Money's users. The minimum current four
week rate card CPM for a keyword is $1,000.
(4) Special Placement
Special placement advertisements are displayed on special feature
pages, such as 'Company Profiles' and can be customized to the needs of the
advertiser. Special placement advertisements include advertisements placed
on our newsletter.
TECHNOLOGICAL ADVANTAGES FOR ADVERTISERS
The online medium offers advertisers the ability to 'narrowcast' their
advertisements. For example, mutual fund companies can display their
advertisements when a user obtains a mutual fund quote. Nichi Money's technology
enables clients to monitor the effectiveness of their advertisements by tracking
click-through rates (the number of viewers who click to an advertiser's site).
Nichi Money advertising sales representatives will work closely with advertisers
to assimilate the data and integrate it into their overall advertising strategy.
MARKETING
The Company's strategy is to build a brand for Nichi Money through online
and trade advertising and promotions. The Company is aggressively marketing its
products in websites such as Yahoo!, Webcrawler and CNN's All-Politics Website.
In addition, the Company cross-promotes with other content providers through
advertising swaps in online media.
COMPETITION
The market for financial websites is highly competitive, with no
substantial barriers to entry, and the Company expects that competition will
continue to intensify. In addition, the market for the Company's products and
services has only recently begun to develop, is rapidly evolving and is
characterized by an increasing number of market entrants with competing products
and services. The Company does not believe this market will support the
increasing number of competitors and their
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products and services. Although the Company believes that the diverse segments
of the Internet market may provide opportunities for more than one supplier of
products and services similar to those of the Company, it is possible that a
single supplier may dominate one or more market segments. Accordingly, any
failure of the Company to provide product and service offerings that achieve
success in the short-term could result in an insurmountable loss in market share
and brand acceptance, and could, therefore, have a material adverse and
long-term effect upon the Company's business, results of operations and
financial condition.
A number of companies offer competitive products and services addressing
certain of the Company's target markets. These companies include Charles Schwab,
Quote.Com, Stockmaster.com, The Microsoft Network and Yahoo! Corporation. In
addition, the Company competes with metasearch services that allow a user to
search the databases of several catalogs and directories simultaneously. The
Company also competes indirectly with database vendors that offer information
search and retrieval capabilities with their core database products. In the
future, the Company may encounter competition from providers of Web browser
software, including Netscape and Microsoft, other online services and other
providers of other financial Internet products and services who elect to
incorporate their own search and retrieval features into their offerings.
Many of the Company's existing and potential competitors have significantly
greater financial, technical and marketing resources than the Company. The
Company may also be adversely affected by competition from licensees of its
products and technology, current and future advertisers, as well as from its
current, future and former content providers. There can be no assurance that the
Company's competitors will not develop Internet products and services that are
superior to those of the Company or that achieve greater market acceptance than
the Company's offerings. In addition, the Company competes with online services
and other Web site operators as well as traditional off-line media such as print
and television for a share of advertisers' total advertising budgets. There can
be no assurance that the Company will be able to compete successfully against
its future competitors or that competition will not have a material adverse
effect on the Company's business, results of operations and financial condition.
INTELLECTUAL PROPERTY AND PROPRIETARY RIGHTS
The Company's success depends significantly upon its proprietary
technology. The Company currently relies on a combination of copyright and
trademark laws, trade secrets, confidentiality procedures and contractual
provisions to protect its proprietary rights. The Company seeks to protect its
software, documentation and other written materials under trade secret, patent
and copyright laws, which afford only limited protection. The Company currently
has no United States patent applications pending. There can be no assurance that
any applications will be approved when made, or that if issued, such patents
will not be challenged, and if such challenges are brought, that such patents
will not be invalidated. There can be no assurance that the Company will develop
proprietary products or technologies that are patentable, that any issued patent
will provide the Company with any competitive advantages or will not be
challenged by third parties, or that the patents of others will not have a
material adverse effect on the Company's ability to do business. The Company
has registered and applied for registration for certain service marks and
trademarks, and will continue to evaluate the registration of additional service
marks and trademarks, as appropriate. The Company will generally enter into
confidentiality agreements with its employees and customers. Litigation may be
necessary to protect the Company's proprietary technology. Any such litigation
may be time-consuming and costly. Despite the Company's efforts to protect its
proprietary rights, unauthorized parties may attempt to copy aspects of the
Company's products or services or to obtain and use information that the Company
regards as proprietary. In addition, the laws of some foreign countries do not
protect proprietary rights to as great an extent as do the laws of the United
States. There can be no assurance that the Company's means of protecting its
proprietary rights will be adequate or that the Company's competitors will not
independently develop similar technology or duplicate the Company's products
or design around patents issued to the Company or other intellectual property
rights of the Company.
There have been substantial amounts of litigation in the computer/Internet
industry regarding intellectual property rights. There can be no assurance that
third parties will not in the future claim
26
infringement by the Company with respect to current or future products,
trademarks or other proprietary rights, or that the Company will not
counterclaim against any such parties in such actions. Any such claims or
counterclaims could be time-consuming, result in costly litigation, cause
product release delays, require the Company to redesign its products or require
the Company to enter into royalty or licensing agreements, any of which could
have a material adverse effect upon the Company's business, operating results
and financial condition. Such royalty or licensing agreements, if required, may
not be available on terms acceptable to the Company or at all.
EMPLOYEES
As of December 31, 1996, the Company had 6 full-time employees. The
Company's future performance depends in significant part upon the continued
service of Olawande Agunloye, the Company's founder, President, Chief Executive
Officer and Chairman of the Board. The Company will provide incentives such as
benefits and stock options (which are typically subject to withdrawal over two
years) to attract and retain qualified employees. The loss of the services of
Mr. Agunloye could have a material adverse effect on the Company's business,
operating results and financial condition. The Company's future success also
depends on its continuing ability to attract and retain highly qualified
technical and management personnel.
FACILITIES/PROPERTY
The Company's principal administrative, sales, marketing, and research and
development facility is located in approximately 1,100 square feet of space in
New York, New York. This facility is leased pursuant to a five year lease
through Sylvan Lawrence. The lease expires in the year 2000. The Company
believes that its existing facilities are adequate for its current needs and
that additional space will be available as needed. There can be no assurance
that a system failure at the Company's principal location would not adversely
affect the performance of the Company's products and services.
27
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The executive officers and directors of the Company, and their ages as of
December 31, 1996, are as follows:
NAME AGE POSITION
- --------------------------------------------------------- --- -----------------------
Olawande A. Agunloye..................................... 24 President and Chairman
of the Board
Abraham Tu............................................... 27 Secretary and Director
Olawande A. Agunloye, founder of the Company, has been a Director of the
Company and Chairman of the Board of Directors since February, 1995. Prior to
February, 1995, Mr. Agunloye served as a registered representative with J.
Gregory & Co. from January 1994 to September 1994. He also served as registered
representative with V.T.R. Capital from September 1994 to December 1994. Mr.
Agunloye served as a consultant for Nigerian-American Consultants. Prior
thereto, Mr. Agunloye attended the International School of Lagos, Nigeria,
University of Ife, Oshun State of Nigeria and Pace University. Mr. Agunloye's
prior positions are set forth as follows:
FIRM NAME PERIOD POSITION HELD
- --------------------------------------------------------- --------------- -------------------------
P.C.M. Securities........................................ 02/95 - 05/95 Supervisor
Northeast Securities..................................... 02/95 - 02/95 Supervisor
V.T.R. Capital........................................... 09/94 - 12/94 Senior Portfolio Manager
J. Gregory & Co. ........................................ 01/94 - 09/94 Senior Portfolio Manager
F.J.C. Ltd. ............................................. 10/93 - 01/94 Manager
University of Ife........................................ 10/89 - 10/93 Full Time Student
International School of Lagos............................ 10/85 - 10/89 Full Time Student
Mr. Abraham Tu has been Secretary and a Director of the Company since
April, 1997. Prior thereto he was employed at the following firms:
FIRM NAME PERIOD POSITION HELD
- --------------------------------------------------------- --------------- -------------------------
Bishop Rosen & Co., New York............................. 11/96 - 4/97 Stockbroker
I.A. Rabinowitz & Co. ................................... 9/94 - 11/96 Stockbroker
J. Gregory & Co. ........................................ 5/94 - 9/94 Stockbroker
Commonwealth Associates.................................. 9/92 - 12/92 Stockbroker Trainee
Mr. Tu received a Bachelor of Business Administration in Finance and
Economics from Bernard M. Baruch College, City University of New York, in 1991.
Both Messrs Tu and Agunloye divide their responsibilities between Nichi and
Wise Choice. Olawande Agunloye spends 50% of his time handling the affairs of
Nichi and approximately 50% with Wise Choice. Mr. Tu spends approximately 25% of
his time with Nichi and 75% with Wise Choice. These percentages may depend upon
the requirement of Wise Choice and its Company.
The Company has two directors, Messrs Agunloye and Tu. Each director holds
office until the next annual meeting of shareholders or until their successors
are duly elected and qualified. Directors of the Company do not receive
compensation for services provided as directors. The Company also does not pay
compensation for committee participation or special assignments of the Board of
Directors. There are no family relationships among any of the directors and
executive officers of the Company.
The Company intends to appoint an Audit Committee which will review and act
on and report to the Board of Directors with respect to various auditing and
accounting matters, including the selection of the Company's auditors, the scope
of the annual audits, fees to be paid to the auditors, the performance of the
Company's auditors and the accounting practices of the Company.
The Company also intends to appoint a Compensation Committee which will
establish salaries, incentives and other forms of compensation for officers and
other future employees of the Company and administer incentive compensation and
benefit plans if implemented.
28
EXECUTIVE COMPENSATION
The following table sets forth all cash compensation paid by the Company
for 1996 to the Company's Chief Executive Officer. Prior to 1996 Mr. Agunloye
was not paid for his services. No executive officer received compensation in
excess of $100,000 during either of the last two fiscal years.
The Company currently has no stock option plan, and no officer has been
paid a bonus for fiscal year 1995.
SALARY OR OTHER
ANNUAL
NAME OF INDIVIDUAL POSITION COMPENSATION
- --------------------------------------------------------- -------- ---------------
Olawande A. Agunloye..................................... CEO $36,693
EMPLOYEE STOCK PURCHASE PLAN
The Company intends to set up an Employee Stock Purchase Plan for its
future employees and to set aside 200,000 shares for this purpose.
EMPLOYMENT CONTRACTS AND CHANGE OF CONTROL ARRANGEMENTS
The Company currently does not have any employment agreements with its
employees. Terms of employment agreements will be determined by a compensation
committee to be formed after the successful completion of its initial public
offering.
CERTAIN TRANSACTIONS AND RELATED TRANSACTIONS
Olawande Agunloye was involved in the founding and organization of the
Company and may be considered a promoter of the Company. Mr. Agunloye received
3,728,067 shares of the Company's Common Stock as his share of the consideration
paid by the Company for its acquisition of the Internet financial services
business of Wise Choice. Mr. Agunloye acquired his shares of Wise Choice on
February 16, 1995, for an aggregate payment of $75,000.
Mr. Agunloye has given shares of Common Stock of the Company effective June
1, 1996 to certain individuals. See 'Recent Sales of Unregistered Securities.'
The Company was formed in New York in April 1996. Effective April 2, 1997,
the Company acquired all of the assets, goodwill and liabilities of the internet
financial services business of Wise Choice Discount Brokerage, Inc. ['Wise
Choice'], in exchange for 3,793,802 shares of Common Stock which were
distributed to the shareholders of Wise Choice. As explained in Note 1 to the
Financial Statements, the financial statements of the Company reflects
historical amounts at which the assets and liabilities are shown and the
historical operations of the transferred business from its inception [February
16, 1995]. Except as the context otherwise requires, the term 'Company' refers
to both Nichi Capital, Ltd. and the acquired business.
The Company believes that all of the transactions set forth above were made
on terms no less favorable to the Company than could have been obtained from
unaffiliated third parties. All future transactions, including loans, between
the Company and its officers, directors, principal shareholders and their
affiliates will be approved by a majority of the Board of Directors, including a
majority of the independent and disinterested outside directors on the Board of
Directors.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock as of December 31, 1996, as adjusted to
reflect the sale of the shares offered hereby, (i) by each person who is known
by the Company to own beneficially more than 5% of the outstanding shares of
Common Stock, (ii) by each director and the Chief Executive Officer of the
Company and (iii) by all directors and executive officers of the Company as a
group. Unless otherwise indicated below,
29
all persons listed below have sole voting and investment power with respect to
their shares of Common Stock, except to the extent authority is shared by
spouses under applicable law.
SHARES BENEFICIALLY
OWNED AFTER OFFERING
SHARES BENEFICIALLY ---------------------------------------
OWNED PRIOR TO PERCENT ASSUMING
OFFERING --------------------------
-------------------- MINIMUM MAXIMUM
BENEFICIAL OWNER SHARES PERCENT SHARES SHARES SOLD SHARES SOLD
- ---------------------------------------------------- --------- ------- --------- ----------- -----------
Olawande A. Agunloye(1)............................. 3,497,389 92.0% 3,497,389 79.5% 62.5%
Abraham Tu(1)....................................... 45,650 1.2 45,650 1.0 .8
All executive officers and directors as a group (2
persons).......................................... 3,543,039 93.2 3,543,039 80.5 63.7
- ------------
(1) Messrs Agunloye's and Tu's business address is 150 Nassau Street, New York,
New York 10038.
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company upon the closing of this
Offering will consist of 15,000,000 shares of Common Stock, one cent par value.
As of July 15, 1997, the Company had issued 3,799,672 shares of Common
Stock. All shares were issued and outstanding held of record by 28 shareholders.
There will be 4,399,672 and 5,599,672 shares of Common Stock outstanding after
giving effect to the sale of the minimum and maximum shares of Common Stock
respectively offered hereby.
The holders of the Common Stock are entitled to one vote per share on all
matters to be voted upon by the shareholders. The holders of Common Stock are
entitled to receive dividends, if any, as may be declared from time to time by
the Board of Directors out of funds legally available thereof. See 'Dividend
Policy.' In the event of the liquidation, dissolution or winding up of the
Company, the holders of Common Stock are entitled to share ratably in all assets
remaining after payment of liabilities. The Common Stock has no preemptive or
conversion rights or other subscription rights. There are no redemption or
sinking fund provisions applicable to the Common Stock. All outstanding shares
of Common Stock are fully paid and non-assessable, and the shares of Common
Stock to be issued upon completion of this Offering will be fully paid and
non-assessable.
LIMITED LIABILITY AND INDEMNIFICATION
As permitted by the New York Business Corporation Law ('BCL'), the
Company's Restated Certificate of Incorporation provides that, to the fullest
extent permitted by the BCL, no director of the Company shall be liable to the
Company or its shareholders for monetary damages for breach of fiduciary duty in
such capacity. Such provision does not eliminate or limit the liability of any
director (i) if a judgment or other final adjudication adverse to such director
establishes that its acts or omissions were in bad faith or involved intentional
misconduct or a knowing violation of the law or that he personally gained in
fact a material profit or other advantage to which he was not legally entitled
or that his acts violated Section 719 of the BCL, or (ii) for any act or
omission prior to the adoption of this provision. As a result of this provision,
the Company and its shareholders may be unable to obtain monetary damages from a
director for breach of his duty of care. Although shareholders may continue to
seek injunctive or other equitable relief for an alleged breach of fiduciary
duty a director, shareholders may not have any effective remedy against the
challenged conduct if equitable remedies are unavailable. In addition, under the
Restated Certificate of Incorporation, the Company has agreed to indemnify its
officers, directors, employees and agents to the fullest extent permitted by the
BCL against actions that may arise against them in such capacities, and to
advance expenses in connection with any such actions.
30
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Common Stock is the Bank of New
York.
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this Offering, there has been no market for the Common Stock of
the Company. Therefore, future sales of substantial amounts of Common Stock in
the public market could adversely affect market prices prevailing from time to
time. Furthermore, since only a limited number of shares will be available for
sale shortly after this Offering because of certain contractual and legal
restrictions on resale (as described below), sales of substantial amounts of
Common Stock of the Company in the public market after the restrictions lapse
could adversely affect the prevailing market price and the ability of the
Company to raise equity capital in the future.
Upon completion of this Offering, the Company will have outstanding an
aggregate of 5,595,302 shares of Common Stock assuming the sale of the maximum
number of shares offered. Of these outstanding shares of Common Stock, the
1,800,000 shares sold in this Offering will be freely tradeable without
restriction or further registration under the Securities Act, unless purchased
by an 'affiliate' of the Company, as that term is defined in Rule 144 under the
Securities Act (an 'Affiliate'). The remaining 3,795,302 shares of Common Stock
existing are 'restricted securities' as that term is defined in Rule 144 under
the Act.
In general, under Rule 144 as currently in effect, subject to the
satisfaction of certain conditions, a person, including an affiliate of the
Company (or persons whose shares are aggregated), who has owned restricted
shares of Common Stock beneficially for at least one year is entitled to sell
within any three month period, a number of shares that does not exceed the
greater of 1% of the total number of outstanding shares of the same class or, if
the Common Stock is quoted on a national quotation system, the average weekly
trading volume during the four calendar weeks preceding the sale. A person who
has not been an affiliate of the Company for at least the three months
immediately preceding the sale and who has beneficially owned shares of Common
Stock for at least two years is entitled to sell such shares under Rule 144
without regard to any of the limitations described above.
PLAN OF DISTRIBUTION
The Company is offering a minimum of 600,000 shares and a maximum of
1,800,000 shares of Common Stock at a purchase price of $5.00 per share.
The proceeds from the sale of shares will be held in an Escrow Account at
Citibank, NA until a minimum of 600,000 shares have been sold. If at least
600,000 shares are not sold by 180 days from the date of this Prospectus, the
proceeds received from investors will be promptly refunded to the investors in
full without interest thereon and or deduction of any kind therefrom. Until the
proceeds from the sale of at least 600,000 shares are deposited in escrow
investors will not be security holders nor able to demand return of their
subscription proceeds.
The Company's common stock will trade on the Niphix System ('System') under
the trading symbol 'Nichi.' Niphix System ('System') is a proprietary electronic
broker-dealer trading system operated by Niphix Investment, Inc., a
broker-dealer registered with the Commission under Section 15(b) of the Exchange
Act and a member of NASD. Niphix is an introducing broker-dealer, clearing its
transaction with Computer Clearing Services, Inc., ('the Clearing Broker') a
clearing broker who is a participant with National Securities Clearing
Corporation.
The system is designed to facilitate the offering and subsequent trading
among investors of the equity and fixed income securities of small businesses.
The securities offered and sold on the System will be exempt from registration
pursuant to Regulation A under the Securities Act or registered on Form SB-1 or
SB-2 of the Securities Act available to small business issuers. The system is an
electronic dial-up computer system and serves an electronic medium for the
furnishing by the issuers of disclosure and related documents. Issuers offering
circulars or prospectuses under Regulation A exemption or pursuant to a
registration on SB-1 or SB-2, respectively, are available to investors on the
System.
31
Investors trading on the System are customers of Niphix and their accounts
are carried by the Clearing Broker. All investors deposit sufficient funds into
their account to cover every trade that they propose to make on the System.
All purchasers' checks should be made payable to 'Nichi Capital,
Ltd. -- Escrow Account.' Certificates evidencing Common Stock will be issued to
purchasers only if the proceeds from the sale of at least 600,000 shares are
actually deposited in escrow and released to the Company pursuant to the Escrow
Agreement. Until such time as the proceeds are actually received by the Company
and the certificates delivered to the purchasers thereof, such purchasers will
be deemed subscribers and not security holders of the Company. During the
selling period, purchasers will have no right to demand return of their
subscription proceeds. If the minimum proceeds are successfully obtained, the
Offering will be continued until completed, until the maximum period of the
Offering has elapsed or until the Offering is terminated by the Company,
whichever occurs first.
LEGAL MATTERS
The validity of the issuance of the shares of Common Stock offered hereby
will be passed upon for the firm of Loselle Greenawalt Kaplan & Blair and Leon
B. Lipkin, Esq.
EXPERTS
The audited financial statements of Nichi Capital, Ltd. at December 31,
1995 and 1996, appearing in this Prospectus and Registration Statement have been
included herein in reliance upon the report of Weinick, Sanders & Co., LLP,
independent certified public accountants, whose report thereon appears elsewhere
in this prospectus and upon the authority of said firm as experts in Accounting
and Auditing.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission a
Registration Statement on Form SB-2 under the Securities Act with respect to the
Common Stock offered hereby. This Prospectus does not contain all of the
information set forth in the Registration Statement and the exhibits and
schedules to the Registration Statement. For further information with respect to
the Company and such Common Stock offered hereby, reference is made to the
Registration Statement and the exhibits and schedules filed as a part of the
Registration Statement. Statements contained in this Prospectus concerning the
contents of any contract or any other document referred to are not necessarily
complete; reference is made in each instance to the copy of such contract or
document filed as an exhibit to the Registration Statement. Each such statement
is qualified in all respects by such reference to such exhibit. The Registration
Statement, including exhibits and schedules thereto, may be inspected without
charge at the Securities and Exchange Commission public reference facilities at
450 Fifth Street, N.W. Washington, D.C. 20549. Copies of such material may also
be obtained upon payment of certain fees prescribed by the Commission.
Electronic registration statements made through the Electronic Data Gathering
Analysis and Retrieval system are publicly available through the Commission's
Web site (http://www.sec.gov).
32
NICHI CAPITAL, LTD.
(A DEVELOPMENT STAGE ENTERPRISE)
JUNE 30, 1997
INDEX
PAGE
-----------
Independent Accountants' Report........................................................................ F-2
Balance Sheets as at June 30, 1997 (Unaudited), December 31, 1996 and 1995............................. F-3
Statement of Operations
For the Six Months Ended June 30, 1997 and 1996 (Unaudited); For the Year Ended December 31, 1996;
For the Period from February 16, 1995 (Inception) to December 31, 1995; Cumulative For the Period
February 16, 1995 (Inception) to June 30, 1997 (Unaudited)....................................... F-4
Statement of Stockholders' Equity (Capital Deficiency)
For the Six Months Ended June 30, 1997 and 1996 (Unaudited); For the Year Ended December 31, 1996;
For the Period from February 16, 1995 (Inception) to December 31, 1995........................... F-5
Statement of Cash Flows
For the Six Months Ended June 30, 1997 (Unaudited); For the Year Ended December 31, 1996; For the
Period from February 16, 1995 (Inception) to December 31, 1995; Cumulative For the Period
February 16, 1995 (Inception) to June 30, 1997 (Unaudited)....................................... F-6
Notes to Financial Statements.......................................................................... F-7 - F-9
F-1
INDEPENDENT ACCOUNTANTS' REPORT
To the Board of Directors and Stockholders
NICHI CAPITAL, LTD.
We have audited the accompanying balance sheets of Nichi Capital, Ltd. (A
Development Stage Enterprise) as at December 31, 1996 and December 31, 1995, and
the related statements of operations, stockholders' deficit and cash flows for
the year ended December 31, 1996, for the period from February 16, 1995
(Inception) to December 31, 1995. 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 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 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 Nichi Capital, Ltd., as at
December 31, 1996 and December 31, 1995 and the results of its operations and
its cash flows for the year ended December 31, 1996 and for the period from
February 16, 1995 (Inception) to December 31, 1996 in conformity with generally
accepted accounting principles.
As discussed in Note 1, the accompanying financial statements have been
prepared assuming that the Company will continue as a going concern. At December
31, 1996, the Company has a working capital deficiency of $158,925 and a
stockholders' deficiency of $93,050. In addition, the Company has incurred
losses from inception to December 31, 1996. These conditions raise substantial
doubt about its ability to continue as a going concern. These financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
WEINICK, SANDERS & CO. LLP
New York, N.Y.
March 21, 1997
(Except for Note 1 as to which the
date is April 2, 1997, Note 5 as to
which the date is August 4, 1997,
and Note 6 for which the dates are
July 25, 1997 and August 11, 1997)
F-2
NICHI CAPITAL, LTD.
(A DEVELOPMENT STAGE ENTERPRISE)
BALANCE SHEETS
DECEMBER 31,
---------------------
1996 1995
JUNE 30, --------- --------
-----------
1997
-----------
(UNAUDITED)
ASSETS
Current assets:
Cash.................................................................. $ 74,490 $ -- $ 2,887
Prepaid expenses...................................................... 671 900 900
----------- --------- --------
Total current assets............................................. 75,161 900 3,787
----------- --------- --------
Property and equipment -- net of accumulated depreciation (Note 3)......... 59,824 66,327 36,091
----------- --------- --------
Other assets:
Deferred offering costs............................................... 16,448 -- --
Organization costs -- net of accumulated amortization of $4,499,
$3,535 and $1,607, respectively (Note 3)............................ 5,141 6,105 8,033
----------- --------- --------
Total other assets............................................... 21,589 6,105 8,033
----------- --------- --------
$ 156,574 $ 73,332 $ 47,911
----------- --------- --------
----------- --------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
Current liabilities:
Cash overdraft........................................................ $ -- $ 27 $ --
Accounts payable...................................................... 142,723 144,223 13,146
Notes payable -- stockholders (Notes 5)............................... 103,300 -- --
Capital lease obligations -- current portion (Note 7)................. 8,300 7,627 7,210
Accrued expenses and other current liabilities........................ 948 7,948 1,751
----------- --------- --------
Total current liabilities........................................ 255,271 159,825 22,107
----------- --------- --------
Capital lease obligations -- less current maturities (Notes 7)............. 5,196 6,557 11,764
----------- --------- --------
Commitment (Note 6)........................................................ -- -- --
Stockholders' equity (deficiency) (Notes 1 and 6):
Common stock -- $.01 par value
Authorized -- 15,000,000 shares
Issued and outstanding shares -- 3,795,302, 3,793,802 and
3,765,728 shares, respectively................................. 37,953 37,938 37,658
Additional paid-in capital....................................... 244,903 203,946 70,342
Deficit accumulated in the development stage..................... (386,749) (328,934) (93,960)
Stock subscriptions receivable................................... -- (6,000) --
----------- --------- --------
Total stockholders' equity (deficiency)..................... (103,893) (93,050) 14,040
----------- --------- --------
$ 156,574 $ 73,332 $ 47,911
----------- --------- --------
----------- --------- --------
See notes to financial statements.
F-3
NICHI CAPITAL, LTD.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF OPERATIONS
CUMULATIVE
FOR THE PERIOD FOR THE PERIOD
FEBRUARY 16, FEBRUARY 16,
FOR THE SIX MONTHS FOR THE 1995 1995
ENDED JUNE 30, YEAR ENDED (INCEPTION) TO (INCEPTION) TO
--------------------- DECEMBER 31, DECEMBER 31, JUNE 30,
1997 1996 1996 1995 1997
-------- -------- ------------ -------------- --------------
(UNAUDITED) (UNAUDITED)
Revenue................................. $ -- $ -- $ 9,101 $ 4,542 $ 13,643
-------- -------- ------------ -------------- --------------
Costs and expenses:
Consulting --
officer/stockholder.............. 26,894 2,500 36,693 -- 63,587
Advertising (Note 1)............... 4,000 30,897 60,479 1,448 65,927
Depreciation and amortization...... 7,467 7,781 13,936 4,623 26,026
Other general and administrative
expenses (Note 4)................ 19,454 40,502 132,967 92,431 244,852
-------- -------- ------------ -------------- --------------
Total costs and expenses...... 57,815 81,680 244,075 98,502 400,392
-------- -------- ------------ -------------- --------------
Net loss................................ $(57,815) $(81,680) $ (234,974) $(93,960) $ (386,749)
-------- -------- ------------ -------------- --------------
-------- -------- ------------ -------------- --------------
Net loss per common share............... $(0.02) $(0.02) $(0.06) $(0.03)
-------- -------- ------------ --------------
-------- -------- ------------ --------------
Weighted average number of common shares
outstanding (Note 5).................. 3,795,152 3,770,379 3,781,978 3,748,322
--------- --------- --------- ---------
--------- --------- --------- ---------
See notes to financial statements.
F-4
NICHI CAPITAL, LTD.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENT OF STOCKHOLDERS' EQUITY (CAPITAL DEFICIENCY)
FOR THE PERIOD FEBRUARY 16, 1995 (INCEPTION) TO JUNE 30, 1997
COMMON STOCK DEFICIT TOTAL
------------------- ACCUMULATED STOCKHOLDERS'
NUMBER ADDITIONAL IN THE STOCK EQUITY
OF PAID-IN DEVELOPMENT SUBSCRIPTION (CAPITAL
SHARES AMOUNT CAPITAL STAGE RECEIVABLE DEFICIENCY)
--------- ------- ---------- ----------- ------------ -------------
Balance at February 16, 1995 (inception)... -- $ -- $ -- $ -- $-- $ --
Common stock issued for cash............... 3,765,728 37,658 70,342 -- -- 108,000
Net loss for the period February 16, 1995
(inception) to December 31, 1995......... -- -- -- (93,960) -- (93,960)
--------- ------- ---------- ----------- ------------ -------------
Balance at December 31, 1995............... 3,765,728 37,658 70,342 (93,960) -- 14,040
Common stock isued for cash................ 27,774 277 127,607 -- -- 127,884
Common stock subscribed.................... 300 3 5,997 -- (6,000)
Net loss for the year ended December 31,
1996..................................... -- -- -- (234,974) -- (234,974)
--------- ------- ---------- ----------- ------------ -------------
Balance at December 31, 1996............... 3,793,802 37,938 203,946 (328,934) (6,000) (93,050)
Cash received on stock subscription
receivable............................... -- -- -- -- 6,000 6,000
Common stock issued for cash............... 1,500 15 29,985 -- -- 30,000
Net loss for the six months ended June 30,
1997..................................... -- -- -- (57,815) -- (57,815)
Capital contribution made by stockholder... -- -- 10,972 -- -- 10,972
--------- ------- ---------- ----------- ------------ -------------
Balance at June 30, 1997 (Unaudited)....... 3,795,302 $37,953 $244,903 ($386,749) $-- ($103,893)
--------- ------- ---------- ----------- ------------ -------------
--------- ------- ---------- ----------- ------------ -------------
See notes to financial statements.
F-5
NICHI CAPITAL, LTD.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF CASH FLOWS
FOR THE
CUMULATIVE
FOR THE PERIOD PERIOD
FEBRUARY 16 FEBRUARY 16
FOR THE SIX FOR THE 1995 1995
MONTHS ENDED YEAR ENDED (INCEPTION) TO (INCEPTION) TO
JUNE 30, DECEMBER 31, DECEMBER 31, JUNE 30, 1997
1997 1996 1995 1997
------------ ------------ -------------- --------------
(UNAUDITED) UNAUDITED
Cash flows from operating activities:
Net loss...................................... $ (57,815) $ (234,974) $ (93,960) $ (386,749)
------------ ------------ -------------- --------------
Adjustments to reconcile net loss to net cash used
in operating activities:
Depreciation and amortization................. 7,467 13,936 4,623 26,026
Increase (decrease) in cash flows as a result of
changes in asset and liability account balances:
Prepaid expenses.............................. 229 -- (900) (671)
Accounts payable.............................. (1,500) 131,077 13,146 142,723
Accrued expenses and other current
liabilities................................. (7,000) 6,197 1,751 948
------------ ------------ -------------- --------------
Total adjustments........................ (804) 151,210 18,620 169,026
------------ ------------ -------------- --------------
Net cash used in operating activities.............. (58,619) (83,764) (75,340) (217,723)
------------ ------------ -------------- --------------
Cash flows from investing activities:
Purchase of property and equipment............ -- (42,244) (39,107) (81,351)
Organization costs............................ -- -- (9,640) (9,640)
------------ ------------ -------------- --------------
Net cash used in investing activities.............. -- (42,244) (48,747) (90,991)
------------ ------------ -------------- --------------
Cash flows from financing activities:
Cash overdraft................................ (27) 27 -- --
Proceeds from sale of common stock............ 30,000 127,884 108,000 265,884
Increase (decrease) in capital leases......... (688) (4,790) 18,974 13,496
Deferred offering costs....................... (16,448) -- -- (16,448)
Proceeds from notes payable to stockholders... 103,300 -- -- 103,300
Payment of stock subscriptions receivable..... 6,000 -- -- 6,000
Capital contributions by stockholder.......... 10,972 -- -- 10,972
------------ ------------ -------------- --------------
Net cash provided by financing activities.......... 133,109 123,121 126,974 383,204
------------ ------------ -------------- --------------
Net increase (decrease) in cash.................... 74,490 (2,887) 2,887 74,490
Cash at beginning of period........................ -- 2,887 -- --
------------ ------------ -------------- --------------
Cash (overdraft) at end of period.................. $ 74,490 $ -- $ 2,887 $ 74,490
------------ ------------ -------------- --------------
------------ ------------ -------------- --------------
Supplemental Schedule of Non-cash investing and
financing activities:
Issuance of common stock for subscription
receivable.................................. $ -- $ 6,000 $ -- $ 6,000
------------ ------------ -------------- --------------
------------ ------------ -------------- --------------
See notes to financial statements.
F-6
NICHI CAPITAL, LTD.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND THE SIX MONTHS ENDED JUNE 30, 1997 AND 1996
(INFORMATION RELATING TO THE SIX MONTHS ENDED JUNE 30, 1997 AND 1996 IS
UNAUDITED)
NOTE 1. BASIS OF PRESENTATION, DEVELOPMENT STAGE ENTERPRISE.
(A) BASIS OF PRESENTATION:
Nichi Capital, Ltd. (the 'Company') began business on February 16, 1995 as
a division of Wise Choice Discount Brokerage, Inc. ('Wise Choice') a company
related through common ownership and control. The Company was later incorporated
on April 22, 1996 under the laws of the State of New York to develop and provide
branded comprehensive web-based financial services which is designed to help
users access and personalize the resources of the Internet.
Effective April 22, 1996, the Company acquired the assets, goodwill and
liabilities of Wise Choice in exchange for 3,793,802 shares of the Company's
common stock. On April 2, 1997 such common stock was distributed to the
stockholders of Wise Choice. The accompanying financial statements of the
Company reflect historical cost basis in assets and liabilities and the
historical operations of the transferred business retroactive to February 16,
1995, its inception. Except as the context otherwise requires the term 'Company'
refers both to Nichi Capital, Ltd. and the acquired business.
(B) DEVELOPMENT STAGE ENTERPRISE:
From inception through June 30, 1997, the Company's operations were limited
and consisted primarily of start-up activities, including recruiting personnel,
raising capital, research and development, and the negotiation and execution of
agreements with various exchanges for stock quote information. All costs were
expensed as incurred during the development stage.
As a result of the start-up nature of its business, the Company has and can
be expected in the future to sustain substantial operating expenses without
generating sufficient revenues to cover operating costs. That matter raises
substantial doubt as to the Company's ability to continue as a going concern.
Management believes that sufficient revenues can be achieved through the
implementation of its plan, the objective of which is to establish itself as a
dominant, branded financial services provider on the Internet in order to reach
the greatest audience. The Company seeks to build a high volume of traffic on
its services to provide a preferred platform for content providers and
advertisers to reach their target audiences.
To achieve its objective, the Company intends to (i) enhance the
attractiveness of its service to users through the addition of new features and
functionality; (ii) develop and license innovative technologies which can
differentiate its service and scale with the growth of the Internet; (iii) offer
advertisers high impact, innovative advertising products; (iv) distribute its
service widely through software companies, access providers and others; and (v)
form relationships with leading third party content providers.
The implementation of this plan is, according to management, dependent on,
among other things, a successful proposed public offering of its common stock.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern.
(C) INTERIM FINANCIAL STATEMENTS:
The balance sheet as of June 30, 1997 and the related statements of
operations, stockholders' equity and cash flows for the six month period ended
June 30, 1997 and 1996, are unaudited. However, in the opinion of management
these interim financial statements include all adjustments (consisting of only
normal recurring adjustments) which are necessary for the fair presentation of
the results for the interim periods presented. The results of operations for the
unaudited six month periods ended June 30, 1997
F-7
NICHI CAPITAL, LTD.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
DECEMBER 31, 1996 AND THE SIX MONTHS ENDED JUNE 30, 1997 AND 1996
(INFORMATION RELATING TO THE SIX MONTHS ENDED JUNE 30, 1997 AND 1996 IS
UNAUDITED)
and 1996 are not necessarily indicative of the results which may be expected for
the entire 1997 and 1996 fiscal years.
(D) ADVERTISING:
The Company expenses advertising costs as incurred.
(E) INCOME TAXES:
At December 31, 1996, the Company has a deferred tax asset arising
primarily from a net operating loss carry-forward of approximately $55,000
available to reduce future taxable income, which expires through the year 2011.
Since management estimates that it is not likely that the Company will be able
to utilize this asset in the future, it has been fully reserved.
NOTE 2. OFFERING PLAN.
The Company plans to offer for sale to the public a minimum of 600,000
shares and a maximum of 1,800,000 shares of its common stock at $5 per share.
NOTE 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES.
(A) USES 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. Accordingly,
actual results could differ from those estimates.
(B) PROPERTY AND EQUIPMENT:
The cost of property and equipment is depreciated over the estimated useful
lives of the related assets using the straight-line method. Upon sale or
retirement, the related costs and accumulated depreciation are eliminated from
the accounts and gains or losses are reflected in income. Repairs and
maintenance expenditures which do not extend asset lives are charged to income
as incurred.
The major classifications of property and equipment at December 31, 1996
and May 31, 1997 (unaudited) are as follows:
DECEMBER 31,
1996 USEFUL LIVES
JUNE 30, ------------ ------------
1997
-----------
(UNAUDITED)
Furniture and fixtures....................................... $ 1,061 $ 1,061 5 years
Computers.................................................... 66,955 66,955 5 years
Telephone system............................................. 13,335 13,335 5 years
----------- ------------ ------------
81,351 81,351
Less: Accumulated depreciation............................... 21,527 15,024
----------- ------------ ------------
$59,824 $ 66,327
----------- ------------ ------------
----------- ------------ ------------
NOTE 4. RELATED PARTY TRANSACTIONS.
The Company sublet a portion of its operating facility to Wise Choice, on a
month to month basis. Sublease rental income of $4,200 and $1,050 is included in
other general and administrative expenses in
F-8
NICHI CAPITAL, LTD.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
DECEMBER 31, 1996 AND THE SIX MONTHS ENDED JUNE 30, 1997 AND 1996
(INFORMATION RELATING TO THE SIX MONTHS ENDED JUNE 30, 1997 AND 1996 IS
UNAUDITED)
the accompanying statement of operations for the year ended December 31, 1996
and the six months ended June 30, 1997, respectively.
NOTE 5. BRIDGE FINANCING.
During the six months ended June 30, 1997 (9) nine stockholders loaned the
Company an aggregate of $103,300. Such loans bear interest at 10% per annum and
are payable on the earlier of (i) ninety days from the loans inception or (ii) a
successful offering of the Company's common stock to the public. Under the terms
of the agreement, the noteholders have an option to convert the debt into stock
at the offering price upon the effective date of an initial public offering.
NOTE 6. STOCKHOLDERS' EQUITY.
(A) CAPITAL STOCK:
The Board of Directors of the Company approved stock splits of 3 shares for
each share outstanding on February 16, 1996, 3 shares for each 2 shares
outstanding on October 31, 1996 and 1 share for each 2 shares on August 11,
1997. The accompanying financial statements retroactively reflect these two
stock splits as if they had occurred at the inception of the Company.
On February 16, 1995, the Company issued 3,732,945 shares of its $.01 per
value Common Shares (the 'Common Shares') to Olawande Agunloye, its President
and founding stockholder for $75,000 in cash.
During 1995, the Company sold 32,783 Common Shares to fourteen (14)
investors for cash consideration aggregating $33,000.
During 1996, the Company sold 27,774 Common Shares to twenty (20) investors
for cash consideration aggregating $127,884.
During December 1996, three (3) investors subscribed for 300 Common Shares
at a price of $20 per share. Such shares were paid for in February 1997.
During May 1997, the Company sold 1,500 common shares to two (2) investors
for cash consideration aggregating $30,000.
On July 25, 1997, the Company sold 3,620 shares of its common stock to an
officer/director and 750 shares to his brother for aggregate cash consideration
aggregating $43,700.
(B) CAPITAL CONTRIBUTION:
During the six months ended June 30, 1997, the Company's majority
stockholder contributed $10,972 to the Company as additional paid-in capital.
F-9
__________________________________ __________________________________
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS OFFERING,
OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING TO SELL OR A
SOLICITATION OF AN OFFER TO BUY SUCH SECURITIES IN ANY JURISDICTION IN WHICH IT
IS UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE ANY
IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY DATE
SUBSEQUENT TO THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
PAGE
----
Prospectus Summary................................ 2
Risk Factors...................................... 5
Use of Proceeds...................................
Dividend Policy................................... 11
Capitalization.................................... 12
Dilution.......................................... 13
Selected Financial Data........................... 14
Management's Discussion and Analysis of Financial
Condition and Results of Operations............. 15
Business Strategy................................. 20
Management........................................ 28
Principal Shareholders............................
Certain Transaction and Related Transactions...... 29
Description of Capital Stock...................... 30
Shares Eligible For Future Sale................... 31
Plan of Distribution.............................. 31
Legal Matters..................................... 32
Experts........................................... 32
Additional Information............................ 32
Index to Financial Statements..................... F-1
------------------------
UNTIL , 1997 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS),
ALL DEALERS EFFECTING TRANSACTIONS IN THE SHARES OF COMMON STOCK, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
__________________________________ __________________________________
__________________________________ __________________________________
1,800,000 SHARES
NICHI CAPITAL LTD.
COMMON STOCK
----------------------
PROSPECTUS
----------------------
, 1997
__________________________________ __________________________________
COMMON STOCK
PROSPECTUS
PART II
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company has adopted provisions in its Restated Articles of
Incorporation that limit the liability of directors in certain instances. As
permitted by the New York General Corporation Law, directors will not be liable
to the Company for monetary damages arising from a breach of their fiduciary
duty as directors in certain circumstances. Such limitation does not affect
liability for any breach of a director's duty to the Company or its shareholders
(i) with respect to approval by the director of any transaction from which he
derives an improper personal benefit, (ii) with respect to acts or omissions
involving an absence of good faith, that he believes to be contrary to the best
interests of the Company or its shareholders, that involve intentional
misconduct or a knowing and culpable violation of law, that constitute an
unexcused pattern of inattention that amounts to an abdication of his duty to
the Company or its shareholders, or that show a reckless disregard for his duty
to the Company or its shareholders in circumstances in which he was, or should
have been, aware, in the ordinary course of performing his duties, of a risk of
serious injury to the Company or its shareholders, or (iii) based on
transactions between the Company and its directors or another corporation with
interrelated directors or on improper distributions, loans or guarantees under
applicable sections of the New York General Corporation Law. Such limitation of
liability also does not affect the availability of equitable remedies such as
injunctive relief or rescission, although in certain circumstances equitable
relief may not be available as a practical matter. The limitation may relieve
the directors of monetary liability to the Company for grossly negligent
conduct, including conduct in situations involving attempted takeovers of the
Company. No claim or litigation is currently pending against the Company's
directors that would be affected by the limitation of liability.
The Company's Restated Articles of Incorporation and Bylaws provide that
the Company shall indemnify its directors and may indemnify its officers to the
full extent permitted by New York law. The Company has entered into separate
indemnification agreements with its directors and officers, which may require
the Company, among other things, to indemnify them against certain liabilities
that may arise by reason of their status or service as directors or officers
(other than liabilities arising from willful misconduct of a culpable nature),
and to advance their expenses incurred as a result of any proceeding against
them as to which they could be indemnified. To the extent the Company may be
required to make substantial payments under the indemnification agreements that
are not covered by insurance, the Company's available cash and shareholder's
equity would be adversely affected.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by the Company in connection
with the sale of Common Stock being registered. All amounts are estimates except
the SEC registration fee.
SEC Registration fee....................................................... $2,727
Printing and engraving..................................................... $
Legal fees and expenses of the Company..................................... $
Accounting fees and expenses............................................... $
Blue sky fees and expenses................................................. $
Miscellaneous.............................................................. $
------
Total................................................................. $
------
- ------------
* To be completed by amendment
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
Effective April 22, 1996, the Company acquired certain of the assets,
goodwill and liabilities by Wise Choice from Olawande Agunloye, the Company's
Chief Executive Officer in exchange for 3,795,302 shares of the Company's Common
Stock.
II-1
Effective July 27, 1997, 3,799,672 shares of Common Stock were sold by the
Company or given without consideration by Olawande Agunloye to the following:
SHARES RECEIVED
FROM
SHARES PURCHASED OLAWANDE AGUNLOYE TOTAL OWNED
--------------------- ------------------ ---------------------
SHAREHOLDER NAME # AMOUNT # AMOUNT # AMOUNT
- ----------------------------------------- --------- -------- -------- ------ --------- --------
Jokotade Agunloye........................ 0 $ 0 900 $0 900 $ 0
Olawande Agunloye........................ 3,758,528 86,012 (261,139) 0 3,497,389 86,012
George & Angela Becharas................. 450 2,000 1,350 0 1,800 2,000
Joe Bellacomo............................ 562 2,500 1,687 0 2,249 2,500
Adrienne Blue............................ 450 2,000 1,350 0 1,800 2,000
Robert Boschert.......................... 225 1,000 675 0 900 1,000
Raymond Brubaker......................... 2,250 10,000 6,750 0 9,000 10,000
Dana Bruno............................... 6,300 28,000 30,150 0 36,450 28,000
Marie Cappiello.......................... 1,350 6,000 4,050 0 5,400 6,000
Carl & Ethel Carlzen..................... 4,800 26,000 18,600 0 23,400 26,000
Theobaldo Delorenzo...................... 1,175 6,000 4,225 0 5,400 6,000
Edwin Der................................ 2,250 10,000 6,750 0 9,000 10,000
Aristeshoma M. Dodoh..................... 0 0 20,430 0 20,430 0
Daniel Dragonetti........................ 1,800 8,000 5,400 0 7,200 8,000
Ernest Focht............................. 4,600 22,000 15,200 0 19,800 22,000
James Foxhall............................ 450 2,000 1,350 0 1,800 2,000
J.P.H. Freeman........................... 225 1,000 675 0 900 1,000
Tenny Hassan............................. 0 0 68,500 0 68,500 0
Boiajl Hassan............................ 0 0 9,000 0 9,000 0
Stuart Lucas............................. 747 4,444 3,253 0 4,000 4,444
Norman Roth.............................. 653 2,900 1,956 0 2,609 2,900
Joan-Ann Sam............................. 225 1,000 675 0 900 1,000
Joseph & Maxine Stephens................. 1,125 5,000 3,375 0 4,500 5,000
Willie Taylor............................ 1,125 5,000 3,375 0 4,500 5,000
Delbert Torno............................ 1,250 7,500 5,500 0 6,750 7,500
Abraham Tu............................... 7,333 70,200 38,316 0 45,649 70,200
Anthony Tu............................... 1,125 15,000 5,625 0 6,750 15,000
Kim Weeks................................ 337 1,500 1,011 0 1,348 1,500
Sabrina Williams......................... 337 1,500 1,011 0 1,348 1,500
--
--------- -------- -------- --------- --------
3,799,672 $326,556 0 $0 3,799,672 $326,556
--------- -------- -------- -- --------- --------
--------- -------- -------- -- --------- --------
II-2
During 1997 the Company issued promissory notes in the aggregate principal
amount of $220,300 to the following individuals:
DATE NOTE HOLDERS AMOUNT
- --------- ---------------------------------------------------------------------- --------
06/24/97 Steven Alterman(*).................................................... $ 25,000
07/02/97 Hardsoft Solutions(*)................................................. 25,000
06/25/97 Leon Messer(*)........................................................ 50,000
07/02/97 Roy Peterson(*)....................................................... 25,000
07/15/97 Dennis Walker(*)...................................................... 2,000
07/11/97 Joel Celestion(*)..................................................... 10,000
07/14/97 Thomas Connelly(*).................................................... 5,000
07/23/97 Eileen Carvilli/Ariea Higmann(*)...................................... 5,000
07/28/97 Thomas Green(*)....................................................... 20,000
08/04/97 Antonio Afonso(*)..................................................... 12,500
08/04/97 Paul Ragosta(*)....................................................... 12,500
04/16/97 Carl Cartzen.......................................................... 6,000
04/14/97 Theobaldo DeLofenzo................................................... 2,000
04/01/97 Edwin Des............................................................. 6,000
05/28/97 Josephine & Maxine Stephens........................................... 6,000
04/14/97 Daniel Dragonetti..................................................... 1,000
04/21/97 Ernest Focht.......................................................... 6,000
06/30/97 Abraham Tu............................................................ 1,300
--------
$220,300
--------
--------
- ------------
* These individuals were also offered the option to convert their debt into
shares of Common Stock of the Company at the initial offering price of this
Offering.
The issuances of the securities were deemed to be exempt from registration
under the Act in reliance on Section 4(2) of the Act as transactions by an
issuer not involving any public offering. In addition, the recipients of
securities in each such transaction represented their intentions to acquire the
securities for investment only and not with a view to or for sale in connection
with any distribution thereof and appropriate legends were affixed to the share
certificates issued in such transactions. All recipients had adequate access,
through their relationships with the Company, to information about the Company.
ITEM 27. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
EXHIBIT NO. DESCRIPTION
- ----------- ----------------------------------------------------------------------------------------------------------
1.1 -- Escrow agreement between Citibank, NA and the Company dated August 22, 1997.
3.1* -- Certificate of Incorporation of Registrant filed in the Department of State of New York on April 22,
1996; Certificate of Amendment of the Certificate of Incorporation of Registrant filed in the Department
of State of New York on May 16, 1996
3.1 -- Restated Articles of Incorporation of the Registrant filed with the Department of State of New York on
October 2, 1997
3.2* -- Bylaws of the Registrant
5.1 -- Opinion and consent of Loselle Greenawalt Kaplan & Blair and Leon B. Lipkin, Esq.
10.1* -- Asset Transfer Agreement (Reorganization Agreement) dated as of April 2, 1997 between the Company and
Wise Choice Discount Brokerage, Inc.
10.2 -- Lease Agreement relating to premises at 150 Nassau Street, New York dated February 8, 1995 and
Modification thereto dated January, 1997 between the Company and Lancet 150 Nassau LP
10.3** -- Bond Quotation Dissemination Service Vendor Agreement between The Nasdaq Stock Market, Inc. and the
Company.
10.4** -- NQDS Information Vendor agreement between The Nasdaq Stock Market, Inc and the Company.
10.5** -- The Nasdaq Stock Market, Inc. Vendor Agreement for level 1 Service and Last Sale Service, between The
Nasdaq Stock Market, Inc. and the Company.
II-3
EXHIBIT NO. DESCRIPTION
- ----------- ----------------------------------------------------------------------------------------------------------
10.6** -- Agreement made as of the 15th day of April 1996, between the Company and the New York Stock Exchange,
Inc.
10.7* -- Agreement dated August 1, 1996, between the Company and Wise Choice Discount Brokerage, Inc.
10.8** -- Form of Transfer Agency agreement between the Bank of New York and the Company
10.9 -- Issuer Agreement between Niphix Investment, Inc., and the Company dated August 30, 1997
23.1 -- Consent of Weinick, Sanders & Co., LLP
23.2 -- Consent of Loselle Greenawalt Kaplan & Blair and Leon B. Lipkin, Esq. (included in Exhibit 5.1)
- ------------
* Previously filed.
** To be supplied by amendment.
ITEM 28. UNDERTAKINGS
The Company hereby undertakes to provide to the shareholders certificates
in such denominations and registered in such names as required by the Escrow
Agent to permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the Company
pursuant to the New York Corporation Law, the Articles of Incorporation or the
Bylaws of the Company, or otherwise, the Company has been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act, and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Company of expenses incurred or paid
by a director, officer, or controlling person of the Company in the successful
defense of any action, suit or proceeding) is asserted by such director, officer
or controlling person in connection with the securities being registered
hereunder, the Company will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question of whether such indemnification by it is against
public policy as expressed in the Securities Act and will be governed by the
final adjudication of such issue.
The Company hereby undertakes that: (1) For purposes of determining any
liability under the Securities Act, the information omitted from the form of
Prospectus filed as part of this Registration Statement in reliance upon Rule
430A and contained in a form of Prospectus filed by the Company pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part
of this Registration Statement as of the time it is declared effective.
(2) For the purpose of determining any liability under the Securities Act,
each post-effective amendment that contains a form of Prospectus shall be deemed
to be a new Registration Statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
II-4
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Amendment No. 1 to its Registration Statement to
be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of New York, State of New York, on this 2nd day of October, 1997.
NICHI CAPITAL, LTD.
By: /s/ OLAWANDE A. AGUNLOYE
..................................
OLAWANDE A. AGUNLOYE, PRESIDENT
In accordance with the requirements of the Securities Act of 1933, as
amended, this Amendment No. 1 to the Registration Statement has been signed by
the following persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
- ------------------------------------------ -------------------------------------------- -------------------
/s/ OLAWANDE A. AGUNLOYE President, Chief Executive Officer & October 2, 1997
......................................... Director
(OLAWANDE A. AGUNLOYE)
/s/ ABRAHAM TU Secretary, Chief Financial Officer, Chief October 2, 1997
......................................... Accounting Officer &
(ABRAHAM TU) Director
II-5
STATEMENT OF DIFFERENCES
The dagger symbol shall be expressed as........................ 'D'
The double dagger symbol shall be expressed as................. 'DD'
The degree symbol shall be expressed as........................ [d]